Long lunches are a long time gone




Long ago, Far away

These things don’t happen

No more, nowadays

Bob Dylan 1962

Johnny Jones, a lovely man and one of the great Pit Traders used to shout at 11.30 every day “Bars open Johnny” and still when I glance to the clock at that time I can hear him . 11.30 was the start of lunch my favourite word and my favourite meal. What a word lunch is. It conjures up a world of possibilities and host of memories and sadly now the memories of long City lunches are pretty all that we are left with. A world where the choice is between still or sparkling at the table, as if the places were occupied by fish, is a long way from the days where lunch started early , if you were in the barrel, with a Moscow Mule in The City Circle and finished with Kummel, Port or Madeira. But what days and I only wish my memories hadn’t been destroyed so much by overindulgence, however I will always remain thankful for those who gently prod the lobes and remind me of stories as Mike Tagg did last week.

One of the great joys of writing these columns is how friends from years ago call or email me saying “But you must remember ….” Ping goes the brain and I’m back and so is the memory. Now Mike and I go back several decades to the great days of City lunches, indeed when London ruled the markets and had scant regard for the U.S. opening, and his memory was jogged by my mention of Peter Shafto. I discussed Peter’s interviewing techniques last week which nudged Taggy to mention Peter’s wife. I would normally not be so ungallant as to discuss another man’s wife but in Peter’s case I must make an exception. Maggie , or Cookie, was a stunning South African blonde of fierce temper and one can only imagine the tempestuous relationship they had. Maggie was the cook at R.P.Martin at a time when every institution had Director’s cooks and dining rooms.

Lunch at Martin’s was unpredictable and certainly never dull whether it was Barclays Bank or London Borough of Camden being entertained they were lively all afternoon affairs. The senior broker would hold court and the wine would flow as if prohibition was about to start, but the real star turn was Maggie. Now she was from memory a pretty good cook with a winning smile and quick wit about her which was all good till you criticised her food. My God you were brave . naïve or foolish to do so . Or possibly all three. There would be a moment of silence and her whole demeanour would change and then the explosion of abuse occasionally culminating in the dish that you had criticised being picked up and dumped on your head. Salad or Soup it didn’t matter it was picked up and emptied on you. Now younger readers may be incredulous and I just wish I could remember the name of the dealer at AP Bank who was drenched in soup as he would verify this story and more!

It was not only the so called “in-lunches” that were so entertaining we would occasionally venture to the West End , more so in the 1980’s, where unshackled from the strict City behavioural codes and with a different audience the show would begin. Angelo , Maitre ‘D at the time at The Savoy Grill would turn a blind eye due to the huge tips would be a stopping point as would Simpsons and Joe Allens in Covent Garden . Further west there was, and is, a restaurant called  Monpeliano’s in Knightsbridge where an erstwhile colleague Adrian Scott-Jones, known as loopy to all and sundry,  used to really get into West End life. Loopy, was the maddest of all the people I have worked with. He almost certainly had Tourette’s but on his day was an incredible Dollar Deposit broker and there are many an unprintable story about him. God we were obnoxious and I’m not proud just thankful I knew when to stop, unlike too many of my colleagues.

Whether it was a City lunch or just a bunch of friends lunching at Langans, a venue with a lexicon of stories of its own , it has always been my favourite time of day. Indeed it was over a lunch in Switzerland that I fell in love with a girl who was to become my wife and being my wedding anniversary I better mention that lunch as my best ever ! Lunch, a time where the drudgery of the morning has gone and the excitement of the evening is just being thought of. A time to reflect and look forward and after this last week the markets feel as if they are taking a lunch break. Brexit seems like it’s on track and certainly in the UK there is at last an acceptance that we are leaving with less talk of a second referendum. Mrs May has had a good couple of weeks whilst the Labour Party seems determined to make itself as unelectable as possible. Elsewhere Dollar deposits remain bid,  increasing the costs of funding, and Deutsche Bank pays out huge bonuses to its staff. Not that I’m making any sort of connection there.

