Memoirs of a Minyan: Sign of the Times
The purpose of the journey is the journey itself.
Chapter 10: Sign of the Times
It was late 2000 and we were riding high at Cramer Berkowitz when Jim Cramer asked if I would join him at TheStreet.com conference, followed by dinner with Gene Hackman.
I jumped at the opportunity to break bread with one of my favorite actors and told him I would go if I didn't have to make a presentation. Writing was one thing but speaking in front of thousands of people wasn't something that interested me. He promised me I wouldn't have to and so I happily tagged along.
The grand ballroom at the Marriott World Trade Center was packed; I had never seen anything like it. Investors swarmed Jim during the cocktail hour looking for stock picks. My nametag remained in my pocket as I tried to remain invisible.
Jim gave the keynote as the audience furiously scribbled tickers on their notepads. I watched him work the room. He’s good, I thought to myself, a masterful marketer.
During the Q&A that followed his speech, someone asked a question about option pricing.
“You know,” he began, “I can answer that but I have someone in the room who trades options better than anyone. You all know my head trader, Toddo “Cookie” Harrison, right? Why don’t we have Todd come up here? Whataya say, Toddo?”
My stomach tied in a knot as a few people began to clap. Before long, the entire audience gave a standing ovation. I had no choice—I was no longer invisible—I slowly walked on stage, answered the question and fielded several more before returning to my seat.
When the conference concluded, I desperately had to use the men’s room but quickly realized it would be tough to get there. Within minutes, I was surrounded. There were eight, ten people deep, circling me like a bulls-eye on an archery target.
“What do you think of Cisco?”
“What’s your favorite financial short?”
“Where will the S&P end this year?”
I was overwhelmed -- I didn’t have time to digest one question before being pelted with another; and I still had to pee.
I looked over and saw Gene Hackman checking his watch. When a two-time Academy Award winning actor is standing alone and a head trader is mobbed like a film star, there’s something very wrong with the mainstream mindset. The stock market movie was not going to end well.
The Moment of Truth
Jeff was at the First Boston conference in late November feeding us tremendous insight. After ten years of friendship and eleven months of close-knit interaction, he and I arrived at a place of instinctive intuitiveness where I often executed upon his thoughts before words were ever exchanged.
It was a thing of beauty, a rhythm that bridged his analytical reasoning with the innards of my trading gut. We were everything a hedge fund was supposed to be and more.
As Jeff shared his bearish inclinations on Microsoft (MSFT) from the hallway of the conference, I was on the horn with Deutsche Bank which had a large vanilla buyer of the common stock. I was looking for an excuse to take a short position and Jeff delivered it in spades.
Bang! We’re short two-fitty (250,000 shares) and covered it down a buck.
Zing! Puts were flowing like water in and out of our green portfolio.
Pow! Another facial tick by Microsoft CFO John Connors and we tossed a few hundred thousand back out.
We had yet to eat lunch and Mr. Softee alone netted us close to three million dollars.
And it wasn’t just Microsoft as we hosted a profit party at the hallowed halls of Cramer Berkowitz. As we opened our stance and took a full cut, we coined money across the board in tech. We traded so much merchandise with so many brokers, my team barely had time to input positions into our systems.
It was the definition of fluidity as our P&L grew from three to four to five million.
As the close approached, I felt a great sense of satisfaction. We played to win and exhibited the discipline that is the hallmark of any great trading operation. It would have been a perfect session if not for the tiny landmine nestled between the sheets.
You see, in the midst of those multiple seven-figure wins was a 20,000-share position in the computer storage company Brocade (BRCD). It was one of the best performing stocks at the time and as an extension, one of Jim’s favorites as well. I hadn’t even seen him slip a position on the sheets.
After the closing bell, Brocade announced a picture perfect quarter, a work of art in an otherwise burning building. Unfortunately, trading well over $100 per share, the good news was already baked into the price.
Blink and it was down five. Sigh and it was down $10.
