Preliminary Terms No. 157
Registration Statement No. 333-131266
Dated December 19, 2006
Rule 433

BUFFERED PLUS® DUE MARCH 31, 2008
(Performance Leveraged Upside Securities SM)

ISSUED BY MORGAN STANLEY

 

 

MANDATORILY EXCHANGEABLE
BASED ON THE VALUE OF

 

 

A  GLOBAL BASKET OF INDICES

 

The issuer has filed a registration statement (including a prospectus) with the SEC for the offering to which this communication relates. Before you invest, you should read the prospectus in that registration statement and other documents the issuer has filed with the SEC for more complete information about the issuer and this offering. You may get these documents for free by visiting EDGAR on the SEC Web site at www.sec.gov. Alternatively, the issuer, any underwriter or any dealer participating in the offering will arrange to send you the prospectus if you request it by calling toll-free 1-800-584-6837.

You may access these documents on the SEC web site at www.sec.gov as follows:

Prospectus Supplement for Leveraged Index-Linked Securities dated December 7, 2006
Prospectus dated January 25, 2006

  MORGAN STANLEY





Buffered PLUS due March 31, 2008
Mandatorily Exchangeable Based on the Value of
A Global Basket of Indices
 
Overview

Buffered Performance Leveraged Upside Securities

Buffered PLUS is a Leveraged Performance Strategy. Buffered PLUS offer leveraged exposure to a wide variety of assets and asset classes including equities, commodities and currencies. These investments allow investors to capture enhanced returns relative to the asset's actual performance while providing limited protection against a decline in the underlying asset up to a specified percentage or “buffer amount”. The leverage typically applies only for a certain range of price performance. In exchange for enhanced performance in that range, investors generally forgo performance above a specified maximum return.

How Buffered PLUS work

At maturity, if the underlying asset has increased, Buffered PLUS will return a multiple of the positive performance, typically subject to a maximum return. Buffered PLUS also provide capital protection if the underlying asset declines by an amount less than or equal to the “buffer amount”. However, Buffered PLUS are not principal protected. As a result, if the underlying asset has decreased at maturity beyond the buffer amount, Buffered PLUS will suffer the negative performance of the underlying asset and return less than the initial principal investment. Buffered PLUS do not pay interest.

page 2 of 18 MORGAN STANLEY





Buffered PLUS due March 31, 2008
Mandatorily Exchangeable Based on the Value of
A Global Basket of Indices
 
Fact Sheet

The Buffered PLUS offered are senior unsecured obligations of Morgan Stanley, will pay no interest, do not guarantee any return of principal at maturity and have the terms described in the prospectus supplement for leveraged index-linked securities and the prospectus, as supplemented or modified by these preliminary terms. At maturity you will receive for each $10 principal amount of Buffered PLUS that you hold an amount in cash that may be more or less than the principal amount based upon the performance over the term of the Buffered PLUS of a weighted basket consisting of MSCI EAFE Index®, the S&P 500® Index, the NASDAQ-100 Index®, the MSCI Emerging Markets Index, the Nikkei 225 Index and the Energy Select Sector Index.

Expected Key Dates

Expected Pricing Date: January         , 2007

Expected Issue Date (Settlement Date): January         , 2007 (5 trading days after the Pricing Date)

Maturity Date: March 31, 2008 subject to postponement due to a market disruption event


Key Terms

Issuer: Morgan Stanley

Issue Price:

$10 per Buffered PLUS and the selling concessions will be 1.25% per Buffered PLUS.

Selling concessions allowed to dealers in connection with the offering may be reclaimed by the agent, if, within 30 days of the offering, the agent repurchases the Buffered PLUS distributed by such dealers.

Stated Principal Amount:

$10 per Buffered PLUS
Basket: Basket Indices Index Weighting
MSCI EAFE Index® (“MSCI EAFE”)      25%
S&P 500® Index (“S&P”)      20%
NASDAQ-100 Index® (“NASDAQ”)      20%
MSCI Emerging Markets Index (“MSCI EEM”)      15%
Nikkei 225 Index (“Nikkei”)      10%
Energy Select Sector Index (“ESSI”)      10%

Payment at Maturity:

If Ending Basket Level is greater than the Starting Basket Level at maturity
$10 + ($10 x Basket Return x Upside Leverage Factor), subject to the Maximum Total Return.

If Ending Basket Level is equal to or less than the Starting Basket Level, but has declined by an amount less than or equal to the Buffer Amount at maturity

The Stated Principal Amount

If Ending Basket Level has declined from the Starting Basket Level by an amount greater than the Buffer Amount at maturity
$10 + [$10 x (Basket Return + Buffer Amount) x Downside Factor]

In no event will the Payment at Maturity exceed the Maximum Total Return.
Starting Basket Level: 10
Ending Basket Level: The Basket Closing Level on the Observation Date

Basket Closing Level:

The Basket Closing Level will be calculated as follows:

Starting Basket Level + (Basket Return x Starting Basket Level)

Basket Return:

The sum of the products, as calculated for each Basket Index, of the Index Return for such Basket Index and its respective Index Weighting

Index Return:

For each Basket Index, the Index Return will be calculated as follows:

          Ending Index Level – Initial Index Level
                              Initial Index Level

where, the Initial Index Level is the index closing level for that Basket Index on the Index Setting Date and the Ending Basket Level is the index closing level for that Basket Index on the Observation Date.
Upside Leverage Factor: 2
Downside Factor: 1.1111
Buffer Amount: 10%

Maximum Total Return:

$11.30 to $11.50 (113% to 115% of the Stated Principal Amount). The actual Maximum Total Return will be determined on the Pricing Date.


