Speaker 1:
From the library of the New York Stock Exchange at the corner of Wall and Broad Streets in New York City, you're Inside the ICE House. Our podcast from Intercontinental Exchange on markets, leadership and vision in global business. The dream drivers that have made the NYSE an indispensable institution for global growth for more than 225 years. Each week we feature stories of those who hatch plans, create jobs and harness the engine of capitalism right here, right now at the NYSE and at ICE's 12 exchanges and seven clearing houses around the world. Now here's your host, Josh King, head of communications at Intercontinental Exchange.
Joshua:
Hi everyone. Come on Inside the ICE House at 11 Wall. A few episodes ago, the New York Stock Exchange's president, Tom Farley, told us how the exchange uniquely brings together technology and human intelligence in what he would say was a real world environment to allow companies to raise the capital that drives global innovation and then facilitating the trading of those securities. So just how human is the human element? Well, you're going to find that out on today's show. On the floor of the NYSE, real life brokers, those guys and girls wearing blue jackets with the American flag on their sleeves toting electronic trading devices in their hands, they remain central to the process. Of course, the technology has evolved dramatically over the last two centuries. It's gathered tremendous speed over the last few years. And in just the last half decade, the Exchange's parent company, Intercontinental Exchange, has transformed the technology to connect the trading floor to the global markets and sophisticated data feeds to allow increasingly informed trading.
Joshua:
But through all the change, the trading community, men and women on the floor have remained the heart and soul of the operation. You've seen the news packages on a big up or down day, brokers screaming orders at one another, the still photo of a forlorn trader staring at his screen in wonder or his head buried in his hands. The people in those photos wear their emotions on their sleeves. It's a lot of blood, sweat and tears on those blue jackets. But over the years, the dips and volatility not withstanding, their efforts have helped to raise capital for companies, drive wealth for millions of investors and made a tidy living for themselves. Our guest today, one of those men, Kenny Polcari, someone you'll peg straight out of Central Casting and dropped onto the New York Stock Exchange trading floor. And in a sense, that's true. He is one of the stalwart voices of the exchange with trading running through his blood. Next time you turn on the TV to get a market update, keep your ears perked for the guy whose voice you're about to hear. You won't mistake him for anyone else. Our conversation with Kenny right after this,.
Speaker 1:
Inside the ICE House is presented this week by the Secure Financial Transaction Infrastructure or The Safety Network. Safety is the backbone of the ICE platform, providing high security, high speed, direct market access and trade execution capabilities to over 150 global markets. Safety connects to data and analytics from more than 600 proprietary and third party market sources. More on Safety later in the show.
Joshua:
Kenny Polcari is managing director of O'Neil Securities and a regular contributor to practically all of the 34 media outlets that broadcast from the NYSE. He's a sort after speaker and lecture on the very topics we'll discuss today and publishes a daily morning thoughts post that breaks down the global financial markets into digestible often humorous portions. And each is capped off with a favorite recipe that he encourages the reader to try and cook for themselves. Kenny, welcome Inside the ICE House.
Kenny:
Well, thank you very much for being here. It's a pleasure.
Joshua:
We've wanted to do this from the very start you heard our first episode.
Kenny:
The very first one
Joshua:
You came right to me and you said you had some thoughts about it.
Kenny:
I did. Well, listen, I told you I thought it was a great idea. I loved the content of the first one. And actually I loved the content of the one that I heard yesterday, which was with Mr. Plumeri, Joe Plumeri, which I thought was great, that was actually a great podcast. But I had my own thoughts on the name of the podcast. But listen, actually as I've thought about it and I've listened to it and I've listened to the podcast, I actually think it works.
Joshua:
What you were saying I think was that if you think of what an ice house means, it means igloo, frigid, cold and this is anything but. It's a place where passions run hot.
Kenny:
Very hot. Very hot. And so for me I've been here for 38 years on the floor of the New York Stock Exchange. And you said it, I bleed the blood of the institution and I bleed the blood of being a member at the New York and of the New York and everything that happens on the New York Stock Exchange. So it's been a really, really great experience for me.
Joshua:
As the year rolls to an end 2017, Kenny Polcari, you and your wife, Evelyn, of 34 years you're cooking your Christmas dinner, the seven fishes. You're thinking about what you might share with your readers. And are you thinking that, what's going to happen once the calendar comes to 2018 is going to be another year of lack of volatility, your 10th year in a row of rising prices with very little disruption? Or you're seeing what was going to happen toward the end of January and into February?
Kenny:
I think as 2017 came to a close I think the discussion as we moved through the end of 2017 and 2018 really should have set people up for expected volatility. Because, look, it took us a dozen years to get into this with the Fed and every other central bank around the world with the stimulus program and jars full of Kool-Aid all around the world. And so the discussion of exiting, the discussion of tightening, discussion of every individual central bank making a move when it was right for them really was a conversation that set investors or should have set investors up for some volatility. So I wasn't necessarily surprised at what we saw. I may have been surprised at the speed and swiftness in fact of what happened a couple weeks ago. But be prepared because you may see it again as fast and as swift.
