The best source of Euromarket gossip for much of the 1970s was a homespun weekly bulletin that frequently managed to offend while educating its readers. Philip Moore meets its unrepentant author, Stanley Ross.
Apicture postcard village in the Home Counties is hardly the most obvious setting for a mini- Euromarket museum housing a library that probably has no equal in the UK.
Forget the Guildhall Library in the City with its airport-like security. For an unparalleled insight into the history of the Eurobond market, the place to go is Stanley Ross's office at his home in rural Surrey. Security here comes in the form of two Siamese cats, who will stare at you quizzically, as though enquiring as to the grey market price of your 10 year Sweden 8.875%s.
The entrance fee will almost certainly be a lunch at the Savoy Grill, which is worth every penny for Ross's recollections alone. On the shelves of his office, copies of Euromoney and Institutional Investor dating back to the early 1970s sit alongside files bulging with the original copies of Ross's plentiful and outspoken speeches and invitations to countless conferences.
On the wall, meanwhile, hangs a picture of one of the Reuters screens which caused such offence in the late 1970s by quoting 'grey' or premarket prices and hence shaking up the antediluvian way in which new issues were priced.
Next to that picture rests a framed original of a 1978 edition of Institutional Investor, with its cover story announcing "The Rise and Fall of Stanley Ross," which was essential reading for delegates at that year's IADB meeting in Zurich following Ross's ousting from Kidder Peabody.
Installed some months later at Ross & Partners, Stanley exacted his revenge by converting a reduced version of the II cover into a Christmas card which read: "Don't believe all you read in the Press. Happy Christmas from Ross & Partners." Inevitably, a copy hangs on the wall of Ross's Surrey office.
Of all the memorabilia that is stored there, however, none provides a glimpse into the Eurobond market of the 1970s that is quite as insightful as Ross's collection of The Week in Eurobonds, the first and most widely read document of its kind.
With one or two interruptions, when he was holidaying or stirring things up at IADB meetings, Ross would distribute this weekly bulletin more than 300 times every Friday at noon between 1971 and 1977, scribbling away in his engaging, colloquial and often provocative style until well into the small hours.
And as he recalls, "its content not infrequently raised the most vociferous complaints from major international banks, companies and even Governments, when their issues were talked of unflatteringly in its pages."
Small wonder. References to "headhunters and disappearing missionaries" probably did not endear Ross to the government of Papua New Guinea, which raised $25m in May 1975.
Nor did his commentary on Finland becoming a triple-A issuer during the Cold War: "We should ask ourselves when considering the new AAA status of this borrower, how many Kalashnikovs are pointed their way across the barbed wire border... As far as we are concerned they can give it all the numbers they like, it will trade no higher in this marketplace than a single A."
Unsurprisingly, this did not go down well in Helsinki, where the then finance minister was an avid reader of The Week in Eurobonds. "Slapped wrists all round," Ross later recalled, although future copies of his weekly bulletin would frequently refer to his "Finland gaffe" and offer repeat apologies to Moody's.
Not that The Week in Eurobonds was preoccupied exclusively with the capital markets. Much of it was unashamedly political - "surely investment today is mostly about politics: pure and simple (or dirty and devious...)" - and often xenophobic. France was often a target for side-swipes that were less than diplomatic, such as the reference in July 1975 to the French franc suffering "its worst beating since Napoleon missed the last train from Moscow".
But it was the UK government of the early to mid-1970s that was the most frequent object of Ross's more barbed political observations and his frustration at relentlessly rising inflation and punitive tax rates.
When he railed against "the present crippling disincentive of taxing at 83% virtually all earned income over £20,000," Ross was presumably speaking for the entire City. Ditto with his exasperation at the unions showing "this weak and impotent government who runs the country and who intends to run it in the future".
From an economic perspective, the climate in the Britain of the mid-1970s managed by "our beloved Chancellor" was uniformly dismal, and in April 1976 there was no such thing as political correctness.
"Maybe it is not surprising," Ross wrote that month, "that a group of Pakistani immigrants was arrested on the beach at Dover today. In itself, that's not unusual - it happens practically every week. The difference is that this time, they were trying to get out..."
Nor did Ross pull his punches in The Week in Eurobonds' printed response to the passage of the new Sex Discrimination Act, which was ridiculed in a January 1976 edition, when Ross observed that "Goldperson and Sachs has a nice ring to it, don't you think?"
