Morning Coffee: The new team of AI bankers with a cool name. Some of the most profitable traders in the world don’t know how much they’ve made

Bankers do love their military metaphors.  Former Goldman Sachs CEO Lloyd Blankfein famously had to remind a colleague during the 2008 financial crisis that “You're getting out of a Mercedes to go to the New York Federal Reserve. You're not getting out of a Higgins boat on Omaha beach".  The reason that bankers love battle vernacular is that it sounds good.  It’s cooler to refer to your elite structured derivatives team as “The Navy SEALs” rather than something like “The Berlin Philharmonic” or “the sous-chefs at Nobu”.

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One fintech entrepreneur who knows this is Gabriel Stengel of Rogo. His company makes AI tools to help junior bankers expedite the process of making financial models, designing pitchbooks and responding to “pls fix” requests.  Gabriel and his colleagues are trying to push the envelope in other areas too, with products in the R&D lab that might be able to help with due diligence, maintaining data rooms and comparing financing options.

Unfortunately, many potential clients think they can do it all themselves. Rogo doesn’t actually have its own LLM, and indeed advertises its capabilities as “model neutral” with respect to whether the underlying AI is Claude, ChatGPT, Gemini or something else. This means that in a sense, it’s a complicated system for giving instructions to a chatbot, and it’s tempting to think that this means that you can save money by “just” giving the junior bankers a Pro subscription and telling them to “just” engineer the prompts themselves.

Of course, as the inspirational quote has it, “If your solution to some problem relies on “If everyone would just...” then you do not have a solution. Everyone is not going to just.” In fact, people like Patrice Maffre, the head of investment banking at Nomura, find a lot of the value in the system comes from Rogo’s onsite specialist consultants, many of them former bankers at the firms they are now advising, who can guide their clients through the correct way to use the product so that you don’t get so many hallucinations or misunderstandings, and who know how to use the technology to produce usable output which doesn’t take up all the time it was nominally going to save with endless rounds of checking.

These consultants are called… “forward deployed bankers”. The implication is probably meant to be that they are similar to Palantir’s “forward deployed engineers”, but this itself was borrowing a military analogy.

There is a temptation to eye-roll. If you find yourself in a few years’ time working for Rogo or one of its competitors to show junior bankers how to vibe code a slide deck, try to remember that you’re not actually ready to immediately scramble at the first sign of hostilities, you work in a bank.

Elsewhere, some of the biggest profits this year have come from physical commodities trading houses, as the conflict in the Gulf has sent oil and gas prices into crazy volatility. But it turns out that as well as price risk and geopolitical risk, this industry has a surprising amount of legal risk.

For example, when a trading firm buys an oil contract on the ICE Futures Abu Dhabi exchange for a cargo load of oil, then what happens if the boat which shows up turns out to have 62,000 barrels in it rather than 500,000? How is this affected if the buyer of the cargo who is suing the seller had at some point in the past sold the same cargo on the OTC market?

The answer is, apparently “oodles of lawsuits”. One senior executive in the oil trading world estimated that he had about $500m P&L, plus or minus, tied up in currently outstanding litigation. It’s the oil trading equivalent of the VAR review in football; you think you’ve scored a goal, but you can’t really be sure until the off-pitch referee gives their verdict. And like the video review, it seems to be making the game considerably less fun for everyone.

Meanwhile…

Goldman Sachs bankers (and possibly others too) have had to stop using the Claude AI in Hong Kong, seemingly due to a provision of their contract with Anthropic which was included out of concern over Chinese researchers getting access to it. (FT)

After joining from Citadel last year as the head of systematic trading and execution oversight, Balyasny have now promoted Nick Bellavia to be the overall COO of global trading. It’s now his job to make sure that every other pod gets to execute their ideas at the best possible price. (Financial News)

Jamie Dimon is continuing to sound cautious, particularly when compared to other CEOs talking about how great the market looks. He reminds listeners to a podcast that there are still plenty of items in the risk column and that “The way it’s going now, there will be some kind of bond crisis, and then we’ll have to deal with it. It will be okay. It’s just not the way to do it”. (Fortune)

Central bankers have different rules of employment from the private sector. Jerome Powell has finished his term as Chair of the Federal Reserve, but is going to stay on the board. He specifically wants to defend the institution against legal pressure from the Trump administration. (WSJ)

Bill Ackman’s social media stardom hasn’t necessarily translated into financial support.  His closed end fund, Pershing Square USA, fell 18% on its first day of trading after mainly attracting institutional, rather than retail, investors. His management company, Pershing Square (without the USA), which IPOd on the same day, was up slightly though, so some people still believe in him. (WSJ)

For some reason, the Codex AI agent from OpenAI needs to be given strict built-in instructions not to talk about goblins. (WIRED)

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