Chapter 26

I still often worked from my home in the mornings and evenings but the noise during the day was too much so I went into the office. One day Yuto came in and sat down. “So this is what work is like?”

“I hear you. I’ve never worked so hard in my life but the desks are filling up with new employees, and they should be taking it away from us little by little.”

“When you told me how we were paying Rodney and Randy, I was upset at the high percentage of profit but now I see that they know what they’re doing and are training everyone from the bus boys to the regional managers. Between their training and the computer systems we use for ordering, inventory and quality control; once a store is open it seems to run itself.”

“We could’ve done the same thing over the next twenty years that I hope to do in two. After that, we sit back and see what’s working and what isn’t.”

“I’m now making more money on remodeling buildings than I am at all of my other businesses.”

“I hope you can expand it into other markets and continue supplying the store with labor to install floors and replace cabinets. There’s a demand there.”

“That’s going well, and I’ve bought a few apartment buildings that we’re renovating and renting at a premium.”

“That’s great.”

“You’d mentioned at one point that you may have another business for me to look at.”

Sitting back in my chair I said, “Close the door.” He got up and closed the door. When he sat down I said, “Yuto, when you asked me for guns, you had to put some trust in me and when I delivered them, I had to trust you. Have you ever been fishing in a pond?”

“I used to fish when I was a boy.”

“Did you ever cast out some bait and then reel it in to find the bait was gone?”

“Yes, the minnows would take the bread I was using or the worm in very small pieces before the big fish could come along and take the bait.”

“Are you willing to be the minnow and not the big fish?”

“Maybe, but I think you’re talking in riddles.”

“The stock market is the pond. If you play like a big fish, you have a good chance of getting caught. If you just nibble away, you get the same amount of bait and maybe more but you don’t register and are free to keep going.

“When I was a freshman in high school, I helped Adam create a software that analyzes stocks. It tells us when the best time is to buy and the best time to sell. In the stock market you can bet a stock will go up and or bet that a stock will go down. The indicators are based on pressures from the market. If you get too greedy, you’ll stand out and some could say that you were manipulating the market. If you just take small bites you won’t be noticed.”

“What does this have to do with me starting a new business?”

“While Adam and I lived in New York over the summer, he would be off setting up computers to run our software. I was hanging out with a friend and she had a job working for her father. Her father had a company that cleaned office buildings. One day I was emptying the trash and saw a memo about going to California to sign a deal. There was a bottle of champagne in the trash and a brochure for a new car on the desk. I gave the name of the company to Adam and he used our software to see if it looked like a good buy and it was at that point where it would go down or break out and look for a new trading range. We bought in and made a lot of money in a short time. Over the summer we turned ten thousand dollars into almost a million dollars. Not bad for a couple high school kids on summer break.”

“That’s a great story. Where do I fit in?”

“Tony Del Rocco makes a lot of money cleaning buildings. It gives jobs to low skilled workers or those that prefer to work at night or have a second job. If we walk around this office or the ones downstairs there are probably charts, graphs and other things that can tell us if our openings are on track, our sales are doing better or worse than expectations, etc. If you have access to the offices then you can observe what the sales numbers are saying. There may be memos in the trash. Again, you may be tempted to get greedy and open a file cabinet or dive a little deeper but then you’re just opening your big mouth to the hook.”

“And you could show me what to look for? I could train the managers what to look for. We could make money with the cleaning and provide jobs to the community.”

“Yes, yes and yes. You would be displacing the existing companies that do the cleaning so the jobs would be a wash. You could hire the existing people to run the vacuum or empty the trash.”

“Can you help me?”

“Of course. But you’ll have to let me know what you find. I won’t quit my day job but it is like a treasure hunt for small treasures.”

“I kind of like the cleaning business even without the side benefits.”

“I once was in one company that was in the metals business. Their office was going crazy to get ready in case one of their customers won a bid to make engine blocks for a car company. Based on the information from the metals office, we bought options on the manufacturing company and when they won the contract, we won the jackpot. It drew some attention to us but we had no contact with the manufacturer a thousand miles away.”

