Trader Monthly Magazine

Hot News, Gossip and Industry Dish

Tue, 27 May 2008 14:31:50 GMT

A Fall, Some Grace

With many folks viewing the Fed-directed takeover of Bear Stearns by JPMorgan as nothing more than a shameful bailout of fat cats at a time when many ordinary Americans were facing foreclosure, staffers at the crumbling bank didn't get much sympathy -- not that they were looking for any.

What the Bear crowd does deserve, however, is a great deal of respect for the manner in which they handled the ordeal. Heaping doses of dignity, pride, professionalism and humor helped mitigate despair even in the firm's darkest hours. There was the anonymous staffer who, in a heartbreakingly pointed gag, taped a $2 bill to the 383 Madison Avenue entrance to Bear on the Monday morning after the deal's per-share price (later upped to $10) was revealed.

During that stunned session, a software company with which we're familiar considered canceling a pre-planned happy-hour event for Bear's back office out of consideration for their difficult situation. In the end, though, the Bear invitees insisted that the gathering go ahead -- and attended in strong numbers, apparently in need of a stiff drink.

"Throughout all this turmoil, the traders continued as if it were business as usual," says one recruiter who watched the situation closely.

Perhaps most inspiring was Ace Greenberg's gesture to pay some longtime mailroom and clerical workers $200 a month for six years. Classy move. Fat cats can be funny that way.

Game On

Move over Monopoly, and slide over Stratego.

Introducing a board game the whole family can play, assuming they all have at least a cursory understanding of technical indicators. Then again, the point of the new Million Dollar Challenge is to help teach people how to trade. Based on the famous seminars put on by Larry Williams (who is currently in Australia fighting income-tax-evasion charges in the U.S.), the game is the brainchild of 30-year-old Jackie Woestman.

"I had absolutely no understanding of commodity trading, and it bothered me," the 30-year old Washington, D.C., electrical engineer says. So she did what anyone frustrated by his or her financial ineptitude would do: She set out to design a board game.

It turns out that Woestman's father had participated in one of Williams's seminars years ago, so that's where she began her quest to become the Milton Bradley of the securities industry. She contacted Williams, free on $1 million bail after being arrested in Sydney last July. (He awaits a final ruling from Australian courts on a request by the American government for his extradition.)

"We made an appointment to go see Larry last summer in Australia," Woestman explains. She couldn't make the trip, but her dad and sister went on her behalf.

"I told them I was not a fan of board games," Williams says. "But after they showed me how it was played, I thought, 'This is kind of cool.'"

Woestman stresses that Williams refused to accept any offer of profit sharing and stands to realize no financial gain from sales of the game. (Got that, IRS?)

Million Dollar Challenge is based mostly on Williams's approaches, with a handful of other well-known technical indicators woven into the mix, including those of Tom DeMark and Jake Bernstein. The premise of the game is to teach players to trade only when the situation is highly favorable and the probability of making money is high. Players start with a $300 grubstake; as they roll the dice and circle the board, they accumulate technical indicators. Players can enter a trade at any time, though success is tied to their having accumulated enough indicator points. When your account hits zero, you're out. The game is available at Amazon.com for $69. (Did we mention that Williams will not make any money from it?)

Clarifying Chris Hohn's Haul

In compiling our annual Trader Monthly 100 list of the industry's top-earning traders, we try our best to give each person a chance to comment. Getting Chris Hohn of The Children's Investment Fund on the horn proved difficult; numerous calls to his London office went unreturned. Meanwhile, staffers at his affiliated foundation claimed they were unable to pass messages to him. Calls to Hohn's wife, Jamie Cooper-Hohn, the foundation's CEO, were also not returned.

Yet when we published the list, estimating Hohn's haul at $800–$900 million, TCI contacted us immediately, offering the exact figure for Hohn's income for 2007 (through the year ending August 31). Hohn, according to investor-relations head Rahul Moodgal, personally earned a mere $1.4 million in that period. If it's possible that the man at the helm of an $11 billion hedge fund pulled down nothing more than low seven figures, credit TCI's unique charitable structure.

But the mystery lingers. Asked specifically how much Hohn donated to The Children's Investment Fund Foundation, Moodgal declined to comment. We stand by our estimate -- and take our hats off to Hohn's apparent generosity.

Music City Misstep

Last autumn, Nashville-based forex trader Francisco Arias decided it was time to share his currency-trading prowess with the larger world. In a space known for extreme volatility, he had consistently generated impressive gains. The 39-year-old had secured dozens of clients but wanted to take his operation, Reynier Management, even further up the asset-management mountain. So Arias, known for living on a steady diet of Red Bull and trading the 24-hour market practically nonstop, hired and trained several traders to help manage his ever-growing book, which at year's end was around $60 million, leveraged at about 10-to-1. He even hired marketing and PR people, while rolling out a flashy Web site.

But things did not work out as planned for the relentless EUR/USD trader.

Not only did reports of a major blowup at Reynier surface this spring (supposedly one of Arias's newly hired traders botched a major euro bet in an overnight session), but Arias filed for bankruptcy and shut down trading in the wake of a lawsuit filed by an unhappy former backer.

Meanwhile, Reynier's Web site is now inactive, and calls and e-mails to Arias were not returned. Steve Lefkovitz, Arias's bankruptcy attorney, declined to comment. Cisco, we hardly knew ye.

Olympic High Jump

Going into the final week of Interactive Brokers' annual algorithmic-trading contest in February, Chris Michalak couldn't help but notice how far out of first place he sat. That's when the Montreal native went all in. The leader had nearly tripled his $1 million in funny money, while Michalak's account was only slightly up. Officially called The Interactive Brokers Collegiate Trading Olympiad, the contest is open to students worldwide. Participants have eight weeks to increase their faux grubstake using programs they write for themselves. It's a way to encourage careers in financial engineering, explains Andrew Wilkinson, Interactive Brokers' director of media communications.

"I figured I still had a one-in-three chance of winning it all," says Michalak, a Ph.D. candidate in mechanical engineering at the University of British Columbia. "I just needed to triple my money."

Michalak's aggressive tactics -- leveraging his account to the hilt and using a random number-generation system that prompted him to buy euro futures in bulk during a week in which the euro popped over 3 cents -- paid off. His final P&L totaled around $2.1 million, or roughly $27,000 more than second-place finisher Ye Tian, a 29-year-old financial-engineering student from Cornell. When asked about his future plans -- a job with Interactive Brokers, perhaps? -- Michalak says he's not sure: "I don't want to do anything too stressful."

Well, so much for his trading career.

Have an interesting tidbit? E-mail it to us at [].

Pony Boys

Tue, 27 May 2008 14:31:59 GMT

Traders and fast horses go together like, well, traders and fast profits. And when two prominent money men pool their assets to indulge their fondness for the fleet-footed fillies? Apparently, the partnership pays dividends for decades. Such was the case, nearly 150 years ago, with flamboyant equities speculator Leonard Jerome and financier August Belmont Sr.

Jerome was known as the "King of Wall Street" in the mid-1800s, earning (and squandering) several vast fortunes tied to, among other things, volatile railroad stocks. He hobnobbed with the Vanderbilts and promoted his twin passions by founding both the Manhattan Academy of Music and the Coney Island Jockey Club.

Belmont, a Hessian immigrant, was the American representative of the Rothschilds, having saved the family from possible ruin during the wave of bank failures after the Panic of 1837.

Both men, naturally, boasted upper-crust families. Belmont was married to the daughter of Commodore Matthew Calbraith Perry, a seaman famous for having opened Japan to the West in 1854, while Jerome's daughter Jennie would, in 1874, give birth to Winston Churchill.

During the Civil War, Belmont and Jerome helped fund the construction of a horse track in the Bronx. Jerome gave it its name -- Jerome Park Racetrack -- but Belmont secured the bigger historical prize by lending his name to the race itself: The first Belmont Stakes was held at Jerome Park in 1866.

The third and final stretch of horse racing's Triple Crown, the Belmont left Jerome Park in 1890, a year before Jerome's death. This year's running, the 140th, takes place June 7 at Belmont Park on Long Island, its home since 1905. Also known as the "Run for the Carnations" after the white garlands draped around the winner's neck, the race offers a purse of $1 million. A trifle for a Belmont or a Jerome, perhaps, but as any trader knows, not too shabby (speaking of fast profits) for two and a half minutes of work.

His Brother's Keeper

Tue, 27 May 2008 14:32:12 GMT

On September 11, 2001, Sean Thomas Lugano, 28, a sales trader with Keefe, Bruyette & Woods, died after United Airlines flight 175 struck the south tower of the World Trade Center at 9:02 a.m., trapping him above the impact zone in his firm's eighty-eighth-floor offices. After the earlier attack on the north tower, Lugano had called his older brother John with a message for him to relay: "Tell Mom I'm OK."

Today, nearly seven years after the attacks, the Friends of Sean Lugano foundation continues to celebrate Sean's life and memory. In 2003, John Lugano, now 38 and a bond broker at Tullett Prebon in Manhattan, got together with Sean's friends and former professors to raise $1 million to build a memorial rugby field at Loyola College in Baltimore, where Sean had been team captain.

That goal achieved, Lugano expanded his efforts, focusing on two New York–area charities, the Adaptive Sports Foundation (ASF) and Lead the Way Fund, both of which assist soldiers wounded in Iraq and Afghanistan. ASF helps disabled veterans reclaim their athletic prowess through skiing and other therapeutic sports, while Lead the Way raises funds for families of U.S. Army Rangers who have been killed or injured in combat. (In an eerie twist, Lead the Way, initially unbeknownst to Lugano, was founded in memory of James Regan, an army sergeant in Iraq who was a friend of his.)

The Friends of Sean Lugano Foundation hosts a trader-packed gala and raffle every February; this year's raised some $70,000 for the two charities. Fundraising, though, continues all year -- and will do so for years to come. "This party will go on after the wars in Afghanistan and Iraq end," John says. "Soldiers will still be hurt."

And then helped, thanks in part to the Lugano clan, who have made charitable efforts a true family affair: In addition to John, siblings Stephanie, Kristen and Michael contribute, while matriarch Eileen Lugano serves as the foundation's president. It is, John avers, a way for Sean’s kin to pay tribute to the humanistic spirit his little brother exemplified. "Sean was awesome -- cool with nerds, geeks, jocks," he says. "He was one of those kinds of guys."

Trading Jacket

Tue, 27 May 2008 14:32:35 GMT

Escapism from the daily rigors of trading -- most commonly achieved via a stiff drink and some righteous clatter from the trusty hi-fi -- is a need as old as trading itself. Your dear old granddad, after a long day spent trading railroad-tie futures, surely popped open a jug of backyard rotgut and tuned into the latest radio serial. Modern traders consumed by subprime woes could, in turn, do much worse than to soothe their frayed nerves with a bottle of fine whiskey and its aural equivalent: the five Kentucky musicians known as My Morning Jacket.

