As Michael fought his bedspread to find his jangling phone, he could see the clock glowing a painful 12:55 AM.
“Who the hell is calling me now?
“Is this Michael Kelley?
“Yes it is.”
“Do you have a brother named Tom Kelley in Aspen, Colorado?
“Yes, who is this, please?”
“Mr. Kelley, I am Dr. Michelle Kmecik calling from Aspen Mountain Hospital. Tom was in an accident tonight. He is stable now but in critical condition.”
Michael bolted up in bed. “What happened?!”
“As best we understand it, sir, he was riding his bike at dusk coming back into town and as he made the s-curve, he was hit from behind. He was wearing a helmet but nevertheless suffered a concussion, a broken tibia and fibula, which we have surgically repaired, and as there is bruising, it appears that his abdomen made contact with the handlebars so we are watching his spleen and pancreas closely. Are you his closest relative?”
“Well, yes … uh … well, no, I mean our parents are alive but he and my father don’t speak.”
“I see. Well, Tom needs a family member here so I must urge you to call them and figure out who can get here the soonest. He is stable but critical.”
“Uh, sure, of course. Who are you again? Who do we contact?”
“My name is Michelle Kmecik. I am the emergency room physician on call tonight.”
“Ok. Thank you, Dr. Kmecik. No wait—can I talk to him?”
“I am sorry, Mr. Kelley. He is still sedated. Please let the nursing station know approximately when a family member will arrive. Let me give you their direct line. Do you have a pen?”
“This can’t be happening,” thought Michael. “Crap! I have so many positions on and I am the only one who understands them.” Between the second ratings downgrade of US debt in a little over a year and China’s severe recession, the perfect storm for global bond and gold markets had been brewing for weeks.
“But I have to go,” Michael thought. “This is serious and no one else can help. Surely Renee can help me manage the positions.” She had been building an options hedge for them anyway.
Michael decided he needed to call their mother, even though it was 11 on the West Coast and he knew she would be sleeping. He filled her in on what happened and mentioned that someone had to get to Aspen ASAP.
“Michael, I can’t get to LAX at this hour. Can you get the first flight out?”
“Yes, I am going to try. It’s just that, well, I don’t know if you have been paying any attention to the markets lately but … well, obviously Tom needs us—and I really do want to go. I am just trying to figure out how to while I also deal with my own kind of serious jam here at work. Plus, we have to call Dad.”
“Michael, I can’t call him. I haven’t spoken to him in eight years!”
“Yeah, Mom, but Tom is a son to both of you,” said Michael as calmly as he could possibly muster.
“Yes, yes … but you are the only one who talks to him at all! And you know how he will react—the doctors don’t have a clue, he has to step in…. You know.”
“Okay, okay, I will call him before I board the plane. There is nothing he can do from Connecticut at this hour anyway.”
Michael stuffed a bag with a change of clothes and his laptop and then realized he had just enough time to go by the office for the London open and make a 6 AM flight to Denver out of O’Hare. He’d call the airlines from the taxi.
* * *
As he stared at his screens in the middle of the night, he at first thought he was seeing things. Treasuries were down, the dollar was down, equities were down, and gold wasn’t really up. This was bizarre.
Everything was going against him. Surely this must just be because the markets were thin. It was a Monday morning and maybe it was just a fire-sale buying opportunity? Maybe I should just add, just this once. That will lower my average price and I’ll be more protected while I am on the plane and out of touch, he rationalized as he tapped out a few key strokes.
* * *
Renee, who had officially joined the firm just a month ago, came into the office earlier than usual. She’d woken up at 5 AM and with all of the economic news breaking she knew she couldn’t go back to sleep. As she put her key into the lock, she noticed the lights were on. And then the door was unlocked. “Wow, this is weird. Who has been here?”
Michael’s desk was a mess, which she found supremely odd. He had a neat-nick streak and kept his desk orderly but now newspapers and printer paper laid everywhere.
