Saving Alice

by David Lewis

  Five long years ago, at the behest of John, another high school buddy, I had accepted an invitation to the business department of Northern State College. John was an assistant professor at the time and needed someone in the arena of investing to give a one-hour lecture to the Investments 101 class. Unfortunately, the class began at seven-thirty in the morning.

  Taking my place in front, I looked out at the twenty-five or so sleepy, indifferent students. I had contemplated how I might get their attention. John, in his professorial bow tie and white shirt, took his seat in the far corner and gave me a halfhearted do-the-best-you-can shrug.

  I’d considered opening with a general philosophy of money. Right or wrong, making money is how most Americans live their lives. Opportunity and wealth are on every side of us, like apples ripe for the picking. There’s no reason to be poor in America….

  Instead, I came prepared with something more dramatic. In spite of possibly overplaying it, I removed a fake one-thousand-dollar bill from my pocket.

  I held it up. “Mr. Robbins asked me to talk to you about the world of investing.”

  Waiting for everyone’s attention, I didn’t say anything more. Slowly, the room awakened. Their eyes expressed their thought: What’s with the big bill?

  When I pulled out the cigarette lighter I’d picked up at the local 7-Eleven, their eyes widened further. I now had everyone’s attention.

  “Is it real, Dude?” A spike-haired surfer-type asked from the back.

  “Investing is boring,” I said. “Let’s talk about trading.” I placed the thousand-dollar bill and the lighter on the table on a front desk where it would tantalize them further.

  A serious-looking brunette in the front row frowned. “What’s the difference?”

  “Good point,” I replied. “The only difference between trading and investing is the time frame. Instead of months, or even years, you’re dealing with days, hours, even minutes.”

  The brunette seemed fascinated.

  “Everyone is an investor,” I continued. “For example, everyone will eventually buy a house and hope to sell it later at a higher price. Short-term trading is the equivalent of buying a house at one in the afternoon for fifty thousand dollars and selling it three hours later for fifty-five thousand.”

  “People do that?” someone exclaimed.

  I nodded, then asked, “How much did I make on the house sale?”

  “Five thousand dollars,” the brunette replied. “Ten percent on your money.”

  “Ten percent in three hours,” I confirmed. “Pretty good return.”

  Everyone nodded.

  “It gets better,” I added. “What if I purchased that fifty-thousand-dollar house for only five thousand?”

  The brunette smirked. “It’s called a down payment.”

  I smiled back. “In the trading world it’s called an option.” I opened my hands in a questioning manner. “So now how much did I make?”

  A red-haired girl with blue-tinted braids frowned. “The same.”

  The brunette broke in again. “Well, not exactly …”

  “Actually … I doubled my money,” I finished. “With just five thousand invested, I made another five thousand. That means … one hundred percent…”

  “ … in three hours,” someone else finished.

  “Dude!” the surfer said in an awestruck voice.

  The brunette flashed him a look: How ignorant can you be?

  “Happens every day,” I said. “But that’s only the beginning.”

  Unbelief moved across the roomful of faces.

  “Good traders are making one thousand percent on their money.”

  More incredulous frowns.

  “Trading is the gold rush of today,” I continued. “It’s the final financial frontier, but unlike the old days when commissions were high and access was difficult, today anyone can trade. Because of the Internet, everyone has a place at the table. All of us can put our pan into the water, sift out the rocks … and find gold!”

  “Keep talking,” another boy with a crew cut said.

  “The trader is the gunslinger of today,” I said, mixing my metaphors. “Independent. Beholden to no one. No boss, no employees. You and you alone decide how much to pay yourself.” I paused. “But there’s a catch.”

  Several narrowed their eyes. They’d been expecting this. “Imagine with me,” I said, “that you’ve got a thousand dollars in the bank.” I picked up the bill from the table. “Think of all the things you could do with that thousand dollars—down payment on a car, new shoes, fancy watch…”

  “Shopping spree!” one girl giggled.