Joshua:
Take us back to that day that the market is dropping. It's dropping triple digits. It's heading toward a four digit drop. Is your adrenaline heating up at that point?
Kenny:
Sure.
Joshua:
What's going on in your head?
Kenny:
Well, listen, you have to remember as the Dow started to drop, it was down 200 points and it was down 300 points but over a period of an hour or so. And then it was down 500 points. And all of sudden the speed at which it started to drop picked up versus the way it had been acting. It's not as if I want to say I'm used to it but you do become a little bit almost desensitized because you've seen it before. I think what was concerning about this one was, again, the speed at which it happened. Because that hasn't happened as quickly as we saw it happen on that Monday.
Joshua:
I'm thinking of the astronaut, Jim Lovell, in Apollo 13, when there's a little shimmy in the spacecraft as they're going around the dark side of the moon and he says classically, Houston, we have a problem. Does a bit of sweat form on your brow? Or are you just cool about it?
Kenny:
No. No. A little bit. You can't help because the adrenaline starts running. So therefore you start to... You naturally start to sweat a little bit. Whether it's coming from the back of your head or from your forehead but you sweat a little bit. The difference is now unlike in 1987 where you not only the market was under pressure but you were actually running around because that's the way the market worked. Today because it's more electronic, there's less running around but there's more of an ability to sense what's going on in the markets around you, the other venues that exist, the other exchanges that are really all electronic. You're trying to put all those pieces together from my position on the floor of the exchanges. So yeah, causes a little bit of... It does absolutely get the adrenaline to rush.
Joshua:
At what point in your career did you say there's great technology, I'm here early in the morning before the market opens, I've got thoughts to share, I'm going to start writing a blog? And where do folks find this?
Kenny:
So it happened right in the middle of the crisis. It was after 2009, we were into 2010 and I remember vividly going home and being so frustrated with the markets and being so frustrated with conversations I was having with people
Joshua:
2008, we're talking-
Kenny:
2008, nine, yeah. Having conversations with not only clients maybe that we were doing business with but people on the outside, friends of mine, people not necessarily connected, who would constantly call me up and ask me what's happening, explain it to me. And so as I did one day I came to work and I said I need to start writing, putting my thoughts down. A little bit it's cathartic actually for me to write, to get it out and to talk about it and to explain it in a way that Joe-Q public understands it. Because that was my goal. Because most of the people I was talking to were people who were not in the business, who kept calling me, asking me. And so I would try to simplify it without making it elementary but just easy to understand. And so when I decided to write this blog that was my goal. And so I started in December of 2009 and I've written it almost every single day since.
Joshua:
And this has made you into a media darling all across the 35 media outlets that cover the New York Stock Exchange.
Kenny:
Well, it has because most of them get it. I send it out to... Listen, it goes out to... I email it directly out to 4,500 people every day. It gets picked up by Bloomberg. It gets picked up and reposted across Bloomberg. It gets picked up by European Blog site, reposted across there. It goes out on my Twitter. And then I might send it to you and you send it to 10 people I don't even know you sent it to. And so therefore I think it's reach is fairly large. And I'm constantly getting... People are constantly commenting because of the way it's written. It's written in a style that is not a Wall Street research type style. It's like me talking. Now if you know me, as you read it, you can hear me. You can hear my voice, you can hear me making the point. You can hear me pounding on the table when I'm trying to make the point.
Joshua:
We'll give it at the end of the show again. But how do people find you?
Kenny:
You can find it on my website, which is just KennyPolcari.com. You can find it on my Twitter, which is at Kenny Polcari. You can find it on my LinkedIn profile.
Joshua:
Now those of us who grew up in Boston will recognize the Polcari name, the famous Polcari coffee shop. But how does a kid from Boston end up at the corner of Wall and Broad Streets?
Kenny:
It was really quite by accident because when I was a kid growing up this was the furthest thing from my mind. I didn't know what Wall Street was. I didn't know a stock from bond, an eighth from a quarter, a buy from a cell. And then when I was in college, that was my freshman year in college down at American University, which is in Washington DC because I thought I wanted to get into politics and legal in politics. And that freshman year I had the opportunity to intern on the floor of the New York Stock Exchange. And I thought to myself, scratching my head and I'm going, why would a 19 year old kid from Boston who spends the summers on Cape Cod want to move to New York City in the middle of the summer and work at a place I have no idea what it is?
Kenny:
And so I thought about it all spring semester of my freshman year. And then I thought, okay, what's the worst that's going to happen? The worst that's going to happen, I'm going to go there, I'm going to choke it up for experience and I'm going to like it or I'm going to hate it. And if I like it. And if I hate it, I'll just move on. In fact, I stepped foot in this building on May, 1980, I think it was around the 15th of the month and I never looked back. It was the most amazing experience as a 19 year old to walk on the floor and feel the energy that was in the building and feel the excitement every single day that made the floor of the New York Stock Exchange the place that it was.
Joshua:
Five years later, 1985, you become a member of this institution. What has to happen from the time that you're an intern to the time that you can get a seat at the Exchange?