page 3 of 18 MORGAN STANLEY





Buffered PLUS due March 31, 2008
Mandatorily Exchangeable Based on the Value of
A Global Basket of Indices


Index Setting Date:

For each of the S&P, NASDAQ and ESSI, the Pricing Date. For each of the MSCI EAFE, MSCI EEM and Nikkei, the index business day for that Basket Index following the Pricing Date.
Observation Date: March 26, 2008

Risk Factors:

Please see “Risk Factors” on page 15

General Information

Listing: The Buffered PLUS will not be listed on any securities exchange.
CUSIP: 61750V873
Minimum Ticketing Size: 100 Buffered PLUS

Tax Consideration:

Although the Issuer believes the Buffered PLUS should be treated as a single financial contract that is an “open transaction” for U.S. federal income tax purposes, there is uncertainty regarding the U.S. federal income tax consequences of an investment in the Buffered PLUS.

Assuming this characterization of the Buffered PLUS is respected, the following U.S. federal income tax consequences would result. A U.S. Holder would not be required to recognize taxable income over the term of the Buffered PLUS prior to maturity, other than pursuant to a sale or exchange. Upon sale, exchange or settlement of the Buffered PLUS at maturity, a U.S. Holder would generally recognize capital gain or loss equal to the difference between the amount realized and the U.S. Holder’s tax basis in the Buffered PLUS. Such gain or loss would generally be long-term capital gain or loss if the investor has held the Buffered PLUS for more than one year.

Please read the discussion under “Risk Factors — Structure Specific Risk Factors” in these preliminary terms and the discussion under “United States Federal Taxation” in the accompanying prospectus supplement for leveraged index-linked securities concerning the U.S. federal income tax consequences of investing in the Buffered PLUS.

The Issuer does not render any advice on tax matters. This material is not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer under the U.S. federal tax laws. You are urged to consult your own tax advisors regarding all aspects of the U.S. federal tax consequences of investing in the Buffered PLUS, as well as any tax consequences arising under the laws of any state, local or foreign taxing jurisdiction.
Trustee: The Bank of New York (as successor Trustee to JPMorgan Chase Bank, N.A.)
Calculation Agent: Morgan Stanley & Co. Incorporated

Contact:

You may contact your local Morgan Stanley branch office or our principal executive offices at 1585 Broadway, New York, New York, 10036 (telephone number (866) 477-4776 / (914) 225-7000)

This offering summary represents a summary of the terms and conditions of the Buffered PLUS. We encourage you to read the accompanying prospectus supplement for leveraged index-linked securities and prospectus for this offering.

 
page 4 of 18 MORGAN STANLEY




Buffered PLUS due March 31, 2008
Mandatorily Exchangeable Based on the Value of
A Global Basket of Indices
 
Key Benefits / Key Risks /
Key Investment Rationale


Key Benefits   Key Investment Rationale
 
• 200% participation in the upside performance of the Basket,   You may be interested in the PLUS if you are:
 

subject to the Maximum Total Return

    
• Protection against a 10% decline in the Basket at maturity   •

An investor who, consistent with your investment objectives,

• Exposure to a diversified basket of equity indices     elects to purchase a security that provides enhanced upside
        Index participation to the Basket, subject to the Maximum
        Total Return
      •

Willing to forgo upside in the Basket above approximately

        113% to 115% in exchange for leveraged upside exposure
      • Not concerned about principal risk
      • Not seeking current income
Key Risks      
     
• No guaranteed return of principal.   Please carefully review all the “Risk Factors” on page 15
• No interest payments      
•

Appreciation potential is limited by the Maximum Total Return

      
•

Leveraged downside for decreases in the Basket below the Buffer Amount

     
• Secondary trading may be limited, and the inclusion of commissions and projected profit from hedging in the original issue price is likely to adversely affect secondary market prices      
• The market price of the Buffered PLUS will be influenced by many unpredictable factors, including the value, volatility and dividend yield of the Basket Indices      
•

The U.S. federal income tax consequences of an investment in the Buffered PLUS are uncertain

      
• Credit Risk to Morgan Stanley whose credit rating is currently Aa3/A+.      

 
page 5 of 18 MORGAN STANLEY

 





Buffered PLUS due March 31, 2008
Mandatorily Exchangeable Based on the Value of
A Global Basket of Indices
 
Hypothetical Payout on the Buffered PLUS

For each Buffered PLUS, the following graph illustrates the payment at maturity on the Buffered PLUS for a range of hypothetical percentage changes in the Basket. The PLUS Zone illustrates the leveraging effect of the leverage factor taking into account the Maximum Total Return. The graph is based on the following hypothetical terms:

• Stated Principal Amount:   $10
• Starting Basket Level:   10
• Upside Leverage Factor:   2
• Buffer Amount:   10%
• Maximum Total Return:   $11.40 (114% of the Stated Principal Amount)
• Downside Leverage Factor:   1.1111

Where the Ending Basket Level is greater than the Starting Basket Level, the payment at maturity on the Buffered PLUS reflected in the graph below is greater than the $10 principal amount per Buffered PLUS, but in all cases is subject to the Maximum Total Return. Where the Ending Basket Level is less than or equal to the Starting Basket Level but has declined by an amount less than or equal to the Buffer Amount, the payment at maturity is equal to the $10 stated principal amount per Buffered PLUS. Where the Ending Basket Level has declined by more than the Buffer Amount, the payment at maturity on the Buffered PLUS shown in the graph below is less than the $10 principal amount per Buffered PLUS and reflects a 1.1111% loss of principal for each 1% decline below the Buffer Amount.

