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There were sartorial no-nos at Goldman Sachs even before this change.

Morning Coffee: Goldman Sachs' new dress code brings tight t-shirt risk. And Deutsche’s new big boss has a plan to improve trading profits

Important news, and possibly an indicator of where we are in the industry cycle; Goldman Sachs has decided to “move to a firmwide flexible dress code”!  There’s an interesting divide in the way in which has been reported; Bloomberg talks about “Trading Bespoke Suits For Khakis” as if to subtly imply that its reporters mainly interact with MDs and above, while the slightly more plebian Financial Times talks about “dropping the stuffy dress code” and raises the possibility that employees will have to be told not to wear “ripped and overly tight t-shirts” (as has apparently happened in the past).  This look is specifically mentioned as a danger for younger employees, so the idea is presumably that they are wearing tight clothes to show off their gym-toned bodies, rather than the more typical phenomenon of traders wearing shirts which are tight because their owners are still buying them in sizes that might have fit ten years ago.

The sartorial edict seems partly about creating a “One Firm Philosophy”.  In 2017 Goldman dropped its dress code for computer programmers and quants in an effort to appeal to tech talent.  But ... where’s the dividing line?  Does a quant reach a level of promotion where they have to throw away the jeans and get fitted for a suit? And in a world of “trader-coders” and generally closer interaction between the tech geeks and the everyday employees, it’s bound to cause resentment if one side of the divide is forced to wear a corporate uniform.

It’s also about generational change; even in the slow moving world of business fashion, things gradually go out of style.  There was some point in the distant past when it became acceptable to arrive for work without a hat, for example.  With a growing proportion of Wall Street’s workforce being young enough to barely remember the days before the Internet made “billionaires in hoodies” a regular thing, there was bound to be a tipping point for suits one day, and Goldman could just be ahead of the curve.  Perhaps the key phrase in the all-staff email is “please dress in a manner that is consistent with your clients’ expectations”.  From hedge funds to tech founders, there are plenty of contexts where a Goldman banker in a suit might look like the inappropriate one.

So, does this mean that the “dress code indicator” might have lost its predictive power as a way to assess the state of the banking labour market?  For decades, it’s been axiomatic that banks start having “dress down Fridays” and losing the neckties when markets are good and hiring is tight, then bring the dress code back with a thump when they no longer have to compete for talent.  This might not be so reliable looking forward.  But there is one definite cyclical indicator you can extract from David Solomon’s email.  When referring to the collective dress sense of over thirty thousand bankers, he wrote “we trust that you will consistently exercise good judgement in this regard”.  That’s definitely the mark of someone who’s feeling optimistic.

Another optimist operating elsewhere in the industry is Matt Zames, the president of Cerberus, former COO of JP Morgan and the person with lead responsibility for the strange shareholder-client-consultancy relationship between Deutsche Bank and the private equity firm with a 3% stake.  Zames has experience in turning round difficult trading books; he first came into the spotlight at JP Morgan when he was given responsibility for the treasury management operation that had acquired the nickname “The London Whale” as it blew up in an oversized credit default swaps trade.

That experience would presumably teach anyone a lesson about how much risk it’s appropriate for an investment bank to take with its liquidity portfolio, but in Mr Zames’ diagnosis, part of the problem with Deutsche is apparently that it’s made the opposite mistake to JP Morgan – taking too little risk in the treasury rather than too much.  By advising Deutsche to move some of its surplus liquidity out of cash and into slightly higher-yielding securities, he hopes to improve the fixed income trading revenue slump which has hurt his company’s investment over the years.  If that wasn’t controversial enough, Deutsche is also expanding its market share in leveraged buyout loans, driven in part by considerable growth in financing of Cerberus deals.  This is all good for top line revenues, but it is certainly a strategy that will do better in bull markets than bears.


The structured equity products team at Deutsche have been put “at risk”.  Since Christian Sewing had indicated that front office cuts were coming to an end, this might indicate a strategic direction rather than normal cost-cutting (Financial News)

Koji Nagai will continue as CEO of Nomura, despite shareholder pressure after the Lehman writedown (Nikkei)

Blackstone have speeded up the vesting of Bennett Goodman’s share awards, after realising he was the only one left of the founders of the GSO credit hedge fund they acquired in 2008 (FT)

When one sibling is on the board of a company, and two others are activist investors, it’s “very awkward” (Bloomberg)

A copy of the “Fearless Girl” statue is going to be placed outside the London Stock Exchange for four months, although without the Raging Bull, so she will have to be unafraid of the double decker buses (Financial News)

European employees who intend on staying in London after Brexit are taking the citizenship test, and in doing so finding out things they had never really known, like why the Scots hate the English (Financial News)

And is this the Andrea Orcel of the Anglican church?  The Dean of Christ Church College, in Oxford, has been caught up in a scandal over his pay, which was regarded as “immoral, scandalous or disgraceful” by the college’s governing body.  It’s not so much the basic pay that’s at issue (£90k, roughly in line with an investment banking associate) as the total package (including accomodation, gardner, cleaner, book budget, research allowance and three course meals in the Harry Potter dining hall). (FT)

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AUTHORDaniel Davies Insider Comment

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