Kenny:
Well, a couple things happened because when I came here in the summer, 1980 and in 1981, 1982, remember what was happening in this country. We had just come through the Jimmy Carter years. We had just come through the Iranian hostage crisis. So the country was morally bankrupt. The economy in this country was a disaster. Interest rates were 21%. Unemployment was 10%. Inflation was running at 13%. And so think about this for a minute.
Joshua:
Can you imagine those numbers today?
Kenny:
Exactly the point. And so it was the summer of 1982. I was going into my senior in college. I came back in May to go work for the same broker, the independent broker, that I worked for in 80 and 81. And when I came back in 82, the economy was so bad. And the Dow was trading at 7.90 and the volume on a daily basis might have been 30 million shares. And he was an independent broker. And he said to me, "Listen, I know I promised you a job. Unless you want to work for free, I really can't afford to keep you." And here I was making $125 a week and this guy couldn't afford to keep me. It was just an expense he couldn't have. And so I thought to myself, okay, I've been here for a couple of summers.
Kenny:
I know a fair amount of people. Let me walk around and just see what I can find before I just pack up and go back to Boston because I was so in love with the place. I couldn't see myself anywhere else. And so, in fact, I did, I walked around and I saw a couple of brokers that I had known and came back to say I'm back for the summer. And then I told them the story about how I probably wasn't sticking around too long because Doug couldn't have me. And this one broker who was the guy I ended up going to work for, who is the salt of the earth... I love this man. He put his arm around me and he said to me, he said, "Do you know a buy from a sell?" I go, "Yes, sir." He goes, " You know the symbol of IBM." I go, "Yes, sir." He goes, "Do you know the difference between an eighth and a quarter." I go, "Yes, sir." He says, "How's 250 a week?" 250 a week, I just got to raise.
Joshua:
That's awesome.
Kenny:
It was the most incredible experience. And so I started with him the next day. And I was here and I think this is the key, I was here on Tuesday, August 17th, 1982. And that day is so important because that's the day that was the birth of the greatest bull market we've ever known.
Joshua:
That's Ronald Reagan and Paul Volcker.
Kenny:
Paul Volcker. Exactly right. And so on the Monday, which was the 16th, as the day drew to an end there was this rumor floating around the floor that the Fed was going to come out with surprise announcement on Tuesday. Remember 1982, there was no television on the floor. There was no radio. There was no internet. There was no social media, no Twitter, no LinkedIn, no nothing. And so the way the news got around was when somebody from the outside picked up the phone and called somebody downstairs and said this happened or that happened. You would get the news like that. And so it was very interesting on that Monday when the rumor came out that the Fed was going to make the surprise announcement. Everyone was scratching heads because the Fed never made surprise announcements. They came out on Thursday mornings at 8:30, they opened the door, they made an announcement, they turned around, they walked back in-
Joshua:
They didn't hold your hand.
Kenny:
Right. They didn't hold your hand. They didn't say to you, "You okay with that? Let's sit down and talk about." Uh-uh (negative). This is it. This is what we're doing, bang, boom. and it was over. And so on the Monday when the rumor came out people were a little bit skeptical. But on the Tuesday morning when we came to work... Now remember there were 5,000 type A personalities on the floor. The floor was at this point there were three trading rooms, the main room, the garage and the blue room. And at 8:30 you could almost feel the whole room just go quiet as people just waited. And it was about 8:30 and maybe 30 seconds every single phone lit up. And at the time they were those industrial metal phones and they had six push buttons. And they used to ring like the old ring. Every one of them rang. And it was like they all rang at the same moment because in fact the Fed did come out. Paul Volcker did come out. He made the announcement they were cutting interest rates by 10%, which was essentially two percentage points. So interest rates are going from 21% to 19%, still high. But the fact is-
Joshua:
Not any of these quarter of a percent nuggets.
Kenny:
No. No. Exactly right. And so today we're having a nervous breakdown about rates going up a quarter of 1%. Then he cut it by 10%. Think about that. It ignited the greatest bull market that this country... Really the world has ever known. Certainly my generation, our generation has ever known. And the market absolutely exploded that day. Now here I was 19 years old, I stood in a booth that was as... My booth space, my desk was as wide as my shoulders. There were two phones in front of me. There was no electronics. There was quotron machine. That was it. But there was no Bloombergs and no computers and any of that stuff.
Kenny:
I had a buy pad, a sell pad, a cancellation pad and report pad on my desk, that was it, chest height because you stood all day, no sitting. But it was the most incredible day because every single order, when you picked up the phone, you could hear the excitement and the voices of the traders and the excitement and the people on the floor. And the orders were by 10,000, by 50,000, by 100,000, all these stocks that you all know, IBM, Johnson and Johnson, GE, American Telephone, all these magnificent US companies. And it was an incredible day. And I think what was even more incredible about it, the market closed up 4.5% that day. 4.5% was 35 points because the Dow was trading at 7.92. 4.5% today when the Dow is trading at 28,000 would be 5,000 points.
Joshua:
5,000 points in a day, that's the equivalent.
