The One Ad Campaign - that made Tommy Hilfinger

MY FASHION MOMENT

TOMMY HILFIGER ON A GAME OF HANGMAN

APRIL/MAY 2017

   

I really disliked Eighties fashion – the new wave look, big shoulders – so I decided to base my designs on what I’d grown up wearing as a kid: classic American prep. I made it oversized and colourful and added unique details. 

In 1985 we opened our first Tommy Hilfiger store, on the Upper West Side, but we didn’t have a lot of money for advertising. So Mohan Murjani, my backer, introduced me to a man called George Lois¹ who he said was an advertising genius.

I told George what I wanted to do – take a great looking model out to the Hamptons, on the beach, with the wind blowing, wearing my casual, cool, preppy menswear and take a beautiful photograph. He said: “You’re crazy! You’ll never become known unless you spend millions and millions of dollars. You won’t stand out from the competition because they are doing something similar.”

Tommy Hilfiger (photographed in the early 1970s) was talking to Luke Leitch 

A few days later we met again. He showed us these campaigns from a lot of the big brands. It was hard to tell the difference between them. “This”, he said, “is the problem. Unless you do something different – something disruptive – nobody will notice.”

Then he said he had something to show me. He brought out this poster design – we called it the hangman ad – in which I was compared to the most famous menswear designers in America; Calvin Klein, Ralph Lauren and Perry Ellis. It left in only the initials from our names and featured my logo – based on the nautical sign for H – at the bottom, saying this was the logo of the least known of the four.

When I saw it, I was shocked. I thought it would make me look completely ridiculous, and yes, like someone with a lot of chutzpah! But Joel Horowitz, the company’s president, said, “It’s a risk. But you need your name to become known. So why not?” I thought okay, these guys have my best interests at heart. And we’ve got to do something new. So we tried it.

Straight after the billboards went up the phones started ringing. The press machine kicked into high gear². There was a lot of negativity towards me from the fashion world – a lot of “who does he think he is?” and comments that this was boastful and nonsensical: how could I compare myself with the big league?³ But people were saying my name and going into my new store, and into Bloomingdale’s and Macy’s too, to look at the clothes. And they were buying them.

George taught me that taking risks can be good. Today I take them every chance I can –calculated risks – because every time one pays off it entices you to keep looking.

Notes on a moment
¹ An influential art director at Esquire who later moved into advertising.

² Hilfiger got a lot of press attention from the ads – and also a certain amount of flack. A profile in the New York Times quoted a senior executive at the Fashion Institute of Technology as saying: “I give it a year. He’s not a designer. He’s a creation.”

³ In “Damn Good Advice (For People With Talent!)”, Lois recalled: “The Hilfiger ad infuriated the fashion industry. In Newsweek and People magazine, Calvin Klein insisted we had spent $20,000,000 (two zeros too many). A few months after the ad appeared, Mr Klein, obviously livid as he watched Tommy’s growing fame, saw me having dinner with my wife and friends one night at Mr Chow’s, strode over, stuck his finger in my face, and blurted out: ‘Do you know it took me 20 years to get where Hilfiger is today!’ I politely grabbed his finger, bent it, and answered: ‘Schmuck! Why take 20 years when you can do it in 20 days?!’”

IF BORDERS WERE OPEN THE $78 TRILLION FREE LUNCH

http://worldif.economist.com/article/13532/78-trillion-free-lunch

Why Commodity Traders Are Fleeing the Business

The number of trading houses has dwindled, and the institutional, pure-play commodity hedge funds that remain are few.

By 

Shelley Goldberg

1

July 12, 2017, 2:30 PM GMT+5:30 July 12, 2017, 11:02 PM GMT+5:30

Copper, the "beast" of commodities.

 Photographer: John Guillemin/Bloomberg

Profiting from commodity trading often requires a combination of market knowledge, luck, and most importantly, strong risk management. But the number of commodity trading houses has dwindled over the years, and the institutional, pure-play commodity hedge funds that remain -- and actually make money -- can be counted on two hands. Here is a list of some of the larger commodity blow-ups:

1990	Phillip Brothers	The largest and most successful commodity trading house in its day caved, triggered by copper trading
1993	Metallgesellschaft AG	The New York branch of this large German conglomerate lost $1.5 billion in heating oil and gasoline derivatives
1995	Sumitomo Corp.	Yasuo Hamanaka blamed for $2.6 billion loss in copper scandal
2001-2002	Enron Corp.	Dissolves after misreporting natural gas trades, resulting in Arthur Andersen, a ‘Big 5’ accounting firm’s fall from grace
2005	Refco	Broker of commodities and futures contracts files for bankruptcy after accounting fraud
2006	Amaranth Advisors	Energy hedge fund folds after losing over $6 billion on natural gas futures
2011	BlueGold Capital	One of the best-performing hedge funds in 2011, closed its doors in 2012, shrinking from $2 billion to $1.2 billion on crude oil bets
2014	Brevan Howard Asset Management	One of the largest hedge funds globally. Closed its $630 million commodity fund after having run well over $1 billion of a $42 billion fund
2015	Phibro	The sister and energy trading arm of Phillip Brothers, ranked (1980) the 15thlargest U.S. company, dissolves
2015	Vermillion Asset Management	Private-equity firm Carlyle Group LP split with the founders of its Vermillion commodity hedge fund, which shrank from $2 billion to less than $50 million.