With each draft lower, Jim nibbled on more stock. And with each downtick, Mount Vesuvius growled louder on the other side of the desk.
I tried to calm Jim by pointing to our monster session. “Relax brother,” I said, “We had a huge day” but he would have none of it. The venom was thick as spit flew from his mouth and the phone and keyboard shattered on his desk. I saw that movie before and wasn’t interested in watching the sequel.
I got up, grabbed my jacket and walked out; I heard an object smash against the closed door while I waited for the elevator. As far as I was concerned, I wasn’t going to return as long as Mr. Cramer was there.
Jim called Jeff to complain that I didn’t care about the fund.
A bit later, Jeff called me and we had a long conversation.
Victory Laps and Big Steps Back
Life at Cramer Berkowitz was like living in a reality show, a surreal story you couldn’t possibly fathom unless you saw it with your own eyes. I only wish someone had the foresight to film it.
Jim’s focus increasingly shifted towards his growing media presence on TheStreet.com and CNBC. That was fine by me—the clock was ticking towards a rather large payday. In hindsight, his ability to juggle so many tasks was an amazing accomplishment. At the time, I viewed his attention as splintered at best.
One day, I yelled across the desk to Jim as he leaned back in his chair with the phone pressed against his ear and alerted him that we were making a bet against the market. He saw me vying for his attention, gave me a thumbs-up and placed his hand over the receiver. “I love ‘em here—go!”
When I informed him that we were aggressively shorting the tape, he nodded his head in agreement and made “selling gestures” with his hands as if to say “Sell, sell, sell!"
I have no agenda in sharing the details of those professional interactions. As we edged towards the end of 2000, however, I had an intense agenda to finish the year and get our investors and myself paid. He was a living, breathing rollercoaster and I desperately wanted to get off.
As year-end flickered in the distance, we collectively made a decision to trade less, sit on our outsized gains and ride out the calendar. It was a prudent decision; we pared our book to minimal risk and agreed to trade only the very best edges.
Jeff, Matt and I seemed to grasp that concept but as I would quickly learn, it’s hard to teach an old dog a new shtick.
When Push Comes to Shove
Our process at Cramer Berkowitz was constant; we walked through our portfolio multiple times each day and manicured our risk profile. We did this through good times and bad, a discipline that sustained us during the wicked crosscurrents in the financial landscape. It was the best way to keep a collection of A.D.D. portfolio managers on the same page during our sensory-overloaded journey.
A funny thing happened with our newfound risk management approach. Positions began to mysteriously appear as we chewed through our skeletal sheets.
While Jim insisted his sources were giving him the wink, Jeff and I would muse and imagine who some of his “sources” might be, via Instant Message.
Genghis Kahn, perhaps?
How about Abe Lincoln?
Maybe Ty Cobb?
It was a little funny and a bit sad but it didn’t matter. On a $400,000,000 tank, these positions were rubber bullets that quietly bounced off the armor of our relative performance.
As I looked ahead, I wasn’t as ambivalent. We had the makings of a legitimate all-star squad in Jeff, Matt and myself. I had only worked with Jim for one year and while I genuinely cared for him as a person, I no longer had an interest in sitting on the other side of his mood.
Additionally, my grandfather’s health began to deteriorate, a sad reality I needed to tend to. Perhaps I was selfish or maybe a bit greedy when I began to calculate what could have been if Jim was removed from the equation.
Once the thought began to germinate, it was difficult to shake. I spoke with Jeff and Matt and shared my intention to leave at the end of the year.
I won’t call it a coup but there was clearly dissension in the ranks. Our instant messages flickered quicker and the outside phone calls increased in frequency. Yes, something was definitely afoot as we swallowed the dings of edgeless risk and waffled our way towards year-end.
As the emotional fervor came to a head, Cramer Berkowitz arrived at the fateful day that would forever change our lives.
Click here for next chapter of Memoirs, "Behind Closed Doors"
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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 email@example.com.
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