Morning Coffee: “By far the best trader in the world, period.” The banker who worked 18 hour days non-stop for a year
In this era where trades are increasingly placed electronically, the trading ability of human beings often comes down to little less than babysitting algorithms and recalibrating systems to improve performance. However, human traders do still exist and exceptional humans are apparently becoming far harder to find.
One reason Louis Bacon gave for closing Moore Capital Partners last week was competition for staff. "Intense competition for trading talent coupled with client pressure on fees has led to a challenging business model for multi manager funds such as ours," Bacon explained in a letter explaining his decision to return client funds.
It's not clear where all this competition for talent is coming from. Presumably it's from other funds rather than from banks which are increasingly content with becoming low-risk electronic market makers. Brevan Howard, for example, is apparently hiring new portfolio managers (PMs) under incoming chief executive Aron Landy. It's just a shame, then, that there aren't more traders around like Bacon himself.
In a encomium for Bacon's trading career, the Financial Times quotes a former colleague who says Louis was, “by far the best foreign exchange trader in the world, period,” and recalls that when George Soros placed his legendary bet against sterling in 1992 he called Bacon (then aged 36) for advice on increasing the size of the trade.
Nonetheless, Bacon does seem to have found some talented traders to work for him. As we noted last week, various traders from banks joined Moore in the past year, including Goldman Sachs' former global head of rates trading. Bacon's own son also features among the ranks: Louis Dillon Bacon (also known as Dillon Bacon) joined Moore in 2017 after nearly two years at Goldman Sachs according to his LinkedIn profile. Another ex-colleague suggests that Bacon senior might have called it a day far sooner had it not been for all the people he employed.
The real reason funds like Moore have been hurting might have less to do with problems finding good talent and more to do with the 'zeitgeist.' “Central banks have compressed volatility, while quants have destroyed the shorter-term trading opportunities. That’s why macro has been hurt,” the head of another fund (Caxton) tells the FT.
Bacon senior is fine - after a nearly 30 year trading career he's thought to be worth $1.5bn and is now free to pursue his interest in conservation and dispute with a neighbour in the Bahamas (whom he accuses of damaging the local environment). His staff might not be - Moore employs nearly 400 people; it's unlikely Brevan Howard has that big a need for new PMs. Talent shortages or not, Bacon is offloading his people into a mostly saturated market.
Separately, you might want to get some rest before the next financial crisis arrives. Symon Drake-Brockman, now 58, spoke to the FT about his experience as CEO of the Americas business at RBS in 2008, when it fell to him to de-risk the bank's mortgage book. When he arrived in the U.S. that year, Drake-Brockman said he found employees "in shock." It fell to him to find a solution. For an entire year, he worked from the moment he woke up until midnight and wrote off $3.5bn of mortgages while selling assets at a discount.
Science and engineering majors at elite schools provide the highest return on investment. At the Massachusetts Institute of Technology, math majors earned a median of $120,300 after graduation while borrowing just $8,219—the lowest debt-to-income ratio for bachelor’s degrees. (Wall Street Journal)
UBS has been cutting jobs but that's fine - it has a tool called Hummingbird that matches staff skillsets to open vacancies at UBS within "nano-seconds." (Financial News)
European banks moved $280bn of assets away from the U.S. market as they sought to escape strict capital requirements. Deutsche Bank has cut assets in its American holding company from $203bn to $117bn since 2016 (although it increased assets by $45bn at its main U.S. branch). Credit Suisse cut U.S. assets by 47%. (Financial Times)
Deutsche Bank is not as systemically important as it used to be. (Bloomberg)
Zdenek Turek, the Dublin-based Citibank Europe Plc Chief Executive Office, says Britain needs to get on with Brexit. "“People have made decisions, spent money on platforms that are ready to go but aren’t fully functioning yet because moves have not happened yet.” Only 60 Citi jobs are being moved out of London. (Bloomberg)
“I am afraid for my family, and I’m afraid people will die, my friends,” said Kevin, a 25 year-old who works as a researcher with a financial institution in Hong Kong and who's stuck at Hong Kong Polytechnic University. He can't remember what day it is any more and doesn't know if he has a job to go back to. (Financial Times)
Michael Grimes at Morgan Stanley explains the role of a technology banker. "The institutional investors are the price setters; if they’re eager to invest in a company, then we try to predict that and get behind the companies that we think will work well there, or [else] give the company advice that this maybe isn’t the right time or maybe this won’t be well-received." (Techcrunch)
Grimes also elaborates on the benefit of direct listings. (Techcrunch)
The European Union plans a $3.9bn fund to invest in early stage technology. (Bloomberg)
Credit Suisse is laying people off in its securities finance business. (FOW)
Goldman Sachs is using gender neutral prononouns. (Reuters)
O.K. is seen as passive aggressive by Millennials. You have to say "kk". (New York Times)
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