“I’ll get someone on this and get it started.” He went back to his office.

It was one of those days where things were busy but I was caught up so I went for a walk. I went down to the retail store. We had finally decided on a name, Rockefellers. I didn’t want to call it Dukes, Buckleys or something generic like the world market. People soon started calling it the Rock. I didn’t care as long as people shopped there.

As I walked down the street, I noticed a line out front. The big glass window had two Harley Davidsons with mannequins wearing denim. I got in line to see what kind of experience our customers were having. I asked the couple in front of me why there was a line.

“They want everyone to enjoy the shopping and not feel too crowded. They know how fast people are checking out and let them in at the same rate. We should be inside in just a few minutes and then you can shop at your own pace.”

“That sounds fair.”

The guy said to the woman, “If you want to get me something for Christmas, that motorcycle would look good under the tree.”

“Dream on and keep saving your money.”

Inside the store looked clean and inviting. Escalators moved people up and down with each step being large enough to carry the customer and their cart. The angle was much less steep, and had to be designed and built for the store but it worked and it was something else to draw people in.

I rode without a cart all the way to the top and then looked around at all of the furniture. There were entry level, mid level and high level rooms with plenty of sales help to answer questions and write up deals. Sakura was with a well-dressed couple showing them a carved bar and one of the carved art pieces that would look nice together. She gave me a quick wave and went back to focusing on the customer.

I wandered down floor by floor. The liquor store had its own entrance. The Harley store had its own space. The ground floor was foods from around the world divided by country or region. If you wanted some hobnob cookies from England or Oreos or a Kit Kat bar from the US, they were easy to find. There were twenty registers and they were all staffed and moving people through the check out process.

One thing I saw past the registers was a place for comments. The cards could be filled out and asked for their mailing information, name, birthday and phone number. There was a place for comments about the store and how we could improve. There was also a place to request other items that were not currently stocked in the store. There was a bin to drop them in and the promise of a drawing for a store gift certificate once a week for twenty-five thousand yen or one hundred dollars.

I found Shiggy and she was smiling ear to ear. The sales were thirty percent over projections and the software told her what was selling, what wasn’t, what was on the shelf and how long it had been there. We talked about the software and she said, “I could look at those reports all day and not get tired but those are the results or what is being done out here. I need to stay out here to make sure that we’re doing it right. Most of the comments are positive. The line out front is off putting but once they are in the store, they like not having people bumping into them while they shop.”

“I saw the line. I was wondering how people would react.”

“Some people see a line and are interested to see what people would wait in line to buy. Some people see no line and come to shop because they don’t have to wait. It is amazing to see what people come in here looking for. If they find it some have even cried because they miss that product so much. Others still want more so they fill out a card and hope we can find it.

“We separate the cards by country and ask the suppliers. Some are easy and some have gone out of business or don’t make that product anymore. In that case we send them a card that tells them we tried and the outcome. We’re also building up a mailing list for advertising later.”

“How many Harleys are you selling?”

“We average two to three a day. It is still too early to see if that number will go up or down but Harley Davidson is happy to have a presence here in Japan. They’ve been very supportive. We sell a lot of t-shirts and some leather jackets. There’s a much larger mark up on those items.”

“How’s Sakura doing?”

“Much better. She felt bad about leaving her father’s company until he came in with some customers and showed them some of the pieces she’d sourced or designed and told them that they would fit perfectly in their home. He told her how proud he was of what she was doing and she was doing for the masses what he was doing for a select few. She’s moved out of their home and into a place of her own. With a four hundred percent markup and the higher price tag, it is one of the most profitable departments in the store.”

“I’ll let you get back to your store. Keep up the good work.”

“Thanks for stopping by. It’s always good to see you, Nick.”

