Memoirs of a Minyan: War Games
The purpose of the journey is the journey itself.
Chapter 16: War Games
The stress of a large hedge fund manager was one I wasn’t going to miss. The outsized risk, the sleepless nights, the battling over positions, the gains and losses; my self-worth defined by green or red bottom lines each night.
There is a reason trading is considered a young man’s game. While I was only 34 years old, my spirit and soul aged well beyond my years. I remember thinking I made a “lifestyle decision,” that my new routine would facilitate an easier and more relaxing existence.
As the capital management paperwork went through the proper channels, I traded my personal account to keep my skills sharp. With a singular assistant, I squirreled away snazzy gains at my new digs. It was unfamiliar operating without a team but it didn’t impede my success, as evidenced by my initial results.
It was a small base but I took calculated bets. My confidence grew -- maybe I was that good and the terms of my fund were warranted after all.
Minyanville transitioned to a pay site -- $10 per month to help offset the operational costs -- but it remained a loss leader. I received piles of checks each week and signed my name quickly.
I needed an income generator to feed the beast, the final piece of the puzzle that would tie it all together; my hedge fund launched in March 2003.
It was a tense time in the world as the US and UN danced around the prospects of war. I was certain the worst was to come, that the invasion of Iraq would plant seeds of global unrest; that the poltergeist had only just begun to stir.
As I watched “shock and awe” brought to the world on CNN, I thought to myself, “This is the end of the Roman Empire, a tipping point through a historical lens.”
We opened for business almost to the day of the invasion and I used the rally to establish bets against the market. It was an opportunity to start my venture with a bang and I was excited for the next leg of my journey.
My stylistic approach incorporated four primary metrics -- fundamentals, technical, structural and psychology -- that served as the foundation of my analysis. While they assumed different weightings at different times, a collective assimilation was the most effective measurement of risk/reward.
Markets climbed the wall of worry at an astonishing pace; something powerful was afoot. Structural agendas pushed asset prices higher as policymakers lit fiscal and monetary matches under the market.
Alan Greenspan fueled the tech bubble to combat the Asian contagion and was intent on a repeat performance; the real estate bubble began, as did the early stages of the debt bubble.
Policymakers bought time for a legitimate economic recovery to take root and were unconcerned with the eventual ramifications. The stock market is the world’s largest thermometer, a fact not lost on the boys from the Beltway. They needed the market higher by all means necessary.
It’s clear with the benefit of hindsight but I didn’t see it coming at the time.
I now appreciate the power of the collective agenda and the influence of a motivated Federal Reserve. At the time, it was a lesson in futility and failure, a stretch when I lost my discipline and got sucked into an emotional vortex, the cardinal sin of any trader. I wasn’t used to losing and took it very personally.
I wrote about the percolating risks on Minyanville and put my money where my mouth was, scaling into short positions as a function of time and price. I expected the ramifications of artificial credit creation to come home to roost and failed to sync my time horizon and risk profile.
The only difference between being early and being wrong is whether you’re there to collect on your bet. I won’t rationalize my missteps; they were painful, public and all consuming. The fund was supposed to underwrite the collective costs of my various endeavors but I was furiously running in the other direction.
I worked four jobs -- managing the fund, running Minyanville, creating content and building the Ruby Peck Foundation. While I had some money stashed away, most of it was on the table with the rest of my chips. They were fading fast.
The stakes had never been higher and as I looked around the table for the sucker; I couldn’t help wonder if that sucker was me.
The Other Side of the Trade
I was mired with losses, consumed with relative performance, overwhelmed with overhead costs, completely miserable during the day and helplessly sleepless at night.
I pressed harder, worked longer, traded faster, wrote more -- it was the only solution that made any sense.
Surely, if I fought for the extra yard and clawed another inch, I would be rewarded for my efforts.
As the year progressed, I put everything that wasn’t directly related to my professional efforts on hold. I worked around the clock, my social life was a ghost town and I was edgy and angry at my lack of success.
The toys that were once a validation of my happiness served as sad reminders of a misplaced soul.
I always believed I was humble, particularly in a business where humility is viewed as a weakness, but then I was bare. My fire -- the energy that ignited all of my hopes and dreams -- was damp and dark as I delved deeper into depression.
Lou Mannheim once said that, “Man looks into the abyss, there’s nothing staring back at him. At that moment, man finds his character. And that is what keeps him out of the abyss.”
I’ve had many swings during my career -- $20 million-$30 million swings in a single session -- but it wasn’t until 2003, as my savings and resolve dissipated, that I truly got it.
I won’t say money is insignificant as that’s untrue but I can tell you from experience that if you look for happiness in a bank account, you’re missing the bigger trade.
I didn’t find what I was looking for when I seemingly had it all. In fact, it took losing almost everything to understand what true wealth really is.
The private jets and front-row shows morphed into calls not being returned by those I helped succeed. David Slaine told me to expect it but I didn’t foresee the magnitude or suddenness. Friends on the Street, those who benefited from my free flowing, revenue-generating ideas, disappeared when I needed them most.
I wasn’t naïve enough to think that I would be treated with the same standing but I projected my loyalty to people and places it didn’t belong. My circle of trust tightened, slowly at first but then dramatically, as I mentally released those who bit the hand that once fed them.
Socially, a similar dynamic began to take shape. My phone stopped ringing as often as it did when there were free bottles and fancy rides. It was a painful realization to absorb.
