11. Sign of the Times

In late 2000, Jim asked if I would join him at TheStreet.com conference, followed by dinner with Gene Hackman. I jumped at the opportunity to meet and dine with one of my favorite actors, and told Jim I would go if I didn’t have to speak at the conference. Writing was one thing, but speaking in front of thousands of people wasn’t something I was interested in. He gave me his word that I would remain in the periphery, and I happily tagged along.

The grand ballroom at the Marriott World Trade Center was standing room only—I had never seen anything like it. Investors swarmed Jim during the cocktail hour asking for stock picks and market advice. I stuffed my nametag in my pocket and tried to remain invisible.

Jim gave the keynote speech as the audience furiously scribbled on their notepads. I watched him work the room and thought to myself, he’s good—he’s, a masterful marketer. During the Q&A that followed his speech, someone asked about options pricing. “You know,” he began, “I can answer that, but I have someone in the room who trades options better than anyone I know. You all know my head trader, Toddo ‘Cookie’ Harrison, right? Why don’t we have Todd come up here? Whadaya say, Toddo?”

My teeth clenched as a few people began to clap, and before long, the entire audience was cheering for me to step up to the podium. I had no choice—I was no longer invisible. I slowly walked on stage, answered the question, fielded several more, and then returned to my seat.

Some people have a fear of public speaking, but I won’t lie, in a way, I enjoyed it. Perhaps it offered validation that I subconsciously sought after being abandoned as a child. Maybe I, too, had a desire to be liked. I don’t fully understand the reasoning; I can only communicate the feeling I experienced at the time.

When the conference concluded, I desperately had to use the men’s room, but realized it would be difficult to make my way through the crowd. Within minutes, I was surrounded—there were eight, ten people circling me like a bulls-eye on an archery target.

“What do you think of Cisco?”

“What’s your favorite financial short?”

“Where will the S&P end this year?”

I was overwhelmed. I didn’t have time to digest one question before being pelted with another, and I still had to pee. I looked over the crowd and saw Gene Hackman checking his watch. When a two-time Academy Award winner is standing alone in a crowded ballroom, and a trader is mobbed like a film star, there’s something very wrong with the mainstream mindset.

This stock market movie was not going to end well.

The Moment of Truth

Jeff was at the First Boston conference in late November feeding us tremendous insight about the technology companies that were presenting. After ten years of friendship and close-knit interaction in the office, he and I had arrived at a place of instinctive intuitiveness, and I executed upon his thoughts before words were ever exchanged. We had a rhythm that bridged his analytical reasoning with my trading gut; we were everything that hedge fund partners were supposed to be, and more.

As Jeff shared his bearish inclinations on Microsoft from the hallway of the conference, I was on the horn with Deutsche Bank, which had a large institutional buyer of the stock. I was looking for an excuse to take a short position, and Jeff delivered it in spades.

Bang! We’re short two-fifty (250,000 shares) and covered it down a buck.

Zing! Puts were flowing like water in and out of our green portfolio.

Pow! Another facial tick by Microsoft CFO John Connors, and we tossed a few hundred thousand shares back out.

We had yet to eat lunch, and Mr. Softee alone had netted us close to three million dollars, and it wasn’t just Microsoft that made money as we hosted a profit party at Cramer Berkowitz. We opened our stance and took a full cut, and we coined money across the board in tech. We traded so much merchandise with so many brokers that our team barely had time to input the positions into our risk management system. It was the definition of fluidity as our daily P&L grew from three to four to five million.

As the market close approached, I felt a great sense of satisfaction. We played to win and exhibited the discipline that is the hallmark of any great trading operation. It would have been a perfect session if not for the tiny landmine nestled between the sheets. You see, in the midst of those multiple seven-figure wins was a 20,000-share position in the computer storage company Brocade. It was one of the best performing stocks at the time and as an extension one of Jim’s favorites as well. I hadn’t even seen him enter into the position.

