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Morning Coffee: Sad spending habits of 23-year-old banker on $100k. The boomer bankers’ hero is deeply uncool

If you believe the TV series “Industry”, then junior bankers spend all their time hopping in and out of each other’s beds (and those of their managers), only stopping for the occasional break to keep their strength up with a few illegal drugs.  According to one first year analyst who wrote a money diary for the Daily Telegraph, the truth is not just a bit more prosaic, but actively heartbreaking.

It’s not just the prosaic way he describes the ups and downs of banker life (“I got dinner for free as we recently closed a deal at work. This one was in a private dining room in a Mayfair restaurant which was great and definitely better than Deliveroo”.)  We can put that down to the format, plus the fact that every young person’s diary sounds a lot more like Adrian Mole than they’d like.  (US readers – think “Diary of a Wimpy Kid”, but much bleaker.  Like the original UK Office compared to the Steve Carrell version).

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More than that, the diarist seems to be genuinely worried about the price of going out and having a good time, something that no young banker should ever be troubled by.  The whole point of going into one of the most competitive and demanding industries in the world is that you don’t have to think twice about spending £4 ($5) on a pint of beer at Wetherspoons. (US readers – imagine if McDonalds ran a chain of pubs, but it was somehow a thousand times less awesome than that sounds).

What’s going on?  Part of the explanation seems to be that this is a slightly unusual banker – he “graduated with a pretty atypical degree”, and the only big luxury spend in the diary is £146 on opera tickets.  He might not understand yet that a basic junior banker’s salary of £80,000 ($100k) is a lot of money; it’s more than twice the London median, and three times that if you include the typical first year bonus.

But it’s also likely to be related to the housing market, the big difference between older and younger bankers.  The diarist isn’t doing all that badly in terms of housing costs; his rent is barely 30% of his post-tax pay.  But at some point in the near future, he’s not going to want to share a house with two flatmates anymore, at which point the extreme expensiveness of property in financial centres will become a factor.

Going by the diary, this junior banker is saving £1,000 a month.  If we assume he also saves the entire bonus, net of tax, then by the time he’s an associate he will have somewhere between £100,000 and £150,000 ($120-180k) saved.  That is just about enough to put down a deposit on a first time buyer home in the capital.

So our frugal friend might have the last laugh after all.  At present, he’s living a lifestyle only slightly better than he did as a student, and missing out on the earthly delights of one of the world’s greatest cities.  In his late twenties, though, he might be enjoying the view from his own balcony, as his more hedonistic colleagues continue to argue over who has to tidy up the living room.

Elsewhere, if you ever hear a Boomer banker say something witty or insightful, the odds are much better than even that it’s either a line from “Wall Street” or a quote from Liar’s Poker.  These are the two cultural touchstones of managing directors – as well as being two of the most accurate portrayals of the banking and trading industries, they’re full of hearty tales of the kind of bullying and mistreatment that you can’t hand out to interns anymore.

Oliver Stone lost his position as a banker hero many years ago, by allowing that awful sequel to be made.  Now it seems that Michael Lewis has blotted his copybook, by seemingly trying to make excuses for his fellow sweatpants wearer, Sam Bankman-Fried.  Going by the sentiment on Finance Twitter, it looks as if such saying as “equities in Dallas”, “ripping their faces off” and, indeed, “Big Swinging ****” will eventually be thought of as folk wisdom with no particular author, while Michael Lewis consoles himself with a huge amount of money and an incredibly sweet-sounding writing office

Meanwhile …

Welcome to the hedge fund in California, where you can check out any time you want, but you can never leave.  Voleon Group is extremely protective of its trading algorithms, and has consequently used some clever structuring of its “voluntary profit-participation program” to effectively bind its employees to multi-year (unpaid!) gardening leave clauses, despite the fact that non-compete agreements are meant to be forbidden by state law.  (Business Insider)

Citigroup is beginning to make those changes to remove layers of management and overlapping franchises.  Sam Hewson, formerly head of EMEA corporate FX sales, will now be global head of all FX sales, including the institutional side. (Bloomberg)

“By the way, don’t trust the media”.  Bridgewater management can breathe a sigh of relief as Ray Dalio confirms that he doesn’t want to come back and is perfectly happy with his own family office. (CT Insider)

Moffett Nathanson, a research boutique covering the media industry, is a boutique once more – it was bought by Silicon Valley Bank in 2021, but the founders have brought it out of the bankruptcy intact. (Variety)

Harald McPike seems like a “life goals” guy to emulate – not only did he was he banned from dozens of casinos for being too good at cards, but today he’s described as a “secretive billionaire”, which sound much cooler than the normal kind who can’t seem to shut up. About the only thing that’s gone wrong for him is a recent SPAC deal, which is why he’s suing an investment banking analyst turned promoter. (FT)

The world of fish farming supports a surprisingly competitive investment banking sector, so congratulations to Jana Singleton, who has gone to Bank of America, covering “food and forest products” for the Pacific Northwest and Alaska markets. (Intrafish).

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AUTHORDaniel Davies Insider Comment

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