I have had the pleasure to meet some very interesting people in my 25 years as a broker at the Chicago Board of Trade. The financial world literally does come to our markets in one way or another so I have indeed been fortunate to have grown up when I did but also to live in or near Chicago virtually all my life.
I have always felt that traders are a lot like athletes, in that you have to be disciplined, mentally and physically strong, competitive, and willing to push your self beyond the limits that most people prefer not too. I don’t mean to paint a picture of superior beings, but those willing to take the risk and count on self-reliance more than others may care to tend to entertain careers in the world of finance and risk.
There are of course a very substantial amount people in trading and finance that never had any desire for physical sports of any kind, yet do have the aptitude, education, and skill necessary to be very successful.
Futures Curve: Steve, as young boy growing up in Northern Minnesota, when did you first get drawn into the game of hockey. And explain how you were eventually drawn into standing between the pipes in your High School, College, Olympic and Professional Career. Were you a decent skater as a kid? Did you have older Siblings that wanted a live target to shoot at, or was it some form of insanity of your own doing? (Don't worry most questions will be of a more dignified nature, I just love humor though)
Steve: I was the oldest of four kids and have three younger sisters. Dad played hockey at Johnson High School where Herb Brooks also played a few years behind him. When we were young he’d build a small rink in the driveway every winter, and within walking distance of the house in White Bear Lake, MN there were five other rinks/ponds to skate on. One of my favorite memories was wanting to skate one night after dinner and dad taking me over to the local junior high school rink where the rink was already closed for the night. We skated in the lights of the old blue Rambler that he parked on a snow bank in the corner of the rink.
Started skating when I was five as a fifth-line center on a team that only played three lines. Was a brutal skater and didn’t really improve much. Over the next year that meant spending a lot of time sitting/standing on the snow bank freezing. When I was six, our goaltender quit. Steve (Peewee) Peloquin – his brother Blubber also played for us as a defenseman – was our goaltender and he quit. The reason Peewee quit was that he like to chew bubblegum and the bubbles he blew stuck and froze on this wire mask. That pissed him off and he left the game forever. He was our only goaltender. Coach was looking for someone to take over the position; I was sitting on the snow bank freezing, and saw it as a chance to finally play. The first game I remember the parents strapping the pads and mask on me - new mask, plastic, no bubblegum – and it was all very clumsy. In the first period a guy had the puck right in front of me and I was ready for him. But he passed to a guy on my left who had a wide open net. Didn’t know what to do so I figured that I would just fall down. I fell down to my left and the guy pushed the puck into my shoulder. Felt it hit my shoulder, saw the puck, put my glove hand on it and got a whistle. Well, damn, the crowd behind the goal – all five of them – went nuts cheering. And I remember thinking, “Hey, I could get to like this”.
So, in my senior year in college we’re playing Michigan Tech at home in Minneapolis in front of a rowdy full house of Gopher fans. First period, guy has the puck right in front of me and I have him nailed. But he passes to a guy on my right who’s looking at a wide open net. Figured I dive across to at least make it look good. So I dive to my right and the silly goose tries to flip the puck up into the net and it hits me on the shoulder, falls harmlessly to the ice and I fall on top of it. And the house just erupts. Laughed so hard I think I started crying. One of my defensemen, Bill Baker, comes up and asks me what’s so funny. I told him he’d never understand.
Futures Curve: That’s tremendous Steve. Being the last line of defense does have its glory moments, highs are truly high and the lows equally low. One of the cool things about hockey is the announcers, and when they are really good at it they really can bring out the action like no other sport. And typically they save their best for the goal tenders when the big save is made. As you matured and developed between the pipes, what was it like when the shot’s coming in matured and developed as well? I mean for Christ’s sake, a 6 ounce ( or is it 9) piece of vulcanized rubber going 10 miles an hour and maybe hitting your shoulder or helmet as a young flounder is one thing, standing in harms way when the puck is coming in at 70 to 100 mph is quite another. Your eye sight and reflexes have to be incredibly developed.
Steve: The object is to keep a 3” diameter and 1” thick, 6 ounce piece of frozen rubber out of a 4’ by 6’ opening for sixty minutes. Break it down. Three twenty-minute periods. Do your best to have absolutely no goals allowed in the first two minutes or last two minutes of a period. You know that most of the twenty to thirty attempts will come in bunches, so if you minimize rebounds it helps a lot. Hard to stop the second shot in a series of rebounds and almost impossible to stop the third one. If you do stop the third one and there’s another rebound it’s like that old golf book, “How to line up your fifth put” for the shooter.
