Morning Coffee: The Goldman Sachs guide to an easy summer at work. Lightweight banker vs. power drinker
Summertime and the living’s easy? Actually, not so much. Wall Street traders and portfolio managers have found that making money in the current low-volatility environment is difficult.
Experienced money managers and traders used to pouncing on price swings are desperate for opportunities to capitalize on market inefficiencies. They fear that the fundamental analysis that informs their investment decisions will give way to a herd mentality where everyone is chasing the same crowded trades.
Well, fear not, because Goldman Sachs has the cure for what ails you during this eerily quiet period for the markets, as reported by Business Insider. If you're looking for an easy summer with the markets, you might want to heed Goldman's advice.
First of all, despite worries that equities are overvalued, Goldman suggests you should not be too pessimistic about stocks. In fact, you should be buying them: Goldman notes that the S&P 500 has seen large risk-adjusted returns relative to other asset classes in low-volatility periods since 1990.
Further, Goldman asserts that stocks see the biggest improvement in risk-adjusted performance when prices are relatively stable, especially emerging-markets, European and Japanese equities.
Goldman is also bullish on high-yield bonds, but it pretty much always is - not just during low-volatility periods.
Overall, Goldman strategists' recipe for success during this quiet summer is to be overweight in global equities and neutral in credit. It advises steering clear of bonds and commodities and to avoid the Treasury market. Despite the fact that government bonds historically reap strong returns during low-volatility periods, coupon income has been dwindling, rendering it unable to counteract any losses from rising interest rates.
So follow Goldman’s advice and head to the beach with the knowledge that your investments and those of your clients are in good order. Just be prepared to return if volatility suddenly spikes.
Separately, billionaire Mike Ashley, owner of the Sports Direct sporting goods retail chain and the Newcastle United soccer club, may have to pony up £14m ($18.16m) if the ex-Bank of America Merrill Lynch investment banker suing him wins the High Court lawsuit currently underway. However, regardless of the outcome, Ashley is confident that he could drink his opponent under the table, saying he’s a “power drinker” in stark contrast to Jeffrey Blue, the “lightweight” banker whom he despises.
Ashley said that he does not drink often, but when he does, he’s “trying to get drunk,” according to The Telegraph.
Blue accused Ashley of reneging on a verbal agreement he made in a pub to pay him £15m ($19.45m) if the Sports Direct share price doubled to £8 ($10.38) within three years. He says Ashley paid him only £1m ($1.3m) – and he wants him to cough up the other £14m ($18.16m) that he allegedly promised after a heavy drinking session.
Testifying in court under oath, Ashley dismissed his comments as mere drunken banter, saying that within an hour he drank four or five pints of beer: “It was a fun evening – drinking at pace. I like to get drunk. I am a power drinker. My thing is not to drink regularly. It is binge-drinking. I am trying to get drunk.”
Ashley said he had been trying to “get pissed and have a good night out” but that Blue “would never have been able to keep up. He's a lightweight when it comes to drinking.”
European regulators and government officials are luring London finance companies with the promise of cheap rents and to protect bankers’ bonuses ahead of Brexit, sparking a continent-wide backroom bidding war. (WSJ)
Britain will lose its status as Europe's top financial center unless it keeps borders open to specialist staff, improves infrastructure and expands links with emerging economies. (Reuters)
The head of the U.K.’s financial regulator argued that financial firms shouldn’t have to relocate from the City to maintain access to the E.U.’s financial markets. (WSJ)
The City of London wants the U.K. to offer a digital skills visa. (FT)
Moelis & Co. hired Pablo de la Infiesta as a managing director and the head of the private funds advisory group in EMEA. Previously, he was a managing director and European head of the private capital advisory group at Lazard. (PE Hub)
BAML, Deutsche Bank, HSBC, RBC and StanChart are among the banks transferring staff from equities and foreign exchange, where electronic trading is more mature, to other areas to speed up the spread of e-trading. (Risk.net)
Almost one in 10 staff at the U.K. central bank earned at least £100k ($129.7k) before benefits and bonuses last year. (Financial News)
As the financial services industry goes, so goes Connecticut. (The Atlantic)
Many smaller hedge funds can still make a profit despite the expense of greater compliance demands from regulators and investors if they cut costs by outsourcing roles. (WSJ)
What’s high-performing developers’ secret? (Daftcode)
People perform better when competitive impulses are sparked with trash talk and other banter. (WSJ)
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