The Big Short_ Inside the Doomsday Machine - Michael Lewis [58]
Event-driven investing: That was the name they either coined or stole for what they were doing. That made it sound a lot less fun than it was. One day Charlie found himself intrigued by the market for ethanol futures. He didn't know much about ethanol, but he could see that it enjoyed a U.S. government subsidy of 50 cents a gallon, and so was supposed to trade at a 50-cent-a-gallon premium to gasoline, and always had. In early 2005, when he became interested, it traded, briefly, at a 50-cent discount to gas. He didn't know why and never found out; instead, Charlie bought two rail cars' worth of ethanol futures, and made headlines in Ethanol Today, a magazine of whose existence he was previously unaware. To the intense irritation of Cornwall's broker, they wound up having to accept rail cars filled with ethanol in some stockyard in Chicago--to make a sum of money that struck the broker as absurdly small. "The administrative complexity of what we were doing was out of proportion to our assets," said Charlie. "People who were our size didn't trade across asset classes."
"We were doing the sort of things that might cause your investors to yell at you," said Jamie, "but we didn't get yelled at by investors because we didn't have any investors."
They actually thought about handing their winnings over to some certified, qualified, sanitized, honest-to-God professional investor to run the money for them. They raced around New York for several weeks, interviewing hedge fund managers. "They all sounded great when you listened to them," said Jamie, "but then you'd look at their numbers and they were always flat." They decided to keep on investing their money themselves. Two years after they'd opened for business, they were running $12 million of their own and had moved themselves and their world headquarters from the Berkeley shed to an office in Manhattan--a floor of the Greenwich Village studio of the artist Julian Schnabel.
They'd also moved their account, from Schwab to Bear Stearns. They longed for a relationship with some big Wall Street trading firm and mentioned the desire to their accountant. "He said he knew Ace Greenberg and he could introduce us to him, and so we said great," said Charlie. The former chairman and CEO of Bear Stearns, and a Wall Street legend, Greenberg still kept an office at the firm and acted as a broker for a handful of presumably special investors. When Cornwall Capital moved their assets to Bear Stearns, sure enough, their brokerage statements soon came back with Ace Greenberg's name on top.
Like most of what befell them in the financial markets, their first brush with a big Wall Street firm was delightfully weird but ultimately inexplicable. Just like that, without ever having laid eyes on Ace Greenberg, they were his customers. "We were like, 'So how is it that Ace Greenberg is our broker?'" said Charlie. "I mean, we were nobody. And we'd never actually met Ace Greenberg." The mystery grew with their every attempt to speak with Greenberg. They had what they assumed was his phone number, but when they called it someone other than Greenberg answered. "It was totally bizarre," said Charlie. "Occasionally, Ace Greenberg himself would pick up the phone. But all he'd say was, 'Hold on.' Then a secretary would come on the line and take our order."
At length they talked their way into a face-to-face encounter with the Wall Street legend. The encounter was so brief, however, that they could not honestly say whether they had met Ace Greenberg, or an actor playing Ace Greenberg. "We were ushered in for thirty seconds--literally thirty seconds--and then unceremoniously ushered out," says Jamie. Ace Greenberg was still their broker. They just never spoke to him.
"The whole Ace Greenberg