9. Battle Lines

My grandfather once told me to keep my right hand up. As a former Golden Gloves boxer, that was his way of telling me to protect my chin. After Jim’s emotional tirade, I never walked through that office the same way again. I knew that I was only as good as my last trade, but at Cramer Berkowitz, that expression was taken to an entirely new level. It wasn’t enough to be right; you had to be right all the time, every day.

It was March 2000 and the NASDAQ had rallied 35% in a little over a month. Jeff and Matt scoured corporate America as Jim and I, sitting five feet apart and facing each other, moved mountains and molehills from dusk till dawn.

While we shared a common mission, our styles were drastically different. Jim, as a momentum trader, warmed to stocks once they rallied and cooled after they fell. As a function of my facilitation roots at Morgan Stanley, I preferred to “fade” the market, buying dips and selling blips. Our stylistic dichotomy was a high stakes game of chicken and somebody was bound to blink.

I remember precisely when the moment of clarity arrived. Tech stocks were rallying 10, 30, 50 points in a single day, and I awoke in the middle of the night with a disturbing epiphany. It wasn’t the first time I had the thought, but it was different that time, a clarity that seemed obvious, a crystallization that would define my career. The technology bubble was about to burst.

One of the toughest disciplines to master when trading is to unwind a position that is making money. Multiply that dynamic by a large portfolio, add a slew of zeros, and factor in the emotional dysfunction of our office, and you’ll get a sense of the task at hand.

I won’t say I was the lone bear—Jeff also sensed wreckage on the horizon—but the timing, coupled with the intensely competitive landscape, made for prickly friction with a razor thin margin of error. Jim summed it up in his first book, Confessions of a Street Addict, when he wrote: “When April came in, and the NASDAQ was still in the 4,500 area, Todd suggested that we were on the verge of a collapse of titanic proportions, that the whole NASDAQ bubble was about to burst and would shortly be at 1,500.”

Now, you’ve got to understand Jim. He had a genuinely kind heart and always strived to do the right thing, but he could make your life miserable if you were on the wrong side of his mind. Jeff used to muse that if Jim hit someone with a car and you politely informed him of the accident, he would drive the victim to the hospital and buy the entire family dinner. If you told Jim he screwed up, he would raise his arms and scream, “Shut up or I’ll hit you, too!”

Such was life at Cramer Berkowitz in the weeks before what was at the time the largest car crash in financial history. It wasn’t enough that I had a strong sense the wheels were about to fall off the financial wagon, I had to explain why the timing was right and do it with tact. Gut feels and hairs on the back of my neck weren’t enough, and heaven help me if we missed further upside or worse, got squeezed on the short side. The tension was thick, and as the new kid on the block, I knew where the loyalties lay.

Pop Goes the Weasel

April 2000 arrived with a bang, and the NASDAQ dropped 20% in a few short sessions. What’s more, as we actively traded the volatility, we caught the countertrend rally back to NASDAQ 4500 before again riding the short side to fresh market lows. The markets crashed all around us, and we were in the eye of the storm, an island of clarity in an otherwise unsure world.

We posted huge gains, paid the Street insane commissions, and the trading staff and risk-management protocol I implemented had paid huge dividends. The swings were wild, $20 million, $30 million in a single session, the type of numbers that you didn’t want to comprehend. Our new systems updated our P&L dynamically, and we knew exactly where we stood with each flickering tick. That was both a blessing and a curse. I didn’t need to watch my screens, as the look on Jim’s face across the desk told the story in real-time.

Any trader who says that he or she doesn’t take performance personally shouldn’t be managing money. We ran one portfolio—hundreds of positions that forged a single bottom line—but we each had our “names.” While we all played for the same team, we each eyeballed our individual stats as we went home each night.

The inherent differences between our individual trading approaches became increasingly apparent. When the market rallied, Jim tossed fresh long exposure into our portfolio. After it reversed lower, sometimes minutes later, short positions would suddenly appear on our sheets. I watched him closely and traded my positions with an eye toward the overall risk profile. I wasn’t worried about stepping on toes or honoring the status quo. After coming so close in my two previous professional endeavors, I had two missions in life: to make money and to protect those gains.

As the summer approached, we operated at a feverish pitch and harnessed that energy into tremendous performance. Still, there was an unspoken angst in the office, the type of tension that was only acceptable if we beat the Street.

It was the best of times; it was the worst of times. It was functional, dysfunctional, friendly, heated, seamless, and strangely sophomoric all at the same time. It was life at Cramer Berkowitz, and unbeknownst to me, we were about to open our window to the world.