In recent years, MMJ have garnered considerable acclaim for their amplifier-friendly blend of Southern rock, country and indie noise. They've always been, in fact, something of a one-trick pony -- never really a problem given the proficiency with which they executed their trick. On their new disc, Evil Urges (Ato), though, they add a few ingredients to the mix -- and the concoction is all the more intoxicating.

Buzzing at first with MMJ's signature mellow hum, the album turns progressively louder, with singer Jim James curling his Neil Young–meets–Carl Jung lyrics around caffeinated guitar licks that recall (in a good way) the finer '80s metal you remember from high school. It's a distinct stylistic departure for a band not known for stylistic departures -- and an excellent soundtrack for the ferments of the trading mind, whatever your current positions are doing to your P&L. Just remember to sober up before tomorrow's opening bell.

Going Public

Tue, 27 May 2008 14:33:12 GMT

Wake up. Eat breakfast. Go to work. Grind terrifying CDO spreads into dust all day. Leave work. Go to the gym. Hit the elliptical trainer. Tone the abs. Do some cardio. Life some weights. Yoga tonight? Drink a smoothie...zzzz...

Ah, to hell with it. Never has keeping yourself in fighting trim been such a tedious chore -- and Stacy Berman knows it. A certified trainer for 13 years, Berman, 32, has long witnessed the rote drudgery of the half-committed gym rat. "I watched people coming in when it got warmer or after New Year's," she says. "They came to the gym for a month, didn't see any change and stopped coming." The workaday monotony of the average city dweller doesn't help: "People go to the office, go home, go to sleep and start all over. They're almost always indoors."

In 2000, to ameliorate this sad situation, Berman founded Stacy's Bootcamp (stacysbootcamp.com) on the notion that "an outdoor workout is the best way to break that routine." Paying $275 per three-week session, Bootcampers gather thrice weekly (rain or shine) in parks around New York to engage in old-school exercises -- push-ups, pull-ups, running steps, even piggyback rides. (Yes, seriously, piggyback rides.) Lou Dobbs bloviating wildly on your neighbor's treadmill? Not a chance. "We don't use any equipment except our bodies," Berman says.

The animating idea, she notes, is to trim down, not mass up -- think Baryshnikov, not Schwarzenegger. With diligence, it works; Berman relays tales of Bootcampers who have dropped 30 pounds in just six weeks, quit smoking or improved their diet. (High-protein, medium-carb, she recommends. Speedballs and Zantac? Not so much.)

Sometimes, it seems, a mere venue change can make an enormous difference. Tired of your dull-as-a-mutual-fund gym routine? Shifting it outdoors might be just the ticket to a finer physique as summer approaches. As for those CDO spreads? Berman can't help you there. That tedious chore, alas, appears likely to remain.

Other People's Money

Tue, 27 May 2008 14:33:22 GMT

Being outrageously rich just isn't as easy or socially acceptable as it used to be, what with the markets in turmoil and economic trend lines looking like a Karen Carpenter weight-loss graph. But those hale Americans with the good fortune (literally) to possess north of $30 million in household assets need succor just like the rest of us -- and Christopher Tennant is at their service.

In the plucky spirit of Lisa Birnbach's 1980 classic The Official Preppy Handbook, Tennant now offers The Official Filthy Rich Handbook, a look at "how the other .0001 percent lives" (Workman). Those $30 millionaires make up that illustriously slender percentage, and Tennant caters to their needs (and soothes their fears) like the world's most well-informed personal assistant.

With a wit as dry as a yacht-club martini, Tennant (in true guidebook fashion, with contact information for companies that provide the services he describes) details the crucial difference between a butler and a majordomo, reveals where the best plastic surgeons ply their trade and shows how to rid yourself of those annoying spare millions by building the finest home ice rink or squash court. He offers travel tips (Sardinia or Ibiza?), personal-security advice (the relative merits of bodyguards who used to work for the NYPD versus those from the Mossad), lifestyle pointers and even birthday ideas for your kids. Why not build Junior a multi-story, multi-tree treehouse strung together with rope ladders? Surely the neighbors won't mind. (And if they do? Hey, you're rich! Sue 'em!)

Of such practical advice is this mordantly deadpan tome crafted. Think American gloom circa 2008 makes its publication poorly timed? Consider that John Paulson made $342,000 an hour last year. Surely he needs help keeping up with the latest in paperless Japanese toilets.

As for the rest of you, banging along pretty well but not yet living in Paulsonville? That, we humbly remind, is what Trader Monthly is for.

Automatic Rifles

Tue, 27 May 2008 14:36:22 GMT

When Dan Mathisson, then 29, arrived at Credit Suisse from quantitative hedge-fund pioneers D.E. Shaw in April 2000, the equity market was in the early stages of a seismic shift. The popping of the tech bubble, intensifying buy-side dissatisfaction with spread-gobbling market makers and the mother of all watershed market-structure events -- decimalization -- provoked new ways of thinking when it came to the sell side's approach to block execution for buy-side clients.

"We had some VWAP capabilities that we used internally," Mathisson recalls, "crude machines that were just not very useful."

Today, Credit Suisse and its Advanced Execution Services unit are proving extremely useful to a 1,400-member universe of money managers around the world, almost half of them hedge-fund managers. These are institutional behemoths who rely on AES quantitative-execution algorithms to reduce market impact, boost relative performance and generally reduce the level of uncertainty that can accompany a giant trade.

Headed by Mathisson and his global sales chief, Manny Santayana, AES is on the vanguard of technology-steeped trading tactics while the rest of the bulge bracket can only hope one day to chase them down. With one-stop connectivity, AES functions in more than 30 countries, accessing vast amounts of historical data as well as real-time information to evaluate and respond to almost every conceivable market pattern or condition. CS's clients call their shots; the AES system does all the heavy lifting.

In a recent survey conducted by TABB Group, a universe of institutional equity managers was asked, "Who do you consider among your top three algo providers?" Credit Suisse was named by 60 percent of respondents. ITG was second at 40 percent, while Goldman Sachs took third, with 27 percent.

"We are full-throttle," says Santayana, who cut his teeth in sales at IBM before joining Fidelity Investments and, later, State Street Global Advisors. He joined CS around the same time as Mathisson. "That's full-throttle both in terms of innovation and distribution."

"Credit Suisse took its AES suite, created a marketing and sales machine around it and then just beat the pants off everybody," attests one former program trader.

"In addition to algo-trading success, CS has been growing its dark-pool market share as well," observes Joe Gawronski, president of Rosenblatt Securities in New York. About six months ago, CS's CrossFinder was crossing about 20 million shares a day; in March it reported crossing six times that amount.

Mathisson would argue that such growth is fueled by the quality of the strategies he and his team have developed and piped into the Street. Of the 167 individuals in the AES unit, 35 are quants, mainly computer-science diehards and Ph.D.'s. "Between our major algos and the introduction of micro-tactics, we now give buy-side traders thousands of permutations from which to choose," Mathisson says. "With hundreds of micro-tactics available and our ability to combine them in thousands of ways, we are rapidly getting to the point where the computers themselves can begin to evolve new trading strategies."

Once the near-exclusive domain of ITG, whose QuantEX system proved popular among indexers 15 years ago, algo trading has moved mainstream -- and few (if any) firms have furthered that cause as much as Credit Suisse.

"Our approach was to create algos that reflected the language of traders and that could be simple to use," Mathisson says. "Instead of hitting clients with all this hardware and software and passwords and codes and manuals and off-site training, we created a system that reflected their day-to-day language, to mirror the way they vocalized orders."

Instead of conveying their tactics in Byzantine tech jargon, AES gave traders the option to harness computer power in plain language, whether "I want to be 20 percent of the volume" or "I want to be in line with price."

Starting around 2001, Credit Suisse, with the support of then–equity chief (now CEO) Brady Dougan and senior management, committed wholly to the AES approach even though it was clearly running counter to the old way of doing business at the firm -- that is, humans working orders. "I give senior management a lot of credit for taking the kind of leap of faith necessary in support of what we were trying to do," Santayana says.

Using names like "Guerrilla" and "Sniper," the AES algo machine is cranking out smarter, faster and cheaper execution as it slices and dices big orders into smaller and smaller pieces, tapping a variety of liquidity venues.

"It's an exciting time in this field," says Laurie Berke, senior consultant at TABB Group. She adds that she believes the true power of algorithmic trading is only now starting to manifest itself, and that new breakthroughs -- such as digitized news feeds that can be translated and acted upon -- are giving algos an even greater edge. "There are portfolio-level algorithms today that can optimize execution across a basket of securities while maintaining tracking error or risk characteristics throughout the life of the trade," Berke says. "And now algorithms are being developed in new asset classes such as options and currencies. Today's algos are far more advanced than just a few years ago."

"We're not taking our No. 1 status for granted," Mathisson says. "The whole space has gotten extremely competitive."

Generations from now, the industry will likely look back on the CS "Algo Factory" and wonder: "Did we really trade that way?" As far as getting to that point, Credit Suisse is leading the way.

Speed Merchant

Tue, 27 May 2008 14:36:42 GMT

More often than not, the entrance to a Manhattan brokerage firm greets visitors with a dull logo on tall glass doors, separating them from the receptionist in a cold, intimidating manner. Not so the entrance to Lime Brokerage's Tribeca office. It's adorned with peaceful Buddhist statues and lush greenery that transform the industrial loft space into a kind of Shangri-La.

Presiding over this trading palace is Mark Gorton, founder and chairman of the 200-employee Lime Group, which comprises a brokerage arm and a hedge fund, Tower Research Capital, among other entities. "You spend a lot of time at work. Why not have the nicest work environment you can?" says Gorton, a 41-year-old electrical engineer–turned-trader. He cofounded his $100 million–plus quantitative fund a decade ago after a four-and-a-half-year prop-trading stint at Credit Suisse. That, in turn, led him to Lime.

After having trouble finding a broker to cater to Tower's high-volume stat-arb trading strategy, Gorton and his cofounder, Alistair Brown, a software developer, set out to start their own. In less than a decade, Lime Brokerage has set the bar for speed in block equities execution. Its system can now handle up to 4,000 orders per second. During the first quarter of 2008, Lime averaged 372 million shares a day; in one exceptional session, it executed a mind-bending 750 million shares.

