In August 1990, Iraqi leader Saddam Hussein invaded is far-smaller neighbor, Kuwait — seizing the nation’s beneficial oil fields and setting off a worldwide scramble to rein in his imperialistic ambitions.
As a worldwide military coalition began to form to oust Hussein from Iraq, his invasion set off a spike in oil trading and costs because the world reeled from such a significant disruption in the worldwide oil supply.
But that disruption also proved a possibility for canny-eyed commodities traders, particularly those on the Recent York Mercantile Exchange.
Brad Schaeffer, writer of the brand new finance memoir “Life within the Pits: My Time as a Trader on the Rough and Tumble Exchange Floor,” was one such trader — who made a mint (and lifelong of memories) doing deals as war raged within the deserts of Arabia.
While stories of mayhem and murder and plunder dribbled out of the imprisoned Kuwait, a looming query remained: within the face of the awesome firepower of the international coalition arraying against him, would Saddam blink and hightail it back into Iraq?
Or would the US and its United Nations allies should blast him out? Nobody knew.
But such uncertainty over there within the sands of Arabia meant a license to print money for the giddy traders over here on the Recent York Mercantile Exchange (NYMEX) at 4 World Trade Center.
And the longer the tensions dragged on the extra money these traders would make.
Trading isn’t the identical thing as investing. An investor within the stock of a priority like Apple is betting that the corporate will carry on growing in value and thus buys a share in the corporate.
The corporate then uses the proceeds to construct and expand and in turn make each share that far more beneficial.
But trading futures on raw materials, which is what commodities are, isn’t an intrinsically bullish operation.
Commodities’ prices fluctuate depending on supply and demand. Prices go up and so they go down with indifference.
And since a futures contract is an agreement to purchase or sell a certain standardized amount of a commodity (in oil’s case each futures contract equals a thousand barrels) at a particular price at a predetermined time, one can effectively go “long” or “short” with equal dexterity and thus take advantage of each an increase (long) or a fall (short) in prices.
As I learned the ropes of a latest exchange, oil trading reached a fever pitch on the NYMEX floor.
Day-after-day from August into the autumn through to Thanksgiving and Christmas, traders voraciously wolfed up profits within the heavy volume and extreme volatility of the whipsawing crude oil futures and options markets driven by hair-trigger uncertainties that will suddenly lurch prices this fashion and that.
On Nov. 29, 1990, the UN Security Council officially authorized using force against Iraq if it didn’t voluntarily evacuate Kuwait by Jan. 15, 1991.
The war clouds were growing ever more dark and ominous.
This was just more excellent news for the oil pit as uncertainty not only begets pricing inefficiencies but heavy volume, allowing one to concurrently buy low and sell high large blocks with little exposure.
The world was taking no possibilities, and so they were buying or selling futures as needed at a frantic pace to mitigate risk.
And what might be riskier than being dependent upon a commodity wherein much of it on the time was produced right smack-dab in the midst of a possible Armageddon?
Not only was the flow of oil from Iraq and Kuwait suddenly off the market, but Saddam’s misadventure had the potential to ignite a regional conflagration by threatening Saudi Arabia’s each day output while tempting the fanatical theocracy of Iran (Saddam’s arch enemy) to choke off the Strait of Hormuz, through which 20% of all crude oil exports passed.
It was a worldwide crisis of literally biblical proportions as Saddam vowed to launch missiles at tiny Israel should the United Nations attempt to expel him from Kuwait by force of arms.
His hope was to prompt the hated Jewish state to retaliate in self-defense and switch the oil conflict into an Arab versus-West internecine showdown that will shatter the delicate alliance confronting him… one which included military contributions from Egypt, Saudi Arabia, Syria, the UAE, Oman, and Qatar.
High-stakes poker indeed.
The stakes were high on the NYMEX floor as well.
This was latest territory so prices continued to fluctuate wildly amidst the fog of confusion as to what this all meant at the top of the day to crude supplies.
Did the Friday, Sept.14, British and French announcements of their deployment of troops to the region increase the percentages that Iraq would flinch and peace (and the flow of oil) be assured?
Sell!
Or . . . perhaps it meant the battle could be just that much larger, bloodier, and more destructive once the shit hit the fan.
As word of the ungodly sums of money being printed in crude oil spread across the exchange and onto The Street itself, the number of recent traders who suddenly appeared within the mosh pit swelled an estimated four-fold.