A Worldwide Window

The fuel injected ascent of technology stocks—the unintended consequences of Alan Greenspan’s policy following the Asian contagion—was unwinding at a rapid pace, and we were making a lot of money. To the outside looking in, our fund was the definition of lucidity, but internally, a different dynamic began to take shape.

As Jim readied for a summer vacation in the Hamptons, he was on the phone with his editor at TheStreet.com looking for someone to write his column while he was away. When his eyes locked on mine, I saw a light bulb flash above his head as a grin spread across his face. “I’ve got it covered. Toddo will write on Monday while you find someone for the rest of the week.”

I was trading 200 positions and managing $400 million worth of risk, and I didn’t want another job—my hands were full as it was. I said to Jim, “Dude, it’s not happening. The last time I wrote something was to my mother while at summer camp.” But he had already made up his mind; his problem was solved, and it quickly became mine.

I didn’t put much thought into my first column. I scribed Grateful Dead lyrics that pertained to the tape, threaded in some levity through pop culture references, and espoused my bearish bent in real-time, delving into the details of my particular trading approach. I didn’t initially embrace the double duty, but surprisingly, it didn’t bother me either. In fact, I found that it helped crystallize my thoughts as I tried to navigate the wicked crosscurrents of the marketplace in real-time.

As the closing bell approached on Monday, July 3, 2000, I got a call from the editor at TheStreet.com asking me to finish the week. “Sure,” I said as I looked at Jeff and smiled. “Anything I can do to help.”

The Switch Is Flipped

There was no middle ground with Jim. Every day was either the best ever or the worst imaginable. That applied to his personal relationships as well: You were either his close friend or a sworn enemy. I toggled between the two, often in the same day, but there was little doubt about which side of his emotional chasm I was on when I pulled up to his East End rental on Friday night. “Toddo!” he screamed as he ran down the driveway and wrapped me in a bear hug. “We gotta talk!”

I was with a friend who was stunned by the outburst of emotion, and I couldn’t blame her; Hurricane Jim was frenzied energy that swallowed everything in his path. She didn’t know the other side of his mental ride, but it was just as well; she wouldn’t have believed it anyway. He excitedly told me that my columns performed fantastically well. That surprised me, but I had little time to digest the news—he had a plan, and his wheels were already spinning. “We’re going to give you a trading diary on TheStreet.com right next to mine. It’ll be great! Whadaya say?”

What could I say? I had never shied from a challenge, and I’m not sure that I could have if I had wanted to. To be honest, I’m not sure that I wanted to. I actually enjoyed writing, if only for the opportunity to synthesize my thoughts and move my mind in a different direction. I had no way of knowing that Jim opened a door for me that would forever change my life.

I promised myself that I wouldn’t let the column splinter the focus that was quietly lining my pockets. Writing came naturally, however, and soon became a seamless part of a cohesive duopoly that opened a world to me that I never knew existed. Uncle Buck, Young Frankenstein, Led Zeppelin, and Jimi Hendrix commingled with my stock market analysis into a single stream of consciousness.

At first, I feared the additional responsibility would add tension to an already strained environment. While Jim and I often disagreed on how to approach the market, that friction was behind closed doors. Now, through the power of the Internet, our approach was at odds for the world to see.

Interestingly, that’s not what happened. TheStreet.com was Jim’s baby, perhaps in a more profound way than the hedge fund. As my page views increased and our performance percolated, I noticed a cumulative kinship. I didn’t realize his motivation at the time, but it made perfect sense. TheStreet.com was a very personal project for Jim; it was his name, and they were his words.

The stock market volatility continued to weed out the weak hands and punish those who confused brains with a bubble. One of the first lessons I learned when trading was that you must adapt your style to the market, and the wild ride of the Internet bubble was a lesson in discipline and agility. By the time the crowd got to the “right” side of the trade, the market shifted in the other direction, leaving blood in its wake. There was carnage all around us, from famous hedge fund managers shuttering their doors to mainstream Americans suddenly caught under a waterfall of supply.

My guttural instinct was to insulate our fund from the crimson tide that swallowed the Street, and I began to view Jim’s momentum-style approach as a contrary indicator, subconsciously at first and then with increased frequency. As our fund outperformed and I embraced the column he enabled me to attain, I swallowed my tongue and kept the peace. He was still the boss; he was still Jim Cramer.

I didn’t dislike him, and in fact, I had tremendous respect for his intelligence and cared greatly for him as a friend. Beneath his wild emotional swings beat a genuinely tender heart. We all wanted the same thing—performance—and I pushed through our problems despite the increasingly frequent clashes over how we approached our risk profile.

As we edged through the back half of 2000, it was clear something was going to give, and that something wasn’t going to be me.