Kenny:
And the volume went from 30 million on Monday to 138 million on Tuesday, which was four times what we had done the day before all by pen and paper. It was probably one of the greatest days of my career but it was that moment that forever sealed the fate. I wasn't going anywhere else. This is the place I wanted to be.
Joshua:
You're in New York City, it's 82, the decade of the 80s, the decade of the 90s, rising prosperity, certainly in the 1990s the impression of New York, Brett Easton Ellis, bright lights, big city. What was life like as a young broker working in the exchange, the opening bell 9:30, closing bell 4:00 but then the city is all yours to own?
Kenny:
It was the greatest place to be. This was the greatest place to be. The city at the time was the greatest place to be because there was, as you said, rising prosperity. But it was like the rising tide lifted all boats. Everybody participated. It was dynamic. It was exciting. Every place you went was full of energy. I would come to the floor of the New York Stock Exchange every day and it was this magnificent energy. It was this personality of the 5,000 people that came to work here every day. It was those personalities that created the larger personality of the New York Stock Exchange. And it was by far the greatest place in the world to work.
Joshua:
Then we turn the century and it's a beautiful fall day, September 11th, 2001. You must be on the floor, quarter of nine or so getting ready for the opening bell. We know what happened that day. It took several days to get the market to reopen, where chairman Dick Grasso, the first responders, Governor Pataki, Mayor Giuliani up on the podium. I want to hear a few of the sights and sounds of that day at the reopening and get you to reflect on that.
Speaker 6:
We will single stroke and pause for two minutes.
Speaker 6:
All heroes will now open the marketplace.
Speaker 7:
Everybody should step to the plate right now and show the strength of the American economy.
Speaker 8:
This city is the capital of capital.
Joshua:
Kenny Polcari reflect on that day.
Kenny:
Wow! The emotions run high because at the time I had my own business, I had an office on the 55th floor of the second tower. That plane, that second plane went right through my office. The fact I'm even sitting here talking to you is in itself a miracle because I shouldn't be here. But for whatever reason I am. And so, it was an emotional six days because it was six days between the hit and the opening. It was on the 11th, we opened on the following Monday, the 17th. And when those towers collapsed, what people don't understand is that the market didn't open because the building was damaged. The market didn't open because we'd become so dependent upon technology up to this point that all the technology that ran the New York Stock Exchange as well is really from Canal Street South, all those cables and fiber optic cables and telephone lines, all that stuff ran through the belly of the trade center.
Kenny:
When the trade centers collapsed, all those wires got severed. Therefore the market and the country became crippled as a result because now the open outcry that was the market up until this point was no longer. And so the ability to trade stocks was now all electronic. And now that the electronics were really knocked out... The building itself was fine. It was, quote unquote, the infrastructure that got destroyed in that event that prevented us from opening. And so for six days the country came to a complete standstill, complete darkness. Because the minute you can't trade stocks you can't trade anything else. You can't trade a deriv of a bond, a fixed income, a currency, a commodity, nothing traded in this country. So we go completely dark. And so what ends up happening over those six days leading up to the 17th was this fear in the country of fear building. Because people started to be fearful of, was there a second shoe to drop?
Kenny:
Was there going to be somewhere else? Was there going to be Boston, Chicago, California? Was there going to be someplace in Europe? Was there going to be someplace in Asia? And so there was this national fear building. But there was also this global fear building because money moves around the world 24 hours a day. Sunday night in New York is Monday morning in Asia. Trading starts in Asia, goes from Asia to Europe, Europe to the US, back to Asia. And so US investors we could access Asia but since you couldn't do anything in the US we were really stunted. And Asian investors and European investors that come to the US couldn't come here because nothing traded. And so there was this global panic and fear building over those six days. Yet as a nation and as a country we brought in guys from around the country almost immediately because they had to rewire this building, connect all these servers that exist downstairs now to the outside world and reconnect the outside world into US.
Kenny:
And so think about the enormity of that task in light of what had happened. And so it was a tremendous effort on behalf of the country and on behalf of these heroes and all these people that did this. And I remember having to come down to the New York Stock Exchange on the Saturday and Sunday because we had a test assistant because we were going to get ready to go on Monday. Because really for the sake of the nation and for the sake of the country and for the sake of global finance we had to get up and running. No matter... I understood clearly what had happened three blocks away. But for the sake of the country we needed to get this market back up and running. And remember at the time the New York Stock Exchange was the central marketplace.
Kenny:
Everything came here. Now what we have today is a direct result. We could talk about that too. But as we built up into that day, we came down on Saturday and Sunday and we could come as far as Brooklyn Bridge and we had to get out. We had a walk from Brooklyn Bridge here and you had to go through three rings of national guardsmen. And you had to prove you worked here, you had to prove who you were and all that stuff. And so we came on Saturday and Sunday, we tested the phones, we tested the computers and it all seemed to work. And we were getting ready to go on Monday. And so on the Monday morning it was difficult on a number of levels. It was difficult emotionally. It was difficult physically. It was difficult mentally. We had lost three of our own because-
Joshua:
In the Trade Center.
