FOOL ON THE HILL
The Enemy on Wall Street

A young man's connections bring him to the stock trading war. His flawed but riveting tales form a book I couldn't put down.

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By Tom Jacobs (TMF Tom9)
March 28, 2002

Nicholas Maier's Trading With the Enemy: Seduction and Betrayal on Jim Cramer's Wall Street, reveals his four years at the financial media personality's former hedge fund. It's a page-turner, but not for the reasons you'd think. Most people will drop in to the latest version of Michael Lewis' now-classic Liar's Poker because of Cramer's public profile, but they'll stay for everything else: the story of a young man's experience in the flesh-eating world of hedge funds and day trading. I ate the book, flaws and all, in one sitting.     

A new soldier 
Maier, today 33, was adrift at 25. Thanks to a friend's father, millionaire New Republic owner and part-time Harvard lecturer Martin Peretz, Maier starts answering phones at Cramer's hedge fund, today named Cramer Berkowitz. Peretz is a fund investor with enough clout to get him the job, apparently over Cramer's objections.

Maier has a strong interest in the stock market, but he's unprepared for this new world. Like a new soldier in boot camp, Maier endures ridicule and abuse designed to make him react to orders rather than think. A quick study, he rapidly absorbs first the jargon and then the culture and practice of day trading -- making split-second trades of huge blocks of stock to eke out a quarter-point gain here or a half-point there.

Trading is not investing, where you buy a piece of a business that you believe has excellent management and a competitive advantage. It's gambling on short-term "information," and the firm does whatever it takes to get it, manipulate it, or even make it up. Maier shows us only the trading side of Cramer's operation -- the firm reportedly also held longer-term value positions -- while showing his progress from performing Cramer's trades to researching and making money for the firm. (While we don't advocate day trading as a way to invest, many who do make our day trading discussion board extremely active. Thirty-day free trial to read, subscription required to post.)

Okay, about Cramer
Cramer is the General, bullying his troops, popping blood vessels, throwing phones, and destroying computer monitors, screaming "Everyone out there is the enemy! We are at war!" He's entertaining, but with repetition his behavior is surprisingly banal. Any successful company, bank, law firm, fund -- or political party -- sports Everests of egos that rival or exceed Jim Cramer's, and they are surrounded by a revolving door staff and a few semi-permanent enablers.

It's tough to find a top Wall Street anyone who isn't an alcoholic, paying huge shrink bills, thrice-divorced, or certifiably looney, and surrounded by a system designed to keep him functioning -- as long as he or she is making everyone money and, as appears with Cramer, the ethical lapses stop short of jail time. My reaction to the work-a-day atmosphere at Cramer's fund and the General's antics was more that he was an employment lawsuit waiting to happen, not that he was somehow unusual.

A thin narrator
We read narrative nonfiction for the same reason we read novels -- for the compelling, personal story. The reader wants to know more about Maier's physical and mental decline as he morphs into a junior killer trader. His reporting style avoids whining and self-pity but fails to communicate his increasingly debilitating anxiety. He fleetingly implies that he toughed it out, perhaps taking on a little of the firm partner Jeff Berkowitz's bravado, the same attitude played out throughout Manhattan every night over drinks (remember those all-too-real scenes in American Psycho?). There's not enough of Maier's soul to make us feel either relief or sorrow when he loses Cramer's favor, and it's very confusing whether and when he is fired or leaves voluntarily. 

It's probably not the author's fault. His agent sold -- and his publisher undoubtedly bought -- the book proposal for the Cramer story, not for anything about Nicholas Maier. Too bad, because Maier is ultimately more interesting.

The clients
Another story is only half-told, too. Wall Street has always been a place where the right connections and pedigrees may get you in the door, but hunger and long hours always win. Cramer attended Harvard Law School. Maier, the son of a Harvard professor, grew up in privileged Cambridge playing with Peretz's kids. Maier reveals only a little of Cramer's clients, wealthy individuals happy to invest with someone who is clearly brilliant at what he does but someone whose behavior would appall them. (See note above: As long as the money's rolling in, great.) 

Maier does reveal some of Peretz's eventual displeasure, but, although the author treats Peretz extraordinarily well, Peretz has been quoted as saying, "This is more than a search-and-destroy operation. It is a reckless work of a malevolent and lurid imagination... I am mortified to be written about approvingly in this fictitious account." I don't buy it. It is precisely the lack of obvious "malevolence and lurid imagination" and "recklessness" that makes it compelling. Maier appears to have held much back. Moreover, Peretz's shock rings hollow because he undoubtedly has read Cramer's own accounts confirming similar behavior. Maier simply committed the sin of telling some club secrets, and Peretz now plays the media game that promotes TheStreet.com's business.

Cramer quit the fund in 2000 to devote himself more to TheStreet.com (Nasdaq: TSCM), a competitor of The Motley Fool. Today, he's a financial entertainer, hoping to prove true the words of former Cramer Berkowitz employee Hans Urkunde, who told Red Herring in 1999 that "Jim Cramer showed me that sheer force of personality can be a profit center." 

After complaints from Cramer, publisher HarperCollins agreed to remove three pages from its 4,000 warehouse copies of Trading With the Enemy and republish the book without them, while sending an errata sheet to bookstores for the 6,000 already shipped. Whether Maier's former employer crossed legal and ethical lines and whether Maier stretched the truth do matter, but that debate is lost to the media game of authors and publishers selling books.

Trading With the Enemy lacks the power and mastery of Lewis' Liar's Poker, but it's well worth the read.

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Tom Jacobs (TMF Tom9) was once a young lawyer sent unwittingly to do a partner's dirty work. Wanna buy the story? At press time, he owned no shares in companies mentioned in this story. To see his stock holdings, view his profile, and sing along with The Motley Fool's disclosure policy.