Celebrating Minyanville's 10th Anniversary: Wall Street Selector Interviews Todd Harrison

By John Nyaradi  OCT 15, 2012 11:15 AM

In this one-on-one, Todd Harrison discusses his book, his trading psychology, and the US economy.

 


[Editor's note: Celebrate Minyanville's 10th anniversary and have your own one-on-one with Todd Harrison on Wednesday at 1:00 p.m. EDT via Twitter @todd_harrison. To read Todd's two previous Twitterthons, click here and here. Also note that Todd posts his vibes in real time each day on our Buzz & Banter (subscription required).]

This article was originally published on June 27, 2011.

Todd Harrison, founder and CEO of Minyanville Media and former president of Cramer Berkowitz, tells his incredible Wall Street tale of rise, fall, and redemption, a story so remarkable that Oliver Stone featured it in his 20th anniversary Wall Street documentary.

John Nyaradi: Hello, everyone, I'm John Nyaradi, publisher of Wall Street Selector Sector, a financial media site specializing in exchange traded funds and global stock market and economic analysis. Today I'm really pleased to welcome our special guest, Todd Harrison. Todd, welcome to Wall Street Selector Sector.

Todd Harrison: Thank you, John.

John Nyaradi: Todd is founder and CEO of Minyanville Media and his flagship website is www.minyanville.com. He's a 20-year Wall Street veteran and was president of the $400 million hedge fund, Cramer Berkowitz. He has appeared on FOX, CNBC, CNN and his articles are published in the Wall Street Journal, Business Week, Fortune and Barron's. He's also an Emmy Award winner for his animated business news show, "Minyanviille's World in Review." Today we're going to talk about Todd's new book, The Other Side of Wall Street: In Business It Pays to Be an Animal, In Life It Pays to Be Yourself and get his insights about trading, investing and today's economic landscape. Todd, congratulations on writing a really great book.

Todd Harrison: I appreciate that. Thank you. It was very much a labor of love.

John Nyaradi: I think the title says it all, "The Other Side of Wall Street: In Business It Pays to Be an Animal, In Life It Pays to Be Yourself." Just start out with what you wanted to do and your overview of life from the inside the Street and how you can be an animal and still be yourself.

Todd Harrison: You know it really was a process of discovery. For me, it has been an interesting journey, to say the least. Coming up through the ranks and really just having the mission in life of just making money, and getting to where I thought I wanted to be and realizing that there are certain truths in life that I had never stopped to think about. The difference between self-worth and net worth and having fun versus being happy, and looking for validation in the value of a bank account. I'm not ashamed of it because it helped to shape the perspective that I have today but it took some very hard lessons and difficult times to get to this point. I think the dramatic nature of the book, the self reprioritization in today's day and age, I think is something a lot of people going through.

John Nyaradi: Oh, definitely. We are all on a personal journey and you've outlined a great one here. I'll start right on the cover with Hoofy the Bull and Boo the Bear. These are two iconic characters. How did you come up with those?

Todd Harrison: The characters were born in 2000. I was the president of Cramer Berkowitz, Jim Cramer's old hedge fund. In 2000, he went on vacation and he asked me to fill in for him for a day and I had never written before in my life. I wasn't interested in writing. I just want to trade and make money.

And you know, typical Jim, he looked across the desk and I actually saw the light bulb go off and he asked me to fill in for him the following Monday for one day. I did so and I actually enjoyed it. I owe Jim a debt of gratitude for opening that door for me.

And so Hoofy and Boo became a representation of my thought process. There was always a bull case, there was always a bear case and you read about it the next day in the Wall Street Journal and to understand how markets work and why, you need to see both sides of that trade. And, you know, an amazing thing began to happen. People started emailing and saying "Hey, does Hoofy see Intel (NASDAQ:INTC) breaking out, does Boo see Cisco (NASDAQ:CSCO) breaking down," and they started to assume personalities and people really liked them, and it occurred to me that nobody had ever branded the Wall Street bull and bear, as crazy as that sounds.

