Memoirs of a Minyan: Battle Lines Are Drawn
The purpose of the journey is the journey itself.
Chapter 8: Battle Lines Are Drawn
My grandfather taught me to keep my right hand up. As a former Golden Gloves boxer, that was his way of telling me to protect myself.
After Jim's rant, I never walked through those hallowed halls the same way again. I knew I was only as good as my last trade but at Cramer Berkowitz, that expression was taken to an entirely new level.
It wasn't enough to be right. You had to be right all the time, every day.
It was March 2000 and the NASDAQ rallied 35% in a little over a month. As Focus Enhancements faded into the rear-view mirror, Jeff and Matt scoured corporate America as Jim and I, sitting five feet apart and facing each other, moved mountains and molehills from dawn till dusk.
While we shared a mission, our styles were diametrically different. Jim warmed to stocks once they rallied and cooled after they fell. As a function of my training at Morgan Stanley (MS), I liked to "fade" the market, nibbling on dips and selling blips. It was a high stakes game of chicken and somebody was bound to blink.
I remember my moment of clarity as if it happened yesterday. Tech stocks were ramping 10, 30, 50 points in a single day and I awoke in the middle of the night with a disturbing epiphany. It wasn't the first time I had the thought but it was different that time, a clarity that seemed obvious, a crystallization that would define my career.
The technology bubble was about to burst.
One of the toughest disciplines when trading is to sell a stock that is making money. Multiply that dynamic by a large portfolio, add a slew of zeros and factor in the emotional context of our office and you'll get a sense of the task at hand.
I won't say I was the lone bear-Jeff also sensed wreckage on the horizon-but the timing, coupled with the intensely competitive landscape, made for prickly friction with a razor thin margin of error. I believe Jim summed it up in his first book, Confessions of a Street Addict, when he wrote:
"When April came in, and the NASDAQ was still in the 4500 area, Todd suggested that we were on the verge of a collapse of titanic proportions, that the whole NASDAQ bubble was about to burst and would shortly be at 1,500."
Now, you've got to understand Jim. He has a genuinely kind heart but could make your life miserable if you're on the wrong side of his mind.
Jeff used to say that if Jim hit someone with a car and you politely informed him of the accident, he would drive the victim to the hospital and buy the family dinner. If you told Jim he screwed up, he would raise his arms and scream, "Shut up or I'll hit you too!"
Such was life at Cramer Berkowitz in the weeks before what proved to be the largest car crash in financial history.
It wasn't enough that I had a strong sense the wheels were going to fall off the financial wagon, I had to explain why the timing was right and do it with tact. Heaven help me if we missed further upside or worse, got squeezed on the short side.
The tension was thick and as the new kid on the block, I knew where loyalties lied.
Pop Goes the Weasel
April 2000 arrived with a bang and the NASDAQ dropped 20% in a few short sessions. What's more, as we actively traded the volatility, we caught the counter-trend rally back to NASDAQ 4500 before again riding the short side to fresh market lows.
I wouldn't believe it either if I wasn't there but you'll have to take me at my word. Markets crashed around us and we were in the epicenter of the storm, an island of clarity in an otherwise unsure world.
We posted huge gains, paid the Street insane commissions and the trading staff and risk-management protocol I implemented paid huge dividends. The swings were wild; $20 million, $30 million in a single day, the type of numbers that you didn't want to comprehend.
Our new systems updated our P&L dynamically and we knew exactly where we stood with each flickering tick. That was both a blessing and a curse. I didn't need to watch my screens-the look on Jim's face across the desk told the story in real-time.
Any trader who says they don't take performance personally shouldn't be managing money. We ran one portfolio-hundreds of positions that forged a singular bottom line-but we each had our "names." While we played for the same team, we eyeballed our individual stats as we hit the showers each night.
The stylistic dichotomy between our individual trading approaches became increasingly apparent. When the market rallied, Jim tossed fresh long exposure into our portfolio. After it reversed, sometimes minutes later, short positions suddenly appeared on the sheets.
I watched him closely and traded my positions with an eye on the overall portfolio. I wasn't worried about stepping on toes or honoring the status quo. After coming so close in my two previous professional endeavors, I had two missions in life-to make money and protect those gains.