As she grabbed her cell phone to call Michael, she realized she had left it on vibrate and she had a text: “Tom’s been hurt. On my way to Aspen. Call you when I land.” And then a second one: “See what you can do with the book. Everything was against me in the middle of the night.”
“What’s he talking about? Is he kidding?” she thought. It was his book. He only gave her a broad idea of his themes. “I’m not a directional trader,” she thought.
She decided to check their prime broker’s trade log and what she saw surprised, even stunned, her. Michael had added to two losing positions at 3:47 AM. “That wasn’t like him,” she thought. “And he had broken one of their cardinal rules. Now the losses were getting even worse.”
She felt her phone rumble. “Ree—don’t have much time—have to sprint to get to the Aspen gate. What’s the market doing?”
“Michael, did you add to these positions in the middle of the night?” She asked in a clipped tone.
“Yes. This is crazy—it’s an over-reaction in a thin market. Why—are we down more?” asked Michael.
“Yep … it doesn’t look good.”
“Ree, this is a once in a decade opportunity. Can you add some more for me? I won’t have time to get logged on and make the plane.”
“I thought you wanted me to hedge them,” she said in an unusually deep voice.
“I do! But I also want you to add to the core longs.”
“Michael, you aren’t serious, are you? Isn’t that breaking one of the few rules we have? Don’t add to losers. You always say it is trying to force the rest of the world to see the market your way—you know that!”
“Ree, this is different. Half of this move might simply be the thin summer markets. It will be okay. I’ve got to go, but we will be fine.”
Michael hung up, exasperated. Tom needed him, and he wanted to go, but it was the worst time. He had never really been trading when markets had become this violent and he really needed to be at his desk to see the speed and rhythm of how things were moving.
“Oh geez, I promised Mom I would call Dad,” he realized. As they loaded more bags into the puddle-jumper to Aspen, Tom reluctantly tapped “RK office” in his call log; even though he would surely be in the middle of his morning meeting with the CEO of the insurance company. He probably wouldn’t even answer.
When he did, Michael stumbled, “Dad, uh listen, I’m in Denver on my way to Aspen. Tom got hit by a car last night while riding his bike and the hospital called me around 1.”
“What? What are you talking about, Michael?”
“What do you mean what I am talking about?” said Michael before with clear agitation he repeated, “Tom got hit a by a car while riding his bike and he is in the hospital in Aspen. The doctor who called asked for a family member to get there as soon as possible, so I got the first flight out and am now almost there.”
“Why did they call you? And more importantly, why didn’t you call me?” barked Richard with more than a few excessive decibels.
“It was the middle of the night, and you are at least almost three hours farther away!”
“Michael, exactly what did they say?”
“That he was stabilized but still in critical condition.”
“Look, I do have to go. The flight attendants are pointing at my phone.”
Richard hung up feeling a jolt of a feeling that he hadn’t felt in years. Tom was hurt and Michael would never know how to handle the doctors. If there was one thing Richard knew it was that doctors needed managing! If you didn’t take matters into your own hands, mistakes always got made. Maybe his friend Bill Riley would let him use his Marquette Air hours. That would get him there faster before Michael made the situation worse.
* * *
As Michael sat dozing by Tom’s bedside he was stunned to hear his father’s booming voice. He hadn’t reached the room but Michael could hear him saying, “But, doctor, I want you to tell me exactly what his prognosis is?”
“How did he get here so fast?” Michael wondered.
“Shhhh!” hissed a nurse to Richard. “Mr. Kelley needs rest!”
Tom’s condition was still critical as described, but he appeared to be resting comfortably. Dr. Kmecik had said something about a careful watch for a possible slow bleed from the spleen. Michael felt helpless to do anything other than sit there. Richard of course probably felt as if he needed to tell the doctors what to do. With barely a hello, he took his father’s sudden arrival as a chance to go outside and call the office. Like all hospitals, mobile phones were frowned upon so he hadn’t checked the markets in more than two hours. He just knew there had to be a reversal—this wasn’t 2008 after all.