Kenny:
... they were way up on the windows of the world at that breakfast. And so when the Monday came, there were people who didn't come back. And then there were people who couldn't come back. They couldn't just come back. But the rest of us came and we showed up. And on that day, Dick Grasso and all the people Schumer and Clinton and the firemen and the policemen. And it was just as you heard, it was exactly like that. And I'll remember as we got close to the bell, as the bell started to ring, you could hear everybody in the place. There were now five trading rooms. At this point, there were five trading rooms. You could hear 5,500 people just go [breathe in] and hold their breath as they flipped the switch. The bell rang, they flipped the switch because the computers were going to light up or they weren't. And if the computers did not light up there would've been global panic. At this point, for six days people couldn't access their money. And so you could feel the panic in the room but what happened was when they flipped the switch, the computers lit up.
Kenny:
And the tape started to trade and orders started to come in and stocks started to trade. And so there was a little bit of sense of calm but the market came under immediate pressure. Not because there was anything wrong with the economy because people were so fearful over those six days, they didn't want to own anything anymore. They didn't want to own Johnson&Johnson or GE. Great stocks but they said I want my money. Because when people get fearful, what do they want? They want their money. They don't want anything else. And so people around the world sell, the market closed down 800 or 900 points that day on massive volume. I'll never ever forget. You almost didn't have time from the minute the bell rang. You almost didn't have time to breathe or think or eat because it was all about getting the nation back on its feet.
Kenny:
And I'll tell you this, 4:00, when the bell rang six and a half hours later, when the closing bell rang and it stopped ringing, you could hear those same 5,500 people exhale right from when they inhaled at 9:30. And it was then that it became really emotional. It was then that people hugged each other and they cried. And they cried not because they were afraid anymore. They cried because here we were after experiencing this event, six days later, we got the very source of what America is, which is capitalism. And this building reflects that 1000%. Completely reflects that. And here we were six days later and the market suffered big that day but yet we did it. We did it and the computers lit up and trading happened and it might have been ugly but I'll tell you something, in the 37 years that I've been here that was probably the proudest day for me and everyone on the floor to not only be an American but to be an American that was right here at the very heart and soul of what defines American capitalism. And it was an extremely emotional moment. It was an extremely emotional moment.
Joshua:
And what came next was a complete transformation of how equities are traded in America. We'll be back with more with Kenny Polcari after this.
Speaker 1:
When the pressure is on to get that final order in before the close, you need to make sure that you have fast, secure access to the world's leading markets. Whether you need to trade or access data, on ICE's future exchanges, the NYSE, other third party exchanges or the leading cryptocurrency exchanges, ICE's Safety Network delivers premier content and direct market access to hundreds of global exchanges and trading desks around the world. Learn more about ICE's Safety Network at the ice.com/SFTI.
Joshua:
Back now with Kenny Polcari, managing director of O'Neil Securities. Before the break, we were talking about the evolution of the New York Stock Exchange leading up to 911, Ken, what that day represented. And then you could almost draw a line of demarcation from then forward. Dick Grasso's reign comes to an end. John Thain comes in, Duncan Niederhauer, the acquisition of the NYSE by Intercontinental Exchange. So how is an average investor to think about this period from 2001 forward to today? The way your life has transformed, the way the floor has transformed and the ubiquity of the technology that drives equity trading today.
Kenny:
So I think what you have to understand is the role that technology had started to play prior to 911 and then the role that technology played post 911. And so prior to it was all about efficiency. It was all about using automation and computers to drive efficiency. Post 911 it was the conversation and the narrative change from efficiency to now how do we use technology and automation to provide security stability as well as efficiency. And so as a result of that event... And here's where a lot of people may not understand it. So let's talk about it. As a result and it might have happened anyway but that event lit the fire under its backside. Today we now have 10 exchanges. The New York Stock Exchange is a physical exchange. The other nine exchanges are virtual. They trade in the cloud. You can't touch them, see them and feel them.
Kenny:
The servers that run Those exchanges are located all over the country. They're not located downtown Manhattan. Because if they were they'd blow up downtown Manhattan, you bring the country to its knees again. So now they're located all over the place. And so they can't really disrupt global finance anymore unless they start blowing up the whole country. And if they blow up the whole country, who really cares what GE is trading? We got much bigger problems. And so if they should attack the New York Stock Exchange, is it a tragedy? It's absolutely a tragedy. But again, the country's not held hostage because the other virtual exchanges... It will make it ugly but we won't be held hostage. So that's the first thing that people need to understand is that there's a method to why we have what we have today.
Kenny:
And then the technology continued to improve. As we moved along, the technology just got better and better and more efficient, which then plays right into how we trade today, why we trade today, why today there's less than 350 people on the floor versus the 5,500 that were. Because that part of technology is efficient. It creates that efficiency. How's it changed? Certainly my life it's certainly changed the way that I do business. I no longer just represent the interest of institutional customers here at the New York Stock Exchange. I have to be able to access all those other exchanges and pools of liquidity. And I do that electronically. Because you can't... There are no human beings in those other venues. They're all electronic. And so I have to access them and trade in them and represent myself in them using electronics.