What Gorton has done outside of trading is equally impressive. In 2000, the wiry serial entrepreneur founded the Open Planning Project, a technology-driven nonprofit organization encouraging civic engagement. He is an outspoken advocate of transportation reform in New York -- and practices what he preaches by riding his bicycle to work. In addition to locking horns with bureaucrats over bike lanes and congestion pricing, he has rankled the music industry with his file-sharing company, LimeWire.

In early April, Gorton sat down with Trader Monthly on the roof deck of his headquarters to discuss the initiatives that have made him a force to be reckoned with -- and find out what comes next on his to-do list.

So you started out in the defense industry?
Yes -- at Stanford I got a master's in electrical engineering. I then got a job at Martin Marietta [now part of Lockheed Martin] working on speech recognition and communication signal processing. I worked there for two years before going to Harvard Business School.

You had nothing to do with trading then?
I didn't know that world existed.

Was business school helpful?
To some extent. I got a job at [Credit Suisse] First Boston, which I’m not sure I was more qualified for after business school, but I wouldn’t have gotten the interview without it.

Did you enjoy your time at CSFB?
Yes, I really did. It was a good place. I worked with a lot of good people there. One of the things I realize now is that [CSFB] was a big corporation, they did a lot of things right, but there was corporate dysfunction. I very much valued the freedom to just sit around and complain about the status quo with my peers. But I can't do that anymore. Now that I have my own place, if anything’s wrong, it's my fault.

When you started Tower Research Capital, was it all your own money?
We started out with my own money, as well as money from friends and family. We later raised more from the outside.

Has Tower ever had a down year?
No.

Lime Brokerage, then, was founded to cater to funds like Tower.
At Tower we were doing automated equity trading. We were having a very hard time finding a brokerage firm that could handle our trading in terms of both volume and costs. I realized that if we were having this problem, then other people in this world were having this problem. So we basically had to build this system ourselves.

Surely there's a Chinese wall between the two.
Yes. Actually, it's more of a Scottish wall. My partner, Alistair, is a Scot. Tower and Lime Brokerage are completely separate. Lime Brokerage is actually moving to a different building in the next few months.

Have you had to continually reinvest in your infrastructure?
We are now on our third complete rewrite of our core trading server. As message volumes keep going up and up, there is always some part that is getting stressed. It's more of a software problem than a hardware problem. The real limiting factor on Lime Brokerage's growth is our ability to hire programmers fast enough.

Speaking of hiring, where do you go to find your talent?
The main office for engineering is in our Waltham office, outside of Boston. We tap into that geographic network, particularly from MIT and other tech companies.

What about India?
I'd like to think I have single-handledly accelerated the wage inflation for IIT [Indian Institutes of Technology] computer-science graduates. When I started going over there, Lime was practically the only Western company recruiting. Now you have Deutsche Bank, Goldman, Yahoo, Amazon, Google, McKinsey, etc. It's unbelievable how competitive it has gotten. That market inefficiency closed very quickly.

Where do you stand among your competitors -- Instinet, Liquidnet, the banks?
I think we occupy a different niche than those guys. I think for the traders who are very serious about having the fastest connectivity to the market, Lime provides things that those guys don't. But they do things that we don't do: If you want to send to big block orders through, the banks are better than us. If you want fast computerized execution, we're better.

Do you even have any competitors, then?
I wouldn't say that, but when customers find us, I think it's such a good fit that they just say, "This is it."

Do Tower and Lime Brokerage fund these other projects of yours?
The one thing I fund with profits from my ventures is the Open Planning Project. That does a number of things: build open-source software to enable public participation in the democratic process, increase the transparency of government, the efficiency with which governments interact with people and bring community groups together. There's a particular focus on reducing traffic in New York City and making the streets more livable.

Is it safe to say that you're not pleased that Mike Bloomberg's congestion-pricing plan for Manhattan didn't pass at the state level?
Yeah, I'm pretty bummed out about that.

Was the Open Planning Project involved in that effort?
Yes. We have this thing called Streetsblog. When congestion pricing passed the New York City Council, Crain's published three winners and three losers, and Streetsblog was one of the winners.

Shifting gears to another of your interests, what has been the music industry's reaction to LimeWire?
There are significant parts of the record industry that don't love LimeWire. We're involved in litigation with some of them. But there are lots of people who recognize that the Internet is a fact of life that has changed the way the music business works. They see file sharing as an opportunity to reach music fans. We're having talks with very senior people at the record companies who are really excited about working with LimeWire. It offers opportunities that the music industry has never seen before. But [striking a deal] is definitely a slow process.

What's the next project you’re looking to get involved in?
I have a list of ideas, but the hard part is just doing them. Everything takes work, and somehow I get busy staying on top of the current list of stuff.

Shell Game

Tue, 27 May 2008 14:36:51 GMT

Apart from the mammoth Visa offering in March, the IPO market has been virtually nonexistent in 2008. With recession in the air and the global financial system teetering on the edge of the abyss, who the heck wants to go public? The answer: SPACs.

Also known as "blank check" firms, SPACs (special purpose acquisition companies) raise money on the basis of having talented dealmakers, a shrewd two-year game plan and escrow assets in place -- the promise, in other words, of strategic purchases and glorious profits to come.

"The most important things to look at when trading SPACs are the management team and their strategy," explains Adam Scheer, who runs a dedicated SPAC vehicle called the Aldebaran Fund out of New York.

"They have the upside potential of a good fundamental public company," adds Sean Gambino, head of trading at New York–based Legend Merchant Group, whose specialty is SPAC deals. "The downside is tempered by hard assets held in trust."

In just the first two months of this year, some 11 SPAC deals raised more than $3 billion -- not bad, considering SPACs are (almost literally) empty shells. Typically, SPACs raise between $50 million and $500 million, some 99 percent of which is held in trust as the sponsors, many of them hedge funds, as well as private-equity funds, set out to devour their targets. If an acquisition candidate is found, a majority of shareholders is required to approve any acquisition. If no deal is approved, shareholder money is returned.

From a trader's perspective, SPACs are unique in that they can be treated as either a conservative fixed-income instrument, with the underlying cash component used to lock in profit, or as something more akin to taking a flyer. They're also a way to participate in a private-equity deal without lockups and million-dollar minimums, says Mark Klein, CEO of Alternative Asset Management Acquisition in New York. AAMC recently announced a deal to bring hedge fund Halcyon Asset Management public. "It's not very often that just anybody can have access to top-level deal talent," he points out.

Talent, however, can get you only so far in SPAC-land. The biggest determinant of success, by a wide margin, is the price a SPAC winds up paying for any acquired business, explains Michael Gross, CEO of New York–based Marathon Acquisition. His recently formed SPAC has announced plans to buy 66 percent of container-ship owner Global Ship Lease, a transaction valued at about $1 billion. A former Apollo Group deal man, Gross knows the value of patience. "If you overpay for a company, no matter how well you run the operation, it's very hard to right the wrong," he says. "We spent a long time finding the right company."

As with any "hot" market, the blank-check game can come back to bite you. Investors initially plowed $173 million into Acquicor, a company formed a few years ago by a wunderteam from Apple, including former CEO Gil Amelio and cofounder Steve Wozniak. In September 2006, this SPAC bought Jazz Semiconductor just as the sector began to tank. JAZ shares have since dropped from $6, closing recently at 60 cents.

Many SPACs, especially those that went public as the credit market collapsed in 2007, have been weak performers. Only a tiny fraction of the 66 SPACs birthed in 2007 were trading significantly above their offering price as of press time.

More common than SPACs that embark on failed deals are those that fail to do any deals whatsoever. Since 2003, 153 SPACs have gone public, raising more than $21 billion. Yet only 46 have actually acquired a business. As the market has become more discriminating, the percentage of deal-doing SPACS continues to shrink. According to SPAC Partners, the number of SPACs that have completed acquisitions has dropped by about 7 percent over the last five years. In fairness, SPACs need to pick their spots carefully, so the sidelines aren't necessarily a bad place for them to be.

"You need to find a company that not only deserves to be public, but one that can access capital to grow," Gross says. "If a SPAC announced a transaction to acquire an unprofitable growth story, it would likely be a failure."

One underwriter agrees: "The deals that are easily understood and play well with the investment public get the 'yes' votes. Jamba Juice, American Apparel and GLG all sailed through, but a widget manufacturer at six times EBITDA just isn't going to resonate."

Nevertheless, the blank-check market is booming. In 2007, SPACs accounted for a quarter of the IPO market, injecting new life into the otherwise moribund American Stock Exchange. Not surprisingly, both the NYSE and Nasdaq, which had previously refused to list SPACs, have since proposed rule changes which would permit them to do so.

A large part of the interest in the SPAC market is driven by arbitrage opportunity, Scheer says. "The value-oriented hedge funds are large players, and for the bigger transactions, you've seen more traditional asset managers," he adds. Amaranth, prior to its extinction, was known to be a large investor in many SPAC deals.

While the blank-check nature of SPACs might seem risky, the fact that many deals are now trading below the value of the assets in their trust is attractive to the fixed-income community.

Another SPAC player concurs: "In today's market, you can buy some SPACs trading at a 6 or 7 percent discount to cash. In today's interest-rate climate, that's an income play."

Then there are those hoping to hit a SPAC home run. SPACs are waiting for their pitch in every conceivable ballpark: Oasis Group is focused on lodging and hospitality; Market Street Acquisition Corp. is scouring the consumer-products and services industry; Sidhu Special Purpose Capital Corp. is focused on the financial industry, specifically the depository-institutions sector; Lambert's Cove Acquisition Corporation will focus on communications, information, technology, entertainment, media and new media; and CR Acquisition Corp. is looking to buy a business in global retail and consumer products and services. A slew of deals, accordingly, are in the pipeline.

Even Goldman Sachs, the last big investment bank yet to underwrite a SPAC, has finally given in, filing on March 25 to raise $350 million for Liberty Lane Acquisition Corp., an arrangement that included more favorable terms for investors, with the management team getting only 10 percent of the acquired company rather than the customary 20 percent. The trend has grown to include private-equity firms themselves, which are sponsoring their own SPACs as an easier way to tap the public markets.

Even celebrities are getting into the act. In March, regulatory paperwork indicated that actor Ashton Kutcher has signed on to Performance Acquisition, an entertainment-themed SPAC to be led by a roster of SPAC all-stars along with talent experts from the William Morris Agency. Its targets are to include media, entertainment and publishing, and the leadership team comprises former dealmakers from Endeavor Acquisition, which in December 2007 completed the successful buyout of American Apparel.

Palo Alto, California–based SPAC Research Partners estimates the blank-check market could reach $32 billion by 2012. In other words, Klein says, much like a blank check itself, "the SPAC market is wide open."

