It was a month after obamas election and despite his

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It was a month after Obama’s election, and despite his promises of hope and change—and his closeness to important Wall Street players such as JPMorgan Chase CEO Jamie Dimon and Robert Wolf, then UBS’s chairman in the Americas—the mood in the markets was still apocalyptic. I was looking for hope myself, and I had a solid idea about where to find it. My piece focused on something that many people had an intuition about but didn’t fully understand: the concept of dry powder. During the crisis, the first thing all the mutual funds and pension funds started doing was selling—and they kept selling, deepening the crisis. As a result, the funds built up a huge cash base, also known as “a wall of money,” or “dry powder.” (The term is an old military one, from the days when it was important to keep gunpowder supplies safe from moisture.) Hundreds of billions of dollars were just sitting on the sidelines. The piece was built on the thesis that even though everyone was still selling, eventually this cash supply was going to become so big that it would have to come back into the market in search of returns, with—no matter how good or bad the world happened to be at the moment—a significant impact. So I came up with a framework for showing how to track when the dry powder was actually getting deployed, and what that said about the direction of the markets. The reaction at Goldman was electric. When I discussed the piece on our internal morning call that day in a conference room on one side of the trading floor—at which all the partners and managing directors were participating—one of the most respected salespeople on the whole trading floor immediately chimed in. “Guys, this piece is going to be essential reading today,” he said. “Everyone on Wall Street is going to be talking about it. I’ve already sent it to my three biggest clients, and they love it. I want everyone to send the piece out to all their clients.” Everyone did: it got sent out to hundreds, maybe even thousands, of clients. Over the next few days, several partners came by the desk and patted me on the back. “This is great stuff,” they’d say. “Let’s do more of this.” They all seemed to be in agreement: commentary like this was a way to stay in front of our clients, to show them we were looking out for them. I think another reason the piece caught on was that people were scared and looking for hope that the markets might recover, and in a calm, objective way, my dry powder thesis had provided some. I e-mailed the salesperson who’d given me that surprising endorsement in front of everyone: “Thank you, man—that truly meant a lot to me.” “It’s well deserved,” he wrote back. “In the new world we live in, content is the way we will
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differentiate ourselves. Keep it up.”
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CHAPTER 8 The Four Clients Passover, April 2009. Goldman Sachs had come through the wilderness of the financial crisis a changed firm. From a simple structural perspective, we were now a bank holding company instead of
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