I kept walking and stopped into the Pub for lunch. I had a pint and an order of fish and chips. The place was busy but was running smoothly. I heard another customer telling his friend. “We will be in and out quickly. This is my new place for lunch. I can come in, sit down, eat and be back to work in no time and not spend my entire lunch break standing in line to eat on my way back to work.”

My last stop of the day was at EJ Patterson’s office. I met with my broker. His name was Nao. He was in his mid-thirties. When I sat down he didn’t look happy to see me. He was told to take care of me by the VP. “How can I help you today?”

“I wanted to do some trading. Can you show me the current buy and sell list from your research department?”

“Sure. I like Yamatori company and Natomi Enterprises.”

I took the list and said, “Can you pull up the chart on Yamatori company?”

He clicked a few keys and hit enter as he asked, “How do you know about this? We just had it installed.”

“That’s the reason that I’m here talking to you.” The chart showed that it was just fluctuating but had no clear direction. I asked to see a couple more off of the buy list and saw one, Kombushi, that kept hitting a resistance line but the line was creeping up and the lows didn’t drop as far. I said, “I like this one.”

“I did some training and the top line means that it’s time to sell.”

“The stock is trading at seven thousand five hundred yen. Do they trade options on this stock?”

“They do but that is a more risky way to invest. We also have to have special permissions on your account.”

“I want to get a price on the eight thousand yen calls for January.”

“The January eight thousand calls are one hundred ten yen each.”

“What is the daily volume on the stock?”

“It is a large company with active trades. Close to forty million shares a day.

“Is a contract equal to one hundred shares?”

“Yes.”

“Place an order to buy twenty thousand contracts representing two million shares at the market.” I handed him a card with my account number.

He looked it up and saw that I had money and approvals on the account. He started to try to warn me. I cut him off. “Listen. You told me the ask was one hundred ten. If I don’t get these contracts at or near that price because you’re wasting time, I will not be a happy customer.”

His manager heard me raise my voice while Nao started typing. The manager walked over, and Nao said, “Mr. Duke, we will be buying twenty thousand contracts of the January calls with a strike price of eight thousand on Kombushi. This will be a market order and the current ask is one hundred ten. Is that correct?”

“Can you check the price one more time?”

“The ask has dropped to one hundred.”

“Send the order.”

He hit send and the manager said, “It’s nice to meet you, Mr. Duke.”

“Call me Nick.”

“We don’t normally get trades that large. I hope it works out for you.”

We waited and the order came back but was filled at a couple different prices, over half at one hundred, then the rest at one hundred five. With commissions my average cost was one hundred five times two million or two hundred ten million yen. That was about eight hundred seventy-five thousand dollars US with the current exchange rate. I said, “I would like to place another order.”

“Yes?”

“I would like to sell all the options when they get to one thousand twenty-five as a limit order.”

“The stock would have to go up over nine thousand yen to get that price.”

“Yes. Can you give me a call when it sells or after the first of the year if it hasn’t sold yet. I’ll come back in and look at the charts if it hasn’t sold and we can change the order.”

“I’ll put a note on my calendar for the 3rd of January.”

“Perfect. Thanks for taking care of that for me. I’ll stop by when I have time and trade some more.”

I walked home. It was about two miles but the weather was nice. I called Yuto and told him about my trade. He said he would copy me in the morning but would do a much smaller trade.

We continued to buy buildings, renovate them, open restaurants and bars and collect money. A month or so later, my new condo was ready to move and it was moving day. I had about ten men hired to move the furniture. If we had more elevators I would have hired more. The moving was almost done when the phone rang. I answered and it was Nao.

“Nick, this is Nao. Your order was completed and we sold all of your contracts.”

“Great. Thanks for calling.”

“What do you want to do now?”

“What do you mean?”

“You just made over two billion yen.”

“It will go into my money market account when the trade settles won’t it?”

“Yes.”

“Then I guess that’s all. I’ll be able to trade some more when I have time. I’ve been kind of busy lately. I’m moving apartments today.”

“Oh. I was hoping to see what you bought next. I think that I read the chart one way and you read it a different way.”