It is different when you get older, but you learn to pick up small things like the position of the shooter’s body or the angle of his stick - even where his eyes are focused – so that it’s not all simply pure reaction. Your peripheral vision gets sharper and you’ve seen more plays so you have a feel for what’s possible in a given situation. Also, and most importantly, you learn how to position yourself and cut down shot angles so the shooter has very little room to score. Most of the time, if a goaler is positioned correctly, if the puck misses him it also misses the net entirely. Or it might hit a friendly post. Most of these net minders today are big and fast. They can drop down in a butterfly and still block the upper corners with their shoulders. They’re amazing athletes.
Been away from it for a long time now, but I can tell you that there is nothing in the world like the feeling you have when the 15,000 people in the arena think that the hard slap-shot is in the net and you know it’s in your catching glove. Awesome feeling.
Futures Curve: I recently watched the movie on the Water front. Karl Malden plays a priest who decides to make the rough and tumble, brutally corrupt loading docks his parish. His character is no retiring bible thumping meek soul, but rather a fierce man of god who had no doubt spent his formative years fighting the good fight, and often with his fists. In the original version of the Miracle on ice, he had the role of Herb Brooks. I would think the producers would have chosen Karl to play Herb Brooks for some of that fierceness and loyalty he cultivated in that role. You probably had a better understanding of Herb than most players on that team and your role on the team required you to work with him on the bench. What the film versions portray of the 1980 Olympic “Miracle on Ice” both with Malden portraying Herb and later with Kurt Russell taking on the role, you guys were subjected to one of the most grueling physically demanding training regiments, borderline sadistic at times. How did you feel about Herb during those days, and when you were with him in your college career?
Steve: Well, you’re right. I played for Herb for five years and have the emotional scars to prove it. He had a greater influence on my life than anyone other than my parents. Net/net, the experience was positive and I use parts of it every week in this business of bond sales. When I was playing for him I didn’t always see the method in his madness. It’s a lot clearer today after a lot of reflection and an additional 30 years of real life experience away from the game.
As a team, we loved the fact that they chose Karl Malden to play Herb in the original movie. We used to love to tell him that he and Mr. Malden looked so much alike. “Could have been brothers separated at birth.” Drove Herb nuts. He had preferred Robert Redford for the role. But the fact is that Kurt Russell really captured the spirit of Herb in the recent movie. Herb was there as a consultant for the movie and he and Mr. Russell evidently spent enough time together for Kurt to absorb some of Herb’s mannerisms. I never had an appreciation for professional acting until I realized that Kurt at times made me think I was watching Herb on the screen. Very impressive acting.
Sadistic is not a word I would use to describe the workouts. Intense, yes. Exhausting, for certain. Like most things Herb did, they were well-planned and executed close to flawlessly. The plain and simple fact is that in the third period of the games in Lake Placid we outscored our opponents by a margin go 16-3 including 5-0 in the third periods of last two games against Russia and Finland. We stayed with the Russians in the third period. No one else had been able to do that in recent history. We outscored the Fins 3-0 in the final 20 minutes of our experience there. It was worth every drop of sweat.
So while the scene in the movie about the skate after the game against Norway was true to the actual experience including the guy in charge of the rink turning the lights off and us still having to skate in the dark, what the movie doesn’t tell you is that we played that same Norwegian team the following night and beat them 9-0. Herb had made his point. We made ours. Both sides found an understanding.
Well after the fact, I found a book from the ancient philosopher Epictetus that summed up for me a lot of the lessons I learned from Herb over those years. One of my favorite quotes from the Enchiridion helped me a lot to understand my role in the whole Lake Placid experience.
“Keep in mind that you are merely an actor in a play which the Author has chosen. If the play is short, then it's short; if the play is long, then it's long. If the Author chooses that you play a beggar, or a cripple, or a king, or a subject, your job is to act the part well. This is your only business—act your part well—for choosing what part you play belongs to another.”
