The Thaumaturge: Confessions of a Hong Kong Trader

The Misadventures of the Street Strategist Vol. 9

 

 Street Strategist Home Page

 

 In this volume the Street Strategist, the most famous unknown, the pavement philosopher of maximum imagination and minimum talent, of infinite comprehension and zero knowledge, of total opinion and minimal truth recounts his first stint in the Crown Colony as a broker in the international market for commodity semiconductors. 

  • He combines theory in sales and marketing with street strategies, tackling markets, customers, risks, advertising, geocommerce, and the most difficult issue in gray market trading: pricing scarce commodities.
  • He establishes a “demand-side” client book that covers US, European and Asian trading cities, utilizes “curve shifting” to maximize profits. 
  • He invents Insight Value Added, generates infinite returns, enforces zero receivables, and maximizes cash flow. 
  • He advertises in Poland, sells to Christchurch, and seduces a Taiwan laptop company to induce an American hard disk maker in Singapore to manufacture an obsolete model specially for him. 
  • He reverses typical deal structures: instead of buying EPROMs from a German distributor, he sells to them; instead of selling CPUs to expensive Europe, he sources from them; instead of begging for IBM’s attention, IBM is now calling him, in the process discovering one of the weirdest secrets of the hard disk industry: IBM is not IBM-compatible. 
  • He analyzes the structural factors that make Hong Kong probably the most efficient trading center in the world. And among other things, he engineers his greatest deal structure about the hottest and newest CPU, a structure that involves five major cities in the world, yet executed merely within a few days at insane profits.

The Thaumaturge (Confessions of a Hong Kong Trader): The Misadventures of the Street Strategist Volume 9 is the latest compilation of the continuing chronicles of the Most Famous Unknown’s ruminations on the irrelevant, the immaterial, the insignificant, the negligible, and the obscure, as published in the longest column space in the country.

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The
Thaumaturge
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T

his is the portrait of the Street Strategist as a thaumaturge. Thaumaturge. There’s a nice ring to it. Of course, you don’t know what thaumaturge means but your ignorance will be rectified as soon as you open up Webster or click on Google.

I’ve always wanted to write an article with this title - Thaumaturge.

In fact, for so many years now, I’ve been waiting for the right time to use this title, although I have decided earlier on that I should use this title to start a year’s new series of columns. I figured this is such New Year.

Actually, I wanted to use this title last year, my fifth year in the business, but for some reason or another, I chose a very pale title of “Creating Intellectual History.”

Actually, I can tell you the reason why I didn’t: At the time I was not yet prepared to write a portrait of the Street Strategist as a thaumaturge.

As I said, now is the time. Thus, this article is the first in the book called The Thaumaturge: The Confessions of a Hong Kong Trader.

Wow. Can you imagine that? I’m working another volume of my misadventures. For the latecomers who have read only three articles of mine, you missed half of your life.

Wow. Even without realizing its full impact, I have already written five books. Are they good? I don’t know. You’re the ones complaining that one week is a very long wait for the next misadventure of the Street Strategist.

However, once in a while, I read my old articles, and truthfully, sometimes, I enjoy reading them.

Long after I have forgotten the pain of writing them, when I read them again, I’m sometimes amused.

Sometimes, I’m even amazed. That’s the truth. There are strong articles that jump at me, yes.

But what really amazes me are not the few gunshots of exceptional articles but the roaring avalanche of the entire spectrum of the smorgasbord of ideas and misadventures.

When you have the chance, why don’t you tell me which articles you like best and why.

By the way, some of you might wonder why I presume readers have a liking for my articles.

Common sense: If you don’t like the Street Strategist, you wouldn’t have gone this far.

Recursive

Anyway, let’s proceed. Ah yes, I almost forgot that this is a portrait of the Street Strategist as a thaumaturge.

But before anything else, I would like to explain something before I confuse you some more.

When I say this is a portrait of the Street Strategist as a thaumaturge, I don’t really mean that it is only in this particular series that the Street Strategist illustrates his genius as a thaumaturge.