“You were looking at the past and I was looking at the future. The chart was correct. I’ll try to stop by next week. Look at some charts and be ready to tell me what you like and I’ll take a look at it.”

I called Yuto and he’d just gotten out as well. “Not a bad stock tip when I invest a million yen and make nine million. I got our first tip from the cleaners.”

“What did they say?”

“They said that the Mori company had a big party yesterday and the sales charts were way off the top.”

“I’ll stop by tomorrow and take a look.”

I did stop by and bought some shares and contracts on the Mori company and made a call to tell Yuto that Mori looked good. He could do what he wanted for the trades. I also sat with Nao and looked at charts. I bought calls and puts on different companies but passed on most of them. We had to stop when the markets closed for the day. I asked if he wanted to get some dinner and he agreed.

We went to Yuto’s steakhouse and went to the bar first. We each had a couple drinks while he told me about growing up and going to school in Kyoto before moving to Tokyo and getting a job as a stockbroker. When we finished the second round, I asked if he wanted to eat. He said, “I would love to eat. I’ve noticed a few come in and be turned away because they didn’t have reservations. Do you have reservations?”

“No but I’m sure they can make room.”

He followed me and I said, “We’d like a table for two please.”

The hostess grabbed two menus and said, “Right this way.” We were seated and Nao was looking at the food and the prices. I took his menu and asked, “Do you like steak?”

“Yes.”

When the waitress arrived, I said, “We would like the shrimp appetizer for two, two wagyu ribeye with Caesar salads, the creamed spinach and a bottle of the Silver Oak from the Alexander Valley.”

“Yes, Sir.

He just looked at me and I said, “If you don’t like it, I’ll take you to get sushi. I think you’ll like it.”

“I don’t know if I can afford it. Do you know how much rent is here in the city?”

“I do. I’ll pay for dinner. I made some money in the stock market recently.”

As we waited for the food, I could tell that he wanted to say or ask something. I finally said, “Nao, if you’re going to be my broker, you’re going to have to say what’s on your mind. If I must wait for you all the time, I’ll get bored and move on to someone else.”

“I wanted to ask how you knew that the stock would go up and go up that much.”

“I didn’t know. It was a gamble or more like a calculated risk. Do you know why people buy stocks?”

“They think they’ll go up in value.”

“Do you know why they sell stocks?”

“They are afraid that they’ll go down.”

“So buy on hope and sell on fear. That’s what the technical indicators tell us. When it gets down at the bottom of the range people feel more comfortable or hopeful that the stock will go up. At the top there is less hope that it will continue up and more fear that it will go down.”

He thought about that and couldn’t see a flaw in the logic so he just nodded.

“But you showed me that stock because it was on your company’s buy list. It was on the list because there was something fundamentally good about the company. It could be stronger sales, new products or more efficiencies. But they were doing something right. The fear of buying too high kept people from buying and moving it to the correct price. That and the people that bought it lower were locking in the profit before it went back down.

“The highs got a little bit higher and the lows didn’t go as low. The time it took to bounce back from the lows was getting shorter and shorter. This didn’t tell me what it would do, but what it was likely to do, which was break out and go on a run. It would find a new top where people would fear and stop buying and start selling. It would then pull back and find a new bottom and the fluctuations would start all over again.”

“I guess I never looked at it like that.”

“If you buy and hold long term on good stocks you will see a decent average return but if you go back and look at the overall growth, it won’t be a straight line. It will be a series of jumps and long periods of plateaus. I try to move my money to the places before the jumps and make more than the average person and leverage the money to make more with less. The stock went up thirteen percent and I made nine hundred percent profit. How long would I have to wait to see that kind of profit with a buy and hold strategy?”

“A long time with most stocks. It felt like you were just gambling but as we talk about it, you had a strategy and knew what and why you were doing what you were.”

“That’s why I was a little short when I came in. I didn’t want to miss out on the jump or the price buying in. I guess this dinner is an apology, a thank you and a way to get you more comfortable with me and what I’m doing.”