The Buy Side

by Turney Duff

  When I leave Kevin, I cut through Central Park to get back to the East Side. I walk past Lexington Avenue and over to Second Avenue, passing bar after bar after bar. I never realized there were so many. I guess it’s only something you notice if you aren’t drinking. I find my gaze lingering on each bar front. Soon I’m looking through the windows and into the welcoming darkness. I come upon one that’s particularly enticing, your typical New York City dive bar. My kind of place … It pulls at me and I cave easily. I find an empty bar stool. A guy two seats down gives me a glance. He reminds me of Larry from all those years ago. The bartender comes and asks what I’d like. I look right into the bartender’s eyes, but my mouth doesn’t work. “I’ll go refill the ice,” the barman says. “You give it some thought.” When he bends to grab a bucket under the bar, I head for the door.

  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 us.”

  But it does bring volatility to the market. And with tons of volatility, there’s money to be made. I start trading the financials and homebuilders back and forth. I buy them on down days and sell them on up days. I fall into the rhythm of it. I can feel it, and it begins to work for me. Meanwhile, subprime or not, the rest of the market is driven by mergers and acquisitions. The activity is insane. Wild. Triple-digit swings in the Dow. I’ve never seen anything like this in my whole trading career. M&A deals maybe happened once a month. Now they’re happening every day: Google buys Doubleclick; Yahoo buys RightMedia. We make a million dollars just on the rumors of Microsoft buying Yahoo. Potential takeover targets line up like dots on my old Ms. Pac-Man game. All I have to do is guide Sue (Ms. Pac-Man) through the maze. Then there’s a massive ad network consolidation. One of our analysts says a digital advertiser named aQuantive is prime for the taking. We think he’s right and buy it. A week later, news breaks that Microsoft is acquiring aQuantive for $6 billion. The day before the announcement, aQuantive had a market cap of just $2.8 billion. The trade makes our firm a couple million dollars. This is too easy.

  But when Jeff calls me into the office, it isn’t about patting me on the back. Any success I’ve had is considered under his direction. I sit in the chair right in front of his desk. He tells me he sees a connection between subprime and credit. He starts talking about high-risk mortgages that were bundled and sold as asset-backed securities all over the world, particularly in Europe. I have no idea what he’s talking about. I think he means a derivative play on the underlying mortgages, but I’m not sure. But when he starts talking about collateralized debt obligations, I give up trying to figure it out. “What do you want me to do?” I ask.

  “Start monitoring the credit markets,” he tells me. “I’m a little worried.” The only thing I’m worried about is how to beat the traffic on the Long Island Expressway.

  Jenn and Lola are on the front porch when I get home. I beep a few times as I pull in the driveway. Things still aren’t great with Jenn. Truth is, she doesn’t trust me, even though I haven’t had a drink or any coke in almost nine months. “I called a cover company for the pool,” she says as I walk up the front steps of the porch. Lola sprints over to me to give me a big hug. “Great,” I tell her, trying to sound authentically pleased. But every one of her words comes with a dollar sign. We’re both concerned about having an open pool and a wandering eighteen-month-old. Despite the relative success I’m having at work, the house is a huge drain.

  Over the next weeks, I try to learn more about credit than I ever hoped. My computer screen is now filled with things like TED spreads, LIBOR OIS spreads, sovereign debt, and sovereign CDS. Lola knows as much about these things as I do. But I do understand this: credit is tightening, and if banks aren’t going to lend money like they have been, then the economy will suffer.

  Jeff was a week or two ahead of the stampede of suits worrying about the credit crisis. But now he’s like Jamie Lee Curtis in Halloween. He knows Michael Myers is in the house, but he’s waiting patiently in the closet to poke him in the eye with a hanger. He’d rather do that than just get out of the house. Though we’re keeping our long exposure on the books, we can and will get short at any point. He’d rather sell the market after it’s already down a percent or two than try to be a hero and call the top.

  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. I know something is wrong, but I don’t want to believe it. What’s wrong is that subprime isn’t contained like everyone had said months before. What is contained is the truth of what is happening inside of some of America’s biggest and most reputable banks—Citigroup, Merrill Lynch, and UBS among them. And the truth isn’t pretty.

  The night before Halloween, Lola wears her Snow White costume to dinner. We’ve decided on hamburgers cooked on the grill. The weather is mild, and this might be our last chance to eat outside. Jenn has the porch decorated in friendly ghosts, jack-o’-lanterns, and a life-size witch, one with a happy smile so as not to spook Lola. The witch hangs from the porch roof and sways in the light breeze. As we sit, I can’t take my eyes off my little princess: the plastic diamond tiara in her dark hair, her skin the color of pearls. She pushes the meat out of the way; she’s much more interested in the potato chips and orange soda. After a few bites, she’s off to the yard to chase the dogs. Inside the white picket fence, the lawn is a carpet of red leaves from the Japanese maple trees. Lola and the dogs run back and forth. Jenn sits across from me wearing a designer jean jacket with a fur collar.

