Morgan Stanley takes a subprime hit

It was Morgan Stanley's (MS) turn today to bite the subprime bullet and writedown the value of some its toxic waste assets. From Bloomberg:

Morgan Stanley's Subprime Assets Fell by $3.7 Billion

Morgan Stanley, the second-biggest U.S. securities firm, said its subprime mortgages and related securities lost $3.7 billion in the past two months, after prices sank further than the firm's traders expected.

The decline may cut fourth-quarter earnings by $2.5 billion, the New York-based company said in a statement today. The figure is subject to change until the end of this month, Morgan Stanley said. The average estimate of analysts surveyed by Bloomberg is for a $1.93 billion profit in the quarter.

Another 4Q07 earning revision on the way no doubt. Even Morgan Stanley does not think this is a one quarter event but more like a one year event. I expect it will take longer. In other subprime related news from marketwatch.com:

AIG quarterly net falls 27% as subprime crisis bites

American International Group reported a 27% drop in third-quarter net income late Wednesday as the subprime mortgage crisis pushed the insurance giant's results below Wall Street expectations.

The company's shares fell 2.8% to $56.28 during late-trading. That extended losses of 6.5% during regular action, before the insurer reported results. The stock is now trading at its lowest level since July 2006.

AIG said net income came in at $3.09 billion, or $1.19 a share, vs. $4.22 billion, or $1.61 a share, a year earlier. Adjusted net income, which excludes net realized investment gains and losses and other items, was $3.49 billion, or $1.35 a share, the company reported.

AIG was expected to make $1.62 a share, according to the average estimate of 19 analysts in a Thomson Financial survey.

I heard a great comment from an analyst on Bloomberg poking fun at those who had said and keep saying that the subprime and credit market problems are contained. He said "yeah it's contained to planet earth" great stuff.