Woellwarth & Co - my personal background

 Well, you might think it strange that I should need a page to describe my personal background at Woellwarth but there were lots of things going on that would change my life quite dramatically one way and another.

HP Programmable Calculator

First off, as mentioned in an earlier post, I had started studying at the Open University. Woellwarth were very supportive in that they paid all my fees and gave me extra holiday to go on the week's summer school, where required. After the foundation course, I did two courses on electronics and then, following on, a course on programming. Now, at that time, programming meant typing out the code on a teletype and making a punched tape to save it. High tech indeed. However, things were moving on in the computer world and Hewlett Packard released a, very expensive, programmable hand calculator that had magnetic tape input so that routines could be loaded and replaced with other routines as required. I was asked to look into using on to generate forward swap prices. 

Part of the basis of forward swap rates was the relationship between the underlying interest rates. I have described this process previously but, quickly, purchasing Sterling (GBP)  using US Dollars (USD) for a date three months ahead attracts a different exchange rate from that pertaining to now. This is calculated from the relatinship between the GBP 3 months interest rate and the same for the USD. So if USD rates (at the time) were 5% for 3 months and GBP rates were 8% then anyone taking USD in exchange for GBP would need 3% compensation. This was reflected in the forward rate for GBP/USD. There was a formula in current use whereby these relationships could be obtained.

There was a known problem with the accepted formula as it became increasingly out of step as the periods became longer, or so it seemed. I felt that I couldn't use the existing formula because of this issue and worked out a solution. I wrote out all of the transactions that would be involved and then reduced these to a formula using my, long unused, mathematical ability. Doing this highlighted where the standard market formula went wrong. It seems that the formula as used had two parts whilst my formula had three. The third part, under normal circumstances, gave an extra boost to the result that was so small as to be ignored.  Unfortunately, when the numbers got bigger, so did the bit that was being ignored!

I tested this out with the French Franc team (led by a really nice guy called John Williams) and we all agreed that it was the way forward so I programmed up the formula into the HP calculator. My first live program!

Friends

I was never happy as a broker but I did have some good friends on the banking side.

First off was Peter Johnson who, if you remember, had started work at the District Bank on the same day as me and came into the dealing room as result of my recommendation. He was now trading DEM at National Westminster Bank (which included the District Bank). We got on well and, although our forward swap DEM business was never good enough for NatWest's trading volumes, we still enjoyed each other's company. In fact, we went to visit his family and he brought his wife (also ex-District Bank) and daughter over to us.

Then there was Brown Harriman and International Banks (soon to be Banque Francaise de Credit International). The chief dealer there was Arthur Whitton. We got on really well and had many a liquid lunch in the Wine Lodge in Fenchurch Street. He was quite ill at one point so I drove down to see him - he lived out the back of Southend. I had my new Triumph Dolomite. When he saw it, he was so impressed that he changed his company car for one - however, he managed to get the Sprint version which wasn't out when I bought mine. Eventually, he left and was replaced as chief dealer by Martin di Lieto (of which more later).

Lastly, we come back to old American Express days where the position keeper in my day - David Britton - was now chief dealer at Nordic Bank ( a "consortium" bank with four shareholders - DNC Oslo, Svenska Stockholm, KOP in Finland and CoCo (Kjobenhavens Handelsbank) in Copenhagen. He supported me quite well when I needed a DEM spot price and we regained our good friendship.

My salary was based on the nett performance of the company after expenses. My take was 1.1%. This generated the £2,600 bonus out of my starting salary of £3,000. Because of the success of the DEM section and the awakening of the short date GBP section under Nigel Staughton, by the time we got 4 years into my stint, my salary was around £16,000. Adjusting for inflation, this represents £168,000 in present day money - not something that you walk away from.

So, here I am earning lots of money but unhappy with what I was doing. David Britton eventually ceded the DEM desk to a German chap called Willi Bock. He came over from CoCo. Things were going fine - and I even sported a CoCo in-house tie! - then one day I was told that Willi was returning to Copenhagen soon. The bombshell was - did I want to join the bank as their DEM trader - did I!!

Negotiations worked their way through and I was left with a dilemma. Was I so desperate to leave broking and return to banking that I could cope with a £6,000 drop in salary. There was wicked inflation between 1974 and 1977 but it had eased off somewhat. As it happens my £16,000 had now reduced to a present day equivalent of £96,000 but a drop to £10,000 would leave me with £60,000 (2020). Still a decent salary but I had kids at private school and a nice detached house in Billericay with a 1st class season ticket thrown in! What I did get, though, was a subsidised mortgage rate which took the then current rate of 9% down to 2.5% which took around £1,800 out of my costs.

What did I do? I jumped at it. I know that was only time until I improved my lot as I was confident of my ability so I accepted the job and at the end of December 1977, I left Woellwarth and Co and Joined Nordic Bank.