After the closing bell, Brocade announced a picture perfect quarter, a work of art in an otherwise burning building—they nailed it. Unfortunately, the stock was trading well over $100 per share, and the good news was already baked into the price.

Blink, and it was down five. Sigh, and it was down $10.

With each draft lower, Jim nibbled on more stock, and with each downtick, Mount Vesuvius growled louder on the other side of the desk.

I tried to calm Jim by pointing to our monster session. “Relax brother,” I said. “We had a huge day.” But he didn’t want to hear it. The venom was thick as spit flew from his mouth, and he smashed his phone and keyboard against the desk, over and over and over again.

I had seen that movie before and wasn’t interested in watching the sequel. I got up, grabbed my jacket from the back of my chair and walked out. I heard an object, which I would later learn was a water bottle, smash against the closed door while I waited for the elevator. As far as I was concerned, I wasn’t going to return as long as Mr. Cramer was there.

Jim called Jeff to complain that I didn’t care about the fund. A bit later, Jeff called me, and we had a long conversation.

Victory Laps and Big Steps Back

Life at Cramer Berkowitz was like living in a reality show. I only wish someone had the foresight to film it. Jim’s focus increasingly shifted toward his growing media presence on TheStreet.com and CNBC, which was fine by me—the clock was ticking toward a rather large payday, and the end of the year couldn’t arrive fast enough. His ability to juggle so many tasks was an amazing accomplishment, but at the time I viewed his attention as splintered at best.

One day, I yelled across the desk to Jim as he leaned back in his chair with the phone pressed against his ear and alerted him that we were making a big bet against the market. When he saw me vying for his attention, he gave me a thumbs-up, placed his hand over the receiver and said, “I love ‘em here—go!” After I informed him we were aggressively shorting the tape—betting in the opposite direction—he nodded his head in agreement and made “selling gestures” with his hands as if to say “Sell, sell, sell!”

I have no agenda in sharing the details of this interaction. As we edged toward the end of 2000, however, I had tremendous motivation to finish the year and get our investors—and myself—paid. Jim was a living, breathing rollercoaster, and I desperately wanted to get off.

As year-end flickered in the distance, we collectively made a decision to trade less, sit on our outsized gains and ride out the calendar. It was a prudent decision given our substantial lead and the uncertainty surrounding the market, and we pared our book to minimal risk and agreed to trade only the very best edges.

When Push Comes to Shove

Our process at the fund was constant; we walked through our portfolio multiple times each day and manicured our risk profile as a function of time and price. We did this through good times and bad, and it was a discipline that sustained us regardless of market conditions. It was the best way to keep a collection of ADD portfolio managers on the same page during our sensory-overloaded journey.

A funny thing happened with our newfound risk management approach—positions began to mysteriously appear as we chewed through our skeletal sheets. While Jim insisted his sources were “giving him the wink,” Jeff and I would muse and imagine, via Instant Message, who some of his “sources” might be.

Genghis Kahn, perhaps?

How about Abe Lincoln?

Ty Cobb?

It was a little funny and a bit sad, but it didn’t matter. On a $400,000,000 tank, those positions were rubber bullets that quietly bounced off the armor of our relative performance.

As I looked ahead, I wasn’t as ambivalent. We had the makings of a legitimate all-star squad, and while I had only worked with Jim for one year, I no longer had an interest in sitting on the other side of his mood swings. It was a delicate balance; I genuinely cared for him as a friend—he was there for me when I needed him—but the professional dynamic had become untenable.

Additionally, my grandfather’s health began to deteriorate, a sad reality that I needed to tend to. Perhaps I was selfish or maybe a bit greedy when I began to calculate what the payout pie would look like if Jim were removed from the equation, and once that thought began to germinate, it was difficult to shake. I spoke with Jeff and Matt and shared my desire to leave at the end of the year. Our instant messages flickered more quickly, and the outside phone calls increased in frequency. Yes, something was definitely afoot as we swallowed the dings of edgeless risk and waffled our way toward our year-end payday.

