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And this was exactly the strategy he employed: “I don’t know exactly how many tankers we had. But I know I got a call from John Gutfreund [chief executive of Salomon, Phibro’s then-parent group] saying, ‘Hey, Andy, you guys never normally use any capital, and they’re telling me you’ve got hundreds of millions of dollars of working capital usage this month.’”
After sitting on tons of cheap oil, Hall recognized that Saddam Hussein was likely going to invade Kuwait and realized he had the potential for a career defining trade. He removed a portion of his hedges against the trade, leaving his cargoes fully exposed to the volatility in oil prices. The losses would have been astronomical if he was wrong.
Hall - Catalyst - Front - Eyes - Night
But he wasn't. And Hall recalled the catalyst playing out in front of his eyes: “And, then, he invaded. I remember the night very well. I got a call at one o’clock in the morning from either our Tokyo office or our Singapore office saying there are Iraqi tanks in Kuwait City. ‘So, what’s the oil market doing?’ And, he said, ‘Well, there are bids $6 a barrel above New York’s close.’ ‘And where are the offers?’ ‘There aren’t any offers.’”
Oil jumped 10% the next day in New York. Within months, it had doubled. By the time it fell, Phibro and Hall were long gone from the trade.
Years - Hall - Phibro - Part - Citigroup
15 years later, Hall's Phibro, now a part of Citigroup, had become its own institution. Hall once again decided to bet big around the turn of the century: he saw China's economy and its 1.4 billion consumers as an opportunity. Seeing that new demand was going to need to be met, Hall bought hundreds of millions in long dated oil contracts, believing the price would rise.
The trade was another grand slam....
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