Morning Coffee: Jamie Dimon discloses curious intention for life after JPMorgan. Where human traders are a necessity, and not

It’s not exactly a farewell tour, but interviews with JPMorgan's CEO seem to be spending more and more time on the succession question, and in the latest with the Financial Times, Jamie Dimon seems to be giving more specific, more detailed and less flippant answers than he did before. 

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Dimon isn’t giving clues as to which internal candidate is currently in the lead to replace him, but he’s provides an interesting list of the characteristics he thinks his successor will need – “courage, curiosity, grit, heart and capability”. Apparently, all the current internal candidates for the job possess these qualities “to varying degrees”.  Marianne Lake, Troy Rohrbaugh and Doug Petno might now wonder who has the heart and who has the courage, rather like in the Wizard of Oz.

Dimon's observations of executive humanity aren't the only thing that stands out in his interview. He also talks about his own life after banking.  He has plans, and they don’t seem to involve going into politics.  Given his public-but-tactful disagreements with the current administration, it was always unlikely that Dimon would take this quick route to vesting his deferred compensation, but he’s also seeming to rule out a run for office himself, saying that he only ever “asked one person, once, what that would entail”.  Although, at an active 69 years, Jamie is nearly ten years younger than the current President and 13 years younger than the previous one, so he has time to change his mind.

For the moment, though, he's tantalising us with something else. Dimon tells the FT he's planning “a little media thing I may do when I’m done with this job”.  Our thoughts immediately turned to a series of railway travel documentaries, a civil war documentary, or perhaps a “Jamie Dimon’s Banking Nightmares” series where he walks in to troubled financial services businesses and tries to turn them around.  By the standards of other US banking CEOs on conference calls, Dimon actually has quite a pleasant speaking voice, so a podcast would be natural.

Or maybe he has something else in mind.  Dimon suggested that his “little media thing” could be “a competitor or an aid” to the Financial Times, and that it’s “something I think all the papers should be doing”. If his plan is, in fact, a daily email round-up of financial sector careers news, he can certainly ask us for a few start-up tips.

Elsewhere, conditions of high volatility usually have two implications for the tech-heavy side of finance.  First, quant funds usually get caught out in the early days of the episode, and experience significant drawdowns before they can reduce risk and recalibrate the models. That’s happened to Renaissance and Systematica among others, and it doesn’t really mean much – the basic principle of “garbage in, garbage out” means that you shouldn’t expect any statistical system to do well when there’s a fundamental change in the data.

But second, these conditions usually remind everyone that the secondary market can’t be completely automated – in a crisis everyone wants to pick up the phone and speak to a human, because getting orders filled in fast-moving and illiquid markets has historically been a task beyond the ability of even the best computers. 

Surprisingly, this doesn’t seem to have happened to anything like the same extent this time round. Although the equity market has been thin and jumpy, the automatic market makers have been doing just fine.  And according to Barclays, portfolio trading in investment grade bonds also held up; unlike in previous crises, there was no need for investors to start trying to make their trades in each individual name.

But for anyone not wanting to take the portfolio route, there's a place where humans are still needed for individual trades. - Older “off the run” bonds in corporate credit have seen liquidity crater and spreads blow out in the recent crisis.  Unlike equities, bonds are not easily “fungible” – they all have different maturities and coupons so they aren’t good substitutes for one another, and they tend to be locked up in the vaults of buy-and-hold investors.

Which means that being able to trade them in a difficult market is a matter of knowing not only who owns the bonds, but who might be persuaded to take the other side of a trade, and at what kind of price.  That’s the sort of knowledge that is – for the time being – only possible to get by human beings with experience and relationships. Some credit traders should benefit from the chaos. 

Meanwhile …

This is usually considered something of a top-of-the-market sign – Bayview Asset Management and Willow Tree Partners, two specialist private credit managers, are both considering selling minority stakes in their business. (Bloomberg  / Bloomberg)

Claire Brown of Aristides Capital had always ploughed her own furrow, as a high-performing hedge fund manager based in Ohio.  She’s now sufficiently concerned about anti-trans legislation in the USA to be planning to open a Toronto office for Aristides and move there. (Institutional Investor)

Grant Thornton ought to be a happy place at the moment – partners’ average payout was £682k for 2024, up 6% on the previous year, staff will be sharing a £39m “exceptional bonus” linked to the firm’s sale to private equity, and non-partner staff will be getting equity awards to be announced next week. (FT)

It must have been quite delicious to be the one to deliver this message, but big banks like JPMorgan have had to tell their regulators at the OCC that after the recent email hack, they are not comfortable sharing data with them until there are more secure channels to do so. (Bloomberg)

Three years ago, bonuses at non-bank trading firms in the EU were subject to the same cap as banks (two times salary, or three times with shareholder consent).  Since deregulation, the average ratio of bonus to base has gone up to something nearer 6x. (FT)

““I have fired people on my boat simply for saying the wrong sentence to me […] because I knew it would piss off a charter guest as much as me”.  When you’re charging $800,000 for a yachting holiday, you need to ensure that all the deck hands are suitably obsequious. (WSJ)

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