Part 1 (2/2)

Right here, in a haze of tobacco smoke and cheap hamburger fumes, I was on the skid row of finance ... places like this specialize in the walking dead of failing corporations.

AT THE AGE of ten, I resided in some kind of a marital no-man's-land, a beautiful but loveless gabled house in the leafy little towns.h.i.+p of Bolton, Ma.s.sachusetts, some twenty miles west of downtown Boston. My father, Lawrence G. McDonald, had accepted the end of his marriage and had left my stunning fas.h.i.+on-model mother to bring up their five children all on her own. I was the oldest. of ten, I resided in some kind of a marital no-man's-land, a beautiful but loveless gabled house in the leafy little towns.h.i.+p of Bolton, Ma.s.sachusetts, some twenty miles west of downtown Boston. My father, Lawrence G. McDonald, had accepted the end of his marriage and had left my stunning fas.h.i.+on-model mother to bring up their five children all on her own. I was the oldest.

The general drift of the breakup was rooted in my dad's hard-driving business career. Owner and chief executive of a chemical engineering company, he might have stepped straight out of a suburban c.o.c.ktail party staged on the set of The Graduate: The Graduate: ”Plastics, son. That's the future.” ”Plastics, son. That's the future.”

And I guess in a way it was the future. At least it was his future, because plastics made him a stack of money, enough to start his own brokerage firm, and it only took him about twenty-nine hours a day, seven days a week, to do it. He was obsessed with business.

So far as my mom was concerned, that was the upside. The downside was his devotion to the game of golf, which took care of his entire quota of spare time. For all of my formative years he played to scratch or better. As the club champion of Woods Hole Golf Club, down on the sh.o.r.es of Nantucket Sound, he had a swing that was pure poetry, relaxed, precise, and elegant, the clubhead describing a perfect arc through the soft sea air as it approached the ball. Also, he could hit the son of a b.i.t.c.h a country mile.

Mom never really saw him, since she never landed a job as a greenskeeper. And he saw her princ.i.p.ally in magazines and on giant billboards around Boston, where dozens of images showed her modeling various high-fas.h.i.+on accessories.

When I referred to the marital home being loveless, I was not quite accurate. There was a burgeoning love in that house, but it did not involve Dad. He'd moved out, and many months later, a new suitor for my mother appeared on the horizon. Years later they were married, but even at my young age I realized he must have been some kind of latter-day saint, taking on this very beautiful lady with the staggering enc.u.mbrance of five kids and a kind of rogue husband prowling around the outskirts of her life, keeping an iron grasp on every nickel of her finances.

The name of the new man, who would one day become my stepfather, was Ed O'Brien. He was an extremely eminent lawyer and a grandson of a former governor of New Hamps.h.i.+re. Ed was a very cla.s.sy guy, and he adored Mom and helped her in every way. He was not so big and tough as Dad, who had a touch of John Wayne about him, a kind of western swagger and a suggestion of unmistakable att.i.tude, which often goes with entirely self-made men.

Anyway, right now I want to get to the point. Remember, Dad did not live with us anymore, and Ed occasionally stayed the night. Well, on this particular morning I was standing in the living room staring out of the window at Ed's brand-new Mercedes-Benz convertible, a $100,000 car even way back then in the late seventies. Suddenly I saw a car pull up outside the front gates.

Into the expansive front yard strode Lawrence G. McDonald, wielding what looked to me like a seven-iron. He came striding up to Ed's automobile and took an easy backswing, left arm straight, and completely obliterated the winds.h.i.+eld in a shower of splintered gla.s.s. The clubhead struck right above the wipers, a little low. I thought Dad might have raised his head just a tad on impact.

Never breaking stride, he walked resolutely to the front of the car, took aim, and smashed the right-side headlight. Moving left, he ripped the club back fast. I thought I detected a slightly tighter swing, hands a little farther down the club. Anyhow, he did precisely the same to the headlight on the left.

