Morning Coffee: Goldman Sachs’ golden partner said the wrong thing on a client call. If you want a banking job now, try Hong Kong

One of the things that superstar traders often find difficult to cope with when they move into senior management roles is to moderate their language.  It’s not just a matter of remembering to use swear words judiciously; the whole culture of a high pressure trading desk tends toward braggadocio, “banter” and dark humour.  The sort of remark which comes over as sharp and witty on a squawk box can appear to be really quite tone deaf to a more formal audience.

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Kunal Shah, the co-head of Goldman Sachs’ fixed income currencies and commodities (FICC) trading business is presumably more than aware than this today.  On a client call scheduled to discuss the current war in Iran, he remarked that some Goldman clients were “just glad that there’s something to talk about that isn’t software exposures and private credit … this is at least a distraction from that”.

Ouch.  Goldman Sachs’ press office have responded that Shah “was asked a question about what he was hearing from clients and shared his observations from multiple points of view”, but this seems to miss the point.  Nobody in private credit really thinks that burning ships and drone bombs have a silver lining, and nobody really thinks that the geopolitical chaos is any kind of media win that will stop anyone from noticing problems with their marks to market.  If any client said that to Shah, in so many words, then it’s much more likely that they too were just making an off-colour joke, and probably would have been surprised to hear it repeated out of context.

The gaffe is unlikely to damage Shah’s personal franchise or popularity, though.  The hedge fund clients who were the main target of the call will, for the most part, have grown up in the same culture.  To complain about a tasteless remark would be the ultimate loss of face, showing an unforgivable failure of sang-froid which might cast doubt on one’s ability to take risks. Even if they had been in the process of evacuating their office and stockpiling food while listening to the call.

It’s just a little bit embarrassing; presumably Kunal Shah will be cringing a bit while listening to the playback.  And it’s a reminder that his own rise through the ranks (MD at 27, Partner at 31 and co-head of FICC at the age of 41) has been so meteoric that he hasn’t quite had enough time for all the rough edges to be knocked off.  We should probably treasure remarks like this, though, as they show that for the time being, there are still some top bankers who haven’t been rendered completely bland by media training.

Elsewhere, the Hong Kong IPO market has got so hot that some banks are no longer able to cover all the bases with their own staff.  Morgan Stanley, for example, has put together a “transaction support team” to help carry out due diligence on new issues, and have had to go into the short term contractor market and hire people on temporary one-year contracts. 

This is not unknown in the industry – due diligence is something of a commodity skill, which can also be bought in from accountancy  and consulting firms.  But it’s not at all common in the Asian market, and it’s a sign that the pressure must have reached levels at which it’s become literally impossible to execute the pipeline even if you abandon all the HR protections on junior bankers.

There are plenty of other signs of stress across the whole region.  HSBC is cancelling remote working for front office staff, while Standard Chartered has announced plans to double the number of bankers at its high-net worth unit in Singapore.  As the rest of the world wakes up every morning wondering what the next shock is, it seems like China and its financial centres are very firmly back in business.

Meanwhile …

Threats from Iran to strike banks in Dubai are being taken seriously.  Employees at Goldman Sachs, Citi and other firms are being told to work from home, and although the DIFC has not been evacuated, people are being told to seek permission before going into offices across the Middle East. (Bloomberg)

The analysts at Cairn Capital use some unusual metrics.  They spotted that Paresh Raja, the finance director of Market Financial Solutions, seemed to be wearing a £200,000 watch while living in a £400,000 house, and this application of the “watch/house ratio” kept them out of one of the biggest recent private credit blow-ups. (FT)

Jefferies, on the other hand, did not do the watch/house check, and were among the lenders to MFS, and quite a few other “high profile situations”.  Rich Handler is now arguing publicly with the CEO of Western Alliance Bancorp, which is suing Jefferies over the extent to which “non-recourse” loan facilities meant what they said. (Bloomberg)

The Pentagon is staffing up its new private equity team.  It wants to hire 30 bankers, to invest $200bn in the defence (or War, presumably) sector.  As well as being an opportunity to accelerate the sale of stock compensation, and to play with “more capital than most investors deploy in their entire careers”, it won’t have escaped bankers’ notice that the opportunity is “not a career move, but a two-to-three year secondment”, so you won’t even have to stick around to find out whether the deals worked out or not. (Semafor)

After many years, Revolut has finally got a full UK banking licence. (Bloomberg)

The latest flex for super-rich and important people seems to be to write emails with absolutely terrible spelling and grammar, leaving it to lesser mortals to work out what they mean. If your boss tries this affectation, it is officially acceptable to ask him if he’s pretending to be Jeffrey Epstein. (WSJ)

It is almost disappointing to find out that, in a week of such high drama for natural gas markets, Pierre Andurand’s “Commodities Discretionary Enhanced Fund”, famous for its wild swings in either direction, was 6% up last week. (Bloomberg)

Meanwhile, Caxton Global Macro is down 7% … (FT)

… and the big multistrats are mostly nursing mid-single digit losses, with DE Shaw as the stand-out exception. (Bloomberg)

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