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Sunday, 22 October 2017

Yer on yer own, Digger...

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  • Peters 475px June 2014

For half the year, traders in Australia call upon the pioneer spirit that built the country.

SO FINALLY, AFTER many years of threatening and promising, I have finally made it to Australia. No kangaroos in Collins Street in Melbourne and not a poisonous spider or snake in the backyard of the charming home I am staying at in St Kilda West.

For many years, one of the first things I have read in the morning – and occasionally the last thing at night – has been the brief comment written by my host and long time friend, Alex Moffatt, principal at Joseph Palmer & Sons here in Melbourne in which he sums up his thoughts and opinions at the time of the Australian markets’ opening.

I have known “Moff” for going on 30 years. We met when he traded Aussie bills, guvvies and semi-guvvies in London for the long-defunct firm of Transcity, which in turn belonged to the now equally defunct US money centre bank, Irving Trust.

Many of the older members of our guild remember the unerringly polite, tall, red-headed Australian with the largest collection of bow-ties known to mankind. In the age in which the Essex barrow boys commanded the City, liberally effing and blinding about just about anything, Moff was never heard to utter a single oath on the trading floor.

Eventually he moved from Transcity to the NAB and from there to Schroders, having worked for both of them in Melbourne and in London. In the end, he jumped ship and joined the retail end of the buyside. One man’s loss was another man’s gain.

I HAVE ALWAYS been a tad dismissive of the two subsidiary dollar markets, namely the Canadian and the Australian. I worked for Wood Gundy for a while in the late 1980s. The Canadian investment bank blew up in the Crash of ’87, was rescued by CIBC and eventually subsumed.

Sitting on Gundy’s trading floor in Toronto and hearing a Government of Canada trader say in the morning meeting that “US Treasuries widened against Canadas overnight” imprinted an image of parochialism in my mind that has stayed with me over many years.

Moff was slightly unusual in that he had been trained in the tough school of the money markets and his claim to fame, if you like, was that he found equally smart people in the European supra-sovereign space who understood that Australian bills could be swapped into US dollars for a massive pick-up.

Though he was always as discreet as he was polite – the raw material for the perfect wealth manager – I recall being told that Moff became one of the most significant outlets for Australian short-term sovereign debt into foreign markets. Returning to Melbourne with his London experience, he became something of a Greek among Romans.

On Monday mornings, they have nothing other than their own mind to help them pin the tail on the donkey

SITTING AND CHATTING, Moff let drop an interesting point that I had never thought of before. At certain times of the year when the northern hemisphere is on daylight saving and the southern one isn’t, Sydney and Melbourne are 10 hours ahead of London and 15 hours ahead of New York. When the clocks go the other way, the difference moves to 8 hours and 13 hours respectively. Thus, when it is the winter down under, Moff and his peers just about get to see the last half hour or so of New York’s trading day. In the summer, they are on their own.

So for half the year local traders and investors start the day with no other market open anywhere in the world, other than maybe the wool and sheep carcass exchange in Auckland. On Monday mornings, they have the Friday close from New York but apart from that nothing other than their own mind to help them pin the tail on the donkey while assessing the impact the weekend’s news might have on asset prices during the day to come.

In time, Tokyo comes on stream, followed by Hong Kong, Shanghai and Singapore. But for a few hours the pioneer spirit that helped to build the Lucky Country is called upon as the Aussies step up and go it alone, something that none of the Big Swinging Dicks in London or New York have to do.

Say the S&P mindlessly loses 15 points in the last twenty minutes of trading and then closes on the day’s lows. Does one price an HFT’s computer with a strange algorithm and a fat finger or does one open on a bearish note? Opening the market here requires traders to take proper risks and not the kind that fiddle around with hedges and cross-market arbitrages but plainly and simply take a view and hope that on balance and over the course of a year one is right more often than wrong.

Moff was trained down here and now having a greater understanding of the dilemma facing an Australia-based trader day-in, day-out, I can now appreciate how and why he always seemed so cool and unperturbed while sitting among the excitable Eurobond traders in the City in the 1980s. Now I understand what “yer on yer own, Digger” really means.

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