The Buy Side — Turney Duff

Amazon link

Duff, a journalism major from Ohio State vividly recounts his experiences as a buy-side trader on Wall St from the 90s to the 00s. What makes this book so entertaining is Duff’s ability to write what is presumably a factual account of his own experiences and his willingness to go to into incredibly sordid details regarding his cocaine/alcohol addiction, which his book suggests is the norm of Wall St’s buy-side (at least back then), e.g.

We sip our fifteen-dollar drinks and take turns going into the bathroom to snort key bumps of cocaine. After a few big nights, sometimes it takes a couple of minutes to insert my apartment key into the lock because of the crusted powder on it.

The book starts off as a typical hero’s journey, but the catch is that as he beings to face the consequences of his addiction (his second trip to rehab prompts an awesome line — “A guy goes to rehab once and everyone’s rooting for him. A guy goes to rehab a second time and people start to drop off”), his victory is not what we might accept: him quitting Wall St for good.

As a buy-side trader, he enjoyed the entertainment budgets of all the shops and sell-side people yearning to earn Duff’s commission. And for a while he enjoys it. Of course, it goes too far (see rehab comment, also hedonic treadmill and of course the obvious yet consistently underestimated addictiveness of cocaine) and he ends up losing his family (the epilogue only says he has joint custody) and his house (which he bought just before the SPMC).

A journalism major from a “non-target school” with no prior intentions of breaking into Wall St, a lucky break from his uncle lands him a place at Morgan Stanley as a sales assistant for Private Client Services. After 5y he makes it to trading, and later to the Galleon fund (pre-Raj insider trading, although one incident suggests that insider trading was pervasive there), then to Berkowitz. As the reader follows his journey up the Wall St hierarchy, becoming a celebrity of sorts that others begin to admire and seek favor with, we root for him and it’s exciting. He tells us he’s able to excel at his job because of his inter-personal skills — something which I imagine has in no small part have to do with him being the only son (of a demanding, cold father, see Drama of the Gifted Child) but youngest of 4 children…

One day, when I’m emailing a fourth cancel and correct form, I put “Personal Ads” in the subject line. Then I type, “Single White Male sales assistant with an athletic build looking for an operations guy who can help me with my cancel and correct. Must also enjoy gourmet cooking, movies, and long walks on the beach.” The response from the back office comes immediately. They don’t charge us for the cancel and correct. Right then, I begin to realize that social skills might be as important on Wall Street as an Ivy League MBA.

Ultimately, the book is entertaining for the reason that all good books are: they provide a window into the life of another person, allowing us to live vicariously through their own experiences. It’s perhaps extra entertaining, therefore, that Duff’s tale is the tell-all story of Wall St that we all imagine from the movies, but with extra emphasis on the deleterious and inevitably unsustainable consequences of that life.

TL;DR: buy-side is fun, cocaine addiction is not; don’t buy a house in 2007; don’t spend money on hedonic pursuits

Some other links

How a Wall Street Trader Blew Through $10 Million (Duff)

35m podcast

if/then TED

Notebook for
The Buy Side: A Wall Street Trader's Tale of Spectacular Excess
Duff, Turney

