Morning Coffee: What a Jane Street partner said about losing $15bn in July alone. Ex-Goldman Sachs' analyst's violent ChatGPT conversation

Jane Street's 3,500 employees are the smartest guys in the room. They mostly generate more in revenues and profits per head than rival electronic trading firms.  They are paid well for this, and pay is allocated not on the basis of individual PnL but on the performance of the firm as a whole. Jane Street is a collectivist sort of place. 

Being a collective is a fine thing, but some people at Jane Street seem to have screwed up. Late Friday, the Financial Times reported that Jane Street lost $15bn in July. Jane Street isn't commenting on the loss, but even accounting for the dropped $15bn, "people familiar with the matter" are saying that net revenues at the firm were still $40bn in the year to Friday. Nonetheless. Bloomberg says it was Jane Street's first monthly loss in a decade. The WSJ says it was Jane Street's worst monthly loss ever. 

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Net revenues at an electronic trading firm are trading gains and losses, netted out, plus money made on spreads, fees and commissions. Compensation is taken out later. As a collectivist sort of place, maybe Jane Street will still pay the people whose decisions contributed to this loss. 

In the meantime, the curiously named Turner Batty, a Jane Street partner about whom we know nothing beyond the fact that he joined in 2007 and has worked nowhere else in the US, has described the loss as "bad."  In an internal note, Batty wrote, “July was a bad month,” says Bloomberg. Batty also indicated that Jane Street's short term market making and prop trading activities are doing just fine: “Market volumes have been strong, and we’ve continued to make improvements to our short time horizon strategies, that trading seems more profitable than ever,” he said. 

So how did Jane Street make this loss? It was partly the fault of Leopold Aschenbrenner, the 24-year-old hedge fund manager whose ill-timed wedding Jane Street co-founder and partner Robert Granieri attended last month. The WSJ says Jane Street invested $2.5bn in Situational Awareness, which soared to become worth $10bn earlier this year. When Situational Awareness lost $35bn in July, Jane Street lost up to $7bn. The WSJ says the remaining $8bn of Jane Street's July losses were the results of Jane Street's decision to cut risks in its remaining AI-related stocks. Bloomberg says Jane Street also made "wrong-way bets in Asian equity markets." 

Batty said Jane Street has now, "closed a significant portion of our risk in the specific areas we lost on in July, and have also reduced risk-taking in other strategies." He also said that Jane Street's "positions currently seem appropriate for our present risk tolerance.” It has been observed that Jane Street helpfully filed a 13F form detailing its investments on Friday and that this showed $576bn of puts and $473bn of calls, suggesting that Jane Street might be a bit bearish.

Either way, it is only August. Jane Street still has $40bn from which to pay its people from the first eight months of the year. Its people still look pretty smart. Maybe they've even made the $15bn back already. But the "bad month" will surely have consequences, even if it's just that some people at Jane Street actually do get their bonuses cut this year, or even lose their jobs. 

Separately, a young analyst and "CFA Level 3 candidate" in Goldman Sachs' wealth division had violent fantasies concerning his ex-girlfriend of six months and has been fired and prosecuted. 

The Palm Beach Post reports that the analyst, who still appears to have a LinkedIn profile, pleaded guilty to aggravated stalking, written threats to kill and illegal use of a cell phone. 

The analyst discussed his violent fantasies with ChatGPT, which reported him to the police. He must now wear an ankle monitor for two years and avoid drugs, guns and contact with his ex. "He's not a violent person. He is not a bad person," his attorney said. "He went through just a very difficult mental health episode and he's doing unbelievable now."

Meanwhile...

Last week, Jane Street raised $16.4bn in a bond issue that was mostly used to refinance existing debt. It paid $200m to do this deal, which will also cost it an additional $200m per annum versus the bonds it was refinancing. The deal will, however, mean that Jane Street doesn't have to make future public disclosures about its profits (and losses). Ironically, the refinancing itself required Jane Street to make a disclosure, which revealed the $14bn loss. (Financial Times) 

Jane Street is running a higher level of risk than anyone thought. It's almost a throwback to the legendary macro hedge fund managers of a prior period. (Rupak Ghose) 

Barclays has got $100bn of notional trades with Qube Research and Technologies. Barclays says: “Gross market value is a notional value that is not equivalent to a bank’s actual exposure.” (Bloomberg) 

The price to rent a Nvidia Hopper H100 chip for an hour has risen to $2.71, up from $1.96 at the end of November. (Net Interest)

JPMorgan ended its banking relationship with Polymarket over regulatory concerns. This does not bode well for its prospects of working with the firm on a potential IPO, but JPMorgan says Polymarket has, "a close, active relationship with JPMorgan across multiple entities.” (WSJ) 

Hong Kong is luring portfolio managers with tax cuts. Singapore is offering access to Claude. (Financial Times) 

Take what headhunters say with a pinch of salt. “There’s so much gamesmanship in this...It’s in a headhunter’s interests to make you unhappy and unsettled and therefore more likely to leave.” (Financial Times) 

Two years ago, Oxford University careers service had 7,000 jobs available to students on its system. Now it has 4,000-5,000. (Financial Times)  

How to make your teenage children stay at home more and bring their friends over. Build a $2.8m house with a pool, conversation pit and room for soccer in the basement. (WSJ) 

I am grateful for my crippling mortgage because it has pushed me to work hard. (The Times) 

"A portfolio you have to live off stops being a scoreboard and becomes the thing that has to pay the bills while it goes nowhere for months.... I have never sat through a 60% drawdown on this book with no pay cheque coming in, and I don’t know how it holds. I’m not going to pretend otherwise." (Cohong Lane) 

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