The Shipping Conference Season Restarts


The Shipping Conference Season Restarts

This Friday (1 Sept 2017) sees the start of the shipping conference season with an intimate, invitation-only, event on the beautiful Greek island of Mykonos. You didn’t get an invitation? Nor did I, but don’t despair, there are over 50 other shipping-related conferences scheduled between 1 September and 31 December 2017 listed on the Shipping Research conference calendar (http://goo.gl/y0kdv).

The calendar includes exhibitions, shipping conferences, and that relatively new hybrid event, the shipping week. The calendar also includes conferences on commodities, which, as the cargo for ships, have a significant impact of the demand for shipping services.

The calendar is researched from the websites of event organisers, direct mail emails, and simple Google searches like “cement shipping conference”. This mimics the typical way anyone in the shipping industry would search for a conference. If your shipping conference is not listed below on the Shipping Research blog shipping events calendar (http://goo.gl/y0kdv), send me a comment with a link to the website.

 

Figure 1 – Forthcoming Shipping Conferences

Figure 1 is a list of the conferences coming up between 1 September and the end of the year. But how do you decide which one to attend? The agenda, speakers, networking potential, and location are important, but almost certainly cost will be the main criteria employed by the person controlling the budget.  To help you decide, the conferences are ranked on a cost per day (USD) basis in Figure 2, below.

 

Delegate Cost per Day?

To simplify the calculation, only paid for conferences are included. The delegate fee used is that quoted on the event organiser’s website or their typical fee. Early-bird discounts are ignored. Where possible, the event discount rate for the host hotel is used or the rate on Booking.com for the days of the conference.

The conference and hotel fees are converted into USD using the Google forex tool as at 8 August 2017. The resulting delegate fee and hotel cost are combined to calculate the USD per day cost. This cost per day analysis does not include flights, meals, drink, or entertainment.

 

Figure 2 – Conferences Ranked by Cost

Figure 2 ranks the shipping conferences from cheapest to most expensive USD per day for the combined conference fee and hotel room. The range is from USD 340 per day to attend the Argus Dry Bulk Transportation and Logistics 2017 Conference in Gelendzhik (Russia) to the USD 2,250 per day to attend the Informa Emissions Conference in Singapore.

Figure 3 – Is there a link between the subject matter and the cost per day to attend?

Figure 3 shows the conferences sorted by sector and average cost per day. That liner and dry bulk conference cost the least per day matches popular perception of the current state of those respective sectors! The tanker sector, on the other hand, is relatively benign, and there is still some activity in the market, and possibly deeper pockets.

Over the next four months, Singapore is the most popular location, followed by London, which reflects the shift in world shipping centres. Third most popular is Houston, the global centre for the offshore industry. The first shipping related conference is due to take place 11 September (Argus Methanol Conference). At this point in time, it is hard to assess the impact of Tropical Storm Harvey on the events due to take place in Houston. It may be that these events will be shifted to other locations. If so, the short URL on the calendar will take you to the new information.

One curiosity is the legacy of past shipping conferences. This has led to “date clumping”. Two dates that are outstanding. There are four conferences in Singapore (Crude Oil), London (Dry Bulk), Bahrain (Aluminium), and Algeciras (Reefers), that are due to start on 25 September. These are quite dissimilar conferences, so there is unlikely to be any delegate / speaker clashes. But 14 November has two conferences in London (Commodities, Tankers), Geneva (Major Dry Bulks), and a popular conference in New York (Ship Finance).

 

Ship Finance World Tour

There has been a steady growth in ship finance conferences. In the 1990s, there were only one or two ship finance events in the 1990s. Today, it is possible to attend eight ship finance events by the end of this year. If you have the budget (around USD 10,000 in fees and hotels, plus another USD 20,000 in flights) and the stamina (more than 30 hours in the air), it is now possible to fly around the world and hear the latest local ship finance opinions / options in what could be called the Ship Finance Conference World Tour. The Ship Finance Conference World Tour starts off in Singapore (19 September) before flying into Europe for the Mare Forum Rotterdam event (3 October), followed by Marine Money Athens (10 October). Then it’s off to Busan (1 November) and Jakarta (7 November) before flying into New York the following week (14 November). The next week sees the potential of some cheap Christmas shopping in Hong Kong (24 November) before a well-earned rest Curacao (1 December). See you on the beach!

