| There was a massive sigh of relief inside Morgan Stanley's towering building in Times Square this week, combined with standing ovations for Ted Pick. He was the most obvious choice to become the bank's next chief executive officer, having been seen as a rising leadership candidate for at least a decade. Pick will start at the turn of the year. When asked how it felt to finally have this moment, Pick said: "It's a thrill of a lifetime." "Morgan Stanley was the first place that I worked out of college. And 33 years later, I'm sitting next to James Gorman," he told me in an interview for Bloomberg Television less than 24 hours after the announcement. He has a tough act to follow in Gorman, who wildly transformed the bank. When he took over in 2010, in the wake of the global financial crisis, Morgan Stanley had a market value of about $40 billion, less than half the size of Goldman Sachs. Now it's worth almost $20 billion more than its fierce rival.  Gorman and Pick on Bloomberg Television on Thursday. Photographer: Jeenah Moon/Bloomberg Morgan Stanley commands one of the best valuations in global banking, with only JPMorgan Chase more valuable on a price-to-book basis. There are investors who sometimes worry that this might be the best it will ever get. So I asked Pick what he tells investors who question the future. His answer: "There's more to come, there's more to come." Of its biggest rivals, Morgan Stanley is the largest wealth and asset manager by funds under management. It plans to bring in $1 trillion of net new money every three years. So far this year, however, as a Top Three firm in investment banking, it's been slipping behind Goldman Sachs and JPMorgan in rankings by volume. In equities trading, where Morgan Stanley is typically No. 1, Goldman recently has jumped ahead in revenue for a few quarters. "In equities and fixed income and across investment banking, we're focused on being No. 1," Pick said. "We want to have the right people in place. We've been investing for the next cycle. That next cycle is going to be investment banking-led." The other big question at Morgan: Where are the women and people of color throughout the highest ranks? There was a notable lack of diversity when the bank had narrowed its search for the next chief. "The next generation has lots of representation of all types. It's a priority, it will continue to be a priority," Pick said. "We run a meritocracy, and diversity comes in all types. We have fantastic women and men from all backgrounds in senior positions on operating committees throughout the firm, and I couldn't be more excited about the look of the firm in the next 5, 10 years." Gorman, with his typical quick wit and big smile, had his own emotions about the day. "It feels great," he said in the interview. "Organizations grow because you have change. You're not going to grow by doing the same thing over and over again." Gorman is going to remain on board as executive chairman. The other top CEO candidates will run the firm's largest businesses, with Andy Saperstein overseeing wealth and asset management and Dan Simkowitz running the institutional business that has all the trading, investment banking and capital markets units. "I shouldn't stay too long, because it's Ted's job to run the firm now," Gorman said. "I want to hand as clean a plate as possible, these are monster jobs." Treasuries VolatilityThe safest markets in the world feel sometimes as if they're cracking. And it's because long-term US Treasuries are smashing around like bumper cars. In recent years, it was typical to see 30-year bonds move just 1 to 5 basis points in a single day. (One basis point equals 0.01%.) Now they're whipsawing 15 to 20 basis points in a matter of hours. Take Monday: When investor Bill Ackman said on X that he was removing his short position on 30-year Treasuries because the world was too uncertain to bet against longer-dated US government debt, the securities went from a high of 5.08% to a low of 4.96% in less than eight hours. This was supposed to be the "year of the bond," with traders in fixed income markets believing investments in government securities and other debt instruments would lead to fruitful payouts. The truth is, it's on track to be the third straight year of losses, and the worst year since 1999. "You have to wait for the knives to stop dropping, and the problem is that everyone has been trying to catch them," Jim Bianco of Bianco Research told my Bloomberg Surveillance colleagues this week. "And they've been falling into this trap—or getting their hands cut, to stick with the metaphor." Volatility is an accidental consequence of the end of free money. One prominent trader explained to me that these are the most drastic moves since the late 1990s, and it has a lot to do with a confluence of factors: - The government balance sheet. US financing needs are ballooning, particularly with the rising cost of defense, and the Treasury Department has had to repeatedly increase the amount of debt it's issuing. That creates a need for more people buy such debt, and fewer potential buyers are coming to the table.
- Short selling. With a dearth of such buyers, hedge funds and so-called levered buyers, who borrow money through repo markets and tend to hedge their wagers by selling short longer-dated Treasuries, are the ones who are stepping in.
- Bank balance sheets. They're becoming more constrained, making it harder for banks to step into markets.
- Quantitative tightening. The Fed's end to its bond-buying program, and its reversal of such support to the market, is seen as complicating market liquidity and therefore exacerbating such wild swings.
The same trader explained to me that he thinks the problem will get worse into next year, even as the Fed comes closer to the end of its rate-hiking cycle. The Securities and Exchange Commission is weighing higher costs to the leverage used by hedge funds that are trading in Treasury markets, which could further complicate the picture. The so-called basis trade that's used by hedge funds to arbitrage Treasury markets has come under increasing scrutiny. Billionaire Citadel founder Ken Griffin said the SEC's efforts are "utterly beyond" him—given that the hedge funds play such an important part of providing liquidity to Treasury markets. "This is totally lost on Gary Gensler and totally lost on the Fed," Griffin said during a conversation at the Robin Hood Investors Conference in New York with fellow billionaire Paul Tudor Jones, according to people familiar with the matter who spoke with Bloomberg's Hema Parmar. The SEC and Fed "seem to be more consumed with this theory of systemic risk from this trade than from the fact that we're saving tens of basis points in cost for the American taxpayer, which is billions of dollars a year by allowing this trade to exist," Griffin said. To know more about the basis trade, read about it here. In Memoriam: Byron Wien
The famed market strategist Byron Wien sadly died this week at 90. His widely read list of "10 surprises" published at the start of every year for 38 years. Blackstone's Joan Solotar, who worked closely with him, sent a memo out this week saying, "The last of his Life Lessons, as many of you probably know, and one Byron always delivered with the utmost sincerity and good humor, was: 'Never retire. If you work forever, you can live forever.' He worked until his last days and, given his 90+ years, there was certainly something to this wisdom." After more than two decades at Morgan Stanley, Wien moved to Blackstone, giving it a bigger following among financial advisers and money managers, a key demographic for the giant private asset manager. Read more about Wien here. —Sonali Basak, Bloomberg Television's global finance correspondent
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