Where do the smart, furtune-seeking graduates go?

The answer to this question goes in waves, according to the zeitgeist, and mirrored by the (ridiculous) starting salaries on offer.  Someone might put approximate years to these, but by my reckoning these are what we've witnessed over the past several decades, in rough chronological sequence of their peak vogue.  There's obviously overlap.

-  McKinseys and the like

-  Tech, of the NASDAQ tech-boom vintage: (various flavours during that run, but at one time B2B was the thing)

-  Investment banks

-  Green investment vehicles

-  Hedge funds

-  "Blockchain" (as a buzzword) /  crypto

-  Commodities trading (as a specific hedgie emphasis)

-  "AI" (as a buzz-phrase) / LLMs

Now, it seems, space flight has a massive vogue.  This one differs a bit, because to enter this field at least a high percentage of recruits will need to be decent engineers of one stripe or another - actual hard graft!  For some of the others, BS + "potential" were the criteria; although the ability to do Hard Sums also featured.

So - what do your bright young acquaintances all aspire after?  What is going to cream off / trendily waylay the next generation of ambitious wannabes?

ND

Emergency measures from Central Banks to support Hedge Funds

Life is strange, here we were thinking 2020 was going to be a good year with Boris on his political honeymoon, then, boom it is all over.

The Bank of England has reduced interest rats by 0.5% to help calm the markets after a start to the week that makes it feel like 2008 again. It is the biggest move by the bank in ten years.

We may wonder, why does moving interest rates down from 0.75% to 0.25% make any real difference to the economy? And we would be right, as this move has next to no impact on the real economy. Unless you happen to be re-mortgaging today (tick for me!) and are able to take advantage of it, it makes no difference. It is not like Amex or Wonga are going to pay any attention  and help their 'customers' and it is not like Banks were paying any interest on deposits anyway - such has been the ruination of our economy since 2008.

So why do it? Well this is all about banks and hedge funds. The hedge funds are borrowing money to play the markets and the ones that are doing well need more cash, the ones that are doing badly are facing huge margin calls. Some of the Asian ones facing margin calls are proving difficult to get hold of I hear.

These huge calls on the banks  to lend or borrow in busy markets mean they themselves can run short of cash very quickly. The key thing for them is to be able to access the central bank Repo markets to get more money very quickly...but this money is not quite free, nearly free, but there is a price. So the banks find the busy markets a very expensive place to be and that can mean they consider limiting the action.

So they could choose to call in the money and not lend, but that runs the risk of further drops in the market, more margin calls and from 2008 we know where that leads. So instead the Central Banks are reducing the rates that they lend money at to keep the markets as liquid as they can and the Banks solvent. Keeping the banks solvent though, now means keeping the Hedgies solvent.

The side effect of all this is that Hedge Fund keep playing and Prime Brokerage banks make some lovely fat margins.

So when you see pictures in the newspapers about the lack of chinese imports or other real world causes like Corona virus, just smile to yourself. This is all about the traders and the trading. As it happens, the US Repo market is 50% busier overnight than it was in September 2008, now partly of course inflation has reduced the value or money and the economy has grown, but it is a sign that things are very awry in the financial markets.

A key week ahead I feel.

EU shoots wrong target

As ever with the financial crisis, the Authorities in Europe are taking aim at the wrong targets. Today we can see the Private Equity and Hedge Fund industry being targeted for bonus payments like the banks.

Yet, the history of the crisis shows the Hedge Funds had very little to do with anything, the short selling crisis was made up; bank share prices fell more after the short selling ban. When it ended the share prices of banks rose!

However, a victim needs to be found, and the Eu authorities don't want the people to know that many of the problems are in fact regulatory failures; exploited by the Hedge Funds.

Also it so happens that this industry is in London, outside the Euro and with an incoming Euro-sceptic Government. A nice target to hit. The Hedgies are going to Switzerland; personally I can see benefits for the UK to copy the Swiss model of co-operation with the EU rather than membership if we are simply going to be targeted as evil Anglo-Saxons at every opportunity.