John Lothian News talked to Gedon Hertshten, the founder of G.H. Financials, for our Open Outcry Traders History Project. This is part one of a two-part video conversation with Hertshten.
As a kid, Gedon Hertshten wasn’t sure what he wanted to do, but it had to be something that would make him rich. His father wanted him to stay and help out on the family farm, but that was not what he wanted.
Hertshten got his start in trading when he came to Chicago from Israel after five years in the armed services there. He came to Chicago to study and met his wife, whose brother was a member of the Chicago Board of Trade. She was trading commercial paper on the floor but didn’t like it at all; however, when she told Hertshten about it, he thought it was something he would like to do. He watched all the jumping and screaming on the trading floor and thought that was exactly what he wanted.
After taking classes to improve his English, he went to a Northeastern university, where he thought he would take courses at night while trading during the day. But while in class he couldn’t focus on his studies because he kept thinking about what he had done during the trading day. So he decided to finish his studies later and focus on trading. He finally got a B.A. 15 years later.
When he started out at the CBOT in 1978, he said, you couldn’t lease a seat, you had to buy one. He bought a Financial Instrument Membership (FIN) after borrowing some of the money from his brother in law, Ray Cahnman, who was already a trader in the pit. Hertshten paid $85,000, which is the highest ever paid for a CBOT seat, he said.
Trading fit him from day one, he said. He embraced trading so enthusiastically that at first he was disappointed whenever Friday arrived because it meant he couldn’t trade for two days.
“I thought the weekend was a waste of two days,” he said. “But a few years later I was very happy when Friday came.”
He enjoyed the market when it was fast and when volatility was high. He traded very well in those conditions, he said. “There were basically no rules, everything was open. It sounds boring but I really liked everything there. My first year and a half of trading I never took a second off. I would never leave the pit until closing – from 7:20 a.m. to 2:00 p.m.”
His worst trading day was In 1981. He had started trading only from the short side, he said. “When interest rates started changing I went short Treasury bonds outright. I thought the prices were very high. I sold it and didn’t cover it, because I didn’t want to take the loss. The next day it went up a little more but I didn’t want to get out because I didn’t want to take the position. The third day, I got out of it. That was three days that probably cost me a few years of my life. I was lucky the market didn’t go much worse against me. I lost quite a lot of money but I learned a good lesson,” he said.
The pit traders were mostly nice guys, he said, but he did witness some fights on the floor. One day an obnoxious broker, who didn’t like it when the locals made money, got in a fist fight with another obnoxious trader in the middle of the pit, “and all the traders and brokers were standing around watching and they didn’t let the pit reporters stop the fight. And some of them were kicking both of them at the same time,” Hertshten said.
“One of the most important things on the floor used to be to get along with people,” he added. “If people didn’t like you they would get at you sometimes.”
Openings used to be so crowded that some traders came early in the morning to get a spot. Traders would even hire someone to stand in line, Hertshten said. “You had to wait in the hallway because the floor was not yet open. The spot was very important. They would get to the pit and put a card on the floor, and then they would go get breakfast and come back later.”
Hertshten would get to the floor much later, when it was already covered with cards. “So I just kicked the cards aside,” he said. “And they came back and said, my card is here – you’re standing on my spot. And I said, ‘I’m sorry, I didn’t see any cards.’ And they would argue, but then the bell would start and nobody paid attention anymore. You could argue until the bell, but after the bell nothing was important and you had to focus on trading,” he said.
