Chapter 70: You're Such A Jonathan!

December 5, 1984, Chicago, Illinois

Wednesday brought very little additional information about Bhopal, though the death toll was quickly rising and exceeded a thousand. As tragic as that was, of more importance was the report that an American had been executed by the terrorists during the ongoing hijacking of Kuwait Airways Flight 221.

Details were sketchy, but gunfire had been heard, and a body had been dumped from the plane onto the tarmac. Reporting by US news agencies was challenging due to strained relations between the US and Iran, leading to sketchy coverage. That caused me to raise the risk level of the Middle East by three points, pushing it to 90 out of 100. Something big was likely to happen, and that change pushed up global risk by a point.

That led to my recommendation that no investments be made in the Middle East or North Africa, except for Turkey, which, as part of NATO and secular, was generally safe. However, if conditions in Lebanon or Syria were to worsen, Turkey might be drawn in. That said, Turkey was dealing with a developing insurgency by the Kurdistan Workers' Party, which had begun in August. That had its own set of risks, but so far, the government had things reasonably under control.

These events put even further pressure on my views on precious metals, and I felt I had to expand my long position, so I picked up the phone and called Jack.

"I need you to buy another 10,000 December 86 gold call options," I said.

"A total of 20,000 gold for September 86?"

"Yes. The risk levels are rising, and my earlier play was a bit too conservative, given the almost guaranteed interest rate cuts and the projected weakening of the dollar. Buy lightly, and I'm OK if it takes into February. Don't go past that, because we'll see the price begin to rebound."

"Got it. I have 2000 contracts already, and with that lot size, no real movement."

"Somebody will eventually notice we're accumulating, but let's at least make it look good."

"I'll take care of it."

"Thanks."

That evening, I attended my penultimate English literature class. There was no final exam, and all that was necessary for the following Monday was to show up to turn in our papers. After class, Violet and I had our usual pie and coffee, and I headed home. Because I'd finished my final paper, I didn't need to spend any time on schoolwork, so I watched CNN and held my daughter before I went up to bed, accompanied by Chelsea and the ever-present Misty.

"I think I'm going to pose for Deanna," Chelsea said as we got into bed. "Deanna said she can simply paint longer hair."

"As long as you're sure," I said.

"Deanna encouraged me to step outside my comfort zone," Chelsea said. "I thought about it, and if I can do all the things I do with you, I can do that, too."

"I'm going to buy the painting," I said. "We can display it here in the gallery room."

"Won't that cause trouble for Deanna?"

"No. Paintings are often bought before the show opens. I'll check with her to make sure it's not a problem."

"OK. I want you to ravish me now."

"Gladly!"

December 7, 1984, Chicago, Illinois

Following my analysis on Friday, I remained confident in my revised price predictions for gold, given that I saw almost no chance that the dollar would not devalue significantly over the next eighteen months. Of course, that wouldn't help my 1985 gains, but would pay off handsomely in 1986.

Union Carbide stock was falling as I'd expected, and I felt pretty good about my end-of-year results. Given we were already a week into December, and the market was preparing for the Christmas lull, not much was likely to change before the end of the year, even if the Fed made another interest rate cut. That said, Jack and I did have some work to do. I went to see him late in the morning.

"I'm going to be out after next Friday, so I'll need you to ensure a smooth transition of the positions from the Arrow Fund into either our fund or the Spurgeon Select Fund. Bob Westergard, Rick Thompson, and Steve Harrington are going with us; Paul Tyson, Bill Anderson, and Charlie Mitchell are going with Noel."

"I can't talk to you at all after next Friday, right?"

"Right. Ten consecutive trading days. We can talk again on January 1st. If you have any questions while I'm on my sensitive leave, speak with Murray. You have the authority to trade, but given our positioning, we have very little exposure for the rest of the year."

"Mesa Petroleum, right?"

"That's the only one. Barring a short squeeze, which I don't foresee, just let it ride."