Futurescurve: “Separated at Birth” – payback’s a bitch. I agree without knowing Mr. Brooks that Kurt Russell certainly seemed to nail the part. I do want to get into your investment banking career shortly, but one more from the jock perspective. I think I recall Tony Esposito, saying he could usually count on losing 10 lbs. per game, he was a pretty active goal tender. I don’t know if you guys kept records but I imagine in those work outs with the gear and all, guys could have dropped 15 – 20 lbs.
Steve: Yes – the old equipment was heavy and pretty dense. I generally dropped about 10-12 pounds of water per game. Didn’t really focus much on getting re-hydrated during the game, either. So much has changed over the years. The equipment is so much better/lighter, and they get to keep a water bottle on the top of the net now to get a quick drink when they need it. And guys take much better care of themselves than we ever did.
Futures Curve: That’s tremendous Steve. Tell me a bit about your investment banking career. Is it a passion for you as much as Hockey was in your younger days? And if you would share some of the “Herbisms” that you like to employ in your approach to your job.
Steve: When I quit playing I thought there would never be anything like the adrenaline rush of the game. I was mistaken. This business is like playing 5 games a week. So much fun. As far as the “Herbisms” go, beyond the one I heard all too often (Janaszak you’re playing worse every day and right now you’re playing like it’s next week), I think my favorite is still the one that he must have pulled from “Ode” by Arthur O’Shaughnessy that was used in Willy Wonka and the Chocolate Factory about “We are the music makers and we are the dreamers of dreams.” Herb was always reminding us that we were uncommon men. That the average guy wouldn’t do this kind of work, wouldn’t drive himself to go to the well every day and in doing so reach levels that he didn’t know were possible. All that stuff sinks in after a while and it becomes a part of your daily personality.
Futures Curve: That’s tremendous Steve. As I noted at the out set I have met some fascinating individuals in this business. One of them was the late John Liscio. John wrote the credit markets column for Barron’s magazine and did some phenomenal work there. I will never forget his no nonsense approach to analyzing the unemployment data how he routinely caused the bureau of labor statistics a fair amount of embarrassment by constantly haranguing them over their payroll counts. He was a very gracious man and would always take the time to help me when I had questions about the treasury market, or just about any subject under the sun, though we pretty much stayed with the markets. His associate at the Liscio report Phillipa Dunne who is another one of the great people I have been privileged to know still follows the markets and the employment situation with that kind of passion. As a matter of fact as you well know Phillippa was kind enough to introduce me to one of her “go to guys” when she wanted some no nonsense information, on some of these complex hybrid, derivatives that have now made the world of trading and finance quite a bit more – what? Exciting, dangerous, pathetically obtuse. I could go on, but the point is that go to guy was you, and you have been one of the most selfless, knowledgeable, highly entertaining, polite, and pretty much no nonsense guys I have had the pleasure of knowing. Give me your take on how the financial world has changed since you have been in it. I know from some of our previous discussions you refuse to buy into a lot of the conspiracy type b.s. that is kind of popular today. You also are a very firm believer in the integrity of our markets over all. Perhaps you have some soothing words, perhaps not so soothing but lay it on as you see fit.
Steve: Well, first let me say that I am certainly glad that Philippa Dunne made the introduction. I agree wholeheartedly with you about her intellect and insight and the way in which she and Doug Henwood approach the writing of the Liscio Report. I believe it’s the best independent research report produced. They do all of their own research, and have added nicely to the very high standards that John Liscio set for the report during his lifetime. John would be very proud. Another good friend, Dick Luebbe, a big Black Hawks fan from right there in Chicago with you introduced me to Philippa a number of years ago. They had a long and interesting history with John and I’m extremely grateful that they were kind enough to include me in their circle of knowledge. In addition, Dick was the guy who pointed out to me where Herb came up with his dreams quote that I mentioned above. He’s one of the best hockey and finance men I’ve ever met. Played for Notre Dame back in the late 1960s with a bunch of other Chicago guys.
I’ve been playing this game for 27 years. Over that time the cost of money – overnight Fed Funds as a proxy – has dropped over 1150 basis points as has the rate on 10yr UST. Most of my business, developed at Bear Stearns a long time ago, is in mortgages and mortgage derivatives. That market, as well as all tradable debt for that matter, exploded in volume over this timeframe. As far as career success attribution goes, there has probably been no better time in the history of the world to have been in this sector of the business, and the simple fact that a Polish goaltender could make a living doing this is my proof.