By this time there was gla.s.s all over the place, and still I just stood there, gaping, wide-eyed. I watched Dad stride around to the back of the car, and for a moment I thought he was planning to survey his handiwork. You know, like standing back after you've dropped a ten-footer.

I was wrong. Once more he took his stance, swung the club back, and fired it straight into the taillight on the left side, shooting red gla.s.s all over the lot. Then he moved two paces right and with precisely the same shot, slightly wristy with a lot of backspin, punched out the other one. If either taillight had been a golf ball, it would have flown high and dug in on landing, probably pin high. There was a lot of precision about Dad's play that morning.

I mention this because the incident is branded into my memory. It took me ten years to ask him about it, and he replied as only he, or perhaps John Wayne, could-real slow. ”It wasn't a seven-iron, son. Didn't need any more than a pitching wedge.”

It would be another thirty years before I would witness at very close quarters another such act of wanton, willful destruction. And that took place on the trading floor of a Wall Street investment bank.

I begin my story with that brief insight into the character of my father because he had, even after the divorce, a profound influence on me. By nature he was a bear. That's not a straightforward grizzly, seeing world disaster in every downward swing of the Dow. Dad was a perma-bear, seeing potential catastrophe every hour from the opening bell to the close of business. begin my story with that brief insight into the character of my father because he had, even after the divorce, a profound influence on me. By nature he was a bear. That's not a straightforward grizzly, seeing world disaster in every downward swing of the Dow. Dad was a perma-bear, seeing potential catastrophe every hour from the opening bell to the close of business.

For some investors the floor of the New York Stock Exchange is the last refuge of the Prince of Darkness, a place where demons of ill fortune lurked behind every flickering screen. Dad was not that bad, because he was an instinctively shrewd investor, often a wizard at stock selection, spotting the corporation that was about to tank. But his att.i.tude almost caused him to miss the two greatest bull market rallies in history, because to Dad, cash was king, and he might need to prepare for the end of the world. He was the ultimate value investor. In outlook he was a cautious, somewhat skeptical pessimist. In personality he made Howard Hughes look like an extrovert.

In his own business Dad was extremely successful. He earned his bachelor of science degree in chemical engineering at Notre Dame, where he was number one on the golf team. Then he went to work as a salesman at General Electric's plastics division, the Google and Microsoft of its day. He ended up a multimillionaire, owning his own plastics manufacturing plant in Ma.s.sachusetts.

When he told me to beware, that history, without fail, repeats itself, he was not thinking of the sunlit uplands of triumph and achievement. He had in mind events like the eruption of Krakatoa, World War II, the fall of the Roman Empire, the collapse of the Soviet Union, and above all the crash of 1929. Always the crash.

With a worldview like his, it was scarcely surprising that the peace and quiet of the golf course was his princ.i.p.al escape. And he was one h.e.l.l of a player. He held the course record of 65 at Woods Hole for more than twenty years, and on one near-legendary occasion he nailed the three par-fives in birdie, eagle, and double eagle. He played the great golf courses in serious compet.i.tion, once losing on the last green at Winged Foot Country Club to one of the best Ma.s.sachusetts amateurs of all time, Joe Keller-and even Joe had to sink a forty-footer to beat him.

Dad had already set me on the road to becoming a scratch golfer when my world caved in. He and Mom split, leaving Mom with us kids in the big house without the means to support either it or us. Ed had a law practice in Worcester, and to that tough Ma.s.sachusetts city we upped and transplanted ourselves, mostly because Mom needed a friend, just someone to be there, in the absence of Dad and his weighty bank balance.

Bolton, where we had always lived, was a little gem of a town, an upper-middle-cla.s.s haven set in green rolling country with the families of well-to-do business guys in residence. From there, my mom, now in desperate financial straits, my three brothers and one sister, and I ended up in a housing project in the worst part of a distinctly suspect city-the absurdly named Lincoln Village Apartments, gateway to nowhere. I was too young to go into culture shock, but h.e.l.l, even I realized that somehow the roof had fallen in on my life.

