Pit Bull

by Martin Schwartz

  “Vickie! Vickie! Is Bob in? I’ve gotta talk to him. It’s Marty…. How you doing?…Right, everything’s fine. Yeah, I’m on the floor now. New experience.” Pause. “Bob. How you doing? What do you think of the market? Yeah, yeah, me too, I’m a little nervous about it. Tape looks a little tired. Listen, Bob, I just bought some options in Mesa, whaddya think?”

  “I got a big position in Mesa, Marty. It looks good. Boone Pickens is gonna go forward with the restructuring; I think there’s real good value, but the market, the Street, doesn’t see it yet; I feel very strongly it’s going up.”

  “You do, Bob, you do? Thanks, Bob. You pretty sure about this one, Bob? Uh, ah, you know, ah, I don’t know whether to buy more or what the hell to do.”

  “It looks good, Marty.”

  “God, I hope you’re right. I’ll talk to you soon, thanks a lot, really appreciate it.”

  Talking with Zoellner was good. I summoned up some more courage and waded back into the crowd around Mesa.

  Tick. 61½.

  “Chickie! Chickie! Uh.” I could hardly get the words out. “How are the Oct 65 calls, Chickie?”

  “Newboy, for you, they’re two and a half bid, offered at two and five-eighths.”

  “Two and nine for twenty, Chickie! Two and nine!” I was bidding to buy twenty more options, each for a hundred shares of Mesa, at a price of 29/16 per share, or $256.25 per option, for a total of $5,125.

  “Sold! Two and nine-sixteenths for twenty.”

  My October calls were trading in sixteenths now. On the American Stock Exchange, when a stock option drops below 3, the minimum trading increments move from eights to sixteenths, the infamous “s’teenths.”

  Tick. 61¼.

  Fuck, I couldn’t watch anymore. I was now “long” thirty Mesa October 65 call options. Oh, man, I didn’t think it was going to be this tough. I had to get off the floor. The only reason to stay there was to keep my money moving, but I didn’t have any more money to move. I’d been positive that Mesa Petroleum was going to be a gusher. My plan had been to sell it for a quick profit and to roll the proceeds into a bigger and better trade. Now it was going against me and I didn’t have any money coming in. I began to think about how I was going to live without a salary. I had to get out of there.

  I trudged up the stairs, pushed open the door, and stepped out into the sunlight, still in my blue smock. I walked across the street and wandered into Trinity Church Burial Ground. I found a free bench on the far side of the church and sat down. It was hot. The burial ground was a refuge for drunks, bums, and all kinds of other losers. It was a place they could hang out without getting hassled. None of the permanent residents ever complained.

  I noticed that I was sitting in front of Alexander Hamilton’s grave. The inscription on the white monument read, “Alexander Hamilton. Died July 12, 1804. Aged 47.” Here I was, thirty-four years old.

  July 12 was the day after Alex was shot in a duel with Aaron Burr in Weehawken, New Jersey. Alex had written a scathing article about how corrupt Burr was and why he shouldn’t be the governor of New York, so Burr had shot him dead. Alex was the first secretary of the treasury and the financial father of our country, but had been forced to resign in 1795 because of personal financial problems. I remembered reading this in my American Studies course at Amherst and wondering how anybody so smart could have gotten so screwed up. Now I was beginning to understand. I got up, brushed off my blue smock, and walked slowly back across Trinity Place to check on Mesa.

  Tick. 605/8.

  I slumped over to Chickie’s post. “Chickie. The Oct 65 Mesa calls, how are they now?”

  Chickie grinned back at me. “Newboy, they’re two and a quarter bid, offered at two and three-eighths.”

  Chickie. My God, Chickie. My Mesas were dropping like a stone. I’d bought ten at 3 ($3,000), and twenty more at 29/16 ($5,125). Now they were bidding 2¼ ($6,750). On paper, I was down $1,375, a 17 percent loss in a few hours. I couldn’t take it anymore. I had to think. I had to go home.

  The next day, Tuesday the fourteenth, I felt better. Audrey had calmed me down. She’d told me that I was the smartest guy she’d ever met, that I had a great plan, that I just had to stick with it, that I had to be patient. I’d done all my charts and calculated my ratios, and Mesa still looked good, really good. It was like Zoellner had said, the market just hadn’t seen it yet.