The bigger better thing; if I couldn’t deliver it, I was no longer part of it. It took a round trip for me to finally see it but I am certain that I’m a better man for it.
In May of 2003, I arranged for my father to return to the East Coast for the first time in 20 years. While I was absorbed with trying to save my symbiotic ecosystem, I made a promise to my father when he was in jail two years prior. My grandfather Ruby taught me that all a man has is his name and his word; while I was losing money, I wasn’t about to lose those too.
One year after my brother Adam and I ventured to Hawaii with hopes of saving our father, I returned as I said I would to enjoy his freedom. After his long stretch of homelessness and hopelessness, he was properly medicated and volunteering at an animal orphanage. It was then we discussed his trip to the East Coast and before I knew it, he touched down in New York City.
As I greeted him, we embraced in a long hug that melted away years of disappointment, anger and judgment. He was a humbled man, the type of humility that comes after you’ve lost everything and stared into an different type of abyss, that of life.
He told me he contemplated suicide many times but the glimmer of his children saw him through his pain; he cried as we talked for hours upon hours.
A few days later, we traveled to Baltimore and he met his grandchildren for the first time. As we sat around the dinner table the first night, I found myself watching him with pride. It was the first time I ever experienced that particular emotion; after a childhood of seeking his approval, I found it ironic that our roles somehow reversed.
The reunion was a long time in the making; it was then I realized that the longer you wait for dinner, the better it tastes.
The Driftwood and the Perfect Storm
The year 2001 was painful but 2003 made it look like a walk in the park. I was spread thin, trying to keep four balls in the air and scrambling for redemption, tangible or otherwise.
The harder I tried to find my footing, the deeper I fell into the crevasse of despair.
As the markets ripped higher, my losses delved into double-digit territory. It was the mirror image of the 2000 scrimmage and that fact wasn’t lost on me.
The cycle of life, I thought to myself; the other side of the cash register.
My money was in the fund, losing value alongside the capital that investors entrusted to me. That, coupled with substantial investments in Minyanville and the Ruby Peck Foundation, chewed through my life’s savings.
I huddled with my advisors and looked at what was left in the till. When I started the year, I had millions of dollars in the bank. I watched that evaporate, expecting the tide to turn.
I was a piece of driftwood in a perfect storm and it was clear that decisions needed to be made -- if I tried to keep all of my efforts afloat, everything would drown at once.
There was palpable heartache, not in the proverbial sense but in an absolute one. I visited a cardiologist frequently, certain that the pain my chest was a foreboding sign.
“Take care of yourself,” he told me, “get some exercise and stop putting so much pressure on yourself.”
I tried to tell him about the metaphorical critters named Hoofy and Boo that were going to affect positive change through financial understanding but he didn’t seem to care. He was more concerned about my ability to physically continue. In my mind, death was the only thing that could possibly stop me.
Minyanville, while loyal, was still a small community. Our mission of provoking thought and providing vicarious education through a shared process -- as opposed to offering outright advice to a faceless audience -- was a departure from traditional media and unconventional in an immediate gratification world.
With each passing day, the piece of driftwood took on a more water. With each wave of losses, my breath became more labored. I was so focused on conventional measures of success that I lost sight of why I started Minyanville in the first place. I lost sight of who I was.
I had to make difficult decisions as I edged towards the end of 2003. They weren’t decisions of choice; they were decisions of need. The business that was supposed to underwrite my existence and the one that sustained my soul couldn’t co-exist if I hoped to survive another year.
If you do what you love, the money would come. That’s what I told myself that when I stepped down as president of a $400 million hedge fund.
The sad truth was there wasn’t much left.
The Fork in the Road
I huddled with my advisors and tried to identify a solution. Given the cash burn in Minyanville, they told me I would be insolvent in a matter of months. It had been almost a full year since I decided to create a symbiotic ecosystem and the well was almost dry.
I spent countless hours trying to map strategies that would allow my dream to survive. My team believed in me but they were lucid and pragmatic; they saw how fragile I was, a shadow of the once powerful hedge fund master who moved markets and made millions. I was running on fumes and everyone knew it. “What are you going to do?” they asked as I studied my bank statements, hoping they would change.
“I’m not going to abandon Minyanville,” I told them, knowing full well it wasn’t an option, “I’ve still got money hidden away and I’ll use that until we succeed.”
They sat in silence staring at me.
“Build it and they will come,” I said in my best Kevin Costner voice, trying to convince myself I knew something they didn’t, but they weren’t as optimistic. I was bleeding from every orifice, day after day and night after sleepless night. They were right but I didn’t see another option.
“If I’m going down, I’m going down with my best one-two punch and those are Minyanville and The Ruby Peck Foundation.”
I spoke with my investors throughout 2003 and the final call didn’t come as a surprise. They knew the risks before they invested but that did little to quell my guilt, shame and pain. I let them down and lost them money, an unavoidable reality that haunts me to this day. For some strange reason, having most of my money in the fund made me feel better, not worse.
I closed the doors, returned the remaining money and booked the largest loss of my professional career. It remains the single biggest black mark on the name and word of Todd Harrison, a painful and embarrassing chapter in my life. The road to recovery would be long and I had to power the engine with a small reserve fuel tank.
If I ran out of gas, I knew there would be nobody left to tow me home.
Keep an eye out for next week's chapter of Memoirs of a Minyan.
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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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