Morning Coffee: The call that highlighted why banking jobs are boring but necessary. The programmer who owes Goldman Sachs $10m

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Tesla earnings call

Big dreams, no money

If ever there were an event which illustrated precisely why research jobs in banks (and maybe banking jobs in general) are not the most exciting in the world, and yet fulfill a vital function, it is the now infamous Tesla first quarter earnings call from earlier this week. Here, the usual etiquette, where analysts say, "Hey, great quarter!" and CEOs say, "Hey, great question!", was thrown out the window. Instead, analysts got pretty direct in their questions about capital requirements and cash burn, and Tesla CEO Elon Musk got pretty blunt in his replies - at one point accusing analysts of being, "boring and boneheaded." 

As Bloomberg points out, if you inhabit a world where you're trying to initiate space travel between London and New York, or invent travel in a vacuum-filled tube between LA and San Francisco, the analysts' questions were a bit prosaic. Who cares about boring things like profit margins and capital expenditure when you're changing the nature of travel as we know it?

Musk seemingly doesn't. Asked whether Tesla could reach a 25% gross margin target on its Model 3 despite new tariffs and higher commodity prices and labor costs, he said: "Yeah, but we’re talking about a 3% to 5% difference, and that’s something that we’ll solve like within three months to six months later...So don’t make a federal case out of it.”   When another analyst inquired about capital, Musk retorted: "Excuse me. Next. Next. Boring, bonehead questions are not cool. Next?”

Fortunately, Musk had a retail investor lined up on Youtube to ask the sorts of questions he did want to answer.  These were way more exciting and included things like, "When will the robo-taxis show up?," and, "Will Tesla amp up its Superchargers? Because Porsche is talking about some cool stuff," and, "Will Tesla require a breakthrough in battery technology for the (forthcoming) Semi truck?"

As Bloomberg points out, Musk's preferred questions were futuristic and expansive. They were about the big conceptual issues, not the nitty gritty like how this stuff is going to be funded. If ever, then, you wanted an exposition of the role of banks and bankers, it is here: your role is to bring the sanity, to inject the reality into a situation. It may not be quite as exciting as dreaming about a future of gravity-free travel, but it's absolutely imperative and innately boring sensible.

Separately, Sergey Aleynikov, a 48-year-old Russian-born former Goldman Sachs programmer did 11 months of jail time for making a copy of the bank’s “secret sauce” high-frequency trading source code just before leaving to take a similar job at Chicago-based Teza Technologies. Aleynikov doesn’t dispute he took the code, but claims he wanted to study it – his lawyer says he didn’t break any criminal laws, and the matter should be a civil dispute, according to the New York Post.

Three years ago, his conviction looked likely to be overturned when a New York judge ruled in his favor. However, a state appeals judge upheld a conviction against him, which is probably the last word on the case. Now, to add insult to injury, his nine-year court battle of appeals has left him in a $10m hole after a New Jersey court ruled that Goldman Sachs doesn’t have to pay his legal bills.

Meanwhile:

Bank of America will shift 125 British jobs to Ireland ahead of Brexit. (Reuters)

CEO James Gorman was a McKinsey consultant, not a star trader or a banker, and his disciplined approach has transformed Wall Street’s problem child into one of its steadiest performers, reflecting the reality that finance is now a mundane business. (WSJ)

A second appeals court win for former Jefferies MD Jesse Litvak has changed the landscape in a federal attack on illegal sales practices in the opaque world of securities backed by assets such as home mortgages. (Bloomberg)

An ex-Cantor Fitzgerald MD was cleared of charges that he defrauded customers by lying about prices of mortgage-backed securities, dealing federal prosecutors another blow in their efforts to tame questionable practices used by bond traders. (Bloomberg)

Cristina Chen-Oster’s lawsuit accusing Goldman of sex bias is 13 years in the making. In the #metoo era, her case just got huge. (Bloomberg)

Jay-Z is in hot water with Wall Street’s top regulator for refusing to cooperate with an SEC probe. (Bloomberg)

A nameless, secret group of the world’s most elite traders confers “a hunting license” that lets an investor sit at the “big boy table and make high-level trades not available to stupid amateurs.” (Bloomberg)

Once a critic of high-frequency traders in Michael Lewis’s camp, Mark Cuban changed his mind on HFT just in time. (Bloomberg)

Bitcoin bulls may want to curb their enthusiasm in the wake of Goldman and Square news, as cryptocurrency usurpers find it tough to scale Wall Street’s pinnacle. (Bloomberg)

The private equity executive and the first African-American chairman of Carnegie Hall Robert F. Smith and his wife, a Playboy playmate, bought a 10,000-square-foot Manhattan triplex with a rooftop terrace for close to $60m. (WSJ)

Apollo Global Management suffered $67m in losses from its investment activities in the first quarter. (WSJ)

KKR partners have hatched a clever scheme to pay less in taxes, and other PE firms are likely to follow suit. (WSJ)

In stark contrast to currently ultra-competitive college admissions, many universities will be desperate for students in less than a decade. (Bloomberg)

Have a confidential story, tip or comment you’d like to share? Contact: dbutcher@efinancialcareers.com

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Photo credit: nadla/GettyImages

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