With five children to care for, my mom, the hugely admired Debbie Towle, could not possibly go back to work. She was still, by all accounts, spectacularly beautiful, and would once again have been in demand as a fas.h.i.+on model, but that was impossible. We were not so much hard-up as bereft.

The apartment was in a nightmarish neighborhood, run-down and dirty, with a slightly sinister atmosphere, as if at any moment some shocking crime might be committed. Mom was always in tears. I could tell she hated the place, hated living at the wrong end of this urban version of Death Valley.

As you can imagine, the people were an absolute treat, many of them s.h.i.+fty-eyed, leering, unkempt, and full of resentment: some really shaky kids, white trash, drug dealers. There were also gangs of trainee criminals staging shoplifting raids and nighttime burglaries all over the city. They kept trying to recruit me, but I knew enough to stay well out of it. I refused to join them, and one night their leader came to the door of our apartment, dragged me out onto the front steps, and punched me right in the face.

Mom nearly had a heart attack, and Ed O'Brien came to the rescue, trying to help with money. Dad? He pretty much disappeared. In my first eighteen months in Worcester I went to three different schools, each one a bigger disaster than the last. This was life as I had never imagined it. Academically I was slipping behind; mostly I was afraid to go outside the door because of the sheer danger of the place. It's hard to explain every vestige of the change in our lives. But the difference was total. There were no more trips to the Cape, no more golf, no more elegant dinners at our home. We were prisoners of the cells of Lincoln Village.

My dad did pull one masterstroke on my behalf. He arranged for me to report to tranquil, green Worcester Golf Club, where I spent time caddying. I was too young to understand I was hauling a huge bag around for one of the immortals-Bob Cousy the six-foot-one point guard for the great Celtics teams of the fifties and sixties, and an excellent golfer. The sweet-swinging point guard called me ”kid;” I called him ”Mr. Bob.”

But those trips around the course were only a tiny respite from my real world. I earned $100 caddying, all of which I gave to my mom. As a family, we were sinking into depression. I remember it all so well-no laughter, no joy, and the unmistakable feeling that we never should have been anywhere near Lincoln Village. Finally, the entire family got together, both Mom's people and Dad's, and decided, ”We have to get those kids the h.e.l.l out of there.”

So one bright morning in the spring of 1979 we all moved to Cape Cod, where Dad had always had a home. We went back into the sunlight, back to life as we had once known it in Bolton, away from the glum recesses of Worcester.

When I began at my high school in Falmouth, I was at a huge disadvantage, way behind in my work in all subjects. I fought an academic war to become a C student, struggling to catch up. During my junior and senior years, when it was time to make a decision about college, I most definitely was not regarded as a candidate for a top university. So you can imagine my surprise one day when Dad showed up and told me he was taking me out to his alma mater in South Bend, Indiana: Notre Dame, the hallowed campus of the Fighting Irish, which also houses one of the greatest libraries in North America under the watchful eye of the Touchdown Jesus, set in ma.s.sive mosaic glory on the eastern wall of Memorial Library.

He took me to all the sacred places: the Grotto, the library, the Rockne Memorial, the Sacred Heart Church, the palatial South Dining Hall, and of course the stadium. I thought then, as I think now, it must be one of the most fabulous university campuses on earth.

Plaintively, I asked my dad, ”But why now? Why bring me here so late? I obviously could never make it, not after the years in Worcester. If you wanted me to come here, I should have stayed at my school in Bolton.”

He was a man of few words at the best of times, and he greeted my comments with even fewer words than usual. There was no explanation of his intentions. And we traveled home to the Cape with hardly any further discussion about my lack of academic future. I think Dad knew I was doing everything I could to regain lost ground at school, but there was no possibility whatsoever that I could ever aspire to a place like Notre Dame.

When we reached the house, Dad took me by the shoulders, turned me around to face him, and said in that rich baritone voice of his, ”Son, remember this-it's not where you start, it's where you finish.” Spoken, I have often thought, like a true hard-driving son of a mailman-and for that matter, a bit like John Wayne. A student's gotta do what a student's gotta do.