Copyright – Craig Jallal

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Rio Tinto Mine Operating Driverless Trucks, Drills and Trains – What Next?


In this article from MIT Technology Review, Tom Simonite examines the progress of automation in the mining industry. As always, shipping reacts to external pressures, and it is only a matter of time until the clients at either side of the shipping link in the supply chain demand the same level of efficiency and lower costs.

Mining 24 Hours a Day with Robots

Mining companies are rolling out autonomous trucks, drills, and trains, which will boost efficiency but also reduce the need for human employees.

Each of these trucks is the size of a small two-story house. None has a driver or anyone else on board.

Mining company Rio Tinto has 73 of these titans hauling iron ore 24 hours a day at four mines in Australia’s Mars-red northwest corner. At this one, known as West Angelas, the vehicles work alongside robotic rock drilling rigs. The company is also upgrading the locomotives that haul ore hundreds of miles to port—the upgrades will allow the trains to drive themselves, and be loaded and unloaded automatically.

Rio Tinto intends its automated operations in Australia to preview a more efficient future for all of its mines—one that will also reduce the need for human miners. The rising capabilities and falling costs of robotics technology are allowing mining and oil companies to reimagine the dirty, dangerous business of getting resources out of the ground.

This story is part of our January/February 2017 Issue

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BHP Billiton, the world’s largest mining company, is also deploying driverless trucks and drills on iron ore mines in Australia. Suncor, Canada’s largest oil company, has begun testing driverless trucks on oil sands fields in Alberta.

“In the last couple of years we can just do so much more in terms of the sophistication of automation,” says Herman Herman, director of the National Robotics Engineering Center at Carnegie Mellon University, in Pittsburgh. The center helped Caterpillar develop its autonomous haul truck. Mining company Fortescue Metals Group is putting them to work in its own iron ore mines. Herman says the technology can be deployed sooner for mining than other applications, such as transportation on public roads. “It’s easier to deploy because these environments are already highly regulated,” he says.

Rio Tinto uses driverless trucks provided by Japan’s Komatsu. They find their way around using precision GPS and look out for obstacles using radar and laser sensors.

Rob Atkinson, who leads productivity efforts at Rio Tinto, says the fleet and other automation projects are already paying off. The company’s driverless trucks have proven to be roughly 15 percent cheaper to run than vehicles with humans behind the wheel, says Atkinson—a significant saving since haulage is by far a mine’s largest operational cost. “We’re going to continue as aggressively as possible down this path,” he says.

Trucks that drive themselves can spend more time working because software doesn’t need to stop for shift changes or bathroom breaks. They are also more predictable in how they do things like pull up for loading. “All those places where you could lose a few seconds or minutes by not being consistent add up,” says Atkinson. They also improve safety, he says.

The driverless locomotives, due to be tested extensively next year and fully deployed by 2018, are expected to bring similar benefits. Atkinson also anticipates savings on train maintenance, because software can be more predictable and gentle than any human in how it uses brakes and other controls. Diggers and bulldozers could be next to be automated.

Herman at CMU expects all large mining companies to widen their use of automation in the coming years as robotics continues to improve. The recent, sizeable investments by auto and tech companies in driverless cars will help accelerate improvements in the price and performance of the sensors, software, and other technologies needed.

Herman says many mining companies are well placed to expand automation rapidly, because they have already invested in centralized control systems that use software to coördinate and monitor their equipment. Rio Tinto, for example, gave the job of overseeing its autonomous trucks to staff at the company’s control center in Perth, 750 miles to the south. The center already plans train movements and in the future will shift from sending orders to people to directing driverless locomotives.

