Nexus 911

By Max Massini

Max Massini never counted on having his life turned upside down when he switched from buying stocks for his clients to shorting them. By making money when the markets crashed, he was participating in profiting from the 911 tragedy. This led to an awakening of international proportions.

• Language: English
• Publisher: Max Massini
• Release date: Dec 16, 2018
• ISBN: 9781386237075

Book preview

9/11

Watching the Towers fall on TV made the whole thing seem surrealistic. It was as if it wasn’t really happening, but a great movie you were watching. The media frenzy detailing the sudden death of 2997 victims and the continued reporting of the attacks on The Pentagon and in Pennsylvania was shocking! There was fire, explosions, death and destruction everywhere. Watching policemen and firefighters rush in to save people and see them vanish in a cloud of dust live was horrific! Millions of people’s eyes were glued to their television sets watching the events unfold. Time stopped that day. As reality clicked in, the hideous facts of the catastrophe wasn’t the only thing that went through my mind: I was trying to guess what the upcoming profits were going to be. I knew they were going to be huge. I was already mentally spending a good portion of them on luxurious fantasies in my very near future.

There was an eerie correlation between the speed of a body falling from the building towards the ground below and the speed at which stocks were going to plummet in the next few days.

Yes! We were heavily short the market...all of it. Much more than usual. We could have been short Coca Cola, McDonalds, United Airlines or Apple. It didn’t matter. We were covered without having to be smart about it...all thanks to Tony.

Let me take a minute to explain what shorting stocks is all about since most people are not familiar with it:

Most people are familiar with what is known as a long position in a stock; this means that I have bought the stock at, let’s say, $10. I have purchased the stock with the obvious intention of watching it go up in the future. The rising of this stock could be for many different reasons; good earnings, more sales, being taken-over by another company or, sometimes, just a rumor. By buying it, I have made an educated guess as to the movement of the price of this company’s stock. If it moved up to $15, I would have made $5 or a 50% profit on the move if I sold it there.

If my brokerage firm had given me additional credit to my own funds, I would have made even more. That is called margin and it gives you leverage. This going long a stock is pretty straight forward and is what 99% of investors do. We were part of the 1%.

Going short a stock is the opposite of going long: You believe that the stock price is too high and it will go down at some point in the future. Here you would sell the stock first and then buy it back at some point in the future. You would do this by borrowing the stock from a brokerage firm, for free, selling it in the market and then buying it back later and returning the borrowed stock.

Let’s simplify this with a comparison:

Let’s say I run into a friend, Randy, who tells me that his $800 iPhone had just been stolen yesterday. Other than being totally pissed off, he hated the idea of forking out another $800 to replace it. I listen, sympathize and move on. Later that evening I’m talking to another friend, Mark, who is enthusiastically telling how the newest iPhone is coming out tomorrow and he will be the first in line to buy it. Remembering Randy, I ask him what he is going to do with his old iPhone. He tells me he will try to sell it. I ask him for how much. He tells me for $400. I convince him that I could sell it within a day but only if he agrees to let me borrow it for an hour or so. I rush over to see Randy with it. I show him the iPhone and tell him he can have it for $600. He gladly buys it. I go back to Mark and give him $400. Both are happy and I have just pocketed $200 without ever having to buy it myself. I just successfully shorted an iPhone. Another way to look at it is that this is exactly what is done in a consignment sale.

Got it? This happens every day with stocks and it was something I was very good at. I became an expert at it and met others who also did it, as well as some that wanted me to do it for them...at a price of course. Let’s also look at the caveat emptor: When you buy (long) XYZ stock at $10 and it goes to zero, you lose 100% of your money. That is the worst that can happen. When you sell short that same stock at $10 and it goes to $20, you have lost 100% of your money. If it continues to rise and goes to $30, you have just lost all of your money and another 100%. You could end up with a debit in your account which needs to be covered. This is why shorting is much riskier than just buying stocks and why many people avoid it. Brokerage firms also discourage it since it could cost THEM money if you don’t pay your tab and leave them holding the bag. There is no top in shorting. It is also why you have to sign a contract that states that you are an expert investor and are in a solid-enough financial position to absorb possible massive loses.

Back to 9/11.

The markets didn’t open that day...or the next. They were closed for 3 days. While many were mourning their dead, or missing, family members, others who were long stocks could only sit and wait to see how much they were going to lose when the markets eventually opened again. My cohorts and I were on the other side of the fence by being short. We had all that time to imagine our forthcoming, newly-found riches and how to spend them: The dead couldn’t haunt us and most of us didn’t know there was a connection at the time. We didn’t have to worry about how to spend it, in how little a time, in what quantities nor where to deposit it because it was all legal. No need to hide anything since it was all clean money. Not as if it were illegal drug or prostitution money. No need to launder any of it. It was a nightmare/dream come true. Since we shorted stocks on a daily basis, other than the very large investment this time, it wasn’t new to us but lady luck couldn’t have chosen a better time to come through for us. While money was probably the last thing people were thinking about at the time, as a stockbroker you can’t avoid it. We are trained to come to instant conclusions on what the effects of any event will be on markets, industries and individual stocks: If corn futures surge, you can be pretty sure it will negatively affect the price of Coca Cola’s stock since they use a lot of corn syrup in making it. If oil falls, it will have a positive effect on the price of airline stocks due to their using tons of it on each flight. You watch the yield on the 10-year bond to have an idea where interest rates are heading. Rising interest rates usually means falling home sales. If you are a good stockbroker, it is almost impossible to watch financial news without having your mind race through primary, secondary and tertiary effects on stocks. Once that butterfly moves its wings, you have to follow its effects.

