Merc Stories Ch 3

The Dean Witter Govie Desk

I started as a house pit clerk in 1984 in the T-Bill pit signaling spread markets back to the Dean Witter Government Bond desk in the WTC. The team was an awesome melange of personalities and disciplines, some of whom I remain friends with to this day. The legendary Jon Eckstein, inventer of the year bill contract !, was our head. We were legit "playas" on the Street and threw cash and futures around in sizable quantities. 200 and 500 lot hits ( small now but ground breaking at the time), several basis points through the prevailing were common. We got early pings from the Fed on bill passes, matches and TTandL calls (GIK) [I remember a TT&L call that sent the market down about 15 bps in a heart beat, hilarious !] and Jon would ring down the line with calm orders into a 15 bid like, "12 trades, ok?" Meaning sell everything down to 12.

So, through the middle of 1987, the dollar was taking a beat down of serious degree. The dollar index had dropped from 124 to 96 by the Crash. As August 1987 rolled into September, the desk accumulated a steady stream of cash bonds and notes and with me, a heavy supply of this rapidly growing contract called Eurodollars. Now, keep in mind, most of these traders had NEVER owned "stuff" - we SOLD stuff - so taking huge hits and heat on long positions was not only gut wrenching but quite probably career ending. But, down went the buck and FI instruments right along.

By October, we were in lock down mode. A few big traders would come in early and ring me before the MD's could see them on the line and say things like, "K, buy 500 more Urins after the open, but don't ring back with the fill, we don't want them to see us on the line !" Order tickets were rumored to being stuffed in desk drawers. Several closed door meetings and position justifications took place. Several traders prepped me for a coming house cleaning but promised to get jobs elsewhere and come back to me. This was not well aligned with a "Stocks and Socks" vision. And then....

CRASH ! T-Bills went limit up on Friday afternoon and serious FTQ grabbing was everywhere. TEDs exploded only to collapse on Monday when Eurodollars opened on an indication of up 300 at up 400. A friend got on the line with me and bunched up all the desk's sell orders. I recall my partner on the floor and me selling huge amounts from 350 to 300 higher. Within an hour or so the market was only 10 basis points wide and we were still tearing down the majority of the position that only 36 hours earlier was hemorrhaging like the Exxon Valdez. The year was made and bonus', out of the question before, were back on the table.

In January, Witter management decided that perhaps the risks (there's that tricky word again) we were taking were not in line with the corporate structure. The operation shuttered not because we lost money, thanks to the crash, we had made a ton, because the volatility scared the bejeezus out of everyone.

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