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Learning the Precious Ropes

November 18, 2016

Chapter 24 in the exclusive series for Dynamic Commodities- becoming a commodities trader

Philipp Brothers was a group of tightly-knit fiefdoms. While there was comradery in the firm, each area operated as a separate business entity and there was lots of competition amongst the senior executives who ran businesses. 1980 was the most profitable year ever for the firm and while all of the commodities contributed to the mammoth profits for the firm, it was the oil and precious metals departments that made the lion’s share.

In Precious Metals, the bulk of the profits came from silver; Philipp Brothers made a mint by buying old silver coins, refining them into bars and selling them on the futures exchange. The bull market in silver that took the price to $50 and back down again made the profit margins staggering as buying and selling spreads widened. Gold was a consistent earner as was the platinum group metals trading business because of the volatility in market prices. It didn’t hurt that Philipp Brothers was one of the most respected precious metals dealers in the world.

Ray Nessim was the chief trader but he sat in an office. In New York, John Gruen was his deputy and the head gold trader. Steve Hamburger was under John and Charlie Bingham and Ben Pugliese were arbitrageurs, they spent their day on the phone with other dealers and the futures exchange, one in each ear, buying and selling gold. Charlie also traded the forward curve or the difference between gold for spot or two-day delivery and the futures months. The more senior dealers were involved in sourcing gold deposits as Philipp Brothers was a bullion bank. Offices in London and Hong Kong made the business a 24 hour a day operation.

The head silver trader was John Mihale, a blue collar kind of guy from Long Island. His assistant trader was an ex-Moody’s analyst, Jimmy DiPiazza. Jimmy’s sister Denise was a secretary at the company and she got him in the door. Sandy Gellis had been trading financial futures for the company before the Salomon purchase; he was moved to trade physical refining contracts and financial futures and currencies used to hedge the forward precious metals books. Judy Vidasdy traded gold coins. Gary Joseph and Ron Strauss were the platinum group metals traders; their business had been separate from Nessim’s but the firm wide consolidation brought them under Ray’s wing. In the corner, was a new business not just new to Philipp Brothers but new to the entire market. The options desk traded puts and calls in gold, silver and other commodities. Sid Gold ran the desk and his assistant was Ralph Mizrahi a young Jewish guy from Brooklyn who was born in Cairo, Egypt. Sid came over from Salomon Brothers after the merger to head up a commodities options business for Philipp Brothers reporting to Nessim.

The traders were a loud and often obnoxious bunch of characters. The senior traders were the most outgoing and would always joke around. The younger guys at the trading desk kept their heads down and worked like dogs. The futures markets opened at 8:15 AM each day and closed by 2:30 PM. The vast majority of business took place during these hours. The traders were in early, usually by 6:30 or so, they left each day by 5:00 PM but they often entertained customers and other dealers at dinners each weekday night. When Ray would come out to the trading desk, the jovial atmosphere would turn very serious. Ray was a no-nonsense boss.

There was a lot to learn, the business was complicated and fast moving. It was hard for me to understand how the traders kept track of their business, long or short positions or anything at all given the amounts of precious metals bought and sold during the day. It took me about a year to figure out what everyone in the department did. I put my head down and learned the precious ropes, at first attempting to fly below the radar by making no mistakes.

Nothing on this site should ever be considered to be advice, research or an invitation to buy or sell any securities

Post Series: Origin Of A Commodities Trader

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