Wall Street Manna

An irreverent look at Wall Street

Monday, June 29, 2009

Dump the Spandex!

In 1985, one of my workout partners, decided to try out for the Minnesota Vikings. He was about 6' 5" and 254, which was pretty big back then. In 1982, "Scar" played in the "scab" games of the strike shortened NFL season, for the Vikings and even got some checks when the Vikes went into the play-offs. So hopes springs eternal, and he was pounding the weights with me in late May of 85, getting ready for another tryout.

We did power cleans first and then we went to the bench press. We both did these sets--220X8, 264X8, 308X6, and then he put on 352 lbs, and he knocked off 6 reps. So as I prepared to go and bench, all of a sudden I felt this massive adrenaline rush, and I just knew that I would beat him. I knocked off 7 reps, and threw the weight back on the rack like it was a toy. He looked at me, surprised as heck, but the truth was, I was way more shocked than him! He then went to 374, and knocked off some reps, but I was already done!

Anyway, admist all this smack talking and commotion, the gym hottie, who had just recently gotten a gig modeling underwear for the Marshall Field's catalogue, came up to us, and asked what we were going to do tonight, because there was a party at this bar, that was just a couple blocks from my house. He declined, but I said I'd show.

So I was feeling pretty good walking out of the gym. I just had a great adrenaline rush lifting; and now I was going out to meet the underwear model.

So I put on my best vintage Hawaii shirt, some white drawstring pants, and walked the two blocks to the bar. And like most woman, she made you wait. So I ended up ordering a bottle of Miller Lite from the bar, and noticed this really pretty Latino girl, approving my taste in beer. She asked me why I was drinking Miller. I said, "Because they sponsored our tug of war team." (Back then, the war between "great taste" and "less filling" was the flag on the tug of war rope!) And I suppose, this was just the response you would never expect to hear, so she laughed, and we started talking.



Turns out she worked as an intern in the law department at Miller Brewing. (Owned of course by Phillip Morris) I found her really interesting, especially because she wanted to change the world by helping the under-privileged, the pro-bono work that she planned, and because she had this wonderful idealistic viewpoint on life. (Now she heads up commercial litigation at one of the majors. Seems pro-bona and the idealism ended after law school!)

But she was smart. My trader friend said, that if she didn't become a lawyer she could always work at Goldman Sachs. Back then, Goldman Sachs had a name that was revered!

Somehow we got to talk about the stock market, and she told me, that I should buy Apple. Her boss had just gotten this Mac, and now you can't even buy them.

Now it was getting real loud in the place, so I could hardly hear her, so I laughingly asked her what else she did besides get coffee---and she said, "Oh, we're real busy now, because we are going to buy another company. We're getting into food. We're going to buy General...."

And right then, the underwear model, made her appearance, in this 80's silvery spandex dress with appropriate cut-outs, and grabbed my arm, and asked me to dance. So she dragged me out to dance to Chaka Kahn's "I feel for you."

So I'm out dancing with Ms. Spandex, but I'm increasingly distracted. So I assessed the trade-- her in the cut out dress dancing to be seen, and then the scene at the bar, of her drinking the bottle of Miller Lite, and I said, to myself, "It's Miller time'" and I left Ms. Spandex to dance by herself.

And then, it was like a beer commercial. We walk out in the parking lot, and she has this really nice sports car, and she throws me the keys and says, "I really don't know my way around this city. Why don't you just drive? And you can keep my car, as long as you pick me up at work." I said to myself, "Nice call!"

The next day, I called the only computer store in town that had Apple, and I found out there was a shortage of parts, and that the only computer they had was the floor model, but they weren't selling it. A shortage of parts is different from a shortage from demand!

I wasn't going to buy Apple anyway. But I couldn't get the "general" out of my head. General Mills? or General Foods? If it was "Mills" it would make sense for her to say we are getting into food. If they were buying "Foods" why say that we are getting into "food?"

So I looked at the calls on General Foods, and the calls on General Mills, but the General Food options were more expensive. So instead of buying the General Food options at $1, I bought the General Mills options at .55.

Three weeks later, General Foods moved up $11 to 82 3/8 on rumours of a Phillip Morris bid. A spokesman for General Foods said there was nothing new to report, and there was no reason for the heavy activity in the stock. They didn't know, but the whole world did. I guess that's why we believe stock prices and not companies.

I picked her up that day of work, and asked her about General Foods. She said, "Did I tell you that? I can't remember!" Interns learn fast

A few months later, Philip Morris bid $120 for the rest of the company. But I never traded it again. I already had made the good trade!

I think the moral of the story is, (beside five good years with her) is sometimes the best trade, is also knowing when to walk away.

And if I missed the trade, so what. So did Goldman. They bought $49% of General Foods in 1929 for $12.5 million, and then sold it back to the company in 1932 for a loss.

For once Goldman didn't have the right inside information!

But it took a depression for it to happen!

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