As you said earlier, they won an Emmy Award in 2008 for new approaches to business and financial reporting and we think they put a fresh face on finance; they educate, they entertain and enlighten. I think that now, more than ever, folks need a trusted choice for a financial voice.
John Nyaradi: I thought that one of most touching parts of your story is where you talk about Ruby Peck, your grandfather, and what he taught you…I tell my kids at the dinner table about your quote from your grandfather.

Todd Harrison: My grandfather was a special guy and he taught me that all you have is your name and your word, that honesty trust and respect are the foundational constructs for any successful endeavor. Over the course of 20 years, there have been opportunities for me to cut corners and I never have.

He also told me that what goes around comes around and so I have to believe that if you do the right thing, someone eventually will take notice. We've perpetuated his memory through The Ruby Peck Foundation for Children's Education and we've raised seven figures for kids over the course of the last decade and right now we're having a drive to help rebuild the library in Joplin, Missouri, after the tornado ripped through it, much like we did after the tsunami in Japan. Given the opportunity to affect positive change, I think we all need to do our part in moving that forward.

John Nyaradi: Definitely. Many traders and investors are in our audience, and in your trading days you were running a $400 million hedge fund and you could make or lose millions in literally moments. How do you handle that psychologically?

Todd Harrison: Well, there are different ways. You know there's a contingent out there that will subscribe to copious amounts of drugs and alcohol to help dull the edges of these types of swings. It's an "A Type" personality that typically succeeds in this business. I did not, for the record, opt for a self destructive solution. I figured at the end of the day when you're dealing with $25 to $30 million swings, you have to just step outside the realm of consciousness and stop looking at it as real money and just, you know, go through the process. You know whether it's a $25 or $50 swing, or a $25 million or $50 million dollar swing, it really is the same process and the mechanics of the swing always trump the results of the at bat.

John Nyaradi: Yeah.

Todd Harrison: I always tried, when I was trading, as unconventional as it may sound, to not look at my P&L, because you should never trade to bottom line, you should never try to trade not to lose. You should always trade to win and I think that perspective can stand traders in good stead.

John Nyaradi: What do you think is the most important part of being successful at trading, is it psychology, a system, what?

Todd Harrison: I think ultimately it's discipline. You hit for average, not for a power, easier said than done. You know this market, the DNA of this market, has changed dramatically over the last few years. Social mood is shifting not only with regards to world climate but with a perception towards Wall Street. And I think that's unfortunate because there are a lot of good people on Wall Street. But ultimately, discipline, by a long shot, and being able to define your risk. You have to understand why you put risk on the table. A definition of an investment should never be a trade that's gone awry and you need to understand why you had your risk on and let your winners run and cut your sinners.

John Nyaradi: That's great. 9/11 was a big part of your book and of course, it impacted us all as Americans, and you wrote at 8:47 in the morning at Thestreet.com, "A bomb has exploded in WTC, may God have mercy on those innocent souls." Can you talk a little about that day and how it relates to the birth of Minyanville?
Todd Harrison: It was interesting heading into that fateful day where there had been numerous occasions when I would wake up at God's hour at three o'clock in the morning in a sweat. I would go to the bathroom to splash water on my face, thinking to myself this is no way to live your life. You know what's the social value here? They're going to put "he's a good trader" on my headstone? I think you have to ask yourself those questions, particularly when you get to a place where you thought you wanted to be your entire life.

I was 30 years old, making seven figures. I was president of a $400 million hedge fund, at the top of my game. Then you see what I saw on 9/11 and you really know it's a fight or flight mechanism. I was unaware that I was as emotionally damaged as I was. You know I didn't realize that until a few years afterwards. I think there are just probably a lot of people out there who are in denial about how 9/11 affected them. But I think, for my part, the single most predominant feeling was guilt for many years.

John Nyaradi: Yeah.