Atkinson of Rio Tinto acknowledges that just like earlier technologies that boosted efficiency, those changes will tend to reduce staffing levels, even if some new jobs are created servicing and managing autonomous machines. “It’s something that we’ve got to carefully manage, but it’s a reality of modern day life,” he says. “We will remain a very significant employer.”

Amazon Edging Ever Closer to the Shipping Indusrty


This article is reprinted from “Business Insider”, which points out that Amazon has its own considerable demand for freight services, and is closing the gaps in its logistics supply chain. Now that Amazon has moved into the trucking industry. Trucking is a highly fragmented and deeply conservative industry, just like shipping. Once Amazon has understood and “conquered” trucking, it will be a relatively small step to apply these techniques to the shipping industry.

Craig Jallal

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Amazon is secretly building an ‘Uber for trucking’ app, setting its sights on a massive $800 billion market

 Author = Eugene Kim, “Business Insider”, Dec. 15, 2016, 7:50 PM

 Amazon is building an app that matches truck drivers with shippers, a new service that would deepen its presence in the $800 billion trucking industry, a person with direct knowledge of the matter told Business Insider.

The app, scheduled to launch next summer, is designed to make it easier for truck drivers to find shippers that need goods moved, much in the way Uber connects drivers with riders. It would also eliminate the need for a third-party broker, which typically charges a commission of about 15% for doing the middleman work.

The app will offer real-time pricing and driving directions, as well as personalized features such as truck-stop recommendations and a suggested “tour” of loads to pick up and drop off. It could also have tracking and payment options to speed up the entire shipping process.

This is the latest in Amazon’s rumored plan to become a full-scale logistics company that controls the entire delivery cycle. Over the past year, Amazon has purchased thousands of trailer trucks and dozens of cargo planes while launching new “last mile” services like Amazon Flex that take packages straight to the end customer.

But the broader goal is to improve the “middle mile” logistics space, which is largely controlled by third-party brokers that charge a hefty fee for handling the paperwork and phone calls to arrange deliveries between shipping docks or warehouses. It would make shipping more efficient and cheaper not just for its customers but also for Amazon, which has been dealing with rising shipping costs lately.

The new service would put Amazon squarely in competition with numerous startups in this space, such as Convoy and Trucker Path, while putting a direct hit on incumbent players, including the publicly listed ones like C.H. Robinson and J.B. Hunt. Amazon is a customer of C.H. Robinson, while CEO Jeff Bezos is an investor in Convoy.

Amazon declined to comment.

‘Exciting and confidential’ initiative

The team for this project is scattered around Seattle, Minneapolis, and Amazon’s offices in India. The Minneapolis office in particular, is expected to have more than 100 engineers by next year working mostly on this project, according to Business Insider’s source.

In fact, one of the job postings for the Minneapolis office says Amazon is looking for a principal product manager to work on “an exciting and confidential initiative in middle-mile transportation organization.”

Another job posting for a software-development engineer in Minneapolis says Amazon’s Transportation Technology division is building software that optimizes the “time and cost of getting the packages delivered.”

It’s unclear why Minneapolis has become such an important part of this project. But the city is close to the headquarters for C.H. Robinson, Target, and Best Buy, possibly making it easy to hire people away from those companies.

RBC Capital Markets predicts Amazon’s package volume will surpass FedEx in three years and UPS in seven years.

$800 billion industry

The opportunity is huge for Amazon. Roughly 84% of all freight spending is on trucking, and the market is estimated to be worth $800 billion, according to the trucking startup Convoy.

Trucker Path, another startup in this space, says truck driving is the most common job in 29 US states, but it’s a market that’s been slow to adopt new technologies, as most of the trucking companies are small businesses and 90% of them own fewer than six trucks.

But unlike its competitors, Amazon has an advantage in not having to worry about demand from the shipper’s side. To make an “Uber for trucking” marketplace work, you need demand from both sides of the equation – shippers and drivers. But Amazon already has a giant shipping network and a rapidly growing package volume, so theoretically it shouldn’t be hard to find a load match for the drivers on its platform.