Amid the mayhem, banks held tightly to their commodity desks in the belief that there was money to be made in this dynamic sector. The trend continued until the implementation of the Volcker rule, part of the Dodd-Frank Act, which went into effect in April 2014 and disallowed short-term proprietary trading of securities, derivatives, commodity futures and options for banks’ own accounts. As a result, banks pared down their commodity desks, but maintained the business.

Last week, however, Bloomberg reported that Goldman Sachs was "reviewing the direction of the business" after a multi-year slump and yet another quarter of weak commodity prices.

What happened?

In the 1990s boom years, commodity bid-ask spreads were so wide you could drive a freight truck through them. Volatility came and went, but when it came it was with a vengeance, and traders made and lost fortunes. Commodity portfolios could be up or down about 20 percent within months, if not weeks. Although advanced trading technologies and greater access to information have played a role in the narrowing of spreads, there are other reasons specific to the commodities market driving the decision to exit. Here are the main culprits:

1. Low volatility: Gold bounces between $1,200 and $1,300 an ounce, WTI crude straddles $45 to $50 per barrel, and corn is wedged between $3.25 and $4 a bushel. Volatility is what traders live and breathe by, and the good old days of 60 percent and 80 percent are now hard to come by. Greater efficiency in commodity production and consumption, better logistics, substitutes and advancements in recycling have reduced the concern about global shortages. Previously, commodity curves could swing from a steep contango (normal curve) to a steep backwardation (inverted curve) overnight, and with seasonality added to the mix, curves resembled spaghetti.
2. Correlation: Commodities have long been considered a good portfolio diversifier given their non-correlated returns with traditional asset classes. Yet today there’s greater evidence of positive correlations between equities and crude oil and Treasuries and gold.
3. Crowded trades: These are positions that attract a large number of investors, typically in the same direction. Large commodity funds are known to hold huge positions, even if these only represent a small percent of their overall portfolio. And a decision to reverse the trade in unison can wipe out businesses. In efforts to eke out market inefficiencies, more sophisticated traders will structure complex derivatives with multiple legs (futures, options, swaps) requiring high-level expertise.
4. Leverage: Margin requirements for commodities are much lower than for equities, meaning the potential for losses (and profits) is much greater in commodities.
5. Liquidity: Some commodities lack liquidity, particularly when traded further out along the curve, to the extent there may be little to no volume in certain contracts. Futures exchanges will bootstrap contract values when the markets close, resulting in valuations that may not reflect physical markets and grossly swing the valuations on marked-to-market portfolios. Additionally, investment managers are restricted from exceeding a percentage of a contract’s open interest, meaning large funds are unable to trade the more niche commodities such as tin or cotton.
6. Regulation: The Commodity Futures Trading Commission and the Securities and Exchange Commission have struggled and competed for years over how to better regulate the commodities markets. The financial side is far more straightforward, but the physical side poses many insurmountable challenges. As such, the acts of "squeezing" markets through hoarding and other mechanisms still exist. While the word "manipulation" is verboten in the industry, it has reared its head over time. Even with heightened regulation, there’s still room for large players to maneuver prices — for example, Russians in platinum and palladium, cocoa via a London trader coined "Chocfinger," and a handful of Houston traders with "inside" information on natural gas.
7. Cartels: Price control is not only a fact in crude oil, with prices influenced by the Organization of Petroleum Exporting Countries but with other, more loosely defined cartels that perpetuate in markets such as diamonds and potash.
8. It’s downright difficult: Why was copper termed "the beast" of commodities, a name later applied to natural gas? Because it’s seriously challenging to make money trading commodities. For one, their idiosyncratic characteristics can make price forecasting practically impossible. Weather events such as hurricanes and droughts, and their ramifications, are difficult to predict. Unanticipated government policy, such as currency devaluation and the implementation of tariffs and quotas, can cause huge commodity price swings. And labor movements, particularly strikes, can turn an industry on its head. Finally, unlike equity prices, which tend to trend up gradually like a hot air balloon but face steep declines (typically from negative news), commodities have the reverse effect -- prices typically descend gradually, but surge when there’s a sudden supply shortage. 

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What are the impacts? The number of participants in the sector will likely drop further, but largely from the fundamental side, as there’s still a good number of systematic commodity traders who aren’t concerned with supply and demand but only with the market’s technical aspects. This will keep volatility low and reduce liquidity in some of the smaller markets. But this is a structural trend that feasibly could reverse over time. The drop in the number of market makers will result in inefficient markets, more volatility and thus, more opportunity. And the reversal could come about faster should President Donald Trump succeed in jettisoning Dodd-Frank regulations.

(Corrects attribution of Goldman's review of commodity operations in third paragraph.)

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To contact the author of this story:
Shelley Goldberg at shelleyrg3@gmail.com

To contact the editor responsible for this story:
Max Berley at mberley@bloomberg.net