If your seasonal chocolate stupor started on Thursday, you might have missed Morgan Stanley's results. You might still think Morgan Stanley is a failure at fixed income sales and trading. You might think Goldman Sachs is a special place which pays fixed income traders in Bugattis, or derivations thereof.
If this is you, then wake up. Smell the coffee, drink some hydrating fluids, and look at the chart below. Produced by the analysts at Bernstein Research in the U.S., it underpins what the rest of the world knows already: Morgan Stanley had a huge first quarter in fixed income, currencies and commodities (FICC).
What most people don't know, however, is that Morgan Stanley's excellent quarter in fixed income was underpinned by the recent climatic turbulence in the U.S.
Source: Bernstein Research
Morgan Stanley owes its big Q1 beat in fixed income sales and trading to the unprecedentedly cold winter in North America.
The commodities business drove the increase in Morgan Stanley's first quarter fixed income revenues. As Bernstein's researchers point out, Morgan Stanley is a leader in power trading. When the polar vortex took hold in North America in January, electricity and gas prices spiked. Bernstein says Morgan Stanley benefited in the following ways:
To prove their point, Bernstein's analysts include the following list of Morgan Stanley's North American power plants:
They also drop in the following graphs of energy prices in the first quarter.