Morning Coffee: Goldman Sachs & JPMorgan instruct staff on new Trumpian era. The coolest traders on election night

It can’t be a great job, writing the all-staff memo from top executives of a major investment bank on the day after a Presidential election.  The trouble is that there’s nothing interesting that you’re allowed to put in it.  If you were to say that you vehemently opposed the winner, that your firm didn’t believe in working together across political divides, or that you dreaded and hated the prospect of engaging with the new administration, then that would grab attention, but of course you can’t.  You can’t even say that all the fuss has slightly distracted from your laser-like focus on clients’ needs, or that you’re frankly more than a little bit pessimistic about the people of the USA. 

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So don’t expect anything other than boilerplate from the desk of your CEO; that’s certainly what came out from David Solomon at Goldman Sachs and from the JPMorgan executive committee.  These statements exist not to convey any real information, but just to mark the passing of another significant event. And perhaps to remind staff that whatever words might have been exchanged during the campaign, it is now all over, there is to be no gloating or blaming, and no further hard feelings between people of different political sympathies.

Of course, it’s not hard to guess what the CEOs might have wanted to say on a day when their share prices were both up by double digits.  Something like “game on!” or “here we go!”, presumably.  The new administration is likely to take a much less harsh attitude to antitrust regulation, which makes M&A deals easier; analyst Mike Mayo described it as a “regulatory game changer”.  We can also presume that banks' worries about having to hold more capital for the “Basel Endgame” can be set to rest, along with some greatly disliked consumer finance regulations passed over the last four years. 

So whether they were intended that way or not, some employees will naturally take statements like “it's clear that a new administration will bring policy changes potentially important to our business and clients” or “begin the work of bringing our nation together and focusing on the pressing economic and global issues before us” to mean something like “we are all going to make a ton of money”.

There’s perhaps one little cloud on the horizon.  Although the sharp moves in long bond yields and increase in the US dollar exchange rate will have been good for trading desks, they don’t do too much for the cost of debt, and therefore they aren’t great for private equity clients. Everyone will have to come together, in a spirit of unity, and hope that the equity market remains strong in order to get some IPOs away in the New Year. 

Elsewhere, having prepared themselves for a long and gruelling struggle along the lines of 2016, trading desks actually found themselves experiencing a fairly easy time of it, with the election result more or less established while most of the decent bars were still open. Hedge fund Millennium Management apparently had its Americas execution desk open all night long, but it’s doubtful that many of the pods were making new investment decisions after 2am.  (This was quite handy for one hedge fund manager, who had decided to trade through the night from his mansion in the Cayman Islands, a plan which was disrupted by a hurricane).

Which means that the real finance news stories of the night were about the celebrations and wakes. The title for the most stylishly chaotic evening has to go to Mike Novogratz, former Goldman star and founder of crypto firm Galaxy Digital.  Having previously been a big donor to Democrats, he apparently dropped his wife off at an election party, then sat down with a bottle of Jack Daniels, a bottle of champagne and a tub of ice cream with the intention of “trading like a banshee”.  He quickly realized that while rooting for Harris, the market had led him into a set of positions which gained massively from a Trump victory.  So before long he was able to toast his victory with one hand, drown his sorrows with the other and head off to find someone to share the ice cream with.

Meanwhile …

“Greenwashing” used to be the name for pretending to have ESG credentials when they weren’t really up to much.  Now, according to analysts at Jefferies, banks might find themselves “greenbrushing”, trying to erase evidence of wokeness in the face of potentially hostile new regulations under the new administration. (Bloomberg)

An anonymous French quant called Theo was the “Trump Whale” on prediction markets.  Apparently the reason he was so confident in taking his huge $30m position was that he had personally commissioned some opinion polls, using a different methodology to everyone else which he regarded as superior. Somehow, this is the most “French quant” possible thing to do. (WSJ)

Japanese wealth management has some crazy stories, even by the standards of US wirehouse brokerages. Nomura has announced that in future, brokers will have to get management approval to visit clients at their homes, after one (now ex) employee has been arrested on suspicion of drugging an elderly couple, stealing money and setting fire to their house. (Bloomberg)

The Credit Suisse Spygate is the story which will not die.  Lawyers at UBS have now discovered that the takeover of their local rival means that they’ve inherited a lawsuit from the ex-husband of Tidjane Thiam’s partner, who claims that he was also spied on, shortly before the divorce.  (Finews)

Somewhat under the radar, Credit Agricole has been putting together a FICC franchise.  It seems to be paying off; although it drove group costs higher, the revenues appear to have saved an otherwise disappointing quarter. (Bloomberg)

Under Communism, the joke used to be “we pretend to work and they pretend to pay us”.  Now there’s an AI tool which allows you to pretend to apply for all the “ghost jobs” that employers put out to gather intelligence about the market.  (Business Insider)

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