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Salomon Brothers On The Scene

Chapter 31 in the exclusive series for Dynamic Commodities- becoming a commodities trader

The Precious Metals Department was a shelter from what was going on in the firm during 1984 and 1985. I kept my head down and toiled away each day in the hope of one day becoming a trader. On a quarterly basis, the layoffs and turmoil in the rest of the company continued. Salomon Brothers was making mega-profits and Philipp Brothers continued to bleed. Since the bear market in commodities continued, only two areas of the commodities company were making any money at all. The oil and precious metals departments had been the big earnings engines in 1979 and 1980. This had created the opportunity for Philipp Brothers to buy Salomon in the first place. However, by 1984, Salomon and its honcho, John Gutfreund, were clearly in charge.

Salomon Brothers personnel began to descend on the firm doing audits and asking plenty of questions. All the while, the headcount at Philipp Brothers was on the decline. No area of the firm was immune from the Salomon interrogation. As a result, it became apparent that Philipp Brothers’ head man, David Tendler, was losing his grip on the firm.

One morning, as I sat at my desk, Ray escorted Tendler into the department with a Middle Eastern gentleman. When they left, the whispers grew louder. The man was Adnan Khashoggi, the world-famous Saudi businessman, who made his fortune in arms dealing. Tendler was attempting a last-ditch effort to save himself and the culture of Philipp Brothers. It seems he was attempting to save the company from the perceived vultures at Salomon. Rumors swirled around the firm that Philipp Brothers was on the market. The gossip was that it for sale to any interested party with the cash. However, all potential deals fell apart. The layoffs continued.

In 1984, John Gutfreund won the power struggle with the two executives from Philipp Brothers that purchased his partnership. This made many at Salomon Brothers multimillionaires. Furthermore, David Tendler and Hal Beretz became victims of their brilliant trade to buy Salomon and diversify the business. Their mistake was not to take control immediately. In leaving the keys to Salomon in the hands of Gutfreund, they sowed the seeds of their departures.

When Tendler and Beretz left in unceremonious fashion, panic set in across all business units at Philipp Brothers. Gutfreund appointed Alan Flacks, the head of the Milan office of the commodities company, as the chief of the division. Flacks was a polished and nondescript businessman. However, his tenure lasted only a few short months since he unexpectedly died.

The flow of Salomon personnel began to fill every department. Big changes were coming. The division with all the power was deciding how the company would look for the future. In the wake of Flacks’ passing, Ray Nessim set his eyes on the top post for the company.

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Post Series: Origin Of A Commodities Trader

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