Chapter 4: Jeremiah T. Whitaker

The trick to buying stocks on the open market was to make sure you had enough capital to cover any unexpected price fluctuations at the market open. Peter had no way to tell other than his gut and how the market had performed the Friday before. His strategy was simple, however. He made himself a budget that would leave him at least $150K in capital and divided the amount to be invested among his top six favorites on his watch list — Microsoft, Apple, Advanced Micro Devices, IBM, Intel, and the newest kid on the block, Cisco Systems. CSCO went public only three weeks prior but he read raving reviews about the silicon company and the market agreed, lifting the stock over 24% on its very first day.

It took him less than twenty minutes to spend over $300,000 and he felt dizzy with excitement as he rechecked his orders that would go live at 9:30 am on the East Coast. That was only six hours away or 5:30 in the morning for him. His six orders were for:

10,000 shares of MSFT

1,000 shares of AAPL

5,000 shares of AMD

1,000 shares of IBM

1,000 shares of INTC

5,000 shares of CSCO

It would cost him roughly $320,000 depending on the opening prices and how many bids had to be executed to gain him his stock. He found himself hesitating and trying to rethink his motives several times before he struck the Enter key to submit the orders. There was no turning back now! He was an Investor!

He stayed up the entire evening, fretting and tossing restlessly in his bed — getting up frequently to log back onto his brokerage account to see if anything had changed.

On Monday, March 12^th, 1990, he logged onto the site to find that all of his orders had been executed within the first 30 minutes of trading. He sat dumbfounded with his face in his hands as he breathlessly reloaded the page repeatedly, waiting for another near-real-time update. By 9 am his portfolio had risen by $6,300 and he spun around in his wheelchair in jubilation, knowing full well that he would likely lose that and more as the market fluctuated.

He waited until ten am before calling Kathy and asking her to buy some more disks and envelopes on her way over. He also asked her to grab him the morning IBD and the weekly issue of Barron’s magazine.

“Sure, thing baby,” she replied. “Are you okay? You sound funny.”

He giggled like a maniac. “Yeah, babe. Everything is awesome! I’m 16, living the life and I’m about to see the girl of my dreams again.”

“Are you smoking weed?” she asked evenly.

“Nope. Just high on life!” he laughed.

“Hmmph!” she replied and hung up.

After he got off the phone, he realized that breakfast was still being served and he felt his belly rumble as he opened his door and smelled coffee and freshly baked bread. He wheeled over to his usual table that he shared with Bob, Frank, and Mike. All three had long since finished eating and were enjoying their coffee when he rolled up. He was greeted with the usual good mornings. Bob had had his voice box removed due to cancer and spoke with the aid of an electronic buzzer that looked like a shaver. Frank was a retired commercial fisherman who lost his right arm up to the shoulder. Nobody really knew much about Mike because he never spoke and barely acknowledged anyone.

“Saved ya the business column, Pete,” Frank greeted jovially, sliding the paper across the table.

“Thanks, Frank!” he replied excitedly and eagerly spread it out on the table.

“Might wanna grab some grub, son,” he added. “Kitchen’s ‘bout ta close.”

Peter nodded blushing and wheeled himself over to where the trays were stacked at the beginning of the food line. He was curious when the server recognized him and then disappeared into the kitchen area. He wheeled himself down the line to look into the doorway just as all six of the kitchen staff came out, wearing bright smiles. They produced a small frosted cake and began singing ‘Happy Birthday’ to him as they set it on the counter.

He sat still and blushed as they completed the serenade and blushed even harder when the entire dining area began clapping and cheering. Finally, it died down and he smiled awkwardly at his adoring caregivers.

“Thanks, guys!” he said feebly.

“We would’ve used candles but they aren’t allowed,” Harmony, the head of the kitchen stated.

“Yeah, I get it,” he replied. “Fire ... oxygen — bad combo.”

He ended up carrying his overloaded tray in his lap as he returned to the table to rejoin the group.

“It gets a lot worse when you turn 60!” Bob stated with his ‘Vader’ voice.

“60?” scoffed Frank. “Try 64!” He reached into his coat, produced a brown paper bag, and handed it across the table. “Here ya go kid. Couldn’t wrap it for ya though. To yer health.”

Curiously Peter took the bag and knew immediately that it held a glass bottle. He shook it and heard the splash of liquid contents. ‘Oh boy,’ he groaned inwardly when he peaked inside and saw an unopened pint of Canadian Mist whiskey. “Um ... thanks, Frank,” he stammered setting it carefully on the table next to the cake.

“Franky!” A sharp voice called from the kitchen side of the counter. They looked over to see Esmerelda Jennings, a stocky black woman in her mid-fifties glaring at them. “I did not just see you trying to slip that boy a bottle of liquor!”

“So, what if I did?” the sexagenarian replied gruffly. “He’s a man now.”