Chapter 1
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There’s only one little problem with my father’s plan: I don’t want to be a wrestler. I used to want to be a chef. A friend’s mother once snuck us into the White Barn Inn, the fanciest restaurant in Kennebunk. When the chef came out of the kitchen, all of the customers looked at him. I liked the attention and deference he garnered. If not a chef, maybe I’ll become a conman. I always loved those characters in the movies.
Chapter 2
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My journalism adviser from Ohio University had called me six months after graduation. He told me if I want to work in New York, I have to be in New York. In the month of December I’d sent over thirty blind résumés and cover letters to newspapers, magazines, and public relations firms. Getting zero responses, I decided to knock on doors.
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The U-Haul is ready to go. My mother gives me a hug that makes me feel like I’m going off to war. My father reaches out his cold hand to give me a handshake. His technique is perfect, firm and solid, while he looks directly into my eyes, exactly how he taught me. “Good luck,” he says. If there was ever an opportunity to hug my father for the first time, it’s now. I’m sure he hugged me as a child, but I don’t remember. He should hug me, I think. I release from his handshake to break the awkward moment. We’re off.
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I don’t want my roommates seeing it, and I don’t want to work at the Gap. But I need a job. I pick up the phone to call my mom for some comforting, and she suggests I call her brother for guidance. I’ve only seen Uncle Tucker twice in ten years, both times at my sisters’ weddings. All I know is, he moved to San Francisco with his second wife. He still works in finance.
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I try to get my words out, and somewhere in between all of my ums, ahs, and dead silence, I manage to tell him I need help finding a job. “Gotcha,” he says. I try to elaborate, but I keep repeating myself. “Call you back in ten,” he says before I’m able to tell him what kind of a job I’m looking for. I set the phone down and sit on the couch also known as my bed. Twenty minutes later the phone rings. “You have ten interviews this week,” he says. “For what?” I ask. “Just tell them you want to get into sales,” he says.
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I’m pulled from my thoughts by Mike. He walks me over to meet the big boss, a fellow named Donald Crooks, who glad-hands me and asks a quick battery of questions: What school did I go to? Did I play football? What he doesn’t ask is anything that might indicate if I’m right for the job. In fact, I don’t remember, in any of my Wall Street interviews, being asked a question that might qualify me for a job in finance.
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Then I’m at Morgan Stanley on the thirty-third floor, the trading floor. I’m almost at the point when the manager takes my résumé and tells me to keep in touch when the phone on his desk rings. “There’s someone on thirty-seven who wants to meet you,” he says. She introduces herself as Stephanie Whittier. She might be forty, but if she is, it’s a nice forty. With raven hair and a figure that fills the dark business suit she wears, she looks a bit like Demi Moore circa A Few Good Men. We get on the elevator and go up four floors. “I love Tucker,” she says. “We go way back.” As she walks me to her office we make the usual small talk. Her desk is clean. She has stacks of folders, but they are in perfect order. She has a few items on her desk—a rubber-band ball the size of a grapefruit, a yellow smiley face stress ball, and some chopsticks. I also notice a photo of her and O. J. Simpson—standing on the trading floor, it appears. Out of exactly nowhere she mentions she missed the previous night’s episode of Melrose Place. Conveniently, Melrose is a guilty pleasure of mine. I saw the show, so I tell her about Sydney’s ploy to hire a prostitute to seduce Robert and how she videotaped the whole thing and how Michael mailed the videotape to Jane—crazy stuff. Stephanie thumps the desk with her hand. “No way,” she says. I nailed it. Twenty minutes or so later, she tells me she has two stacks of résumés for the job she’s going to fill. “One’s this high,” she says, holding her hand a few feet over her desk. “And the other’s this high,” she says, lowering her hand to a couple of inches. Then she smiles and says: “You’re in the second one.” Twenty-four hours later, she calls and offers me a job.
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“I got some advice for you, kid.” His words come on a carpet of white smoke. “There are three things you need to always remember if you’re gonna make it in this business.” Watching Larry is like viewing bad television. I really want to turn the channel, but there’s something about him that holds my attention. I nod my head ever so slightly. “First, always, and I mean always, work the day after Thanksgiving. It’s only half a day and it makes you look like a hero.” I signal the bartender for another beer. I can feel Larry’s stare boring in on me. He leans in close. “Second,” he says in a smoky whisper, “you need to get in with all the ten-five-Ws.” “The what?” I say, afraid to ask. “The Eskimos,” he says. I’m really confused. “Keep ’em close—they run the business. Sure, the Merrills, Morgans, and Montgomerys are all stacked with guys like you and me.” I look at him and wonder what he means by guys like me and him. I’m nothing like him. “But who do you think is in upper management, who’s pulling all the strings? It’s the ten-five-W’s.” “Ten-five-what?” I ask. “What’s the tenth letter in the alphabet? The fifth letter in the alphabet?” I use my fingers to count out the letters, J and E. Jews? I grew up in a town without any Jewish or black people. The only thing we knew about racism was what we saw in the movies. I drink what’s left of the beer in front of me, pick up all but two bucks of my cash. As I turn to go, I feel his hand on my shoulder. “Wait,” he says. “I didn’t tell you the third thing.” I turn back and look at him. His eyes are rheumy, his teeth are crooked and the color of a school bus. He pulls on his cigarette so hard that his cheeks sink. “Attach yourself to revenue,” he says while pointing his cigarette at me. “If you do that, then nobody can touch you.”
Chapter 3
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“Welcome to Private Client Services,” she says. My uncle told me PCS is as close to the trading desk as I can get.
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It’s our turn to introduce ourselves. And as each of my new coworkers does, the group starts to sound like a Who’s Who of the talented and gifted and their alma maters like a Princeton Review top ten colleges list. Duke, Stanford, and Harvard all get mentioned. I’ve never felt embarrassed by where I went to school. I love Ohio University.
