submitted by JJ
A long time ago when the NYMEX was still called the Merc and they traded potatoes on Harrison Street, a guy named Neil was a local. He wore polyester brown suits, old shoes and he looked like a pear. His lapels were wide and his unbuttoned polyester shirt showed a hairy chest and a thick gold chain. Neil had a tiny little head and beady brown eyes and little teeth that barely came out of his gums and his smile was a strange toothless smile. It was the 70s and his hair was long and oily and he had a handle bar mustache that he habitually smoothed away to the sides of his face. Neil was hard on the eyes but he didn’t care. He said it made people make mistakes and he made a lot of money pissing people
In fact, nobody liked Neil, some hated him, and that was just the way he liked it. The more money he made the more he was hated and the more he loved it. “I’d rather be rich than pretty,” he’d say in a gravelly voice but there never was any worry about that.
The pits in those days were full of colorful guys and one of the most colorful was an Irishman named Bobby. Bobby was a potato man – an old school man; a hard-drinking, chain smoking, local who was dominant in the pit and made money intimidating smaller traders. Neil got under Bobby’s skin every chance he got.
Potatoes were a strange contract. There were only a few months on the board that traded; November, the end of the season, new crop April and May which was really the whole market. Bobby was well known for running raids (stop loss hunting) and squeezes.
One year there was a tight crop and the street was looking for high prices. Bobby and his buddies went up to Maine to check things out and when they came back they bid up the Mays from 3 cents a hundredweight to 8. Meanwhile the farmers no strangers to games, bought an old scow of a boat and loaded it with a cargo of rotten potatoes and sent it off to Belgium. At the time Belgium was the largest per capita consumer of potatoes on earth and shortly after departure, a piece of news appeared on the wires announcing “Historic First Export Cargo of Potatoes Disembarks for Belgium.” The effect was to say the least, bullish.
Potatoes went limit up for days trading as high as 15 cents while the errant tub traveled across the Atlantic. A week later another news item hit the wires: “Belgian Farmers Riot on Docks in Protest to US Potato Exports”. Potatoes went limit down for days and lost all their gains. By then Bobby and the farmers were shorting the market and as soon as the “potato boat” was sent home the street revised their estimates for the harvest and larger acreage and yields were announced. Potatoes plummeted.
The old saying, “A small crop gets smaller, a big crop gets bigger” was never more apt. It seemed every day the crop got bigger. Retail was long and stops were big below. I will digress for a second here. One of the largest paper brokers on the old Merc was diminutive man named Mel. Mel might have been 5 feet tall in his soul train platform shoes but really he was more like 4’11”. He had a shrill squeaky voice and was always stopping the market to get his book in order and when it was busy he disappeared in a sea of bodies.
As March became April, the market traded all the way back to 3 cents and then one day it broke three. The pit smelled blood. Bobby offered 2000 at 2.90 and then 2.80. Neil bought a hundred from Bobby just to piss him off. Prices went lower the next day. Bobby kept offering it down and Neil kept buying a hundred here and there casually. Never challenging Bobby.
Somewhere near the 2.00 handle the market was really busy and Neil bid 2.10 for 3000 lots; about 10% of the book. In those days there were no rules on position size. The only rules were exchange rules and the exchange was standing in the pit. Bobby said,” Sold!!!”
Then a little voice yelled out in a panic, “Wait, Wait Wait… I’m 2.15 bid for 10 lots! I’m violated!” It was Mel with his stack of orders and his eyes were all bugged out. “I’m violated! It can’t trade 10!” Everyone looked at Bobby.
“Ya got what ya want,” growled Bobby. “I’ll fill the f*&%ing ring… But He…” and he pointed his finger like a hand gun at Neil,“he gets three f*&%ing thousand at ten.”
Neil just shrugged and said, “Yeah, buy’em,” and wrote the trade on his cards with a soft smile.
That was the low of the move. Bobby had to pay up to get out but he didn’t care. He was a man’s man, a shooter and he said it was worth it to take a shot at Neil.
Neil said he didn’t care where the market went. He knew he had the better side of the trade. A contract of potatoes was 50,000 lbs. Three thousand lots at 2 cents was “only $3 million (a mere bag of shells). I’d throw half in the Hudson just burn his stones.”
Imagine all this happening in 50 milliseconds on a server in Chicago at the CME.
Think about that as you reach for your mouse to read the next story…