  That was the perfect moment. I picked up the lighter, flicked it, and set fire to the bill. Mouths opened wide. Gasps escaped their lips. Gloom and frowns descended upon their faces. I held it up as it disintegrated into ashes, then placed it on a saucer of water I had ready. “How did that feel?” I asked.

  “Painful,” the brunette replied, her face ashen. “Hope that wasn’t real.”

  “That’s trading,” I told her.

  Another hush of silence before someone squeaked: “But I thought you made money?”

  “You have to burn money first.”

  Their chagrined faces turned confused.

  “It’s like counting cards in blackjack,” I continued. “For every hand you win, you lose a hand. Same with trading. For every thousand you make, you’ll burn another thousand. For every good day, you’ll have a bad day, but sometimes you might not burn any. And that’s how you get rich. The key is knowing when to bet and how much to bet. And if you get attached to your money, if you start counting it before the day is finished, you are finished. The inevitable bad days will so debilitate you that you’ll have nothing left for the good days.”

  Sitting in the corner with his arms crossed, my buddy John grinned.

  “Only those with stellar character survive. Only the most courageous persist. Trading is the purest form of psychotherapy known to man.”

  I pointed to the surfer dude. “Want to know what you’re made of?”

  He shrugged with a smile.

  “Then trade,” I said.

  “Want to test your limits of emotional fortitude?” I asked the brunette.

  “Date?” she asked slyly, and the room filled with laughter again.

  I grinned, then asked the entire room: “If you want to determine the extent of your mental pain threshold? Trade. When it comes to fear, skydiving is easy. When it comes to risk, surfing is easy. Trading is the scariest activity ever created by humankind.”

  You could have heard a pin drop.

  “Take a man or a woman of towering self-confidence, yet inexperienced in the world of trading,” I suggested. “Lock them in a trading room. Make them trade their own money. In a few hours, they’ll be sweating. They’ll turn red. Panic will be leaking out of their very pores, and they won’t be able to hide it. Eventually, they’ll ask—no, they’ll beg—to be allowed to stop. In a matter of hours a person who seems to have total confidence and inner strength will have been turned into a quivering fool.”

  “Why?” someone ventured.

  “Because the market will cause you, force you, intimidate you, into doing the opposite of what you should do. It will play you like a fool, then spit you out. It will take your money and give you nothing in return.”

  “So what’s it take?” someone asked.

  “Faith,” I replied, slightly noting my own irony. “Faith in your ability to withstand pressure. Faith in your market research. Faith in yourself.” I dropped the final bombshell. “The truth is: only one percent of one percent succeed.”

  “It’s that hard?” the surfer asked.

  “Not technically,” I said. “This isn’t rocket science. You don’t need a college degree to figure out the mechanics.”

  “So … how much do the good traders make?” someone asked, getting down to brass tacks.

  “What is your major?” I asked him.

  He shrugged.
“Accounting.”

  “As an accountant, you’ll make, in today’s dollars, about two million dollars…”

  He seemed intrigued.

  “ … by the time you die,” I finished, and his face fell.

  “You’ll spend most of it on your house mortgage, on your wife’s hobbies, and your daughter’s shopping sprees.”

  “Hey!” the lover-of-shopping-sprees objected, then smiled. But the accounting major wasn’t pleased.

  I finished my comment. “But a good trader can make a million every year.”

  “Just by sitting in front of the computer?” a blond girl asked.

  “In your bathrobe,” I added. “In fact, if you wanted, you could live anywhere in the world. You could drive the nicest cars, live in the biggest houses, and attract maintenance-free men!”

  The brunette flushed.

  “So how does it work?” someone else asked, and a few others nodded in agreement. I smiled with approval. Now that I had their attention, it was time to get on with the fundamentals of how Wall Street operated—as if anyone in the world really knew.

  I began with the bottom line: “The value of all things in life, especially stocks, is based solely, and exclusively, upon perception…”

  My lecture went over so well that John invited me back the next month, but I never made it.