As the emotional fervor came to a head, Cramer Berkowitz arrived at the fateful day that would forever change our lives.

Behind the Closed Door

I don’t know what was discussed during the hour Jim Cramer and Jeff Berkowitz huddled in Jim’s office toward the end of 2000, but time stood still as I watched them from the other side of the glass wall.

I had a serious heart-to-heart with Jeff the night of the Brocade tirade when Jim destroyed keyboards and threw a water bottle at me as I walked out of the office. I had told Jeff that night that as much as I appreciated the opportunity and was grateful to Jim for the friendship in my time of need, I didn’t want to return the following year if he was there. Jeff wasn’t surprised—my frustration had been obvious since the end of the third quarter—but that was the first time I put it out there. “I’ll talk to him,” he said at the time. “Just relax and show up tomorrow.”

Jeff is a good man who lives his life by example, and he had more on the line than the rest of us combined, nine hard years of channeling information to Jim and quietly feeding his stardom. Loyalty is a rare quality on Wall Street; Jeff lived it and I knew it. I suppose that, more than anything else was in the back of my mind as I waited for them to emerge from Jim’s office.

The door flew open and Jim bounded into the trading room at a quickened pace. At first, I couldn’t tell if he was angry or ecstatic, which was apropos given the fine line that separated the two emotions in the man. He stepped up to the front of the trading desk and a hush fell over the firm. This was it, I thought to myself at the time, the moment of truth.

“I’ve made a decision,” he said as the corners of his lips folded upward into a smile. “At the end of this year, I’m going to announce my retirement and hand the firm over to Jeff.”

My eyes connected with Berko as I began to digest the news. And then it hit me—Jeff was the one who told me the car crash analogy; he’s the one who taught me that you don’t talk at Jim, you talk with him.

I assumed that Jeff communicated his desire to step out from behind Cramer’s shadow and take his shot as the man in charge. I’m unsure of how large a role I played in Jeff’s decision to have that discussion—or Jim’s reaction, knowing that my loyalties were with Jeff—but it didn’t really matter. Much like trading, all that counted was the bottom line.

Perception and Reality

The mood was generally positive as we spoke of Jim’s legacy. He would often joke, “Gretzky, Elway, Jordan—Cramer!” And we ran with it. The man had a heck of a run as a hedge fund manager, and it was fitting that he wrote his own swan song.

Jim knew that he could leverage his track record into a successful media career, and he had already made inroads with CNBC. His stated stance was that he wanted to spend more time with his family and that he had tired of the sleepless nights and vicious competition that were the necessary evils of money management. It seemed like the best-case scenario. He was happy, and we were happy; it was perfect.

My initial relief morphed into a more pressing question. If Jim left the business, what would he claim as his final payday when we whacked up the bonus pool? I was guaranteed a set portion of the profits, but given my relative contribution to the performance, I believed I was entitled to a larger percentage. After a string of year-end disappointments, I had finally hit the lottery. It couldn’t be happening again. Could it?

We stopped trading for the final month of the year, sitting on a 28% gain while the rest of the Street swallowed sizable losses, and spent most of our time chewing through the logistics of transferring full ownership of the firm to Jeff. I was excited for Berko as he earned the right to helm his own operation, and I was excited for myself as I prepared to assume the role of president, a title previously held by Jim.

That, and a $700,000 annual salary with a two-year guarantee, had harnessed me into a positive place. I sat down with Jeff to discuss the final compensation allocation for 2000, and he assured me that I would be taken care of in a manner consistent with my performance. True to his word, I was.

While Jim secured a sizable chunk of change as his final payday on Wall Street, I netted close to $5 million, which was considerably more than I was contractually due. A new era began at Cramer Berkowitz, and I finally shook the monkey off my back.

I was finally on the other side of the cash register.