  The sun was shining as I walked up Trinity Place. The guard at the “Members Only” door called me by name; when Joey Dee handed me my blue smock, it already had my “Martin Schwartz & Co., 945” badge attached to it; I remembered to change into my crepe-soled shoes and to check in with my clerk to pick up my daily printout from Bear Stearns. I got my cup of tea, with a lemon to save my voice, and headed for the floor. I walked around with a new spring in my step, thanks to my crepe soles. I checked the Trans Lux and the Dow Jones news wire. The bell rang. Mesa opened at 60½. All right. All right. Don’t panic. This has to be the bottom. Audrey’s right, I just have to be patient.

  I waved hello to my friend Hayes Noel. Hayes was a southern boy, a tall blond from Nashville, who spoke with a drawl and had a bit of a cracker sense of humor. Hayes had gone to Sewanee, “The College of the South,” and had been on the floor since 1970. It was Hayes who’d gotten me onto the floor with visitor passes before I bought my seat and had shown me how things worked.

  I nodded to Jerry Muldoon, another old-timer. Jerry used to run outside the Exchange and sell crates of vegetables off of trucks back in ’73 and ’74 when the market was slow and he needed to make a few extra bucks. Over to his left, next to Donnie Gee, the specialist who made the book on Texaco options, were Allen Applebaum and Eddie Stern. They were the Exchange’s sharp dressers. Allen was a wiry, whippet-looking guy who always wore a starched shirt, and Eddie, whose father had a seat on the New York Stock Exchange, always wore a suit rather than a blue smock.

  Tick. 603/8.

  Oh, man. “Chickie. Chickie. The Oct 65 calls, what’s happening?”

  “Newboy. You still here?”

  “Yeah, yeah. Just gimme a quote.”

  “Two and an eighth bid, offered at two anna quarter.”

  Holy shit, Chickie. “What’s the size?”

  “Fifty by thirty.” That meant that Chickie was willing to buy fifty options at 21/8 or sell thirty options at 2¼.

  What do I do, what do I do? Sell? Do nothing? Buy? Time to call Zoellner.

  “Bob, Bob, whaddya think, Bob? I’m down $1,750 and I’m dying. Are you sure you’re right?”

  “Marty, listen. I’ve done a lot of work in my day. I’ve had a lot of winners and a lot of losers; this is a winner. Just hold tight. It’s undervalued. It has to come back.”

  “Thanks, Bob. I know I believe in you, baby. I know you’re good.” I trotted back to Chickie.

  “How’re the Oct 65 calls now, Chickie?”

  “Same as before. Two and an eighth a quarter. Fifty by thirty.”

  “Three teenies bid for twenty, Chickie!”

  “Sold! Newboy.” I’d just bought another twenty options at 23/16. I’d committed another $4,375 and was now “long” fifty call options.

  I didn’t sleep at all that night. I tossed and turned, thinking and rethinking my position. Mesa had closed at 60. My options were threatening to sink below 2. The phrase “shoot dying quails” kept racing through my mind. How far could I ride this loser down? Was I going to give up everything I’d been working for?

  For the past twelve months, I’d locked my door at my office at E. F. Hutton and worked feverishly, trading live rounds. I’d been playing the market with my own money to make more money so that I’d have enough capital when I moved to the Exchange and, more importantly, to prove to myself that I could be successful. Some analysts thought they were hot stuff because their hypotheticals, or “paper trading” models, showed how much money they could have made, but they were just shooting make-believe bullets and couldn’t get hurt. You’ll never know how good you really
are until you’ve performed under fire. I was like Rose in the candy store, pushing ahead all the time. I’d subscribed to a dozen or more periodicals. I’d studied the floor with Hayes Noel. I’d borrowed $50,000 from my in-laws, Mac and Sally Polokoff. I had it all figured out; this was where I wanted to be.

  I got up out of bed, went to my desk, and reviewed my plan. What was I doing wrong? I had spent a year and a half planning this trade. I’d made up a whole list of rules, and I’d already bent two of them badly. My first rule was never to risk more than I could afford to lose, yet I now had half of my working capital riding on one play. That couldn’t be helped; I only had enough of a grubstake for two plays and given the information I had, dumping half of it on Mesa was my best bet.

  My second rule was to try to book a profit every day, yet here I was, stuck for two days in the red, but that couldn’t be helped either. It was the third rule, “shoot dying quails,” that was bothering me. When was I going to pull the trigger? When would I have to admit that I was wrong and get out of the position? Even the best traders, even the Zoellners, had their share of losers. The way they hedged their bets was to maintain a diversified portfolio, only I didn’t have enough money to build a diversified portfolio. Mesa was it. Finally, as the first rays of morning light crept through our bedroom window, I made my decision. If Mesa opened down again today, I was out.

