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Morning Coffee: Unknown ex-Goldman Sachs & Morgan Stanley banker gets UK's hardest job. Bankers who kept their jobs are vindicated

There are various things that can make a banking job stressful. - Huge sums of money being at stake, with nobody else to blame if things go wrong.  Being dependent on key decisions which you have no input into.  Being completely obscure when it comes to praise and pay for a good job well done, but with the possibility of suddenly being thrust into the limelight in a crisis.  So spare a thought for Jessica Pulay, who has just been handed the attractively decorated chalice which is leadership of the UK Debt Management Office, and is about to discover the nature of the drinks contained within it.

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About the best one can say of the DMO job is that there’s more stability than most bond market roles.  Jessica Pulay takes over from Sir Robert Stheeman, who was the first chief executive when the office was created in 1998, and whose career goes back to the days when “coupon payments” were real coupons and you had to cut them off the bonds with an industrial guillotine, five hundred at a time.  She joined herself in 2015, after spending 16 years at the EBRD, having been a managing director (MD) at Deutsche Bank and a director at Goldman Sachs and Morgan Stanley previously.

Jessica's new job might not seem to be that much of a step up at first glance, because she’s being promoted from “co-head of policy and markets”, and it’s not obvious what this organisation does which isn’t either “policy” or “markets”.  But there’s something of a tradition in finance that banks have a habit of appointing their first female leaders just at the moment when something is about to go horribly wrong. 

Although this presumably not the reason that she's been promoted now, everyone – including the departing Stheeman – seems to agree that the near future could be a lot more difficult for the DMO than the recent past.  During the period when interest rates were low and stable, UK gilts more or less sold themselves; it was a generational bull market for bonds of all kinds, there were captive buyers in the form of domestic pension funds and the Bank of England’s quantitative easing program was there to provide a solid bid. 

Now the Bank is becoming a net seller, and the pension funds have had their fingers burnt by the 2022 “Liability Driven Investment” (LDI) crisis.  Not only that, but some of the figures intimately involved in that crisis have chosen to politicise it, and to blame the “Deep State” for the gilt market’s response to their policies.  So far, the DMO has managed to stay in the background, but it would be entirely possible for someone to fix on Ms Pulay as a scapegoat in any future financial disaster.  She apparently “brings with her over three decades worth of relevant experience, is highly regarded in the market, and [..] provides strong continuity”, according to the appointment press release. Hopefully these qualities will be supplemented by a decent slug of luck.

Elsewhere, it seems that CEOs across the Street will get a chance to slip some subtle “I Told You So’s” into conversations with investors or other commentators who were telling them to cut costs more quickly last year.  Not only have investment banking revenues bounced back in the Q1 results season, they have done so at exactly the time when “safe” retail banking revenues have begun to disappoint and bad debts threaten to severely affect profitability going forward.

At times like these, top executives will be glad that they didn’t panic and make moves that damaged the franchise for the sake of a couple of quarters’ earnings and perhaps a temporary boost in the share price.  Across multiple cycles, this has been the big difference between the big US incumbents and any of the other players who have tried to take them on; a stable commitment to the industry is so much more efficient a way to run a bank than trying to change strategy with the frequency of the business cycle.  The single most important managerial resource in the investment banking industry is a tolerance for pain.

Meanwhile …

According to the Daily Mail, the receptionist at BlueCrest’s London office doesn’t know who Mike Platt is.  (An alternative explanation might be that if you call up from the Daily Mail, the receptionist will tell you she doesn’t know who Mike Platt is).  Anyway, their profile on him recounts the usual stories – late night poker, tipsy taxi rides and all – but adds some detail gleaned from stalking neighbours on the fact that he is very good to his mum. (Daily Mail)

Among the problems with forecasting at the Bank of England (and probably other central banks) is that their computers are just too old and slow to handle modern datasets. (Finextra)

The former alt-data guy at WorldQuant and ThirdPoint is now running “Initial Data Offering”, a marketplace trying to streamline the often thankless process of matching up owners of potentially useful datasets with people prepared to pay for them.  He says that “we are not just trying to have a bunch of hedge funds on the other side buying data, we think the world is bigger than this”. (Business Insider)

Three years after rejoining from Wells Fargo to be co-head of Americas ECM, Beau Bohm has left Deutsche Bank, to an unknown destination. (Bloomberg)

Jamie Dimon has sold the last lump of $33m JP Morgan shares, completing the “financial diversification and tax-planning purposes” disposal announced last year. He still has 7.6million shares left. (Reuters)

What’s happening to Bitcoin?  Is a Patek Philippe watch a little too ostentatious for work?  How are people dealing with college admissions this year? If, like many bankers, you are constantly being drawn into boring conversations, the Journal has some tips on how to get out of them.  Alternatively, one expert suggests you might regard listening as your good deed for the day. (WSJ)

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AUTHORDaniel Davies Insider Comment

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