Pit Bull
Page 25
“So Motty, they wouldn’t put me through. No phone calls to the CCU. So I told them I was your personal physician and that you’d called me in for a second opinion.”
“Uh. You’re a good doctor, Avi,” I whispered. “What’s my prognosis?”
“You’re up ten ticks, just about two hundred thousand dollars. Whaddya wanna do? Sell?”
“That seems like good advice. Thanks, Dr. Goldfedder.”
The next morning, my real doctors put me on steroids and, thank God, they worked. My fever went down dramatically and my pulse rate fell back to 90 from 140. I finally left the hospital for good on December 14. Since November 7, I’d been in the hospital on three separate occasions for a total of twenty-six days. Sure I’d made more than $500,000 for my investors, but at what cost? My hospital bills alone were over $100,000, but that was just money. What really hurt was the realization that for a year, I’d been putting clients, none of whom cared enough about me to so much as send a get-well card, ahead of my family and my health.
I thought back to my meeting with Mike Schmeiss on the night this whole nightmare had started. What would I tell him now about starting his own fund? I’d tell him that OPM isn’t worth the aggravation. I’d tell him that no amount of money is worth working for people who don’t care anything about you.
I’d wanted to prove that I could run with the top dogs, and I did for a while, and it almost killed me. Big funds might be okay for Tudor Jones, Soros, Druckenmiller, Robertson, Bacon, and Kovner, but they weren’t okay for me. I’d found out that I was a pure trader. I didn’t like people looking over my shoulder, and I didn’t want to be responsible to people whom I didn’t like. I just wanted my freedom, and my health.
Even so, I wanted to continue on, still being naive enough to believe that I could run a major fund by finding investors who appreciated me and my abilities.
December 14, 1990 (the same day I was released from my third stay in the hospital)
Dear Partners:
I’m terribly sorry for the delay in reporting our November results, but as some of you know, I was stricken with a mystery virus that began as pneumonia and traveled to my pericardial sac, which necessitated emergency life-saving surgery in the early morning hours of November 16th….
I look forward to a far more productive 1991. The funds will be downsized in 1991 to a total of $45 to $50 million, which should enable you remaining clients to get a higher return on your investment. The people who remain are now part of a family who will get a much more focused effort from me in 1991, particularly after what I’ve lived through.
Two Lessons for Life
I. Break the Pressure Before It Breaks You
Ray Gura was a stocky, white-haired, crew-cut options trader who sat in the bullpen, a bunch of desks packed together that were filled with small-time traders trying to grind out a living. I met Ray in the early eighties soon after I started spending more time off the floor of the American Stock Exchange. Bear Stearns, my clearing broker, had given me a small private office on the ninth floor of 86 Trinity Place, the building next door to the Exchange. The bullpen was right outside my door.
One day I was building a large position in S&P futures and the pressure was really starting to get to me. The market was dropping and I kept adding to my already substantial position. Buying on the way down was something I almost never did, but my indicators kept telling me that the market was oversold and due to rally. Plus, Audrey had taken the day off and wasn’t around to tell me that I was violating my first and best rule: never let your ego take over your trading.
As the sweat began dripping from my brow, I started looking for some way to break the pressure. I fumbled through my desk, found a paper bag, put it over my head, and ran out into the bullpen. I jumped up on Ray’s desk and began dancing from desktop to desktop across the bullpen screaming through the bag, “I’m long! I’m long! I’m too fuckin’ long!”
WHEN YOU’RE IN A LOSING POSITION AND YOU’RE BRAINLOCKED, DO WHATEVER’S NECESSARY TO HELP CLEAR YOUR HEAD. Whether you’re a pro or an amateur, you cannot lose your objectivity.
I went desktop dancing to break the pressure because I was afraid I might freeze, like I had when I sold the Republicans short. Then I was able to come back to my chair, sit down, and rethink my strategy. I came up with the same conclusion—being long was right—but this time I also put in a stop loss on my position. Not too long afterward the market began to turn, and by the end of the day I was up $100,000.
The next morning, Ray Gura came into my office. He was holding a baseball. It was autographed by the 1960 New York Yankees, the team that had won the American League pennant. “Here,” he said offering me the ball, “I want you to have this, because you’re such a big Yankee fan.”