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On my second day, I’m asked to send an eighteen-page fax of bond prices to a broker’s client, which I do. But the client calls the broker and tells him he didn’t receive it. I resend it. This time the client calls and says he has thirty-six blank fax pages—I’d put them all in upside down. The broker doesn’t talk to me for the rest of the day. A few days later they have me answering phones for another group. The system works like this: The phone rings and I pick it up. Then I write down the information that’s coming from the trading floor, then stand up and yell it to the two brokers and three assistants sitting behind me. It’s only a little more advanced than two soup cans and a string, but this is 1994 and that’s how it’s done.
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My days, weeks, then months as a floater become one of those montages in romantic comedies, the ones where you see the protagonist go on bad date after bad date: there’s the crazy broker who randomly shouts profanities at nobody; the team of brokers who want a hot chick as their assistant and not a dude; the Latin American brokers whose clients don’t speak English; the female broker who hates me and anyone with a penis; the broker who is getting a divorce and cries all day (he wants me to go to dinner with him after work to talk about his ex-wife); the broker who doesn’t talk to me and whispers things into the phone because he thinks I might be a Russian spy trying to steal secrets; the broker I’d love to work for, but who already has two assistants. All I want to do is find a team, but as the days go by, it seems like I never will.
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Now I type emails to fix problems. Maybe having my fingers on the keyboard awakens my dormant writer’s imagination, but having a way with words can come in handy. For example, there’s something called a “cancel and correct” form, which we use when we have to fix an error on a trade. If you have to rebook more than three trades a month, the back office, the operations guys, will charge fifty bucks for each subsequent ticket. Andy and Josh get upset with me every month we get charged, because it’s my fault. One day, when I’m emailing a fourth cancel and correct form, I put “Personal Ads” in the subject line. Then I type, “Single White Male sales assistant with an athletic build looking for an operations guy who can help me with my cancel and correct. Must also enjoy gourmet cooking, movies, and long walks on the beach.” The response from the back office comes immediately. They don’t charge us for the cancel and correct. Right then, I begin to realize that social skills might be as important on Wall Street as an Ivy League MBA.
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Though things get better in PCS, three years somehow pass and still there’s no sign of a job on the trading floor. I go over to the floor once or twice a month, just to say hello and hang around a bit. I want them to know who I am. That way, if a job opens up maybe they’ll think of me. I want to be around the Uncle Tuckers of the Wall Street world; I don’t want to become like Andy. The trading floor isn’t stiff like PCS. It’s glamorous, flashy, filled with young guys my age. Though I do some trading, most of the work I do is administrative. I
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Just down the crowded bar a few stools sits Dave Slaine. Everyone on Wall Street knows him. Six feet tall and muscle-bound, Slaine has the body of a professional football player. But his wispy brown hair gives him an almost boyish appearance. Don’t be fooled. His hair-trigger temper is legendary on the floor. He’s the head of the over-the-counter desk; he runs the entire trading operation.
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One of the advantages of growing up with older sisters is that I know how to connect with females. It just comes naturally. I know just about every woman who works in PCS. I know where they grew up, their boyfriend’s name (if they have one), and how to make them smile. That they all happen to be beautiful says more about Wall Street’s hiring practices than any selectiveness on my part. “This is Dave,” I say to Heather and Nora. And just like that, Dave and I are surrounded by some of the most beautiful women in the bar. “You guys need a drink?” I ask. I can feel the group’s attention on me. Even Dave has begun to realize I’m standing next to him. “Heather wants a boob job,” I say. “Dave, what do ya think?” Heather playfully slaps me on the shoulder, then sticks out her friendly B-cups with a smile. Dave has one of those slack-jaw, I-can’t-believe-this-guy-just-said-that expressions. But his eyes are wide and twinkling. I can feel my stock rise.
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The whole purpose of my newsletter is to get people excited about the party, but I also want it to be fun to read. The who, what, when, where, why, and how of the party fills the whole first page. I add some cheesy champagne bottles and flying streamers clip art, and also a table of contents—a teaser of what’s inside. I know I can’t provide any of my coworkers with market knowledge or insight that they don’t already know. This has to be straight-up supermarket checkout lit. Water cooler talk. When I realize this, the stories begin to fly out of me. I title the first story “So … You Want to Be a Porn Star?” Eight hours later—an interval that goes by in the blink of an eye—I finish the last of the blind items. All that’s left is to give the newsletter a name. I write The Turney Tape in large, bold font across the top.
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Then I hear his voice directly behind me. “Turney?” he asks. I turn around and say hey. I can feel hundreds of eyes on me, from all directions. “Have you ever considered doing something other than selling stocks and bonds?” he asks. For a moment I’m not sure if it’s a compliment or an insult. I shrug and peer up at him, waiting for my fate. It’s then that his face breaks into a huge smile. “This is great,” he says. The expression on his face is better than any year-end bonus I’ve ever gotten. The turnout for the party is huge. A resounding success. At one point, John Straus walks up and puts his arm around me. He gives me a hug. “So, Turney, where did you grow up?” he asks. I can see Stephanie smiling across the crowd from us. In this moment it comes to me. I just made my first power move.
Chapter 4
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TWO YEARS later, I’m still a sales assistant for Morgan with my résumé burning in my hands. Some power move. It’s been more than five years since I first sat in the conference room listening to Stephanie and I’m still working as an assistant. “I can no longer work for my group,” I tell Stephanie. “I have to do something else.” I’ve lost all hope of becoming a trader at Morgan.