As the summer approached, we operated at a feverish pitch and harnessed that energy into tremendous performance. Still, there was an unspoken angst in the office, the type of tension that was only acceptable if we beat the Street.
It was the best of times; it was the worst of times. It was functional, dysfunctional, friendly, heated, seamless and strangely sophomoric all at the same time.
It was life at Cramer Berkowitz, and unbeknownst to me, we were about to open our window to the world.
A Door Opens
The July heat was unbearable as my driver navigated the FDR at 5:00 AM. Business was good, which on Wall Street means we were making money.
To the outside looking in, our fund was a fighter jet navigating the perfect storm of a bubble gone awry. Internally, a different dynamic began to take shape.
As Jim readied for his Hampton's vacation, he was on the phone with his editor at TheStreet.com looking for someone to write his column. When his eyes locked on mine, I saw the light bulb flash above his head as a grin spread across his face.
"I've got it covered. Toddo will write on Monday while you find someone for the rest of the week."
I was trading 200 positions and managing $400 million worth of risk as the biggest bubble in history imploded. I didn't want another job.
"Dude, the last time I wrote something was to my mother while at summer camp. It's not happening."
In typical Jim fashion, his mind was already made up. His problem was solved and it quickly became mine.
I didn't put much thought into my first column as I had bigger fish to fry. I scribed Grateful Dead lyrics that pertained to the tape, threaded in some levity through pop culture references and espoused my bearish bent in real-time, delving into the details of my particular approach.
I didn't embrace the double duty but it didn't bother me either. In fact, it helped crystallize my thoughts as I tried to navigate the wicked crosscurrents of the marketplace.
As the closing bell approached at the end of the day, I got a call from the editor asking me to finish the week.
"Sure," I said as I looked at Jeff and winked, "anything I can do to help."
The Switch is Flipped
There was no middle ground with Jim. Every day was either the best ever or the worst imaginable. That applied to his personal relationships as well; you were either his best friend or a sworn enemy.
I toggled between the two, often in the same day, but there was little doubt which side of his emotional chasm I was on when I pulled up to his East End rental that Friday night.
"Toddo!" he screamed as he ran down the driveway and wrapped me in a bear hug, "We gotta talk!"
I was with a friend who was stunned by the outburst of emotion. I couldn't blame her-Hurricane Jim was frenzied energy that swallowed everything in his path. She didn't know the other side of that ride but it's just as well; she wouldn't believe it anyway.
He told me that my columns performed fantastically well. That surprised me but I had little time to digest it. He had a plan and his wheels were spinning quickly.
"We're going to give you a trading diary on TheStreet.com right next to mine. It'll be great-Whataya say?!?"
What would you say?
I never shied from a challenge and I'm not sure I could have if I wanted to. To be honest, I wasn't sure that I wanted to. I actually enjoyed writing, if only for the opportunity to synthesize my thoughts. Little did I know that Jim opened a door that forever changed my life; little does he know that I remain grateful for that to this day.
I swore that I wouldn't let the column splinter the focus that was quietly lining my pockets. Writing came naturally, from the heart and from the gut, and it soon became a seamless duopoly that introduced a world I never knew existed.
At first I feared the additional responsibility would add tension to an already tense environment. While Jim and I often disagreed on how to approach the market, that dialogue was behind closed doors.
Now, through the power of the Internet, we were at odds for the world to see.
When trading, one must adapt to the market. Different times require different styles and the choppy cusp of the Internet bubble was a lesson in agility. By the time the crowd got on one side of the market, it viciously shifted, leaving blood in its wake.
It wasn't an easy tape to trade; in fact, it was brutal even if you were best in breed.
I began to view Jim's momentum-style approach as a contrary indicator, subconsciously at first and then with increased regularity. As our fund continued to outperform and I embraced the column he enabled me to attain, I swallowed my tongue and kept the peace.
I didn't dislike the man; in fact, I had tremendous respect for his intelligence and cared for him as a friend. We all wanted the same thing and tried to push through our problems despite increasingly frequent clashes.
As we edged through the back half of 2000, it was clear something was going to give.
And that something wasn't going to be me.
Click here for the next chapter of memoirs, "Reality Bites"
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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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