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Morning Coffee: Someone at JPMorgan has had a VERY good week. And the investment bank recovery site that needs its own recovery site

As the saying goes, it is an ill wind that blows nobody any good.  They are trying not to make a big deal of it – neither bank is commenting publicly, but according to “people familiar with the matter”, JP Morgan had a $50m day on the equities trading desk in late February, and is currently running around $300m better than last year for the equivalent period.  Citigroup is also between $150m and $200m up, and other banks may be too.  It appears that in a world full of fear, people look to the derivatives markets for protection, and when volatility is high, trading volume tends to follow it. No one's naming any names, but there must be at least one trader at JPMorgan who is feeling pretty pleased with him or herself this week.

Of course, it’s hard to exactly do victory laps, given that the reason for the market turbulence is the possibility of a global pandemic.  Even while the nightclubs are still open, it might be thought to be a bit tasteless going out for celebratory bottle service if your colleagues and their families are getting diagnosed.  As Joe Montesano on the equity desk at Goldman Sachs says, “it’s a health before wealth hierarchy of needs”.

And there is also the well known fact that in terms of the flow through from P&L to compensation, it’s much better to have a mediocre year in a bull market than a great year in a bear market.  The equity derivatives guys who generated the $50m revenue days are quite likely to find at the end of the year that the revenue bucket has only very weak connections to the bonus bucket, and that with the leveraged loans and credit markets at risk, the bucket may have sprung a lot of leaks before they get to dip into it.

So there might be some quite awkward conversations in equity derivatives across the Street come the fourth quarter, and some more than slightly bitter people in January.  Because not only is it more than a little bit unseemly to be going on about what a great year you had in these sorts of circumstances, it’s also a bit unconvincing.  Flow traders aren't the same as rainmakers in investment banking, who tend to get paid for their personal revenue generation, as do hedge fund managers and some salespeople.  This is because they can draw a clear link to their revenues, and management are scared that if they're dissatisfied, they will walk and their P&L will go with them. 

Flow traders have a tougher time doing the same thing, though.  If it looks more like you made a load of money because you happened to be on the vol desk during a period when vol went through the roof, your boss is more likely to reason that you were just in the right place at the right time, and that you won’t necessarily be able to replicate the success next year.  So it might make sense not to get carried away.

Elsewhere, spare a thought for the traders and bankers starting work in recovery sites.  They’re often in some very unglamorous places with mediocre transport connections, and the local lunch options can be pretty dispiriting.  There’s the lingering suspicion that the recovery site team might be the B-Team.  And now it turns out that you’re not even necessarily any safer from catching coronavirus.

By the standards of recovery sites, Morgan Stanley's in New York actually looks pretty fine – it’s in Purchase, NY, a glossy suburb in Westchester County, where MS already had some commodities trading operations.  But it turns out that it’s just down the road from the New Rochelle Containment Zone, and now someone at Morgan Stanley Purchase has the virus.  It’s not clear who the MS employee is, where they might have caught it from or who they’ve worked with, but MS say they've had the good sense to self-quarantine “for some time” and have been recovering at home while the tests were being carried out.  So there might not need to be a deep clean of the Purchase trading floor yet, but it contributes to the sense of nervousness. 


Across trading floors around the world, the familiar refrain from Grandpa Simpson types is that youngsters just don’t remember what a crisis is like.  Could it be that the correct response to this complaint is a hearty “OK Boomer”?  Half of all the major volatility spikes since the 1960s have happened in the last ten years. (FT)

Campaigns to reduce plastic waste are leading to more disgusting coffee cups in office sinks, and epic arguments over the washing up. (WSJ)

Hudson Yards, the “vertical hedge fund neighbourhood” in Manhattan is on edge as an employee of Point72 has been sent home after testing positive for coronavirus (Institutional Investor)

And office blocks which house the regional operations of Wall Street banks are getting hit – MS, UBS and Merrill are all co-tenants of a block in San Francisco in which a Wells Fargo employee has been diagnosed. (Business Insider)

In fact, in general, the coronavirus has people reassessing the merits of open-plan, hot-desking modern office spaces where employees are always sitting at different desks and pushing together in communal areas. (WSJ)

One other bright spot for revenues – Asian billionaires are stuck at home, and seem to be amusing themselves by playing around in their brokerage accounts. (Japan Times)

Possible sign of the times - the “Rising Stars of Banking and Finance 2020” include only a couple of fintechs, no bitcoin, quite a few Blackrock employees and, as ever, lots of extremely consistent white smiles (Crain’s New York)

James Forese, a former tip for the top job at Citigroup until he left a year ago, has been appointed to the board at HSBC (Financial News)

A roundup of the recriminations over the Barclays trial, mainly focused on the prosecutors complaints about not having enough powers.  Contains a few genuinely cringey nicknames (“they call him the Quarterback, because he gets the deals over the line”) (FT)

Testing yourself and making up questions is a much better way to study for exams like the CFA than just constantly reviewing notes. (BPS Digest)

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AUTHORDaniel Davies Insider Comment

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