The NASDAQ had already fallen 1200 basis points, the biggest crash in 10 years. Tech stocks fell further and further, with nothing but a sea of red on the historically upbeat ticker feed above the trading floor. Shouts from one trader to another rained out, but they were more out of desperation than information. The entire market was crashing, and no one could do anything about it.
While many traders were winners and losers of this false-flag correction, two in particular stand out. A trader at Goldman and a trader at JP Morgan. Both accosted by a trader at Morgan Stanley, but only one escaping with his dignity- and more importantly, his money.
One day, Salomon was sitting at his desk, and he noticed that NASDAQ and Dow futures were trading lower than normal. He ringed up one of his friends, Bill, at Goldman, and he mentioned how he was surprised that the market seemed to be going lower. Bill was also surprised. But the two were different in their reaction. Salomon was excited to short some stocks as soon as the market opened, and he mentioned how this would really help his bonus. Bill was not as sure, and though that if Salomon was successful in his short, Bill could just buy the stocks Salomon sold, then short those stocks that he had just purchased himself. If they fell, he would make money off of the short, and if they rose, he would make money off of the cheap purchase- it was a win-win. Thus, he let Salomon go on his way.
A trader at Morgan named Lewi sensed that some of the traders would see lower futures and get too excited, and he sniffed an opportunity. Through less than legal methods, he had learned that many tech stocks would post strong quarterly earnings, and thus, as the market fell, it would rise around 2:00PM when earnings started going live. He called a few traders pretending to be panicked and eventually met Salomon. Salomon shorted a stock currently selling for $500/share to Lewi, and Lewi managed to entice him further to where Salomon had exposed himself $5,000,000 dollars out. It was all of this profit for the year, but this was a sure-fired deal, and it would likely net him upper eight digits. As the NASDAQ opened low, Lewi enticed Salomon further, to buy on margin, and to continue buying. By the time the NASDAQ had fallen 1000 basis points, he exposed himself to $9,000,000 of one stock that was sure to fall. In fact, he already had unrealized gains of $11,200,000.
Lewi had tried shorting the same stock to Bill, but Bill had wisdom beyond Salomon. Instead, he sold stock to Lewie that others were shorting, acting as the middle man, and taking a 2% fee each time. By the end of the day, quarterly earnings were released, and the stock shot up to $800/share. Salomon was at a $3,000,000 deficit, and was ultimately fired for his rash decision. Meanwhile, Bill had trader smartly, allowing $50,000,000 to flux through his account. His 2% fee netted him $1,000,000 that day.
Author's Note:
I retold the story of The Wise and Foolish Merchant, but instead of merchants, I used traders. In addition, a trader loses his job after being outsmarted, as opposed to being killed by a demon. There are some fun inside jokes, such as Bill (dollar bill), Salomon (Salomon Brothers), and Lewi (Lewie Ranieri), but overall, this take on the story is simply about a false flag stock leading to losses. One might wonder what shorting is, essentially, it is selling a stock that you do not own, then buying it later. Hence, if it falls, you gain money. If it rises, you lose money. Since Salomon's stock rose, he lost money, and ultimately, his job.
Bibliography:
The Wise and Foolish Merchant by Ellen C. Babbitt
While many traders were winners and losers of this false-flag correction, two in particular stand out. A trader at Goldman and a trader at JP Morgan. Both accosted by a trader at Morgan Stanley, but only one escaping with his dignity- and more importantly, his money.
One day, Salomon was sitting at his desk, and he noticed that NASDAQ and Dow futures were trading lower than normal. He ringed up one of his friends, Bill, at Goldman, and he mentioned how he was surprised that the market seemed to be going lower. Bill was also surprised. But the two were different in their reaction. Salomon was excited to short some stocks as soon as the market opened, and he mentioned how this would really help his bonus. Bill was not as sure, and though that if Salomon was successful in his short, Bill could just buy the stocks Salomon sold, then short those stocks that he had just purchased himself. If they fell, he would make money off of the short, and if they rose, he would make money off of the cheap purchase- it was a win-win. Thus, he let Salomon go on his way.
A trader at Morgan named Lewi sensed that some of the traders would see lower futures and get too excited, and he sniffed an opportunity. Through less than legal methods, he had learned that many tech stocks would post strong quarterly earnings, and thus, as the market fell, it would rise around 2:00PM when earnings started going live. He called a few traders pretending to be panicked and eventually met Salomon. Salomon shorted a stock currently selling for $500/share to Lewi, and Lewi managed to entice him further to where Salomon had exposed himself $5,000,000 dollars out. It was all of this profit for the year, but this was a sure-fired deal, and it would likely net him upper eight digits. As the NASDAQ opened low, Lewi enticed Salomon further, to buy on margin, and to continue buying. By the time the NASDAQ had fallen 1000 basis points, he exposed himself to $9,000,000 of one stock that was sure to fall. In fact, he already had unrealized gains of $11,200,000.
Lewi had tried shorting the same stock to Bill, but Bill had wisdom beyond Salomon. Instead, he sold stock to Lewie that others were shorting, acting as the middle man, and taking a 2% fee each time. By the end of the day, quarterly earnings were released, and the stock shot up to $800/share. Salomon was at a $3,000,000 deficit, and was ultimately fired for his rash decision. Meanwhile, Bill had trader smartly, allowing $50,000,000 to flux through his account. His 2% fee netted him $1,000,000 that day.
It is perhaps easier to be a lost merchant in a dessert, than any trader on Wall Street. Source: PixaBay
Author's Note:
I retold the story of The Wise and Foolish Merchant, but instead of merchants, I used traders. In addition, a trader loses his job after being outsmarted, as opposed to being killed by a demon. There are some fun inside jokes, such as Bill (dollar bill), Salomon (Salomon Brothers), and Lewi (Lewie Ranieri), but overall, this take on the story is simply about a false flag stock leading to losses. One might wonder what shorting is, essentially, it is selling a stock that you do not own, then buying it later. Hence, if it falls, you gain money. If it rises, you lose money. Since Salomon's stock rose, he lost money, and ultimately, his job.
Bibliography:
The Wise and Foolish Merchant by Ellen C. Babbitt
Hi Sean! I like your story. It’s really creative and unique. 1200 points.. That’s a lot of loss in market. Even billionaires would have lost a lot although I think they wouldn’t mind much since they can gain back once NASDAQ recovers. Those traders from prestigious banks must be some of the smartest in Wall Street. Bill sounds like the smarter man and his emotional stability paid off. Thank you for a great story!
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