If exasperation with politicians was one leitmotif of The Week in Eurobonds in the 1970s, Ross's fear of flying was another, with his experience on board an especially hairy flight from Bermuda to London early in 1976 calling for a "haze of tranquilisers".
In 2003, however, and the twilight of the Concorde era, none of Ross's scribblings about flying have quite the resonance of his entry for December 9, 1977, describing his experience on the maiden flight to New York of the supersonic aircraft, which halved what he calls the "terror-time". "Maybe the best comment came from my boss in New York who suggested I might like to return by Laker Skytrain to even up the cost," Ross wrote, which was an oblique reference to the rapid deterioration in his relationship with his superiors at Kidder's New York headquarters.
Aside from outspoken comments on the credit quality of governments such as Finland, the 126 surviving copies of The Week in Eurobonds contain a number of other priceless insights into the way in which the market has changed over the last three decades.
A recurrent theme of 1975 was amazement at the speed with which the Eurobond market was growing, and at the vast volumes it was now capable of accommodating, which seemed to reach a crescendo in the summer.
In August 1975 Ross found the record-breaking $100m transaction from New Zealand breathtaking, saying that it was "mighty uncommon for an issue to be doubled". But $100m, he reckoned, was just about as far as borrowers would be able to push the envelope: "Let us dispel at once any idea that $100m offerings in the Eurobond market will or can become a generality.
"This will clearly not be the case. We appreciate this may come as a disappointment to certain Third World military finance ministers swishing along dirt roads in their brand new Mercedes!"
If there was surprise at the New Zealand $100m deal in August 1975, in April 1976 there was astonishment that the EEC had been able to tap the Eurobond market for more than $1bn in three weeks. "If anyone had told me a year ago that a single entity could raise such a figure in our bond market in less than a month," wrote Ross, "I would have considered him a candidate for the Funny Farm!"
A year and a half later, in September 1977, Ross was writing about a dual tranche $250m deal for Australia - "another jumbo issue slipped easily into the history books this week" - and reflecting that $100m transactions had become "commonplace", with 19 such deals already completed in the first nine months of 1977.
It was not just the size of transactions that staggered Ross in the mid-1970s. It was also the regularity of issuance.
"Not so long ago a new issue was an event," he wrote in May 1976 when he had been told by his Eurobond advisory department that the market was averaging one issue a day based on a seven day week. In those days, the merits of every new issue were discussed, "the management scrutinised and portfolios switched to make room. Today no one really seems to care and new issues come around as regularly as Idi Amin awards himself a new medal."
If Ross's commentaries were liberally sprinkled with deliberate frivolities, there was also plenty of judicious, forward-looking analysis of the key events of the era. In October 1975, for example, he quite rightly rejected the suggestion aired by "one Swiss banker" that the abolition of the US withholding tax would "kill the Eurobond market".
The market, said Ross, would change but not die, not least because: "Only a handful of borrowers are acceptable to US institutions in any case and the old story of having to comply with SEC regulations will preclude many Eurobond issuers." Plus ça change...
|The final paragraph of the final issue|
Among other trends in the market of the 1970s, Ross foresaw the growing importance of ratings agencies earlier than most, at a time when the press was generally sceptical about their purpose and value.
Following a visit from "our friends at Moody's" in July 1977 he advised that "the presence of ratings is a reassurance to investors and more and more corporations, governments and government agencies will undoubtedly seek them for their bond issues in the future."
Another trend correctly identified by Ross in the 1970s was the inexorable internationalisation of the Eurobond market. In virtual despair at a US television programme broadcast in the summer of 1976 which said that "a Eurodollar bond is simply a bond sold in Europe to Europeans," Ross commented that "perhaps it is time that the prefix 'Euro' was quietly buried and our business referred to as the International bond market."
After all, he said, "it seems to me that the Middle East oil sheiks, third world dictators, and other miscellaneous offshore residents to whom taxes are something incurred by other people, would be rather puzzled to hear themselves collectively described to 5m or so viewers as 'Europeans'!"
Of all the surviving copies of The Week in Eurobonds, Ross says that the most poignant, for him, is the final edition. The weekly bulletin apparently ended its life as a casualty of the growing rift between Ross and his New York superiors, and there was a palpable sadness from Ross in the final edition, written on December 17, 1977: "It is possibly true that the somewhat folksy, individualistic style of comment no longer has a place. It all depends where you sit.
"For my part," he wrote, "sitting at home on a Thursday evening often into the small hours has not always been fun, far more often a chore, but just very occasionally - and that made it all worthwhile - exhilarating."