In the hypothetical example below, an investor will realize the Maximum Payment at Maturity at an Ending Basket Level of 107% of the Starting Basket Level, or 10.70.

 
page 6 of 18 MORGAN STANLEY




Buffered PLUS due March 31, 2008
Mandatorily Exchangeable Based on the Value of
A Global Basket of Indices
 
Information about the Basket Indices

The MSCI EAFE Index®
The MSCI EAFE Index® is a stock index calculated, published and disseminated daily by MSCI, a majority-owned subsidiary of Morgan Stanley, through numerous data vendors, on the MSCI website and in real time on Bloomberg Financial Markets and Reuters Limited. The MSCI EAFE Index is intended to provide performance benchmarks for the developed equity markets in Australia and New Zealand and in Europe and Asia, which are Austria, Belgium, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Italy, Japan, the Netherlands, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the United Kingdom. For a discussion of the MSCI EAFE Index®, see “Underlying Indices and Underlying Index Publishers Information— MSCI EAFE Index®” in the prospectus supplement for leveraged index-linked securities.

The S&P 500® Index
The S&P 500® Index was developed by Standard & Poor’s® Corporation, which we refer to as S&P®, and is calculated, maintained and published by S&P. The S&P 500® Index is intended to provide a performance benchmark for the U.S. equity markets. For a discussion of the S&P 500® Index, see “Underlying Indices and Underlying Index Publishers Information— S&P 500® Index” in the prospectus supplement for leveraged index-linked securities.

The NASDAQ-100 Index®
The NASDAQ-100 Index is a modified capitalization-weighted index of 100 of the largest non-financial companies listed on The NASDAQ Stock Market LLC. The NASDAQ-100 Index constitutes a broadly diversified segment of the largest securities listed on The NASDAQ Stock Market LLC and includes companies across a variety of major industry groups. For a discussion of the NASDAQ-100 Index see “Underlying Indices and Underlying Index Publishers Information— NASDAQ-100 Index” in the prospectus supplement for leveraged index-linked securities.

The MSCI Emerging Markets Index®
The MSCI Emerging Markets Index® is calculated, published and disseminated daily by MSCI, and is designed to measure equity market performance in the global emerging markets. For further information about the MSCI Emerging Markets Index®, see Annex A to these preliminary terms “The MSCI Emerging Markets Index and the Energy Select Sector Index –The MSCI Emerging Markets Index.”

The Nikkei 225 Index
The Nikkei 225 Index is a stock index calculated, published and disseminated by NIKKEI that measures the composite price performance of selected Japanese stocks. The Nikkei 225 Index currently is based on the 225 underlying stocks trading on the First Section of the Tokyo Stock Exchange representing a broad cross-section of Japanese industries. The 225 companies included in the Nikkei Index are divided into six sector categories: Technology, Financials, Consumer Goods, Materials, Capital Goods/Others and Transportation and Utilities. For a discussion of the Nikkei 225 Index, see “Underlying Indices and Underlying Index Publishers Information— Nikkei 225 Index” in the prospectus supplement for leveraged index-linked securities.

The Energy Select Sector Index
The Energy Select Sector Index is a modified market capitalization-based index intended to track the movements of companies that are components of the S&P 500® Index and are involved in the development or production of energy products, and which is calculated, published and disseminated by the American Stock Exchange LLC (“AMEX”). The Energy Select Sector Index is owned by S&P. For further information about the Energy Select Sector Index, see Annex A to these preliminary terms “The MSCI Emerging Markets Index and the Energy Select Sector Index –The Energy Select Sector Index.”

License Agreements

License Agreement between MSCI and Morgan Stanley
“MSCI EAFE Index®” is a trademark of MSCI and have been licensed for use by Morgan Stanley. See “Underlying Indices and Underlying Index Publishers Information— MSCI EAFE Index®— License Agreement between MSCI and Morgan Stanley.” in the prospectus supplement for leveraged index-linked securities. “MSCI Emerging Markets Index®” is a trademark of MSCI and we expect this trademark to be licensed for use by Morgan Stanley prior to the Pricing Date.

License Agreement between S&P and Morgan Stanley
“Standard & Poor’s®,” “S&P®,” “S&P 500®,” “Standard & Poor’s 500”, “500” are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by Morgan Stanley. See “Underlying Indices and Underlying Index Publishers Information— S&P 500® Index— License Agreement between S&P and Morgan Stanley” in the prospectus supplement for leveraged index-linked securities. “The Energy Select Sector Index” is owned by The McGraw-Hill Companies, Inc. has been licensed for use by Morgan Stanley in

page 7 of 18 MORGAN STANLEY




Buffered PLUS due March 31, 2008
Mandatorily Exchangeable Based on the Value of
A Global Basket of Indices

connection with Buffered PLUS. See Annex A to these preliminary terms “The MSCI Emerging Markets Index and the Energy Select Sector Index –The Energy Select Sector Index –License Agreement between S&P and Morgan Stanley.”

License Agreement between The Nasdaq Stock Market, Inc. and Morgan Stanley
The “Nasdaq®,” “NASDAQ-100®” and “NASDAQ-100 Index®” are trademarks of The Nasdaq and have been licensed for use by Morgan Stanley. See “Underlying Indices and Underlying Index Publishers Information — NASDAQ-100 Index — License Agreement between The Nasdaq Stock Market, Inc. and Morgan Stanley.” in the prospectus supplement for leveraged index-linked securities.

License Agreement between Nihon Keizai Shimbun, Inc. and Moprgan Stanley
As of the issue date of the Buffered PLUS, we will have received the consent of Nihon Keizai Shimbun, Inc., the publisher of the Nikkei 225 Index, to use and refer to the Nikkei 225 Index in connection with the Buffered PLUS. Nihon Keizai Shimbun, Inc. has the copyright to the Nikkei 225 Index. All rights to the Nikkei 225 Index are owned by Nihon Keizai Shimbun, Inc. See “Underlying Indices and Underlying Index Publishers Information— Nikkei 225 Index—License Agreement between NIKKEI and Morgan Stanley” in the prospectus supplement for leveraged index-linked securities.