The Wisdom of Steinberg

Tue, 27 May 2008 14:37:02 GMT

As the bear market of 2001–'02 wore on, hobbling his personal-finance publishing company, Jonathan "Jono" Steinberg found himself fascinated with the potential implications of a growing (but at the time overlooked) securities market: exchange-traded funds. Gazing across the financial spectrum, Steinberg saw approximately 8,000 mutual funds and 5,000 hedge funds. ETFs, by contrast, numbered just 100.

What if, thought Steinberg -- who had never run a money-management company before, just a struggling magazine called Individual Investor -- someone built a company that invested solely in ETFs?

Low-cost, alpha-generating portfolios swirling in his head, Steinberg set out to transition his company (also called Individual Investor), wallowing in pink-sheet peril. "At one time our stock was trading -- I'm serious -- at 1 cent per share," he recalls.

With a mere $93,000 in market cap remaining, Steinberg began to create a new business. Tapping hedge-fund legend Michael Steinhardt as a primary backer and noted Wharton Finance Department professor Jeremy Siegel as his senior adviser, Steinberg launched a firm called WisdomTree. His goal: to become the Fidelity of ETFs. His niche: dividend-weighted funds, as opposed to cap-weighted.

"When Jonathan was making his presentation, I stopped him in the middle and told him 'OK, I believe, I want to be a part of this,'" Siegel says.

Now, with more than 40 ETFs and some $4.5 billion in assets, New York–based WisdomTree is well on its way to becoming a major force in financial services, with widespread distribution among CFPs and brokers. Interestingly, professional traders have embraced the WisdomTree ETFs, which are distinct baskets of stocks grouped in an array of sectors, flavors and styles. This industry following stems from these ETFs' extraordinarily tight spreads (.01) and robust liquidity. The wider the spreads, as far as ETF players are concerned, the more difficult it is to get trades done, because market makers won't take on a seller's inventory without extracting a shave and a haircut. The tight spreads reflect WisdomTree's dividend-weighted approach; companies that make up each "basket" are selected and weighted based on the premise that cash dividends, not stock price alone, provide the more heuristic measure.

Steinberg was able to land Steinhardt and Siegel only after he spent the better part of two years pitching his idea to would-be backers, most of whom passed. Those who wanted in advocated a 2-and-20 structure, which ran counter to Steinberg's vision of a sophisticated asset-allocation approach for the little guy: low-cost, long-term alpha generation.

Special Situations

Tue, 27 May 2008 14:37:11 GMT

When you're involved in any type of speculation, it's essential to maximize your edge. Usually, gaining an edge depends upon taking advantage of the prevalent conditions. To illustrate, let me discuss a couple of examples from poker and trading.

I spend a lot of time, of course, in Las Vegas. Most of the time I play at the Bellagio, and generally the game there is pretty tough. As I've mentioned in previous columns, the majority of the players I'm up against are top professionals. Frequently, one or more skilled amateurs also play. Then sometimes, fortuitously, comes the occasional underskilled and over-wealthy drop-in who is, essentially, throwing his money away. The game is worth substantially more on those occasions. Although I feel as though I have a slight edge against most of the regulars, it's nothing like the edge I have when a thrill-seeking rookie decides to drop in and play a session.

When I was coming up, I used to play 60 to 80 hours a week, 50 weeks a year. Although I still play a lot of hours, I now have many other business activities that require my attention, and I take a lot more vacations than I used to. In order to be more efficient with my table time, I make an attempt to concentrate my play when my edge is greatest. (I say attempt because you all know, from regularly reading this column, that I have a lot of gamble, and sometimes I'm just in the mood to play regardless of the competition.)

One of the best ways I've found to maximize my gains is to be acutely aware of when certain players are visiting Las Vegas and are playing in the big games. I expend a pretty good amount of energy staying current on who is playing in those games and exactly how long they're likely to be there.

If I'm out of town and get a call informing me that a particularly big net loser is willing to play super-high, I'll usually hop on the next plane to Vegas, ready to play within an hour of landing. If I'm in town, I'll either be in the game or milling around the casino ready to get in the game when that guy is likely to be playing. And I'll almost always stay in the game as long as he's playing, putting most everything else on hold until he leaves town. I do this for a very simple reason: One week can often end up being worth more to me than the subsequent month or two.

Here's the trading parallel: The market has recently seen considerable volatility, and with volatility comes opportunity. Look at Bear Stearns: Its stock was above $170 a little over a year ago, and toward the end of February it had fallen by half, to $85 a share. Ten days later it was at $60, and it soon closed the week at $30 amid news of severe liquidity problems. That was the weekend the Fed stepped in and facilitated JPMorgan's takeover. The Fed essentially underwrote most of the risk and approved a buyout price of $2 a share. Monday morning, in pre-market trading, Bear was fluctuating around $3 a share.

That was an example of an extreme situation that had potential to be worth many months of regular trading. The $2 price looked absurdly low, and the Fed was virtually underwriting the risk of the buyout. It was extremely unlikely that Bear's stock would drop below $2, but there was a great deal of uncertainty about whether its shareholders would accept such a low price.

This left a lot of room on the upside. Many savvy traders jumped in either pre-market or at the open for just under $3 per share. Less than an hour later, many had nearly doubled their investment. The next day, Bear traded as high as $8.20 a share. Three days later, it had dipped back to about $5, but late in the week, Jamie Dimon, JPMorgan's CEO, announced that he was upping the offer to $10 a share.

For those who were on top of the situation, following the events over the weekend and ready to take advantage at market open Monday, there was much profit to be had.

In both poker and trading, doing your homework and consistently staying on top of prevailing conditions will do wonders for your bottom line. Train yourself to be ready and willing to take advantage of those special situations that come around infrequently. They can often be worth many months of regular work.

Vision Quest

Tue, 27 May 2008 14:37:20 GMT

One of the most famous (and prophetic) vision statements in business history came from Bill Gates, who in the 1980s built his software company on a basic premise: "A personal computer on every desk." A decade later, the Microsoft founder retooled his strategic thinking to reflect the transformative power of the Internet. Announcing in October 1992 that his revolutionary company would be throwing its considerable weight toward dominating the new medium, Gates informed his 7,000-plus employees gathered at the Kingdome in Seattle for their annual meeting that this quest would be the driving force behind the new work being done on the whole product line. Gates had titled his speech "Microsoft's Vision."

Whether codified in PowerPoint and distributed to your staff or scribbled on a scrap of paper kept tucked away in your wallet, having (and being able to articulate) a vision for what one aims to achieve can be a valuable weapon for a trader looking to take his career or fund to the highest level. It means putting short-term worries aside and thinking big-picture.

In last month's column, I talked about how important team building is to hedge-fund leadership. As leaders in asset management -- or any industry -- can attest, creating a vision and promoting it with clarity is crucial. Integrating it within the culture of your firm is key to success. A leader without vision is like an explorer without a map: He'll get somewhere, just not where he had hoped.

When you declare a vision for you and your associates, you're saying, "This is what the firm can be; now we have to take the steps necessary to achieve it." To be effective, a vision has to be more substantial than your day-to-day goals -- grand, yet realistic.

In his 1902 book As a Man Thinketh, the British spiritual philosopher James Allen hammers away at the point that your thoughts create the future. The first step, once you know what your vision is going to be, is simply to focus on it. Slowly, as you learn to control emotions and compartmentalize negative thoughts, the notion will become reality.

A highly successful hedge-fund manager based in New York once discussed with me the challenges he faced going from purely a portfolio manager to chieftain of a large hedge fund. "You need to be introspective," he explained. "You have to understand exactly what your strengths are. A good leader needs to step back and say, 'Where do we want this business to go?'"

How long a perspective did he need?

"I don't think you see 10 years forward," he told me. "I think you need to know a one-year vision and a three- to five-year vision. In our case, we set out a three-year plan."

Did he, as the head of the firm, generate this agenda?

"Our perspective is that of a collaborative and benevolent dictatorship. I don't think a collection of board members can set a vision. A board can review if we're on track. There are people talented at carrying the ball from point A to point B. Leadership is about saying, "Here is point B, here is when we're getting there and here is what's going to happen if we don't get there."

In other words, as a hedge-fund leader, you not only need to set the necessary vision, but set the strategy for how to get there. A vision gives your team a target for committing itself to working harder than it might otherwise.

When someone who made $3 million last year says he's going to make $20 million this year, you have to question whether that is achievable. But if he made $20 million last year, well, maybe he can make $30 million this year. The question becomes, what must you do to reach $30 million? And are you willing to do what it takes?

Vision statements can be just a few sentences on a piece of paper, and it's always good to share your sentiments. When you publicly promise a certain result, you've made the first powerful stride toward turning your vision into reality. A vision, along with a positive attitude, will carry you and those around you to previously unimaginable heights.

The Cayne Mutiny

Tue, 27 May 2008 14:37:30 GMT

The summer of 2007 was a hot one for Jimmy Cayne. Bear Stearns was enduring the evaporation of two sizable internal hedge funds amid the subprime-mortgage-market meltdown. Cayne, Bear's chairman and its public face, was still in charge, but his grip was weakening. He didn't manage the funds in question, but he had, over time, allowed his venerated firm to become lost in a frightening pile of high-risk securities for which there would soon be no buyers. Press reports asserting that Cayne overgolfed as his firm teetered cast him in a negative light, as did reports that he smoked pot. Then there was his health; he had suffered through a prostate infection that nearly killed him.

One August afternoon, I asked him point-blank: Why was he still coming to work?

After all, Cayne was certainly wealthy enough to retire, although by that time Bear's stock price was eroding more each day. He could easily sell the firm for around $100 a share -- well below Bear's all-time high of $170, but not too shabby a multiple. He could hand his day-to-day chores to one of his underlings. But Cayne would hear none of it.

Bear could survive, Cayne told me. As for his own fate, I remember his assessment going something like this: "If I'm going down, I'm going down like a samurai!"

Cayne didn't quite commit hara-kiri, but as most people know, he was forced to resign from the firm in disgrace. This exit was a mere prelude to an even more profound shame: Bear's near-total implosion and its government-mandated sale to JPMorgan Chase for a mere $10 a share. The deal, of course, still needs shareholder approval, but even if by some miracle the majority of the shareholders veto it (which seems unlikely given that JPMorgan, as of press time, controlled around 50 percent of the shares), Bear is finished. And so is the reputation of Cayne, a man who a little more than a year ago was considered one of the most successful figures ever on Wall Street. He even secured a spot in the Trader Monthly Hall of Fame. We were hardly the only people singing his praises.

By early 2007, he had earned the begrudging respect of just about every major bulge-bracket CEO.

