By Richard Matthews January 31st
Dealing rooms were always meant to be noisy and that was always the attraction of them to me. From my very first day I loved the shouting and the laughter, in short I loved the buzz. A room of 400 or 500 traders or brokers banging phones and shouting seemingly random words was and still would be heaven. “BundBobleshatz” from one desk, “Cable in fifty” from another and the triumphant “you’re wearing them “. Brilliant fun but sadly those shouts are being confined to history by electronic trading and in history books they will soon reside along with the street cries of old London. How many of you remember the newspaper sellers calling “Starnoosstannerd” or “all the winners” trying to tempt you into paying for the Evening Standard (or the other papers The Evening News and Evening Star) on your way home? I suspect not many of you recall the newspaper sellers but hopefully some remember the cries in the dealing room….many of which I can’t put into a written piece without getting censored!
I hear the cries oh so rarely these days and normally uttered by a colleague as he tries to impart some excitement and urgency into his young team of brokers. There is still noise, oh yes but of a different kind. The constant babble of the TV in the background is there but in the end the sheer repetitiveness of the rolling news channels becomes an irritant. Not the news or the presenters, although some do grate after five minutes and I am much too pleasant to name names, it’s the adverts. The News cycle changes, the interviewers and interviewees change but the adverts do not. The same jingle, introducing the same asinine message, hour after endless hour. At least with the old cries there was a randomness to them both in time and content that kept you aware but not anymore. This last week more than most I’ve kept an ear cocked to the TV channels to hear what wonderful pearls of wisdom were being uttered by the great and good in Davos.
Davos the conference where a Marxist ( John McDonnell) will happily attend paying upwards of $50,000 for the privilege and then $1200 a night to educate the world’s thinkers that the problem in Venezuela was not one of socialism but one of not enough socialism. An interesting thought process. But then I guess if I could get the taxpayer to fund me attend this giant party I would be there. It was however a slightly different jamboree this year once Donald Trump appeared, and let us be honest stole the show. Like him or loathe him he is the world’s most important man and he does, clearly, enjoy being so. Despite the seemingly randomness of his tweeting he is getting on with business and again declared that America was open for business. It amuses me when I see the righteous indignation of Europe at his effrontery in saying this. I mean France doesn’t look after France first and neither does Germany. Well they do, they just aren’t quite so upfront and open about putting their countries first.
Each time I glanced up to the screen during the week there was yet another member of the elite be it a youthful Jamie Dimon or Larry Fink chief executive of BlackRock being interviewed in what looked like a set from a Christmas cake decoration shop or one of those model shops I loved as a kid selling miniature snow-capped trees as I tried to make my model railway more exciting and appear to be going through The Rockies. The babble turned my mind to consider and have another look at forecasts around the UK and US economies and see if I should be listening or watching something more illuminating. I wrote recently, at the turn of the year about forecasts and whether the forecasts were worth the paper they were written on. At the bottom of this column there is a table of forecasts. I am not economist by any sense of the matter and some would say I am much closer to a monkey with a dartboard when it comes to economic forecasting. But what to me comes clear is the disparity in forecasting the UK economy and the US , for example Mme Christine LeGarde , the hint may still be in the name , and her highly paid academics at the IMF were pretty much on target with the US forecasts but in common with most forecasters were miles off target with the UK. Is this because of a deeply held bias against Brexit or because the US economy was easier to forecast even with the unproven maverick Donald Trump newly in charge. Looking at these numbers the only link is that they were universally awful forecasts for the UK and pretty good for the US. Taking a further hike down forecast avenue I wondered if the US economy was easier to call then the year end closing price on the S&P would be relatively easy and did a little research on some of the top US houses on this. Wrong! Look at the table.
If economic forecasts are so flakily I wondered if it was worthwhile taking a more generalist approach to the jamboree and try and get a “feel” for what is concerning the uber powerful. It feels to me that there was a certain smugness at the economic recovery that we are enjoying which, let’s face facts, is being driven by ultralow interest rates and QE. If as rates start to edge up and QE dries up the economy stalls we will then need to see how clever the great minds are. Some worries over the power of the FANGS were expressed and time will tell if they start to get their houses in order.
As I wrote earlier Trump stole the show and in a TV interview with his friend Piers Morgan broadcast on British TV he gave, to my mind, the most interesting interview ironically to mainstream TV and shown on a Sunday evening .In an interesting dialogue, as you would expect, he reiterated the strength of the American economy, was warm towards Brexit and critical of Europe who he thought, had treated the United States very unfairly when it came to trade. Trump said “I’ve had a lot of problems with (the) European Union, and it may morph into something very big from that standpoint — from a trade standpoint.” And he continued “(The European Union) Had done many bad things to the United States”. A clever thought provoking interview but as you tend to get with Trump one that gave the impression that America is open for business if you want to do business on his terms.
Apart from the sabre rattling from Trump there was little out of Davos to get really excited about and four weeks into the New Year I hear a new call …get the monkey a dartboard. The betty is already busting the forecasts of “it won’t go above $1.40 as that’s its natural high ….. Where does this leave us all as traders? I am not saying ignore predictions but just put them into context and question whether the bank/ organisation making them has an ear of corn to grind or whether they really are independent. Secondly as, if not more importantly, watch the flows and stops . If a price has had a ceiling of, say $1.40 for a long time just be aware that there will be stops around the figure … “roundaphopia” I used to say, and that there will be increased volatility as we break on through as witnessed by sterling last week. The market doesn’t lie as for politicians I’m not so sure. Maybe Trump is different, but then Trump isn’t really a politician.
By Richard Matthews November
Richard Matthews, who began his career in 1973, is a former trader-broker in the London money, futures and foreign exchange markets. Twitter @dickiematthews5