Elegy For a Servant of the Market

In April, I posted Yet More Investing Truisms, which began with an adage that was taught to me by Fred Berliner, a veteran trader I’d known since the early days of the Russian stock market. The saying was, “Buy at a Price, Sell at Market,” which means that you can be picky about your level when entering a stock, but when you’ve made the decision to exit, you should just get out. Fred liked my truism posts and, sure he’d be pleased to be quoted, I emailed him the new one as soon as it was published.

Fred Berliner

An hour after I sent the email, I got a call from Fred’s wife telling me he’d died the night before. He’d been sick for a while, so it wasn’t unexpected, but still came as a shock, as deaths always do. Selfishly, my first thought was that he’d never see the new Substack. Upon reflection, what occurred to me was that as Fred’s cohort passes away, so will the accumulated knowledge of a generation of Wall Street pros whose work was analog and personal, communicated on landlines and memo pads.

In this age of algorithmic and high frequency trading, the conditions just don’t exist anymore to produce others like Fred, who felt the market in his bones and developed an intuition — a gut, to use the cliche — for financial opportunity and risk. (He was also a great source of jokes and quotable quotes, delivered in a gravelly New York accent that recalled a character from Guys and Dolls.) It falls to people like me, who learned from the Freds, to pass on their wisdom, which stays relevant even in the age of AI — and will continue to, for as long as humans stick their irrational fingers in any part of the market.

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When I first met Fred in 1995, he was working at one of the new Moscow brokerages, Troika Dialog, having originally gone on a USAID grant to help create Russia’s NASDAQ. I remember flagging down a car — in those days you could get any fume-belching Lada to slam on the brakes and drive you anywhere — to Troika’s office on the outskirts. It occupied the second floor of a dilapidated industrial building and consisted of some flimsy desks and chairs and a few rudimentary trading terminals. There was probably a babushka in the kitchen making kasha for everyone’s lunch, as was the common practice.

Fred and I hit it off right away. I guess I found it comforting to meet another ex-Wall Streeter in this unlikely place, as if legitimizing my possibly crazy decision to bet it all on Russia; and he was encouraged to see a foreigner who recognized the big opportunity ahead. Fred’s task was to teach eager Russian kids how to trade on the new exchange and to handle professional clients. USAID expressed the idea that spending a little money bringing Western practices and support to developing countries would ultimately redound to our benefit — an idea rejected by the current administration.

One of the things Fred taught the novices was the importance of building trust. People are usually surprised when I say that in my 30 years of experience with Russian brokers, I can hardly think of even one time that I’d felt cheated. In an environment without the rule of law or functioning courts, all you have is your relationships. By contrast, I was often tricked by British and Canadian brokers and promoters, with whom I let my guard down because they were “like me.” I’ve also had bad experiences in emerging markets with less sense of nationhood and confidence in the future than Russia has — anyway, had prior to 2022. Ukraine, for one, was a place to get fleeced, although this is changing as the war creates a patriotic identity they lacked after the breakup of the Soviet Union.

Fred helped build Troika into one of the top Russian-owned brokerages. Within a couple of years, they moved from the abandoned factory to modern headquarters in the center. Fred navigated both the Russian stock bubble of 1997 and the emerging markets crisis of 1998. I have a PTSD-esque memory of him calling at 3 A.M. my time (both on landlines, of course) to report that stocks were collapsing. He went down the list of nausea-inducing prices, ending with, “Gazprom, four centavos.” Anyone who scooped up Gazprom that day at the ruble equivalent of four cents could have sold it within a few years for as much as $12.¹

When his tour of duty ended, Fred returned to America, somewhat reluctantly. While life in Russia at the time lacked many Western comforts, like deodorant in the subway, it was exciting, and staff was cheap: the Berliners had a driver and full-time nanny. It’s hard to think of a greater contrast to chaotic 1990s Moscow than Ancram, the semi-rural town in upstate New York that the Berliners retired to. There, Fred focused on his golf game, poker with his buddies, and investing his own capital.

Fred wouldn’t want me to end this piece without a comment on investing, and I don’t think he’d mind if I used his post-Russia experience as a case study. In his retirement, we spoke often — he was a sympathetic ear whenever things went haywire, as they did in Russia with regularity — and saw each other occasionally. We played golf, and he always came to New York for group lunches with Firebird investors, of which he was one for 20+ years.

Mostly what he had to say about his own post-retirement investing was lamentation. He sat at his home computer trading post every day, watching the market, and he read everything: Barron’s, The Wall Street Journal, Financial Times, etc. He sometimes got bearish, tried to time the market, shorted stocks, bought gold, and told me that he finally concluded he’d have been better off all those years just sticking his money in index funds (and Firebird) and playing golf.

This isn’t unusual. Many, if not most, professional investors can’t turn it off at home, overthinking the management of their personal assets and costing themselves a lot of money. When they retire, it’s like exiting the highway at 70 M.P.H. and trying to relax into a 30 M.P.H. zone: it feels weird. Similar to Fred, they read everything and know everything about the economy and markets, thinking they’re contrarian when they’re really inside the consensus of the people who read everything and know everything. This inevitably leads to the trap of market timing, which almost no one does successfully.

I’m guilty of it too. Besides the capital in my own funds, I have a very diversified portfolio of U.S. and foreign stocks, bonds, real estate, hedge funds, private equity, venture capital funds and SPVs, etc. This has taken time to construct and monitor, including the annoyance of capital calls and multiple K-1s. Meanwhile, in 2012 I created a generation-skipping trust for my kids which, because in my mind it had a 40-year time horizon, I put it into stock index funds, plus a couple of decorrelated assets like Firebird and fine art. The trust’s return has beaten my personal portfolio’s badly, and the beating could’ve been worse, but at least I never try to market time.

When Fred and I commiserated over our investment mistakes, his voice had an undertone of resignation and even amusement. We understood that every trader and investor sets out to master the market, and everyone ends up its servant.

1. The famous Chandler brothers of Monaco reportedly did buy Gazprom at the bottom and added to their fortune, earned in distressed emerging markets. We didn’t start buying Gazprom until it was around 30 centavos.