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Wednesday Conversation with Carlo Amorim

What fascinated me about the bond market was people apparently making money out of nothing, says the director of 28E Capital.

NASTASSIA ARENDSE:  28E Capital was founded in 2010 by Carlo Amorim, Hugo Gous, Sarel Snyman and Dirk van den Berg. This is my conversation with Carlo Amorim, who is a director at 28E Capital, about the company’s story and the way he views the world.

CARLO AMORIM:  I was born and bred in the south of Joburg, matriculated in ’92, and didn’t know what I was going to do with my life. I basically wanted to just get out of the house and go to the army. At that time it was still compulsory, so I just wanted to get out.

Then after a long discussion with my parents, I eventually enrolled to do a business and marketing management diploma, and also registered to do the one through the international IMM. That is actually where it started because, once I was introduced to statistics and economics, I found a real love for them. I was very good at it, which helps. A lot of my lecturers at that time said look, you are wasting your time – go to varsity, get a degree, get your honours in economics or become an economist. That sort of bit me.

Fortunately – and this was a just pure stroke of luck – I was offered a position on the old bond floor in 1993. I went for the interview and the guy said to me, look, if you can last a week on the floor you’ve got the job. That’s how I actually got into it. It was pure luck.

Once I had got there, it was really strange to me, coming off the street, never having been exposed to shares or bonds or whatever. And, on top of it, it was the bond market, which is much more difficult. After a week I was almost in tears and decided to just persevere and learn about it.

I think what fascinated me was that people were making money out of nothing, buying something one minute and selling it the next and making a profit. It just fascinated me that there was no physical exchange of anything. That’s what really got me.

So even though I started as an admin clerk – in those days they called them unauthorised clerks, as we weren’t allowed to trade – I was always [going] on to trading. That’s what I wanted to be, a trader. So that’s how it started and that’s where my love of the markets began.

NASTASSIA ARENDSE:  What was the work environment like back then, because I think a lot of us who’ve been in financial journalism say for at least five years or maybe slightly more we are used to the JSE having everything you do online – they don’t have a floor any more. You see the pictures every now and again of someone who used to be a JSE trader, with that vibe and that excitement, or you see it on the New York Stock Exchange, where there is still a lot of activity. What was that like?

CARLO AMORIM:  It was awesome. I enjoyed it thoroughly. If you ask my partner, he’ll say that he hated it because it was organised chaos. It was noise from when you got there to when you left. It was just a constant humming of people. If you are not made out for that or if you do not enjoy the noise levels and things like that, obviously it’s going to irritate you. But I enjoyed it thoroughly. It was the camaraderie between the traders. You were working next to your competitor; we were all on the same floor. There was a mutual respect for each other. There was honour, and your word was your bond. There was no such thing as electronic trading where I did a trade with you and it just matched automatically. If I told you I sold you X amount of shares or bonds, it was a done deal. And if you went against that sort of unspoken law, you were cut out of the party.

So to me it was wonderful, but of course you’ve got to then ask yourself – it wasn’t great for people out there, but that was because there was no technology. The client itself was at disadvantage because there was no transparency. You had to believe what I said. If I told you Anglo is trading at this price, that’s the price it was trading at. These days it’s just so much more transparent. Everybody has an equal footing when it comes to the information.

But it was interesting. No computers, sharing screens, old dial-up phones, no cellphones, believe it or not. That’s how old I am now. But I loved it. I absolutely loved it.

NASTASSIA ARENDSE:  So let’s talk about 28E Capital. How did you meet your partners?

CARLO AMORIM:  Well, it’s interesting. Hugo Gous, who is my partner, I met him first on the floor. He actually was not a bond trader, he was a futures trader at that time. And the market’s a small place. We all know each other. We know practically everybody that works at every other firm. It’s a very close-knit community. I met him way back then in ’94, ’95, and then met up with him again at Thebe Securities, where we were the derivative team. I was still working on the bond desk, and he invited me over to join his team. That’s where the relationship got going.

My other partner was in fact our boss at Thebe. He was the financial body. And my partner who’s no longer with us, Charl, also worked with Hugo. That’s where we became friends and built this relationship.

NASTASSIA ARENDSE:  What was the objective of starting 28E Capital?

CARLO AMORIM:  It’s interesting. If I look back now, I think we were crazy. We had just come out of the 2008 crash. Things were not that great. Prior to that the market was extremely busy. It was this new single-stock future market. We were the second-biggest market in the world at that stage. It was just such a hype with people making money hand over fist, and it was just wonderful. But the 2008 crash came and took out a lot of players in the market. So it wasn’t the ideal time to start.

But what we found was that because of the corporate environment where people were trying to implement strategies that don’t necessarily work for a stockbroking firm – and it was just a bit sticky. We wanted to be the masters of our own destiny. We wanted to listen to the clients and then adapt quickly and efficiently. The decision must be quick without red tape. That’s why we just wanted to be quicker, nimbler – and I think that’s what we achieved. We became a very niche stockbroking firm.

NASTASSIA ARENDSE:  When you look back from when you started your career in the ’90s to now, how would you say the world of finance and stockbroking has changed over the years, outside of the technology aspect?

CARLO AMORIM:  Tremendously. I don’t think you can actually separate the two. Technology has just made a huge difference. But, saying that, globalisation. The world is so much smaller. We can invest in any product around the world. There are so many new products being developed all the time. It did change in some [respects].

Yes, it’s very transparent now, very efficient, but at the same time a lot of jobs were lost because in the old day we had the paper runs. We would settle with certificates. Guys were running around. We had a room full of people, scrip people, and those people no longer have a job. So there were a lot of people who lost their jobs. But I think at the end of it all it has become much more transparent and a lot easier for the guy in the street to have access to all this information. I think you cannot take that technology away from how things have changed – the algorithims, the robots online, cellphones. It’s just a barrage of technology that you have to try to keep up with.

NASTASSIA ARENDSE:  There is so much happening in the local market, where now there is A2X, there is 4AX, where the JSE is not the only platform where you can trade. Did you ever imagine that would ever happen – that the market would open and the JSE would have competitors?

CARLO AMORIM:  Ja, that was something that I never thought possible, and of course now we’ve got a couple that are now competing. In fact, it was such a revelation that I don’t even think the legislation caters for it, that there should be two exchanges because, according to my knowledge, I think if you have a client order you can’t trade the same order on two exchanges. So there’s a lot we still have to do get it on par, but I think it’s wonderful. I think it’s great that we’ve now got the option.

Whether it is the right time is another question. The way volumes have been going on the JSE, they’ve fallen a lot. People are uncertain. It’s almost as if South Africa’s been put on hold. We will wait and see. But I think that it’s good for the market. Whether there is enough business to go round I don’t know. That’s for them to figure out and see if it makes sense.

NASTASSIA ARENDSE:  A few days ago we had the CEO of Capitec here, and he was talking about how before, when they were doing strategy for Capitec, you’d worry about the environmental aspect of things. But now they’ve had to factor in environmental and political aspects and everything else that’s happening. They’ve had to adjust and change the way they deal with clients, etc. When you look at the business of 28E Capital, when you put in everything, environmental aspects, global and political as well, how has that affected the way you guys run the business, the way you deal with clients?

CARLO AMORIM:  It’s a difficult one. The environment, the volatility falling, the volume falling – that’s the result of whatever is happening in the country. There is not really much you can do to counter it. Look, there is always something you can do. There are always products that you can offer your clients that will maybe give them access to something different, hedge themselves across the world. There are products that the JSE itself has created to cater for clients who are looking for something else.

NASTASSIA ARENDSE:  Carlo Amorim, thanks so much for your time.

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