第 4 章
The Spectacular Rise and Catastrophic Fall
Paul's success continued when he partnered with Larry Broderick, combining Paul's floor execution skills with Larry's cash market connections. They quickly dominated the lumber pit, handling 600-800 of the daily 3,000-4,000 contracts. At 6'3" with a booming voice and 100-lot orders, Paul became a presence. His success reinforced his belief in his special abilities, but he failed to recognize that his achievements stemmed more from luck than skill.
Paul vividly recalled the first time he made $5,000 trading - it gave him the same thrill as making $5 caddying at age ten. This feeling repeated with each milestone: $10,000, $20,000, and beyond. By December 1980, Larry and he had reached their peak with accounts from every major lumber business player and $3.5 million in equity. However, as interest rates soared in 1979-1980, housing sales plummeted, lumber prices crashed, and daily trading volume fell from 6,000 to 1,000 contracts - not enough business to maintain his lifestyle.
Believing he could apply his "money-making talents" elsewhere, Paul ventured into Arabian horses as an investment. Despite his skepticism about these non-racing show horses that "don't do anything" except look pretty while selling for millions, he purchased a gray Arabian named Onyx for $22,000. The cash register immediately started running with transportation, boarding, training, and vet bills. When Onyx developed a rare blood disease and died - naturally before they'd insured him - the Arabian horse fiasco cost Paul about $50,000.
As the lumber market dried up, Paul shifted his business upstairs, handling speculative customer accounts and trading from quote machines. Needing expertise in other markets, he relied on his brilliant friend Kirby Smith, who focused on soybean oil in summer 1982. By early 1983, they were building massive bull spread positions - so large that the Chicago Board of Trade informed Paul he'd exceeded the 540-spread limit.
With business booming, Paul bought a Porsche 911 convertible and rented an $11,000 motor home for a family vacation along the east coast. He had a phone installed to monitor markets while traveling. When soybeans jumped 20 cents on drought forecasts, he felt vindicated - getting paid while vacationing. Driving down the Jersey Turnpike, drinking beer and trading by phone, he thought he was the world's smartest trader.
After three limit-up days, their bean oil spreads finally started trading. In one spectacular day, Paul made $248,000 - his secretary made $2,400, Broderick nearly $50,000, and collectively their group made $700,000. When he heard legendary trader Richard Dennis was on the opposite side of their trade, he arrogantly thought they'd "take out" the Prince of the Pit and become famous. The high from being right and making money was better than any drug - Paul felt invincible, browsing through The Robb Report considering a $400,000 motor home.
Then the market turned. Monday morning Paul arrived at his lavish office with its suspended mahogany desk, German leather furniture, and $4,000 stereo system. He was ready for another $50,000 day, but the bean oil market had other plans. The spreads opened against them, then continued to decline despite bullish news. Paul lost $20,000-$25,000 daily for months while rationalizing every drop. His sophisticated clients bailed out, but he stubbornly held on, convinced the world would run out of bean oil and Smith and he would make $10 million.
By October, Paul was underwater as bean oil plummeted from 37 to 29 cents. Margin calls mounted, but the firm initially gave him leeway due to his status. He borrowed around $400,000 from friends to meet margins. His life unraveled - he fought with his family, lost 15 pounds, couldn't sleep, and dreaded market openings. When he couldn't meet another margin call, the firm mercifully liquidated his position and seized his assets, including his exchange membership. In just 75 days, he had lost everything.