No, no, I don’t mean that.

And that’s why I have to make this clarification: Over the last five years, the smorgasbord of misadventures, irrelevant ideas, immaterial topics, insignificant strategies, and obscure ruminations were a running portrait of the Street Strategist as a thaumaturge.

In other words, this particular series, The Thaumaturge, is a mere recursion of the overall misadventures of the Street Strategist.

Yet, I pray that you will grant me this recursion, this loop within a loop.

Special position

In this series, I will recount a few events that occurred when I was still very young.

I once had a short stint working in a small company. They didn’t have a position for me, so they created one. I think this was a good move.

In general, the Street Strategist works well when the position is created for him, rather than when he is forced to fit into a particular position.

I was then in charge of the international markets. No, no, it was not such a big position. I was given the task of trading with other traders overseas, some big, some small.

Basically, I was a one-man team, except for the company’s support team such as warehousemen, accountants, documentation assistants, et cetera.

Trader vs. distributor

The company was dealing in semiconductor commodities. I was given a table, a phone, and, basically, I had to generate cash out of that.

Our company was both a trader and a distributor. What’s the difference?

A distributor is an authorized distributor. For example, Microsoft appoints an authorized distributor in Poland. That company is known as a “disti.”

A “dealer” is an authorized outlet of the disti. Usually, there is only one authorized disti in each country and the disti in turn serves its own clientele of dealers.

A “trader” on the other hand, is one who buys from the disti or dealer and sells on to other customers.

Thus, a trader could be a dealer, but oftentimes, the trader is not an authorized dealer.

The term trader has something to do more with what is called as parallel trading or gray market trading.

A trader may buy from disti or dealers or other traders, or he may buy from overseas, from other traders.

One thing to note: A disti is not allowed to sell outside of its territorial jurisdiction. After all, he is the main actor of the distribution channel that is protective of country jurisdictions.

In the overall scheme of things, the disti is the big guy, the dealers are the small guys, and the traders are the scavengers.

I was a scavenger.

Gray market

If you don’t buy from authorized disti or dealers, then you are said to buy from the gray market or parallel market.

For instance, if you buy an imported BMW directly from a second hand shop in Japan, or from a local yard selling used-cars in your city, and not from the authorized BMW dealer, then you are buying in the gray market.

Dual

The small company I worked for had a dual role.

Since we were disti on certain product lines, the other salespeople focused on these lines.

For those products, for which we were not the disti, we functioned as traders. I was assigned to a non-disti product line.

Trader vs. broker

There is a demarcation between a trader and a broker.

However, this distinction is fuzzy in actual practice.

In the financial markets, a trader is one who sells his own inventory, while a broker does not have his own inventory. He merely brokers the buyer and the seller.

In real practice though, in the physical markets, the broker is one who gets an order first from his client, then subsequently places an order with his supplier. This is called back-to-back deal.

Again, in practice, there is no distinction between broker and trader.

In fact, you don’t have to tell your client whether or not you have actual stock at the moment of taking his order.

Market structure

The market structure of the worldwide semiconductor industry is similar to most industrial product lines.

Let’s illustrate.

Texas Instruments makes EPROM ICs (electrically programmable read only memory integrated circuits).

TI’s distribution chain will be: First to the OEMs (original equipment manufacturers). The OEMs always have the lowest price. These are the computer manufacturers in Taiwan, or the cellular phone manufacturers in Sweden.

Next in line are the distis, the authorized distributor.

They have the next best price, and they are assigned territorial jurisdictions. Should Acer in Taiwan be served directly as an OEM by TI, or should it be served by a disti? These are common sources of friction between manufacturers and disti.

Next in line are the dealers. The distis usually practically appoint as many dealers in a city as they can. They have the third best pricing.

How about the traders or brokers? They feed on any of the distribution points above. They are the scavengers.

And don’t forget, the young man who was to become the Street Strategist was a scavenger.

And this series will illustrate whether or not the Street Strategist deserves to be called a thaumaturge.

(Thads Bentulan,