“He’s SIXTEEN!” she screeched stomping around the counter toward them. “And you know better than to bring that poison water here!” Her accent made it sound like ‘Heh’.

“Ah hell, woman! When I was sixteen, I was floating around in the South Pacific after my ship got torpedoed by the goddamn Japs! I didn’t know if I was gonna get rescued or eaten alive by black tips!”

She snatched the brown bag off the table and glared at him with a withering gaze until he appeared contrite. “Hmph!” she snorted and stalked away.

Peter pushed his tray over slightly, encroaching into Mike’s space as he attempted to eat and read the financials at the same time. He listened absently as the others talked around him, and nodded appropriately when he felt it was expected. He was raising his loaded fork towards his mouth when a particular column caused him to freeze in mid-air.

Microsoft to split 2 for 1 at market closing 4/16.

He gasped as he set down his utensil and picked up the paper to learn more. It affected all shareholders of record on 3/15/1990. His heart skipped a beat when he realized that he made the cut-off, by two days. Next month he would own 20,000 shares of the software giant!

When Kat arrived, she brought with her another 80 orders which they worked on together. They worked steadily til after lunch, sharing his birthday cake for their meal. He carefully updated the spreadsheet and entered the expenses for her gas, floppies, and envelopes.

“Wow, so far, we have brought in almost $7,000 in gross revenue! That’s not bad at all,” he stated as she gathered all of the shipping packages and placed them into her bag.

“I can’t believe this is even happening,” she replied and she came over to sit in his lap. He held her back and indicated the bed where they commenced snuggling a minute later. “You know none of this would be happening right now if it weren’t for you, baby.”

“I don’t know about all that,” he replied sheepishly. “I paid attention in AP Business and Finance and asked a lot of questions, is all.”

She plopped herself atop him and gazed lovingly down at his face. “And you must’ve taken good notes because you knew exactly how to get where we are now, and I love you for it.”

“I knew it wasn’t just my dashing good looks and sporty wheelchair,” he grinned, earning him a painful poke in the side.

“Not funny jerk!” she growled. “You want to know the truth? I fell in love with you years ago. I was silently plotting how to end Brittney’s life before the shallow twit dumped you for getting hurt.”

“Truth?” he replied. “I dumped her the day she came by to visit. Her simpering pity party and the need for her friends to come for moral support made me sick.”

“Hmm,” she purred as they kissed again.

A loud knock on his door interrupted their make-out session and Kat rolled off of him just as it started to open. They both sat up to stare at the figure in the doorway with open astonishment. He stood over six feet tall and had skin as brown and tough-looking as old leather. He had silver-white hair that spilled to his shoulders from beneath a black felt Stetson Rustler hat that featured a wide woven tribal band of silver and turquoise. His pants were ostrich skin with short lacing up the side of each leg. They were supported by a wide leather belt with an enormous hand-crafted silver buckle. His shirt was ivory muslin with a brown leather vest closed in the front with thong loops and bone ties. His alligator skin boots gleamed from recent polishing. He held an alligator skin attaché case in his left hand, and a shiny ebony walking cane with a curved silver handle in his right. His face was covered by a thin waxed mustache and pointed goatee that just covered his chin — his age was indeterminant. Peter would never forget his first impression of the man — likening him to a gambler or gunfighter straight out of the Wild West.

He turned and gaped at his girlfriend, matching her surprised expression before returning to the visitor.

“Mornin’,” the man stated, “might you be one Peter Elliot Shipley?” he asked. His voice was deep and thick with a Southern accent.

“Uh,” Peter stammered. “Um, yeah. That’s me.” He felt more than a little insecure by the overwhelming presence of the man.

“Well, good sir, allow me to introduce myself,” the stranger said, removing his cowboy hat and holding it to his chest. “My name is Jeremiah Tobias Whitaker ... the third. At your service.” He dipped his head slightly in salute.

Too stunned to move Peter just swallowed and nodded his head in response. “Um ... Hi. How do you know me?”

“Might I come inside?” the man drawled pleasantly.

That shocked Peter into motion, scooting his butt forward and reaching for the arm of his wheelchair. “Oh, yeah. Please do. Come in that is.” He flopped himself into the seat and unlocked the brakes to wheel himself around, indicating the table near his desk.

“Much obliged,” the man said stepping forward. His boot made a soft tapping sound as he walked. He placed his briefcase and hat on the table and helped himself to a seat, holding the cane before his legs with both hands.

Kathy slipped off the bed and stood behind Peter as he joined the man at the table.

“To answer your question, maybe you remember a business card that was passed onto you by one Scott W Bales, Esquire?” the man began.

Peter immediately recalled the card and the conversation. “You are the ... um, state-appointed accountant guy?”

“Certified Financial Planner, to be precise. I specialize in asset management and wealth protection.”