Hank Paulson, the current Treasury secretary and the former CEO of Goldman Sachs, told Cayne, as the mortgage crisis was emerging, that Wall Street was in for some tough times and that Bear was "lucky to have him" at the helm, according to people close to Bear.

To understand just how low Cayne's stature on Wall Street has fallen, consider this: Cayne, my sources tell me, had beefed up security to protect him from disgruntled employees, most of whom saw their life savings go up in smoke. A Bear spokesman declined to comment.

When it was revealed that Cayne was playing bridge during the tumultuous days before the firm collapsed, one top Wall Street executive told me that many of his counterparts turned highly critical of Cayne, describing him in ways unfit to print. People on the Street who practically used to bow in his presence now don't even want to be in the same room with him. One hedge-fund manager recently told me that he had decided against offering Cayne an office because he feared a backlash among employees whose spouses worked for Bear.

The historical verdict of Jimmy Cayne's life and career will no doubt be harsh. In addition to the destruction of employee wealth in the wake of the firm’s fire sale is the cruel fact that the vast majority of Bear's 14,000 staffers are now looking for jobs -- during one of the worst job markets Wall Street has seen in two decades.

This isn't just about affluent traders who will have to forgo a beach house. On Cayne's watch, Bear always pushed an "ownership culture," meaning that everyone from executives to secretaries was paid in stock and was expected to hold onto it until retirement. "What happens to the janitor who worked here his whole life?" wondered one senior staffer. "All he wants to do is retire in Florida with a $400,000 nest egg he saved up. That's gone. What happens to him?"

While the popular narrative of Cayne as an aloof chief executive who would rather be playing golf or bridge, or smoking a joint, than running a major Wall Street firm makes for good headlines, it misses the broader, more accurate summation of what ultimately led to his dizzying downfall.

Let me say up front that I know Cayne better than most journalists; I have had a long reporter-source relationship with him. I have never seen him stoned -- not once. Everyone knows he likes to golf and is a champion bridge player, but I know for a fact that his staff could track him down anytime, anywhere. Not being around the office wasn't Cayne's problem; even when he was at a bridge tournament, he blessed just about every major decision made by the firm. For a long time, those decisions were the right ones.

The bigger problem was that Cayne was around the office too much. He didn't understand what most good gamblers intuitively understand: Your luck always runs out sometime. The best gamblers know when to quit while they're ahead.

Cayne's greatest sin, in my estimation, was arrogance. It goes beyond his famously telling the Fed to shove it in 1998, when he refused to join the rest of the Street in bailing out Long-Term Capital. It goes beyond the arrogance of someone who made tens of millions from a specialist firm that cranked out huge profits on the floor of the New York Stock Exchange (thanks in part to the leadership of former NYSE chairman Dick Grasso) telling investigators he didn't realize Grasso earned more than a civil-service worker.

No, Cayne's was an arrogance that comes from being right for so long that you really begin to believe you can't ever be wrong -- so you keep rolling the dice. Bear Stearns made a lot of money under Jimmy Cayne -- its stock price grew from less than $20 a share when he took over to around $170 at its height. But in the modern era of megabanks that control the markets with huge balance sheets, Bear was merely a piker. It was only a matter of time before market forces slowed its growth and took its stock price down to earth, which would have forced management to sell. Yet Cayne continued to believe the firm could remain independent.

JPMorgan's Jamie Dimon ultimately bought Bear for $10 a share, but five years ago, when the firm was trading near its all-time high, he was willing to pay significantly more, sources tell me. Cayne apparently set the price so high there was no way Dimon could afford it. Most people I know on the Street say that back in the early summer of 2007, at the beginning of the mortgage crisis, Cayne could have sold. Instead, he sought foreign capital to keep his firm independent.

There is, of course, something endearing about a company that wants to remain independent, that strives to maintain its culture in the face of the homogenization of Wall Street. Bear's brash, risk-taking culture -- and Jimmy Cayne's "F-you" attitude -- were appealing not just to me as a journalist covering the company, but to many talented traders and bankers who worked there instead of at other, more prestigious firms.

Taking risks is part of life on the Street. Nevertheless, a man has to know his limitations. Romanticizing the business of Wall Street is a fool's game, as was Cayne's gambit to keep Bear independent. It has been my experience that even the most successful CEOs and Wall Street players are right only about 60 percent of the time.

The ones like Jimmy Cayne, whose legacies become tarnished, seem to save up that other 40 percent for the end of their career.

Globe Trot

Thu, 29 May 2008 19:08:06 GMT

Whether you buy into globalization or just want to rule the world, where you trade matters less than what you trade. These days, you don't need to be sitting in a Midtown Manhattan office to short financials.

But because trading is more than a job -- it is, as our readers have come to appreciate, a way of life -- the place in which you choose to plug in your terminal can certainly play a role in your success, not to mention how you go about enjoying it.

We first asked the question a year ago: If you could trade anywhere, where would you go? Constructing a matrix that combined a robust mix of business and lifestyle criteria in equal measure, Trader Monthly's editors set out to rank 50 of the most trading-oriented cities we could find, examining taxes, time zones, real-estate prices, weather, nightlife and a host of other factors. In our first Best Trading Cities roundup (Trade Here Now! June/July 2007), Chicago, London and New York, not surprisingly, took first, second and third place, respectively.

While those same cities maintained their top slots this year -- indeed, Chicago is soon to be crowned the undisputed futures mecca by virtue of the CME's absorption of the NYMEX -- we did witness a few interesting changes. Hong Kong rose up the rankings, as did tax-favorable, rogue-friendly Paris, while Boston and Dublin fell. (So much for the luck of the Irish.) We added some new cities (Abu Dhabi, Dallas, Istanbul and Monaco) while nixing others (Atlanta, Lisbon, Stockholm and Washington, D.C.). We also placed greater emphasis on trading opportunities and infrastructure. Booming emerging-market cities, such as sugar-sweet São Paulo, thus saw their stock rise. We're spanning the globe in search of the perfect place to trade -- and you're invited to come along for the ride.

Introduction	#1 Chicago	#6 São Paulo	Cities #11 - 20
Our Methodology	#2 London	#7 Los Angeles	Cities #21 - 30
	#3 New York	#8 Paris	Cities #31 - 40
	#4 Hong Kong	#9 Toronto	Cities #41 - 50
	#5 Miami	#10 Dubai	Amsterdamned

Not Your Father's Financial District

Tue, 17 Jun 2008 18:12:53 GMT

It's 7 o'clock on a chilly midwinter weeknight. Manhattan market strategist Mike Morrissey saunters east on Wall Street past Broad and the still heart of world commerce: the New York Stock Exchange.

Morrissey is semi-shell-shocked from another session in the arena in which he does daily battle -- the mortgage-backed securities market -- and he's ready to unwind. To his left, through heavy columns, an army of treadmillers marches in unison inside the Equinox health club at 14 Wall Street, an icon of Art Deco architecture and once the headquarters of Banker's Trust. He soon passes the sparkling street-level displays of Tiffany's at 37 Wall before ducking into Cipriani, one block over. Minutes later, negotiating the open pockets of a bustling bar space, the intense 43-year-old MBS maven is sipping a bellini on a terraced colonnade. The entire space, specifically its famous 16,000-square-foot interior framed by magnificent Corinthian columns, reeks of history. This was, at one time or another, home to the New York Merchants' Exchange, the New York Stock Exchange and National City Bank.

"How's business?" Morrissey asks Cipriani's general manager, Eric Bonnetain, a gregarious Parisian and five-star player who has overseen the Street's swankiest new nightspot since it opened last September. Bonnetain is upbeat. "The neighborhood is changing," he says. "It's happening."

Upstairs, Bonnetain adds, Cipriani's condo sales are going briskly.

Condo sales? Happening?

Only a few years ago, "happening" on a weeknight near Manhattan's southern tip was a junior analyst making a McDonald's run. Now not only is the Financial District (call it everything south of Chambers Street) welcoming new nightlife, it's being infused with new life, period. The fabric of the area is being transformed. What was once a cavernous citadel of men, concrete and their moneymaking schemes has, thanks to a real-estate boom and tantalizing post-9/11 tax abatements and Liberty Bonds, emerged as a high-end developer's dream.

While a range of potential setbacks lies ahead -- looming recession, the bursting of the real-estate bubble, uncertainty surrounding the future of the lifeblood NYSE -- a host of other forces suggest that the makeover of the Financial District has only begun. And, furthermore, that there is no turning back. Hybrid trading may spell the end of the NYSE, but insofar as FiDi is concerned, the term is emblematic, as commercial melds with residential, historic allure with modern amenities. Fittingly, it is money and crowds (rich people, many of them foreigners) driving the transformation.

"If J.P. Morgan were around today to see BMW open a showroom on his block, I think he'd be stunned," says David Miranda, a former NYSE specialist who grew up on Sullivan Street just north of this neighborhood. "This is a major metamorphosis."

Starting at the intersection of Wall and Broad and radiating outward, river to river, the forging of an upbeat, upscale destination is a working order with no resistance. Receding are the days when interloping armies simply worked in FiDi and bolted as fast as they could finagle use of the company car service. "Even a few years ago, it was so empty down here after the closing bell you could lie down in the street," says Vincent Alessi, a managing partner at Bobby Van's Steakhouse, which arrived on Broad Street in 2005. "Now we're packed almost every night with a regular Wall Street crowd."

In 1990, just 14,000 residents lived south of Chambers. Today, that number has grown to more than 50,000 -- and Elizabeth Berger, president of the Alliance for Downtown New York, projects it will reach 60,000 by year's end. Since 2005, more than 13 million square feet of former office space have been converted into some 11,000 new apartments. "Our mission is to animate Lower Manhattan," Berger declares. "This neighborhood is not on the verge on anything -- it's here."

Everywhere in FiDi one finds startling evidence of this transformation: the luxury-brand retailers (Tiffany's, Hermès, Thomas Pink) that have set up shop within spitting distance of the Big Board; the condos that have engulfed 25 Broad, once the storied Broad Exchange and the former home of PaineWebber, not to mention a historic hub for legions of curbside traders; the $27,800-per-year prep school, Claremont Prep, that resides in what was once the Bank of America International building. The former JPMorgan Chase building at 75 Wall has a beach planned for its forty-second-floor deck. Pram-pushing parents populate the circa-1903 Cocoa Exchange building on Wall Street Court. Artful lodger André Balazs -- who anointed FiDi the new Soho last year -- is diving in with his 47-story William Beaver House across from Delmonico's. Epic megaliths steeped in history, such as the former Chase Manhattan digs at 20 Pine, have been converted to luxury residences replete with yoga studios, swimming pools and rooftop gardens.

