Confessions of a Wall Street Insider

by Michael Kimelman

“Yes, Jay’s old girl. Can we not refer to her that way?”

  “Sorry, Mike. You mean Crazy Red?”

  “Fuck you,” I said. “I like her a lot. But I never get to see her because I work until eleven every night.”

  “Not every night, surely?”

  “You’re right,” I said. “Some nights I work until midnight. I’m lucky if it’s only 10 p.m. I’m tired of the salt mines, Randy. Of getting bossed around by people that live in mortal fear of our clients at the banks. I can’t stand being ordered around by the senior associate, who gets ordered around by the partner, who gets ordered around by some twenty-nine-year-old douchebag at an investment bank. I want to BE the twenty-nine-year-old douchebag at the investment bank. You know I’ve always loved the markets, gambling, cards. Taking risks. I traded my way through law school, and that was on a bullshit E-Trade account. I had no idea there were tools like this.”

  “You would be good at it,” Randy admitted, his eyes consulting the corners of their sockets as he mentally verified this. “It’s one reason why I didn’t want to tell you about it. I don’t want to recruit you and be responsible for you throwing away a job at a marquee firm. Your life might be hard right now, but believe me, this is hard too. It burns people out. It’s the only job where you can do all your homework and preparation, and they still can reach into your pocket and take your money away from you at the end of the day. And who knows how long the opportunities here will last. Because of the market, this can all disappear in a heartbeat.”

  “Exactly, which is why I should start now,” I insisted. “Worst-case scenario? I do it for a year, the market crashes, or the laws change, and then I go back to work at S&C or some other law firm. What’s the risk?”

  I was playing innocent. There were risks, plural, and I knew that.

  If I told my firm that I wanted to go be a visor-wearing day-trader, and then came crawling back in six or twelve months, they might give me a job again, but they’d make life hell for me and future opportunities would be few and far between.

  That did not deter me. If some of these knuckleheads here in this weird room could make $250,000 a year—and the good ones were making seven figures—it was a no-brainer.

  Randy sighed.

  “You really want to do this? I’d have to stick my neck out for you. Erik’s a bit … unpredictable. And 95 percent of these guys here are Ivy League. I was the first non-Ivy guy they hired. But because I did well, he’s hired a few more. I think I can get him to take a chance on you, but you have to want to do it. No ‘I’m thinking about it’ or ‘We’ll see.”

  “Brother, I’ll start today if he lets me. I’ll fax my resignation back to S&C from here.”

  Randy laughed.

  “You promise not to hold me responsible in any way whatsoever, that you are of sound mind and body and making this decision sober and with all your … faculties?” Randy checked one more time.

  “Scout’s honor,” I said, holding up my hand.

  “Then … you want to do this right now?” Randy asked. “We can see if he’s got time.”

  My eyes went wide.

  “Rock ‘n’ roll,” I said, standing up and straightening my tie.

  “First of all, take that off; you look fucking ridiculous,” Randy said, pointing to my Hermes necktie. I glanced around the room. There were people with hats on backward, in shorts, or even barefoot—despite the February chill.

  “Oh,” I said. “I see your point.”

  “Wait here, and I’ll go see if Erik’s around,” he said. “And whatever you do, don’t fucking touch anything.”

  Five minutes later, Randy reappeared.

  “He’s in his office, down the aisle in the back. Says he’ll meet with you. I put in the best word I could. Now it’s all up to you.”

  “Thanks Rand. I owe you.”

  “You know I wouldn’t recommend any of our other friends. But you … I think you’ve got the right mentality to do this. Just don’t embarrass me.”

  “No more than usual,” I said and walked across the trading floor and down the hallway. The door was open, and after double-checking the name on the plaque, I gave a light knock.

  “Come in and shut the door,” a voice commanded. I did as ordered, and Erik popped up from behind his desk. He had a large, pear-shaped belly and matching chubby red cheeks that seemed out of place on a kid that couldn’t have been more than twenty-six years old. I tried to feel intimidated.

  “So you’re Randy’s friend?”

  “Yup. Mike Kimelman, thanks for taking the time to meet me.”

