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Another Round- Caught In The Crosshairs

Another Round- Caught in the Crosshairs

November 10, 2016

Chapter 18 in the exclusive series for Dynamic Commodities- becoming a commodities trader

I was so busy working twelve hour days that I did not see the next round of layoffs coming. Philipp Brothers was losing money. Commodity prices were moving lower, but that was not the problem. A talented trader could make money in a bull or a bear market. However, profit margins shrunk and activity dried up after the merger with Salomon. At first, people in the firm called the deal to buy Salomon a takeover, but when Salomon Brothers began making all the money, the term changed to merger.

It was not just a bear market in commodities but a fundamental and structural change in the raw materials business that caused Philipp Brothers so many problems. The company profited from the lack of transparency in commodity markets around the world. Producers and consumers often turned to merchant firms like Philipp Brothers to tell them where a price was. Technology, the maturing futures markets and improvements in communication allowed previously unaware buyers and sellers of commodities around the globe to know exactly where prices were on a minute to minute basis and that resulting in fewer opportunities and fewer profits for the company.  At the same time, the explosion of equity, fixed income and currency trading and an increase in merger and acquisitions and financing caused Salomon’s profits to skyrocket. The power in the firm was shifting from Tendler to Gutfreund, and the Salomon boss wanted to cut back on businesses that were not making any money.

When Al called me into his office, I thought we were going to discuss a deal or some other traffic related issue. Al had told me on many occasions how pleased he was with my work and my progress in the department as had both Eric and Kenny as I saved the company money on some deals while keeping mistakes to a bare minimum. Al looked stressed; he told me more cuts are coming and because I was the low man on the totem pole in the section the chances were that he would have to lay me off. He said that nothing was certain yet, but management asked for a name, a sacrifice to offer up for the next round which was coming soon. I was calm but felt like crying. It was 1983, and I had been with the company for the past seven years full and part time. I was only 23 years old, so for almost one-third of my life, I was a member of the Philipp Brothers family.

Al said he would look around the company for a spot for me, but he could make no promises. I would be leaving his department even though my work was excellent. I was in the crosshairs, and my future with the firm was in doubt. I tried to remain positive with some hope that I could find another position where I would have to start and prove myself all over again.

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Post Series: Origin Of A Commodities Trader

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