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“Get your ass over here now,” the female voice on the other end of the phone says. It has to be a wrong number. I’m just about to say something smart, or hang up, when I hear, “Turney, I’m serious, get over here right now,” she says. I realize it’s Keryn. Keryn left Morgan a year ago to go to a start-up hedge fund called the Galleon Group. I haven’t had much contact with her since. I heard through the grapevine she’s doing really well. Dave Slaine helped her get the job and then went over there himself a few months later. Liz, who worked with all of us at Morgan and then got her big break with Lehman, saw me today at my interview. She called Keryn and told her I was looking for a job. I know nothing about Galleon, and very little about hedge funds. I don’t even know what the job is. I ask her if I can come in tomorrow.
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My roommates and I live in an Alpha Pottery Barn frat house. The ringing stops and the call goes into voice mail. “Nobody can come to the phone, but we’d like to know you called … For Turney, press one; for Jason, press two; if you want Jayme, press three; for Ethan, press four; and if you need Johnny, well … sorry, there are no voice mails left.” When I get home I check my messages. “Hey, Turney, this is Janine from the Galleon Group,” the cheery voice says. “We’d like to offer you the trading position. Please call me back so we can set up a time for you to come in and sign the contract.” Later, Janine would tell me she almost reconsidered the offer when she heard how many roommates I had. How could she take me seriously? “Welcome to the buy side,” her voice mail says.
Chapter 5
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SO WHAT’S the buy side? I don’t really know the difference between the sell side and the buy side, but I soon learn. Imagine the relationship in biblical terms. Old Testament. If you’re on the buy side, you roll into the marketplace with a wagon filled with the pharaoh’s gold, charged with buying the best products you can. The pharaoh will compensate you for good purchases. Now, though you have a proprietary relationship with the pharaoh’s money, it’s not your money, and the only thing you stand to lose is what you might gain. And you stand to gain a lot if your performance is good. Like, the next time you roll into the marketplace your wagon might have custom rims or built-in GPS. But you’re not the only wagon of gold. So when you get there you have to be ready. The open market is buzzing. There are merchants everywhere. If you’re on the sell side, you want the pharaoh’s buyer as your customer. Every merchant wants to get the highest price he can for all of his goods, and they all want to rid themselves of the crap in their inventory. They want the highest revenues. Competition between the merchants for your attention is great. They need you. Some of them offer you boat rides down the Nile with a few “mistresses of the house,” or a tomb in the pyramids, or a weekend in Mesopotamia with some really good lotus. Whatever. But a lot of them are phonies, and if you end up buying the crap, or paying too much, maybe the pharaoh doesn’t let you drive the wagon next time. Or worse, you have to go back to being a merchant. If I buy some livestock from the guy who took me down the Nile on Thursday night and I can sell it at a profit to the guy I went to Mesopotamia with on Friday, then I’m going to do it. So in one sense, you need the sell side almost as much as they need you. On Wall Street the buy side can buy or sell—they’re the customer. The sell side is selling information, research, and customer facilitation. In the simplest terms, the buy side is the client. The sell side loves clients.
Chapter 6
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RAJ RAJARATNAM, Gary Rosenbach, Krishen Sud, and a fourth guy named Ari Arjavalingam (who worked on the West Coast) started Galleon in 1997. They all came from Needham & Company, a small investment bank, where Raj’s performance, especially in tech stocks, was making the firm a lot of money. He was also making a lot more money for himself—ten times the profits he made for Needham. When the partner, George Needham, found out, he told Raj, Gary, and the others that they could no longer trade in their personal accounts. It was then that the four of them bolted from Needham to launch the Galleon Group. Their timing was sublime. It coincided with both the technology boom and the emergence of hedge funds. Still, in the early years, they had to scratch and claw for every resource they got, but now, in 1999, Galleon’s sails are aligned with the favorable financial wind.
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“Each day expect to be fired,” he says. “If you’re not, then you’ve had a good day.” The terror begins each morning in the shower. The frightening thoughts come one after the other like punches to my solar plexus. Did I book everything correctly yesterday? Did I remember to do everything Gary said last night? Each and every morning, I go to work with a knot in my stomach. It’s the same every day. I’m the first one in the office.
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“Oh no you don’t,” he screams. “Stand in the corner! Five minutes!” I look at Gary and then the corner of the room. I think he’s serious. Dave starts to laugh and Keryn and Todd-o are trying not to. Even Gary and Raj are smiling. Gary goes straight-faced again and points to the corner at the other end of the trading desk. I’m not sure what to do. I walk over to the corner. I don’t say a word. I face away from the desk about two inches from where the walls connect. I’m almost thirty years old and I’m stuck in the corner like a first grader. I close my eyes. I hear chuckling behind me. I think they’re grabbing analysts and assistants from other parts of the office to have them look at me. Maybe Gary did say “buy,” but why would I type “sell”? I want to laugh. The idea of an adult professional having to stand in the corner is comical, even if the adult professional is me.
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I want to buy QCOM (Qualcomm). I lost all of my profits on commissions, so I’m going to buy it on the Instinet machine so I only have to pay a .01 commission. I click on the buy button, type “QCOM” on my keyboard, type “10,000,” and hit send. I look at my screen; I bought ten, thirteen, twenty, thirty thousand shares. What’s happening? I keep buying more shares. Up, up, and up. I can’t stop it. I look at my 0 button and it’s stuck in the down position. The keyboard they gave me was the oldest, crustiest one they had. Oh my god, I just bought 100,000 shares of QCOM. I’m not sure what to do, and then I hear Dave scream, “QCOM being downgraded by Merrill!” He has no idea I bought the stock or that I bought 100k shares of it. The stock is down four points before I even realize what’s happening. In a matter of minutes I’ve lost $400,000. I have no idea what to do. Dave stands up and leans over to my computer screen. “Jesus Christ,” he says. He hits the J. P. Morgan direct wire and tells him to sell 100,000 shares of QCOM, on the wire. Meaning it will be done before he hangs up the phone. And as he does he says to me, “You’re welcome.” The stock is in a free fall. QCOM is down another six quick points, but now the broker is on the hook for the extra $600,000, not us.