Drinking habits change, as do attitudes, but it does feel like the markets are digesting a huge lunch and have absorbed too much good wine. There are the signs of some ructions coming and my fear is that the markets have been partaking of too much Port and that all hell is about to break loose. Whether it’s Tariffs, Italian politics or some unseen threat that is the needle that finally pricks the balloon their feels like there is too much risk out there. As we approach a long Easter Weekend I think that it is worth remember two market catchphrase that have relevance this week. Firstly “long weekend –reversal of trend” and secondly the Tony LaPorta dictum “ Thou shalt not loss thy ass on a Friday “( or Thursday this week) . In the coming days I would recommend de-risking and squaring off on Thursday and use the weekend to take stock. And my best piece of advice?  A nice quiet lunch on Thursday in Langans. If that’s possible.

PS I do not, contrary to rumour, own shares in Langans.

A force of nature replacing old interviews

By Richard Matthews 23rdMarch 2018

As my index finger circles over the keyboard searching for the right letter, like a hawk looking for a field mouse my mind is often pulled out of the window to distraction. As my wife skips pretending to be a pantomime horse, to amuse our dog, I’ve noticed how quiet the world is this morning. A kind of hush has fallen and the animals have become hermits as a storm approaches. Not a spring storm but the last kick of winter is coming in. I love the excitement of a storm be it in the markets, in nature or just in daily life. Too often we drift along and accept life without thought or challenge until it turns round and bites you or in some cases just hits you firmly between the eyes.

As I sat in a boardroom on Thursday last week there was a hush as the combined executives waited to hear a presentation on recruitment. Recruitment. What do I know about recruitment? Personally I was interviewed by Peter Shafto, a Director at R.P.Martin in 1975, who simply met me in their boardroom , which as they often did then doubled as a bar/dining room. As this tall striking man walked into the room he simply got two glasses out, asked me what I liked to drink and on hearing Vodka, simply said in a cut glass accent, “I like a boy who drinks Vodka”. He then poured out an enormous drink , undid the knot on his tie and retied one end around the glass and used the other end of the tie like a silk pulley to guide the glass to his lips. I looked at him in astonishment and he said “If I don’t do that I spill too much. When can you start?” I started a month later and I’m not sure he knew who I was for a long time.

Forty years later I recalled this story twice last week once because one of the guys I started with strode back into my life Mike Tagg imaginatively nicknamed Taggy. Probably the only other survivor still involved in the markets who can recall recruitment policies like the one I’ve just described. I’m sure we had a trainee on one desk who only realised after a month that he was in the wrong office when he wasn’t on the payroll. He had come to the fourth floor on his first day instead of Simon and Coates on the third floor and we had accepted him in. I wonder if what happened to him? The broking equivalent to Paddington Bear. The other time, this week, I thought back to our old recruitment policies was when the force of nature Lee McQueen strolled in.

For those not familiar with the television show “ The Apprentice “ it is a talent contest that brought fame to not only Donald Trump but also to Lee who won the show in 2008???. His background is in recruitment although he without doubt would have made a great broker and he has reinvented the search for new employees and was pitching for a contract. He has several interesting ideas which not wanting to steal his thunder I won’t reveal apart from to say he really made me think. Does the employer chose the right candidate and does the employee chose the right employer. His processes are aimed at making the process more scientific, although they resemble a massive television game show they do make sense.


In the early days of broking in the interbank markets we just wanted to make money and enjoy life. I can her the refrain “I’m a money broker and I’m OK, I work all day and drink all night….” (The rest of which is censored) and it was true work hard, drink in Draycott’s and play harder. Our recruitment policies, and many still are, were based around hiring from the existing talent pool or the relatives of it. Some hires were impulsive like the ticket tout we hired at Refco, or the shoe shine boy that Salomon’s hired, these were based just on personality and drive. Personality and an ability for mental arithmetic which certainly Darren ( Dips) Cottrell , who loves to repeat the title of this piece, had both in spades. Unless the gene pool in a broker’s office is shaken up, thoroughly, you end up with too many similarities of style which breeds two things I can’t abide. Arrogance and laziness. I may be wrong but I would love to follow some of the youngsters that Lee unearths as I feel they will be exciting prospects in whatever career they chose, for sure they will have better training than I received which consisted of learning two facts. “Buy low, sell high” and “The secret of good broking is accurate quoting”, both great bits of advice but not entirely scientific.

