| The slump in M&A deals is causing a dramatic turnover of senior bankers, traders await this week's Federal Reserve meeting, and Wall Street workers say they'd most like to work for JP Morgan's Jamie Dimon. — Tiffany Tsoi A slump in mergers and acquisitions and the collapse of Credit Suisse have sparked an epic turnover of senior managers across the financial industry spanning trading and advisory services. Managers at Jefferies Financial Group Inc., Evercore Inc. and PJT Partners Inc. say they've been inundated with CVs from the likes of Goldman, Barclays Plc and Credit Suisse. Having expanded aggressively during the boom years, big banks are cutting jobs in some of the biggest downsizing rounds the industry has seen in the past decade. Simultaneously, lower-ranked rivals such as Deutsche Bank AG and Banco Santander SA are on a hiring spree, while boutiques are poaching top talent they've eyed for years, betting the next M&A boom cycle is just around the corner. Treasury yields have edged lower as traders are positioning for the Fed to raise interest rates this week and to signal whether more hikes are likely. After taking a break from tightening last month, Fed Chairman Jerome Powell and his colleagues look locked in to raising interest rates by a quarter percentage point at their July 25-26 meeting. Rising hopes of a soft landing for the US economy likely hinge on the Federal Reserve's willingness to tolerate inflation markedly higher than it would prefer. "It's going to be hard to get enough demand compression without a recession to get that price pressure out of the system," said JPMorgan Chase & Co. chief economist Bruce Kasman. "I don't think inflation is going to slide below 3% on a sustained basis" otherwise. Wall Streeters say they'd most like to work for JP Morgan CEO Jamie Dimon, according to the latest Markets Live Pulse Survey. Nearly three in five of the almost 600 respondents picked Dimon as their preferred boss among the heads of the big six US banks. Jamie Dimon has lorded over JPMorgan Chase & Co. for more than 17 years, quadrupling the stock price and captivating legions with candid comments and occasional zingers on the economy, regulators and politicians. Jane Fraser of Citigroup Inc., a work-from-home supporter, came second. At the same time, though, Wall Street workers aren't letting Dimon or other top bosses off the hook. Almost half of the respondents, who represent a broad range of investors and bankers in the US and beyond, blame executives for high expenses and headcount reductions that are weighing on the industry. S&P 500 and Nasdaq 100 futures are both up as of 5:08 a.m. in New York. Treasury yields have declined across the curve, while the dollar has pushed higher. Gold and iron ore prices have climbed, whereas oil prices are down. US June Chicago Fed National Activity data is due at 8:30 a.m. At 9:45 a.m., US July S&P Global PMIs will be released. At 11:30 a.m., the US is selling $65 billion 13-week and $58 billion 26-week bills, and at 1:00 p.m., $42 billion 2-year notes. Here's what caught our eye over the weekend: Hello and Happy Fed Week. I've been on vacation for the last week, so I'm still catching up on old news. So before focusing on current events, I want to look backwards for a second. Last week we released two topics of the podcast related to AI. The first was with Josh Wolfe of Lux Capital, a firm that's been investing successfully in the space, since long before anyone was talking about ChatGPT. These days there's an investor frenzy with all things AI related. And as everyone has observed, all the VCs who were cheering on crypto and Web3 just two years ago have totally pivoted their brands. So it was nice to talk to someone who's been in the space for longer.
Then on Thursday, we spoke with Brannin McBee of CoreWeave, which is attemping to build the ultimate GPU cloud for AI, which means they're in the business of acquiring lots of Nvidia chips and putting them together in the most efficient manner possible, so that various companies in the space can train and run their models. Anyway, two related thoughts jumped out to me after these episodes. 1) I don't think it's obvious to anyone which business models in AI are going to work yet. People are excited because the tech can do cool stuff. But outside of, say, Nvidia and maybe some other core infrastructure players, it's probably TBD who really turns all of this into money-making enterprises. Some AI companies are already doing layoffs. So it's a moment of a lot of uncertainty.
2) Thanks to compute and energy needs (not to mention scarce talent) there are many aspects of the space that are extremely dollar intensive. In the 2010s, a lot of companies were launched that didn't really need that much cash to get the product going. The various SaaS giants that emerged over the last 15 years weren't like the semiconductor foundries of yore, that had huge upfront costs and operational risks. But due to huge cash demands associated with some aspects of AI, maybe some of the old VC economics is coming back. The AI hype has come at a nice time for tech, which has been reeling a bit since the peak of the froth in early 2021. But we may be back to a period before the current one, in which business models are characterized by extreme uncertainty and high upfront costs just to get a seat at the table.
Follow Bloomberg's Joe Weisenthal on Twitter @TheStalwart | 
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