Financial crises have a habit of festering during the dog days of summer. Lehman’s collapse had been simmering for months until it eventually toppled in September 2008 and – on a much smaller scale – the problems begetting investment banks last year only really started to become apparent during towards the end of the third quarter when the ‘summer lull’ excuse was no longer valid.
Right now, it’s eerily quiet out there. As the WSJ points out, the last 30 days have been calmer than at any point since 1995 on the U.S stock market. The S&P 500 hasn’t moved more than 0.5% in either direction. Hit the beach, literally nothing is happening.
But periods of extreme quiet often “ended in a sharp correction”. However, the VIX – which acts as a fear gauge for Wall Street – isn’t expecting this. It’s “roughly in the middle of its range for the past 20 years”, says the WSJ. Part of this is Brexit – investors closed their big positions after the vote, meaning there’s less need to “trade on the news”. Then there’s the Fed, which has continued its ‘put’ under Janet Yellen, meaning it’s more likely to step in to prop up asset prices if they start to fall.
“Everything feels distorted and unnatural; you know the source of that is the central banks but equally there’s nothing to stop them carrying on,” said Matt King, head of credit strategy at Citigroup. No bother then.
Except…the Brexit also vote has somehow slipped into a ‘no big deal’ category over the summer, but there’s a growing unease that the repercussions are only really just getting going.
Investment banks aren’t really going to wait two years before they move people out of London to ensure access to EU markets, they’re likely to do it next year at the latest; the UK government continues to bicker over its policy on the City; European companies are already packing up and UK commercial property values are falling but no one really seems to know by how much.
If you’d got comfortable in your seat over the past few weeks, bear in mind that the main thing that’s stopping big banks from moving people out of the UK – passporting rights to the EU – is looking increasingly shaky. Michael Fuchs, a close ally of Angela Merkel, said yesterday that trying to gain concessions for the City will be a tough ask and rules will not be bent.
“If you’re member of a club you have certain benefits, but if you’re out, you will not have the benefits any more,” he told Bloomberg. “It’s not going to be an easy game.”
Separately, while junior Goldman Sachs bankers are satisfied with Tinder, those further up the ranks demand something more exclusive for finding the right partner. Investment bankers in the City of London are ready and willing to pay £9k ($11.8k) annually for membership of dating agency Vida. It counts ‘senior executives’ from Goldman Sachs, Deutsche Bank, Barclays, EY and KPMG among its clients, 55% of whom are men aged between 35 and 60.
What are they looking for? “I meet a lot of very successful men who specifically don’t want to meet people in finance,” said Rachel Maclynn, the firm’s founder and managing director told Business Insider. Instead, they’re interested in people from ‘creative’ industries like fashion or marketing to “balance out” their “logical and analytical” traits.
But not just anyone: “A director in a fashion business, for example,” she said. “But smaller firms, people working for hedge funds, for example, have less of a focus on meeting someone with a certain level of academics.”
Two ex-Goldman traders who now run hedge funds stand to make $600m if a New York court case manages to unravel complex legal minutiae and rule in their favour over U.S. mortgage debt they snapped up during the financial crisis (WSJ)
Goldman Sachs will cut another 15 jobs in New York before the end of the year (Bloomberg)
Boutique investment banks are cleaning up as healthcare M&A takes off (Financial News)
UBS has taken on two junk traders, Jeff Chang and Vivek Raman, from Morgan Stanley (Bloomberg)
Goldman Sachs has teamed up with lending start-up, Fundation: “Marketplace lending was going to change the state of banking, but that’s not really the case,” said Fundation CEO Sam Graziano. (WSJ)
Sihan Shu, who helped Paulson & Co make its famous 2008 bet against the U.S. housing market, has left and will be launching his own hedge fund (Reuters)
Summer vacations lead to a spike in divorce rates (WSJ)
Why French men dress better: “The idea is to express good dress sense through detail but not through style. You do not want to take that sort of risk.” (Financial Times)