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A topsy turvy day


Today was a bit unusual. We entered orders counter to our orginal plan. We went long on our shorts and shorts on our longs. By noon Mosk was fed up and feeling beside himself. I know he blogged about this. He gave us a speech before we broke for lunch. When you are having a bad day, simply just walk away. Before walking away, get out of your positions, by going flat or taking some share size off. This limits the amount of pain you will take. The next step is to get your strategy in order and know your risk tolerance. Do not try to make it  back on one trade! Make sure you stay small and feel good about your trade. Walk away from the day feeling okay.

After lunch we did not trade until around 3:00pm entering orders for overnight. Going into close we owned CLF. Needless to say we ended up positive.

A traders biggest down day usually comes after there biggest up days.

-Justin Valle



The Reality of the Market


The following commentary is derived from a conversation I had this morning with our former Chief Market Strategies Jeremy Klein regarding the recent trends in the market from a macro and micro perspective.

In realilty, problem is there are very little resistance levels as we came down so fast from summer of ’08.  37.50 is grasping at straws, but u can say there is resistance there


Reality is round #’s like 1330 which was a bit tough
and 1340 which shld be defended

and then certainly 1350

1337.50 was highs in spooz on 6/25/08

we gapped down the next morning and sold off 3+ %

I don’t think it’s great, but it’s something


I wld put a mild short on in front (say 36.50) also because if we get to 37.50, we’d be up 11 handles which is a bit much


But reality, no good resistance levels as it has been a straight shot higher
and plenty of support down below, so tough to break down

but the entire world is bearish — look at your chat room -

which means continuing grinding higher

but any decent weakness will be sold fairly aggressively

see Jan 28 Open Interest figures

legendary startegis Ed Yardeni wrote this morning about this FIBS

“Fully invested bears”

those institutional investors forced to be long, but deep down think market will end badly


Perfect descrition of this market b/c it grinds the action higher, but exacerbates single day sell offs
if/when they come w/hedging

forced to be long b/c of prisoner’s dillema

everyone looks around and sees everyone long, so will be left behind vs. competition and vs. SPX

so they have to participate

and get long

so far, there has been real buying today

first time shown up in a while

TICK has not dipped below -356

Average TICK on day is 300

sectors are skewed more toward growth


Small caps outperforming middies which are outperforming large caps
RTY beating MID beating SPX which is beating DJIA
-Jeremy Klein



death of conventional technical analysis


i began my interest in technical analysis in 1969,same year as woodstock. i think i actually took some books with me at that iconic concert. while a member of the Bear,Stearns arb dept. i could not keep my charts out on the desk.i actually had to cover my chart book with a playboy cover. thats how full circle things have come. there were only a handful of books and a couple of masters papers.now the books stores are full  of great books that give everything from indicators to patterns to how use ai software to build systems. i believe its this plethora of info that has created a major problem for conventional technical analysis. the volatility ,patterns and trend changes on a dime intraday,etc,etc. hopefully this  is the age of astrological market analysis. i suspect so.



Egypt, the Stock Market and……Yoga


Mubarak before getting into his disguise

Mubarak in disguise as he slips out of the country

I feel compelled to write a blog about the events of the day. I assume I will be one of the multitudes of individual’s blogging about Egypt, the stock market, and yoga in a single blog. Let us begin with Egypt. Incredible, Fascinating, Mesmerizing. Look I am actually loving the fact that we are on the verge of real change in the middle east. But here is the crazy thing. It wasn’t Hillary Clinton, President Obama, Former president George Bush or 2009 senate maj. Leader George Mitchell who brought about this monumental change. Who do we have to thank for what seems to be the beginning of the end of Islamic fundamentalism? Not very surprising, Jack Dorsey – Twitter founder, a St. Louis Missouri kid who went to NYU and has changed how we communicate. Not very surprising, Mark Zuckerberg – A Jewish kid from White Plains, NY who went to Harvard, created Facebook and changed how we socialize. Definitely not surprising, Steve Jobs, the da Vinci of our generation for creating the tools by which we communicate and socialize. And yes, let us not forget to thank Al Gore for inventing the Internet. These are the true revolutionaries, sans Al Gore, who when all

