Wednesday, May 04, 2005 looks at Morgan Stanley

The Street Purcell Is Paving -

Given how much has been written on the troubles at Morgan Stanley, it is interesting to see a new angle. Forbes writes that the firm is suffering as many of the firm's stars are leaving and looking for work elsewhere.

Two key points to to take from it

1. Intangible assets can often walk away, so be careful (this has repercussions not only to management scandals, but also capital structure, risk taking, etc. To keep their talent, Morgan will have to pay more.

2. Financial firms often do disappear as a result of managerical problems. (see EF Hutton, Drexel, Kidder Peabody, and others)

Quick highlights:

* "Generally when managements come under pressure, the human capital exodus is the precursor of a preordained demise," said Michael Holland, once a Morgan banker and now head of Holland & Co. "And it's almost all attributable to the actions or inactions of top management. Hubris is normally a part of it. I can't think of any case when it wasn't hubris." "

*"Few Wall Street powerhouses, once they began losing their top talent, have ever managed to regain their former independent glory."

*"Not only have individual bankers fled, but headhunters have told that they're beginning to target entire departments for their next big raids"

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