The markets are sitting in a hush as well and one gets the feel that a force of nature is heading their way. Dollars  are still being searched for in the deposit markets and a story is going around that there are not enough dollars in the system to be repatriated and synthetic dollars are being created. Hmm sounds like a bit of scaremongering to me but the rates will go higher. Whether the OIS market is warning us of something nasty lurking around the woodshed I’m not sure as the CDS market looks quiet calm but none the less perhaps we will see a flight to quality currencies like the Swissy and Bill and Ben.

The observant of you will notice that this column isn’t published by Livesquawk anymore. Some new exciting opportunities have arisen and even at my grand old age I can’t resist a challenge. It seems apt in the same week that the truly great broker and visionary businessman Michael Spencer is considering his future that I do. Now I am not fit to be mentioned in the same breath as a man who has raised £140m for charities and been at the forefront of broking for three decades but it neatly allows me to close this column with a comment about him. I’ve been the other side of the table to Michael a couple of times and walked away happy, which is the secret to a good deal, but also I was under no illusion who was far and away the shrewder and brighter of the parties and it wasn’t me. Indeed I had several opportunities to work with him and each time turned the offer down for no other reason than I thought I knew better. On reflection I didn’t. So here is a little hint for the CME who are rumoured to be buying NEX. Remember in negotiations with Michael, if you don’t know who the sucker in the room is, it’s you.

Richard Matthews, who began his career in 1973, is a former trader-broker in the London money, futures and foreign exchange markets. Twitter @dickiematthews5    website: www.theotherdoor.co

The division bells are starting to chime.

Bells have always been important in my life. From the first bells I heard in my Teddy’s ears, called Rawhide for some odd reason, through the fact my dad was born within the sound of them through to the daily closing bell of the market they have always resonated. I started thinking of bells when I met up with two old colleagues indeed great friends this week. Not alarm bells although the assault I got from one of them certainly had me alarmed by the ferocity of his friendship. It was a story that they reminded me of that featured Bells. A stag party for a legend called Nelson who at the time owned Bellfinito held at The Belfry golf club, and a Pit broker nicknamed Dips. I should say now that Dips was called thus for his unerring ability for always buying the market dips and not the fact he could occasionally be dippy.

The full details of the stag are of course not fit to be published in public or even on my website but suffice to say copious amounts of liquor were consumed. The highlight of the tales was a story featuring Long, a very tall and very good spread trader, an empty bag of crisps and a lady of dubious reputation. I can say no more apart from it ended up with the shower overflowing as the resalted crisp bag blocked the plug hole. Or was it the clingfilm from the loo ? Sorry to dangle these details but those that were there know the story and those that weren’t…well you can always ring me. The part that really stuck in my mind was that of Dips who turned up at the party in disguised as a woman with a false nose,  female wig and of course fashionable high heels. Now consider that Dips is a Bermondsey Boy at least 6ft 4ins, with a voice more akin to Joe Cocker than the Queen. I hope you will have painted a picture of this great guy appearing. I hear you question why he had dressed up like this? Simply why? He had parted company with the broker the day before but was determined to attend the party and thought that the drag outfit was sufficient disguise.

Of course it was no more efficient as a disguise than Europe is using over the Italian elections. They, as I must say I warned, were a triumph of populism over common sense. It almost like horseshoe politics where the two opposing sides, simply left and right, join in the middle and find common ground over subjects such as immigration. Of course a country that is the birthplace to both Machiavelli and Leonardo the shenanigans in the background that will now play out will be hard to follow but will have a profound impact on Europe. With Renzi suffering a major setback and Berlusconi falling short it’s the new bambini, Luigi Di Malo and Matteo Salvini who hold the cards. Amongst all the horse trading that will take place, over many months, there is the spectre of the Italians running a parallel currency, based on THE ISSUANCE OF PERPETUAL T BONDS, to the Euro. What could possibly go wrong? Ah well as least Mutti is back in power, just.