Todd Harrison: I felt guilty feeling bad when so many other people lost so much more and that guilt manifested in a lot of ways and I turned off. You know I went dark socially and professionally and then thankfully discovered the corridor that was Minyanville and that corridor was an animated world that was void of politics and pain and agendas, things that I just probably couldn't handle anymore.

You know I've always said, John, I've always said the definition of professional nirvana is to do what you love with people you respect while serving the greater good. I don't make the money I did once, far from it, but I'm very lucky to work with the people I do and The Ruby Peck Foundation and to be able to do out of love what you know is right and to help people make better decisions. To be able to get up in the morning and look yourself in the eye and like the person you see is something that I don't take for granted and something that hasn't been familiar for all that long.

John Nyaradi: That's great. I'd like to take a minute and talk about your big picture for the economy right now in the US.

Todd Harrison: It's an interesting juncture for the market right now. There are two sides here. The corporate credit market is suggesting that stocks go higher. In a vacuum, that in and of itself would be awesome. But unfortunately we don't live in a vacuum and you know we here at Minyanville see a debt sandwich, where you have the consumer debt below and the sovereign situation above.

I think that the risk has not mitigated since the financial crisis, I think it has just changed shape. It's amorphous. It has gone from the financial to the economic to the social sphere. And we talked about the two paths in the midst of the crisis; on one you have debt destruction and/or debt reorganization, and that's a bitter pill, for sure, but in my view that's the medicine that will cure the disease and lead us on the path towards legitimate globalization. And maybe the US is not out in front leading but certainly participating and so this globalization is most certainly attainable.

I look at it very much like the dot-com situation. Everything they said in the dot-com boom about what the Internet could be, proved true, but not without the technology crash first. I think everything that they say about globalization will prove true but not without debt destruction. So that's the path I think we ultimately have to take. But instead, we've been given drugs to mask the symptoms rather than medicine that cure the disease. We'd been giving the drunk another drink with hopes that he doesn't sober up.

John Nyaradi: Yeah.
Todd Harrison: And that I think is manifesting itself in the social sphere. The three phases that we've been talking about on Minyanville for a long time are societal acrimony, social unrest and geopolitical strife. You can see the societal acrimony in the Tea Party uprising, the way the banking industry and BP (NYSE:BP) and other big businesses are viewed by the mainstream, and we're seeing social unrest overseas in the riots, and the spring of discontent is now edging into a hot and bothered summer.

That needs to stay on the radar because if the last leg of the tricky trifecta, geopolitical strife, comes to pass, we need to remember that social mood and risk appetite are what shape financial markets and that psychology is paramount going forward and I think we are in the process of a psychological paradigm shift.

John Nyaradi: I always like to end these conversations, Todd, by asking if there's anything on your mind right now. One thing that keeps you up at night that people should watch out for.

Todd Harrison: I think patience is important. I think it's important to remember that The Depression was an era, it wasn't an event. The crash didn't cause The Depression, The Depression caused the crash. These are big conversations which are not to say that the market can't continue to rally. I just think that we need to make sure that when we have these sorts of discussions that we draw a distinction between economic recovery and the stock market rally. I think they are two different conversations.

John Nyaradi: Well, folks we've been talking with Todd Harrison, author of The Other Side of Wall Street: In Business It Pays to Be an Animal, In Life It Pays to Be Yourself.

The book has received great reviews from people like David Stockman, John Mauldin, Barry Ritholtz, Marc Faber, Herb Greenberg, and many others. I would like to add my humble endorsement and say that this is really a book you don't want to miss.

Todd, it has been great chatting with you. Thanks so much for joining us.

Todd Harrison: I appreciate it, John. 

(Interview recorded and edited for length and clarity.)
 
Editor's Note: Read more from John Nyaradi at Wall St. Sector Selector, a financial media site specializing in exchange traded funds, global markets and economic analysis.

Twitter: @WSSectorSelect

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