  I offered a thin smile and pumped his hand.

  “Sooo, you’re a loy-yah?” he said with a thick Staten Island accent.

  “I am. Though hopefully, not for long.”

  Then he exploded.

  “Ya know, loy-yuz are … THE WORST FUCKING TRADERS I’VE EVER SEEN!” he shouted, addressing the traders down the hall as much as me. He threw up his arms with the intensity of someone trying to scare off a bear. I wondered if he was being serious, and if I should try to respond. Then I realized he was just getting warmed up.

  “THEY CAN’T PULL THE FUCKIN’ TRIGGER!” he literally shouted. “THEY OVERANALYZE EVERYTHING! Ya know, if Randy hadn’t made me so much fuckin’ money, I wouldn’t have even wasted five minutes to talk to one.”

  Okay, so it wasn’t quite the interview style Latham or Davis Polk came at me with. Hell, even Skadden Arps hadn’t been like this, and they were widely known as some of the meanest bastards in Big Law. As I was to learn later, Wall Street interviews are different. I’d heard of Goldman’s thirty interviews, case studies, complex mathematical and brain puzzles—all that, sure. But this was something else entirely. I thought of the Monty Python skit where a guy comes in for an argument, and says, “Hey wait, this is just abuse.”

  My mind raced until it found the one place where this type of questioning had been routine. Based on the kids out there—out on the loud, crowded Datek trading floor—I thought I might have just understood something. Datek was a fraternity, and I was a potential pledge. At Phi Delt, our verbal abuse had been legendary. The hazing, the pranks, the psychological warfare. And now this guy Erik wanted to take his turn as an in-your-face drill sergeant, a sadistic pledge-master, a slob with the keys to a $250M a year cash machine.

  Sensing familiar waters, I quickly moved to highlight my twin addictions of gambling and drinking.

  “Randy is the best,” I said. “But you can ask him about me and confirm everything I’m going to tell you here. I may be a lawyer, but I’m the farthest thing from a technical, four-eyed nerd. I played baseball in college and Randy and I used Atlantic City as our personal ATM in college. We clobbered people on the poker tables, and I can drink like a fish and play blackjack all night. I’ve been banned from Resorts International for counting cards and I still have a host at Trump Taj that will send me a car anywhere in the northeast on thirty minutes’ notice.”

  Erik’s face transformed into a curious stare that told me I had successfully changed the tenor of the conversation. He looked at me for a few more long seconds, slowly nodding his head to the internal monologue in his brain. He walked back to his chair and sat down. He reached under his desk and pulled out two huge notebooks labeled SERIES 7 and slammed them down.

  “You gotta pass the Series 7. You think you can do that?” he growled. “I have to sponsor you … And if you fail, are you going to pay me back?”

  That sounded an awful lot like a job offer, and the fastest one I’d ever gotten. I smiled. I didn’t answer his question immediately, simply because I couldn’t tell if he was being serious.

  “I’m not asking you, guy, I’m telling you,” he snapped before I could respond. “You fail, you pay for the test.”

  “Don’t worry about that,” I managed.

  “Cocky bastard, aren’t you?”

  “Not really. When I commit to something, I commit. There’s zero chance I will fail it.”

  I’d
passed the New York Bar without breaking a sweat, and nobody is about to confuse the Series 7 for the Bar. I had seen enough of my knucklehead high school friends pass the Series 7 to not be scared of it.

  “Consider it done,” I continued. “What’s the timetable?”

  “You schedule the test yourself,” he said. “Most people take about three months to study. After you pass, if you pass, you start a twelve-week training program here.”

  “Okay, I’ll see you in two weeks,” I said.

  “Two weeks?” he scoffed. “You’re nuts. The quickest anyone’s done it here was a month. Don’t shoot yourself in the foot. Take the time to know the material. You fail it, you’re done. There’s no second chances here.”

  “It was the same at my law firm. One shot at the Bar. I’ll be fine. I appreciate the opportunity, Erik.”

  I walked over to his desk to shake his hand.

  “Go see Barry next door in HR, and give him all your info,” Erik barked. “He’ll get you started on the paperwork.”