There are some regulatory problems that need to be addressed. For example, drivers are not allowed to press more than one button when making a call while driving. There are also strict limits on how long drivers can go without a break. Amazon may be considering adding Alexa’s voice controls and new auto-logging features to get around these issues.

Trucking has certainly been one of the hottest spaces in tech over the past few years, with big startups like Uber joining the race. Amazon is the new 800-pound gorilla that everyone will have to be aware of.

C.H Robinson’s stock went down roughly 2.5% after Business Insider reported Amazon’s plans:

Disclosure: Jeff Bezos is an investor in Business Insider through his personal investment company Bezos Expeditions.

 

 

Liner Revolution Eats Its Own Children


Former Lloyd’s Shipping Economist contributor Andrew Craig-Bennett has written, in Splash24/7, one of the best thought pieces on the state of liner shipping. I have reproduced the article below, but it is worth following the link to the comments, too.

The liner revolution eats its children – Splash 24/7

What do you call a multi-billion-dollar global business in which the boards of directors of almost every large company in the trade, finding that they are losing money because they are making more of their product than they can sell at a profit, decide to make much, much, more of it?

Answer: liner shipping.

There are two possibilities: either the directors on those boards have the brainpower of jellyfish, or they thought they had a cunning plan.

The cunning plan was to cut their unit cost of manufacture of their product, carriage by sea for ISO containers, by building ever bigger ships and gaining economies of scale, to the point where competitors would just give up and get out of the business, at which point the last men standing, one of whom would be Danish, would jack the rates back up again and, combining their low unit cost with quasi-monopoly control, they would become immensely rich.

The cunning plan looked quite good to start with.

Ever since Temasek gave up on Neptune Orient Lines, and particularly since the Korea Development Bank threw in the towel and stopped propping up Hanjin, liner companies have been merging.

When businesses merge, it is said that the devil is always in the detail. The grinding of the gears that accompanies a merger makes the merging businesses less efficient for a while. Certainly this is true of those mergers which are brought about, not by the ability of the acquiring company to pay more for the target company than the target company’s shareholders think it is worth, but by what is politely known in East Asia as ‘administrative guidance’. These mergers never happen when times are good, only when times are dire, and they are accompanied by the gentle tinkling sounds of breaking rice bowls.

So far, so good for the cunning plan.

The liner shipping industry is experiencing the fate that some of us predicted for it when Directorate-General IV of the EU Commission hearkened unto the European Shippers’ Councils and decided that conferences were a bad thing. The upshot is likely to be that the world is left with perhaps half a dozen ‘full service’ containerlines, plus a number of regional trade liner companies sitting more or less comfortably in the niches that they have carved out for themselves.

This makes life particularly grim for the smaller fry; the multitudes of private and family companies, often highly geared, who are owners of tramp boxboats. Just a few years ago, these people thought they had found the golden ticket – all they had to do was to order bog standard boxboats, man them with warm bodies, and charter them to the big liner companies, who were no longer much interested in the dull business of running ships. Which was fine until the big liner companies built behemoths.

Today, the tramp containership owners are starting to discover what it was like to be an independent tanker owner in 1983… the year in which Elf Aquitaine scrapped the world’s second biggest ship, the ULCC Pierre Guillaumat – named after their chairman – at six years old. Who wants a panamaxboxboat, now?

Meanwhile, the next part of the cunning plan, seen by the staff of the big liner companies as ‘The Good Bit’, comes into play, as the surviving giant containerlinescan at last do what their staff have wanted to do for decades, and put the bite on the forwarders, by jacking up their rates and shutting them out.

