Morning Coffee: 26 year-old trader? You have until April 2017 to make your career. Jamie Dimon's special friend
If you're around 26 years old and you work on the trading floor of an investment bank or hedge fund, you're in for the busiest and most-career defining five months of your life. Make the right calls between now and April 2017, and your reputation will be sealed.
The reason, needless to say, is Donald Trump. As Bloomberg points out, markets are balanced on some precarious assumptions. Will Trump the president prove more placatory than Trump the presidential candidate? Will Trump's promised fiscal stimulus (which, as hedge fund manager Eric Peters points out, is twice as large as Reagan's and equivalent to a huge 5% of GDP per year) go ahead? Will Trump repeal Dodd Frank and free banks from the shackles of post-crisis regulation?
For the moment, the assumptions seem to be yes, yes, and yes. Equity markets didn't collapse post the Trump victory. There was no rush to gold; bank stocks soared. But as Anthony Chan, JPMorgan Chase’s chief economist, notes, no one really knows what Trump will do next: "The message on the campaign trail has rarely matched the reality of what investors have seen long after the party horns and hats have been put aside." Basically, markets will only be able to make sense of the new president as he starts to govern.
The upshot is that traders, researchers, strategists and salespeople can expect to spend the next two months staring at Trump's transition website, where his policies and appointments are announced. Once he's inaugurated, they can expect another three months of politically generated volatility as the new administration gets to work. Peters points out that 70% of all the new legislation "for any administration throughout American history comes in the first 100 days in office." It will be at least April 2017 before securities professionals get any breathing space.
During this period, there will be significant opportunities to make money. As Bloomberg notes, Russian equities are already up on Trump's win; long term treasury yields have already spiked. Coal stocks are up, bank stocks are up; wind-power stocks are down. If the Trump-related assumptions underpinning any of these movements prove wrong, positions will be unwound.
The role of securities professionals now is therefore to second-guess Trump - a man with a reputation for unpredictability, until he steps out of the shadows. Get it right, and clients will remember you for a long, long time. As Lloyd Blankfein told Goldman Sachs staff last week, “Amidst the changes we expect to unfold, you should stay close to our clients. Your ideas, insights and advice will prove valuable to them as circumstances evolve in the weeks and months ahead.”
Separately, Jamie Dimon has got a new friend. It's not Trump - who reportedly contacted him to sound out his interest in becoming Treasury secretary - it's Philip Hammond, Britain's Chancellor of the Exchequer. Sky News says Dimon has met Hammond on three occasions since the Brexit referendum, and has impressed upon him the need for a 'multi-year Brexit transition.' Dimon's access is seemingly superior to that of other banks' lobbyists whose recent 15 minute meeting with the City Minister was mostly wasted on a convoluted joke about Ed Balls, the former chief economic adviser to the Treasury whose dancing to Gangnam Style on British TV has had hundreds of thousands of views on YouTube.
How to endure in the markets: watch all the time, but rarely trade, “turnover usually indicates a failure of judgment.” (WSJ)
More than $1 trillion was wiped off the value of bonds worldwide last week. (Bloomberg)
Trump: "When I had a financial turnround in the early 1990s, there were contributing factors, but I realised that I had lost my focus. I didn’t blame anyone but myself for that. Focus is very important." (Financial Times)
Trump's presidency means new rules requiring banks to defer bonuses over a four year period and mandating seven year clawbacks might not come to pass. (Bloomberg)
Citi is working on a "project of substance" to move 900 jobs from London to Dublin. (Sunday Times)
Just call Dublin "Canary Dwarf." (Bloomberg)
How to hack your hotel’s wifi. (Bloomberg)
Which programming language should you learn first? (Medium)
Brexit means British expats don’t want to come home. (BBC)