Morning Coffee: $1bn hedge fund manager now regrets "wasted" life spent making money. And millennials are rejecting financial hub cities

“I've wasted my time making money for the last 30 years and watching the body politic getting worse and worse”.  It’s quite a thing to say as an assessment of a hedge fund career that brought Crispin Odey to a net worth of over $1bn (£750m).  It’s not as if he’s been politically inactive during that period either – he was a major donor to the Brexit campaigns.  He’s also had quite a bit of fun with his money, including (apparently ironically) building a Palladian mansion for his chickens.

But right now, Odey is going through a fairly unique form of psychological pain, one which most of us will never experience.  That’s the anguish of making a load of money, but doing so in a way that you’d rather not.  After two absolutely awful years for his hedge fund, where a few high-conviction but losing trades destroyed years of accumulated investment returns, he has staged something of a recovery, and has the best-performing fund in Europe for the year to date.

The trouble is that a lot of this performance has been driven by shorting British stocks and UK government bonds.  And for this reason, it looks very much as if the financial returns are being driven by the problems caused by Brexit.  That’s quite an awkward position for a prominent Brexiteer to be in.  It’s not dissimilar from the way that Jamie Dimon must feel when he sees Donald Trump writing another tweet claiming the credit for a rising stock market and economy.

Odey takes it on the chin in his interview with Financial News; he says that “You'd rather the country was getting it right than you were getting it right... but you're benefiting from the fact it's their policy, not your policy, which is causing the problem”.  Which raises a few questions.  First, is he really saying that he’d rather be right than make money?  Successful hedge fund managers generally tend to prefer things the other way round.  And secondly, if a successful and outspoken man thinks that the politicians are getting it wrong and that they should be following his policy, what’s the logical next step?  In America, going into politics is a normal rich guy thing to do, but historically this has been regarded as rather below the dignity of a City gentleman with an architectural folly and some chickens.

The suggestion from the interview that Odey might go into politics, either by standing for election or by financing a breakaway new political party, ruffled quite a lot of feathers when it hit the headlines – not least among his investors, who might have been forgiven for worrying that the key man at Odey Management was getting distracted again, just as they were starting to get some of their money back.  So later in the day, he had to issue a statement to Bloomberg.

It was another graceful and humorously worded philosophical musing; “It is not true that I am planning to enter politics - I know my limitations and others know them better than me!”.  The statements about “the body politic getting worse and worse” and “you suddenly realised you’ve got to get involved again” were apparently small talk, about the difficulty of reading the political scene at present.  It is hard not to conclude that, over the course of the day, Mr Odey had time to reflect on the relative merits of different ways of spending the rest of his life, and that he came to the conclusion that making a billion dollars was not really as much of a waste of time as he’d thought.

When you’re at the start of your money making career, though, you tend to have less time for rumination on the state of politics and morality, and more in the way of pressing concerns like “can I pay the rent this month?”.  This is a problem that’s got worse and worse over the last two decades, particularly in the major financial centres of the world, and it’s now potentially reaching a point where the balance of incentives is finally about to tip.  The graduate intake at PwC, according to its chairman, is no longer keen to work in London – at a recent recruitment meeting less than a third of job applicants put their hand up to say that their ambition was to go there.

For London, read New York, or Singapore or San Francisco.  All the hub cities are so expensive for housing, transport and the general cost of living that it’s no longer as attractive as it used to be for juniors to spend a few years of house-sharing and ramen noodles while they climb up the corporate ladder.  For one thing, even shared housing and cheap beer are now potentially out of the budget of trainees on all but the best graduate programs. For another, the point at which you earn enough to buy a place of your own and start enjoying the urban lifestyle keeps getting moved further out into the future.  There are always going to be the super ambitious types who know that “if you make it there, you’ll make it everywhere” in the Big Apple.  But increasingly, the merely diligent and hopeful might see the trade-offs better in the lower-status towns.

Meanwhile …

Jamie Dimon, like Crispin Odey, has decided that making money is better than indulging a political ego and ruled out a Presidential bid in 2020, saying that he had made comments out of “machismo” and that he regretted claiming he could beat Donald Trump. (Bloomberg)

David Harding, the founder of Winton Capital, on the other hand, appears to have found a way to bring the twin priorities of “making money” and “having people listen to your political opinions” into harmony.  In an interview, he points out that one reason people should listen to him is that he and his company have payed £1bn of tax over the last decade. (Financial News)

Deutsche Bank is the latest big firm to give some guidance on its Brexit plans, which include potentially shifting €450bn of assets and relegating the London operations to the status of a branch. (Financial Times)

Meanwhile, UBS has chosen Frankfurt to be its post-Brexit European hub (Business Insider)

Credit Suisse have been on the carpet at their regulator’s office.  They were censured for failing to control a rogue trader in the wealth management division (identified by Bloomberg as Patrice Lescaudron) who lost over $140m for clients by doubling up on losing trades (Bloomberg)

CS were also criticised by the same regulator for failures of anti-money laundering controls in transactions involving the Brazilian and Venezuelan national oil companies, and with FIFA.  In neither case were there big fines (FINMA doesn’t seem to have the same powers as its peers in the regulation world), but to have two big regulatory black marks on the same day has to be reputationally damaging. (Reuters)

Elsewhere in regulatory news, Tan Boon-Kee, Deutsche Bank’s former APAC head of FIG banking, has been called in by the Commercial Affairs Department in Singapore to answer some questions about 1MDB. (Bloomberg)

He had previously been considered for the Deutsche Bank CEO job, but Richard Gnodde appear to be staying a Goldman Sachs, adding responsibility for all non-U.S. business to his current head of EMEA role (FT)

As the senior roles get reshuffled in anticipation of David Solomon officially taking the CEO job, the WSJ notes that the era of dominance of the top ranks by J Aron alumni is coming to an end (WSJ)

Blocktower Capital, a cryptocurrency hedge fund, is still growing and hiring new people despite the problems surrounding the asset category. (Bloomberg Quint)

An investigation suggests more serious issues in the whistleblowing process at Barclays, with four staff suggesting that their efforts to challenge misbehaviour were not adequately addressed.  Barclays has been taken to seven employment tribunals over whistleblower retaliation issues; although none of these have resulted in a judgement against the bank, this is more than its peers.  Barclays rejects the “unfounded and untested allegations” (Financial News)

And Kweku Adoboli has won a last-minute judicial review of his case, meaning that his deportation has been temporarily paused. (Guardian)

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