But the problem with the cunning plan rears its ugly head. Owners of unwanted tramp boxboats can either scrap them, at tender ages, or do something else with them, just at the time when big forwarders, controlling worthwhile cargo volumes on certain routes, find themselves shut out.
The solution is obvious and not even difficult to put into effect– Non-Vessel Operating Common Carriers become Vessel Operating Common Carriers, by chartering ships, cheap, from the desperate tramp owners. The NVOCCs know all about the liner business; all they need to do is to hire a few operations people, appoint agents, and buy bunkers.

Presto! A whole new generation of liner shipping companies, carrying negligible debt or overhead, springs up like the dragon’s teeth and starts to out-compete the ‘legacy’ big shipping lines.

And thus the container revolution eats its children. Amongst the legacy liner companies, few are very old. They saw off the old guard of the conference carriers – even the boys in blue were once ‘tolerated outsiders’ – and soon they, in turn, will be swallowed up by, in effect, ‘virtual’ liner companies.

Who loses in this orgy of value destruction? At first glance, the banks, but the banks are bailed out by the taxpayers. Which is to say, gentle reader, that the people who lose are you and I.

 

Futurenautics: The Rime of the Future Mariner


From the FutureNautics website (http://www.futurenautics.com/)

 

In honour of the UK’s National Poetry Day. The Rime of the Future Mariner, with apologies to Coleridge. And everyone else.

 

The Rime of the Future Mariner

 

I thought him an ancient mariner,

When he LinkedIn with me.

His profile pic showed crusty beard,

And picture of the sea.

 

Let’s start a conversation”

Quoth he, ‘for I bring,

A tale of shipping’s future,

via LinkedIn messaging.”

 

Said I, “I’m LMFAO,

Oh crusty bearded loon,”

But as his rime unfolded I saw,

That I had typed too soon.

 

Heavy was my workload,

I had no time for chats,

Upgradeth I to Windows 10,

For videos of cats.

 

But sayeth he, “This rime of mine’s fantastic,

It enthralls,”

Then describeth he, what seemed to be,

A total load of rubbish.

 

A mariner, he claimeth,

He had surely been,

On board an LNG carrier,

Back in two-thousand fourteen.

 

A satcom link, predictive text,

And gas 161 below,

Together caused the accident,

That begat his tale of woe.

 

Predictive algorithm,

combined with cryogenic freeze,

Propelled him to the future.

And buggered up his knees.

 

“I have seen what you see now,

And what is yet to come.

I can now vouchsafe to you

Shipping 2051.”

 

“Begone, you fiend,”

I typed at speed, but nary checked before,

Predictive text corrected it,

Begin, friend,” ‘s what he saw.

 

He did, “The future’s different,”

The Mariner did warn,

“No Ballast Water Management, no slow steaming.

Or porn.”

 

“No Mariner, it will not be,

As long as we have tankers,

We’ll still have ballast water,

And crews will still be reading the magazines for the articles.”

 

“Men and ships are now as one,”

The Mariner replied.

“All of us connected,

With technology inside.”

 

“Cargoes are intelligent,

Supply chains all holistic,

We talk no more of shipping

We are all now blue logistics.”

 

“But Mariner, look at us today,

Look at what you see,

Speculation in tonnage,

And overcapacity.”

 

“The industry is struck with gloom,

In almost all its facets,

The liner guys are struggling,

For a return on their net assets.

 

“Dry bulk is a basketcase,

And tankers on the slide,

How do we get from here to there?

Where is the upside?”

 

Quoth he, “The fate of shipping,

Is entirely your decision,

But if you desire any lucrative hire,

You’re going to need a digital vision.”

 

“But people always will need ships,

The IMO says it’s true.”

Pauseth did the mariner; then came the answer,

“Who?”

 

“Leave not this in your inbox,

Nor save it up for later,

You need more linkativity, connectitude,

Big Data.”

 

“Focus ye on customers,

Industry four-point-o,

Collaborative platforms,

Analytics, data flow.”

 

My mind was filled with wonder,

As the tale was told to me,

Of shiny things and slimy things,

And new technology.

 

When it was done I raised my hands,

And typed upon the keys,

“Mariner, you have to share,

Your visions such as these.”

