Morning Coffee: The equity analysts trying to sleep ahead of nightmare 4am day. Financial sponsors bankers replaced by AI

If you're an equity analyst, life is not what it used to be. As a former practitioner of the trade wrote here last year, the job is harder. Clients have mostly become demanding hedge funds. Competition is vicious, hours are long and there's always a junior trying to take your job.

With this in mind, seasoned analysts need to provide something special. Next Tuesday, some will need to do this five time over. 

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The Wall Street Journal points out that five US banks are reporting their results on Tuesday: Bank of America, Citi, Goldman Sachs, JPMorgan and Wells Fargo. Equity researchers covering these banks are already bracing themselves. 

One (Laks Ganapathi of Unicus Research), says she'll be up at 4am, reading news and emails ahead of the torrent. Another, (Mike Mayo of Wells Fargo), says he'll be up at 4.45am doing some "mobility stretching." Manan Gosalia at Morgan Stanley says "sleep is really important" as the deluge approaches. 

It's not just the results, it's the investor calls. It's not just the investor calls, it's the number crunching. It's trying to get beneath what's really going on.

Although banks are expected to report record revenues in areas like equities sales and trading and equity capital markets (ECM), there are still suspicions about private credit losses and the impact of macroeconomic uncertainty on the rest of the year.  Ganapathi says banks will almost certainly downplay the risks and talk a lot about the resilience of the consumer instead. "We are expecting them to sugarcoat everything," she says. 

Analysts will therefore need their wits about them. Tuesday will be "crazy," says Gosalia. Crazy could be good, but it next week will be "gut-wrenching," says Mayo. Analysts need to stock up on carbs as well as sleep.

Separately, financial sponsors bankers have been waiting years for struggling private equity firms to sell the tarnished jewels they bought when prices were high and rates were low. Whenever banks report quarterly results, CEOs predict these sales are about to start. And when they do, the financial sponsors bankers who interface with private equity firms will be deluged with work and the fees will flow once again.

AI may intervene. The Wall Street Journal reports that private equity firm CVC quietly sold Greek shipping business Skroutz earlier this year, and that a machine ran the sale process rather than some bankers.

Skroutz co-founder George Hadjigeorgiou reportedly pushed for the AI interception. Prospective buyers received a link to a data portal where an analyst chat bot replicated a banker and provided information on financials and answered questions on due diligence. 

This seemed good enough for Blackstone, which bought Skroutz for $746m including debt. Advisors weren't absent from the deal altogether: Blackstone used law firm Weil and strategy consulting firm OC&C to help with the purchase. Financial sponsors bankers don't seem to have trumpeted any involvement, though.

Meanwhile...

JPMorgan is setting up a new team of bankers focused on small cap companies valued between $100m and $500m. (WSJ) 

Goldman Sachs employees can't use prediction markets to bet on whether Goldman will announce a restructuring, whether a ceasefire will be declared, the price of bitcoin or merger outcomes. They can bet on sporting events though. (Bloomberg) 

Hedge fund Qube now has $50bn in AUM and is still building its new group of discretionary equities portfolio managers who will make their own trades and build their own portfolios. (Business Insider) 

Ken Griffin: "My colleague built an agentic AI system that would read a paper, reproduce it, verify the results that were published in the paper, produce the results out of sample, and do all of this work in about, on average, two to three hours per paper." (Goldman Sachs) 

Strategists at JPMorgan built an AI that shifts between equities and bonds depending upon market conditions and that beat a 60/40 portfolio by 0.7 percentage points in a year with low volatility. (Bloomberg) 

Bank of America seems to want to get in on the OpenAI IPO. It has extended a $520m credit line to the firm after initially turning it down. (Bloomberg) 

UBS advised wealth clients to withdraw money from private credit and caused outflows from Blue Owl's technology private credit fund which was launched in 2022 after consultation with UBS. (FT) 

Scotiabank exited precious metals trading six years ago. Now it's back, with a smaller team. (Bloomberg) 

Recruiters have stopped filling junior jobs which can be automated and are filling jobs like AI trainers, process automation specialists, data scientists, database architects and cybersecurity experts instead. (Bloomberg) 

What if SpaceX will be worth $10 trillion because it's "enabling a new infrastructure layer spanning transportation, communications, compute, manufacturing, and energy"? Yeah. (Financial Times) 

Blue Origin wants to raise an initial $10bn and believes in data centres in space. (Yahoo)

Paramount's Warner Bros deal will saddle the combined company with $80bn of debt totalling 6.5x EBITDA. (WSJ)

Asian hedge funds are thriving. These are they. (Rupak Ghose) 

You can earn $33 an hour and become a millionaire working at Costco. (WSJ) 

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