“Ah ... I see,” the boy hesitated. He had intended to keep his part of the settlement a private matter from everyone, including his friends and family. He glanced up towards his girlfriend guiltily. The other man noted the expression and shrewdly regarded the young native girl.

“Am I to presume that you would be Missus Shipley, then?” he inquired gazing into her wide brown eyes.

“Well ... not yet,” she replied firmly placing her hands on Peter’s shoulders possessively. “I’m his girlfriend Kathy Parsons.”

“I see.” He twirled the gleaming black stick in his fingers causing the silver handle to spin slowly. “I do hate to ask, but I’d be most appreciative if you could give us some time to discuss some issues of a ‘sensitive’ nature?” he asked directly. “I don’t mean to interrupt your visit, but my time is limited and I have much to discuss with this man.”

She regarded the man suspiciously for a moment before gathering her shoes. “No, not at all,” she replied politely. “I have to go to the post office anyway and run some errands for my dad.” She turned to stop and kiss Peter’s lips softly. “Call me this afternoon when you are free.”

He nodded and watched her slip out the door, pulling it closed behind her.

The silence stretched out as the odd man sat straight and regarded Peter with an expression the boy could not read.

“So ... um,” he began. “You’re not really court-appointed, are you?”

The thin man snorted through his bushy mustache and stood. “Not hardly!” he grunted as he began pacing around the room exploring everything. He paused to look at the computer and gazed at the curious screen saver that weaved about on the blank display. “I do, however, come highly recommended to you by our mutual acquaintance.” He stopped in mid-step and turned to regard the boy again. “He asked me to meet with you and ascertain for myself what it is that strikes him so curiously about you.”

“I don’t understand,” Peter replied, suspecting that he did. “I’m just a crippled kid recovering from an accident.”

“Be that as it may, you also seem to possess a great deal of foresight and intuition for a young man of your age.”

“I’m just trying to look out for our interests,” he replied. “I don’t think anyone else in my family has much of a grasp on the impact of my situation nor how it will impact me going forward.”

“Words I would not expect to hear from so young a... ‘potential’ client,” he mused, standing stock still with his cane centered before his spread boots.

“Um ... okay.” Peter suddenly felt like he was being dissected in a lab experiment. “So, I am smart for my age. That doesn’t make me exceptional.”

“Hmm perhaps. But your behavior and actions might,” he replied. Then he replaced his hat upon his head and returned to his seat. “I’m not here to render judgment or opinions. I came because I was asked to help you in your endeavor to build and protect wealth.” He set his cane on the table. “What I can offer you is advice, support, and ‘shelter’ if you will — from the system that would otherwise find you too young and or incompetent to make ‘grown-up’ decisions for yourself.” Peter sensed a change in his demeanor and found himself gazing into a dark pair of eyes that contained an odd energy. “My services come with an understanding that my main purpose is to protect you from the ‘coyotes’ of society — be they immaterial, implied, or ... otherwise.”

‘Like a bodyguard?’ he wondered as he sat back in his wheelchair contemplating the man’s message. There was no question that the colorful character exuded energy and power, but Peter could not sense anything that caused him to feel any misgivings or qualms about the man. His decision was immediate and certain.

“Mr. Whitaker,” he replied solemnly. “I will take all the advice and help I can get.”

Jeremiah simply nodded his head in response and nodded towards the computer. “Well spoken. Now why don’t you show me what you have going on.”

They spent an hour going over the limited partnership he had pieced together with his friends and the work they were doing to design and sell games. The CFP recommended specific software to better help him record and track their business expenses, equipment depreciation, and profits.

When Peter pulled up the E-Trade account Jeremiah spent almost 15 minutes quietly reviewing the account and the brief history of his trades. “I’m glad to see you aren’t throwing all of your eggs in one basket and that you have retained enough working capital for future ventures,” the man said. “Capturing Microsoft just before the split was brilliant on your part.”

“More luck than brilliance,” Peter admitted with a smile. “But I know they are only going to continue going up as their market share overwhelms the competition. Right now, they are vying against a few small potentials like Apple, who they will either absorb or outperform.”

Jeremiah nodded thoughtfully. “Indeed, and I feel that this spilt will energize more traders who were otherwise intimidated by the price tag, to jump on board.” He paused wiggling his upper lip. “Tell me, have you looked into trading options yet?”

Peter felt a sudden rush of excitement as he nodded eagerly. He reached for a notebook that he had buried beneath his completed schoolwork. “Yes,” he replied opening it to a page full of handwritten Calls and Puts for the software giant. “MSFT will begin trading at about twelve dollars a share post-split. I know in my bones they will climb like a rocket over the next few months,” he replied eagerly, tripping over his words. “I already paper traded these April 23 Calls at $3.50.” That translated to $350 per contract because each call controlled 100 shares. “And I’ve already made...” he stopped to pull up the option chain for the underlying MSFT stock. “It’s sitting at 4.7 right now! That’s $120 profit for each Call and I pretended to buy 100 contracts!” He felt his skin tingling as he talked and realized it was partially from being able to share his thoughts and ideas with another person who understood him.