Historical Information

The following graph sets forth the hypothetical historical performance of the Basket (assuming that each of the Basket Indices is weighted as described in Basket Weightings above at December 15, 2006). The graph covers the period from January 1, 2001 through December 15, 2006. The graph does not attempt to show your expected return on an investment in the Buffered PLUS. The graph reflects the historical levels of the Basket Indices, including the effect of offset and correlation in the movement of these levels. The hypothetical historical performance of the Basket and the historical performance of the Basket Indices should not be taken as an indication of their future performance.

 
page 8 of 18 MORGAN STANLEY




Buffered PLUS due March 31, 2008
Mandatorily Exchangeable Based on the Value of
A Global Basket of Indices

The following tables set forth the published high and low index closing values for each Basket Index, as well as end-of-quarter index closing levels for each quarter in the period from January 1, 2001 through December 15, 2006. The associated graph for each Basket Index charts the daily closing prices of the relevant Basket Index for the period January 1, 2001 through December 15, 2006. The MSCI EAFE closing level, the S&P closing level, the NASDAQ closing level, the MSCI EEM closing level, the Nikkei closing level and the ESSI closing level on December 15, 2006 were 2,060.37, 1,427.09, 1,808.56, 891.65, 16,914.31 and 612.19, respectively. We obtained the information in the tables and graphs below from Bloomberg Financial Markets, without independent verification. The historical levels, the historical price performance of the Basket Indices and the degree of correlation between the price trends of the Basket Indices (or lack thereof) should not be taken as an indication of future performance or trends.

MSCI EAFE   High   Low   Period End
2001                  
First Quarter   1,495.36     1,220.79     1,282.99  
Second Quarter   1,386.40     1,248.98     1,261.49  
Third Quarter   1,271.95     995.59     1,080.95  
Fourth Quarter   1,178.79     1,072.45     1,154.96  
2002                  
First Quarter   1,179.43     1,060.01     1,155.60  
Second Quarter   1,190.24     1,073.77     1,123.01  
Third Quarter   1,128.11     881.44     897.05  
Fourth Quarter   988.28     857.43     952.65  
2003                  
First Quarter   984.21     823.51     868.55  
Second Quarter   1,074.97     876.58     1,025.74  
Third Quarter   1,138.13     1,024.11     1,103.39  
Fourth Quarter   1,288.77     1,124.33     1,288.77  
2004                  
First Quarter   1,365.62     1,286.25     1,337.07  
Second Quarter   1,360.32     1,226.65     1,327.97  
Third Quarter   1,328.19     1,258.55     1,318.03  
Fourth Quarter   1,515.48     1,329.37     1,515.48  
2005                  
First Quarter   1,568.18     1,462.16     1,503.85  
Second Quarter   1,518.07     1,439.66     1,473.72  
Third Quarter   1,618.84     1,450.18     1,618.84  
Fourth Quarter   1,696.07     1,533.92     1,680.13  
2006                  
First Quarter   1,841.74     1,684.06     1,827.65  
Second Quarter   1,980.26     1,681.70     1,822.88  
Third Quarter   1,914.88     1,708.45     1,885.26  
Fourth Quarter (through                  
   December 15, 2006)   2,060.37     1,890.59     2,060.37  


page 9 of 18 MORGAN STANLEY





Buffered PLUS due March 31, 2008
Mandatorily Exchangeable Based on the Value of
A Global Basket of Indices

S&P   High   Low   Period End
2001                  
First Quarter   1,373.73     1,117.58     1,160.33  
Second Quarter   1,312.83     1,103.25     1,224.42  
Third Quarter   1,236.72     965.80     1,040.94  
Fourth Quarter   1,170.35     1,038.55     1,148.08  
2002                  
First Quarter   1,172.51     1,080.17     1,147.39  
Second Quarter   1,146.54     973.53     989.82  
Third Quarter   989.03     797.70     815.28  
Fourth Quarter   938.87     776.76     879.82  
2003                  
First Quarter   931.66     800.73     848.18  
Second Quarter   1,011.66     858.48     974.50  
Third Quarter   1,039.58     965.46     995.97  
Fourth Quarter   1,111.92     1,018.22     1,111.92  
2004                  
First Quarter   1,157.76     1,091.33     1,126.21  
Second Quarter   1,150.57     1,084.10     1,140.84  
Third Quarter   1,129.30     1,063.23     1,114.58  
Fourth Quarter   1,213.55     1,094.81     1,211.92  
2005                  
First Quarter   1,225.31     1,163.75     1,180.59  
Second Quarter   1,216.96     1,137.50     1,191.33  
Third Quarter   1,245.04     1,194.44     1,228.81  
Fourth Quarter   1,272.74     1,176.84     1,248.29  
2006                  
First Quarter   1,307.25     1,254.78     1,294.83  
Second Quarter   1,325.76     1,223.69     1,270.20  
Third Quarter   1,339.15     1,234.49     1,335.85  
Fourth Quarter (through                  
   December 15, 2006)   1,427.09     1,331.32     1,427.09  


page 10 of 18 MORGAN STANLEY





Buffered PLUS due March 31, 2008
Mandatorily Exchangeable Based on the Value of
A Global Basket of Indices

