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East Goes East, Memoir of a Global Head

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East Goes East, Memoir of a Global Head ALCHEMIST ISSUE EIGHTY SEVEN East goes east, Memoir of The Original Bullion Coin a Global Head By Michele Blagg, Research Consultant and Visiting Research Associate at the ICBH, King’s College London His first proper job The first step in his career path was taken in 1980 following an interview for a telex operator post in a commodity trading team at Derby, part of Philipp Brothers, one of the largest commodity companies in the world. As part of the interview process, he was invited to tour the dealing room, and as he stood mesmerised by the sight of the trading floor with its atmosphere, noise and fast- paced environment, he instantly knew this was where he wanted to be. However, he was jolted back to earth when told he wasn’t right for the advertised position. Instead, he was offered the role as the company’s first graduate trainee, which he immediately accepted. Strangely, as fate would have it, his first intern role was telex operator in the gold department. The telex was similar to the Reuters desk of today. There was a bank of screens and operators sat on wheeled stools, rolling themselves back and forth making and changing prices and trading. Philipp Bros offices in Bolivia circa 1930s. Photo reproduced by kind permission of Lee Baeck Institute. Centre for Jewish History Digital Collections, AR25131, Running not reading a book Lee Baeck Institute, LBI Archive, 15 West 16th St, NY 10011. Record no, 43,072. Box 1, Folder 1. Over the next few years, Jeremy rotated How do you become the Global Head of a commodities trading through the various departments within the company? During his interview for the Voices of the London Bullion company before ending back in the gold department. His on-the-job training saw him Market project, Jeremy East provided insight into how his own career go into the back office, providing him with path led the way to him taking on such a role. an understanding of settlement procedures, payments and transfers, so that when he temporary jobs that paid quite good money moved to the front office, he understood Early career but had no career prospects, his initial what was going on behind the scenes. As thought was that milkmen work short hours. he progressed through the company, he sat On leaving university armed with a degree He applied to the local dairy, but when they alongside the commodity traders, helping in Economics and Economic History, Jeremy saw that he had a degree, they thought it was them with their positions. Showing promise, took a short three-month break in the South a practical joke and he was rebuffed. A local he was trained to run a book, the first of France, returning to his parent’s home job agency then set the wheels in motion for being silver. penniless and in need of work. Having worked an exciting career in finance, enabling him to his way through university doing a number of live and work around the world. A brief history of Philipp Brothers New York. He is joined later by his cousin Siegfried employs 10 people, which include three or four typists Ullmann, who has also worked in Hamburg for and two apprentices. Julius generally leaves at 9pm and Julius Philipp. most days the office closes at 10pm. 1901 Metals trading company is founded by Julius Philipp 1917 In response to an advert, Oscar purchases Derby & in Hamburg Germany. The apprentices remained behind coding cables, Co from “two kind gentlemen”, who want to become closing envelopes, and delivering mail and cables 1909 Oscar Philipp moves to London. On 11 June 1909, antique dealers rather than continue the primary to the post office at the central railroad station. On with the help of Julius, he starts trading under the activities of dealing in scrap metal, especially silver. Saturdays, they continued working for two or three name Philipp Brothers at premises in Leadenhall Due to the wartime hatred experienced by many hours after sunset preparing the mail reports. On Street. With a starting fund of £125, from which he small German businesses operating in Britain, it is Sundays, they work from 8am to 3pm. Lunch breaks spends £25 on an impressive desk, and a staff of almost impossible to continue to trade while German are for two hours and they are entitled to eight days three, he shows a surplus profit of £700 at the sounding names are printed on company letterheads. off a year for vacations. The average working week is end year. Oscar strikes a deal so that the names of the 65 hours. Apprentices earn 20 marks a month (there 1914- Julius relocates to Amsterdam for the duration of the previous owners will remain on Derby’s letterhead. were at the time 37 marks to £1). 1918 war Oscar remains in London, having avoided Links between the firms end in 1929. internment by the British authorities thanks to 1921 Mendel Bernberg leaves Julius Philipp. 1919 Julius returns to Hamburg where he continues to deal holding British citizenship. In 1917, he supports the in metals and runs his thriving export business. Mendel war effort as an ambulance driver. 1923 Siegfried Ullmann (previously employed in Hamburg Bernberg joins the firm aged 15 as an apprentice. He by Julius Philipp) joins Siegfried Bendheim in New 1914 Siegfried Bendheim, who has previously worked for begins work at 8am opening the office, placing overseas York. They remain the only shareholders of Philipp both Julius and Oscar, leaves London for the US calls and sorting the mail. Julius arrives at 9am. The firm Brothers New York until after 1945. to avoid internment. He sets up Philipp Brothers in 23 ALCHEMIST ISSUE EIGHTY SEVEN Unlike today, all trades were made over the phone. People phoned Derby, a primary market maker, for prices. There were no such things as credit lines. Trust and integrity were at the core of how business was done. London was very much a spot trading market – you bought if the price of metal went up and you sold when it went down. The greatest challenge was in knowing, when someone called for a price, whether the market was going up or down. Most traders had a natural instinct, a feeling for what was happening. Jeremy worked alongside Robert Stein, who he classes as one of the great traders. Robert was very disciplined with his trading but also had a great feeling for the market. If he felt the price might be going up, he would start the day by selling. If he sold and the price didn’t go down, this gave him an indication that he was right and he would start buying. He had a track record as a profitable trader for many years. The Derby (Phibro) dealing room in Moor House in 1983. Pictured left to right are Trevor Clein, Martin Turner, Vincent Thompson, George Pajak (sadly deceased) and, last but not least, on the far east, it’s Jeremy East As fate would have it, his first intern role was Buying and selling on the fix telex operator in the gold Breaking the gold trading monopoly of the It evolved from a purely department. traditional five bullion firms which ran the intuitive ‘seat of the pants’ gold fix was the greatest challenge Derby spot market to now include a faced in order to increase the company’s market position. The Derby team was headed more mathematical formulaic The telephone was the trader’s greatest up by Guy Field, who in order to break forward market. asset. Jeremy recalled how Robert would call down some of the barriers, decided that Andrew Stoppani over at Drexel Burnham and Derby would adjust its fixing commission. ask him to make a gold price for Derby, and at Traditionally, if you were a seller on the fixing, the other end, he might say ‘I could do more’, you paid a premium of 5 cents and if you Looking forward then you got a good idea that there was going were a seller, you received a premium of 25 to be some serious buying around and that cents. Derby introduced rates of 10 cents For a long period, the market remained very we might turn our entire position” – although, and 20 cents respectively. This move diverted active. Buying and selling generated all the it could have been that he was playing a game business to the firm, increasing volumes revenue. As volatility declined through the of ‘cat and mouse’ and didn’t really have through its books. It also encouraged other 1990s, there were many days when gold only an order to fill but was just trying to see if financial institutions to trade precious metals had a $1 daily range. Jeremy was part of Derby had an order to sell. As a 21-year-old, as they became more aware of the financial the generation of traders who developed the it was an exciting world for Jeremy to work in. gains. Generally, the standard trade between forward market. Forced to move away from The average age of the team was 24. Unlike the fixing companies was 4,000oz (10 bars). planning trades on the back of a cigarette today, where people need to have university However, once the market expanded, it wasn’t packet to using a Hewlett Packard calculator degrees and impressive CVs, in the 1980s, unusual for Derby or Drexel to quote each other – although it would still be some time before anyone who fancied themselves as a bit larger volume trades of 10,000oz or more.
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