Tapas in the Stock Market

the dust settles and a real democracy exists in Egypt, deserve Nobel peace prizes. Al Gore already has one. The Internet has changed our lives forever; we are still at the beginning stage of understanding just what that means. Yoga has taught me to live in the moment, to be present. As we watch these momentous days unfold, it is best not to fear the future, but to embrace the change optimistically. While he was not a yogi to the best of my knowledge, our 16th president Abraham Lincoln wisely said, “The best thing about the future is that it comes one day at a time.” Now I am not suggesting that violence and rioting are good things, but change very often is a great thing. Real change such as we are hearing in the voices of the Egyptian populous is revolutionary, it is evolutionary. And it has been driven by the genius of the aforementioned innovators. The most devastating blow the Mubarak government has thrown was not tear gas and rubber bullets; it was shutting down the Internet. It was also the final nail in their coffin. A starving man will kill to eat. A repressed society will revolt for enlightenment.  No revolutionary moment has come without a price to be paid; Without a price paid, without sacrifice, there is no success.

Yogic scripture refers to this sacrifice as Tapas. It is the suffering and pain we must go through for self-purification. Today was a Tapas day for the stock market. There may be a few more to come or not. We will have to wait for Monday to see if there is more Tapas to come. But what we saw today was healthy. We had approached a psychological level in the market. 1300 on the S&P is not a level to be taken lightly. Nor is 12000 on the Dow. We were not going to just glide through these levels. We need to blast through them when the time comes. And we needed a catalyst to sell off from the levels. But now is a time to breathe. Perhaps we need to pull back a bit more. But not much. What we need to do is rest. Observe the world around us and take stock of our current situation. Monday is month end. I do not expect much as funds will neither want to paint the tape to inflate returns, nor will they want to see much more damage done to the strong returns of the opening month of 2011. As the saying goes in the market “So goes January, so goes the year”. We are still in a bull market, but that doesn’t mean you have to be net

Breath of a Trader

long. It does not mean you buy every pull back. I expect a couple of weeks of stagnation and then a real attempt at breaking the psychological barriers in the market. Make sure you are long the market when that moment arrives. Until then, remember what Andrea Boydston famously said, “If you woke up breathing, congratulations! You have another chance.”



The Day The New York Stock Exchange Almost Died - Thats How I Came To Hear Of Ron Shear


The article arrives.

All the mail was in a bundle. The envelope itself had taken on a commanding presence in the pile of mail.

I entered the apartment and dropped the keys on the kitchen table. I let the incidental mail drop, everything other than the grey envelope slipped to the tabletop. As I strolled to the second hand couch and cheap wooden coffee table I examined it. Not very heavy. Felt like a bunch of papers stapled together. I would need to smoke something before I opened it, my Dad’s office address was in the upper left hand corner.

Ten minutes later, a bag of chips in my lap, a glass of wine in my hands. I was ready to read.

“A month ago today the New York Stock Exchange died.”  The article was dated November 20 1987, “but within an hour or two, it was raised from the dead.” Ahh, my Dad had sent me some light reading,

Then

recapping the events of the day after black Monday. But it was more than just a recap. This was a seminal market event. Those participants who would ultimately be responsible for the actions that would chart the course of the day, would set precedent for future generations. There perception of financial meltdowns had been shaped by stories of the great depression. But like many movies the great depression had become a classic. Great to watch but in practicality not relevant. Philosophically one can appreciate the lessons we learn from a classic. But time and progress ultimately limit the value of classics as a relative concept. The great depression was a classic , but the nightmare of ’87, to those who stood strong on that scary Tuesday, still in shell shock from the previous day, was reality. Their experience on that Tuesday would shape them and those they would influence for decades to come.

James Stewart and Daniel Hertzberg wrote the article. Titled: How the stock market almost disintegrated a day after the crash.

