Train Tracks (9 page)

Sam also learned that there were different delivery
months. It being March he would trade in May, July, or September cocoa, or
distant May contracts in beans, which would be delivered more than one year from
the time of offering. Under the advice of his broker, Sam had focused on “near
May” contracts. He learned that speculators like himself would trade only up to
a few days before the first of the delivery month and then settle their
accounts, usually by selling their contracts, hopefully at a higher price. Only
those accounts that actually used the cocoa bean, such as Hershey or Nestlé,
would take delivery of the beans to meet their production needs. In essence,
these accounts purchased beans ahead of time both to assure a steady supply and
also to buy at the lowest price. Speculators such as Sam always “offset” their
position by selling before the delivery date. Sam dreaded the thought of making
a mistake and getting a notice from a warehouse in Philadelphia notifying him
that 214 burlap bags weighing 140 pounds each were awaiting his final payment
for delivery.

A
t
9:30
A.M
. the next morning he phoned his
broker.

“Hi, Sam. Look, I gotta be brief,” said Jim. “This
is the busiest time for me. The London market indicates cocoa is selling from
large liquidation accounts and gold is unchanged at $142.50.”

That was all Jim said. As Sam soon learned, the
broker never made recommendations to buy or sell. All he did was state a few
technical facts. Since Sam was at a loss to make any decision, he remained
dumbfounded, creating quite a pause. The busy broker quickly jabbed:

“Tell you what, Sam. Let's wait until the market
stabilizes. Call me tomorrow, same time.”

At the barest audible affirmation sound from the
speculator, the broker switched buttons on his phone, leaving Sam dumbly on the
line.

That day in the bookshop, Sam went through the
financial page of the previous day's
Wall Street
Journal
looking for facts in the multiple-columned quotations and
otherwise found the paper quite interesting. The business outlook on world and
national events was sensible and refreshing to Sam, who had been schooled along
by whims of articulate but imbecilic academicians. Otherwise, his day was quite
usual except for a more deeply ingrained expression of contempt on his face as
he picked through a series of modern poetry for a customer.

Ten years before, Sam had written much poetry
himself. He came to sit at the feet of the most famous of the “beats” and once
read himself on a rickety pier over the Hudson River. While others thought his
poems worthy that night, Sam felt depressed and continued to write mainly
maudlin statements concerning the fact that one day he too would be dead, but as
a rule he became less quick to call himself a poet when newly introduced to
people. Once the bookstore was under way and substantial profits realized, Sam
became less and less involved in the world of poems. Nineteenth-century French
novelists intrigued him, especially those who either made or lost fortunes or
spent their entire lives trying to get rich and famous. He also remained an avid
student of biography, prizing the lives of those who achieved greatness through
bold moves made at crucial times in their career. Other than these areas, books
became mere merchandise to sell.

He stocked the newer poetry more as a sentimental
link to his past than for business reasons. Those who were most interested in
the stuff never seemed to be able to buy any of the slim paper volumes. They
merely read the verse to themselves and left the books more soiled than they
found them. Sam never bothered to chastise any of these poor customers. He
understood them well. Besides, his business was becoming important in the
neighborhood and he wanted to maintain good relations with these people. Already
the grumblings about his being a “rip off” were getting back to him and he
wanted to avoid a confrontation at all costs.

A
fter
a few days of calling his broker, Sam decided to buy one contract at the market
price of 64:95 cents per pound. His broker told him the trend appeared upwards,
but that if things “turned around,” they could liquidate and take only a small
loss, more than compensating for it on the next trade.

Through the day Sam phoned Jim four times. He was
careful not to say much on his side of the line, not wanting the book buyers to
know he had become a speculator. As it turned out, May Cocoa closed at 65:10,
just a few points above the point at which Sam bought it. While he knew he had
made a good move, he didn't bother figuring out his paper gain in dollars. He
figured that one cent up, to a price of 65:95, would give him $300 profit, less
$60 in commissions. Below that one-cent figure, he would merely take the
ride.