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And on a trading desk filled mostly with bad cops, it’s only natural for me to assume the role of good cop. I bend over backwards to help the salesmen who cover us. They’re ecstatic when I pick up the phone. It means they aren’t going to get a tongue-lashing for whatever trading sin they might have violated, or for merely being born. They always want to take me out to dinner or meet for a drink. Sometimes they even offer to take me to a game or a concert. I get asked at least three to four times a day. I never want to say yes. I’m afraid they’ll ask me questions about the market. Questions I can’t intelligently answer. They’ll realize I’m a fraud and don’t belong.
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Twice a week I go out with sales traders. Every time I pick the restaurant or bar we go to, and each time I get a ride home by car service. I start to enjoy these nights. I’m the client. There’s very little I can do wrong. At first I don’t understand it. Why are these guys tripping all over themselves to be my friend? Much later I realize that people on the sell side buy call options on people just like stocks. Today I might not be the head of the desk or control most of Galleon’s order flow, but it’s in their best interest to befriend me early in my career. Take care of me now, and I’ll remember you later.
Chapter 7
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Undoubtedly, part of Gary’s good humor is because of the business Galleon is doing. By 2000, our reputation on the Street is vicious. That happens when some of your funds have triple-digit returns. We no longer talk in millions; we talk in billions. Investors can’t give us money fast enough. If a salesman or trader won’t do what we want, there are ninety-nine other guys standing in line to service us. Each day a new analyst shows up and occupies one of the vacant offices. We’ve picked off another senior trader from Morgan Stanley, and the bosses have promised to hire a couple of younger guys to take over my grunt work. But there’s also something about Gary’s directions that makes me suspicious. Coinciding with the firm’s insane growth is an ever-thickening atmosphere of intraoffice distrust and competition that flows down from the top. Raj is notorious for taking two analysts who are equal in status and manipulating a rivalry between them. I call it the Raj cockfight model. He whispers something to one analyst and then the other, and then likes to sit back and watch them scratch each other’s eyes out. It’s survival of the fittest. The one who wins the fight gets to keep his job; the pile of bloody feathers gets swept out the door.
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I’ve lost a total of $75,000, but we’ve paid Goldman and First Boston $60,000 each in commission. And that’s the point, Gary tells me at lunch. “Good job,” he says. It doesn’t feel very good, but if he’s happy, then I’m happy. Though it still doesn’t make sense to me, it’s fun. And, both my Goldman and First Boston sales traders are thrilled. It makes more sense the next day. First Boston prices an IPO, Selectica Inc., symbol SLTC, putting four million shares on offer this morning. I have no idea what the company does, but its IPO is about a hundred times oversubscribed. Every client of First Boston is trying to get an allocation. This is what everyone refers to as a hot deal. We put in for a million shares last week just like everyone else on the street. First Boston calls and I pick up the phone. My sales trader tells me we got 100,000 shares and the deal is priced at $30. He says we got one of the highest allocations on the Street, which is probably true. Most of his clients got shut out or received an allocation of five, ten, or twenty-five thousand shares, he says.
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It becomes clear to me then how the game is played, and why Gary wanted me to trade in and out and didn’t care if I made money for the firm. It’s quid pro quo: the bigger the commissions we pay the sell side, the better information and allocation we receive in return. The seventy-five grand I lost for the firm the day before is just part of a business model that generates huge profits. With the stock now at $110, we make eight million bucks. It’s like they just handed it to us. And there’s nothing wrong with it from a legal standpoint, I guess. Wow. What a business.
Chapter 8
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“Jefferies is going to upgrade Amazon in six minutes,” it says. Then I hear a click, and just like that he’s gone. I have no name, no phone number, and no idea if the information is correct.
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The stock is up almost five dollars when Raj walks through the front door. I wait until he gets into his office. There I tell him about the call from Mr. Whisper and that I bought 100,000 shares. Our P&L shows a profit of $500k. He looks down at his computer screen and begins to giggle. Raj is a big giggler, especially when things break his way. I ask him if he wants me to sell the stock or hold on to it. “I got it,” he says, smiling. For the first time in my Galleon career, I feel less like a clerk and more like a trader. After the Amazon trade, I realize that nothing in the world of hedge funds happens by accident. It’s all about getting information the fastest, and however you can. If I’m going to make money, real money, buy side money, then I need to find some way of creating my own edge.
Chapter 9
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We’re having a garage sale—everything must go. Either we know something or we’re going out of business. Raj steps out of his office. He cups his left hand on the side of his mouth as if he’s about to whisper something, but instead yells over to an analyst: “Send me an email with fundamental reasons to sell Nortel,” he says. “Make sure you put something in it about them canceling from the Robertson Stephens conference.” Robertson Stephens is a boutique investment firm based in San Francisco. Once a year, it hosts a technology conference where all the big players and investors gather to press flesh and talk about the industry and the future. That Nortel, one of the biggest players, pulls out at the last minute doesn’t necessarily mean it has bad news. But it could certainly be construed that way.
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It’s utter chaos. I’m trying to give out my entire stack of sell orders, take reports for everyone on the desk, and book them in our system. A normal busy day for Galleon is a total of one hundred orders, but that’s for the whole day. We’re in the midst of more than twice that in an hour. I pray I’m not making any mistakes. After an hour of complete bedlam, the room quiets. We did it. We sold more than two hundred positions. Now we’re flat; we don’t own any stocks. Unbelievable!
