Monday, March 27, 2006

Fear And Losing in Las Vegas

Industry Standard, April 9, 2001

On Wall Street, when the going gets tough, the tough get going to Las Vegas -- where the gambling is just as gruesome but the pleasures are finer.

Marcus, a New York venture capitalist, had lost money before, but never like this. The stock market was knocking down his public companies left and right. His private companies, mostly biotechs, were taking investments at lower and lower valuations; Marcus had to double down with each round just to stay in the game.

But that was play money -- his funds' money. Las Vegas was all too real.

When our San Francisco contingent showed up at the Mirage early Thursday evening, Marcus (names have been changed to protect the marriages of the innocent) wasn't there to meet us. All around us, slot machines clanged and vacationers strolled through looking for Siegfried and Roy.

"How bad is Marcus?" someone asked.

"Bad," said Trautman. "It's been six hours of bad." Trautman, a staid New York money manager, looked ready for the weekend, festooned in a Hawaiian shirt, khakis and sandals. But he remained Manhattan-tense.

"How bad is bad?" I asked.

"Fifty," he said.

"Fifty thousand dollars?"

Trautman nodded: "We gotta get him out of there." This was as bad as the Nasdaq.

So began our weekend in Vegas, March Madness 2001. Make no mistake about it, this was not a truly celebratory jaunt. The market had punished these guys so unmercifully, a weekend in Vegas was arranged to diversify the portfolio of their lives. It was forced pleasure.

Why gamble in Vegas if you gamble for a living? Why not? The markets have been so punishing of late, these money managers are feeling destroyed anyway. These guys went on CNBC or CNNfn to talk about bargain-hunting and value investing, but in private they seemed more likely to curl into a fetal position to hide from the pummeling of the market.

Our high rollers stayed in opulent suites (gratis, courtesy of their losing streak at the Mirage), where a cocktail party was held that first night. Arkansas vs. Georgetown was on the television, about 20 men milled about, smoking cigars, drinking, shouting at the game and each other. Seven women, noticeably unburdened by gravity, joined the party, as waiters wheeled in $2,100 worth of Cristal, Ketel One, reserve Cabernets and Chinese food.

"Excuse me, sir." The waiter pulled aside Max, an earnest CEO of a small health care dot-com. He looked something like a responsible party. "Typically, we are accustomed to an 18 percent tip."

Max turned serious and reviewed the check, noting the $100 tip already on the tab. "Eighteen percent on $2,100?" asked Max, amazed. "For wheeling it from the elevator?"

"Yes sir, typically we are accustomed to an 18 percent tip," said the waiter.

"Uh, right," said Max, turning his back. The waiter walked away with his $100.

The next morning, one by one, guys stumbled out of bed and made it to the pool. Eighteen holes were scheduled at Shadow Creek in the afternoon, which left a few hours to soak up some sun and talk about stocks.
Murph, a handsome young New York hedge-fund manager, paged through the stock listings of Investors Business Daily, occasionally reading aloud. "Akamai, 52-week high $219.50; today it's $7.22," he said, sipping a Bloody Mary through a straw. "Inktomi, 52-week high $226.94; today it's $6.87. InfoSpace, 52-week high $112.53 ..."

"I'm never selling my InfoSpace!" we all interrupted in unison. Our friend Chas had infamously uttered these words about InfoSpace a year ago, when he held the stock in size. It now trades at $2.25, and Chas' mantra had become our running joke.

That night, the group splintered; some gambled, some hit the sports book at Caesar's Palace. A couple of the guys went to Club Paradise, a strip joint across from the Hard Rock Hotel and Casino. One of the Club Paradise managers was known to be a friend to Wall Street, and Wall Street a friend to him; he'd made a small fortune in recent years by getting in on IPOs and selling shares when the prices popped up.

Many hours later, we were each sitting behind a pile of chips at the blackjack table. I'd gone from up $500 to down $200 -- real money to me. Hell, that's nearly 100 shares of Inktomi.

"Nothing's what it used to be," said Murph.

"Even hindsight isn't 20-20 anymore," I said.

Within minutes, I was down $300. "What are we doing here, Murph?" I asked. "I mean, don't you guys bet on stocks, not cards?"

"Cory," said Murph, "at least in Vegas the odds are better."

COPYRIGHT 2001 Standard Media International


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