I’ll Short You Fifty Cleveland States!
If someone isn’t laughing at your dreams, maybe they aren’t big enough.
Robin Sharma
In response to last week’s post, a former colleague from Montgomery Securities shared the following story related to the 1986 NCAA basketball championship, ultimately won by Louisville (raise your hand if you remember “Never Nervous Pervis”). The names have been changed, and some of the underlying facts may be in the alternative. But it’s still a pretty good story.
Wednesday, March 12, 1986: The boy geniuses at Montgomery Securities hustling fortune and hype are conducting a $100 per person pool for the 1986 NCAA tourney. Suckers masquerading as brokers pacing the duct-taped 21st floor of the Transamerica Pyramid randomly pull one of the 64 teams out of a hat. Once all the teams are distributed they can trade on the open market like stocks. Since the result from the winner-take-all pool totals $6,400, an individual team’s share price reflects their chance of winning the tournament
Booyah Bob– “YEAH BABY! I pulled Kansas (a #1 seed). I’m going to ‘Rock Chalk, Jayhawk’ all the way to St. Barts on this one!”
Two-Down Tony– “Brown? Where the hell is Brown (a #15 seed)? Do they even play basketball in the Ivy League? What moron would name a college after a color?
JC Attaboy– “The same moron who thought it was a good idea to hire you. Read ‘em and weep, boys! I got Indiana (a #3 seed). Bobby Knight’s Hoosiers are like IPO sales credits; both make me want to rush down to the Lamborghini dealership and take a few test drives.
Two-Down Tony– “Heeeeeeey, Booyah Buddy. I need to hedge my Brown position. I’ll bid you a thousand bucks for your Kansas. I’ll even convince the Syndicate department to allocate my shares of Microsoft to you so you can finally get on the research list at Hail Mary Capital. (MSFT came public the next day at $21…and proceeded to split nine times over the next thirty years.)
Booyah Bob– “I’d rather suffer through a Wham concert than hit that bid. Tell you what, Mr. Brown Bracket Buster, I’ll offer my KU at the one-time, bargain-basement price of $3,000. And just for fun, I’ll even short you a share of this year’s Cinderella story, Cleveland State (a #14 seed). I hear Bill Gates coaches the team when he’s not running that software sewer into the ground.
JC Attaboy– “Don’t take him up on his offer, Two-Down. Cleveland State plays my Hoosiers tomorrow morning in the first round, and NEVER in the history of the NCAA tournament has a #3-seed EVER lost to a #14-seed. Plus, they’re a 20-point underdog. Mark my words; Cleveland State will be out of the tournament before my pastrami and rye lands on my desk.”
Two-Down Tony– “Is that right, JC? Well did you know the mighty Vikings of Cleveland State are 29-3? They whipped DePaul by 15 in Chicago, piled 180 points in losses at Ohio State and Michigan, and finished second and sixth among all Division 1 teams in scoring and rebounding margin, respectively. Then they went out and beat Northern Iowa, Illinois-Chicago, and Eastern Illinois to win the Association of Mid-Continent Universities tournament, whatever the hell that is. Since you’re so damn sure of yourself, Mr. Knight Rider, where would you offer Cleveland State?”
JC Attaboy– “There you go again, Two-Down, taking pity on me and acting like my personal ATM machine. No way a traditional college basketball powerhouse like Indiana coughs it up to a state school from kuh, kuh, kuh, Cleveland. In fact, I’ll take pity on you and offer FIFTY Cleveland States at $100. That way I cover my pool ante and get to play the tournament for free.”
Two-Down does the math in his head. A #14-seed offers better odds than a #15-seed, especially if you get to own it fifty times…at $2 a share. White smoke finally rises from Two-Down’s head.
Two-Down Tony– “I BUY!”
Less than 24 hours later…
Thursday, March 13: Cleveland State 83, Indiana 79.
Meanwhile, the next day…
Two-Down Tony– “Geez, JC, will you look at that; a #14 just took down a #3. Ya’ think Reagan’s going to declare the entire state of Indiana a disaster area?”