“Ree, what’s up?”
“Well, things don’t look so great. Geithner is again saying this second US debt downgrade is meaningless but rumors are swirling that China really is a seller of Treasuries this time.”
“Oh, c’mon, they can’t sell without hurting themselves. Besides they are known to have a five-year plan to generate more internal GDP and they are only three years into it. I think, if anything, they could behind schedule given the recession they seem to be in.”
“Yeah, I know that and you know that, but evidently not everyone else does.”
“Renee, please just add some more. This thing is all out of whack because it is a summer Monday and half of Wall Street is still in the Hamptons. I know I am right about this one.”
“Michael, I really don’t think so. My options overlays aren’t doing us much good, and we seem to be standing smack in front of a steamroller.”
“Look, I’ve studied the charts. There are so many high volume areas below, it just has to hold. Those long-term holders will step in and buy there. I just know it.”
“Michael, my father would never trade that way!” she retorted with immediate regret. She wished she could take it back. She knew Michael needed to prove himself, sometimes a little too much for some inexplicable reason, but she really didn’t mean to deliver that low of a blow.
“Whoa … your father would never trade that way?” Michael felt as if he had been punched in the gut by a very big man instead of a lithe, female volleyball player.
“Michael, I’m sorry—I really didn’t mean it the way it sounds….”
“Never mind, I will just call Josh at Newline. He is always saying we don’t work him hard enough for the prime brokerage commission we pay so now I can. He will trade my account as I ask. He’ll see the opportunity. The Chinese aren’t really going to sell any of their US debt holdings. It is all talk. So the markets are oversold. Plus, we could be up over 25%, maybe even 50%, if it works. That would be our best year to date. When we start to raise outside capital next year those kinds of numbers on the boards would look really good.”
“Sounds like what Denise always calls fear of missing out, if you ask me … or needing to be right.”
“Look I have to get back upstairs before Richard irritates any more of the staff” said Michael as he hung up without waiting for a response.
Thank God Tom was at least stable. The doctors were saying it would take 36 hours to be sure about the spleen and the pancreas. Their mother was about to arrive. He hated to leave. He knew Tom didn’t need their father terrorizing the doctors or to even see him when he woke up, but Coup d’État was really Michael’s whole life. They had some junior analysts and execution traders now, but having been laid off from trading desks twice, this was going to be his last chance.
“Dad, I think now that with you and Mom here, I am going to try to get back to Chicago tonight. The markets are crazy with all this debt talk and it is just too hard to manage from here.”
“You are going to do what!?!! Rush right back to that money-grubbing operation of yours while your brother’s life hangs in the balance,” growled Richard.
“Dad, they said he was stable. And Mom will be here in less than an hour. She’s already landed.”
“But you are the one who can stay up and monitor him at all hours. I am too old for that. Can’t you do what you need to do from here?”
“Things are moving too fast. I need to be back.”
“The only place you need to be is here. And that’s my final word!” yelled Richard loudly enough to startle the nurses at the desk four rooms away.
* * *
He didn’t feel like calling the office. Renee would probably just harass him over the positions. Josh would give him an update without judgment.
“Really, what do you think?” Michael asked his prime broker.
“Well, man, I don’t know, you’ve got a big position here, I might cut it.”
“Really, I was thinking of adding to it. None of this makes any sense—China can’t really sell and the Fed and Treasury will certainly step in. The dollar can’t just keep getting hammered like this. In fact, yeah, I am sure of this. Just buy some more 10 years, Apple, Google, and LinkedIn.”
“Are you sure, man?
“Yes, and while you are at it add 5,000 e-mini ‘spoos’ too.”