Stocks, Options and futures trading all but stopped during a crucial interval on Tuesday” October 20th. This was not some metaphoric statement or exaggeration for dramatic affect, these staff reporters for the wall street journal were stating the fact. “The stock market and by extension all the world’s financial markets faced one of the worst crises.” The article went on in great detail to describe one of the most frightening days in financial history. As I read it, I was amazed not just as to the events of the day, but the power this Industry held over the world. There were rumors through out the day that the Big board would close. That the powerhouses such as Lehman, (bankrupted), Kidder Peabody (sold at discount after Trading scandal Joe Jett), Morgan Stanley (ravaged by the credit crisis of 08) and Banker Trust (sold to Deuthce Bank after derivatives scandals and severe losses on Russian bank debt.) were rumored to be buying up bankrupt specialists who could not meet their debt obligations and collateralization needs. These same firms had all but stopped extending unsecured credit. The Arbitrage community, the predecessors of the 90’s macro hedge fund community had lost untold fortunes.

'87 Crash

Rumors flew that some of them were contacting the SEC to temporarily close the exchange, something that can only be done by the President or the exchange itself. “some big investment banks were facing catastrophic losses if the market panic continued”

The specialist firms are responsible for maintaining liquidity. On that day the New York Stock exchange that can trace its history back to 1792 when traders gathered under a tree in lower Manhattan, faced extinction. The specialist, the last line of defense could no longer support the market. There was no liquidity, just one side of the market was there. Sell. Offers. Sell at marketkt. Not held. Stock to go. Just get me out. Get me the F out.

“The Federal Reserve issued an extraordinary statement affirming its ‘readiness to serve as a source of liquidity to support the economic and financial system.” Sounf familiar? Its chairman Alan Greenspan had been made chairman only 3 months earlier. I had never heard of him. I certainly had never heard of Gerald Corrigan the New York Federal Reserve president trained by yet another foreign name to me, Paul Volcker. How little I understood. It would take nearly two decades for me to understand that these men held all our lives in the balance. That at that moment, the positions they occupied were more powerful than all but the president of the United States. This was no ordinary article and these were not ordinary people. There actions have reverberated for decades. Volcker is still hanging around making a mess of things.

The article went on to describe other key players that day. John J. Phelan was chairman of the Big Board. He was the link to the Fed. It was he who would spread the gospel of the Fed throughout the lines of Wall Street. It was he that would sigh relief as the exchange opened up 200 points regaining nearly 40% of its previous days disaster. And then watch in frightening awe as it gave up all its gains losing an additional 80 points and adding over another 5% of losses to the battered average by noon.

It was Phelanwho would have to explain how the stocks were just not trading and one could not properly value the index which meant one could not accurately value the futures.

Chairman Karsten Mahlmann, also known as “Cash” was the chairman of the Chicago board of trade. His exchange was still trading futures contracts of the MMI, the Major Market Index, the other leading index of the Day. The MMI was a blue chip indicator of 20 large cap stocks created by the American Stock Exchange in 1983. It was often referred to as the XMI, which was the ticker for the underlying cash index. It included stocks such as General Motors, Coca Cola and General Electric. He listened in astonishment as representatives from the big board alerted him to the possibility of a close for the New York Stock Exchange. They had moments earlier notified Leo Melamed, the chairman of the Chicago mercantile exchange, who at 12:15 halted trading in S&P 500 futures contracts on the MERC. Cash watched as the “relatively little used” futures on MMI dropped to their deepest discount to the cash value of the MMI index in its history, triggered by the news that back in NY on the floor of the American Stock Exchange trading in Index options on the MMI was halted.

His voice was one of authority, he was 46 and perhaps on of the most seasoned veterans on the floor of the Amex. “Trading in MMI related options is temporarily halted, no more orders.” He was Ron Shear and he was the senior specialist for the MMI on the American Stock Exchange. He was a cross between a Jewish Wall Street Godfather and your local old world Italian grocer, who sends you home with an extra bag of fruit and regards to your mother. One shadow casts the guy who sweetly offers up fruit as a gesture from a service to long-standing family customers, the other depicts a gleaming smile, which makes you wonder why your mom spends so much time at the grocery store. Ron Shear is a dichotomy. Objective/subjective, hard as stone/soft as a feather, your greatest friend/your worst enemy.