Kenny:
And so I do it all day long as does really anybody now in this business. And so what we've lost a little bit is the ability to look in somebody's face when it was an open outcry, New York Stock Exchange... I could walk into a crowd and I could assess supply and demand. And I could look at you and I could make a bid, you could make an offer and then we could have a further conversation and really determine liquidity and size and supply and demand. Today you have to do it by feel because in the other venues there are no humans to talk to. So you have to feel it. It's like almost being blind where you put a bid in and you see if somebody hits you. Because if they do then there's a sell there.
Kenny:
You put an offer in, see if somebody takes you. Because if they do then you know there's a buyer there. Versus here on the floor I can walk in a crowd and I can physically see you as a buyer or seller. I can continue to have a conversation with you here the way I used to. The way we trade those, we then would trade electronically. The old open outcry is no longer. So we still trade electronically. It's very efficient. It's very state of the art. And quite honestly as an American post 911, having lived through 911, I completely get it and I support it. Has it changed my life and my business? It absolutely has. Because now I have to remain relevant using technology because the technology's constantly trying to become more efficient. And more efficient just means how do we get rid of more people.
Joshua:
As you're describing the designated market makers you're careful to say he or she, we have a room here at the New York Stock Exchange here at the big board club named after Muriel Siebert , who was the first holder of a seat on the exchange as a woman. And in addition your wife, Evelyn, was a broker or is a broker.
Kenny:
Was.
Joshua:
Was a broker and you met her on the exchange. Talk about the evolution of the role of women here at the exchange over the years.
Kenny:
So it was really, really fascinating for me to be here. Right at that 1980s was when women were really starting to hit their head on the glass ceiling. But my wife started here right out of high school as a runner on the New York Stock Exchange in 1976. And then she got picked up fairly quickly by a small firm, Mitchell Shriver. They taught her how to do the teletype. She did that. And then she started to say I want to do his job and Mitchell Shriver said women don't do that job. And so if you have to know my wife, she didn't take that for an answer, so she quit and she got a job at Oppenheimer. Oppenheimer then told her they would teach her how to do that job. And so she had to first start as a teletype. So she did the teletype thing and after three months she said, "Okay, I'm ready." They said, "No, we're not going to teach you how to do that job." And so she quit again.
Kenny:
Now it's just 1980. And she went to work for Donaldson, Lufkin & Jenrette where she knew a bunch of the brokers and she knew some of the traders. And it was a time where women were starting to hit their head and big firms realized that and so big started to change. And so they hired her and they promised her they would teach her. And in fact they did. And so they taught her how to be a clerk and how to talk to the traders and how to handle order flow and trading strategies. And it was a fascinating... Again, it's fascinating to do. And then it was, I think, 1981, she was approached by then Goldman Sachs, who had no women, to come out and run their booth in the blue room. It was a whole booth in the whole blue room. So it was a fairly big job for a woman in 1981. Now check the other box.
Kenny:
My wife is also a minority because she's Puerto Rican. And so it worked really well. She took that job. She ran the booth. She had four guys who worked for her, reported to her and she really managed and ran that booth. And it was a fascinating experience for her at the time. And then she had an independent broker who was on her line at Goldman Sachs who was retiring and he just adored my wife. And he said to her when he retired, "I want you to take over my business. I want you to take my seat. I want you to take my business. I want you to become a member of the New York Stock Exchange." And she debated this opportunity and I couldn't get my head around why she was debating this opportunity. Why are you even thinking about this? This is the most amazing opportunity you could ever get.
Kenny:
And at the time we were dating and she was concerned that if she took this job as a member of the New York Stock Exchange that my ego was going to somehow be bruised and I wasn't going to be able to handle it. And I looked at her and I said, "Listen, if you don't take this job, then my ego's bruised and I'm breaking up with you. Because that's not the woman I thought you were and it's not the woman I'd rather be with." So she took the job. She became a member in April, 1984. I became a member in August of 1985. And you asked a question about how did that happen for me so quickly between when I started here as an intern and then I became a member. Two things happened. The birth of the bull market.
Kenny:
So the market was just going crazy. And then your ability to understand and your ability to understand supply and demand, your ability to negotiate, your ability to understand the market, your relationship with your clients, your relationship with the brokers on the floor, your relationship with the clerks on the floor. All that played a very big role and I was good at it. It was also time and place. Because the market was going crazy and there was an opportunity for me as well. So I became a member in August of 1985. We got married in October, 1985. She had her business out in the blue room. I worked with the guys I worked with in the main room. And so she retired in January of 1987. And my daughter was born in March and really from there the rest is history. She never came back to work here in that sense because then she went on to chapter two of her life, which was to be a mother which is what she wanted. And now my kids are grown and now she's director of development at a veteran's charitable organization.
Joshua:
Your history has continued well past then and continues on today. You are one of the most recognizable faces and voices on the New York Stock Exchange partially because of the presence of these 30 to 36, call it 34 news organizations that are planted here every day reporting on the markets and what's happening today. Cameras in every angle of the exchange, microphones all over the place, how has the presence of so much news gathering equipment and coverage of this building changed the institution?
