Having the time of my life - Canadian Dollars

When you see the real story of 1967 to 1968, you will see why I spent so much time discussing inflation. The numbers involved look quite small now but, unless you have lived through the ensuing period, you won't appreciate just how much the prices in the UK have changed. As explained, everything in 1967 has to be multiplied by 1,575%. Yes, that is right. Everything is nearly 16 times dearer now than it was then.

A good example is a car. The Ford Anglia (as we rented for our honeymoon) was a popular car in 1967 and the deluxe version - lots of chrome but with a heater as an optional extra and no radio - was £596. Using our inflation multiplier, this makes the car cost £9,387 in current terms. This is for a basic car - hand wind windows, no heater or radio, top speed around 73mph and a 0-60mph of 30 seconds - yes, thirty seconds - and 39mpg! You can see the full details - HERE. The list price for a current Ford Fiesta is £9,995 but this is an immeasurably superior car. 0–60mph is 16.9 secs, top speed is 94 mph and average mpg is 54.3 and with all the amenities that we expect.

OK, back to life. District Bank was a small clearing bank with around 570 branches. It was purchased by the National Provincial Bank in 1962 - with 1,500 branches - and ran as a separate entity until the big National Westminster Bank merger in 1970. We had some fairly large clients, however, due to the bank's large number of branches in the north of England. Customers included Radio Rentals, Leek & Moorlands Building Society and Unilever. Unilever had a Deutsche Mark account with us in London and would quite regularly call us to top up the account. On most occasion, this was for DM1,000,000 (around 6.5 million pounds at todays exchange rate). The big one was Turner Brothers (TB) - latterly Turner Newall. This company was a customer of our head office in Manchester. They imported much of their raw materials from Canada. As Manchester had no ability to fix exchange rates above a fairly small amount, they always had to contact us in London for the current Canadian Dollar/ Pound exchange rates on the transactions. As TB took constant deliveries of material, they had a wide spread of maturities that they needed prices for. These prices were for them to buy forward Canadian Dollars over around 10 - 15 maturity dates running out for about 3 - 4 months. They needed these prices as they were contracting to buy regular shipments and the dates chosen for the exchange deals matched the major dates. The process would go as follows:

"Can we have outright prices for Turners for..." with a list of dates. The trades would have been simple but the total amount that they were requesting was normally around Can$ 15,000,000. Although they were buying for future dates, we had to buy the total amount on the current spot (2 day delivery) market and then cover the forward dates by doing what were known as forward swaps. The forward market was tied to interest rate movements so was relatively stable over a couple of days whilst the spot market moved all the time based on current supply and demand.  This is where the inflation calculator comes into play. In the current environment, fifteen million doesn't sound too large amount when you think about some London house prices but... at current inflation levels, we are talking about two hundred and thirty six million dollars! Now the spot market in London was good for about two million at that time, if you were lucky. The Canadian banks in London had a bit of a stranglehold on the market. Royal Bank of Canada (RBC) and Bank of Montreal (BOM) were the two main supporters of the market but there was another couple of problems. Firstly, there were only two brokers in London allowed to quote Can$ - M.W. Marshall and Godsells. Both of these would normally have a firm price (i.e. one that could be traded on rather than a guess) but only in one million dollars. We had fifteen million to buy! The main banks in Canada would probably deal for two million at a time. Both RBC and BOM were good traders in Montreal (Montreal was the main trading centre then - Toronto nowadays) with Mercantile Bank of Canada (25% owned by Citibank NY) a bit behind. This meant that, if we were quick, we could get two million done in London; another six million in Montreal and hope to clear the rest in New York. There were two problems. Firstly, we had to give Turner Brothers a set of fixed prices and secondly, given the state of international telephone calls at that time (our two telephone lines ran through the bank's switchboard!) we would have to use our one telex machine to contact any overseas bank. The manager, John Botevyle, would take the London brokers and my job was to get on the telex. We would try and time it so that I had at least got one bank on the line when John hit London so that we could do as much as we could simultaneously. Having dealt with one bank, I would quickly dial another. Two was about as much as we could manage before the news got out in Montreal that there was a big buyer. My job then was to switch to New York and try and get the balance done. It was VERY exciting.

Once the spot price was fixed, we could relax a little. We still had to move the maturity of the trades from two days ahead up to at or around the trading dates for Turner Brothers. This was John's main task. He used to spread the trades in the market so that we took on about 6 or 7 standard trading dates to make the initial task easy. Over the next few weeks, we became a mainstay in the Canadian Dollar 'cock' date market. 'Cock' dates were any date that didn't correspond to a standard date. The market traded one week, 1, 2, 3 and 6 months on a standard basis. However, like us, all banks needed explicit cover for dates that were off that schedule. Also, apart from the Canadians, most banks didn't have an underlying interest in Can$ so wanted to cover any commitment that they had. Our constant developing of non-standard dated transactions in the size that we had enabled us to quote into that market very competitively so John developed us into a fairly important part of the Canadian Dollar forward market.

Next time, I will discuss our other regular involvement in the Canadian Dollar and also how we got caught up in the Greek Drachma market!

Note: What was a Telex machine?