JC Attaboy– “Bite me, Mr. Potato Face. I see Brown kept their game close and lost to Syracuse by only 49 points.”
Booyah Bob– “I feel your pain, JC. My Kansas barely squeaked by North Carolina A&T, 71-46. Tell you what, Big Fella. Before Cleveland States plays St. Joseph’s (a #6 seed) on Saturday, I’ll offer you all the Cleveland State you want at $10…A SHARE! C’mon, dude. That Stanford education should tell you it’s a wise move to cover your short for only $500.”
JC Attaboy– “What kind of grass are you guys from Berkeley smoking these days? Only an overrated Cal grad like you would make an offer that ridiculous. As we all know, lightening doesn’t strike twice unless you’re pitching a Montgomery secondary. St. Joe’s is going to destroy Cleveland State on Saturday. I practically guarantee it.”
Saturday, March 15: Cleveland State 75, St. Joseph’s 69.
Cleveland State advances to the Sweet Sixteen, led by 20-year-old, 6’1” freshman Ken “Mouse” McFadden. The East Regional Semi-finals are scheduled for next Friday, pitting #1 Duke vs. #12 DePaul, and #7 Navy vs. #14 Cleveland State.
One excruciatingly juicy week later….
Two-Down Tony– “Hey JC, where’s Microsoft trading right now?”
JC Attaboy– “$26.50 last, up 25% since the IPO. Why are you asking?”
Two-Down Tony– “I’m just checking up on my portfolio. Where’s Cleveland State trading?”
JC Attaboy– “Have I told how much I hate you?”
Two-Down Tony– “Have I told you how much older you look this week? C’mon, man, I just want to hear where Cleveland State is trading so I can take a few victory laps around the trading floor.”
Booyah Bob– “Calm down, boys. I’ve got your answer right here. According to my sources in the Compliance department, the latest Cleveland State market is strictly one-sided; $100 bid, nothing offered. Two-Down could hit that bid for one share and breakeven on your trade with JC, and he’d still have 49 shares left for the rally in case Cleveland State muscles another upset.
Two-Down Tony– “You know that old Wall Street saying, Booyah? About bulls, bears and pigs? I’m not that greedy. I’ll make the other side of that market and offer my Cardinal colleague my entire Cleveland State position at $50 a share.
Booyah Bob– “Really? So, let me see if I got this straight. If you believe in miracles and Cleveland State somehow manages to win the tournament, our boy JC would have to make delivery on $6,400 times FIFTY? That’s $320,000! I think even Mrs. JC would miss that much cash.”
Two-Down Tony– “And thus would conclude the greatest short squeeze since the Dutch invented the tulip. C’mon, JC, pay up. At this point your Stanford stupidity will only cost you $2,500. Cover that short before Cleveland State dirties the rest of your underwear drawer.”
JC Attaboy– “Eye, eye, eye….Bah-Bah-believe…in-in-in…N-N-N-Navy.”
Just a few hours later…
Friday night, March 21, Cleveland State vs. Navy– “Only twenty second remain in the game! Cleveland State leads 70-69. Can they hold off #7 Navy, who led at the half 39-30, for one more possession and pull off one of the biggest upsets in NCAA history and advance to the Elite Eight and face #1 Duke?
“Navy lobs the ball into David Robinson, who has scored ten of his team’s last twelve points. But it’s tipped! The ball is tipped! Cleveland State has the ball with five seconds showing on the clock!”
“But wait…there’s a whistle.”
“The referee says Navy’s Vernon Butler tied up Cleveland State’s Paul Stewart, resulting in a jump ball. Since the possession arrow points to Navy, the Midshipmen get the ball back underneath their basket with only five seconds left. Oh, my!”
“Navy lobs it in again to Robinson. Robinson catches the ball and lays it in virtually uncontested! Navy leads by one!”
“Cleveland State inbounds the ball up the court to Clinton Smith, whose 25-foot desperation shot at the buzzer…”
“…bounces off the back of the rim!”
Final Score: Navy 71, Cleveland State 70
The following Monday…
Two-Down Tony– “Feeling better, JC?”
JC Attaboy– “About what?”