  Two weeks after my classroom lecture, I burned three million dollars.

  CHAPTER FIFTEEN

  The digital display showed 4:30 A.M. when I finally gave up trying to sleep. After showering, I grabbed a cup of caffeine and headed for the office. I arrived just before five and parked on Main.

  The early bird gets the parking spot, I mused. Getting out of the car, my shoes crunched the old snow. A slight breeze nipped at my exposed collar, but the day promised higher temperatures—maybe as high as thirty degrees.

  Climbing the stairs, I opened the rickety door and hung up my coat on the hanger in the reception area. In my office, I turned on the computer, then glanced over at Alycia’s photo.

  “Hi, sweetie,” I whispered.

  I sat at my clutter-free desk, empty but for the keyboard, screen, and phone. I accessed the computer, navigated through a few Web sites, and within minutes, renewed my old data service accounts. Much had changed in the last three years, so I purchased and downloaded new software—albeit nothing expensive or elaborate. I accessed my online broker and discovered yet more services—company research, analyst opinions, stock ratings. More distractions, I told myself. More voices whispering in my ear.

  I reminded myself of what I’d forgotten during the past year, that most traders, including myself, are looking for the next idea, the next complex variable method, the newest software, the next sure thing. Amateur traders, desperate to quantify every conceivable variable, confuse complexity for improvement. Yet, according to the great traders, the best methods are so simple they can be written on an index card.

  I prepared morning coffee for Larry and looked out at the growing dawn. Main Street had a new sparkle to it, welcoming the first cars of the day with their frost-covered windows and pluming bluegray exhaust smoke, which dissolved into the humid cold.

  After last night’s deliberation, I’d decided to go with S&P futures—a leveraged approach to trading the S&P 500. Less to monitor.

  A quick examination of the latest price charts confirmed for me what I’d already suspected. Considering yesterday’s high, and with the market at such lofty heights, I needed to wait for prices to dip— enough of a dip to trip my divergence indicator, which was nothing more than a short-term moving average juxtaposed against a longer one. So when the market resumed its upward move, I would be automatically stopped in at the safest place, statistically speaking.

  However, if the market continued to dip after I was on board, I would be automatically stopped out below the price bar of the previous day. Sure, I would have lost some money, but I also would have saved enough money to fight another day. Just as I’d told those students five years before, the disciplined approach to this system would yield a profit, but only if I could weather the occasional losses.

  When asked why she posted her secrets of swing trading for the whole world to see, multimillionaire Market Wizard and accomplished violinist to boot Sarah Taylor only laughed. “I could disclose all my secrets—publish them in the New York Times for that matter— and it wouldn’t make a difference. Knowing what to do is worthless. It takes the emotions of Spock to compete in this world.”

  Larry arrived at six o’clock, stood in my doorway for a moment, wearing a sophisticated charcoal suit with a silly tie that appeared to have been finger painted by toddlers. I leaned back in my squeaky office chair and grinned at my dazed partner.

  He shrugged, yawned casually, and headed for his own office. As usual, we performed most of our duties with the minimum of interaction. Larry remained knee-deep in tax consulting while I carefully screened phone calls, sold our tax services to new wealthy clients, answered e-mails, and monitored the Web site.

  At eleven, I called Dacotah Bank, talked to Matt Goeman, an old high school acquaintance, and arranged for a two-o’clock meeting.

  “I’m taking a late lunch,” I informed Larry without explaining further. He grunted with indifference. When the mail arrived, I sifted through it and discovered another round of letters from the IRS. The hazard of operating a tax service turned out to be getting very familiar with the tax enforcers.

  I placed all the letters on Larry’s desk.

  “What do you need the money for?” Matt asked me, after we’d dispensed with a minute’s worth of informalities. He was my age, thirty-six, and while he’d lost most of his dusty brown hair, he was still in denial, carefully combing it over the thinning area on top.