But what does this all mean for the money monoculture that has dominated the labyrinths of Lower Manhattan for almost four centuries? Will it be cast aside by a master plan unseen in New York since the days of Robert Moses, or might it be the pivot of the most dynamic turn yet of FiDi's evolutionary wheel?

That, indeed, is the big-money question -- $20 billion rebuilds the World Trade Center site alone -- but in this New York financial story, the bulls are already edging the bears.

The Rising

Tue, 27 May 2008 14:42:05 GMT

Soirées rarely come any more sizzling than the one thrown by Sports Illustrated February 12 in New York to celebrate the launch of the magazine's 2008 Swimsuit Edition. Heavy snow was falling outdoors, but inside was considerably warmer as numerous models -- including SI cover girl Marisa Miller -- paraded before the crowd.

All the more breathtaking was the venue: the top floor of 7 World Trade Center. "People should be aware of the magnitude of this building," said swimsuit model Brooklyn Decker, who lives in Manhattan, "and if that means coming up here in skimpy clothes, I am more than ready to promote it."

Last to fall on September 11, 2001, some seven hours after the Twin Towers collapsed, 7 WTC was the first to be rebuilt. For now, the 52-story structure stands as a beacon of just how far Lower Manhattan has come.

For developer Larry Silverstein, the office building, begun in 2002, completed in 2006 and currently three-quarters leased, is the prism through which downtown’s redevelopment should be viewed. "Six of our nine major tenants moved here from Midtown," he says. "And our tenant mix spans the business world, from design and publishing to financial and scientific. This is the beginning of the total transformation of downtown -- not just rebuilding the towers we lost, but creating a diverse business community in the heart of a dynamic, 24/7 neighborhood."

It's the action on 7 WTC’s tenth floor that really gets the blood pumping. First, there are the scale models and video projections of the new WTC site, including Towers 2, 3 and 4, all of which Silverstein is developing. He has arranged a custom-built collaborative design lab for the architects, engineers and other professionals of the three firms working on his portion of the WTC reconstruction. From 7 WTC's south-facing windows, they can observe the beehive of construction in what was formerly known as Ground Zero, but is now called (as it was back in the late 1960s during the start of the original WTC project) the "Bathtub."

For anyone who assumes the Freedom Tower is still bogged down in bureaucracy and going nowhere, here's a news flash: It's already taking shape. Foundation steel and a three-foot-thick concrete core rise toward street level.

Of special note to the trading community: Towers 2 and 3 will each have purpose-built 55,000-square-foot trading floors. Meanwhile, Westfield Properties, builders of some of the largest, most ambitious shopping centers in the world, is set to bring in nearly half a million square feet of retail across multiple levels of the site. Plans for a multilevel transit terminal and a performing-arts center are also in full swing.

Says David M. Childs, the architect of the Freedom Tower, of his creation: "Traders will have a restored vertical element to mark the center of their world."

There are, it's worth noting, no tenants lined up for the Freedom Tower yet. Which raises a sensitive question: Who would be willing to occupy offices with such a security stigma?

There is early speculation that for both symbolic and pragmatic reasons, the Freedom Tower will be largely a "government" building. This is borne out by early leasing activity: The Alliance for Downtown NY reports that New York State has agreed to lease 415,000 square feet, while U.S. Customs & Border Protection has executed a Memorandum of Agreement for 600,000 square feet. Key players at primary leasing agent Cushman & Wakefield declined interview requests. However, the Alliance also reports that "Cushman & Wakefield expects to have the building substantially leased by the time it is completed and ready for occupany in 2012."

Note to developers -- set aside ample space for those in possession of the nerve required for occupancy: traders.

Redistricting

Tue, 27 May 2008 14:42:16 GMT

1. New York Stock Exchange
11 Wall Street
The number of clerks, specialists and brokers on the NYSE floor has been roughly halved to 1,700 from 3,000 at its peak as trading moves electronic; some believe the exchange may eventually become a full-time tourist attraction/museum/television studio.

2. The American Stock Exchange
86 Trinity Place
Long the redheaded stepchild of exchanges, the AMEX is set to be acquired by the NYSE. Its classic Trinity Place headquarters could be next in line for a mixed-use conversion.

3. The New York Mercantile Exchange
1 North End Avenue
In March, the CME Group announced it would acquire the NYMEX for $3.4 billion in stock and cash as both move to electronic trading.

4. New world headquarters of Goldman Sachs
West Street between Vesey and Murray Streets; Battery Park's "Site 26"
Expected to open in 2009, this 43-story glass and stainless-steel tower will house six high-tech trading floors.

5. Merrill Lynch
4 World Financial Center
The famous brokerage firm, rocked by subprime woes, nonetheless recently extended its lease downtown through 2018.

6. 1 Wall Street Court
1 Wall Street Court
Formerly the Cocoa Exchange, the 105-year-old building was converted in 2006 into a 15-floor, 126-unit condo.

7. 10 Hanover Square
10 Hanover Square
Converted in 2005, this 24-floor, 493-unit luxury rental dwelling was once Goldman Sachs's headquarters.

8. Equinox
14 Wall Street
A coin flip away from the NYSE, this posh fitness center is coupled with retail space and part of a development owned by Capstone Equities and the Carlyle Group.

9. Brown Brothers Harriman
140 Broadway
Among Wall Street's most storied firms, BBH moved to this modern, sleek skyscraper along Cedar Street in 2001.

10. The Crest at 63 Wall Street
63 Wall Street
Originally built in 1929, this 36-story neoclassical building was the former home of storied private bank Brown Brothers, which in 1931 merged with Harriman Brothers, then located at 59 Wall Street. The 63 Wall building now houses 476 luxury rental apartments; it was the first residential building to open on Wall Street after the September 11 attack.

11. Thomas Pink Flagship
63 Wall Street
The London clothier opened this 3,000-square-foot shop here, between Hanover and Pearl, in summer 2007.

12. Future site of the Freedom Tower
Bounded by West, Vesey, Fulton and Washington Streets; formerly occupied by World Trade Center towers 1 and 2
Construction has begun on this Port Authority–led project, which will include a 9/11 memorial, a cultural center and shopping options. Cushman & Wakefield is handling the leasing.

13. 7 World Trade Center
250 Greenwich Street
Larry Silverstein's 52-story office space is the first of the World Trade Center sites to be rebuilt, and is already about three-fourths leased.

14. Cipriani
55 Wall Street
The restaurant/bar/event space/condo complex occupies a space that was home to the New York Merchants' Exchange, the Custom House for the Port of New York, National City Bank and the Regent Hotel.

15. Tiffany & Co.
37 Wall Street
One of Manhattan's first skyscrapers, this building was once home to Trust Company of America. In addition to the famous luxury retailer, the site now boasts 373 high-end rentals.

16. Claremont Prep
41 Broad Street
Housed in the former Bank of America International Building, this tony private school opened three years ago. What was a grand banking hall featuring restored historic murals by Griffith Baily Coale has been transformed into an auditorium and performing-arts center.

17. Future site of W New York–Downtown Hotel and Residences
123 Washington Street
Already under construction one block south of the Freedom Tower, 72 of 223 condos in this 58-story tower sold out on day one.

18. Future site of Four Seasons Hotel and Condominiums
99 Church Street
This proposed 80-story tower would be the tallest residential building in Manhattan. Construction starts in June.

19. Bobby Van's
25 Broad Street
25 Broad used to be Broad Exchange, and was PaineWebber's headquarters for 70 years; it's now the area's most popular restaurant-and-condo complex.

20. Hermès
15 Broad Street
This luxury men's clothing store opened in the former JPMorgan headquarters in 2007.

21. 45 John
45 John Street
Once an office building owned by the Dutch Protestant Church, 45 John will have condos available later this year.

The New Boys' Club

Tue, 27 May 2008 14:42:24 GMT

Minutes after another grinding market session closes, Scott Placona is sitting pretty: a beer in one hand, a pool cue in the other. Placona, a 25-year-old associate at Broad Street securities brokerage Joseph Gunnar & Co., lets the stress of the day fade into memory. It's the kind of scene that has played out for generations in these storied canyons. Except when his pool game is finished, and the bottle in his hand has been drained, Placona will not be bellying up to the bar for another brew. He'll be going down the hall...for a manicure.

Welcome to John Allan's, among the Financial District's most popular men-only clubs. A spa/lounge/grooming-and-pampering emporium located in the Trinity Building across from the American Stock Exchange, John Allan's has actually been part of the FiDi fabric since 1988, when it opened on Stone Street. Moving in 1991 to 95 Trinity, between Rector and Thames, the club in more recent years has been expanding its amenities (pedicures, too, are all the rage of late).

As for Placona, he joined after he graduated from college three years ago. "I like to look good," he says unapologetically between sips of Sam Adams. And as his billiards game nears conclusion, Jasmine Jones, a stunning blonde and the club's manager, tells Placona that "Cece will definitely fit you in."

Membership has its privileges. John Allan's stylists are uniformly pretty and stylish. Everywhere, it seems, are tall, long-legged blondes in black attire and heels, massaging scalps and planting steaming hot towels on the blissful faces of Street soldiers who recline lazily in vintage leather barbershop chairs.

For a year's membership of $720 (à la carte pricing is also available), men can come anytime and enjoy the full treatment: massaging shampoo, conditioning treatment, hot towel, manicure, haircut and a shoe shine, capped off with a drink. Not to mention those facials and pedicures. "Men feel totally at home here," says Sam Choi, the club's creative director.

"When you walk in, everyone says hello, and everyone knows your name," adds Darnell Deans, the 42-year-old president of Unity Financial Strategists, a financial-planning firm. "It's almost like Cheers."

Perhaps that's a stretch. But everything's a trade -- and instead of a boorish postal worker named Cliff, there's Tida, a gorgeous, petite Asian beautician. She'll be the one cutting Placona's hair after his nails are done.

"The girls are attractive, friendly and fun to be around," notes Rick Collins, a Wall Street veteran and would-be councilman waiting for a full-service appointment, before flashing a sly grin. "What's not to like?"