What I had to do was scramble my way into a university of some description. Any description. In the end I made it to the University of Ma.s.sachusetts at Dartmouth, a small seaside town that sits in the southernmost corner of the state, where the Atlantic washes through the trailing headland of Cuttyhunk, the last of the Elizabeth Islands.

Before I reported to UMa.s.s for my economics courses, I spent a summer working in Falmouth pumping gas. I swiftly developed a deadly rivalry with the gas station next door, which was manned by one of my local buddies, Larry McCarthy.

He was a whip-smart kid, built like a jockey, 120 pounds wet through, and about five foot five. He got a pretty hard time at school partly because he was so small and partly because he was frequently seen reading the Wall Street Journal Wall Street Journal when he was in seventh grade. But he was a feisty little devil, and he fought like a tiger, ever ready to swing a roundhouse right at any perceived slight. Just how feisty he was would be demonstrated to me in Technicolor when we both had our backs to the wall at Lehman Brothers twenty years later. when he was in seventh grade. But he was a feisty little devil, and he fought like a tiger, ever ready to swing a roundhouse right at any perceived slight. Just how feisty he was would be demonstrated to me in Technicolor when we both had our backs to the wall at Lehman Brothers twenty years later.

His dad was a bank president, and he sent his son to the expensive Sacred Heart School. Right from the get-go Larry was being groomed for a Wall Street career. He sailed into Providence College to study economics and business administration.

Even as a teenager, I should have known he'd go far, because he was h.e.l.l as a business rival. One week things were a little quiet, so I cut a cent off the gas price at my station, guessing the notoriously parsimonious New Englanders would go for that with enthusiasm. I was right, and for a couple of days I was doing real well. Then it all went south and I was back in the doldrums.

It did not take me long to find out why. Across the street Larry had slashed his price by more than two cents and mopped up almost all of the town's regular business at the pumps. The summer drew to a close leaving us still best friends, but with the business pecking order established.

As a freshman, I lived in Falmouth with my dad and made the hour journey to school each day. That had the advantage of being free except for gas, and the disadvantage of my being watched beadily by a very advanced financier as I toiled my way through the demanding curriculum. Dad was making a big effort, seeming to want to make amends for things in the past, and we got closer. I guess I started to like him more, as I have done ever since.

By the time I moved into junior year, I had become a top student, straight As, while majoring in economics, with probably the best grades in my cla.s.s. Dad regarded all this with a watchful gunslinger's gaze. Never said anything. Probably figured there wasn't any need. But I bet he secretly knew I could have made Notre Dame if I'd had a shot.

When we talked, it was usually about business. Sometimes about our other shared interest, golf, but mostly Dad let his short irons do the talking. Although I do remember he once told me he'd dropped a sixty-footer on the fifth green of the exclusive International Club out in Bolton. This was reputed to be the largest green in the game, a 120-yard-wide upside-down apple pie generally regarded as impossible from all angles. Dad, who was the best player in the entire members.h.i.+p, recounted that putt with a paucity of words. But he told it like it was, straight and true, the upholding of good over evil, like a scene from the back lot of High Noon High Noon.

Those were the terms in which he saw the world, and he looked at the financial markets with a mixture of suspicion and cynicism, watching, waiting for the c.h.i.n.k in the armor of the mighty that would allow him to cash in. Like all bears, he was intuitively drawn to the art form of shorting stocks-acquiring shares in a corporation in antic.i.p.ation of a downward spiral. In the broadest possible terms, if one thousand shares are acquired at $100 each and the price then falls to $50 per share, the bear tucks away a succulent $50,000 profit. It's a bit complicated, because the original $100 shares are not actually purchased by the bear. They're borrowed through a broker and immediately sold. All the old bruin needs to do is buy them back at the cheaper price and pocket the difference. And so, while all around him the stockholders are licking their wounds, losing their cars, selling their houses, and watching their portfolios blow up, men like my father bask in the sheer scale of the disaster, counting their cash and staring balefully around for the next potential casualty.

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