Morning Coffee: JPMorgan, Balyasny traders among those rendered semi-dysfunctional on Friday. The all-engrossing existence of a top dealmaker

There will be lessons to be learned from the events of Friday. One might be that having released its second unstable update in three weeks, US cybersecurity company CrowdStrike has issues with its employees or its testing procedures or both. Another might be that banks have serious vulnerabilities in their enterprise software products.

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Bloomberg, the Financial Times and Reuters published lists of all the banks affected by what one trader described as "the mother of all global market outages." The FT said JPMorgan, UBS and Bloomberg were all hit, with some of JPMorgan's trade execution systems not functioning correctly. Bloomberg said JPMorgan was telling some buyside clients that it couldn't process their trades. Nomura had a similar issue, but routed trades through computers that were still working. Deutsche Bank couldn't publish or distribute its research. The London Stock Exchange Group couldn't publish news on its website...

Multistrategy hedge funds and central banks weren't immune. Balyasny's Singapore office was reportedly out of action on Friday, with computers down and employees unable to login, even by mid-afternoon.  In Norway, the central bank was forced to conduct a banking liquidity system by email and over the phone because its system was down. 

Back at JPMorgan, Bloomberg reports that the bank switched to its backup servers in an attempt to fix things, but that many of its people in Hong Kong left to work from home anyway. “It’s a mess,” one senior trader at an asset manager told the FT. “This is the biggest upset in years.”

The problem was partly the nature of CrowdStrike's product. To run effectively, the FT notes that cybersecurity and virus-scanning software, such as that produced by CrowdStrike, needs “deep and profound privileges” across a computer’s system. It's fine if it works, but if it doesn't the system will “stop dead” in order to protect itself.

Friday's issue is resurrecting age-old criticisms of cloud computing systems as "just someone else's computer." It's also leading to questions about IT vendors. "The vendor doesn't care as much as you do about your business and incentives aren't aligned. Probably in time people will move back to self-hosting and more development in house," one senior hedge fund executive tells us, speaking off the record. 

Separately, if you're wondering how dedicated you need to be to become the trusted confidant of corporate executives doing M&A deals, the FT's interview of corporate lawyer Faiza Saeed, presiding partner of Cravath, Swaine & Moore, suggests very.

Saeed, who has worked for Cravath since 1991 and been a partner since 1998 has an enormous list of deals to her name. While she's not executing deals in the style of a banker, she is providing legal advice on deal execution as a lawyer and is considered invaluable by the clients she works with. "Her advice and counsel has helped the company and helped me be a better person . . . She can read a room better than anyone you’ve ever met,” says Howard Schultz, former chief executive of Starbucks. "She has the subtlety of a shotgun. Both barrels coming at you at once, and I couldn’t be more appreciative of that,” says DreamWorks co-founder Jeffrey Katzenberg  “You only get the unvarnished truth from her.”

For her part, Saeed seems to live and breathe her job. “Many of my dear friends are people I work with,” she tells the FT. “Clients in particular have become my true friends.” She even joins them on vacations.

The art seems to be seeing beyond the client. They are humans, says Saeed. “They bring insecurities and stress, and everybody’s worried about their reputation. You have to understand the stress that they’re going through and redouble your efforts to be the calming presence.” 

Meanwhile...

Mark Spitznagel, a protégé of “Black Swan” author Nassim Nicholas Taleb, thinks the "greatest bubble" is nearing its peak. He loses money almost every day but makes up for it during calamities. (WSJ) 

Deutsche Bank is making a comeback in investment banking in Germany. According to the latest league tables from data provider Dealogic, no other bank in Germany earned more in investment banking in the first half of the year than Deutsche Bank. (Boersen Zeitung) 

Goldman Sachs technology analyst Jim Covello says AI has shown the promise of making some jobs like coding more efficient, but not by nearly enough to justify the expense. (Bloomberg) 

Charles Wang Zhonghe, chair of investment banking for China at Nomura International, has arrived back in Hong Kong where he was previously based, after being banned from leaving China last September. (Financial Times) 

The British government wants to consolidate local council pension funds. The £360 billion ($465 billion) Local Government Pension Scheme in England and Wales is split across 87 funds and has seen its fees jump 70% since 2017 to around £2 billion a year. (Bloomberg) 

Britain's Labour Government wants to pay for 8,500 new mental health workers and other good causes by tightening the tax rules for wealthy private equity executives. It might best achieve this by levying a 33% rate of tax on carried interest. (FT) 

Vice-presidents across fundraising and sales at private markets firms, who were paid £117,500 last year, expect to receive around £98,000 this year, representing 84% of their salary. This is up from around £69,000 in 2023. (Financial News) 

Abrdn has been culling its ESG team.  In the last 12 months, its sustainable investing team has been hit by job cuts and departures, with two of its star female leaders, chief sustainability officer Amanda Young and climate specialist Eva Cairns, out the door. (Financial News) 

Traditional private equity fund structures can raise a lot of capital but they don’t make for enduring firms because after around 12 years, all the money has to be handed back and the fund shut down. (NetInterest)

Mohamed El-Erian will step down from Barclays’ board. (Financial News) 

Kevin Byrne, the chief financial officer of hedge fund Millennium Management is joining Balyasny. (Bloomberg) 

Deutsche Bank hired Dan Rossi from UBS as a credit trader. (Bloomberg) 

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