I looked at the ball. Mickey Mantle, Roger Maris, Yogi Berra, Elston Howard, Whitey Ford, all of my heroes when I was a kid growing up in New Haven, had signed it. “Ray,” I said, “I can’t take your ball. And why would you want to give it to me?”
“’Cause you made me and my family a lot of money, that’s why,” Ray answered. “Yesterday when you were dancing over the desktops with that bag over your head screamin’ about how long you were, I called my son and son-in-law down on the floor and told them that if you were long, we’d better start buying, too. Marty, yesterday was the best day we’ve had in a long time, and we want you to have the ball as a present from us.”
I still didn’t want to take Ray’s twenty-three-year-old memento, but after he continued to insist that I accept the baseball as a token of his appreciation, what could I say? I didn’t want to be rude, and I was truly touched by the gift. Today, that ball sits proudly in a plastic case in my son’s bedroom, right on his desktop.
II. Nobody Ever Lay on Their Deathbed Wishing They’d Worked Harder
In 1992, a bond broker from Chicago named Ken Kush called me and asked if I wanted to go in on a racehorse with him. I was trying to wean myself away from the market and develop some new interests, and ever since my first day at Aqueduct, I’d dreamt of owning a racehorse, so I said, “Sure, let’s do it.”
Ken got us a four-year-old filly named Prebend, and Prebend was a loser right out of the gate. She had all kinds of allergies and spent most of her time wheezing along at the back of the pack. Ken used to fly around going to all her races and he was always calling me and telling me, “Marty, don’t worry, she’s a great horse. The trainer just can’t get her medication right,” or “Marty, the trainer thinks he’s found this new drug that he’s sure is gonna make her a winner,” or “Marty, she just missed third place. It was so exciting, you’ve gotta come see her.”
I wasn’t about to fly around to watch Prebend run out of the money, but one day Ken called and said, “Marty, good news. We’ve entered Prebend in a race at Pimlico next Wednesday, and she’s got a real good shot. The trainer’s got her on a new drug that’s just been approved by the Maryland Racing Commission and she’s running like Secretariat’s sister. Her training times are awesome. You’ve gotta go down and see her.”
I figured what the heck’s the use of owning a horse if you never get to watch it run and Pimlico was in Baltimore, so it wasn’t a bad trip from New York. “Okay,” I told Ken, “I’ll take the Metroliner down and make a day of it.”
I was going to catch a 10:30 train, but when the market opened, I got into a couple of interesting positions and when it came time to leave I figured, why go all the way down to Maryland to see Prebend? If she didn’t win, I’d be disappointed that I wasted the whole day, and besides, I didn’t have to go to Maryland. I could just walk over to the nearest OTB and make a bet.
So I don’t go, and it turned out the Prebend won the race. To make matters worse, I’d bet $2,000 at OTB, but I was so much of the pool that I only got back $5,500. At the track, Prebend went off at better than 12-1, which meant I would have gotten $25,200 back on a $2,000 bet. When I didn’t meet Ken at the track, he couldn’t believe it. “Marty,” he said, “you’ve got to
get your priorities straight.”
Prebend’s asthma got worse, and we eventually sold her for a pittance compared to what we could have gotten if we’d sold right after her only winning race. I’ve never bought into another racehorse, but I might someday. If I do, I’m going to get my priorities straight. A lot of people get so enmeshed in the markets that they lose their perspective. Working longer does not necessarily equate with working smarter. In fact, sometimes it’s the other way around.
I’ve learned through the years that after a good run of profits in the markets, it’s very important to take a few days off as a reward. The natural tendency is to keep pushing until the streak ends. But experience has taught me that a rest in the middle of the streak can often extend it.
KEEP YOUR BALANCE. When your horse runs, be there. Sit in the owner’s box, bet your buns off, have a great time, and forget about the market.