It was 10 years later that I first met Ron Shear. I would be one of the few who would come to understand him (just a bit), but it would be 16 years before he and I would make a real connection, and in doing so make some money and I would earn a seat at the Big Boy’s table for a little while.

Here, embedded in an article copied from the wall street journal, stapled together, yellow post it on the front, “Read This!” from Dad” was the description of a man that would play a big part in my movie. Coincidence? Fate? Pretty F’n crazy.

He couldn’t sleep the night before. He smoked a fine cigar as he walked the streets at 4 am. Brasserie, a 24-hour French restaurant in midtown was already crowded with other suits whispering to each other as they sipped hot coffee, eyes red, and shirts ruffled. You could hear only a few words from the huddled groups. “Disaster, wiped out, panic, what next?” Shear paid his bill leaving a 15% tip. Not a penny more , not a penny less, that is his way. He perked his lips as he often did before he entered battle. His coat was of fine cashmere, aged but in a vintage sense. He shuffled out the door and hailed a taxi.

By 12:15 as he made his way to the microphone to make his announcement, other traders on the floor turned to him in fear looking for any words of comfort?” Ron, have you heard Merrill was taking over a number of defunct

Gerald Coriiigan

specialist?” and “Ronny, I heard they stopped trading Du Pont, Merck and Eastman Kodak” “Ron, is the SEC closing the exchange?” and “Ron, are we going to be ok?” The floor supervisor approached shear

Howard Baker

confirming that over 20% of the underlying MMI stocks had stopped trading, in fact Shear believed nearly half of the underlying stocks had actually stopped trading.  After his announcement, shear turned to a number of traders standing beneath the podium, and with a grimace that both exuded confidence as much as it did submission, “It is what it is” he said. With that he sat down and lit another of his small cigars.

The white house chief of staff Howard Baker, pressed Mr. Phelan to keep the exchange open for as long as possible, knowing that the country might not sustain the trauma. The loss of confidence in our financial system would ripple through the globe. Mr. Phelan was heard to have said, “If we close it, we would never open it.” It would be 2 decades before the financial community and the greater world would once again stand on the razors edge, teetering toward the brink of disaster.

“At 12:38 with the closing of the big board seeming immanent and the market in disarray, with virtually all options and futures trading halted, something happened that some later described as a miracle. In the space of about six minutes, the major market Index futures contract, the only viable surrogate for the dow jones industrial average, and the only major index still trading, staged the most powerful rally in its history” (pre ’87). The MMI rose nearly the equivalent of 360 Dow points. The Dow ultimately rebounded nearly 10% from its lows, “setting the stage for the salvation of the worlds markets.”

While conspiracy theories abound, it is believed that a small group of the most powerful firms on Wall Street, banded together and risked it all to save the market. With trading as thin as it was, their buying, together all at once, created an upward thrust in pricing the likes of which many seasoned veterans on the floor had never experienced.

Ron shear was still enjoying the taste of a spicy small cigar as he strolled back on to the battlefield, his instincts were heightened, as he began to feel the commotion on the floor, something was happening. The blood in his body warmed, he felt the thrill of the game and just like that, the defeated army of capitalism experienced a moment of redemption. A seasoned warrior like Shear, smells that moment of opportunity and moves quickly for the kill. Momentum was his weapon and with it he and his cohorts would prevail. He bolted for the loudspeaker and announced that he would open the MMI options market in 15 minutes. I am sure he went on to kill it that day, that is, to make lots of money that day.

As I put down the article, I realized that somewhere about midway through reading, the weed had kicked in and I was baked. I thought, that’s was one F’d up article. I cannot wait to get to that battle. Ahh to be young and naive, what bliss…………In January of 2007, Ron Shear and I sold Carlin Financial Group to the Royal Bank of Canada.  My Movie Continues.