 

“You must go out into the world,

Get on the conference circuit,

Do some social media,

Shipping Podcast; Holly Birkett.”

 

The silence from the Mariner,

Came straight from Davy Jones,

T’was chilling, as the knowledge

of it echoed in my bones.

 

“Oh Mariner, will you confess,

Your person is a lie?

This flesh’s pretence: you’re intelligence.

The answer came:  “AI, AI.”

 

He had no beard, nor head,

Nor heart, nor notion of the sea,

But he knew all of shipping’s past,

And shipping yet to be.

 

He’d earned no love, nor honour,

Nor he to any owed.

For the future Mariner I’d known,

Was nothing more than code.

Changes In Fashion: Panamax Vs Post Panamax Container Normalised Transaction Analysis


Premiums and discounts for vessel features change over time (fashion). These changes are due to shifts in preferences by the market for different vessel features and characteristics, which in turn are determined by underlying customer needs, the economic environment and geo-political events. Here at VesselsValue, we constantly analyse these changes and the effect they have on vessel values. One of the tools we use is our “Normalised Transaction Analysis” within our market value model.

Our market value model uses a series of algorithms to determine current vessel market values through the relationship between five factors: ship type, age, size, features and the current state of the market.

In “Normalised Transaction Analysis” we begin with the transaction price of a fair market transaction; we then use our market value algorithms to adjust the transaction price for the five factors. After stripping away the effects on value of features and characteristics of the transaction we arrive at an equivalent transaction price for a 0-year-old, generic size and specification vessel in a flat market. Applying this process to all transactions in a sector allows us to compare normalised transaction prices.

panamax-vs-post-panamax

The graph above shows this “Normalised Transaction Analysis” for Panamax and Post-Panamax container vessels.

The combined factors of the expansion of the Panama Canal; the industry’s pursuit of greater economies of scale and the depressed market, of which Hanjin is a victim, mean that the difference between Panamax and Post-Panamax container values is growing. In “Normalised Transaction Analysis” we can seek confirmation of this trend and this is demonstrated in the chart.

Along the Y-axis we measure the normalised value and the X-axis measures time. This has been indexed for both Post-Panamax and Panamax container normalised values. Normalised transactions are represented as scatter points and the linear regression through these two groups of transactions shows that whereas Post-Panamax normalised value remains stable (regardless of current market) the trend in Panamax normalised value is showing a continued downward trend.

The scope of this type of analysis is to identify trends in value differentials between vessel features. Example applications of this analysis include looking at the changing premiums and discounts associated with different features and characteristics such as yard, engine type, tanker coatings, gas containment systems, hull type, pump type, ice class, DP class.
Source: William Bennett Senior Analyst, Vessels Value

What Might Have Happened to Sterling


What Might Have Happened to Sterling…..by PolemicTMM

Nobody seems to know what caused the dip in sterling on the Asian markets on 7 October 2016, but forex currency blogger @PolemicTMM has written a very funny and informative post on how he or she imagined what went on the trading floor. It is reproduced below, but if you want to read the original, it can be found here.

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GBP goes EURCHF. What’s going on.

Ok , so I was wrong. Cable was not a good buy 2 days ago and just to prove me REALLY wrong the marvelous Antipodean time zone decided to ram GBP in a way that hasn’t been seen since the SNB spoofed EURCHF.

It’s the small hours of London Friday morning for me  and the reasons for GBP’s freediving world record attempt haven’t yet been formulated. Now I’m afraid that if you started reading this expecting me to tell you what I guess is going on in GBP, then sorry, I don’t know. But having worked in FX for a good chunk of my life I can have a good guess at what is now going on in the banks.

