Morning Coffee: The cautious 32-year old private equity guy watching peers lose their jobs. Goldman analysts accidentally demonstrate how AI can replace them

When a market turns down, the people who have most reason to worry are often the high-profile recent recruits.  There are few things more uncomfortable than being hired to a new firm on an adventurous package, with the expectation that you’re going to hit the ground running, and then to come back from gardening leave to find things are absolutely frozen: there are no deals to be done, and you’re just there sitting on your hands with no allies or mentors, just bathing in the resentment of everyone around who thinks that your compensation is draining their bonus pool.

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For this reason, Joseph Magnuson, a private equity guy with a wife and three children in Texas tells the Wall Street Journal that he's feeling pretty happy at his market timing.  Magnuson moved jobs in 2021 for a 60% pay rise, but since then he’s stayed put rather than taking advantage of a hot market to move a few more times and get paid even more.  Now the music has stopped, and as he puts it, “It’s all kind of coming to a head, and the people who were really opportunistic are starting to lose their jobs”.

Is this a good reason not to seek out the best pay that you can?  Probably not.  Even in cases like Magnuson’s, it’s more luck than judgement which allows you to take advantage of good times without leaving yourself standing out as a cost-cutting opportunity in the bad.  If you can forecast what’s going to happen to the overall market over a period of years, you ought to be making money out of that talent, not using it to optimize your job moves.

And it’s not as if being in the middle of the pack is a particularly reliable way of keeping your job safe.  When really bad downturns come, the most expensive people often go first, but not always.  In some cases, the high-priced rainmakers end up being among the last cuts to be made, as while they are still there, the franchise still has some hope value.

Front office investment banking is not a career that’s really suited to a “play it safe” kind of strategy.  Risk management and compliance are better choices if that’s how you want to live your life.  If you’re never one of the most expensive employees at your level, then the “m-word” (mediocre) is likely to eventually get associated with you, and that’s a badge which is very difficult to get rid of once acquired.

So there are only two real ways to make a career.  Either stay put and go your best – you’ll hopefully sometimes be one of the expensive people, but you’ll never be one of the new expensive people.  Or jump from firm to firm, taking as much advantage as you can of the pay boost, and accept that you’re taking a risk in doing so.

Elsewhere, there was a time not so long ago when it would have been considered a quite clever and cool use of alt-data for a sell-side analyst to go through a thousand of Donald Trump’s social media posts, trying to correlate them to movements in the oil price. The Goldman Sachs commodities team who did exactly that have found out that Trump seems to prefer a price of between $40 and $50 a barrel; he’s posted over 900 times about the subject in the last 15 years, complaining that the price is too low for producers when it’s below this range and a bad deal for American households when it’s above. 

The trouble is that feats of analysis like this aren’t as impressive as they used to be, because everyone just presumes that you fed the data into ChatGPT.  The Goldman team don’t seem to have given away exactly how they “sifted” the Truth Social feed, but even if they didn’t use AI, a lot of clients might just ask “why not”?  Inadvertently, Daan Struyven and his team might have provided another example of a way in which their jobs could be automated.

Meanwhile …

“Svuota Londra” (“Empty London”) is the Italian name for the new tax treatment they brought in to benefit from the UK’s abolition of its favourable non-dom regime.  It might be working, as Ares is apparently planning to open an office in Milan, and several of the big names of UK private equity have already gone. (Bloomberg)

JPMorgan London employees have been going into their office through a side entrance, as the front door of their building has been smashed and the fascia vandalised with red paint. (City AM)

Barclays hasn’t looked externally to replace Vanessa Koo as head of APAC investment banking – they’ve promoted Avinash Thakrur, the current head of capital markets financing. (Bloomberg)

Sound advice to a manager who has just been criticised for overworking the team – take a few seconds to think about how to express yourself, because it is almost never the actual workload that’s the source of the complaints.  “Juniors will tolerate long hours if they feel they’re learning. If they think you’re being difficult they’ll switch off or worse, quietly undermine you”. (Global Capital)

A farewell appearance from veteran Hong Kong banker and activist investor David Webb, who says that “I fought the disease [prostate cancer] as hard as I could and I'm still fighting but there is an obvious end to it” (Finews)

The Mandarin Oriental Residences was meant to offer a condo living experience “like being in a top hotel with no other guests” to the super-rich of Manhattan.  According to a current lawsuit, even paying a huge amount of money can’t always ensure a cockroach-free environment. (Curbed)

Jefferies appears to have quietly built itself the top franchise in providing investment banking services to crypto firms.  After first being the only bank to take MicroStrategy seriously, they appointed the first bank to dedicate an MD exclusively to crypto, and now they’ve advised on over $150bn of deals in the space. (Coindesk)

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