Photo: flickr: vagawi
On Wall Street, when you lose, you don’t just lose money, you lose respect.That’s why, when we talk about these losses, we say things like ‘getting your lunch eaten, or getting your face ripped off.’ It’s degrading, especially for the big boys — big boys like Morgan Stanley.
Reuters reports that the bank is getting creamed in the commodity trade. It’s one sector where the Morgan Stanley used to dominate. Now, though, according to government figures, port intelligence, securities filings, and other sources, we know that the bank’s commodities trading revenues are down 60% since their height in 2008 at which point they were at $3 billion.
In the power markets, it is trading only one-fifth as much electricity as five years ago. In oil, its imports to the United States fell last year to the lowest since 2004, while exports remain negligible. It barely makes the top 100 list of U.S. natural gas traders, with activity slipping from 2010.
Even the bank’s prized subsidiary TransMontaigne, a Denver-based refined petroleum products supply and distribution company it bought for $630 million six years ago, hasn’t helped it cash in on the boom in domestic U.S. crude oil trading this year. Its 2011 revenues were $152 million, up just 16 per cent from 2007.
To be fair, new regulations are making it difficult (read: expensive) to maintain commodity trading units. For one, you need more capital than before. On top of that, unlike its big boy peers, Morgan Stanley has stayed firmly in the commodities merchant-trader business while others have moved toward things like hedging corporate risks and selling indices to investors.
The bank is considering a partial sale of their commodities business, according to CNBC, but analysts say its just too big to give up entirely.
So what’s a big boy to do?