Tops in the Bottom

Tue, 27 May 2008 14:42:32 GMT

24-Hour Eatery: Gold St., 2 Gold Street

Bar for Bellying Up for a Shot and a Beer: Papoo's, 55 Broadway

Small Hotel: Gild Hall, 15 Gold Street

Breakfast Meeting Spot: 2 West, Ritz-Carlton New York at Battery Park, 2 West Street

Burger: Bobby Van's Grill, 25 Broad Street

Coffee Stop: Blue Spoon Coffee Company, 76 Chambers Street

Conference Facility: Downtown Conference Center at Pace University, 157 William Street

Discounted Men's Designer Shoes: Stapleton Shoe Company, 68 Trinity Place

Deli/Cafe with Delivery: Mangia, 40 Wall Street

Diamond Hunting: Tiffany & Co., 37 Wall Street

Digs: William Beaver House

Event Space (tie): Cipriani Wall Street, 55 Wall Street; Broad Street Ballroom, 41 Broad Street

Guinness on Tap: The Full Shilling, 160 Pearl Street

Italian Restaurant: Barbarini Alimentari, 225 Front Street

Local Joint: John Street Bar & Grill, 17 John Street

Massage: The Spa at Equinox, 14 Wall Street

Men's Suits: Hickey Freeman, 111 Broadway

Nightcap: Harry's Steak & Cafe, 1 Hanover Square

Old-School Irish Bar: The Beekman Pub, 15 Beekman Street

Power Dinner: MarkJoseph Steakhouse, 261 Water Street

Outdoor Bar/Eye Candy: Ulysses, 58 Stone Street

Place to Grab a Power Tie (tie): Hermès, 15 Broad Street; Thomas Pink, 63 Wall Street

Seafood Restaurant: The Ketch, 181 Pearl Street

Pizza: Adrienne's Pizza Bar, 54 Stone Street

Spa/Salon: John Allan's, 95 Trinity Place

Steakhouse: Bobby Van's, 25 Broad Street

Sushi: Haru, 1 Wall Street Court

Two-Centuries-Old Bar: Fraunces Tavern, 54 Pearl Street

View: The Rise Bar, Ritz-Carlton New York at Battery Park, 2 West Street

Wine Store: Pasanella and Son Vintners, 115 South Street

The Jimmy Wales Experience

Wed, 18 Jun 2008 21:27:48 GMT

Jimmy Wales had no life, which suited him just fine. It was 1994. He had abandoned the insular world of academia to take a dream job at Chicago Options Associates. He loved it -- nearly to the exclusion of all else, working long hours. Once he did get home, Wales spent much of his free time running computer models in pursuit of risk-arbitrage strategies late into the night. His idea of a good time was pinpointing price discrepancies between Fed Funds and LIBOR futures contracts.

"I was pretty obsessed," he says, looking back on the four years he spent as a quant trader. It would not be his last obsession.

Among the earliest known forms of encyclopedias came courtesy of ancient Greek philosopher Speusippus, who in the fourth century b.c. looked to his uncle Plato as a scholastic role model. In the mid-nineteenth century, Isaac Funk drew upon his experiences in publishing and at the pulpit as he set out to create bound volumes of knowledge. (Wagnalls was his college buddy.)

Wales, by contrast, owes his inspiration to the financial markets. A student of free-market thinking, Wales used the tenets he honed as a trader to form Wikipedia, the online user-generated encyclopedia that has become, since its founding seven years ago, an Internet dynamo.

The core mechanism that makes the site work is, after all, an offshoot of the free market, the ultimate play on the wisdom of crowds. A virtual community of users (anyone with an Internet connection can create, write, revise, correct, vandalize or make incorrect a Wikipedia entry) controls the content -- it is a decentralized, bottom-up structure that in many ways parallels the bid-sell, price-discovery action of a financial exchange.

"All of my work is influenced by market economics, in thousands of subtle ways," Wales says. "It underlies my thinking about everything."

It's this very structure that accounts for Wikipedia's mind-blowing scope (at last count, it boasted more than 9 million articles in 253 languages), as well as the boom/bust quality of its entries. Since it first went online in 2001, Wikipedia has become one of the 10 busiest sites on the Internet, attracting more than a million visitors a day.

Because of this success, Wales has become famous. The 41-year-old is a regular on the international speaking circuit (not to mention in the gossip columns), where he's seen as a kind of high-tech visionary, a new-media rock star.

Despite all this, Wikipedia, set up as a nonprofit, has not made Wales much direct income. Not yet, anyway. Wikipedia -- and how to profit from it -- is a kind of puzzle for Wales, one he feels he's finally on the verge of solving.

From a modest bungalow near Clearwater, Florida, where until recently he lived with his wife (the couple recently split) and daughter among strip malls, trailer parks and retiree developments, Wales has been plotting the Next Big Thing.

In 2004, he launched another Web site, this one called Wikia Inc. (See "Wikipedia 2.0.") The company, Wales readily admits, is his effort to take the success -- and, indeed, the underlying philosophy -- of Wikipedia, and commercialize the hell out of it. "Look, I'm not against making money," he says.

Though he admits that he's leaving the nitty-gritty of Wikia's business plan, and its execution, to his CEO and other managers, it's his job to "make Wikia popular." It's up to him, in other words, to come up with the big idea (or set of ideas) that will make the site into a humming profit machine. It's no small task -- but Wales always has shown an ability to chase down his aspirations, however grand they might seem.

Born and raised in Huntsville, Alabama (though he speaks with no appreciable accent), Wales was essentially home-schooled. His father was a grocer. His mother (and grandmother) ran a private day school -- the House of Learning -- a literal one-room schoolhouse, which Wales attended until the eighth grade.

Wales likes to point out that the World Book Encyclopedia ranked high among his favorite childhood texts. But he also had an affinity for the business section of the local paper. He says his fascination with the financial markets began at age 7 or 8, when he developed a precocious knack for tracking stocks. (One of his earliest picks was Winnebago, shares of which he shrewdly predicted would rise after the end of the OPEC oil embargo.)

"I always thought being involved in the markets would be a lot of fun," he recalls.

In pursuit of that ambition, Wales studied finance, doing his undergraduate work at Auburn University, where he first developed his love for the writings of Ayn Rand and the free-market economist Friedrich Hayek, and later doing Ph.D. work at the University of Alabama. His academic interests soon coalesced around derivatives and risk management.

"He was a real thinker," remembers Robert Brooks, one of Wales's professors at Alabama. "Right out of the gate, he really wanted to press the envelope of understanding."

Brooks eventually used Wales (and the grad-student "slave labor" he could provide) to tackle a "nasty" but widely known technical problem involving index options. "It was an effort to build an options-pricing model on the index that was internally consistent back to the underlyings," Brooks says. He and Wales, along with a mathematician at the university, eventually published their answer to the problem in a paper called The Pricing of Index Options When the Underlying Assets All Follow a Lognormal Diffusion.

So math-heavy was the research that Brooks thought Wales might balk at the project. "The average finance Ph.D. student would've taken one look at it and said, 'Well, I don't know this stuff' and walked away. Jimmy's response was: 'Where do I go now? Where do I go to find this out?' He dived right into the middle of it."

As Wales says, "Being a quant jock was always kind of my thing."

He left Alabama after two years with only a master's degree. He'd grown restless, maybe a little bored, so he enrolled in the Ph.D. finance program at Indiana University's Kelley School of Business. He finished the coursework and then taught undergraduate finance classes, but he didn't pursue the dissertation. His dream job had come calling.

A friend told him about a small Windy City–based trading partnership, Chicago Options Associates, that needed some extra manpower. Run by veteran Michael Davis, who had a handful of floor traders under his watch and a seat on the CME, the firm was willing to give Wales a shot as an upstairs trader. Davis would bankroll him.

Wales arrived in Chicago in 1994, and it didn't take long for the greenhorn to get the hang of it. He specialized in proprietary trades in short-end derivatives -- Fed Funds, LIBOR, Eurodollars, five- and 10-year bonds -- and he put his quant experience to work, developing his own model for risk-arbitrage trades between Fed Funds futures contracts (a relatively new instrument at the time) on the CBOT, and LIBOR futures on the CME. Next to Wales sat another Davis-bankrolled trader, Fred Huebner, who focused on trading five-year governments against a strip of Eurodollars.

"I'm quite sure he was profitable from day one," Huebner says of Wales and his trades. "He really tried to do things that not everybody else was doing. The guy had a real feel for relationships between assets, and how they would or should behave."

Wales loved the "detail work," the "intellectual puzzle" of formulating his model and then putting it into action.

He was a free-marketeer from both a nuts-and-bolts practical perspective and the lofty perch of the theorist. Wales was an optimist, a believer in markets and a beneficiary of their largesse. With his combination of quant-jock mind and superior work ethic, he flourished on LaSalle Street.

He remembers his trading days as mostly good times -- and money makers. But apart from the occasional Vegas junket, his personal orbit was pretty much restricted to home and office. He couldn't have known it at the time, but a defining moment -- for his career and for the way human beings share information -- would soon be at hand.

Wikipedia 2.0

Tue, 27 May 2008 14:42:47 GMT

Wikia Inc., the for-profit cousin of Wikipedia, may have launched in 2004, but only now does it appear poised for profit-taking. Rooted in the concept of online communities, those on Wikia have, so far, skewed toward the supremely geekish: Star Wars, role-playing video games and comics are among the biggest sub-sites in the Wikia ring. But there are also communities for literature, travel, psychology, politics, sports, guns and, yes, even trading. The communities themselves combine elements of an encyclopedia entry, a search vehicle and a discussion forum. Each Wikia community, the thinking goes, will thus become -- based on the numerous nuggets of information that each member can offer up to the whole -- the Internet's most comprehensive authority on the topic in question.

Based in Silicon Valley and led by a CEO named Gil Penchina (formerly of eBay), the company has received $14 million in venture-capital investment, has 350,000 registered users and is growing faster, in terms of its database size, than even Wikipedia. The company's business plan maintains that the bulk of its revenue will be generated by...drumroll, please...advertising.

"The monetizing is pretty straightforward," Wales says. "We don't have any clever, innovative ideas around that."

But even after three years of operation, the site has refrained from selling ad space, content to build critical mass before it goes full-tilt with its sales effort. For now, it's about brand building.

Wales's ambitions for Wikia don't stop with online community-building. At the end of 2007, his company launched an alpha version of Wikia Search, with which Wales aims to do battle with Google. Essentially, he wants to build an open-source search engine whose mechanisms are governed by a community of users, and which, contra the secretive Google, are entirely "transparent." Instead of search results produced solely by computer programs, the Wikia engine will use its wiki-based communities -- and the actual human beings who participate in them -- to refine its results. The hope is that these people -- the open market -- will edit out the spam and other extraneous junk, producing a series of links that Wales believes will be more relevant to people than what Google generates.

That's the goal, anyway. Wales and his team are a long way from working out the kinks, and he's well aware of the work still ahead of them. "My role is to work on the design, grow the community, give some thought leadership to the project -- and make it popular," he says. "If it becomes popular, we can put ads on it and make money. But if I'm wrong, then the search results will not be very good and nobody will care. Then I'll just have to think of something else interesting to do."

