Morning Coffee: The traders earning $14m beyond banks and hedge funds. Goldman Sachs' and Morgan Stanley's pedestrian purpose for AI

When we wrote about commodities trading pay two years ago, we said traders at top commodities houses were earning $6m. Twenty-four months later, that looks like an understatement.

After a bumper two years, during which the profits at the four big commodities trading houses (Vitol, Trafigura Group, Mercuria Energy Group Ltd. and Gunvor Group) have gone from $6.8bn to more than $50bn, Bloomberg reports that pay at commodities brokerage houses has increased in similar proportions. 

The most fortunate are the employee shareholders, who receive a proportion of the gains. At Vitol, for example, Bloomberg reports that 450 employees shared $6.5bn in profits for last year, an average of $14m each. At Trafigura, 1,400 shareholders shared $5.9bn for 2023, an average of $4m each. They also benefited from a 188% rise in Trafigura's share price. 

The giant sums on offer help explain why people like Nick O'Kane, the former head of Macquarie's lucrative commodities business, chose to join a commodities house when he left Macquarie earlier this year. O'Kane is now at Mercuria, which Bloomberg says concentrates share ownership in the hands of a few people, of whom O'Kane is presumably now one. Last year, Mercuria made profits of $2.7bn

If commodities traders, don't want to work for commodities trading houses, banks and hedge funds are also besotted by them, although the feeling isn't always mutual. Citadel aside, most hedge funds don't have a physical commodities presence and lack visibility on flows. Commodities' volatility can also be a shock to the uninitiated hedge fund mogul with a strict approach to stop losses, meaning that new recruits don't always stick. Failing that, electronic trading houses like Jane Street have also been spied building a commodities trading presence; even quants are getting in on the game. 

Separately, Goldman Sachs and Morgan Stanley are using AI but some of the applications for the new technology are not the most exciting. 

Business Insider has been speaking to Goldman Sachs' chief information officer, Marco Argenti, who says that AI is being rolled out across the firm and that probably half the company will be "touching" it in some way by the end of the year. The biggest users of AI are Goldman's developers, says Argenti (even though developers don't seem that keen on AI coding tools), but it has uses beyond writing code. At Goldman, these include: summarizing emails, summarizing meetings, and briefing people ahead of meetings.

Morgan Stanley seems to have concluded that meetings are AI's initial sweetspot too. The WSJ says it's developed a tool called 'Morgan Stanley Debrief', which summarises meetings and generates drafts of follow-up emails. 

Things may get interesting in the future. Once it's got AI-empowered meetings in-hand, Argenti says Goldman is also thinking about AI-powered pitch books and augmenting bankers and traders with the technology.

Meanwhile...

The UK’s Chancellor of the Exchequer Rachel Reeves has kicked off plans to close a tax “loophole” on private equity performance fees. Private equity firms and other interested parties have until August 30 to submit details to inform the government's tax reform of private equity. A decision is expected alongside the budget on October 30. (Financial Times) 

Private equity firms have been using margin loans to boost returns. This means they borrow against their remaining stake in a company at the same time as they list it publicly so that they can monetise investments without risking a larger IPO that could weigh on the share price. (IFRE) 

Overachieving pervert in NYC for Citibank internship tries raping woman day after groping another: prosecutors (New York Post) 

Traders of agricultural commodities aren't doing so well. Futures for soybeans, corn and wheat have plunged as production rebounds, easing buyers’ urge to secure supplies. (Bloomberg) 

JPMorgan named Sunil Dhupelia and Peihao Huang co-heads of equity capital markets for Asia Pacific, expanding their roles. JPMorgan’s co-head of Australia ECM Simone Haslinger is leaving the bank and Jonas Troeber will become sole head of Australia ECM. (Bloomberg) 

Gen Z keep reneging on graduate job offers when they find something better. This is problematic as it discourages employers from recruiting from their universities in the future. (Business Insider) 

If you say "we" instead of "I', it “signals receptiveness, which enhances persuasiveness.” (WSJ)  

A technology firm hiring a CTO had a 43 stage interview process. (Financial Times) 

VCs: “yeah i’ll be in europe for the summer but i’ll still be working” 

VCs in europe: pic.twitter.com/Io1bFjHZoK

— sophie (@netcapgirl) July 29, 2024

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