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Dave comes back and throws forty new tickets on my desk, but now we’re shorting all of the names we used to own. Shorting is the same thing as selling, but without owning the stock. You sell first and hope to buy it back cheaper. Not only did we sell all of our stocks, but now we’re betting against them. Chaos again, but even worse this time because we’re racing against the closing bell, which is in thirty minutes. Traders screaming, phones ringing, Raj asking if we’re done. I can’t keep things straight. I don’t have time to think. At all times a phone is on my ear, I’m listening with my other ear to my desk-mates, and I’m trying to book trades. When the closing bell finally rings, Galleon is 100 percent short. Two hours ago we owned almost every technology stock, and now we’re short them all. This is uncharted territory, exposure this hedge fund has never had before.
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A hush holds the room. Raj stands behind Gary’s desk; they’re watching the news scroll across the tape. Two minutes after the bell, Nortel Networks reports terrible earnings, and their future earnings forecast is even worse. At the height of the tech bubble, the company grew faster than its expertise. Now their stock is being halted. This is not only bad for Nortel, but bad for the whole market. The aftermarket futures are getting killed, down huge. The bubble is about to burst and we’re going to make a boatload of money tomorrow. “Holy shit,” I whisper. Then Gary instructs me to book 10,000 Nortel puts (1 million shares) at $.25 per share commission to the broker—that’s ten times the normal commission. I start to feel like I’ve wandered into a heist and Gary just handed me a mask. If we didn’t have prior information, why are we paying extra commissions? It has to be hush money. I book the trade because Gary tells me to. But I can’t help thinking how thin that reason would be as a legal defense. When I show Dave the ticket, he tells Raj we’re all going to jail. “I didn’t authorize the trade,” Raj answers. “It’s Gary’s and Gary’s alone.” Oh my.
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Over the next few weeks, the atmosphere in the office is tense and suspicious. A couple of my fellow traders talk about lawyering up. Dave tells me the SEC called Raj and wanted to know why he sold all of his tech stocks. Raj told them he did it because Nortel was pulling out of the Robertson Stephens conference. In that moment, I remember Raj screaming to the analyst to include in his email the information about the tech firm backing out of the conference, and I realize Raj was creating a paper trail to support his alibi. And it worked. Raj’s excuse was good enough for the SEC. They probably even told him to have a great day before they hung up.
Chapter 10
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But though I’ve come a long way in the short time I’ve been with Galleon, I still haven’t broken through with a big trade, or secured a steady flow of information. Then one day the Leerink Swann light rings. They’re a tiny brokerage firm in Boston, focusing on healthcare. I’m the only one who answers their line because everyone else thinks they’re useless. I’m starting to think the same thing. There is shorthand we use on the desk. Brokers who call are either an MG or a YG, “my guy” or “your guy.” By default all of my MGs are the people no one else wants to talk to—the Island of Misfit Sales Traders. I’m still the low man on the trading desk besides Rob and Chad, who don’t talk to anyone. Funny thing about Misfit Island, though. Every once in a while you find a Cabbage Patch doll in the mix.
Chapter 11
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THE FIRST six weeks of 2001 have been difficult. We chased a rally in January, but missed it. Now the market is selling off again. We’re losing money. Let me repeat that—we’re losing money. It’s a time when all hedge funds must navigate to survive.
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Everyone on Wall Street talks about their “number.” It’s usually a single or double digit, at least in the strata in which I exist, something like “five” or “ten.” Those numbers are the millions you need in the bank to leave Wall Street. The longer you stick around, the more children you have, the better the schools they go to, the more ex-wives and bad investments you collect, the more the number rises. I’ve never seen anyone hit their number and leave.
Chapter 14
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ONE BROKEN leg, 2 prescriptions of Vicodin, 4 planes hijacked, 7 escorts called, 10 percent loss in the market, 12 nights of cocaine, 16 weeks of mono, 19 terrorists, 24 one-night stands, 30 cartons of cigarettes, 75 new sales traders, 100 miles to the summer house, 150 business dinners, 250 nights out, $300 million in capital, 365 days later …
Chapter 15
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2:55 p.m.… 3:17 p.m.… 3:58 p.m.… I count down the final minute like a Canadian in Times Square on New Year’s Eve. I’m free. Forty-five minutes later: There’s an ounce of cocaine piled in the microwave. An additional few thousand dollars’ worth of blow sits on a single plate in the kitchen. The place is littered with Grey Goose bottles, ice, cups, and straws for snorting. We call this East Side apartment the White House for obvious reasons, but it’s more like a Wall Street crack house.
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We sip our fifteen-dollar drinks and take turns going into the bathroom to snort key bumps of cocaine. After a few big nights, sometimes it takes a couple of minutes to insert my apartment key into the lock because of the crusted powder on it.
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Gus digs in his pocket and surprises us with a few ecstasy pills and some weed. We traders on Wall Street pride ourselves on being the ultimate alchemists. Drugs, alcohol, money, and sex are all ingredients in the elixir of power. I
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The waitress stuffs bottles of Veuve Clicquot into a bucket of ice. The bottles are only half liters, so we order multiple.
Chapter 17
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Once, during my Argus days, Brad, my sales trader from Lehman, calls. There are a dozen or more guys like Brad who’ll do anything for commissions. I’ve been out with Brad numerous times, for dinner and at clubs. I like him. He’s a couple of years younger than me and holds a junior position on Lehman’s trading desk. Actually, I see some of the old me in him: he’s a little overwhelmed and people like to pick on him. Brad is a good sport about it. He went to Syracuse University and comes from Jersey. Now he’s on the phone, begging for orders. But before he gets to business he rehashes a recent night out. “You’re like the Joan Rivers of Wall Street,” he says. “You know everyone.” I act like I’m offended, but I’m really not. I like that people know me. I hang the phone up. Click. He calls right back. “I think we were disconnected,” he says. Nope. Click. This happens three times in a row. Finally on the fourth, I let him speak. “You’re really mad at me for that?” he asks. “Uh-huh,” I say. “Aw, Turney … please. Let me trade with you.” “Maybe,” I say. “But first you have to get back in my good graces.” “Anything,” he says. “Okay, I want you to climb up on your desk and sing ‘Milkshake.’ ” “Come on,” he pleads. “You heard me: up on your desk and leave the phone open so I can hear.” First comes the shuffling of paper and the squeak of his heels. And then I hear the rap hit coming out of his mouth, off-key and with something less than full gusto: “My milkshake brings all the boys to the yard …” In my mind’s eye, I can see him on top of the desk as the crowded Lehman trading floor stops to watch and throw balls of paper at him. I call over to Melinda and tell her to pick up the Lehman line. We’re both laughing. When Brad gets back on the phone, I tell him to buy me 69,000 shares of BBH.