Rooms With a View

Tue, 27 May 2008 14:42:58 GMT

Sabora Tented Camp

Singita Grumeti Reserves

Location: Serengeti Plain, Tanzania
Opened: 2005
Size: 750 square feet (alternately, 346,000 acres)
Beds: One
Price: $950 per person/night
Contact: 011-27-21-683-3424; singita.com

You might not be able to trade like Paul Tudor Jones, but you can now sleep in his bed. Once the private reserve of the commodities king, this luxury safari is spread across 346,000 acres of the western Serengeti and resides on the famous migratory route for wildebeest, zebra and gazelle. Sit and watch as the herds thunder right past your private deck -- and then, when you get bored of that, go back to what you do at home: The camp's six air-conditioned tents boast Wi-Fi, satellite television, DVD players and PlayStation consoles. There's even a tented spa.

If your brand of fun is more outdoorsy, you can take your pick of archery, lawn croquet, badminton, hot-air ballooning, Land Rover game drives and a full-service equestrian center with 16 thoroughbreds and polo horses. And there's no need to kill and cook a gazelle; French chef Laurent Large will feed you quite well.

Presidential Suite

Hilton Molino Stucky

Location: Venice, Italy
Opened: June 2007
Size: 980 square feet
Beds: Three
Price: $16,000/night
Contact: 011-39-041-522-1267; molinostuckyhilton.com

Sure, the water roads, bridges and gondolas are nice and all, but Venice was never all that liquid when it came to luxury hotels. Until now. Set in Giudecca -- the latest celeb hotspot -- the restored ultra-luxe Hilton Molino Stucky hotel is the city's newest landmark building, and the Presidential Suite the city's largest. The lavish two-level digs even offer a private observatory with an aerial view that has not been accessible since this nineteenth-century mill was shuttered 50 years ago.

The site now boasts 44 windows, a private gym, six-person hydro pool, dining room, plus master and guest bedrooms featuring marbled bathrooms with customizable "aroma showers." Of course, all that is only good for those into privacy and customized experiences. Those into generic and underwhelming ones? You still have your pick of those in town.

Private Reserve

Soneva Gili & Six Senses Spa

Location: Male, Maldives
Opened: 2005
Size: 15,000 square feet
Beds: Six
Price: $6,500–$10,000/night
Contact: 011-960-664-0304; sixsenses.com/soneva-gili

These days, staying in a private, freestanding ocean-view villa in the Maldives is about as cutting-edge as using a Quotron machine to price your bonds. Instead, today's in-the-know traders with a few extra bones in their pockets take up temporary residence on their own private compound -- like the one here at Soneva Gili.

Entirely self-contained, this miniature island nation consists of six separate buildings with two master suites, four guest rooms, a private spa, an air-conditioned gym, kitchen and world-class snorkeling below your over-water deck. There's a wine cellar you can personally stock in advance with selections from the villa's 300-bottle collection. Movies, music, books and magazines are even tailored to your tastes ahead of time, so you don't have to lug around your bound collection of Trader Monthly to read on the rooftop sundeck.

Since the Private Reserve is 1,640 feet from the main resort and 980 feet from the closest villa, your only connection to civilization is via your own speedboat, with a crew on call 24 hours a day -- as are "Mr. and Mrs. Friday," your live-in personal butlers. And yes, no joke, those are really their names. Rather offensive, yes?

Hardwood Suite

Palms Casino Resort

Location: Las Vegas
Opened: 2005
Size: 10,000 square feet
Beds: Two
Price: $25,000/night
Contact: 702-944-3429; palms.com

Do you secretly dream of playing for the NBA instead of trading for the NYSE? Well, give it up. That's idiotic. It's not gonna happen. Still, you can always indulge your "I'm David Lee" fantasies at the Hardwood Suite, the coolest digs in the Palms casino.

The brainchild of George Maloof, owner of both the Palms and the Sacramento Kings, the Hardwood bills itself as the world's only suite with an indoor basketball court. And no Nerf hoops here. We're talking electronic scoreboard, locker room, customized jerseys, referees ($250 for two hours) and, of course, cheerleaders ($260 each for four hours, based on availability). The bilevel suite also features three Murphy beds on the court, where pickup-game losers can be forced to sleep while you dribble around them victoriously. (Winners stay in the two master bedrooms.)

Off the court are a 10-person Jacuzzi, 10 42-inch plasma TVs, an iPod-equipped stereo, poker tables and a wall signed by the likes of Shaq and Justin Timberlake, who cavorted around on this very court during last year's MTV Video Music Awards performance.

Penthouse Suite

The Fairmont San Francisco

Location: San Francisco
Opened: 1981
Size: 6,000 square feet
Beds: Three
Price: $12,500/night
Contact: 866-540-4491; fairmont.com/sanfrancisco

Plenty of penthouses offer the traveling trader opulent accommodations and access to luxury automobiles. But only the top-level suite at the Fairmont features all of that...and a secret passageway! Located behind bookshelves on the second floor of the library and ending in the master bedroom, the corridor allegedly helped JFK hide his sexual dalliances. In other words, Marilyn Monroe might well have performed the walk of shame there.

The floor-through suite also boasts less scandalous amenities, such as a billiard room covered in Persian tiles, a grand piano, an outdoor terrace offering views of San Francisco's stunning skyline and 24-hour butler and maid service. Originally built as a private residence for financier John Drum, the suite has since hosted everyone from Mick Jagger to the Dalai Lama to then–Secretary of State Edward Stettinius, who drafted the U.N. charter there in 1945.

The hotel, meanwhile, withstood the Great San Francisco Fire of 1906 -- and the preceding earthquake -- so it should certainly be able to handle your NBA Finals party.

Exile on Wall Street

Tue, 27 May 2008 14:43:11 GMT

Photographer: Alberto Badalamenti
Fashion Director: Jennifer Lee
Grooming: Martha Friedlander for L & A Artist

During the week, Manhattan's Financial District is a veritable hub of activity -- until Friday after the market close, when, despite recent gentrification, the neighborhood still performs a passable imitation of a scene from I Am Legend. All of which makes a weekend stroll there an ideal time to collect your thoughts in solitude. Should you wish to look swank (in a moody sort of way) while doing so, a button-collar cotton trench coat and conservative pair of trousers should do the job nicely. Think Bogie. Think James Dean. And then think: "Monday...things will be better."

Button-collar trench coat, $1,060, and crew-neck cotton cashmere white knit sweater, $560, both by Adam Kimmel. Navy trousers, $245, by Theory.

Ah, the suit. Whether off-the-rack (heaven forbid) or gloriously bespoke, the two-piece is a symbol of power and prestige, making it a suit of armor that's hard to shed when you're at your lowest. Still, sometimes it pays to pair a bit of flair to that most predictable of appointments: to wit, a silk shirt and a pair of "painted" shoes in a design reminiscent of a Jackson Pollock work. Because although today’s financial skies may look gloomy, bear in mind that the sun might, eventually, some day, if you’re lucky, maybe, who knows, come back out again.

Two-piece grey suit, $1,695, silk button-down shirt, $880, and painted shoes, $520, all by Yves Saint Laurent.

It has been a tough few months for the trading man. But even in the most bullish of times, the inevitable ups and downs of the market can leave you with your head all tangled up (shoulda bought, shoulda sold, shoulda held) and picking up the itty-bitty pieces of some seemingly solid positions. In this case, the smartest trade is swapping your workaday attire for something a little freer -- like motorcycle pants (coated cloth, somewhat more flexible than leather), a cardigan and some sneakers. Bonus upside: Bear in mind that you're now wearing motorcycle pants, and it's a proven fact that doubling the speed limits through the downtown canyons on one's Ducati can do wonders for one's disposition.

Gray button-down cotton cardigan, $308, and black motorcycle pants, $325, both by C.P. Company. Gray-black-and-blue motorcycle T-shirt, $65, by Black Hearts. WWII leather belt, $60, by Leather Island. Patent sneakers, $370, by Cesare Paciotti.

Soon enough it will again be Monday, and time to leap back into the trenches (you'll buy, you'll sell and, hey, you just might hold). And regardless of whatever pounding you took last week, when you assumed all those unfortunate positions, it's imperative to reenter the fray looking like a man with nary a care in the world. This navy two-button duster and birch-khaki trousers should turn that trick nicely -- as will the jaunty linen summer scarf, a sly reminder that no matter how hot it might get on the floor, you'll stay as cool as Cohen.

Cotton printed shirt with drawstring hem, $295, by Z Zegna. Vienna two-button duster in Channel navy, $440, and Belmont Slant Pocket trousers in birch khaki, $190, both by Shipley and Halmos. Linen green-and-navy summer scarf, $68, by Banana Republic.

Borough Haul

Tue, 27 May 2008 14:43:21 GMT

A few decades ago, Brooklyn was a market of limited entry points for New York traders. Basically, guys who got married but still wanted to believe that they lived in Manhattan bought a stroller and moved to Brooklyn Heights...and that was it. For the rest of the financial set, anything else in the borough might as well have been Ronkonkoma.

Then again, 10 years ago, oil sold for $10 a barrel.

Today, thanks to a rezoning two years ago that allows moderate-density residential development on the Williamsburg-Greenpoint waterfront, along with the impending expiration of easily procurable tax abatements, new luxury developments across New York's most populous borough have been sprouting to heights that could soon rival -- or at least mirror -- Manhattan's skyline. These towers of bubble have served as a beacon for those on the Street who can't beat the short commute, unparalleled views and the (relative) value.

"Where else can you buy 3,000 square feet for $3 million in a super-luxury building?" asks developer Mario Procida, president and CEO of SDS Procida. (Uh, Cleveland -- but point taken.) "There is not a chance you're getting that in Manhattan."

Where Manhattan might retain its advantage is, of course, in the seemingly gravity-defying strength of its market: As average prices in the city rose 17 percent in the final quarter last year, Brooklyn saw more modest gains of 3 percent over the same period. And as Manhattan continues its inexorable march toward being affordable for only the top 1 percent (tycoons, emirs, John Paulson), Brooklyn as a whole has begun to cool, with average home prices dropping 10 percent (from $686,000 to $615,000) in the past three months.

Still, with the city pouring $300 million worth of public improvements into downtown Brooklyn -- including a central park called Willoughby Square, the improvement of the BAM Cultural District and the creation of the waterfront Brooklyn Bridge Park, all by 2012 -- future appreciation seems guaranteed.

Even so, you might just appreciate it now: "It's really the quality of life where you notice the difference," says Thomas Twomey, an energy trader at independent trading firm 1618 Group, who has lived in the Carroll Gardens neighborhood for the past eight years. "It's not as dense as Manhattan. You actually have space, the streets aren't as crowded, and the dry cleaners and grocery stores aren't as crazy busy."

In other words, what your typical Manhattanite might consider to be a trade-off might, in fact, be trading up.