The Wisdom of Bear Stearns’ Ace Greenberg

In his awesome new book The Rise and Fall of Bear Stearns, Ace Greenberg spends the majority of the time setting the record straight from divergences from he thought was the truth. The majority of these divergences came from the mouth of Jimmy “I put it to my mouth and I did inhale” Cayne.

This is a blog about trading so I’ll spare you all the details, but frankly, my take on the whole she-bang as delineated in the book, is that dealing with Cayne was like dealing with a teenager for 30 years. He was a complete pain in the ass, but every now and then he’d make a big play in the game, so his parent (Greenberg) would be proud. Cayne’s ego would be his undoing. He fell on his own saber.

Greenberg gives Cayne credit where it was due and appears genuine. I could not tolerate anyone like Cayne and it’s why I enjoy being a prop trader. If you bust my chops enough, I can tell you to “go forth and procreate with yourself.”

What you’ll get from this book is a great history of Bear Stearns, during which Greenberg spent the majority of the career we know him to have had. Bear was 21 years old when Greenberg started and he spent the next 61 years there.

Throughout his career, Greenberg has been a trader first. All the other roles he played or assumed emanated from his role of trader and his understanding of risk management. It appears that he was able to trade his accounts with full discretion — which means that he could buy, sell, and short at will for his clients who trusted him enough to do what was best for them. They still do. Greenberg was born with the perfect temperament for a trader and IMO his next book should be about trading.

I tried to convince his handlers to get him to do a podcast with me, but those of you who know Ace, know that he is a man of few words. If you’re thinned-skinned or not ready for him, he may come across being unintentionally curt. I think he’s just direct and to the point. My dad is that way.

If you’re looking for trading gems, the book is light in this area. But then again, this is not about trading so much as the book is about “the rise and fall” of a firm and its employees that Ace felt greatly responsible for.

One thing that Ace did and owned was to make sure that the house account was purged of all losses post haste: there was no way of getting around this and all the head traders of the various desks had to answer to him first thing Monday morning. Below is an excerpt from Ace in his own words that describes that recurring Monday morning scenario:

“Every Monday I chaired a meeting of the risk committee, whose agenda was to enforce limits on the extent of our capital exposure. Traders from eight or ten departments attended, knowing that yours truly would react quite unhappily if anyone was found to be holding a loss. As a rule, losing positions got sold on Friday, and I didn’t care how nasty a hit we had to take, by 4:00 pm. Monday all the dogs better have been off the books.” (Bold emphasis is mine).

Emerging CTAs and students of trading pay small fortunes for proper training. The single most important take-away should be to keep losses small. The spiritual benefits of not having losses suck up all your attention and energy is so freeing, you can focus on looking for new winners.


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