I am a firm believer in two fairly basic concepts: (1) that in all markets risk eventually finds those least able to indentify it and value it; and (2) the concept of “dynamic hedging” is a snare and a delusion. Over the years, as the derivatives markets expanded, we applied a lot of sophisticated mathematical models to markets and products where the outcomes are driven, for the most part, by human emotions of fear and greed and indecision and the like. You can’t really model a lot of this stuff. Don’t get me wrong. You can produce modeled results, and the models are very powerful, but they’re more “model storytelling” than predictive, in my humble opinion. Generally most of the opaque trades can usually be broken down into tradable components which generally can be valued. It’s not easy work, but it’s indoors and there’s no heavy lifting.
At the end of the day – and you and I have talked about this – the US markets are the deepest, most liquid markets in the world. The players here are truly world class both in their trading abilities as well as their creative abilities. Anyone overly concerned about our ability to come through this down turn doesn’t have their eyes and ears open to the tremendous creative ability around them here in the states. Bio-technology, molecular biology and the huge gains made in technology and medicine, these all need to be financed and they will, by definition, spawn new opportunities. Was reading an article earlier today on Bloomberg news about 40 ex-Googlers having invested in over 200 fledgling companies since 2005. They’ve used some of the over $170 billion of wealth that Google has generated for its employees and investors since it went public six years ago. Not saying it will be easy – Herb never said it would be easy, in fact he all but promised us that it would be more difficult than we could imagine – but what I do know and what he would tell you is that if you go out there with a solid plan and work hard and try to raise your level of play every day and be accountable for the results that good things will eventually happen.
Futures Curve: That’s tremendous Steve. Lastly The Miracle on Ice, which many agree was the sports story of the 20th century, has been lauded as something that transcended sports and lifted the spirits of the country which at the time was very much in need of a Miracle. The current Olympic hockey games will be culminated this weekend, personally I hope it comes down to the US vs. Canada, as the Chicago Black Hawks have players on each team. It will be great hockey, but in terms of what went down 30 years ago, the game will not have that kind of significance. But we and the entire world are in need of some miracles, how you see things playing out, not so much this weekend, but more in the realm of getting the financial turmoil sorted out. Try not to scare the children, with your answer. My own 2 cents would be we each, every one of us needs to look in the mirror take personal responsibility to an Olympian level, and look for opportunities to help each other, the miracles are all around us, and we just need to take action to make them happen.
Steve: There were a lot of lessons learned playing for Herb, and a lot of great memories from the Lake Placid experience and what you just stated fits in well with those thoughts. After all we had been through as a team, all of the physical work and the emotional roller coasters, by the time we were playing those last couple of games there were 20 players that lived and breathed and fought as a single individual for a common goal. And I will tell you that the power of that experience, where the egos have left the building and the hearts and souls and minds and bodies remain, the power of that experience is far greater than the sum of the 20 parts. As you noted above we’re all in this together. As soon as we embrace that we’ll be well on our way to winning the game.
Part of the answer to your question will be found in a reflection from Archbishop Oscar Romero. He served the people of El Salvador and was assassinated in 1980 while he was saying mass in San Salvador. We won a Gold Medal that year; he died for a cause he believed in. And here we are 30 years later struggling with questions with no easy answers. Maybe the struggle is more important than the answers are.
“It helps, now and then, to step back and take a long view.
The kingdom is not only beyond our efforts,
it is even beyond our vision.
We accomplish in our lifetime only a tiny fraction
of the magnificent enterprise that is God's work.
Nothing we do is complete, which is a way of saying
that the kingdom always lies beyond us.
No statement says all that could be said.
No prayer fully expresses our faith.
No confession brings perfection.
No pastoral visit brings wholeness.
No program accomplishes the church's mission.
No set of goals and objectives includes everything.
This is what we are about.
We plant the seeds that one day will grow.
We water seeds already planted,
knowing that they hold future promise.
We lay foundations that will need further development.
We provide yeast that produces far beyond our capabilities.
We cannot do everything, and there is a sense of liberation
in realizing that. This enables us to do something,
and to do it very well. It may be incomplete,
but it is a beginning, a step along the way,
an opportunity for the Lord's grace to enter and do the rest.
We may never see the end results, but that is the difference
between the master builder and the worker.
We are workers, not master builders; ministers, not messiahs.
We are prophets of a future not our own.”
FC: That was tremendous Steve, Thank you.