Kenny:
Well, I think it's drawn the curtain back. Because I think it's allowed the institution to exist in everybody's living room and give them a view and a shot of what really goes on there. And listen, it started back 1994, 1995, when Dick Grasso approved Maria Bartiromo, who at the time was a 28 year old journalist with CNBC, to broadcast live from the floor. And I'll never forget when that first happened. People thought, what are we doing this for? And why is this young woman here who doesn't understand what we do? And honestly she gets in... Most of the time she got in the way because there were 5,000 people running around and here's this-
Joshua:
I remember getting jostled-
Kenny:
And here's this woman trying to report from the middle of a trading crowd and it would be pandemonium. But everyone grew to really appreciate and adore Maria. She did a lot to ingratiate herself to everyone down here. She realized that it was a huge opportunity not only for her but for the world really because she brought it into everyone's living room. It was really CNBC and her that brought it into the living room. And so in that sense, all the other of news organizations that followed did the same thing. And they're not just US organizations. They're all international.
Kenny:
There are stations from Europe, stations from Latin America, stations from Eastern Europe, stations from Asia. And so it brought the very core of American capitalism into homes around the world. And so in that sense I thought it was fascinating. And when I had the opportunity, when I first started to appear in the media, which was 2000 start of the century, I could appear across a range of channels. I was an approved person and I could do it. And I did until six years ago when CNBC came to me and said, "We don't want to see you on the competition. We'd rather just have you with us." And so today I represent CNBC only or anyone of the NBC family of stations. So it could be NBC or MSNBC.
Joshua:
Except you got dispensation to appear inside the ICE house.
Kenny:
Here I am inside the ICE house. Yes I am. But you don't compete with CNBC. So that's okay.
Joshua:
Not yet. You talk about information and awareness about the exchange being spread around the world. And it starts, I guess with Maria Bartiromo spreading it around the country on CNBC before she moved to Fox Business New. Despite all that, we started out this conversation when you got your internship they said, do you know the difference between a stock and a bond and supply and demand? Those fundamental ideas of financial literacy are probably not understood by, put a number on it. 95% of young people in America. How do we get people's financial literacy up in the United States?
Kenny:
So that's a fascinating question. And I have to tell you, I think a lot of it starts and it's too bad it can't happen anymore just because of the world we live in. But I think a lot of it starts by bringing people right here, letting them see it. And I do a lot of that. I do a lot of that with colleges and university. I do a lot of that with customers and clients and organizations. I do a lot of that on behalf of the exchange with listed companies, educating even those people, letting them see at the very core how it works and talking to them through the process. And I think that that is something that we need as a nation to do more of. Because I think it's so important for people to really understand how the markets work, how they function,
Joshua:
We mentioned at the beginning of the show that you've been here for 37 years. You've been blessed. This career has given so much to you. You have, it seems as your career has progressed, tried to give a lot back. A few years ago through the Drive for Pediatric Cancer, you have shaved your head. You do so many things that are philanthropic and charitable. You've also helped raise awareness for Headstrong, a charity that provides 911 families with cost free, stigma free and bureaucracy mental healthcare that Evelyn is a member of. I want to hear just a little bit of some of the voices from Headstrong and have you talk a little bit more about that.
Speaker 10:
It was a very isolated, hostile environment.
Speaker 11:
Every time my truck stopped and I got out I was just a giant target.
Speaker 12:
You were so worried and concerned for the Marines around. Any little noise, dogs barking at night, the call to prayer.
Speaker 10:
On guard all the time.
Speaker 11:
You saw a lot of tracer fire-
Speaker 12:
the battlefield with one to five pound explosive.
Speaker 11:
I lost one of my closest friends.
Speaker 12:
My direct boss got blown up that day-
Speaker 10:
I was hit from the front and the blast knocked my head back
Speaker 12:
This Marine is dead. Okay. Get them off the battlefield and continue on with the mission. I can't believe that I just survived that.
Speaker 10:
relying on me not get blown up.
Speaker 12:
I remember staring...
Joshua:
Kenny Polcari, veterans are five times more likely to suffer from depression, 10 times more likely to have PTSD and have a 21% greater chance of committing suicide than the civilian population. What are the things that you do at Headstrong to combat this scourge and what should we all know about it?
Kenny:
So Headstrong was an organization that was begun by returning vet, returning a Marine. When he came back to this country, post his service, he looked at his parents and he looked at some very influential friends of his and said, "This country has no idea what's returning. They have no idea what these young men and women have seen and lived through. And the difficulties that they're going to have coming back." And we're talking about the mental difficulty. We're not talking about the physical difficulties because there were plenty of organizations in this country that helped the veterans with physical difficulties. There were not a lot that helped the veterans with what you call the hidden wounds of war, which are the mental wounds of war. And so this veteran and his family seeded this organization and my wife went to work there immediately. Partly because we pride ourselves on being philanthropic but partly also because for me and for us and for my wife it struck a real chord because it was the events in 911 that created this war and the opportunity for these men and women to give of themselves on behalf of this country.