Chapter 20
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Though using 69 is an original idea and as far as I know unique, smart traders have been finding ways to separate themselves from the crowd for years. Wall Street isn’t like slots in Vegas, where you are playing against the house. This is poker, with winners and losers sitting at the same table. Picture two hedge fund traders, one from Hedge Fund A and the other from Hedge Fund B. Both have identical educational backgrounds, identical resources, and identical ability to process the same information. But that doesn’t mean they’ll make the same amount on the same idea. It’s the art of making money. It’s a skill. I don’t have the same educational background as many of the people I trade with and against. I don’t have the advantages other traders have or have been given. So I have to find my own edge. I take what I’ve learned in my first eighteen months at Argus, the ability to read people and nuances, add my alliances with the other members of the Healthcare Mafia and the courage of a teenage Camaro driver, and then stamp all of it with the number 69. And guess what? I start to get really good at what I do. Soon I’ll be sitting at the poker table with everyone’s money.
Chapter 22
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At some point, I guess when I entered my teens, the relationship between my father and me became the kind of war that nobody wins—ever. It was just lots of firing missiles back and forth into enemy territory, trying to make a direct hit. If he wanted to punish me, I’d hide behind my mother and flash a smug smile his way. He’d flash one back. He had all the time in the world, his grin said, and there’d be a day when Mom wouldn’t be standing between us. As I got older our relationship matured into a respectable struggle, a gentlemen’s duel with lots of underlying causes and triggers. There’s no anger in it, at least on the surface. And that’s where both of us stay.
Chapter 24
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Belittling was a way of life there. Always politically incorrect, Raj and Gary one day walked into the office with a dwarf, whom they introduced as an analyst hired to cover “small-cap” stocks. Other stunts weren’t nearly as innocuous. Once, after I’d left Galleon, Taser International came up to the offices for an investor’s road show. Raj offered five thousand dollars to the most attractive woman in the office if she agreed to get zapped. A fellow employee pointed the Taser as the woman braced herself. Her legs buckled and she collapsed to the floor when she was hit by the darts. The story goes that she may have had an accident in her pants. The odor of burnt flesh and defecation lasted longer than the laughter. Fuck those guys.
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The point is, I have to change. Here I am, hitting full stride in my career, and I’m caught up in this bullshit. I don’t even care about the money. Yes, I’m still upset that my friends at Galleon think I used them, that I put their jobs in jeopardy. But I’m not going to let people like Gary push me around, and I’m not going to feel guilty about pushing back. And if someone else gets hurt in the process, well, that’s the cost of war. You do more damage being tentative than making a wrong choice. From now on, I’m all in. If I’m going to be a successful trader, I can’t do it by just trading stocks. I have to be willing to club baby seals, park in handicap spaces, and demolish an orphanage to build a strip club. On Wall Street, the timid get trampled. I’m tired of the hoof marks.
Chapter 26
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It’s past midnight. On the street, I get a text from a guy named John at Credit Suisse. He’s with a group at Lotus back in the Meatpacking District. I jump in a cab. There’s a line of about twenty people waiting to get in when I arrive. I walk directly to the door, but the tree-trunk arm of the three-hundred-pound African American bouncer stops me. “I don’t wait in lines,” I tell him. “I snort them.” He looks at me curiously for a moment and then he opens the velvet rope.
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I notice a girl standing off to the side, talking with a couple of her friends. She looks really cute. She’s got a silky black sleeveless shirt and white pants on. After Labor Day—I love it. I catch her eye as John hands me a drink. She’s petite and her hair is all done up except for one loose strand that hangs to the side of her head. I like the way she smiles. I walk directly up to her. “Do you think I’m cute?” I ask. “I—I guess,” she says with a giggle. “I’m thirty-four, single, live in a triplex in Tribeca, and make seven figures,” I say, and then wait a beat. “How cute am I now?” “You’re funny,” she says. I don’t even say goodbye to the guys from Credit Suisse. I grab my new friend’s hand and leave. By four fifteen a.m. I’m standing naked in my bathroom. I drop the used condom in the toilet and look in the mirror. My hair stands straight up and my face is bright red. I have two thoughts. How am I going to get this girl out of my bed and how am I going to get out of work today?
Chapter 30
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Restaurants are a great sinkhole for Wall Street money. But that’s because too many guys go into the business for the wrong reasons. They want to be part owner of a fancy bistro or a nightclub or bar to show off, to act like the boss or have a place to bring their girlfriends.
Chapter 32
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I can’t live like this anymore. I never had a friend try to commit suicide. A pipe never burst in my apartment—it was a leak. Jenn had a miscarriage, but it was two weeks before I called in sick. I’ve been sick almost once a week, but not the kind of sick I tell work about. I’ve been doing cocaine four nights a week. I tell Jenn I have business dinners and then rent hotel rooms to snort cocaine by myself. I tell my friends I’m busy with work dinners. I tell Wall Street friends I’m busy being a father at home. I thought I was going to be able to stop when Jenn told me she was pregnant. Then I knew I would stop when my daughter was born. But when Jenn and Lola fall asleep, I tiptoe out to the computer and watch porn and snort coke all night. I can’t stop. Just one more line. I’m so fucked. How’d I let it go this far?