  Wednesday the fifteenth of August, 86 Trinity Place, “Members Only” door, blue smock, crepe soles, Bear Stearns profit and loss statement showing me down $2,300, cup of tea with lemon, out to the floor, check the Trans Lux and the Dow Jones wire. D-d-dr-ring…

  Mesa opens 60¾, up 5/8. Yeah, baby, I’m with ya all the way. I run over to Chickie Miceli’s post. People are jostling for position. The noise level is rising.

  Tick. 61.

  Louder, more crowded. People are starting to yell. “How’s the market?” “What’s offered there?”

  Tick. 61½.

  Zoellner. I love ya, baby. I knew you were good.

  “What’s the size?” “What’s the quantity?” “What’s bid for, how many are bid for?” “How many are offered?” “WHAT’S THE SIZE?”

  The day wore on. I was too excited to eat lunch. I was loving it.

  “Three to a quarter! Fifty at a quarter!” “TAKE ’EM! I’LL TAKE ’EM!” somebody yelled.

  “Three and a quarter bid for fifty! Three and a quarter for fifty more!!” “SOLD!” “SOLD!”

  Mesa’s stock ticked at 633/8! Tick. The Mesa October 65 calls were up again. “Three and five-eighths, it’s seven-eighths, trades!” “Seven-eighths to four!” The noise level rose to a crescendo. “A hundred Mesa Oct 65 calls offered at four!” “Two hundred trading at four!” The options were really moving. The stock was in orbit. All hell was breaking loose. For what had to be the hundredth time I checked my position. Ten Oct 65s at 3. Twenty more at 29/16. And twenty more at 23/16. Do I sell now? Do I take profits? Do I buy more? Do I call Zoellner? Fuck it. It was time to hear the cash register ring.

  I barged to the front. “Chickie! Chickie! Give me a market on Mesa!”

  “Oct 65s, four and an eighth a quarter. Ten up.” The spit hit my jacket. I cleared my throat to hit the bid. A big pink pudgy fist shot over my shoulder “Sold! SOLD! TEN AT AN EIGHTH!” The smell of cheap bourbon filled my nostrils. Shit, Fat Mike had taken my trade.

  “What’s it now?” Chickie was on his phone. “What’s it now, Chickie?”

  “Four to a quarter, twenty up, Newboy.”

  “SOLD! Twenty at four!” I squealed.

  Tick. The stock moved to 641/8.

  Someone else elbowed in behind me. “Four and a quarter bid for thirty.” It was the guy from Merrill.

  “SOLD,” I screamed as I turned around and spit in his face. My trades were in, I was out. Sweat dripped off my nose as I worked toward the edge of the crowd. The pit clerk came over to confirm. I took out my pen, turned it around, and stamped the tickets with my “945.”

  Now it was time to count up my profits. Sold 20 at 4, 30 more at 4¼. That was $8,000 on the first sale and $12,750 on the second, a total of $20,750; my cost was $3,000 at 3 and $5,125 at 29/16, plus $4,375 at 2 and three teenies. Eight grand, baby eight grand. It felt like a million. I’d found the promised land; this was the American Dream. I hadn’t gone tapioca; I wouldn’t have to go back to being a securities analyst, no more kissing ass. I wasn’t going to be sitting in the burial grounds next to the bums and Alexander Hamilton, and most of all, I wasn’t going to be hammered by the Depression like my father. I had my freedom. I was running with the winners.

  I strutted over to Digital Equipment, Frannie Santangelo’s post. Frannie Santangelo, the toughest fuckin’ dude in town. Not Chickie Miceli. Frannie’s been through the Korean War. Smoking Camels on the side of the floor. He’s tough.

  “Rookie, whaddya want?”

  “Frannie, I wanna play. How’re the Oct 85 Digital calls?”

  “One and five-eighths, three-quarters. For you, Rookie, I’ll give ya ten at three-quarters.”

  “One and eleven for ten, Frannie.”

  “No way, Rookie. Gedoudahere, fahgedaboudit if you wanna play like a pussy. No way.” This tough bastard wouldn’t even give me a s’teenth, a lousy six and a quarter cents per share.

  “All right, Frannie, I’ll pay one and three-quarters for ten. Digital. Oct 85 calls.” I thought to myself, You beat me for a s’teenth, Frannie, that’s $62.50. I know you want to show me who’s boss, you fuckin’ pizza parlor operator. You got me today, but I’m here to stay. I’ll get you next time.