  After meeting Barry, the only bona fide adult in the place, I walked back out to Randy carrying my Series 7 books and drawing guarded looks from the other eighty traders in the room. Another mouth to feed. Another competitor. I strolled up to Randy with an ear-to-ear grin.

  “What do you have there?” he asked, frowning.

  “The Series 7 books. I’m starting in two weeks.”

  “You’re not even going to think about it or talk to your firm?”

  “It’s time for a change, Rand. Plus, only a fool would turn down the type of numbers you’re putting up. If I can make half or even a quarter of what you’re doing, it’ll be a home run. And that’s just on the comp side. The hours are the real prize. I like this girl I’ve been hanging with. I don’t get to see her enough. I don’t get to read, work out, or do anything. Too many people who are less motivated than me are making coin and making moves. This is the wrong time to be a drone.”

  Randy looked me up and down—sensing, I think, my total determination—and shook his head.

  “I know you’re right, but I still feel responsible. I don’t want you to throw away a promising career for …”

  “We covered this already, bro. You’re off the hook. Now shut up and give me a hug.”

  We hugged it out and Randy walked me back to the front door.

  “What are you going to tell Sullivan & Cromwell?”

  “I don’t know yet,” I said truthfully. “But I’m going to keep working there and wait until I pass the Seven for sure.”

  “You’ll pass,” he assured me. “I’ve seen guys pass it after a three-day coke and booze bender.”

  “They should probably require people to take it under those conditions; it better models the industry,” I said with a grin, and departed.

  When I got back to my office, I called the SIPC scheduling agent and booked the first available date for the Seven—three weeks away. It would still be a Datek speed record, and would give me more than enough time to study. When I hung up the phone, I saw Wu watching me closely. After a passing pang of paranoia, I figured that even if he understood, he couldn’t care less.

  Fuck it.

  “That’s right, Wu,” I said. “It’s time to make some real money. You’re about to have your own private office, all to yourself.”

  Wu looked up.

  “Fock dis place,” he said with an agreeable nod, then buried his head back in his book.

  CHAPTER SIX

  THE TRADING GAME …

  ______________

  I ACED THE SERIES 7 AND jumped headfirst into a brave new world. Randy and everyone else at Datek urged caution and patience, telling me that it would take anywhere from nine months to a year to learn the business, and that I should expect to see no paycheck above the de minimis $500 a week draw they paid traders in the training program. While $500 a week might work in some cities, in NYC you’d be lucky to cover a room in a flea-ridden hostel. At Sullivan & Cromwell, I’d been pulling several times that.

  But after two weeks of intensive training and paper trading, under the guidance of a guy named Dan Balber, I was ready to go live. Within six months, I knew that I’d made the right decision. I was positive three out of five days and learning quickly to eliminate my mistakes and see the tape. Nine months in, I was making real money and taking home my first substantial paychecks. They weren’t jaw-dropping, but they were consistent: anywhere between $25,000 and $75,000 for the firm each month, and approximately 40 percent in my end. My confidence was growing, steady and solid.

  It had happened. I was hooked.

  At Datek, the bosses who reaped the jaw-dropping bonuses were personal degenerates, but they knew how to get results from us. The key was competition. The first time someone made $10,000 in a day, it was only a matter of weeks before several other traders had pulled that in. Then the bar was raised to $50,000, then came $100,000—all in a day—and soon enough others matched those figures. With each new impossible milestone reached—$1,000,000 in a month!—the roar of greed, speculation, and success boomed louder and louder. Erik Maschler and his cronies were the Roman Emperors, holding their thumbs up or down to whip a coliseum of financial gladiators into a frenzy of money-lust and one-upmanship.

  Our emperors’ weapon of choice for fomenting maximum competition was something called the Watcher trading software. At most firms back then, traders only saw their own P&Ls. The Watcher allowed any trader to pull up a list of the entire firm’s daily P&Ls, laid out from top to bottom. You can imagine how it went.

  Who’s up $25K? Bastard. Who’s gonna get ripped a new asshole for being $30K in the red? Ha, love it.