The markets crashed huge when they opened. We covered our short positions and started counting...

On the first day of trading after 9/11, the N.Y.S.E. fell 684 points, a 7.1% decline, setting a record for the biggest loss in exchange history for one trading day. At the close of trading that Friday, ending a week that saw the biggest losses in N.Y.S.E history, the Dow Jones was down almost 1,370 points, representing a loss of over 14%. The Standard and Poor's index lost 11.6%. An estimated $1.4 trillion in value was lost in those five days of trading. Where did the money go?

The biggest sell-offs hit the airline and insurance sectors, as was anticipated when trading resumed. Hardest hit were American Airlines and United Airlines, carriers whose planes were hijacked for the terrorist attacks.

Let’s put that into real dollars:

First, we should mention here that when you short, most brokerage firms give you 100% margin; that means that if you put up $1000 of your own money, you can short up to $2000 in the transaction. This is simply because when you short, the proceeds of that sale go into your account and you cannot touch them until you cover your position. This acts as a cushion for the brokerage firm and they share it with you since the bigger the trade, the bigger the commission. As a stockbroker, I set the minimum with which you could open up an account with me at $50,000 USD.

Pete had gone big by shorting 19,400 shares of United Airlines at $30.82. He had shorted about $600,000’s worth of the stock on September 10. By September 17, he had bought back (covered) the same shares at $17.50. His $300,000 had become $560.500 almost overnight. Pete was very happy but a little confused, uneasy and more than a little suspicious as to why he had been egged on to use up all of his money on this one trade. He had never done that before. He, like I, didn’t question Tony’s decisions nor fantastic timing...we just splurged!

I had about 300 short accounts at my brokerage firm. I knew of about another 350 Tony-connected short accounts with another broker and owner of the same brokerage firm, including Tony’s. The average account normally had $400,000 in it but many of them had mortgaged their homes and had used up their children’s university funds to add to their accounts, including Tony. The amount of newly created money in these accounts was Gargantuan, and, I was a part of it.

The 10 Point Man

We were poor immigrants in a new country where none of us spoke the language. We made a family affair and fun past time going garbage picking on Saturdays. Unfortunately, our fun didn’t go unseen by our neighbors nor their children, who ribbed us to death when they saw us in school. My older brother and I just took the bullying since the rewards were sweet: During those Saturday outings we found toys, books and lots of interesting things (to 9 and 10-year olds) while our parents found tables, chairs and many other things that were interesting to adults that were just beginning to furnish their new home. Learning to speak the language was very difficult at first but we had a very good reason to do it fast; bullying. I picked up the language a little faster than my brother since I loved games. We had a special ESL class every day from 3-4. We played a lot of Scrabble and, being competitive already at that early age, I would take the dictionary home with me to learn new words I could use to win the games. Playing scrabble also made me an addict to word games. I play Phrazzle Me as often as I can now. I later learned kickboxing from a couple of neighbors and the bullying stopped really quickly after I kicked a few butts. I don’t remember ever going hungry in those years. We had all we needed but my brother and I soon realized that money of our own wasn’t coming our way without working for it. We did what every North American kid did to get it; paper routes. My father managed to buy his first car at about that time and would help us by driving us around, from house to house, delivering those newspapers when it had snowed too much for us to walk. He was nice that way. In other ways, he was quite a tyrant. My father was the kind of guy who, instead of patting you on the back for getting 90% on a test at school, would ask: What happened to the other 10%?

He instilled, and called for, perfection in us both. He also demanded attention to detail as a rule. As kids, my brother and I would be given cleaning jobs around the house on weekends. I got the bathroom for the first time and proceeded to clean it quite well. Or so I thought. When he inspected it, he slid his hand under the wash basin. His fingers came back dirty. He asked me What’s this? I told him that it was dirty there but no one ever got down under there to see it. He said that that wasn’t the point. When you do something, it doesn’t matter if it’s cleaning the bathroom or working as a street cleaner, you do it right the first time or you don’t do it at all. You have to take pride in the work you do, no matter what it is.. Thud was the sound my head made when he whacked it. Now do it again.

I learned perfection and discipline from my father at an early age and it followed me throughout my whole life. Years later, when I was doing well financially, I took my father to play golf for his birthday. He enjoyed it and seemed to have a knack for it. He did quite well for his first time playing the game. When he saw the bill for our game at Glen Abbey though (I had paid for 3 of us), he nearly had a heart attack. He went on and on about how decadent it was to have spent so much money for a 3-hour game when there were people out there starving to death. You just couldn’t please the man. In my rebel years I would purposely try to piss him off. I loved law at the time and practiced being the devil’s advocate in arguments with him. Since he was left-wing, I always took the capitalist side. When he couldn’t beat me with logic, he simply said: This conversation is over. and would storm away from me. Mom would just giggle to herself and secretly egg me on. I think one of the worst moments for my father might have been when his son failed grade 6 and got to stay on with Mr. Mia for another hellish year. The official story was that they thought it would be a good idea to separate my 11-month older brother and I. He passed, I failed. He went on to junior high and I stayed on in grade 6. It was a miserable year for me. Another friend was also failed and that helped a lot since we hung around each other all year and shared our shame. That separation with my brother lasted another 5 years since he went to a different high school than I did. We weren’t very close after that. Both my father and brother are the type that you had better not open up too much to them since they seemed to be waiting for the opportunity to throw it back in your face. It was usually within days. I kept things to myself after learning to do so the hard way. I went from playing a lot of soccer to playing hockey and then football. This toughened me up a lot at a time when a kid needs to do it. It was hard staying up when fighting on the ice when you are still