Morgan Stanley posted record quarterly revenue and profit because equities trading surged 69%. That's the headline. Here's the analysis: people traded stocks and Morgan Stanley charged them for it.
Revolutionary business model.
The bank beat expectations by doing the thing banks do when markets move. They stood between buyers and sellers and collected a fee. Goldman Sachs did it. JPMorgan Chase did it. Now Morgan Stanley did it. Apparently we're supposed to act surprised that when trading volume goes up, the companies that facilitate trading make more money.
Equities trading revenue jumped 69%. Not 68%. Not 70. Sixty-nine percent. Some analyst at Morgan Stanley definitely high-fived someone when that number came through. Probably sent it to the marketing department with a winking emoji. Real professional operation over there.
Retail traders saw this headline and thought it meant their portfolios were up 69%. Wrong building. Morgan Stanley's clients made money. Morgan Stanley made money. You bought three shares of a company you can't pronounce because someone on Reddit told you it was undervalued. Morgan Stanley underwrote the derivative instruments that actual investors used to hedge against people like you.
The phrase "record quarterly revenue" shows up in financial news approximately every quarter. It's almost like companies try to make more money than they did before. Weird strategy but it seems to work.
Three massive banks all crushed earnings because of equities trading and financial journalists wrote three separate articles about it like they were covering different events. They could've just written "Banks Make Money When Markets Are Volatile" once and saved everyone time. But that wouldn't justify the subscription fee.
Morgan Stanley's stock will probably go up. Then retail traders will buy it at the top and wonder why their broker charged them a fee to lose money. The broker was Morgan Stanley.
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