NASDAQ   High   Low   Period End
2001                  
First Quarter   2,730.05     1,563.14     1,573.25  
Second Quarter   2,052.57     1,370.75     1,830.19  
Third Quarter   1,827.07     1,126.95     1,168.37  
Fourth Quarter   1,720.91     1,151.24     1,577.05  
2002                  
First Quarter   1,675.03     1,348.25     1,452.81  
Second Quarter   1,478.52     1,022.74     1,051.41  
Third Quarter   1,060.89     832.52     832.52  
Fourth Quarter   1,127.06     804.64     984.36  
2003                  
First Quarter   1,094.87     951.90     1,018.66  
Second Quarter   1,247.90     1,022.63     1,201.69  
Third Quarter   1,400.13     1,207.28     1,303.70  
Fourth Quarter   1,470.37     1,335.34     1,467.92  
2004                  
First Quarter   1,553.66     1,370.04     1,438.41  
Second Quarter   1,516.64     1,379.90     1,516.64  
Third Quarter   1,489.57     1,304.43     1,412.74  
Fourth Quarter   1,627.46     1,425.21     1,621.12  
2005                  
First Quarter   1,603.51     1,464.34     1,482.53  
Second Quarter   1,568.96     1,406.85     1,493.52  
Third Quarter   1,627.19     1,490.53     1,601.66  
Fourth Quarter   1,709.10     1,521.19     1,645.20  
2006                  
First Quarter   1,758.24     1,645.09     1,703.66  
Second Quarter   1,739.20     1,516.85     1,575.23  
Third Quarter   1,661.59     1,451.88     1,654.13  
Fourth Quarter (through                  
   December 15, 2006)   1,819.76     1,632.81     1,808.56  


page 11 of 18 MORGAN STANLEY





Buffered PLUS due March 31, 2008
Mandatorily Exchangeable Based on the Value of
A Global Basket of Indices

MSCI EEM   High   Low   Period End
2001                  
First Quarter   379.02     313.14     313.14  
Second Quarter   338.32     297.01     322.89  
Third Quarter   323.54     245.64     251.40  
Fourth Quarter   317.40     247.05     317.40  
2002                  
First Quarter   351.46     317.45     351.43  
Second Quarter   364.08     309.44     319.75  
Third Quarter   331.22     266.11     266.11  
Fourth Quarter   304.86     254.79     292.09  
2003                  
First Quarter   308.01     269.71     272.27  
Second Quarter   337.56     273.66     332.68  
Third Quarter   386.10     336.74     377.63  
Fourth Quarter   442.78     381.67     442.78  
2004                  
First Quarter   488.37     450.70     482.06  
Second Quarter   497.26     395.93     432.20  
Third Quarter   466.57     418.51     464.15  
Fourth Quarter   542.17     463.38     542.17  
2005                  
First Quarter   588.68     518.25     548.69  
Second Quarter   572.22     526.39     565.17  
Third Quarter   661.32     562.60     661.32  
Fourth Quarter   707.68     603.73     706.48  
2006                  
First Quarter   791.85     707.01     787.80  
Second Quarter   881.52     665.28     747.54  
Third Quarter   789.97     710.33     778.17  
Fourth Quarter (through                  
   December 15, 2006)   891.65     774.39     891.65  


page 12 of 18 MORGAN STANLEY





Buffered PLUS due March 31, 2008
Mandatorily Exchangeable Based on the Value of
A Global Basket of Indices

Nikkei   High   Low   Period End
2001                  
First Quarter   14,032.42     11,819.70     12,999.70  
Second Quarter   14,529.41     12,574.26     12,969.05  
Third Quarter   12,817.41     9,504.41     9,774.68  
Fourth Quarter   11,064.30     9,924.23     10,542.62  
2002                  
First Quarter   11,919.30     9,420.85     11,024.94  
Second Quarter   11,979.85     10,074.56     10,621.84  
Third Quarter   10,960.25     9,075.09     9,383.29  
Fourth Quarter   9,215.56     8,303.39     8,578.95  
2003                  
First Quarter   8,790.92     7,862.43     7,972.71  
Second Quarter   9,137.14     7,607.88     9,083.11  
Third Quarter   11,033.32     9,265.56     10,219.05  
Fourth Quarter   11,161.71     9,614.60     10,676.64  
2004                  
First Quarter   11,770.65     10,365.40     11,715.39  
Second Quarter   12,163.89     10,505.05     11,858.87  
Third Quarter   11,896.01     10,687.81     10,823.57  
Fourth Quarter   11,488.76     10,659.15     11,488.76  
2005                  
First Quarter   11,966.69     11,238.37     11,668.95  
Second Quarter   11,874.75     10,825.39     11,584.01  
Third Quarter   13,617.24     11,565.99     13,574.30  
Fourth Quarter   16,344.20     13,106.18     16,111.43  
2006                  
First Quarter   17,059.66     15,341.18     17,059.66  
Second Quarter   17,563.37     14,218.60     15,505.18  
Third Quarter   16,385.96     14,437.24     16,127.58  
Fourth Quarter (through                  
   December 15, 2006)   16,914.31     15,725.94     16,914.31  


page 13 of 18 MORGAN STANLEY





Buffered PLUS due March 31, 2008
Mandatorily Exchangeable Based on the Value of
A Global Basket of Indices