First, every salesperson is struggling to call all their clients who had ‘call levels’ at zones never expected to be hit, whilst trying to fill orders in systems at levels that they think they can get away with. Oh, hang on, no they can’t do that anymore as they need audit trails. So, they will all be huddled around spot desks arguing over whose order was hit at what. Said spot dealers will be shouting a lot and staring at an automated blotter that is slowly dripping in a queue of trades that their antiquated order and back office system in some far off distant place on the planet is trying to process. Basically, there will be a lot of ‘WHAT THE FUCK IS MY POSITION.. ARRRGH ‘ going on.

Meanwhile, clients will be calling in demanding to know why their stops were done 7% below current market and why no one called them. Because if they had been called they would have bought it back at 8% below current markets because they are all retrospective geniuses.

Managers will be trying to recite the rules of engagement for filling stops but can’t find them so call compliance. However, compliance is asleep because they are mostly based in head office and that isn’t in the Antipodes, apart from the Antipodean banks whose compliance officers will be teaching some course to the catering staff on how not to deal with Yemeni banks.

By now the dealing systems will be catching up with what’s going on and the spot traders now fit into two categories:-

Group 1 who look at their position screens and see a vast profit who split into groups ‘A’ and ‘B’. ‘A’ stays very quiet knowing that sales will want some of the profit if they see how much it is and ‘B’ who stand up and declare themselves as trading Gods.

Meanwhile Group 2, on seeing vast losses, immediately write emails to every manager under the sun blaming their staggering losses on system latency and the ridiculous guaranteed stop levels that sales made them undertake. If they are lucky management will swerve the losses into a contingency book, but if they are unlucky and the bank was thinking of replacing them with a ‘Raspberry Pi’ algorithm, they will be out of the door by close of Friday.

But back to sales. Those that are still on the phone are quoting the reason for the fall on anything that they feel everyone else is saying because no one has a real clue. They will probably repeat what JPMChase or Goldman say as they reckon that the guys there are cleverer than them and more likely to know. So, clients will currently be being told that it is due to- “Barriers being hit at 1.25, 1.20 , and 1.15” and if they can’t even manage that will say “Stop losses”, which is a great generalised term that demands no justification. But some foolish folk will have done a Bloomberg News search for GBP and decided that it is due to the news that fracking had been allowed in North West England. Which is of course rubbish, because we all know that it happened because Diane Abbott was made the shadow Home Secretary.

By now very senior management will have come down to the dealing room. Bearing in mind this is out of London time zone, the senior managers involved will have absolutely no idea whatsoever about Sterling so will ask questions to frantic spot and sales folks along the lines of “Has Brexit been announced?” or “is this is a big move?” The frustrated dealing staff will have to tread a thin line with them, alternating between wanting to tell them to piss off and ingratiating themselves with them as, with the size of the losses they can see, they may well be up before them the following morning.

Meanwhile sales are noted to be only saying, into phones and Bloomberg chats, “But seriously, that’s where it was” and starting to swear at overseas sales coverage who are trying to goad them into either filling their clients better or having any profits accruing through their clients stops reallocated back to them rather than staying in the center thatripped them off did the execution.

The options trading desk will have appeared to have turned Greek as that is all they are speaking, shouting things like .. “Watch your gamma”, “check your theta”,” where did I trade that delta” and “Oh shit, they said you made money shorting vol. “

For the sales guys with no clients with GBP orders, they will be feeling rather smug and trying to sound intelligent by quoting correlations as to what this should do for other pairs. Such as “Well with the cross correlations we should see a pick up in MXN/CNH vol and our model says that the 3m/1yr calendar spread is the way to play it”, only to find that if they try to get a price from their options desk they are told to “fuck off, haven’t they seen what is going on in GBP”.

So, it will all be fun and games. Do I care? Not a bit. Because I am sitting at home, it’s the wee hours of the morning and I am about to go to bed chuckling mischievously to myself, knowing that London FX sales folk are going to have one hell of a miserable start to the day explaining to their clients why they have just lost 7% of their company’s hedge book.

Oh and let’s not forget all those corporate treasurers dusting off the wording for their ‘due to FX volatility, losses were greater than forecast’ statements to add to this year’s accounts.

 

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