16
Night Fighting
“Because I am tough, you will not like me. But the more you hate me, the more you will learn. I am tough, but I am fair. There is no racial bigotry here. I do not look down on niggers, kikes, wops, spics, or micks. Here you are all equally worthless. And my orders are to weed out all slackers who don’t pack the gear to serve in my beloved Corps. From now on you will speak only when spoken to. And the first and last words out of your filthy sewers will be Sir. Do you maggots understand that?”
“Sir, yes Sir.”
“Bullshit, I caaaan’t heeeeear you. Sound off like you got a pair!”
“Sir, yes SIR!”
“I still caaaaan’t heeeeear you!”
“SIR, YES SIR!!”
On February 5, 1968, I arrived at the U.S. Marine Corps base in Quantico, Virginia, to start my training at Officer’s Candidate School. I’d signed up for the USMC Reserves after my first semester at Columbia Business School because the rumors floating around academia had it that the Pentagon was going to do away with graduate school deferments, and I didn’t want to get drafted and go to Vietnam.
The marines owned you for ten weeks, and during that time, they controlled every move you made. Their objective was to break you down and rebuild you in their own image. They kept you busy from 5:30 A.M., when they got you up by rolling a metal garbage can down the concrete floor of the squad bay, until 10:00 P.M., when they said “good night, ladies” and cut the lights, leaving you prone, but still at attention, stretched out, scared and exhausted on your bunk. But I survived. “Congratulations, Lieutenant Schwartz, you are now a marine.”
On November 7, 1990, I’d started my six-week battle with viral pericarditis and I didn’t get out of the hospital for good until December 14. Since then, I’d been working from my office at home, trying to recuperate. During the lunch hour, Rob LeVine, one of my assistants, would come up from my office at 750 Lexington Avenue and walk me around the block. Dr. Hochman insisted that I get out and take walks in the fresh air even though it was twenty-five degrees outside. I’d bundle up in the Revillon cashmere coat that I’d gotten for an art trip Audrey and I took to Russia in 1987 with my dear friend Al Fresco, wrap an Armani scarf around my neck, turn up the fur collar on the Revillon coat, put on the sable hat I’d bought at Gum’s in Moscow, and march out with Rob into the cold New York winter.
We’d started this routine at the first of the year because when a new year comes, a new bell goes off in my head and a new race begins. Even though I’d almost died and half of my investors had deserted me while I was in the hospital, I was still Captain Schwartz of Sabrina Partners. Investors were depending on me and I had a good chunk of my own money tied up in the funds, so getting back to work was as much self-preservation as it was duty. I had to start fighting for some big numbers.
I love working for Uncle Sam.
I love working for Uncle Sam.
Let’s me know just who I am.
Let’s me know just who I am.
One, Two, Three, Four, United States Marine Corps.
One, Two, Three, Four, United States Marine Corps.
One, Two, Three, Four, I love the Marine Corps.
One, Two, Three, Four, I love the Marine Corps.
My Corps. Your Corps. Our Corps. Marine Corps.
My Corps. Your Corps. Our Corps. Marine Corps.
On January 2, I could hardly make it around the block. I had no energy, no stamina. My chest hurt from where they’d cut me open and spread my ribs, and I was still on Prednisone, a corticosteroid. Prednisone was not a good drug for traders because one of its side effects was psychological derangements. According to my medical encyclopedia, they “range from euphoria to mood swings, personality changes, and severe depression. Prednisone may also aggravate existing emotional instability.” Hochman was trying to wean me off the drug, and to do that I had to build up my physical strength.
I’d come back from my walks with Rob sweaty and dog tired, but improving a little bit every day. Four blocks, eight blocks, twelve blocks. As my distances went up, my dosages went down, 30 milligrams, 25 milligrams, 20 milligrams.
Ever since August 2, 1990, when Saddam Hussein invaded Kuwait, the markets had been gyrating wildly. Stock prices generally had been sinking, while commodities, especially oil, had been gushing upward. But every time the Iraqis punched out a SCUD missile toward Israel, the program traders in New York would hit their buy and sell buttons, and the markets would be projected into chaos.