"Even if it goes up?"

"At this point, yes. It's a modest bet, and I'm certain it will pay off next year, given how I read the 10-Qs and the rest of the industry."

"OK. I'll make sure it happens."

"Good. I'm going to place calls to all those men and let them know everything is in progress and that if there are any questions, they should call you."

"Anything else I need to know?" Jack asked.

"Not that I can think of. If there is some life or death emergency, you can get permission to call me from Compliance, but they'll need to listen in on the call."

"It's just licensed professionals, right?"

"Yes, though Tony will handle anything in Research. I double-checked to ensure there are no issues with speaking with Bianca or Violet, and there aren't, as long as they don't pass on messages, which they won't. And, in any event, I'll be in Saint Martin or Hawai´i the entire time, except for a couple of days either side of Christmas."

"OK."

"Then I'll see you at 5:00pm for Star of Siam and Beverly Hills Cop," I said.

I left my trading office and returned to my office in the Research department, where I worked until 11:30am, making the calls to the Arrow Fund investors, then left to meet Marlena Volkmer for lunch. After lunch, I began making calls to all the investors in the Cincinnatus Fund to inform them that I'd be out of the office, but that Jack would be available to assist them with anything they might need. I reached about two-thirds of the clients directly and left messages for the others.

That ate up most of the afternoon, and at 5:00pm, Violet and I left the office to meet Jack, Kristy, and the Boys for our usual Friday night out.

December 9, 1984, Chicago, Illinois

Saturday afternoon and night with Isabella and Kaitlyn had been wild, and on Sunday morning, we showered together before having breakfast. The girls decided to stay for the Bears game against the Packers, which did not end well.

The Bears were ahead 14–13 at the two-minute warning and elected to go for it on 4th and one, hoping to run out the clock. Instead, Walter Payton was dropped for a loss of a yard, turning the ball over to Green Bay. They promptly marched down the field and won the game on a 43-yard touchdown pass with just 34 seconds remaining.

That dropped the Bears to 9–6, but they were still likely to make the playoffs, with just a single game remaining against the Detroit Lions. I'd miss that game, though, as I'd be in Saint Martin with the girls. If they did make the playoffs, I'd likely miss the first-round game, as I'd be in Hawai´i with Deanna.

CeCi called early Sunday evening, and we had a good chat. Unfortunately, shooting was not expected to wrap for about two weeks, so there was no possible way for her to join us in Saint Martin. She would need to return to California on January 5th, and I promised to call Barney at Windy City Travel to make the flight arrangements.

December 10, 1984, Chicago, Illinois

"Three more moves," I said to Jack late on Monday morning. "Buy 100,000 Cray Research at market, and short 50,000 each of Management Assistance and Amfesco Industries, also immediately at market. Cover Cray with July 86 put options and the shorts with December 86 call options. That will be it, except for the planned buy to cover for Union Carbide."

"I wondered if you were going to pull the trigger on Cray, given the Research Note that was created earlier in the year."

"You are free to ask those questions and to make recommendations," I said. "I'm neither perfect nor omniscient, no matter how much it might seem like I am!"

"You haven't made any mistakes!" Jack countered.

"Yet," I replied. "You know what happens to most guys who start out the way I have, right?"

Jack nodded soberly, "They have a couple of good years, then flame out. That's basically what happened to Fletcher and Taylor. It also looks like it might be true for Mansfield and Blume."

I nodded, "Yes, they've beaten the market by a few points for the past few years, and are on track to do so this year. Think about what that means, though."

"That by the time you factor in the fees, they don't make any money for their clients beyond what they could make in a mutual fund, and this year they might not hit the hurdle, which would mean they wouldn't make any money for themselves or Spurgeon."

"What would you do?"

"Man, that is WAY above my pay grade!" Jack declared.

"Noel asked me that same question; do you think he'd accept that answer?"