The division between Southern and Northern Europe was, and is, always going to be a problem. If the North is epitomised by Luxembourg and Germany, where I visited this week , than The City of London also has problems larger than I had thought. Much larger. I last visited Luxembourg some twenty five years ago when I stayed with a broker friend who was locally famous for playing the piano. That is playing the piano so badly that the local Restaurants used to ask him to play at closing time to hurry people out. Whether his playing has improved I don’t know, as he has retired, but what I can report is that it’s a different country. Modern, open to do business and accommodating to anyone especially it seems those coming from London. The short, but frighteningly expensive Taxi ride from the Airport downtown was more than enough to convince me that the City has a problem. The infrastructure of institutions we are so proud of is also there for all to see and as you drive past every major financial institution all housed in gleaming modern office blocks the point sinks home. A different world to the sleepy backwater that it was. If you need further evidence just stand on the roadside for 15minutes and count the luxury cars. Easily as many as Knightsbridge.

Good news and bad news from Europe and a feeling from everyone that I spoke to was that it was a great mistake that the UK was leaving Europe and that it will be punished for doing so. Sad I’m afraid and if I was the other side of the channel I would take the same attitude. I do however feel that we are fast approaching the closing bell and that the UK will be left with little option but to walk away.

Whilst we gaze at our naval and fret over European fishing areas and the fate of the Euro important events are happening with the Dollar. Not just the potential impact on European car makers of Mr Trump’s impending trade war but the impact, that I wrote some time ago about, that the changes to the US tax system are having. I am not as great a follower of data as I was once was but two little snippets have caught my eye this week and both I think are reflections of the flight home of US Dollars. Firstly the USD LIBOR/OIS* spread has widened dramatically from 25 to 44 in the last week . Is this a sign of liquidity drying up in USD? Interestingly the Euro, Yen and other majors, spreads have stayed pretty tight. As commercial paper is sold to enable repatriation of funds there has been a flood of attractive T-Bills to finance the US government which has acted as a carrot at the same time that the Fed is pulling back from QE and rates are edging up acting as a stick.

This alone would be seen as a solo cloud on the horizon but the HKD has taken a pounding and is at its lowest level against the USD for 33 years. The HKD has been pretty much pegged to the USD for all those years so a meaningful move is of interest and whilst HIBOR has weakened the carry trade has widened to 103 basis points the widest since 2008 what could possibly go wrong? As the repatriation of Dollars gathers pace there will be more spots of local difficulty and the challenge will be joining the dots quicker than anyone else to see if there really is an impending crisis. For sure the dots that are already joined are looking like a bell but it’s certainly not one from a Rawhides ear.

The LIBOR/OIS spread is the difference between LIBOR and the Overnight Index Swap which oftentimes is based on the Fed funds rate. This spread can be read as an indicator of a flight to quality as the spread widens commercial paper is being shown as increasingly less attractive than Government paper.

General Tariff and his trade troopers are on parade

Arbitrage. To me a lovely sounding word, a woody word as some would say, with all sorts of possibilities and I love the way that the word turns to arbitrageur to describe someone who partakes in the business of arbitrage. I first learnt about arbitraging from a lovely, if somewhat eccentric, man called Hugh Newcomb who was a director at R. P. Martin and would come up with the most extraordinary ideas to create profits. One of these was to watch the contango on Copper and when it steepened too much we, the money brokers, would pile in and correct the price. The commodity markets couldn’t always take the volume as we would have, oftentimes- someone like Barclays looking to lend three months deposits and the volumes on Copper were relatively small. It didn’t really matter though as we showed we thought and looked sideways. Hugh was also famous for sporting the most extravagant facial hair in a style that used to be known as Bugger’s grips and probably the least said about that the better. Oh and nearly bankrupting The Scottish Co Op but that’s for another day.