  You could click “Top Losers” with your mouse and the Watcher would give your P&L in reverse order from worst to first. There were no secrets at Datek; and thus no bullshit lies after hours; and certainly no tenure. Poor performers could be fired at any time and there was no honeymoon period, no “take your time to settle in.” Competitive pride was juiced even further by managers launching contests, handing out a few thousand in cold, crisp, impromptu cash for Best Week or Best Day.

  Look at those jealous glares.

  Those new Ben Franklins were often topped off with all-you-can-drink alcohol-infused parties at nearby bars. Movados, Tag Heuers, and Rolexes (bottom-of-the-line Rolexes, but still Rolexes) were handed out like party favors. Erik loved rewarding and praising his best, and vocally shaming his worst. Managers were given fat expense accounts to entertain traders at steak dinners across Manhattan. These meals were often followed by hours in strip clubs, and the jaunts occasionally concluded with trips to Asian massage parlors for a “happy ending” to the evening. These excesses infused loyalty into the trader ranks and ingrained that cash-money lifestyle into their blood. It didn’t take much to get hooked. To fucking need it. The raw meat of cash gifts, of steak dinners followed by female flesh, and expensive watches tossed in for the fuck of it … it made the boys more loyal than they ever ought to have been.

  The rewards were legendary, but so was the abuse. Erik was a plump Napoleon, prone to spittle-spraying verbal attacks. This was a jarring change for me. At Sullivan & Cromwell, the hallways were rarely louder than a whisper. If a partner or senior associate wanted to yell at you, he pulled you into his office, shut the door, and went for the jugular with soft-voiced sarcasm. (“Here’s a quarter, Mr. Kimelman. Go call your mother and tell her you’ll never be a lawyer …”) Datek was the opposite. Erik stalked the floor like a male lion before the morning’s opening bell, waiting to pounce. There was palpable tension in the room—a real feeling that violence was a possibility—and God help the trader who dared to make eye contact.

  Take the tale of Alex Perez. A quick-on-the-uptake trader, and one of the few guys who, like me, was over twenty-five. Alex had been a trader for Cantor Fitzgerald and Prudential before deciding, again like me, to join Datek because one of his boyhood buddies was printing money on an everyday basis. One day in late ’98, with the futures way down
, I glanced out from my protected corner (always have your back to the wall in such an environment) and saw Erik, hands clasped behind his back, high stepping through the aisles to inspect traders’ pre-open rituals. Alex was at his desk, munching on a bagel smeared with cream cheese and punching up the charts of different stocks that piqued his curiosity. Erik walked right up beside him, hovering, and the next time Alex put the bagel in his mouth, Erik wound up and swiped an open hand as hard as he could into Alex’s fingers, sending the bagel flying out of his mouth and across the room with a loud “thwack.” (You wouldn’t think bagels would be loud, but there you go.) Alex was in total shock. His mouth hung open. Before he could respond, Erik screamed, “You motherfucker, don’t let me EVER catch you eating right before the open. This is game time! You want to stuff your fat face, go do it before 8:30, when the real traders do. Well, what do you have to say for yourself!?”

  It wasn’t even remotely a question.

  “I’m … sorry?” Alex sputtered.

  But Erik had moved on. Another trader, after four straight down days, was told that today would be a “big day” for him. The trader asked how.

  “How big?” Erik growled. “Here’s how big. If you’re negative again today, you can either choose to be fired, or shave your head.”

  This wasn’t a buzz-cut kid either. With blonde, wavy, enviable surfer hair, you could see his heart just sink. The kid did his best but still ended up losing a token amount that day. He chose to shave his head, and two other traders whipped out the clippers and took him to the bathroom to complete the sacrificial offering. When the shiny-scalped kid was negative the following day, Erik fired him anyway.

  Pride? Why wouldn’t you quit? Because you wanted, you needed to ride that gravy train. And where else were you going to make that kind of money, at that age?

  That was life at Datek. Those who didn’t earn were harassed until they either started making money or were weeded out and let go. Datek was like a trellis full of roses, and Erik the gardener with the sharp pruning shears—carefully cultivating his favorites and mercilessly removing everything else.