“It takes money to make money.”
It did not take long in Hawaii to figure out we needed a local in a management position to prospect the native populations. The Hawaiians and Samoans are incredibly friendly folks. If they like you, you have a friend for life. Unfortunately, that natural good will had been taken advantage of repeatedly by people coming from the Mainland, and they had grown distrustful and skeptical of mainlanders.
Matthew, Our Salesman
We hired Matthew as a salesman to prospect locals and especially Japanese. Matthew was always meticulously dressed, usually in a tweed sport coat. Howard also insisted on wearing a suit to the office. I was the only one semi-casual, though I did usually tuck in my aloha shirt for meetings.
At that time, the mid-1980s, the Japanese economy was doing well. Japanese investors were everywhere on the island, buying mostly real estate but always looking for new opportunities.
Matthew spoke a dialect of Japanese sometimes called “Emperor’s Japanese.” It is quite beautiful and lyrical, captivating even if you do not understand a word of it. When he spoke to Japanese prospects in the office, you could see they were almost hypnotized, saying little save for the occasional “Hai!” (yes).
Matthew worked out of the office a lot, and sometimes he would disappear for several days. Once he called from Japan requesting a small cash infusion. He had spent it all entertaining Japanese businessmen. Often after a night of entertaining in Honolulu, the owner of one of the nightspots would come to the office with the bill. “The man said you would pay this, please.” No problem. It was usually a couple hundred dollars.
The $1,900 Bill
Well, one morning in walks the owner of one of the more upscale places. Our secretary pointed her to me. I know the drill and held out my hand for the damages. I looked. $1,900! Holy Big Kahuna! I told her to have a seat while I showed the bill to Howard.
“Howard, we have a bill from Matthew’s prospecting.”
“OK, Michael, go ahead and pay it.”
“I think you should have a look!”
I will never forget the surprised look on his face. “I guess we’ll have to pay it. Has anyone seen Matthew?” “Not lately.” “Try to reach him and find out what’s going on. That’s a lot of money!”
Matthew actually called in soon thereafter. “I am working a $400,000 account, Duane. (Howard called me “Michael,” most others called me “Duane.”) Hopefully I have it soon.” I reminded him we could not do too many $2,000 nights. “No, just one time. Big account! It takes money to make money, Duane!”
The Wire That Went to the Wrong Place
Two days later, still no Matthew, but at least no visiting creditors. Our office was at the top of the Ala Moana Pacific building, new at that time. The ground floor was the Bank of Honolulu, where we conveniently banked. It was the smallest of Hawaii’s major banks and we were on a first-name basis with the president. That morning, on the way up to the office, I stopped in the lobby to cash a small check. The president of the bank saw me and looked down from the balcony. “Hey, congratulations on that big account!”
I was confused. How would he know if we got a big account?
“You received a deposit of $410,000 from Japan in the night!”
OMG! Matthew had the client wire the money to our account, not to the brokerage firm in Chicago with which we cleared our trades. That was a BIG no-no. For a managed account we only had a Limited POA (power of attorney) to trade the account, but absolutely no access to the funds themselves. We would have to return the money to the client and have him re-wire to Chicago.
I hustled up to the office and brought Howard up to date. Naturally, he was upset. “Well, call Matthew, tell him we have to return the money and ask the client to re-wire to Chicago. What a great account, Matthew really came through!”
I called Matthew and explained what we needed to do.
“Oh, no, Duane. I cannot do that! The client will lose face, we will never see him again. No, Duane!” I tried to reason with him, but he got a little hot. “Duane, I worked two weeks on that account. You and Howard figure it out! And I’ll be in the office tomorrow, have my $10,000 commission check ready!” And he hung up.
Fixing It
Howard and I sat in silence for several minutes. Four hundred thousand was a big account. At the time we had a total of a little over $1,000,000. Howard spoke. “Let’s call Jim!” Jim Lattanzio was our contact in Chicago. We explained everything to him. “We can’t touch that money if it isn’t from the client. The CFTC would be all over us!” The three of us went back and forth on ideas, and all dead-ended at the CFTC going bonkers. Jim said he would check with Legal and see if they had any ideas. He would directly benefit from the account as our Representative, so he had some motivation. Alas, Legal said “NO!”
I honestly do not remember exactly how it got done. Our friendship with the president of the local bank was a key, and Chicago doing something was not an option. But the account got to Chicago, in the client’s name. The client had requested a daily update and market preview via fax. No problem, but at the time fax machines were dreadfully slow and a connection to Japan for several minutes was pricey.
Matthew prospected a second $400,000 account soon thereafter. It must have been a nice round number in yen. Another tale for 50YearTrader sometime.
Good Trading!
Michael Duane Archer
Related Reading
- The Pink Lady: Meeting Herb Dollahite in Early-1980s Hawaii
- When No Means No: A Honolulu Commodity Office Story
- Goodmanisms: Charlie Goodman’s Sayings on Trading, Explained
Keep Learning the Goodman Way
If this article was useful, these are the next steps:
- The Method: propagation, intersection and the 3-C Principle, drawn plate by plate.
- The Goodman Library: the books, from Goodman for Grasshoppers to The Goodman 6 & 6.
- The Trader’s Playbook: the Molokai setup in one printed, numbered volume.
- Mentoring: work one-on-one with the authors.