Q&A With Jared Dillian – All The Evil of This World
Jared Dillian’s new book All The Evil of This World hit shelves/kindles on June 21st and is already seeing great reviews on Amazon (4.6 stars). He was kind of enough to take the time to answer some questions I had related to the book. You can read my review of the book on WSO here: “All the Evil of this World: A Monkey's Review”, and you can see @Jared Dillian"'s posts on WSO here.
ITF: Let’s start things off with the allure of the Palm (Pilot) trade. What was it about this new spin-off that made everyone on the Street so eager to get into it? What was your personal experience with the trade in real life? Also, I believe in Street Freak you mentioned that you started working on the trading floor in San Francisco around the time of the tech bubble. Where were you when Palm hit the tape?
I was actually present on the floor of the PCX options exchange when that spinoff took place. To this day, it is still the most insane thing I have seen in the markets, and that includes the financial crisis (and my own firm’s bankruptcy). A lot of people here will probably not believe it is possible for the market to be that euphoric, since we’ve had a lot more fear than greed over the years. But this was insane.
ITF: What was the inspiration for your characters? Were they based on people you knew, were they purely fictional, or a mix of both? Did you have a personal favorite out of the main seven?
You might find this hard to believe, but the characters aren’t really based on anybody in particular—they are kind of a blend of people I have met over the years in the business. Also, each one of the characters have a piece of me in them (like a horcrux or something)—I am the Clerk, I am W83, I am T22, or at least, a small piece of me is.
I do have a favorite character: T22, the floor broker. I think it’s really some of the best writing I’ve ever done.
ITF: March 2, 2000 was the height of the dot-com bubble and "irrational exuberance," which was also around the time the Palm spin-off happened. In your view, was this event really the straw that broke the camel's back, or just an event assigned as "the bubbles peak" with 20/20 hindsight?
The spinoff was actually 8 days before the actual peak of the market, but I like to think of the spinoff as the day that the market actually peaked. It certainly was the peak of lunacy, if you know what happened with the trade. 3Com owned Palm, spun off 5% of it, and it was so richly valued that it implied a negative value for the stub of 3Com—something that should not be possible. You could buy 3Com and short Palm, but shorts were getting squeezed and borrow rates were 75% a year. Like I said, madness.
ITF: You talk about the greed, fear and euphoria aspect of the market around this time and with this particular trade--lots of strong emotions. Did traders or investors resort to any foul play to get their hands on Palm, or was that kind of stuff (like front running the trades, etc) getting harder to pull off without tipping off the regulators?
The one thing I will say about the spinoff is that there was a lot of shady stuff going on with stock loan. Since there was an actual, can’t-lose arbitrage if you could buy 3Com and short Palm, everyone wanted to short Palm, to the point that 146% of the float was sold short. Obviously that can’t happen, so there was a lot of naked shorting. That behavior all went out the window in the mid 2000’s with Reg SRO, which made sure you got a locate on stock before you borrowed it. In a lot of countries, you can practically get caned for naked shorting—the penalties are very severe. Back then, in the U.S., it was the wild west.
ITF: You were on the floor of the options exchange when the Palm spinoff happened, early in your career I believe. Did witnessing such a spectacular, unusual event color your perspective of markets in general for the rest of your career in a positive or negative way? Is it a good or bad thing for a green finance employee to be present firsthand for something like that during their first job?
It was definitely a positive—I really got to see the power of markets, and what behavior is like at the extremes. I got to see extreme euphoria, that day in March, 2000, and I got to see extreme fear eight years later (and other times in my career). It was good to start my career in the midst of an actual bubble—it makes it easier to spot bubbles. There is one going on in the bond market as we speak.
ITF: Let's say you were writing your Daily Dirtnap newsletter the day after the Palm trade. What would you tell your readers?
Hopefully I would have had the presence of mind to ring the bell at the top, but I probably wouldn’t have. It’s hard to have that long-term perspective when you’re in the middle of it.
ITF: You mentioned that the scene on the floor was the most insane behavior you ever saw--in the book, one of your characters sprints into the bathroom and just passes out. In real life, did you ever see anybody just snap and absolutely lose it while they were trading?
I am by no means the only person to lose his squash on a trading floor—to protect people’s anonymity, I won’t tell any more stories here. One of the things I tried to capture in the book is that extreme market conditions (like the Palm spinoff) often coincide with extreme circumstances in people’s lives, and it often serves to magnify people's stress many times over. If you remember that scene in Real Genius where everyone is sitting around studying and one guy suddenly loses his mind, screams, and runs out of the room, it’s like that. It does happen occasionally.
ITF: In the "Thank Yous" section of All the Evil in This world you mentioned that the story took you over five years to complete. Why do you think that was?
It was a hard book to write. Fiction is hard anyways, but the engineering of this book, the sheer complexity, made it harder. I’m really more of a non-fiction writer—that comes a lot easier to me.
ITF: And finally, just a fun one inspired by one of your characters: favorite Siouxsie and the Banshees song and why?
Ha, that’s an easy one.
Want to read more? Order your Kindle copy here, or your paperback here.
Jared’s Bio:
Jared Dillian grew up in southeastern Connecticut in the eighties and nineties, became a Coast Guard officer and spent some time at sea. While in the service, he developed a passion for finance, attended business school, and secured a job as a trader at Lehman Brothers. He joined the firm in 2001, shortly before 9/11, and left at the bankruptcy in 2008. STREET FREAK is the story of those years. He now publishes a financial market newsletter from South Carolina: The Daily Dirtnap. His debut novel, ALL THE EVIL OF THIS WORLD, was released 21 June 2016.
Just bought a copy Jared Dillian and I'm looking forward to it. Hope you're well, brother.
Thanks. It will blow your head off
I'm sure it will. You know what else blew my head off? Moving from SF to SC (and the interim steps in such small places such as NYC). Please describe living sequentially in San Francisco, New York, and then South Carolina and how you and your family adjusted to such drastic environment changes.
Massive culture shock. The last move to SC was tough at first. But we love it now.
Buying now.
Going to put this on my virtual bookshelf next to Eddie's. I've always appreciated your ability to tell a story, can't wait to read
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