Market Predictions, New Years Resolutions and The Year that was 2010…….All Employees Must Wash Hands and Read This Blog


Saad - Vintage 2010 "He is our future at Hedge Fund Live"

This will be a long year. Barring an extreme exogenous event such as a major terrorist act or an all out collapse of the European union, I expect the market to end strongly this year. I expect it to be a slow steady grind all year as opposed to a gappy volatile run. I also expect a number of records to be broken, such as most consecutive days in a row up on the S&P. As such I expect to

New Years Resolution - Spend More Time With Saad

see a near 1400 close on the cash. Let me be specific about the European Union. A difficult restructuring of sovereign debt, even a loss to some senior lenders, even a bailout of Spain does not fall into exogenous events. In-fact these events are expected. The open issue, is how orderly the Union deals with the problems.

That said, the art of investing, the sport of trading and the millions of athletes that run the race, have just finished a strong season. It is time to rest a bit. Warm up, practice, and take a few lay up games. Reassess the competition and the ever-evolving landscape of the sport. While I believe the market moves higher over the first quarter, I expect it to be a modest 3% - 6%. It may seem odd to refer to this as modest, but the times they are a changing.

I am looking forward to a consistent trading environment with ample opportunity for singles and doubles and an occasional triple. The time for home runs is behind us for now. Low concentration and high diversification. 2X to 3X leverage on any extreme move.

Saad and I make new friends

On the long side of the market I am looking for 2 types of names. Names that have been beaten up in the past 6 months due to earnings, margins and business or consumer related issues. BBY, CSCO, Bank Names, YHOO, GNW, THOR to name a few. I still believe that the fundamentals of these types of companies remain intact, and that an improving economy and a grind higher market will give you the biggest bang for your buck in these names. Secondly, I will be looking for LBO related names and Merger and Acquisitions plays. Names that should be taken out, names whose independent business models can be taken no further but can be absorbed into a broader infrastructure that can reshape the companies direction. SVU, IMAX, PLCE, STX, AONE, GAIA, TTWO, GME.

On the Short side I will be looking for names that have been on a tear, where expectation far exceed the reality of the trading levels. I will be looking to sell bubbles and high short interest names. Names trading near 52-week highs that I believe fast money will shift out of. CLF, LULU, XOM, QCOM, KSS   etc etc etc.

As I said in my previous blog, my plan is to take trading and things in general day by day for the next couple of months. Life, day by day. We have had a strong opening performance for the firm MTD, up over $150,000. The chemistry on the desk is evolving, and while it has taken a year to get here, the progress over the last month has been remarkable. Caroline remains my trusted right hand. Jeff Tynik and Zach Guterman, have truly come into their own as traders. They will have long productive careers ahead of them. Betty Lee has transcended both trading and business and is an integral part of the Business execution plan. The return of Mark Moskowitz, and addition of Jach Shuman have substantially added to the collective intelligence. Saad and Judah have built a foundation for our business and have proven to be

Saad wears a special brain cover when programming

one of the most unique pairings in entrepreneurial history. Kandace and Lamont have allowed me to see through my vision of merging media with a trading desk. They have added a touch of class to a previously raw process. Dean’s consistency and discipline anchor us all. His wisdom and broad perspective help us stay grounded and true to our discipline. Marc Schwartz’s trading prowess and leadership are cornerstones of our profitability. His grounding and calmness under volatile and difficult trading and business environments help us control losses and maximize gains. My intention is to add 2 to 3 more individuals to the collective, as well as fully fund 5 – 10 university desks and integrate their perspectives as well into the broader collective.

As we enter year 2, I am left with a number of business thoughts.

Without vision there is no business.

A business begins with an idea, but the vision takes time to come in to focus.

It needs experience to grow.

It needs failure to have clarity.

It needs success to have direction and focus.

My vision for the business while broadly consistent still changes on a daily basis. Each challenge causes reflection and reevaluation. I see a merger of media and finance, an intense website and an intense trading desk, transparency and real time investing, real time education and real time experience, and collective intelligence imbedded in a proprietary trading environment. Collective intelligence that is exposed to and thus strengthened by the website’s membership community.