  Mashed Potatoes

  “It’s the latest, it’s the greatest, come on baby, it’s so easy to do. Oh, mashed potatoes, mashed potatoes, you can do it too. Mashed potatoes, mashed potatoes, yeah, yeah, yeah….”

  It was 3:59. Hayes Noel and I were up on the balls of our feet, twisting our crepe-soled shoes in opposite directions, dancing around the floor of the American Stock Exchange singing Dee Dee Sharp’s 1962 hit. As my young son would later say, “It had been a big busy day.” Discarded buy-sell slips covered the floor and we were getting some good sliding action. We were hot. I was up ten grand on paper for the day with only a minute to go. I’d only been trading on the floor for a couple of months, and I was so happy that I was doing so well and that my positions were all marked up in my favor that I didn’t realize that I should have converted the ten grand into real money.

  The market opened way down the next day, and because I’d been dancing instead of closing out my positions, I was locked in and lost the whole $10,000 in paper profits. From then on, I always fought back the temptation to start dancing before I’d heard the cash register ring. When you feel like doing the mashed potatoes, it’s a visceral clue that you’ve lost your objectivity, you’ve gotten too emotional, and you’re about to go into the shitter.

  The other thing that’s stupid is that you actually think you’re dancing well. And, of course, you’re not.

  2

  The Plan

  “Audrey, we missed the turn. We’re still on Route 84 West. We’re going to freakin’ Newburgh. Can’t you read the map?”

  “Buzzy, don’t blame me. You’re the one who’s driving like a maniac.”

  “One job, that’s all I give you, Audrey, one lousy job, and you screw it up. How could you miss Route 684? It’s the main route to the City!”

  “Buzzy, you’re driving too fast, I can’t read the signs. And how was I supposed to know we wanted 684?”

  “Because you plan ahead, Audrey. You study the map before we get in the car. Plan ahead, Audrey, you gotta plan ahead!”

  “Here, you plan ahead.”

  I ducked as the map sailed across the front of our leased Chrysler Cordoba. When I get flustered, I tend to lapse into my Marine Corps persona, which means that I expect Audrey to behave like a good captain’s wife. That’s usually a mistake, and today was no exception. Audrey was in no mood to have me barking orders at her, and I couldn’t bl
ame her. It was July 1978, the temperature was hovering near a hundred degrees, we were hot, we were tired, and now, having missed our turn, we were barreling toward Newburgh, New York, a beat-up old dump of a town on the backwaters of the Hudson River fifty miles north of New York City.

  We’d just spent Sunday afternoon with our friends Rich and Susan Bertelli. Rich and Susan were former members of our group summerhouse in Westhampton Beach, out on the South Fork. They’d gotten married the previous winter and had bought a beautiful four-bedroom colonial in Danbury, Connecticut. They’d invited us up to show off their new house. When I saw it, I was impressed and jealous. Here were Susan, a freelance computer jockey, and Rich, a battery salesman for Union Carbide, building up equity, racking up hefty tax deductions, and watching the value of their new home go up while Audrey, the head of the Paper Recycling Division of the American Paper Institute, and I, a high-powered analyst for E. F. Hutton, were paying rent, getting zero tax deductions, and sitting on the sidelines watching the real estate market boom without us. Together, Audrey and I were pulling down more than $100,000 a year, which had to be a lot more than Rich and Susan, but we couldn’t afford this house.

  “Rich, Susan,” I said, “how can you afford such a beautiful home?” The four of us were sitting in their second-floor study guzzling iced tea. The windows were wide open but there wasn’t a breath of air. I was sweating profusely. Obviously, one of Rich and Susan’s financial secrets was that they pinched a few pennies by not turning on the air-conditioning.

  “A plan, Buzzy,” Susan said. “You’ve got to have a plan.”

  “A plan?” I said. “I get up, I go to work, I come home, I hope I have enough energy left to get laid, and I go to bed. That’s my plan.”

  “And that’s the problem. Tell us more,” Audrey said.

  And they did. Susan and Rich talked and talked, and Audrey and I listened and listened. The more I heard, the more I began to realize that sitting down and seriously developing a plan might not be a bad idea. I needed to do something. Despite all my college degrees and experience, I had yet to achieve success. Developing a plan with specific goals and setting a time frame for achieving them would at least get me thinking about what I should be doing. But I hated the thought of setting goals. I could feel the knot starting to grow in the pit of my stomach.