The next day, at exactly 9:30
A.M.,
he phoned his broker. A strange voice
answered. Sam was stunned. “Is Jim there?” he asked.

“No. Who is this? His train must be late. Call him
back in a few minutes.” Then a disconnect. Sam was curious. “What kind of
schmuck is this? Who misses a train when a market opens in thirty minutes?” came
the inner logic.

He finally got through at 9:55
A.M
. Instead of wasting precious time in anger, he
listened to Jim's news that gold was down $3. “All right, let's liquidate at
65:10, the least,” said Sam. “That should be enough to cover the commission,” he
thought.

As the day would have it, Sam was “executed” at
65:10. This gave him a gross profit of $45 but a net loss of $15 once the
commissions were consistent, no matter how many contracts were traded. Whether
you moved one, two, or multiple contracts, the commission remained at $60 per
contract.

Even though he lost, Sam felt good. May Cocoa
closed down, the limit by the end of the trading session, at 63:10; and he
congratulated himself for having made his decision as early in the day as he
had. At least he had “felt correctly” about the day's trading.

A
s the
days went by, Sam watched May Cocoa close lower until it was down to 58:00. The
analyst at the brokerage house filed this report.

“Fundamentals remain unchanged. Demand remains high
while production is lower than anticipated. The 58-cent level remains a good
entry position. If the price breaks 68 cents it should go to 78 cents.”

The next day, May Cocoa turned around, and went up
the limit to 60:00. The day after, it closed up 150 points at 61:50. That
afternoon Sam decided to buy. He phoned the broker at 3:10
P.M.
and told him to place a market order. Jim
advised him that a pool of 310 buyers remained at the close of day and that even
though Sam wanted to buy two contracts he might not find a seller.

At eleven
A.M
. the
next day, Sam phoned to find out if his orders had been executed. Jim told him
yes, he had gotten two contracts for him when it opened up the limit, at 63:50,
but at the moment the price was down to 61:75. It seems that buyers now
outnumbered sellers.

Sam was nauseous. Each contract was off 1.75 cents,
or $515 each, for a total paper decrease of $1,030 plus commission, of
course.

Jim did not console him. “Look, stay in touch. This
could close down the limit; at 59:50 we may have to make a decision.”

Sam was aghast. He said to Jim, “Wait a minute. I
thought the trading limits were two cents in any one trading day. How the hell
could I buy at 63:50 and see it go to 59:50 in one day?”

Jim explained to him, “It can fluctuate two cents
up or down from the
previous
day's close, in any one
day.”

Sam felt like cursing at Jim. “What kind of schmuck
buys up the limit on a day when the price bounces down the limit one hour
later?” He was sick to calculate that four cents down on each contract would
mean he lost $2,400 in one day!

Jim told him to phone back at three
P.M
. and hung up.

Sam was in agony. Instead of seeing the price go
from 63:50 to say 78:00, and making $9,000 in a few weeks, he might lose that
amount in a few days. The thought suddenly occurred to him that for everyone who
made a profit there must be at least one person who suffered a loss. The world
became grim for him. The old hatred for capitalists rushed back upon him in a
red wave.

At three
P.M.
he
learned that things were not quite as bad as he feared. May Cocoa closed down
150 points at 62:00, and his worst fears were mildly tempered.

Jim told him to relax that weekend, it being a
Friday afternoon, and to phone him at 9:30
A.M
.
on Monday morning, when they would make a new “battle plan.” Sam asked Jim what
was influencing the cocoa market. The broker explained that fundamentally cocoa
remained strong, but that it was being traded like precious metals, gold,
silver, and platinum, by nervous investors who were reacting to world events.
Each time gold went down in price, cocoa seemed to follow. When it went up,
cocoa did likewise.

Jim told him, “These are crazy times, we've never
seen anything like it.”

Sam asked for a key to events that might occur over
the weekend and that might influence the opening price on Monday. Jim said,
“Well, if they start shooting again in the Middle East people will rush to gold,
and cocoa should go up as well.”