“Twelve grand is a tidy sum for less than a week, well done,” Mr. Whitaker said. “So, let’s look out to May and see what the 23 Calls are bidding for.” The beauty of what he proposed was that when a stock executed a 2:1 split — the Call and Put options split as well. “If you buy 100 May 23 Calls for...” he tapped the down arrow to find the option, “$6 even — you would have 200 May 11.5 Calls at $3.”

Peter’s head was spinning as he did the mental math. He blew out his air explosively. “That’ll cost me $60,000, but if Microsoft goes up even a quarter, I will be in the money.”

“Well in the money,” Jeremiah agreed. He pointed at the screen. “Look at the open interest.” It was a number that reflected the overall public sentiment or ‘interest’ in that particular contract. The number was 6500 which translated to very bullish sentiment. That was an even bigger factor in driving up the price (or demand) for a contract, than the actual performance of the stock itself.

“I want to do it!” Peter decided firmly.

“I think you should.”

“Can you watch over my shoulder?” he asked nervously. “I don’t want to ‘F’ this up.”

Ten minutes later he confirmed his submission and committed another $60,000 of his settlement to a gamble.

“Very good,” his new mentor congratulated him. “Now let us talk about Stop Losses.”

Peter turned to him intrigued. “What’s that?”

“It is your ace-in-the-hole that prevents you from losing your profits as the stock or contract appreciates,” he replied.

‘I like the sound of that,’ Peter thought to himself as he grabbed his notebook and pen.

“Let’s say you buy a share of, say XYZ at a hypothetical price of, say, $10 per share,” the man offered getting a quick nod from the boy. “Then XYZ earns a huge government contract and the news sends the stock shooting up to $20/sh.” He paused for effect then continued, “You could just put in a sell order on the market and capture that $10 profit, or — say you thought maybe it could go higher but weren’t totally convinced.” He opened up a random ticker symbol on the computer and pulled up the Order menu. “Instead, you can put in what’s called a Stop Loss, but you set it just below the current Asking price — some people use the Bid. That way if the stock suddenly drops below your target, it will sell and you get your profit. Do you see how that works?” he pointed at the option for the Stop.

“Holy crap!” Peter breathed in awe. “That is so awesome! Then if it keeps going up, I can cancel the current stop and put in another one even higher,” he exclaimed.

The other man nodded. “That is called a ‘trailing stop’ and is the whole trick to managing your money smartly. You capture gains and prevent losses,” he summarized. “The same thing applies to Options. So tomorrow morning after your order executes, I want you to go and set your first Stop Loss on the order for just below what your Asking price is. Chances are you won’t get all 1000 contracts for the same price. But you are smart enough to figure it out. But keep market fluctuations in mind when you do it and set your stop low enough that you don’t accidentally get kicked out with a random hiccup in Ask or Bid. I’d recommend about fifty cents below your entry point.” He watched as Peter began scribbling furiously on his notebook with his tongue sticking out.

When he finished, he looked at the man with an incredulous expression. “Mr. Whitaker, can I ask a stupid question?”

“Call me Jeremiah, and it ain’t stupid unless you don’t ask it?”

Peter chewed his lip thoughtfully. “Why doesn’t everybody do this?”

Jeremiah considered the question. “The simple answer is ‘risk aversion’,” he replied. “Peter, think about this for a second. You just spent sixty thousand dollars,” he suggested, then raised his hands, “on what?”

Peter looked at him blankly. “Uh...”

“Look at it this way.” Jeremiah grabbed an apple off the table. “If I sold you this apple for a nickel, you would have paid me five cents, and you would have ... an apple. It’s tangible — you can touch it, feel it...” he took a bite out of it and chewed noisily. “You can eat it,” he swallowed. “Now, what do you have to show for sixty grand?”

“Um ... I bought the right to purchase Microsoft at a much lower price than it currently sells for?”

“That is the straightforward answer, yes. But is that tangible?” he asked.

“Well ... no. But...”

“Think of insurance. People buy it just in case something happens. Maybe it will — maybe it won’t. But all they have purchased is a little peace of mind. That is not tangible and neither are stock options,” he explained. “All you purchased for your money is the idea that, if things go in your favor, you will make a lot more money. But that is nothing more than a promise. It’s a bet and a gamble. For most people, the idea is so anathema to them that they won’t even buy an ‘imaginary’ share of a company they believe in.” He reached into his pants pocket and pulled out a wad of bills. He separated a dollar from the stack and held it up. “This is no different, but people don’t even see the parallel.”