Morning Coffee: The amazing trading job you never knew about. Mnuchin makes a mean Kool-Aid
Behind the scenes of Amazon, day traders, quants and coders of artificial intelligence algorithms compete as third-party vendors selling products alongside Amazon’s own goods – an unseen world complete with volatility and even flash crashes similar to a stock market. In fact, the wild pricing gyrations sometimes resemble the peaks and valleys of a penny stock during heavy trading.
The portion of Amazon’s business driven by independent sellers is a juggernaut that translates to tens of billions in revenue a year – 100k of the 2m registered sellers each sold more than $100k in goods in the past year. What better way for unemployed or burnt-out traders to gainfully apply their skills in their spare time?
The biggest of these vendors are growing into sophisticated retailers in their own right – with powerful software, according to the Wall Street Journal. The cream of the crop use pricing algorithms, competing with one another for the coveted “Buy Box,” the designated default seller of an item, a big driver of sales equivalent to the top ranking on Google search.
Amazon’s retail business “is like this massive slowed-down stock exchange,” Juozas Kaziukėnas, founder/CEO of Marketplace Pulse, a business-intelligence firm focused on ecommerce, told the WSJ. You can identify typical market dynamics: Sellers enter and leave the market, prices rise in response to temporary scarcity and sellers test consumers and each other with prices ranging from dirt-cheap to exorbitant.
Some vendors attempt to bait competitors into raising their own asking prices for particular items. Kaziukėnas said that this works because Amazon sellers of commodities constantly monitor and update their prices, sometimes hundreds of thousands of times a day across thousands of items. Most use “rules-based” pricing systems, which simply seek to match competitors’ prices or beat them by some small fraction. If those systems get into bidding wars, items offered by only a few sellers can suffer sudden price collapses—“flash crashes.”
New York-based Feedvisor claims to use artificial intelligence to learn the market dynamics behind every item in a catalog and touts its platform as a “set it and forget it” system for Amazon pricing. The algorithm will often raise the price on items in a seller’s catalog to entice other sellers will follow suit in an attempt to maximize sales while avoiding race-to-the bottom bidding wars.
If you’re sick and tired of spending long hours in the office to further your traditional financial services career, then maybe it’s time to jump off the hamster wheel and try your hand as an Amazon third-party vendor.
Separately, in addition to his investment banking skills and knack for Hollywood film production, Treasury Secretary Steve Mnuchin makes a mean Kool-Aid. He’s certainly been drinking plenty of it since starting his new job in the Trump administration.
Speaking at Axios' News Shapers event series on Friday – several hours before his party failed to pass the much-loathed American Health Care Act intended to “repeal and replace” Obamacare – the former Goldman Sachs chief information officer called Trump the “negotiator-in-chief” who closes “big deals” and touted his stamina by basically saying he’s an Übermensch: “He's got perfect genes. He has incredible energy and he's unbelievably healthy.” It is true that he never misses a round of golf.
Part of that newfound energy may be down to Trump’s healthier diet, as Mnuchin claimed the president no longer eats KFC or McDonald’s and said the White House food is “great.”
Kweku Adoboli thinks banks need to change their culture – he blames it on paving the way for him to make “morally unsound” decisions as losses started to pile up. (New York Times)
Once the highest paid banker in the U.K. who dated supermodels and hung out with celebrities, Roger Jenkins is now in hot water with the Serious Fraud Office. (The Times)
Two sisters who work at a Moscow bank stole tens of millions of rubles from clients’ accounts to bankroll their lavish lifestyle, which included driving a Ferrari. (The Moscow Times)
How much of a bonus should Credit Suisse have granted CEO Tidjane Thiam? Perhaps nothing at all, which is what Deutsche Bank CEO John Cryan got after a lesser loss of €1.4bn ($1.5bn) in 2016. (New York Times)
At a time where cost efficiency has become the new world order, outsourcing almost everything from trading technology to post-trade processes has become the next big thing. (The Trade News)
Brevan Howard 1, Reuters 0. (New York Times)
A fund run by a Goldman alum and two former associates of billionaire shipping and rig tycoon “Big Wolf” has returned 46% in its first nine months by buying distressed and out-of-favor oil-related assets. (Bloomberg)
Champion rower Barry Meyers has returned to J.P. Morgan as a managing director in EMEA ECM –previously he spent almost a decade at the bank, rising to executive director before leaving to join Barclays as the head of UK ECM in 2015. (Financial News)
Michelle Gill, a Goldman Sachs partner who oversaw packaging mortgages and other consumer loans for sale to investors, will join TPG Special Situations Partners (TSSP), an investing arm of the San Francisco-based buyout shop. (WSJ)
Cities and towns with ties to Wall Street and Silicon Valley are among the 100 places in America with the highest U.S. household incomes. (Bloomberg)
Image credit: Getty Images