The group overflowed to the purpose where it was not unusual for a trader to be squeezed out and shot from the ring as if popped from a pimple and are available careening down onto his back into the aisle as you walked by.
The waterfall of profits was so regular that each moment spent off the ground, whether to grab lunch and even just use the toilet, could cost 1000’s in lost opportunities.
So vital was trading time that some firms went to extraordinary lengths to be sure their people were in position and raring to go when the opening buzzer sounded.
One firm even went up to now as to pick up their star trader every Monday morning and whisk him by helicopter from his Long Island home to lower Manhattan to avoid the Hamptons traffic.
It was money well spent.
Meanwhile, Saddam himself was spewing forth defiant statements on a each day basis.
They immediately made their way onto the analog electronic news ticker hovering above our heads.
— Saddam — “We will not be intimidated by the dimensions of the armies or the sort of hardware the US has brought.” — [November 12]
Or on Dec. 12 — Saddam: “Allah is on our side. That’s the reason we are going to beat the aggressor.”
And so forth, and so forth.
The dictator’s bellicose proclamations only served to toss lighter fluid on the bonfire of uncertainty . . . and by unintended consequence shower money like confetti onto the NYMEX floor.
One trader leaned over to me: “I f–kin’ love dis guy!”
Such was the worldwide crisis within the second half of 1990.
What was a looming disaster for the world was manna from Heaven for the NYMEX oil traders who would eventually earn the envied sobriquets of “Gulf War babies” as this was the time in which their fortunes were made.
After the hectic trading session was over and the day’s profits tallied up — which translated into stacks of cash higher than anyone on this sleepy backwater exchange could have dreamt of only a yr before — many would retire to Suspenders pub on Greenwich Street and strain bottle upon bottle through already overworked livers (these guys didn’t look superb for all their riches).
They’d drink and carouse and backslap the night away, all of the while pondering what “So Damned Insane,” as Alan called Saddam Hussein, would do next.
From “Life within the Pits: My Time as a Trader on the Rough and Tumble Exchange Floor,” by Brad Schaeffer. Copyright 2023; Post Hill Press. All rights reserved.
In August 1990, Iraqi leader Saddam Hussein invaded is far-smaller neighbor, Kuwait — seizing the nation’s beneficial oil fields and setting off a worldwide scramble to rein in his imperialistic ambitions.
As a worldwide military coalition began to form to oust Hussein from Iraq, his invasion set off a spike in oil trading and costs because the world reeled from such a significant disruption in the worldwide oil supply.
But that disruption also proved a possibility for canny-eyed commodities traders, particularly those on the Recent York Mercantile Exchange.
Brad Schaeffer, writer of the brand new finance memoir “Life within the Pits: My Time as a Trader on the Rough and Tumble Exchange Floor,” was one such trader — who made a mint (and lifelong of memories) doing deals as war raged within the deserts of Arabia.
While stories of mayhem and murder and plunder dribbled out of the imprisoned Kuwait, a looming query remained: within the face of the awesome firepower of the international coalition arraying against him, would Saddam blink and hightail it back into Iraq?
Or would the US and its United Nations allies should blast him out? Nobody knew.
But such uncertainty over there within the sands of Arabia meant a license to print money for the giddy traders over here on the Recent York Mercantile Exchange (NYMEX) at 4 World Trade Center.
And the longer the tensions dragged on the extra money these traders would make.
Trading isn’t the identical thing as investing. An investor within the stock of a priority like Apple is betting that the corporate will carry on growing in value and thus buys a share in the corporate.
The corporate then uses the proceeds to construct and expand and in turn make each share that far more beneficial.
But trading futures on raw materials, which is what commodities are, isn’t an intrinsically bullish operation.
Commodities’ prices fluctuate depending on supply and demand. Prices go up and so they go down with indifference.
And since a futures contract is an agreement to purchase or sell a certain standardized amount of a commodity (in oil’s case each futures contract equals a thousand barrels) at a particular price at a predetermined time, one can effectively go “long” or “short” with equal dexterity and thus take advantage of each an increase (long) or a fall (short) in prices.
As I learned the ropes of a latest exchange, oil trading reached a fever pitch on the NYMEX floor.
