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January 27, 2017

Chapter 67 in the exclusive series for Dynamic Commodities- becoming a commodities trader

Chris Linen knew, from the moment he arrived at Philipp Brothers, that he had to make a significant mark at the company. In the old days, before Salomon Brothers, it was enough for a Philipp Brothers manager to turn in a steady stream of profits. However, the powers downtown at One New York Plaza did not expect singles and doubles, they wanted and required grand slam home runs. The biggest producers at Salomon Brothers regularly contributed $100 million or more each year to the bottom line. While the oil department was a player and could compete with those kinds of numbers there were no departments at Philipp Brothers that had that kind of potential.

Chris Linen racked his brain day in and day out to come up with a plan to make not just a lot of money but a whole boatload that would vault him to the top of the commodities division and get him in front of the ultimate boss, John Gutfreund, the King of Wall Street.

In 1988, the price of palladium was trading at around $130 per ounce. The world’s largest producer of the precious metal is Russia, a nation that contributes around 80% of the world’s supplies on an annual basis.

Marty Kaufman, the Chairman of Philipp Brothers, had developed a special relationship with the Russians in the years when the country was undergoing a momentous change from a Communist enemy of the United States to a capitalist powerhouse rich in raw materials. After the death of Brezhnev in 1982, weak leadership under Andropov and Chernenko led to the era of Mikhail Gorbachev and the breakdown of the Soviet Union. To his credit, Marty saw it coming and encouraged business with the Russians in the late 1980s. Almazjuvilirexport or Almaz was the arm of the USSR that was responsible for selling platinum group metals and diamonds to the international market. Almaz had one franchise as a result of the nation’s dominance in production and that was in the palladium market. After many discussions with Marty and many nights over cigars and martinis at the St. Regis with his inner circle, which I was fortunate enough to be included in; Chris decided that it was the palladium market where he would make his mark. Chris Linen decided that his grand slam would start with Palladium profits and end with a joint venture with the Russians. Chris started buying palladium and for a while the price began to rise. Chris decided that he would take his time building a position and that his strategy would take twelve to eighteen months before he could approach the Russians with a proposal. First, he had to prove himself to Marty, Salomon Brothers and the world.

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Post Series: Origin Of A Commodities Trader

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