Being Jewish, Sam quickly retorted, “Well, I'd
rather take a loss than see them shooting at each other.”

Jim did not believe that.

T
hrough the remainder of the afternoon and into the evening, Sam quipped
to his girlfriend, Joanne, how adept he was at losing money. He felt bad about
the 1.5-cent drop in the price of cocoa, which in dollars represented a paper
loss of $1,030, plus commission. He reminded Joanne several times how good he
was at investments: “Who else do you know who could lose $1,500 in a few
minutes?” This form of self-effacement was characteristic of Sam during his
poetry days. With his successes in the book business and the continual ego
bolstering provided by Joanne, who had observed his trait over the years and
decided it was not “honesty” that motivated Sam when he chose to bear inner
truths to his friends, but a genuine need to be hurt, where hopefully, pity
would follow. The sweet warmth of maternal hugging that followed his every
childhood upset had made him like this.

Now that he had hurt himself, at least on paper, he
resorted to self-derision, hoping for reassurances, which, in fact, followed
from his soul mate.

“Oh. Come on, Sam. Don't be too hard on yourself.
First of all, you haven't even given this enough time to see if you're gonna
make or lose. Second, even if you do lose money, it won't matter to me at all.”
These magical woman words had their effect on Sam's expressive face, giving to
Joanne her encouragement to go on. “Sam, you must learn to detach yourself from
your ability to make money. You are separate from whatever you can do.” He
nodded, she drove further, now slightly conscious of the thoughts he had taught
her to believe he was thinking. “Sure,” she said, “I love your ability to make
it in this rat race of a world, but that's not the only reason I love you.”

In such a way, Sam bore his initial mistake. He was
still baffled by the drop in the price of cocoa and decided to listen very
carefully to the news that weekend, to know exactly what to do Monday morning.
If tensions grew in the Middle East, God forbid, he would keep his futures; if a
truce were announced, he would liquidate and take a loss.

A
s a
result of heavy wine drinking at a friend's house Sunday evening, the investor
overslept on Monday morning. He jumped up at eleven
A.M
., startled by the time, and phoned his broker. The analyst told
him cocoa was moving up and down, changing every few minutes. Sam decided to
sell, rather than risk a loss, should the futures contract close down for the
day. He told Jim to sell whenever the price was at least half a cent higher than
his purchase price. Jim repeated the instructions carefully. “So you want me to
sell at a price of 64:00.” Sam repeated the order. “Yes. I bought them at 63:50,
and I want them sold at 64:00.” The order was confirmed and the conversation
terminated. After placing the receiver back on the hook, Sam settled back in
bed. He felt good. He assumed he would take a profit on the two contracts. As
Joanne opened her eyes, Sam smilingly reassured her. “Don't worry. Everything
will be all right. I'll probably make at least $300 today, less commission, and
we'll get back in whenever the trend upwards looks stronger.” Joanne lightly
patted Sam's hand and returned to her dreams. Sam felt wise. He estimated he
could make several hundred a day just by buying and selling; a few phone calls
each day, and he would become a very rich man.

As he tossed the figures over in his mind, an
alarming thought occurred to him. He grabbed the phone and dialed a familiar
number.

“Jim. Hello. This is Sam. A thought just hit me. I
can't get a price of 64:00 today. A two-cent increase over Friday's closing
price of 61:75, assuming it goes up the limit, would give me a maximum of 63:75.
Only 25 points more than I bought it at.”

Jim satisfied him. “Relax. I just found out that
the closing price on Friday was in error. It actually closed at 63:25, not 61:75
as I told you. You know how those dumb clerks are. Come Friday afternoon, and
they run home for the weekend leaving things hanging.” He continued without
interruption while Sam fought a sickness in his stomach not apparent since those
high school days when he learned that he had failed an important exam. “Besides,
you make out OK. Your two contracts were just executed at 64:00, so you profited
on the transaction.”