Arbitrage has been in existence for as long as markets and came to the fore again in the early days of the futures market. The Euro Dollar price in London was 25bp different to the price in Chicago. For the life of me I can’t remember why or which traded at the premium, and be quiet in the cheap seats I did know once.  All afternoon half a dozen brokers would sit on the phone to Chicago trying to take advantage of this spread by putting on positions when the market moved out of line and unwinding when they came back in. Maybe making two ticks as they did so and alongside the profit it also created volume in a fledging market. Despite the fact it drove the Euro Dollar locals mad as I tried to get orders filled and distracted from their personal positions it made profit. I whole heartedly apologise to Tony, Welly, Bucky and the rest for being a pain.

I started thinking about arbitrage after hearing President Trump announce his decision to impose tariffs on Aluminium and Steel this week. I guess it was the price differential in those markets that made me think about this and how they really are imperfect markets. The shock that greeted this announcement was surprising as Trump has stated ad infinitum that his plan was to make America great again and he does appear to be a man of his word, politically at least. It also, as importantly appeals to his heartland vote. It will be interesting to see whether this ban benefits the core voter or harms the Auto industry more. An Auto industry that has been dependent on cheap aluminium and has exceedingly complex cross boarder supply agreements that will be damaged.

At first reading the tariff imposition was aimed to benefit his blue collar vote. Look beyond that and at China despite their exports to the US in Steel and Aluminium are pretty minimal this is an opening shot. Is it a coincidence that the come in the same week that President Xi has pretty much appointed himself Emperor Dictator for life? I think not. China looks like they, as always, are playing a longer game. A game that involves helping North Korea  as well as “investing” heavily into the Philippines in exchange for a “peaceful” expansion in the South China Sea’s islands. China is with these moves as well as the construction of the new Silk Road threatening American dominance economically and militarily and this is what Trump is reacting to. In a further announcement President Trump tweeted on Saturday that European tariffs on US cars were unfair whilst they can export unhindered into the US which would damage the already beleaguered Volkswagen group and by association its German Banking allies. The Hausfrau has put together a coalition but if German car makers suddenly lost the UK, an uber-hard Brexit could cause this, as well as the US markets, German Banks would come under increased pressure and further questions about the viability of the largest would be asked.

Prior to Trump’s announcement on Saturday regarding European Car makers there was a chain of thought that he may well retreat and that he was only sabre rattling. I’m not so sure now and my mind goes back to the attack in Davos that he made on Europe and their attitude to the US. Barnier and cohorts may find that the UK appears an easy country to bully. His latest tactic is to orchestrate a collection of has been and never weres as a fifth column, it is almost insulting to the intelligence. I mean really who apart from European leaders think that Blighted Blair or Major, at his most creepy, are anything other than discredited busted flushes? Trump and The US are a different matter as not only does Europe rely on the US as a huge export market it also relies on The US to protect it with disproportionate contributions to NATO and as such will find the US much harder to negotiate with.

The imposition of trade tariffs was made under the auspices of National Security which seems extraordinary whilst for all intents and purposes I fail to see that The US is at war. As a second guess, not always easy with Trump, this was the only route that he could his wishes through. How the WTO react will be crucial as if they accept the move it means that any country could in theory site National security as a the reason for tariff imposition. As in all wars the escalation to an all-out trade conflict could be quick and damaging to the fragile recoveries that we have seen. Previously we saw Bush and Obama implement limited anti-dumping rules but nothing like the imposition of a 25% steel and 10% Aluminium tariff.

I thought I had seen it all, apart from World War, in my decades in The City. I’ve heard the rattling of sabres before over trade but this time it feels like they have been sharpened and the troops sent armed with them to the stockade. The message will be heard loud and clear across the world and must worry his neighbours such as Trudeau. However seeing him parade his family in India like extras from a Bollywood film one wonders if anything concerns him, certainly not image. These are worrying times for world trade and as a consequence the fragile economic recovery that we have seen and by association the stock Markets. I wonder with the 2year 10 year yield was telling us something back in December and will it now invert portending a recession? Sadly I feel darkness is drawing in and only history will tell if it’s for a lifetime or it’s just a short night time. Hey ho perhaps I should retreat to my youth and spend the afternoon in The Arbitrageur for some cheer……