The Secret Broker: When a gnome flaps his… arms

After 35 years of stockbroking for some of the biggest houses and investors in Australia and the UK, the Secret Broker is regaling Stockhead readers with his colourful war stories — from the trading floor to the dealer’s desk.

 

They say when a butterfly flaps its wings, the ripple of air caused by them can be felt thousands of miles away and this week, the traders from Credit Suisse Australia, felt that ripple.

It was actually more like a slap in the face, as events that happened 12,000 miles away then left them with a large helping of doom and gloom.

The head gnomes in Switzerland had managed to capitulate themselves, rolled over and thrown the head office office keys to their arch rivals, UBS.

UBS stands for Union de Banques Suisses or Union Bank of Switzerland, for those of you who can’t yodel, and they started life in 1862. Credit Suisse started out its life in 1856.

That’s a hell of a lot of fondue parties, a long time ago.

I first learnt about gnomes when I was a young kid, as we had an eccentric Auntie who would bury gold bars under them in her back garden, as she didn’t trust the banks.

One day, one of the gnomes in her front garden got stolen and then started to send her postcards from around the world. A year later he reappeared, freshly painted and with a little brown suitcase.

She suspected that it was either the local bank manager, from five doors down, or the airline captain seven doors down.

We all found it a lot funnier than she did though!

So, I just presumed that when people referred to the ‘Gnomes of Switzerland’, that it referred to the Swiss bankers who could take your gold and bury it for you in one of their mountain vaults.

In fact, this slang term for Swiss Bankers first came about in 1966, after there was a run on sterling. Harold Wilson, the then UK Prime Minister, blamed this currency crisis on the Swiss, claiming that “the gnomes of Zürich are at work again”.

There is even a book on the subject:

 

Not your average Joe

I have had many dealings with Swiss bankers in my time and I always found them pleasant, though what they actually did we didn’t really know as they always seemed to have an air of secrecy about their conduct.

When I was trading convertible notes, we used to deal with Joe from Credit Suisse, as he always had a good source of distressed notes, trading at the right price.

He once came over to meet us and over dinner he told us that every Swiss man had to do a year’s worth of army training. All Swiss men by law had to sleep with a rifle under their bed.

He explained that even though they were a neutral country, someone had to protect all of those Toblerone bars.

So his humour was good.

In fact, it got even better, as after dinner and standing in the crisp cold air of an English winter, he was asked what he was now going to do.

He said he would wander about the streets for a bit and maybe we could keep him company whilst he did.

We were following him around, as he randomly went down streets and dark alleyways and we were thinking that he seemed a bit more confident than he was letting on.

We presumed that this confidence must have come from the fact that he might have brought his rifle and Toblerone bar with him and had it hidden under his long winter coat. Maybe he had his Swiss army knife on standby?

Then all of a sudden he stopped and said he feels a bit lost, so he would just knock on this door and ask for directions, as he’s never been here before.

When he knocked on the door and it opened, a dapper dressed gentleman answered it and said ‘hello Joe, nice to see you back’.

Lost indeed!

He had only taken us to a hostess bar, where scantily clad women would keep lonely businessman company, by listening to all of their ‘my wife doesn’t understand me’ woes, whilst ordering copious amounts of cigarettes and champagne and charging it to the sad businessman’s bar tab.

So, Joe had done us and as he was on our turf, it was customary for us to pick up the bill.

The next day, I managed to get him to sell me a couple of million Bell Resources bonds at a quarter of a percentage point lower than they should have been, so I could recover my expenses.

From that day on, we called him the ‘crafty gnome’ and this name was duly placed on our dealing phone. If he called up and someone else answered, they would shout out “crafty gnome on line three”!

 

What a mess

Going back to the butterfly affected wheelers and dealers at Credit Suisse over here, you have to feel for them, as they probably have now lost their bonuses and maybe even their jobs and it was through no fault of their own.

I remember drinking at Ryans Bar in Australia Square as some of the boys from Bankers Trust were crying into their beers because some trader in Japan had managed to blow up U$200m trading bonds and all bonuses were cancelled.

The thing that upset them the most though, was that Bankers Trust had, in a desperate attempt to cut back on costs, sacked all the tea ladies from each floor and now they had to clean up the kitchen after themselves. So, no more frozen Tim Tams or boxes of Shapes.

Bankers cleaning up after themselves! The hide!

As for my eccentric Auntie, she had it right all alongh. Though judging by the recent rise in the price of Bitcoin, I think that if she was still with us, she would be burying USB (not UBS) dongles under the gnomes instead of gold bars.

 

The Secret Broker can be found on Twitter here @SecretBrokerAU or on email at [email protected].

Feel free to contact him with your best stock tips and ideas.

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