Could it be that we’re entering a new golden era for Goldman Sachs? A time when the warm glow of favourable markets will be suffused with the twin aromas of restricted regulation and friends in high places? Deutsche Bank and KBW seem to think so.
Both banks have upgraded Goldman’s stock to buy, citing a sudden improvement in Goldman’s outlook. A stronger U.S. economy under a President Trump should benefit Goldman’s advisory and capital markets businesses and its fixed income and equity trading businesses, said Deutsche Bank analyst Matt O’Connor in a note this week. In a separate note, KBW’s analysts said Goldman is particularly well placed to benefit from the improving conditions in fixed income trading. Accordingly, Goldman's stock is at an eight year high.
It's not just market conditions. There’s also the unexpected rehabilitation of the Goldman-to-government move. 17-year Goldman employee Steve Mnuchin is Trump’s Treasury Secretary. Eight-year (or so) Goldman employee Steve Bannon is Trump’s chief strategist. Current Goldman Sachs president and Goldman number two Gary Cohn, is said to be in line to become a director of the Office and Management of the Budget in the Trump administration. This might be because Cohn is on friendly terms with Trump’s son in law, Jared Kushner, but Goldman seems a the stronger bond – Cohn and Mnuchin were both made partners in the same year, 1994.
Will Goldman’s newly empowered alumni be in a position to make life easier for their former employer? Quite possibly. Mnuchin used his first press briefing to declare his intention to strip back Dodd Franck and “look at” the “confusing” Volcker Rule. As a firm which historically ran a large proprietary trading operation, this will be music to Goldman ears.
Mnuchin, meanwhile, brings Goldman-style sensitivities to the White House. Highly attentive to detail, he reportedly criticized one of his staffers for wearing the wrong shoes (Gucci loafers, seen as too outré for Conservative politics), saying: "“You’re 80 percent perfect.” How this will go down in an ostentatious Trump administration remains to be seen. For Goldman, though, it’s possible to have too much of a good thing. While Goldman’s success looks assured in the short term, too close an association with the Trump administration could bring future reputational risks if things go wrong.
Separately, the detrimental effects of testosterone on trading floors have been well-documented, but this hasn’t prevented those floors being filled with men, or some ageing financiers self-administering testosterone shots. Now, however, new research suggests another disadvantage to the male hormone: it makes you unfriendly. Models built by researchers at the University of Massachusetts, suggest testosterone-heavy individuals not only feel less close to others, but desire less closeness in the first place. Don’t expect hugs in a volatile market.
Gary Cohn’s probably a bit bored of playing second fiddle to Lloyd Blankfein. (Vanity Fair)
Goldman's analysts think a Trump presidency will be good for every single sector of the equity markets. But they also caution that fear is likely to pervade the second half of 2017. (Bloomberg)
Just because illiquid bond markets haven’t caused problems yet, don’t assume they won’t in future. Recent trading was mostly in big names, there were no forced sales and there were enough people with differing opinions on Trump to create a healthy market. (Gadfly)
Traders didn’t get much sleep last night, what with the Italian referendum. (Bloomberg)
Private equity fund Terra Firma made 11 hires. One of them was the former chief executive of the Guardian Media Group. (Financial News)
Hedge fund Bridgewater preaches “radical transparency,” except when it comes to disclosing what happened with a claim brought by an employee alleging he was sexually harassed by his boss. (NY Times)
Angela Merkel is making the reclamation of Deutsche Bank bonuses past into an election issue. (Bloomberg)
A Marie Claire photographer shot Sergio Ermotti and made him into a style icon. (FUW)
Why you must sit the CFA exam even when you're pretty sure you're going to fail. (300 Hours)