ESSI   High   Low   Period End
2001            
First Quarter   342.24   301.47   308.77
Second Quarter   346.18   293.55   305.11
Third Quarter   305.64   239.81   259.90
Fourth Quarter   286.22   248.43   267.85
2002            
First Quarter   292.88   247.58   290.16
Second Quarter   295.27   255.05   263.11
Third Quarter   263.16   198.13   212.13
Fourth Quarter   232.36   204.98   223.77
2003            
First Quarter   230.57   206.82   224.14
Second Quarter   255.62   219.76   241.28
Third Quarter   250.31   228.77   240.88
Fourth Quarter   278.10   239.59   277.26
2004            
First Quarter   302.10   276.17   294.43
Second Quarter   320.29   290.04   316.23
Third Quarter   353.22   306.47   351.45
Fourth Quarter   377.17   345.05   364.35
2005            
First Quarter   449.73   347.93   430.36
Second Quarter   459.69   387.28   445.97
Third Quarter   546.42   452.98   538.17
Fourth Quarter   536.81   457.24   504.21
2006            
First Quarter   580.97   511.61   545.56
Second Quarter   599.48   502.03   568.54
Third Quarter   590.16   510.10   536.54
Fourth Quarter (through            
   December 15, 2006)   618.74   511.74   612.19


page 14 of 18 MORGAN STANLEY





Buffered PLUS due March 31, 2008
Mandatorily Exchangeable Based on the Value of
A Global Basket of Indices
 
Risk Factors

The following is a non-exhaustive list of certain key risk factors for investors in the Buffered PLUS. For a complete list of risk factors, please see the accompanying prospectus supplement for leveraged index-linked securities and the accompanying prospectus.

Structure Specific Risk Factors

• Buffered PLUS do not pay interest or guarantee return of principal. The terms of the Buffered PLUS differ from those of ordinary debt securities in that the Buffered PLUS do not pay interest or guarantee payment of the principal amount at maturity. If the Ending Basket Level has declined from the Starting Basket Level by more than the Buffer Amount, you will lose your principal by an amount equal to 1.1111% for each 1% decline in the Ending Basket Level below the Buffer Amount.
   
• Appreciation potential is limited. The appreciation potential of Buffered PLUS is limited by the Maximum Total Return of $11.30 to $11.50, or 113% to 115% of the Stated Principal Amount. Although the Upside Leverage Factor provides 200% exposure to any increase in the value of the Basket at maturity, because the payment at maturity will be limited to 113% to 115% of the Stated Principal Amount for the Buffered PLUS, the percentage exposure provided by the Upside Leverage Factor is progressively reduced as the Ending Basket Level exceeds approximately 106.50% to 107.50% of the Starting Basket Level.
   
• Market price influenced by many unpredictable factors. Several factors will influence the value of the Buffered PLUS in the secondary market and the price at which MS & Co. may be willing to purchase or sell the Buffered PLUS in the secondary market, including: the value, volatility and dividend yield of the Basket, interest and yield rates, time remaining to maturity, geopolitical conditions and economic, financial, political and regulatory or judicial events and creditworthiness of the Issuer.
   
• The Buffered PLUS are linked to foreign equity securities. Investments in securities indexed to the value of foreign equity securities involve risks associated with the securities market in those countries, including risks of volatility in those markets, governmental intervention in those markets and cross-shareholdings in companies in certain countries. There is less publicly available information about companies in some of these jurisdictions than there is available for U.S. companies that are subject to the reporting requirements of the United States Securities and Exchange Commission, and generally foreign companies are subject to accounting, auditing and financial reporting standards and requirements and securities trading rules different from those applicable to U.S. reporting companies.
   
• Not equivalent to investing in the Basket. Investing in the Buffered PLUS is not equivalent to investing in the Basket Indices or their component stocks. Investors in the Buffered PLUS will not have voting rights or rights to receive dividends or other distributions or any other rights with respect to stocks that comprise the Basket Indices.
   
• Changes in the value of one or more of the Basket Indices may offset each other. Price movements in the Basket Indices may not correlate with each other. At a time when the value of one or more of the basket indices increases, the value of one or more of the other basket indices may not increase as much or may even decline in value. Therefore, in calculating the Basket Closing Value on the Observation Date, increases in the value of one or more of the Basket Indices may be moderated, or wholly offset, by lesser increases or declines in the value of one or more of the other Basket Indices. In addition, the basket is not equally weighted among the basket indices. Significant decreases in the value of the more heavily weighted indices could moderate or wholly offset increases in the prices of the other, less heavily weighted, indices.
   
• The inclusion of commissions and projected profit from hedging in the original issue price is likely to adversely affect secondary market prices. Assuming no change in market conditions or any other relevant factors, the price, if any, at which MS & Co. is willing to purchase Buffered PLUS in secondary market transactions will likely be lower than the original Issue Price, since the original Issue Price included, and secondary market prices are likely to exclude, commissions paid with respect to the Buffered PLUS, as well as the projected profit included in the cost of hedging the Issuer’s obligations under the Buffered PLUS. In addition, any such prices may differ from values determined by pricing models used by MS & Co., as a result of dealer discounts, mark-ups or other transaction costs.
   
  The U.S. federal income tax consequences of an investment in the Buffered PLUS are uncertain. Please read the discussion under “Fact Sheet — General Information  — Tax Consideration” in these preliminary terms and the discussion under “United States Federal Taxation” in the accompanying prospectus supplement for leveraged index-linked securities (together the “Tax Disclosure Sections”) concerning the U.S. federal income tax consequences of investing in the Buffered PLUS. If the Internal Revenue Service (the “IRS”) were successful in asserting an alternative characterization for the Buffered PLUS, the timing and character of income from the Buffered PLUS might differ from the tax treatment described in the Tax Disclosure Sections. For example, under a certain characterization, U.S. Holders could be required to accrue original issue discount on
   
page 15 of 18 MORGAN STANLEY




Buffered PLUS due March 31, 2008
Mandatorily Exchangeable Based on the Value of
A Global Basket of Indices

the Buffered PLUS every year at a “comparable yield” determined at the time of issuance and recognize all income and gain in respect of the Buffered PLUS as ordinary income. The Issuer does not plan to request a ruling from the IRS regarding the tax treatment of the Buffered PLUS, and the IRS or a court may not agree with the tax treatment described in these preliminary terms and the prospectus supplement for leveraged index-linked securities.