Over his father’s objections, Michael did make it back to Denver and onto another overnight flight—first west and now east—in a little over 24 hours. He went straight to the office despite desperately needing a shower and shave. Normalcy would have to wait. He had to see all his markets together.
He saw that the usual relationships of late between US Treasuries and gold were not holding. Both were down. The fund had given back 25% of their gains for the year.
Surely this had to turn around later today. Back in October 1997, the Dow was down 500 points on Monday afternoon and came roaring back on Tuesday. In 2011, there was that week where it was up or down 400 net points for four days in row. These kinds of swift moves and subsequent reactions happened much more frequently, but time after time, the market comes back. This should be the same. It wasn’t banks again going broke, after all. As he sat blankly staring at the screen, the phone rang.
“I thought you would like to know the doctors just upgraded him to serious,” Richard said.
“That’s terrific, Dad. Is he awake?”
“No. But actually the real reason I called is that I want to know why you defied me and left.”
“Dad, I have responsibilities. I have other people’s money under my watch. I am the only one that can really manage our portfolios. We are still small and no one else here can do what I do.”
“You choose your greed over your brother!”
Michael started to say, “Dad it isn’t like that …”—but Richard had hung up.
“This is impossible,” thought Michael. “I can’t be in two places at once. What does he want me to do—quit? Fail?”
As he turned to his screen he saw that the S&P had taken another dip. It was nearing the overnight low. It should hold here. This would be the perfect time to buy at one last lower price. As he pushed the buttons again, Renee appeared at his door.
“Whoa, you’re wiped. You need sleep!”
“I got some on the plane, but I can’t sleep with these markets moving the way they are.”
“Actually, Michael, you can’t afford not to. You know you can’t make a decent decision without sleep. You know that you won’t judge the risk properly! We’ve always had that as our first rule of managing our psychological leverage,” argued Renee.
“I’m okay, trust me, I am fine.”
“Yeah that’s what it always looks like when you are too tired to know it,” Renee uncharacteristically snapped.
Michael just sat there. On one hand, he had that adrenaline-filled energy and on the other, thinking seemed like a chore. He felt a hundred things and he felt nothing. It was almost like he was outside of himself. His positions were huge, and he was risking a lot. Tom seemed okay but maybe he wasn’t. Renee, who had never been short-tempered with him, clearly was exasperated. And his father … well, it was always the same—never good enough, never the right thing.
As he stared at the screen through some sort of dense haze, he realized that in fact that all the markets were bouncing. Maybe he really was right after all? Everyone was coming to their senses and seeing the buying opportunity he had seen earlier. This was going to be a killer trade.
If he went home right now for a shower, shave, and an hour’s nap, he could be back by the regular hours close.
* * *
As Michael locked up his bike, he saw Chris’s Mercedes parked at the corner. That’s odd, he thought. This would be maybe only the third time he had come in during the summer in two years. That first summer, 2012, he came in at least weekly and stayed the day; but last year, he came in maybe once, and that was to pick up a check.
Inside, he didn’t see Renee or Chris as he sat down in front of his screens.
“What? This can’t be right.” The fund had lost 8% more since he left three hours ago. “No way! That just can’t be,” Michael said to himself under his breath. As he did, he realized someone was walking up behind him. He turned to see Chris.
“Michael, these positions are quite large, and at the moment, quite against us. Can you tell me about your rationale?”
“Well, Chris,” he said (thinking maybe he should be calling him Mr. Smith), “These markets are way oversold. Everyone’s assuming the worst but there is no way that China will start massively selling US Treasuries. They can’t afford to. So this rumor just should not be pushing bond prices to where they are.”
“Yes, Michael, but the fund is down by over 32% from where we were just a few weeks ago. When we started I basically gave you free rein, but you need to start closing out, and closing out quickly.”
“But …”
“No, Michael,” Chris said in a tone he had never heard him use. “I am not asking, I am telling. Get out now!” And then the man who put him in business turned and walked away.