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Goldman chiefs tell juniors to take a chill pill.

Morning Coffee – Goldman executives tell bankers not to panic. The hottest job in banking tech has gone cold.

The vibes out of 200 West Street haven’t been exactly great over the last few months – it wouldn’t be wholly unfair to take the anonymous banker quoted as saying “Nothing says ‘Happy New Year’ like ‘You’re already on the verge of losing your jobs — but let’s just make sure you lose your free coffee, too” as representative.  But if you listen to people like Dan Dees and Jim Esposito (the co-heads of Global Banking and Markets), there’s a lot more reason to be hopeful.  A whole set of senior Goldman bankers interviewed by Reuters have been talking about being “primed for a recovery”, possibly in the second half of 2023.

Of course, bankers are natural optimists, and there’s a strong tendency to say that you have to look at actions rather than words.  If Goldman is about to announce thousands of redundancies and getting rid of free coffee, then how can the outlook be anything other than bleak?

Well … for one thing, they haven’t got rid of the free coffee.  Of course they haven’t – when did you ever hear of an investment bank without coffee machines?  Goldman has made it clear that “There is free coffee available to all employees on every floor — from drip coffee to espresso drinks”.  What’s changed is that you now have to pay for the nice expensive stuff in the Sky Lobby on floor twelve.  This apparently came as a shock to some bankers who don’t read signs and who think that a sensible reaction to a change in the cafeteria is to rant to the New York Post. 

So the question is – what’s the basis for these predictions?  Or more cynically, are any of the bankers talking up the prospects for H2 2023 likely to have signed up to corresponding revenue budgets, or is this just morale raising happy talk?  Unfortunately, the answer to that question is a little bit ambiguous.

The bankers quoted in detail are the global co-heads of M&A – Stephan Feldegoise in New York and Mark Sorrell in London.  And what they’re talking about is a version of the “dry powder” thesis that has been hanging around for the last six months.  Companies are not doing deals because creditors have pulled back from risky buyout loans, but according to Sorrell “When the financing market comes back, we don't know when it will happen, but it will happen because of the amount of liquidity in the system, we think transaction volumes will and activity will recover” and the resurgence “may be quicker than we expect”.

It may also be slower than we expect.  You wouldn’t necessarily want to bet against the existence of some big, dumb player out there with enough spare capital to start the market going again, but so far, if such a player exists, they’re keeping quiet.  It’s true that one day the cycle will turn, and when it does the top financial sponsors teams will make a lot of money, but for now the overall impression is of a lot of guys in suits, sitting in an office full of silent phones, saying things like “when you go through periods of volatility, you know it creates opportunity” to each other.

Elsewhere, it was only a year ago that cloud computing was the hottest thing in banking tech; JP Morgan even built a special campus out in Seattle so that cloud afficionados wouldn’t be too far from the fog and rain that they love.  A year later, the future for finance cloud hiring looks a bit more cloudy.

There is still plenty of competition for top talent and in  specialised niches like cloud security and reliability engineering.  But there’s no longer anything like the same desperation to get anyone with any basic familiarity with cloud systems.  Many of the big “lift and shift” projects (getting big applications and databases shifted onto the cloud in one big lump for the first time) have been completed, and the engineers responsible for those projects are now available to actually do useful things with them.  Added to which, big tech is not quite so competitive in the labour market.

So what’s the next big trend?  It seems that the current labour shortage is in artificial intelligence.  But for most banks, it seems that new AI applications are going to be located in the cloud anyway, so those boot camps haven’t gone completely to waste.

Meanwhile …

Rakesh Kumar has gone from BlackRock Alternative Asset Management’s special situations group to be head of equity capital markets at Surveyor Capital, part of the Citadel group. (Bloomberg)

Possibly despairing of ever being able to teach a manageable course on the subject, the CFA Institute has written to global regulators asking them to try and create some kind of consistent global framework.  (Financial News)

Complete the sale of the securitised products group, get the rich clients back on side, set up First Boston with a credible business model, rightsize the cost base and avoid any more large lawsuits.  As long as Credit Suisse can get that little to-do list ticked off and with a bit of luck, it can get back on track just like Deutsche did. (Bloomberg)

Emanuel Lemelson, a priest who also runs a short-selling hedge fund along strictly Christian ethical lines, has finally lost an appeal against an SEC judgement which held that some of his public statements about a company he was shorting were breaches of the Eighth Commandment. (Dealbreaker)

Mangesh Ghogre has quit his job as head of equity capital markets at Nomura India and moved to the USA on an EB-1 “Genius visa”.  It’s not quite clear whether the genius in question refers to his skill in managing IPOs or to the fact that he’s one of the world’s best crossword puzzle setters. (Money Control)

According to a research paper from the Fed, there are hardly any particular personality traits common to successful traders – only “general intelligence”.  Good traders also have “strategic sophistication in the sense of taking analysis of other people’s behavior to high levels”, which means that they’re poker players rather than chess players. (Bloomberg)

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