Other Risk Factors

•

Secondary trading may be limited. There may be little or no secondary market for the Buffered PLUS.
   
• Adjustments to the Basket Indices could adversely affect the value of the Buffered PLUS. The publisher of any Basket Index can add, delete or substitute the stocks underlying the Basket Index, and can make other methodological changes that could change the value of the Basket Index; or may discontinue or suspend calculation or publication of the Basket Index at any time. In these circumstances, MS & Co., as the calculation agent, will have the sole discretion to substitute a successor index that is comparable to the discontinued index and is not precluded from considering indices that are calculated and published by MS & Co. or any of its affiliates. Any of these actions could adversely affect the value of the Buffered PLUS.
   
•

Potential adverse economic interest of MSCI and the calculation agent. The economic interests of the calculation agent and other affiliates of ours are potentially adverse to your interests as an investor in the Buffered PLUS. MSCI and MS & Co., thecalculation agent, are each our subsidiaries. MSCI is responsible for calculating and maintaining the MSCI EAFE and the MSCIEEM and the guidelines and policies governing their composition and calculation. Morgan Stanley, as the parent company of MSCI, is ultimately responsible for MSCI. The policies and judgments for which MSCI is responsible concerning additions,deletions, substitutions and weightings of the component stocks and the manner in which certain changes affecting such component stocks are taken into account may affect the value of the MSCI EAFE and the MSCI EEM and, consequently, the performance of the Basket and therefore the value of the Buffered PLUS. The inclusion of a component stock in the MSCI EAFEand the MSCI EEM is not an investment recommendation by Morgan Stanley or MSCI of that security.

As calculation agent, MS & Co., and other affiliates of ours will carry out hedging activities related to the Buffered PLUS or tradein the component stocks of the Basket Indices or other instruments related to the Basket Indices. The hedging or trading activities of our affiliates on or prior to the Pricing Date and on the Observation Date could adversely affect the Basket Value and, as a result, could decrease the amount you may receive on the Buffered PLUS at maturity. Any of these hedging or tradingactivities on or prior to the Pricing Date could potentially affect the Starting Basket Level and, as a result, could increase the value at which the Basket Indices must close on the Observation Date before you receive a payment at maturity that exceeds the principal amount on the Buffered PLUS. Additionally, such hedging or trading activities during the term of the Buffered PLUS could potentially affect the value of the Basket Indices on the Observation Date and, accordingly, the amount of cash you will receive at maturity.
   

 
page 16 of 18 MORGAN STANLEY




Buffered PLUS due March 31, 2008
Mandatorily Exchangeable Based on the Value of
A Global Basket of Indices
 
ANNEX A

The MSCI Emerging Markets Index and the Energy Select Sector Index

The MSCI Emerging Markets Index

The MSCI Emerging Markets Index was developed by MSCI as an equity benchmark for international stock performance, and is designed to measure equity market performance in the global emerging markets. The performance of the MSCI Emerging Markets Index is a free float-adjusted average of the U.S. dollar values of all of the equity securities (the “Component Securities”) constituting the MSCI indices for the selected countries (the “Component Country Indices”). As of June, 2006, the MSCI Emerging Markets Index consisted of the following 25 emerging market country indices: Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Israel, Jordan, Korea, Malaysia, Mexico, Morocco, Pakistan, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand, and Turkey. Each Component Country Index is a sampling of equity securities across industry groups in such country’s equity markets.

Prices used to calculate the Component Securities are the official exchange closing prices or prices accepted as such in the relevant market. In general, all prices are taken from the main stock exchange in each market. Closing prices are converted into U.S. dollars on a real time basis and disseminated every 60 seconds during market trading hours. It is also calculated on an end of day basis. The MSCI Emerging Markets Index has a base date December 31, 1987.

We have derived all information contained in this pricing supplement regarding the MSCI Emerging Markets Index, including, without limitation, its make-up, method of calculation and changes in its components, from publicly available information. The MSCI Emerging Markets Index is a stock index calculated, published and disseminated daily by MSCI, a majority-owned subsidiary of Morgan Stanley, through numerous data vendors, on the MSCI website and in real time on Bloomberg Financial Markets and Reuters Limited. See “—Affiliation of MSCI, MS & Co. and Morgan Stanley” below. Neither MSCI nor Morgan Stanley has any obligation to continue to calculate and publish, and may discontinue calculation and publication of the MSCI Emerging Markets Index.

In order to maintain the representativeness of the MSCI Emerging Markets Index, structural changes to the MSCI Emerging Markets Index as a whole may be made by adding or deleting Component Country Indices and the related Component Securities.

MSCI may add additional Component Country Indices to the MSCI Emerging Markets Index or subtract one or more of its current Component Country Indices prior to the expiration of the MPS. Any such adjustments are made to the MSCI Emerging Markets Index so that the value of the MSCI Emerging Markets Index at the effective date of such change is the same as it was immediately prior to such change.

Affiliation of MSCI, MS & Co. and Morgan Stanley
Each of MSCI and MS & Co. is a majority-owned subsidiary of Morgan Stanley. MSCI is responsible for the MSCI Emerging Markets Index and the guidelines and policies governing its composition and calculation. Although judgments, policies and determinations concerning the MSCI Emerging Markets Index are made solely by MSCI, Morgan Stanley, as the parent company of MSCI, is ultimately responsible for MSCI. MSCI® is a registered trademark and service mark of MSCI.