Saad is making the mustache cool for kids of all ages

The first year has had many setbacks and expensive mistakes. I would not change a thing. All has been as it should have been. While at this nascent stage I am approaching the business day by day, I am significantly more confident with the future. I look forward to the challenges that are ahead of me.



A Wall Street Trader’s New Year’s Resolution 2011


Trading, Stock Market and Wall Street = writers block

I have had writers block for nearly a week. I had decided that my first Blog in the New Year would not be a traditional New Years Resolution blog; I could not find a single thing that I want to resolve. I did not want to put some silly list of humorous resolutions, such as I ”I resolve to not mix my Meds”.  I didn’t want to put a list together of common everyday resolutions such as “I will try having

Wall Street - A New Year

more date nights”. ……….With my wife or Marc Schwartz.

So………After hours of meditation…………………

I have a single New Years resolution, I am resolved to live each day in the present. I expect to experience 365 unique days. Too many of my mistakes from the last year were because I believed I could control tomorrow.  More importantly, they were because I arrogantly believed I had a clue as to what tomorrow had in store. Now before you stop reading, because you think this will be some self-reflective sappy shit blog, think about how this applies to your investing and your trading. For 6 months I have been bullish. I called for a 1275 2010 year end close on the S&P cash; I was off by about 25 points and one day, as we hit my level January 1st. And while I continue to be Bullish on the overall market as well as optimistic about the direction the world is going, none of that has anything to do with tomorrow’s trade.

Willian daley - Obama's New Year's Resolution

One of the most important objectives in this game, is to stay objective. Last year I was not objective. Objectivity is reality. My perception may be very different than the market, but it is the market’s view that is reality. I may believe a loss I have may turn into a gain, but reality is, it may not, and I must adhere to my risk limits. I can have an educated opinion, but only time will tell if it is reality. Truth be told, there is no such thing as an objective opinion, It is an oxymoron, moron. When you make an investment with a time horizon, what exactly does that mean? Who is to say one earning’s multiple is too high and another too low. Why did so many believe the euro was going to parity? Why did our market spend so much time in 2010 worrying about Europe? The sky did not fall. CDS spreads continue to fluctuate. The Dow is 17% off its all time high. That is just a few Flash Dashes away from a new high. And what about that Flash Crash thing? How can any trader believe they have an idea of what tomorrow holds in store when the concept of a flash crash exists? Every currency impacts the bond market, which impacts the equity markets, which impact the masses of IRAs 401ks and pensions, which impact all of you, which impacts the politicians. And what about the politicians? How can any trader be comfortable with “tomorrow”, when the president thinks he can change the rules on a daily basis? No more proprietary trading. No more shorting? Oh, just not in the shitty stocks. And what about

Shit, Shit, Shit, and Goldman Sachs

the word shitty? During the senate hearings villainizing Goldman Sachs, Senator Levin referred to Goldman as “Shitty, Shitty, Shitty”. Maybe he doesn’t realize that some of us like to watch C-span with our kids. And what about C-Span and the 1,000 other channels, Internet, and numerous other media outlets? We are bombarded with information. None of us can actually decipher it. The technology changes so rapidly that it is impossible to know which one will be in business tommorow. One year ago, I thought “THE CLOUD” was where God lived. And what about God, is he out there? You know what? I wont go there. I wrote in an early 2010 blog that I thought the market had systemicly changed. I was wrong. The market never changes, only the players change. I am a changed man.  Shit, that really sounds cliché. For many years I believed people couldn’t fundamentally change. My one new year’s resolution is to fundamentally change. Yes, I now believe that a person, given the right discipline and enlightenment can change fundamentally. My new year’s resolution will

