Memoirs of a Minyan: Trading Places
The purpose of the journey is the journey itself.
Chapter 6: Trading Places
I would love to say it was easy sailing as I reached for the rudder at Galleon.
The truth is that I navigated directly toward the perfect storm.
A global financial contagion began brewing after Thailand cut the peg between the Thai Baht and the U.S. Dollar. That began a domino effect that spread throughout Asia and crippled the capital market system
I wasn't thinking about the Thai Baht nor was I focused on a powerful hedge fund called Long Term Capital Management. I was unaware that a butterfly flapping its wings in Asia could create a hurricane on East 57th Street in New York City.
I managed the derivative exposure for the overall portfolio and traded my own, smaller book where I would be paid a percentage of the profits. It sounded easy but I quickly discovered that the skills I learned at Morgan Stanley (MS) weren't helpful on the buy-side.
I enjoyed life as a customer. Morgan, Goldman (GS), First Boston, Deutsche Bank (DB) and other top-tier firms all vied for our business. As the trader responsible for executing the orders, I often chose which firms were paid with our commissions.
I was surrounded by tremendous talent but struggled with the reality that hedge fund traders eat what they kill. There wasn't customer flow to lean against or a franchise to tap into; it was an entirely different process
There were about eight of us sitting in a room armed with nothing but acumen and information. As financial contagion consumed the world, finding a life vest was the last thing on my mind.
I toggled between my two roles, focusing primarily on the derivative portfolio of the flagship fund, as I was certain that was my meal ticket.
Gary, Raj and three other partners slapped on positions at a furious pace and I looked for ways to leverage their ideas into performance.
The more time I spent on the overall exposure, the less I focused on my own trading. By the time the end of the year arrived, losses piled up on my pad and my job security was at the mercy of a select few I barely knew.
There would be no bonus.
In fact, given the performance in my trading account, I was told I was lucky to have a job.
The Beginning of the Bubble
As the world markets digested the global imbalances, Alan Greenspan slammed his foot on the gas with historic fiscal and monetary stimuli. That planted the seeds of the dot.com bubble that would eventually create the real estate, commodity and debt bubbles behind it.
David Slaine resigned from Morgan Stanley to join Galleon as a partner in 1998. Assets under management swelled into the billions and the firm's stature grew in kind.
Slaino and I sat next to each other as Galleon grew into one of the most powerful funds on Wall Street. I sharpened my skills and kept my eyes wide open.
Following the script I wrote at Morgan, I did whatever I could to add value. This time, however, I had a skill-set to execute upon. I introduced options that leveraged in-house strategies and offered intricate ways to maximize reward relative to risk.
Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at firstname.lastname@example.org.
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