CHAPTER 8

STINKOSLOVAKIA

fter chirping like a canary for more than seven hours, day one of singing on Court Street had finally come to a close. I had gotten as far as my first day as a licensed stockbroker, which, by sheer coincidence, was October 19, 1987, the day of the Great Stock Market Crash. My four captors, as well as my own attorney, had found great irony in that. After all, between my first day of dental school, my first day in the meat business, and my first day on Wall Street, I seemed to have the Midas touch, in reverse: Everything I touched turned to shit.

Yet, on the flipside of that, there was no denying that I had a certain resilience to me. The way Magnum had put it, if someone were to flush me down a toilet bowl I would come out the other side holding a plumber's license. And while Magnum's words had been greatly appreciated, I was completely certain that there was no plumber's license waiting for me on the other side of thistoilet bowl.

Right now I was in the limousine again, on my way to Old Brookville, where I would place myself back under house arrest, reduced once more to a prisoner within my own home as well as an emotional piñata for the Duchess to swat around. As always, the babbling Pakistani was behind the wheel, but he hadn't uttered a word since we'd left Sunset Park thirty minutes ago, when I'd threatened to cut his tongue off if he didn't stop talking.

At this moment we were on the Long Island Expressway, somewhere near the Queens-Long Island border. It was the tail end of rush hour, at that hour of dusk where the streetlights come on but make little difference. As we crawled along at a snail's pace, I stared out the window, lost in thought.

The Great Crash of 1987 was the pivotal point of my life, an exceptional happening from which all other happenings would unfold. The Dow had dropped 508 points that Black Monday in a single trading session, sending the longest bull market in modern history to a screeching halt.

In truth, I had been nothing more than a casual observer, not just of the crash but also of the fabulous run-up that preceded it. In the summer of 1982, in the wake of slashed income-tax rates and plummeting interest rates, runaway inflation had finally been tamed, and Reagonomics was the rage of the day. Money had become cheap, causing the stock market to catch fire. Michael Milken had just invented junk bonds, turning Corporate America upside down on its ear. Hostile raiders like Ronald Perelman and Henry Kravis, a new breed of financial celebrity armed with war chests of cash raised by Milken's junk bonds, were becoming household names. One by one, they were bringing America's largest corporations to their knees through hostile takeovers. TWA, Revlon, RJR Nabisco… who would be next?

By October of ‘87 the euphoria had reached its peak, as the Dow crossed the 2,400 mark. The era of the yuppie was in full swing, and there was no end in sight. And as the Michael Falks of the world raked in the dough, people like Bill Gates and Steve Jobs were changing the world. It was the dawn of the Information Age, and it hit with the force of an atomic bomb. Lightning-fast computers were appearing on every desktop; they were powerful, intuitive, and they had shrunk the world to a global village.

For Wall Street, this opened vast possibilities: Faster computers yielded massive increases in trading volume, as well as cutting-edge financial products and novel trading strategies. The financial products, called derivatives, allowed large institutions to hedge their investment portfolios like never before, and the trading strategies, the most exciting of which was called portfolio insurance, began fueling the buying frenzy itself.

In a financial farce of Kafkaesque proportions, portfolio insurance caused advances in the Dow to stimulate computers to spit out massive buy orders for derivatives, which then caused the Dow to advance even further, which stimulated those very same computers to spit out even morebuy orders for derivatives… and on and on it went. Theoretically, it could have gone on forever.

Actually, it couldn't have, because the two numnuts who'd invented portfolio insurance had programmed a fail-safe mechanism into the software. In other words, after a certain level of price increases the computers said, “Wait a second—there's something rotten in Denmark! We'd better sell all the stock in our portfolios as fast as our silicone wafers will allow!”

That's when the problems started. In a real-life version of The Terminator,computers turned on their masters and began spewing out endless waves of sell orders at the speed of light. At first, the market declined sharply; that was bad. But, alas, the computers kept right on selling, and by midday, the volume was so enormous that the computers on the floor of the New York Stock Exchange couldn't keep up. And that was tragic, because just like thateverything came to a grinding halt.

Meanwhile, stockbrokers, being stockbrokers, stopped answering their phones, thinking: What's the fucking point of listening to my irate clients scream, “Sell, God damn it! Sell!” when there're no buyers around to sell to? So instead of holding their clients’ hands and telling them everything would be okay, they leaned back in their seats and put their crocodile shoes up on their desktops and let their telephones ring off the hook. By four p.m., the Dow had plunged twenty-two percent, half a trillion dollars had vanished into thin air, investor confidence had been shattered, and the era of the yuppie had officially come to a close.

Now, more than a decade later, as I'd recounted those events to my captors, I felt strangely detached from them, as if the young man who'd lived through all that—some poor schnook named Jordan Belfort—was a complete stranger to me, someone whose life story I had been narrating in the first person for the sake of simplicity. And odder still was how I had conveniently omitted the personal impact those events had had on me, especially when it came to my marriage to my first wife, Denise, who I'd wed three months prior to the crash. We were both broker than broke. Yet we knew that success was right around the corner. So we had hope and we had faith—until the crash.

And that was where I'd left off: Jordan Belfort had just left the boardroom of LF Rothschild with despair in his heart and his tail between his legs. He was a broken twenty-five-year-old with one personal bankruptcy under his belt and a license to sell stocks that had suddenly become worthless.

Ironically, inside the debriefing room I had grown disturbingly comfortable as the day wore on. Losing myself in the past had allowed me to block out the pain of the present, especially my sense of loss regarding the Duchess. And despite the fact that I knew I was ratting, the information I'd provided was strictly historic-sketching only broad strokes about things marginally illegal. The ninety-seven people on my villains, thieves, and scoundrels list still seemed reasonably safe.

Then the Bastard burst my bubble.

It was a few minutes before five when Joel had said, “We need to put the history lesson on hold for a while. We're fighting a time clock with your cooperation…” and then he went on to explain that there was only so long my esteemed status as a rat could be kept secret. There were telltale signs when someone was cooperating, starting with the court record, which in my case would be conspicuously dull. In other words, there were certain motions filed when a defendant was taking a case to trial, motions that wouldn'tbe filed if he was singing on Court Street.

In practical terms, explained the Bastard, there would be two distinct aspects to my cooperation: historical ratting and proactive ratting. Up until now I had been engaged only in the former. Now, however, the Bastard had asked me to make a recorded phone call to one of the soon-to-be-sorry souls on my villains, thieves, and scoundrels list. And, the Bastard had chosen of all people, my loyal and trusted accountant, Dennis Gaito, aka the Chef.