Cloud Technology - Where is God

manifest itself in both parts of my life. The only two parts a real Wall-Streeter has, family and business. And for many a Wall-Streeter the line is particularly blurry. I expect to see every day with my family as both a blessing and a testament to all that I have accomplished. I expect to live every day of the business as a new challenge in the game, a new scene in an unseen movie or a new chapter in an unread book. I guess I am going cliché. Very sappy, I apologize. But I believe that the player has changed. I can no longer rely on skills honed during bygone years. It is time to embrace a new style of living and a new strategy in the game. Day by day. Moment to moment. As we survive, we grow stronger. As we embrace the moment, we secure the future. I can no longer waste a day thinking about tomorrow. I need to end the day thinking about all that I accomplished. I need to see a day as a building block for the future. I need to see the trade in the moment and the business as it is today. Maybe a time will come when the future can be planned, but that is not today and more importantly it is not tomorrow. Play the game like you are in the midst of the battle and then hopefully the war may ultimately be won. I once believed  trading was a long-term strategy. I now understand it is a series of short-term battles in an ongoing war. I once believed a business was methodically built over an extended period of time. I now understand that business is “ten percent luck, twenty percent skill, fifteen percent concentrated power of will. Five percent pleasure, fifty percent pain and a hundred percent reason to remember my name”. (Fort Minor – Remember the Name) I now understand that I am in control of neither but capable of succeeding at both. My new years resolution is simple, I will truly embrace the moment, I will let go, and I will fundamentally change.



New Sizzle Reel with Jeremy Frommer in ‘Risky Money’


“Risky Money” Sizzle Reel

CHECK OUT THE NEWEST SIZZLE REEL OF JEREMY FROMMER IN ’RISKY MONEY’! :

http://www.youtube.com/watch?v=2mpuT2HWjUE



Bonus Season - Wise Advice from Tom Bernard, The Human Pirahnha and Pappa Bull


Bonus Season - Remember what the Papa Bull Said

Bonus Season - All those lucious grazing cows

My first Wall Street year-end was 1990, 21 years ago. I was a grunt on the Kidder Peabody High Yield (Junk Bond) trading desk. I worked for the iconic Tom (The Human Piranha) Bernard. I was 22 years old. My base salary was $18,000. I had been on the trading floor less than 6 months. My bonus was zero. Nothing, but a few pearls of wisdom from my fearless leader. After sensing my frustration during my year-end review, Tom closed my file and sat back in his chair. He was younger than I am today, 39 maybe 40 at most, but wise beyond his years. He told me a story. He told me that there was once this Father Bull and Son Bull taking a stroll on the top of a mountain overlooking a canyon filled with grazing cows. For those who don’t know this as Bernard found it necessary to explain to me, “Cows” are Female Bulls. Male Bulls are just “Bulls”. As the story goes, the Son Bull got very excited when he saw the canyon filled with these luscious cows. He turned to the Papa Bull and said “Dad, Dad…lets run down there, nosing in the direction of the

Bonus Season - "F" em all

eutherian harem, grab one of those cows and have sex with her.” “Let’s go, lets go, come on Papa.” Bernard paused for a moment; letting the young bull’s words sink in.  The Papa bull slowly turned to his son and looked him straight in the eye, “Patience my son, patience”…..”Why don’t we walk down this mountain and f*** them all”. Then silence. Bernard looked me straight in the eyes as he leaned forward over his desk. “Do you understand the f***ing story?” he asked. “Yes” I said, dead seriously, “I understand the f***ing story”. He was quite brilliant. Silence followed for a moment. I got up, shook his hand, ready to return to the trading floor and get my head back in the game. “Hey”, he called to me as I began to open the door to his glass office dubbed the “fish bowl”, at the far end of the trading floor. “Keep working hard and stay focused, maybe you wont be disappointed next year.”

He was right, too right.  Bonuses on Wall Street are a conundrum wrapped in an enigma. The next year I got a nice bonus.  And yes I wasn’t “disappointed”, but I wasn’t ecstatic either. Bonuses are meant to achieve a balance in your mind, often referred to as “satisfaction”. Satisfaction that you make more money than you ever thought you would but not as much as you now want. Satisfaction that the number you received was somewhere between the low end of your expectations and the high end, and you wont have to start looking for another job. Bonuses are also meant to give you a taste but not the full treat. They are meant to get you hooked. They are like a drug that gets you high but leaves you wanting more, needing more. Six months after you get your bonus, you are meant to have somehow elevated your life style, and increased your expenses such, that as you count down the next six months you work your ass off praying and hoping for a bigger bonus than the previous year, only to repeat the entire emotional process again and again.

