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June 29, 2010

A Place in Trading History

By Michael Scotti

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Good traders often have a gut feel for what's about to happen next, an uncanny timing that can be prescient at times. Austin George, the one-time head trader at T. Rowe Price, who's been retired since 1992, recently fit that description. George penned a letter to this editor on May 5--the day before the Dow Jones Industrial Average plunged nearly 1,000 points before recovering.

Austin George in Traders Magazine, 1989

The rapid drop in the marketplace on May 6 is still under investigation, but many believe that an individual trading a high volume of e-mini contracts started the spiral. The movement in the underlying stocks was further exacerbated when the exchanges showed a lack of harmonization of their rules during a time of stress. Consequently, stocks continued to plummet.

The gist of the letter from the man, who received his first order from a portfolio manager on the back of an envelope in 1962, is how dramatically equity trading has changed and how difficult it is for someone from his era to follow or even associate with it. "I seldom see any names I know and most of the firms have ceased to exist or merged with others," George wrote in a clear penmanship. "And the trading lingo and techniques of today might as well be a totally foreign language."

The letter prompted this editor to call George, a gracious man of 77 years and also a loyal reader of this publication. "Sheer coincidence," is how George described the timing of his letter and the unraveling of the markets. George said he was unsure what long-term effect the plunge would have on investor confidence, but he said that when trades occur "much faster than a human's ability to react to them, you know you're going to have problems like this crop up." Still, he said investors will always buy and sell stock based on their fundamental value.

In retirement, George hasn't distanced himself completely from the market and trading. He still might find himself checking the market at noon to see what's going on. To this day, however, George has vivid dreams about trading. And he's not always on the winning side. Trading is that ingrained in his psyche, he said, mainly because he has such fond memories of the business.

"It was a different world," said George, who was chairman of the Security Traders Association in 1989 and one of the first buyside participants of a group that was almost entirely comprised of OTC traders. "I'm not saying a better world, but for someone who liked meeting interesting people, it was almost like heaven on earth."