Morning Coffee: JPMorgan takes aim at fixed income traders. Laid-back life of the formerly overworked financier

Not long ago, JPMorgan’s analysts issued a note. In it, they said that fixed income sales and trading revenues across all banks are likely to fall by 3% this year and by 3% next year. They also suggested that Morgan Stanley’s restructuring of its fixed income business was looking pretty good. As of yesterday, they haven’t changed their minds on fixed income’s decline, but they have changed their minds on Morgan Stanley.

Bloomberg reports that JPMorgan just changed its call on Morgan Stanley’s stock to neutral (from overweight) on the grounds that the rival bank probably won’t cut its fixed income business by as much as it should. In June, Morgan Stanley had $192bn of risk-weighted assets allocated to its fixed income business. By the end of this year, JPMorgan’s analysts would really like Morgan Stanley to have reduced this to $180bn. However, they predict that Morgan Stanley won’t achieve this because its thriving wealth management business has tempered the need for any urgent restructuring in fixed income. And yet, without this fixed income restructuring they think it unlikely that Morgan Stanley will ever generate a return on equity above 10%, making it unlikely that the stock will rise. If you work in fixed income – at Morgan Stanley or elsewhere, this should make you nervous. When banks are being marked down by investors for being too active in your business area, it can only be a matter of time before banks take remedial action.

Separately, following yesterday’s suggestion that Mohamed El-Erian might have been regretting his Manichean approach to his job at Pimco, further details have emerged about why he quit and what goes on in his new ‘portfolio’ life.  As previously reported, it turns out that El-Erian was driven out of Pimco not by the nuttiness of Bill Gross, but by his 10 year-old daughter, who compiled a detailed list of everything he’d missed. Elements of this list have finally been revealed: among other things, El-Erian missed her first day of school, a football match, a school open evening and a Halloween parade. Struck by guilt, he left Pimco. And now? El-Erian says that he and his wife take it in turns to wake their daughter in the mornings. He often picks his daughter up after school and he takes her to her activities. Soon, he and his daughter are even going on holiday together. “My work life balance [at Pimco] had got way out of whack,” El-Erian reflects. “…I decided to make a major professional change.”