  “I’m getting nervous,” I say. She tilts her head sideways, curious, and puts a little more salad on her plate. “We’re spending like twelve grand a month before we even put food on the table.”

  “So we’ll cut our expenses,” she says. “We can cancel the cleaning lady, we can get rid of all the movie channels, we won’t eat out, and we don’t need to go on any vacations.”

  Though my experience tells me everything will work out—it always has—I’ve done the math in my head and know what’s happening on the Street. I can’t help but feel anxious. “With all the bills, property taxes, and a six-and-a-half-percent mortgage, it’s still gonna be tight,” I say. Jenn lights a cigarette but hides it from L
ola; she blows the smoke toward the house. In the yard, the fallen leaves crackle under Lola’s princess footsteps.

  “Well, if we can’t afford to live here, then we’ll just sell this and move to a smaller place,” she says.

  “Yes, that’s what we’ll do,” I say, smiling. But I’m not sure that’s even possible.

  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.

  Whitney’s report, it turns out, is a scathing assessment of the very solvency of Citigroup, the biggest bank in America. The impact of it rocks Wall Street like an earthquake. Banks such as Citigroup have been considered impregnable castles where the masters of the universe live. But in the weeks to come, when their vaults crack open, only worthless pieces of paper spill out. Whitney times her report to go along with the Fed meeting, which warns of slowing economic growth. Good night. It’s over.

  That weekend I strap Lola into the car seat and drive the short distance to the center of Huntington Village. On the way to New York Avenue, I see a house with a For Sale sign in front, then another, and another. I follow New York Avenue to Main Street. Huntington Village is a quaint little town and one of the reasons we bought the Queen Anne Victorian. The sidewalks are red brick, and iron gaslight fixtures hold the streetlights. Main Street is the perfect setting for a homecoming parade. But on this day, I see that several stores are empty or going out of business, and I wonder to myself: Why haven’t I noticed this before?

  MARCH 2008

  SIX P.M. It’s snowing. I hear the melodious plucking of a harp. At first just a few tiny, wispy flakes dance and flutter to the triumphant sounds. The flakes’ graceful descent is spectacular. The scene is dreamlike. The curtain of snow grows thicker. The music becomes louder, faster. I can feel the excitement building in my stomach. It’s like I’m seven years old again and have just found out it’s a snow day. The melody lingers in the air as the final snowflakes parachute to the ground.

  The mound of cocaine rests on a polished mahogany coffee table, next to my American Express card, a glass of scotch, two packs of Newports, my lighter, and a remote control. I’m holding my cell phone as I hit Dial. I stand up to pace the deluxe suite at the Fitzpatrick Hotel. This is the hardest part. I need to call now so I can start my night. But is it too early to say good night to Jenn and Lola? Jenn never tried to be my parole officer; she wants what’s best for me. She knows how much the commute is killing me, so we’ve worked out a deal for me to stay in the city once or twice a week. She thinks I’m at Gus’s, though, not in a four-hundred-dollar suite. When she answers I try to act casual but tired. She’ll believe tired. “How’d you do today?” she asks first thing. It’s a question she’s been asking a lot lately. Now the whole world knows what’s happening to Wall Street.

  “We’re doing better than most,” I tell her. “We’re still up on the year.”

  “I’m glad,” she says. “We need you to be up.” I ask if I can say a quick hello to Lola. Jenn calls her, but she doesn’t want to get on the phone. Then Jenn starts talking about Lola’s preschool, but I’m not listening anymore. I’m staring at the mound of cocaine. I need to get off the phone.

  “I’m gonna crawl into bed and watch a movie,” I say. “I might fall asleep, so if I don’t talk to you again, have a great night. Kiss and hug Lola for me.”

  “Okay,” she says, but she sounds a little annoyed. Did I cut her off? Did she have more to say about Lola’s preschool? Or is she suspicious?

  But my questions are quickly displaced by the harp music that begins to play again. I roll a twenty-dollar bill and gather enough cocaine with my American Express card to form a hefty line. I order my first porn movie with the remote. I light up a cigarette. I snort the entire line and the rush immediately flushes to my head and then all over my body.