Kenny:
And it was my experience in that building, in the World Trade Center, the second tower of the trade center that almost took my life that made us incredibly passionate about giving back to these men and women. And so this organization is exactly what you said. It's bureaucracy free, it's cost free and it's stigma free because everything around mental health care people can easily talk about cancer and they can easily talk about other diseases but everyone's so afraid to talk about mental health care and there's a stigma somehow associated with it that isn't associated with any other disease in the country, in the world really. And so this organization treats these returning 911 combat vets, you had to start somewhere. So we started with 911 combat vets. We started here in New York. We partnered up with Weill Cornell. They have an outstanding clinical program that treats these kids, these men and women.
Kenny:
And what happens is you know the stats. 22 a day are committing suicide, 22 vets a day are committing suicide. And so this organization, these veterans come to us and they are seen within 24 hours by a clinician. Within 24 hours. Contrast that to what happens at the VA. You go to the VA and they're so backlog, they give these kids a handful of drugs and they say come back and see us in 45 days. This kid may not make it 45 days. And so when they come to us at Headstrong they go through this process. They're seen within 24 hours and then they have cost free, bureaucracy free, anonymous, it's really anonymous, mental healthcare for as long as they need it. There's no, okay, you get 10 sessions and you're done. You need it for five years, you're going to get it for five years. We are going to save you. And in the six years that we've been in existence, we haven't lost a single veteran. And we've now gone from New York, which is where it started. We are in Houston, San Diego, LA, Chicago, DC. We're launching in Denver, we're launching in South Carolina. I get the Carolina it's confused. It's South Carolina.
Joshua:
Huge military population.
Kenny:
In South Carolina and out in Washington state. And so it has grown tremendously. I'm on the board of the organization, so I help direct it in terms of growing and raising assets and raising money and raising awareness. I also happen to be the auctioneer at all the events.
Joshua:
Of course, you are.
Kenny:
Just works out that way. And we have our annual event in October here in New York City. We have it at Chelsea Piers Last year we had 700 people at this event. We raised over $1.6 million on behalf of the veterans. It was an incredibly emotional yet rewarding experience. We have these vets, like you heard on the intro, these vets come up and they'll get on stage and they will speak their story to 700 people. They will tell them what it was like. And they will tell them how they suffered and they will tell them how Headstrong has saved their life. It's an incredible organization.
Joshua:
I've got to let you unfortunately get back to the trading floor, Kenny Polcari. It's been such an incredible journey that you've taken us on. As we wrap up you've seen this incredible change in the six floors below us on the trading floor of the New York Stock Exchange. And not only at the exchange but across the financial sector. Where do you think investing and trading is headed? And is it headed, in your view, to a good place or not such a good place?
Kenny:
Well, listen, we could talk about that all day long. I would love it if we were trading back in fractions of a dollar open outcry, if you ask my honest opinion. But now it's... Listen, trading is going to continue to evolve. It's going to become more efficient. It allows people certainly more access. I think it's going to go to a more complicated place because I think they're going to continue to be very complicated and complex products that are now created. Look, we saw it the other day, two weeks ago. Those are complicated complex products. Not built for Joe Q Public but Joe Q Public benefits or gets hurt as a result of when those products go bad. And I think people need to understand that while those products exist, they exist for a reason. And you may have dislocations at certain times based on extraneous circumstances of what's happening, whether with the Fed or interest rates or a geopolitical issue that may cause some of those products to react negatively. But in the long term, listen, the US capital markets are a place to build and generate and create wealth for a lifetime and for generations to come and that will never change.
Joshua:
Kenny Polcari, thank you so much for joining us Inside the ICE House.
Kenny:
Thank you for having me.
Joshua:
I hope the name is beginning to settle with you.
Kenny:
It is. It is. It took a little bit of time but it is.
Joshua:
Thanks buddy.
Kenny:
Yeah.
Joshua:
That's our conversation for this week. Our guest was Kenny Polcari, managing director of O'Neil Securities. We mentioned a few things on the show that you may want to check in on. One is Kenny's blog. You can find that at KennyPolcari.com. That's K-E-N-N-Y-P-O-L-C-A-R-I.com. You can follow Kenny on Twitter at Kenny Polcari, spelled the same way. The foundation for veterans that we mentioned can be found at getheadstrong.org. If you like, what you heard, please rate us on iTunes so other folks know where to find us. It's really the easiest way we can get some notice of what we're doing here Inside the ICE House. If you've got a comment or question you'd like one of our experts to tackle on a future show, email us at [email protected] or tweet at us at NYSE. Our show is produced this week by Pete Ash and Ian Wolf with production assistance from Ken Abel and Steven Portner. I'm Josh king, your host, signing off as always from the library of the New York Stock Exchange. Thanks for listening. See you next week.
Speaker 1:
Information contained in this podcast was obtained in part from publicly available sources and not independently verified. Neither ICE nor its affiliates make any representations or warranties expressed or implied as to the accuracy or completeness of this information and do not sponsor, approve or endorse any of the content here in. All of which is presented solely for informational and educational purposes. Nothing here in constitutes an offer to sell or a solicitation of an offer to buy any security or recommendation of any security or trading practice.