Day-after-day from August into the autumn through to Thanksgiving and Christmas, traders voraciously wolfed up profits within the heavy volume and extreme volatility of the whipsawing crude oil futures and options markets driven by hair-trigger uncertainties that will suddenly lurch prices this fashion and that.
On Nov. 29, 1990, the UN Security Council officially authorized using force against Iraq if it didn’t voluntarily evacuate Kuwait by Jan. 15, 1991.
The war clouds were growing ever more dark and ominous.
This was just more excellent news for the oil pit as uncertainty not only begets pricing inefficiencies but heavy volume, allowing one to concurrently buy low and sell high large blocks with little exposure.
The world was taking no possibilities, and so they were buying or selling futures as needed at a frantic pace to mitigate risk.
And what might be riskier than being dependent upon a commodity wherein much of it on the time was produced right smack-dab in the midst of a possible Armageddon?
Not only was the flow of oil from Iraq and Kuwait suddenly off the market, but Saddam’s misadventure had the potential to ignite a regional conflagration by threatening Saudi Arabia’s each day output while tempting the fanatical theocracy of Iran (Saddam’s arch enemy) to choke off the Strait of Hormuz, through which 20% of all crude oil exports passed.
It was a worldwide crisis of literally biblical proportions as Saddam vowed to launch missiles at tiny Israel should the United Nations attempt to expel him from Kuwait by force of arms.
His hope was to prompt the hated Jewish state to retaliate in self-defense and switch the oil conflict into an Arab versus-West internecine showdown that will shatter the delicate alliance confronting him… one which included military contributions from Egypt, Saudi Arabia, Syria, the UAE, Oman, and Qatar.
High-stakes poker indeed.
The stakes were high on the NYMEX floor as well.
This was latest territory so prices continued to fluctuate wildly amidst the fog of confusion as to what this all meant at the top of the day to crude supplies.
Did the Friday, Sept.14, British and French announcements of their deployment of troops to the region increase the percentages that Iraq would flinch and peace (and the flow of oil) be assured?
Sell!
Or . . . perhaps it meant the battle could be just that much larger, bloodier, and more destructive once the shit hit the fan.
As word of the ungodly sums of money being printed in crude oil spread across the exchange and onto The Street itself, the number of recent traders who suddenly appeared within the mosh pit swelled an estimated four-fold.
The group overflowed to the purpose where it was not unusual for a trader to be squeezed out and shot from the ring as if popped from a pimple and are available careening down onto his back into the aisle as you walked by.
The waterfall of profits was so regular that each moment spent off the ground, whether to grab lunch and even just use the toilet, could cost 1000’s in lost opportunities.
So vital was trading time that some firms went to extraordinary lengths to be sure their people were in position and raring to go when the opening buzzer sounded.
One firm even went up to now as to pick up their star trader every Monday morning and whisk him by helicopter from his Long Island home to lower Manhattan to avoid the Hamptons traffic.
It was money well spent.
Meanwhile, Saddam himself was spewing forth defiant statements on a each day basis.
They immediately made their way onto the analog electronic news ticker hovering above our heads.
— Saddam — “We will not be intimidated by the dimensions of the armies or the sort of hardware the US has brought.” — [November 12]
Or on Dec. 12 — Saddam: “Allah is on our side. That’s the reason we are going to beat the aggressor.”
And so forth, and so forth.
The dictator’s bellicose proclamations only served to toss lighter fluid on the bonfire of uncertainty . . . and by unintended consequence shower money like confetti onto the NYMEX floor.
One trader leaned over to me: “I f–kin’ love dis guy!”
Such was the worldwide crisis within the second half of 1990.
What was a looming disaster for the world was manna from Heaven for the NYMEX oil traders who would eventually earn the envied sobriquets of “Gulf War babies” as this was the time in which their fortunes were made.
After the hectic trading session was over and the day’s profits tallied up — which translated into stacks of cash higher than anyone on this sleepy backwater exchange could have dreamt of only a yr before — many would retire to Suspenders pub on Greenwich Street and strain bottle upon bottle through already overworked livers (these guys didn’t look superb for all their riches).
They’d drink and carouse and backslap the night away, all of the while pondering what “So Damned Insane,” as Alan called Saddam Hussein, would do next.
From “Life within the Pits: My Time as a Trader on the Rough and Tumble Exchange Floor,” by Brad Schaeffer. Copyright 2023; Post Hill Press. All rights reserved.