Bonus Season - It is an addictive drug

There were year-ends of famine and year-ends of feast over the last 21 years. Such is the nature of a career on Wall Street, finance or trading. Even if your career is not structured around a year-end bonus, the last week of December is still a period of annual “career self reflection”. “What was my total take for the year?”, “How much better or worse did I do year over year?”, and “How am I going to make more money next year?”. During your early days, you try to gauge what you think you are getting by consensus. While it is taboo on wall street to discuss your actual bonus with anyone other than your manager, it is vey common to discuss bonuses as a concept with just about everyone under the sun, or at least on the trading floor. “What are you hearing? Up or down year over year.” “I heard there hitting the new guys first but they cant do anything about all the guarantee, so we are getting screwed”. Some of my favorites were, “look, we had a good year, but we have to make up for some of the groups that didn’t, we are a team”. I am not sure I knew which group we were making up for, let alone anyone’s name.  My other favorite was, “look, expect the worst and no matter what you will be happy.” What the f*** did that mean? Jesus, it was like water torture in the month leading up to bonus. Should I expect cancer my whole life and when I die of heart attack, be happy?” In the final week certain people would get told their bonuses before other, and then the rumors would start. “Did u hear that so and so trading desk was paid down 20%?” Or “I heard so and so desk really got fucked, they are all

Bonus-Season-Can-be-harmful-to-the-soul.

Bonus Season - This drug will help value yourself

downstairs drinking and putting together resumes”. Occasionally you would actually have a random trader crack, and see him kicking in stall doors in the men’s room. The worst though is when you saw someone who you knew was just told their comp and he was F’n smiling. You felt like ripping out his gullet. You see, traders were told there was a finite pool for bonuses, and any body smiling before you had gotten comped could only have taken money out of your pocket.  The whole process was structured such that when the moment finally arrived when you were to be told your bonus, your expectations had been lowered so severely, that the best you are hoping for is not to have to hit the men’s room in the middle of your review, because your stomach gives out. As you get older you are plagued by other questions. “Are my best years behind me?”, “What did I do to screw things up?” , “Why cant I be the guy who makes 1 million?” or “Why cant I be the guy who makes 10 million.” This whole process that begins as early as November is commonly referred to on Wall Street as, bonus messaging. It is both a science and art that has been practiced by management for centuries.

This year is different for me in a number of ways. It is the first year in a long time that I have not worked for an institutional firm and I am not getting a bonus. It is the first year in a long time that I am not being reviewed by a manager. But it is actually one of the most difficult bonus seasons I have faced in quite a long time. I am on my own. I will live or die by my own sword. There is no bonus for me this year, and there may not be any for many years to come. I continue to plow money into the business I started a year ago. I am investing in the journey, and there is no promise of a bonus or reward at the end…..Yes, I no longer will measure myself by “year end”. I have finally broken myself of “Bonus fever.” I will not suffer the year end “self worth affliction.” After 21 years of the December “money malady”, I see December no different than January or February. Each day I keep my business running and stay alive to fight another day is my bonus. The journey itself has become my reward, and I am looking inward for self worth. Management no longer will judge me, but I will weigh in on my own value. My “Self” will review my “Ego” and while the “Ego” may never be satisfied as I am sure it never has been in previous years. My “Self” will be much better off and has learned to have no expectations. That is my bonus.

Yes, year-end and the holiday season are about peace on earth and all that other stuff. But unfortunately for those particular demented species known as Wall- Streeters, bankers and traders, it is about money and self worth and then maybe peace on earth. So during this time of holiday cheer, try to remember the Papa Bull’s lesson.

My personal Bonus season message, is ignore the “Ego”, focus on the “Self” and try to enjoy the Journey…..Oh yeah, Peace on Earth too.

Bonus Season - Peace on Earth and may the Bull run free