These are dark days if you work in proprietary trading. For the past five years, you have been the king of financial markets, raking in bonuses and enjoying the prestige that comes from making most of your bank's profits.
Now you are about as employable as a Greek-bond salesman. Goldman Sachs Group Inc. and JPMorgan Chase & Co. are two companies winding down their prop-trading units to comply with new regulations that limit the ability of financial firms to trade on their own account. Plenty more firms will follow suit.
Teams of traders fired by big banks are now setting up dozens of hedge funds. But hold on. Surely the one thing you learned during all those years on the trading desk is that there is no money to be made by following the herd. When everyone else is buying bonds, pile into equities. When the whole world is chasing the gold price higher, buy the dollar.
Who wants to be the 13th former Mega-Bank derivatives trading team knocking on the doors of pension-fund managers hustling for a few million to be invested in your new high- frequency yak-hide futures fund?
It's hard to stand out in a crowded field. And even if you do find some investors, there is a big difference between being the trading arm of a bank with a few billion on its balance sheet, and just some guy with a nice suit, a new Blackberry, and a smart sales pitch. The former gets to push the markets around. The latter is easily ignored.
There's no point going into business for yourself if you're just doing the same thing you were doing for the bank. You need to plan a career switch.
Focus on the skills you developed on the prop-trading desk, and decide where else they can be applied with equal success, if not comparable remuneration. After all, there must be plenty of industries in need of self-glorifying, hyper-competitive young men and women with micro-second attention spans.
Here are five to think about:
Social-networking entrepreneur: Get rid of the suit, but keep the high-end smart-phone and you can become one of the Facebook or Twitter clones. Your easygoing charm and ability to limit your focus on any one subject to only a few minutes will make you a natural. Even better, you'll know precisely whom to call in six months' time when you are ready to sell out to a clueless, old media dinosaur.
Divorce lawyer: Remember all those hedge-fund wives you never quite got around to talking to at those charity evenings with your clients? At least half of them will be divorcing their husbands in the next five years. Retrain and become their lawyer. They will need someone as ruthless and rapacious as they are. You'll also have a good idea which bank in the Cayman Islands their husbands might have hidden their assets in. Admittedly, the shallowness and viciousness of your clients might be disturbing at first. It will be far worse than anything you saw in prop trading. But at least you'll get sweet revenge on that guy who stuffed you on the oil trade last year.
Piracy negotiator: The shipping industry is getting taken to the cleaners by a few Somali teenagers equipped with a couple of hundred dollars' worth of AK-47s. They take the ship, then get a few million dollars to release it. It's crazy. What the shippers need is someone on the other side of the trade who knows how to play hardball. Delay. Scream and shout. Talk the pirates into taking a bunch of Hungarian bonds instead of cash. Then send some mercenaries in to get rid of them. After a few months of negotiating with you, the Somalis will happily go back to tuna fishing.
Regulator: Goldman Sachs, JPMorgan may be closing their prop-trading units. But maybe they are just giving that desk a new name. After all, prop trading was where they made money. The average pen-pushing career bureaucrat won't have a clue how to spot that. Offer to work for a regulator and negotiate a bonus payment for every prop trading desk you identify. You'll only increase the odds of catching the next big meltdown after every regulator failed to spot anything before the credit crunch.
Personal shopper: Go to one of those big, swank London department stores where women from Saudi Arabia and Moscow go to spend a few million petrodollars. Become one of their personal shoppers, reassuring them how fabulous that Tiffany necklace looks with that Prada bag. After all, playing with other people's money is what you've been doing all along.
There are plenty of other possibilities. The point is that the glory days of prop trading are over. But just because you are redundant, it doesn't mean your skills are. Just find a new way to apply them.
Thoughts opinions feelings? Anyone else a prop trader right now? :>