BECAUSE EACH OF MSCI AND MS & CO. IS A SUBSIDIARY OF MORGAN STANLEY, THE ECONOMIC INTERESTS OF MSCI AND MS & CO. MAY BE ADVERSE TO THE INVESTORS IN THE MPS, INCLUDING WITH RESPECT TO CERTAIN DETERMINATIONS AND JUDGMENTS MADE IN DETERMINING THE MSCI Emerging Markets INDEX. THE POLICIES AND JUDGMENTS FOR WHICH MSCI IS RESPONSIBLE CONCERNING ADDITIONS, DELETIONS AND SUBSTITUTIONS OF THE COMPONENT COUNTRY INDICES AND CORRESPONDING COMPONENT SECURITIES COMPRISING THE MSCI Emerging Markets INDEX AND THE MANNER IN WHICH CERTAIN CHANGES AFFECTING SUCH COMPONENT SECURITIES ARE TAKEN INTO ACCOUNT MAY AFFECT THE VALUE OF THE MSCI Emerging Markets INDEX. FURTHERMORE, THE POLICIES AND JUDGMENTS FOR WHICH MSCI IS RESPONSIBLE WITH RESPECT TO THE CALCULATION OF THE MSCI Emerging Markets INDEX, INCLUDING, WITHOUT LIMITATION, THE SELECTION OF THE FOREIGN EXCHANGE RATES USED FOR THE PURPOSE OF ESTABLISHING THE DAILY PRICES OF THE COMPONENT SECURITIES, COULD ALSO AFFECT THE VALUE OF THE MSCI Emerging Markets INDEX. IT IS ALSO POSSIBLE THAT MSCI MAY DISCONTINUE OR SUSPEND CALCULATION OR DISSEMINATION OF THE MSCI Emerging Markets INDEX AND THAT, CONSEQUENTLY, MS & CO., AS CALCULATION AGENT, ALSO AN AFFILIATE OF MORGAN STANLEY, WOULD HAVE TO SELECT A SUCCESSOR OR SUBSTITUTE INDEX FROM WHICH TO CALCULATE THE FINAL AVERAGE INDEX VALUE AND THE SUPPLEMENTAL REDEMPTION AMOUNT. ANY SUCH ACTIONS OR JUDGMENTS COULD ADVERSELY AFFECT THE VALUE OF THE MPS.

MSCI maintains policies and procedures regarding the handling and use of confidential proprietary information, and those policies and procedures will be in effect throughout the term of the MPS to restrict the use of information relating to the calculation of the MSCI Emerging Markets Index prior to its dissemination.

page 17 of 18 MORGAN STANLEY




Buffered PLUS due March 31, 2008
Mandatorily Exchangeable Based on the Value of
A Global Basket of Indices

It is also possible that any advisory services that our affiliates provide in the course of any business with the issuers of the Component Securities could lead to actions on the part of such underlying issuers which might adversely affect the value of the MSCI Emerging Markets Index.

The Energy Select Sector Index

The Energy Select Sector Index is a modified market capitalization-based index intended to track the movements of companies that are components of the S&P 500® Index and are involved in the development or production of energy products. The Energy Select Sector Index is calculated and published by AMEX and owned by S&P. Energy companies in the Energy Select Sector Index develop and produce crude oil and natural gas and provide drilling and other energy related services. The Energy Select Sector Index, which serves as the benchmark for the Energy Select Sector SPDR Fund, was established with a value of 250.00 on June 30, 1998. Each stock in the S&P 500® Index is allocated to only one Select Sector Index, and the combined companies of the nine Select Sector Indexes represent all of the companies in the S&P 500® Index.

Of the companies included in the S&P 500® Index, 31 were included in the Energy Select Sector Index as December 15, 2006.

For a discussion of the S&P 500® Index, see “Underlying Indices and Underlying Index Publishers Information— S&P 500® Index” in the prospectus supplement for leveraged index-linked securities.

License Agreement between S&P and Morgan Stanley.
S&P and Morgan Stanley have entered into a non-exclusive license agreement providing for the license to Morgan Stanley, and certain of its affiliated or subsidiary companies of the right to use the Energy Select Sector Index, which is owned by S&P, in connection with the Buffered PLUS.

The license agreement between S&P and Morgan Stanley provides that the following language must be set forth in these preliminary terms:

The Buffered PLUS are not sponsored, endorsed, sold or promoted by S&P. S&P makes no representation or warranty, express or implied, to the owners of the Buffered PLUS or any member of the public regarding the advisability of investing in securities generally or in the Buffered PLUS particularly or the ability of the Energy Select Sector Index to track general stock market performance. S&P’s only relationship to us is the licensing of the Energy Select Sector Index to us, which is determined, composed and calculated by S&P without regard to us or the Buffered PLUS. S&P has no obligation to take our needs or the needs of the owners of the Buffered PLUS into consideration in determining, composing or calculating the Energy Select Sector Index. S&P is not responsible for and has not participated in the determination of the timing of, prices at, or quantities of the Buffered PLUS to be issued or in the determination or calculation of the equation by which the Buffered PLUS are to be converted into cash. S&P has no obligation or liability in connection with the administration, marketing or trading of the Buffered PLUS.

S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE ENERGY SELECT SECTOR INDEX OR ANY DATA INCLUDED THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY MORGAN STANLEY, OWNERS OF THE BUFFERED PLUS, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE ENERGY SELECT SECTOR INDEX OR ANY DATA INCLUDED THEREIN IN CONNECTION WITH THE RIGHTS LICENSED UNDER THE LICENSE AGREEMENT DESCRIBED HEREIN OR FOR ANY OTHER USE. S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE ENERGY SELECT SECTOR INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL S&P HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.

 
page 18 of 18 MORGAN STANLEY