We all laughed and, clearly, the thought took seed in my brain; for when I returned to India some years later, I jumped at the chance to become a currency forecaster. Of course, with a newbie's arrogance, I didn't believe I would ever meaningfully go wrong - and indeed over the first several years, I consistently got the market right. My head, not surprisingly, continued to swell.
This was the mid-1980s, and getting the direction of the rupee right was no rocket science; the only issue was judging when the premiums were high enough to warrant export sales. Importers, of course, had to keep buying. It was easy as pie.
A few years later, in 1991, things changed. The market started to open up and this new animal - volatility - entered my life.
I quite quickly understood that currency forecasting is not like weather forecasting - you don't get paid if you are wrong - and in the new environment, getting the market right was not, as it used to be, child's play. To build my business I needed to leverage the new game in town: risk management.
It took a while for the concept to enter peoples' minds - there were conferences and seminars and worthy folk (myself included) spoke sagely about the subject. But the truth is that while most people understand and can talk about risk management, it has taken decades for the reality of it to enter peoples' hearts.
This is why I was overjoyed with a wonderful victory I won recently in my continuing battle at getting companies to really manage risk. There is a lot of lip service to the concept, as I said, but most companies - even those with highly professional management - continue to depend excessively on market views.
Last week, in response to the Iraq conflict (and myriad other nervous-making signals), the rupee had suddenly dipped below 60 to the dollar. A client rang and asked what I thought. I said, "Well, I don't think geopolitical events will have a sustained impact on the markets and with the India story quite strong, I think this might be a good level to sell dollars." He said, "I've already sold $4 million."
Great, I thought.
Minutes later, I called a client, a company with huge imports for which we have developed a wonderful risk management system with multiple bells, whistles, horns and glasses of champagne. I spoke with the treasury head and told him what I had just said to the other guy but that he should buy dollars.
He said, "But how can you say that? You just told me your view and that you had told someone else to sell dollars. How can you ask me to buy dollars?"
I said, "My friend, your stop-losses have been hit - the bells, whistles and horns are all honking red. In this environment, you can't afford to have a view. You can only have a view - or, certainly, you should only use a view - when you are in safe waters."
Now, this company has been running a very active and successful treasury for several years; their board had wanted a tighter framework and we worked together to come up with a system, which - like I said earlier - is really well designed and finely tuned to both the company's business and its risk appetite. The operations team has learned how to use it effectively, and since April it has delivered about Rs 3 crore of cost savings. On top of that, with the rupee strengthening, it has been a simple matter to ride the market and the company's position-taking has added a further Rs 3.5 crore of savings.
They are rightfully pleased with themselves and their capabilities.
But now, despite against their (and, for that matter, my) views, the system was demanding they buy dollars. "Let me see," he said.
I got a mail later that afternoon saying they had bought $10 million! I had asked them to cover $20 million, but that fact that they did grit their teeth and push the button was worthy of celebration.
Allah-o-akbar - a loud success!
The trick, of course, is to ensure they stay the course, particularly since the rupee did duly appreciate (modestly) and the stop-loss hedge ended up losing money.
But tomorrow is another day - and unlike James Bond, who I understand I do resemble from time to time, risk management is ensuring that you live another day.
jamal@mecklai.com