October 20, 2012
Though Morgan Stanley reported a massive third-quarter loss of $1 billion, things aren't exactly as they seem.
As Fool.com analyst Matt Koppenheffer points out, this reported loss is entirely due to a shift in Morgan Stanley's own debt valuation. We've seen these sorts of fabricated gains and losses at all of the major financial institutions recently, and as a result, to get a true idea of how these companies are performing, you have to dig into the numbers, strip out these accounting judgments, and do some due diligence.
Good news ahead, though: Rulemakers are looking at stripping out this debt valuation adjustment for these companies, so earnings could be more straightforward in the future.
In sum, Morgan Stanley's numbers aren't as bad as you think. For more, watch the following video.
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