  His office was starkly decorated with sheer white curtains on the windows, shiny veneer coating the desk, and industrial blue carpet covering the floors. Against one wall was a small bookshelf. His expansive desk, like mine, was nearly empty of pencils, pens, or paper.

  “Business capitalization,” I replied. Technically, it was true.

  “For the company?”

  “Not the partnership.”

  “So, it’s … for you personally?”

  “A side business,” I replied calmly without expounding further.

  Matt stared blankly at me. And then, in the absence of any forthcoming explanation, his gaze dimmed. “Stephen…”

  I swallowed and plunged forward. “I’m providing my house as collateral.”

  “After your second refinance, there’s not much left.”

  “All I need is twenty thousand dollars.”

  Matt leaned back in his chair, but not so far back he couldn’t tap a pencil eraser on the edge of his desk. The chair squeaked as he adjusted his position. He regarded me curiously: “Are you going to trade with this money, Stephen?”

  That’s the problem with a small town. Everyone knows your past and assumes your future. Your personal mistakes are etched upon the stone of their memories.

  “Short-term investing,” I told him.

  “I see,” he said with a note of finality.

  “There’s plenty of equity in my house,” I repeated. “I’m good for it, Matt.”

  “I know you are,” he replied. “And we’re pleased with your loan history, but we’re also familiar with your personal history. I can’t do this loan, Stephen. I’d lose my job.”

  Just like that, the meeting was over. He walked me to the door and patted me on the shoulder. I expected him to say: Get some help, Stephen. Instead, he said, “I was sorry to hear about you and Donna.”

  I repeated my pat answer. “She’s a wonderful woman. We’re working it out.”

  Matt nodded patronizingly. Most likely he’d heard a different story.

  Hugging myself against the cold, I walked the three blocks back to the office. Undaunted and seated behind my desk again, I proceeded with Plan B. I picked up the phone and dialed my credit card company. Despite the bank ex
perience, I figured my chances were modest to good. When I reached a customer service rep, I presented my request for a home equity line of credit.

  They put me on hold. Two minutes later, the rep returned with good news. Although the interest rate and fees were ridiculous, the loan was readily approved. I downloaded the documents, then scanned in my signature. According to the rep, I’d have access to thirty thousand dollars in a matter of days, deposited automatically in my bank account. From there, I’d wire it to my broker. That, plus the margin—another fifty percent of account total—would bring my total trading capital to forty-five thousand. More than enough to begin.

  It was seven when I left Larry at the office and headed for Joe’s, promising myself an hour and no more. Paul was sitting at our usual table, staring up at the TV, watching ESPN scores scroll across the bottom of the screen. When he saw me, his face lit up. “Buddy!”

  Sitting down, I felt a roomful of eyes on my back. Paul cleared his throat. “So … was it forgetting the party?”

  I sighed, then recited my now oft-repeated speech. After nearly half an hour of Paul’s inebriated responses to the collapse of my marriage, he finally gave it a rest.

  Bracing myself, I nodded toward his glass. “How’re we doing here?”

  I felt like a parent monitoring a child, but Paul only grinned. “I’m stopping at three.”

  I asked about Susan.

  “Haven’t seen her,” Paul said.

  “Maybe it’s true love?”

  Paul smiled sluggishly. “And maybe statistical probability doesn’t exist.”

  After that comment, I debated whether to tell Paul about my new stock-market activities. Since I hadn’t even told Larry yet, I decided against it. Instead, we discussed the latest sports news.

  Half an hour later, I stood to my feet. “Gotta go, Mr. Mole.”

  Paul’s eyes looked pained. “So soon, Mr. Loon?”

  I hesitated. “Three, right?”

  “I promise! Relax, Dad.”

  I grinned and headed out. On the way home, I thought of Susan again and her last remarks. “I’m getting out.” Maybe she’d finally found the true romance she’d been seeking for twenty years. I sincerely hoped so.