On January 9, 1991, Secretary of State Baker met in Geneva with the Iraqis to try to reach some kind of political accommodation. The market expected an agreement, but when Baker came out of the meeting and stepped in front of the cameras, the first word out of his mouth was “regrettably.” The S&Ps dropped ten points before he could finish the sentence as a wave of selling broke loose in the market. I dove into my bunker and started firing live rounds. I was going short, selling S&P futures that I didn’t own and would have to buy back later, hopefully at a lower price. Cover up, cover up.
The following Wednesday I told Audrey, “You know, the market can only discount this potential war so many times, and I think it’s bottomed out. All my indicators say it’s oversold. Something’s going to happen and I think I should be buying stock before it happens.” Getting Audrey’s opinion was more important now than ever; I was never sure whether my feelings were due to the markets or to the Prednisone.
“Buzzy. If you like it, get it.”
I started buying. Amgen. Bristol-Myers Squibb. Compaq. Delta Airlines. Fannie Mae. The Gap. Gillette. Home Depot. Johnson & Johnson. The Limited. Merck. Microsoft. Nike. Novell. Philip Morris. Texas Instruments. United Airlines. WalMart. Waste Management. I was convinced that the United States was going to have to take some action to resolve the crisis in the Gulf, and that when it did, the market was going to react positively. On Monday and Tuesday, I’d gone long 160 S&P contracts, so in three days, I’d spent $12 million starting to position my funds for any potential up move.
That evening, Wednesday, January 16, I lay down on the couch in my library to watch NBC Nightly News with Tom Brokaw. I was drained. It was just five weeks to the day that I’d gotten out of the hospital for the third and last time, and that afternoon, I’d had my best walk yet, one New York mile, twenty short blocks. I hit the remote control and Tom Brokaw came onto the screen. He was even more full of himself than usual, the way newscasters get when they’ve got something really big on their plates. Just moments ago, speaking from the Oval Office, President Bush had announced that U.S. forces had launched an all-out attack on Iraq. Operation Desert Storm had erupted.
Once a marine, always a marine. I didn’t pray for war, I was not a minister of death, and I was still weak from my near-death experience, but when war came on January 16, 1991, I was still a marine, and I was ready. It was time for me to go to war. I pulled myself up from the couch, went back into my office, eased into my chair, put on my phone headset, and looked at the clock. It was 1840 eastern daylight time. I was in no condition to trade, but I was tough, I was a marine. What d
id it matter that half of my investors had deserted me? I was still determined to do my duty as a responsible officer.
“Candidate Schwartz. Lemme see your war face.”
“Sir?”
“You got a war face? This is a war face. AAARRRRGGGHH!”
“Aaarrrrggghhh!”
“Bullshit, you didn’t convince me, lemme see your real war face.”
“AAAAAAAAARRRRRGGGGHHHHH!!!!”
“You don’t scare me. You’d better work on it or I’ll really jump in your shit!”
“SIR, YES SIR!”
The United States was attacking with F-15s that were capable of delivering smart bombs and laser-guided missiles with surgical precision. There was no question that we were going to annihilate this camel driver and bury his so-called elite Republican Guard deep in the desert sands. And we were going to do it fast, so I had to move even faster.
“There will be a magic show at 0900. Chaplain Charlie will tell you how the free world will conquer all with the aid of God and a few marines. God has a hard-on for marines because we kill everything we see. He plays his game, we play ours. To show our appreciation for so much power, we keep Heaven packed with fresh souls. God was here before the Marine Corps so you can give your heart to God, but your ass belongs to the Corps. Do you ladies understand that?”
“SIR, YES SIR!”
Now that America had joined in battle, all of the fear and uncertainty that had been driving the oil and gold markets higher for the past four months would evaporate overnight. I had to find a market that was open. I wanted to sell oil and gold contracts short and buy them back later when the prices had dropped. Why, you might ask, would anybody in their right mind want to short crude oil when the Persian Gulf was about to blow up, and why short gold when gold was the one thing everybody ran to in a crisis? The reason was that crude oil and gold had been overbought since the invasion of Kuwait, and once the markets realized that Saddam was no longer a threat to the Gulf and its oil supplies, crude oil and gold would drop like a couple of overripe coconuts. I had to short gold and oil immediately. I leaned forward in my chair and punched in the number for the Kidder, Peabody night desk.