  It’s maybe a few days later, I can’t be sure. I’m at work, though, and I get an email from Gus. It’s a picture of a two-dollar bill taped above the Bear Stearns logo at their corporate headquarters. That’s how much J. P. Morgan paid for Bear’s stock, a stock that was worth $171 just a year before. I look around our office. The analysts are sitting silently, glued to their screens. Heather, the other trader, has a worried look on her face as she slumps low in her chair. Jeff looks like he hasn’t slept in months. I imagine all of Wall Street looks the same. It doesn’t matter: sell side, buy side, fixed income, equity, or private equity, we’re all screwed.

  I send an IM to James, with whom I started trading a few months ago. Let’s meet at 4:15, it says. Our code. Since 4:20 is synonymous with smoking weed, we thought meeting at 4:15 was only appropriate for cocaine. I trade a ton with James today, all day. After the market closes, I’m on the sidewalk, smoking a cigarette. Midtown is already a sea of people heading to Grand Central, nearly all of them with a cell phone pressed to their ears. I can hear their conversations: a woman with a thick Long Island accent, a guy whispering to his sidepiece, a boss screaming at his secretary. Across the street from me is a bike messenger. His bare legs are purple with tattoos; he wears a locking chain across his chest like a slave. When I look at him, he looks away and begins touching his nose, and I know it’s some kind of a signal. I’m convinced he’s watching me. Just then, James comes waddling up Third Avenue. I hand him my pack of Newports and he puts it into his coat pocket. “Fucked up out there, dude,” he’s says. “All my accounts are freaking out.”

  “I know, I know,” I say. “Fucking brutal.” But all I can think about is the bag he’s surreptitiously sliding into my cigarette pack. James asks about my plans for the night. I tell him I have a dinner with some research guys. “I need this,” I say, as I hold up the Newport box he just handed me, “just to get through the night.” He laughs at the thought of my being all jacked up sitting around some Wall Street stiffs. As I begin to turn away, I feel another bolt of paranoia. “This is just between you and me,” I say. No one can know, not even Randy or Gus.

  “No problem,” he says. “I’m a vault.” I search his face for any sign of deceit. His eyes dart away from my assessing glare. I give him a gentle fist bump to his shoulder and walk away.

  And then I’m in a room in the Fitzpatrick again. Hank Paulson is on the television screen. I pour out the coke onto the coffee table in front of me. I rip a line, hit mute on the remote, and watch Paulson’s lips move for a few moments before I order porn.

  It’s after work, a week later, maybe two. I go to an informal charity event at a bar in Midtown. It’s to raise money for Wounded Warriors. When I walk in, a few people call out my name—they’re surprised to see me. I go to the bar to order a Coca-Cola. “I don’t drink anymore,” I tell the bartender. He didn’t ask, but he tells me I’m probably better off. I stand with my back to the bar, looking out at the crowd. All of a sudden it dawns on me: they’re all younger than I am. My ten years on the buy side flash before my eyes, and I think of Galleon with Gary and Raj. I ran into Raj at one of these cha
rity events not too long ago. He acted like he didn’t even know me. I laughed at his phoniness. I guess I was dead to him. The last time I saw Gary was at a fortieth birthday party for a mutual friend. They had Usher play for the entertainment. I alluded to the MDRX trade with the courage of cocaine within me. I said that I didn’t know who said what, but I was sorry for my part. He looked me in the eye and shook my hand. I think he thinks I was apologizing for something, but that was fine with me. I believed it was behind us.

  At the Wounded Warriors party, I see a friend of mine from Credit Suisse walk in. Stephen looks like he just got off a beach. He’s tan and his long hair seems highlighted by the sun. He grew up in a Wall Street family, but surfing is more important to him than his job. He gives me a big hug and asks how I’m doing. When he notices the soft drink in my hand, he smiles. “I’m proud of you, man,” he says. I know the remark is genuine, but I’m a phony. And then we’re surrounded by four or five young Wall Streeters who know Stephen. “My boy Turney here is legendary,” he says. “His parties were epic.” He tells them about South Beach and Susquehanna: “His skin was green when he came back from that trip,” he says to peals of laughter, but the laughter recedes to a subtle soundtrack of memories. I think of September 11 and the Twin Tower Fund’s party and my birthday bash. I think about all the money I spent and all the money I’ve made just by being myself, or who I thought I was. Who was I, anyhow? How far away my childhood and Maine seem now. An image of my father comes to me, him shoveling the driveway, not nearly keeping up with the heavy flakes that keep piling higher. And yet he works on, and on, until the day runs out of light. As I look around the room, I wonder who in this crowd came from where I did, and who has the same path ahead of them. And in that instant, I feel sorry for myself. As the memories fade and the moment again comes into focus, the laughter has ended. This pending doom on Wall Street has everyone feeling sorry for themselves. A pall hangs over us. It’s like a party after a funeral. No one is smiling.