Chapter 35
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We move into the house on Memorial Day weekend, 2007. In full spring bloom, the yard is beautiful. The original owner of the house, which was built in 1906, was a landscaper from Europe and brought with him many of the trees that make the property so attractive. We agreed on a price of $2.1 million. After the broker fees, the co-op flip tax, and the mansion tax, I have $500,000 from the sale of the apartment to contribute toward the down payment. To that, I add $100,000 from my checking account, which just about drains it, and then I borrow $1.5 million from Wells Fargo. Sure, it’s a lot of money, but real estate is bulletproof.
Chapter 36
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Though a part of my brain has made a prudent decision, the rest of my body is still in revolt. My hands grip the wheel like the car has just gone off a cliff. I can feel perspiration gather under my arms and drip down my sides. I light up a cigarette. I just need to get on the bridge. Once I get on the bridge, there’s no turning back. The traffic is thick. It takes me several red lights to get past Fifty-Seventh Street. I light up another cigarette. A hit of cocaine would be so nice right now, though. It would never be just a hit, I remind myself. Then my mini-fantasy goes where it always takes me: alone in a hotel room, with enough coke and porn for a short forever, and a bottle to even my world out. I look down at the keys to my house in the console. I grab them and pretend to dip them into a tiny imaginary bag of cocaine. I bring the key to my nose and snort it in one aggressive pull. My head snaps back, my eyes are closed. Then a horn sounds behind me. When I open my eyes, the cars ahead have moved along. I throw the keys back in the console. I just need to get home. At the moment of no return, just before I enter the ramp, I feel one last intense tug to peel out of the traffic flow and head back downtown. But then I realize the cars that surround me have sealed my fate. I inch up the ramp and onto the bridge.
Chapter 37
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IN JUNE, Jeff calls me into his office and says he wants to talk about the credit market. Credit market? I just got used to subprime, and now he wants to talk about credit? Since February, the talk on the Street has been all about subprime. I’d heard the term for the first time right after HSBC wrote down $10.5 billion of losses in subprime-related mortgage-backed securities. Then, over the next few months, subprime became part of just about every Wall Street conversation. The primary worry was that it would affect the homebuilder stocks and the financial sector. But by June the Street, at least my corner of it, isn’t that worried anymore. Everyone says it’s a housing problem for a certain group of borrowers. “It’s just the minorities,” I hear. “Has nothing to do with
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In July we get short and Countrywide Financial, the biggest U.S. mortgage lender for single-family homes, reveals their delinquency rate has nearly doubled to almost 25 percent. As the housing prices plummet, more and more loans sink under sea level. Then, at the end of July, Bear Stearns announces that nearly all the value of two subprime hedge funds has vanished. The news is startling. It’s one thing when an overseas bank, such as HSBC, has problems, but another thing altogether when a firm on the Street has them. It’s like the SARS epidemic in Hong Kong. You feel sorry for the Chinese, but you’d feel a whole lot different if your neighbors started wearing surgical masks. Still, three days later, the Dow climbs over 14,000 for the first time. The peak is short-lived, though. BNP Paribas, France’s largest bank, halts withdrawals from three funds while it sorts out the stateside subprime mess. Over the next two weeks, the Dow loses 10 percent. New home sales drop more than 20 percent. The market is schizophrenic. Led by a cash infusion from the European banks and the Fed, credit steadies and the stock market corrects; by October it climbs to new highs. The rebound is driven by encouraging news from tech giants such as Microsoft, Google, Apple, and Intel. I’m not sure what to make of it. Everything around me seems to be in distress, yet the market continues to surge.
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It’s November 1, 2007, and Jeff is already in the office when I get there. This rarely happens. Before I get to my desk, he yells to me about a report by Meredith Whitney. I don’t know who Meredith Whitney is, let alone what he’s talking about. I boot up my IM and send a message to Gus to ask if he knows, but he’s not in yet. No one is in at this hour except some of the international traders around the Street. Initially I find out a few things about her: she’s hot, she’s a cougar, and she looks like she’d be fun to roll around with. Then I find out Meredith is an analyst at Oppenheimer and the report she’s put out has Wall Street electrified. Jeff begins yelling to me to sell SPYs and QQQQs. What he wants me to do is to short the whole market. I haven’t read the report, but there’s no denying the urgency in my boss’s voice. The market doesn’t open for hours, so I start selling both the SPYs and QQQQs on my Instinet machine. The pricing isn’t great, but at this point I don’t think Jeff cares about my execution; he just wants to sell as much as he can. In just an hour or so, I have us short fifty million dollars, and in just a few hours the firm is net short and it looks like we’re going to be for the foreseeable future.
Chapter 40
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In March, Jenn finally told me she’d had enough. We put the house up for sale. She said she couldn’t do it anymore, that she wanted me out of the house. But I can’t afford to rent an apartment, let alone a hotel room for a night. I’ve been sleeping on couches, driving back and forth to get new clothes and spending the weekends in Huntington Bay. Chase closed our home equity loan. I’m out of money. Even though the firm did exceptionally well in 2008, up 10 percent, my bonus was tiny compared to what I’m used to. We don’t manage enough money. My salary doesn’t cover our mortgage, and I still have to feed our family.
Chapter 42
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Although the house is going into foreclosure, Jenn and I are not getting back together, and no firm wants me as their trader, the next few months have a graceful simplicity to them. I attend an outpatient program at a place called the Realization Center and go to a few meetings a week. A colleague on Wall Street offers me a job selling his geopolitical research—I used the product at Berkowitz. All it entails is picking up the phone and leveraging what is left of my contacts. But the best part of the job is, I can work from home. It allows me the opportunity to take Lola to preschool three times a week. It also gives me time to write.