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 Writing
a traditional Bio page did not come naturally for us. A
long list of jobs at different firms with different titles
and an explanation of all the time spent away from work
have always seemed like a confusing set of reasons to be
hired as a money manager. Measuring true passion about
this craft and caring for the people who trust you to do
what is best for them should be inversely related to the
length of that list.
More
authentic K&C is to share a story or two instead. So,
after talking for several hours one day we decided to use
those notes we had scribbled down for us about something
more important than each other - a team in every way - and
how it all came together. Neither of us has a resume
because we never wanted another job. Our paths to get here
were strangely perfect. We got something much luckier than
a big break early in our careers – none at all. Only
with that gift did we come to find out that there was
nothing in the world finer than to genuinely love what you
do every day and want nothing more.
There
Are No Coincidences
One of Mike Catalano’s most vivid childhood memories was
playing a Sports Illustrated Baseball game, made in 1972.
He didn’t play it like most 12-year old kids. The rule
book noted the game should take one hour. Volumes of real
statistics folded together to produce a set of likely or
unlikely game results. Mike got it down to 10 minutes so
he could create more results. Why? The odds of success or
failure and each outcome fascinated him for some reason,
more than playing. Each different input created different
outputs and he kept track of every single scrap of data in
a huge spiral notebook for each season. He played
countless variations of a 162-game season for each team
and kept separate records meticulously recorded on pages
that are still stored in his mother’s New York home.
Ryan
Krueger’s first job at the age of 13 was one nobody else
wanted. He sorted tens of thousands of baseball cards in
the back room of a
shop, just a bike-ride around the corner from his house.
Studying the statistics on the back as they were filed, he
searched for patterns that were predictive of future
success from one year to the next. He created his own
formula that he then used to enter a national Rotisserie
baseball league against adults that summer. New back then,
this now famous game measures success by an ability to
predict a player’s stats in advance. Ryan placed first
in the country. He fondly recalls taking the winnings and
opening his first "trading desk" from that
windowless shrine to numbers. By the end of the next
summer, he was buying blocks of thousands of cards for
pennies each and selling them for nickels and dimes
because he had discovered something else - about people
and prices. He bought local fans favorite cards from
stores in other cities, where nobody cared, and then sold
them at home, where they were coveted.
To this
day, Mike and Ryan have never shaken their endless
fascination with combinations of numbers, tweaking inputs
and studying outputs, along with an admittedly strange
desire to look for patterns and overlooked pricing
differences that others may not have considered. Never
knowing each other, growing up worlds apart, they started
coming together years before meeting.
Looking
back now, they can only describe each other as the brother
they never had and are truly amazed to recount so many
remarkable similarities while growing up in New York and
Houston, respectively. They hardly believed each other
when describing that their first stocks purchased were
both funded from umpiring baseball games as teenagers.
The
First Trades
They earned every nickel invested, perhaps later
explaining their relentless desire to always do their own
research and take complete responsibility. A shoe company
for Mike and a computer company for Ryan, they found one
stock each to start with and miraculously tripled their
original investments of about a thousand dollars, almost
identical outcomes, which they still laugh about to this
day. Another similarity was that they lost every penny of
that on their next few trades. A greater lesson could not
have been learned and became one of an entire book of
trading rules they later wrote together: "Losing
hurts more than winning helps." But they were hooked.
The
Big Breaks
Each began their careers – Mike on Wall Street and Ryan
on Westheimer Road - with the same firm. However, this is
the part where "no big break becoming the best gift
of all" comes into play.
The firm refused to let Mike near stocks, shoving him
into a back office role instead. He spent the next four
years trying to learn his way out and begged for a chance
to trade. Looking back he remembers being turned down by
at least 20 different managers. Finally, one day came the
inspiring words he’ll never forget, "Fine, since I
just fired somebody I have a desk, start tomorrow."
Unfortunately his old boss would not let him go from the
back office. Stuck in between his job and his dream he did
the only thing he could figure out – both. Working day
and night to complete both duties for weeks, Mike finally
got released from the back office and onto the front row,
quite literally, of Wall Street.
The firm would not even interview Ryan when he applied.
He wrote a letter to the manager, anyway, detailing his
plans for success (the "Hail Mary" as he now
calls that letter) and asked to visit with him just once.
That manager decided to open the door – to the mailroom
– and offered him the firm’s minimum salary. Later
that year before leaving for his training class in
Connecticut, Ryan learned just how much that manager went
out on a limb to hire him after meeting with his boss who
threw down a binder the size of two telephone books and
announced, "We forgot to give this to you a few
months ago, but it needs to be done by Monday." Too
naïve to know that was likely their way of saying get
lost, he completed three months of material in three days
before boarding a plane to join a class of more than 100.
Each member knew only a handful would survive but none of
them got the instructions that Ryan did, in words he will
never forget, he was told, "If you see the divisional
director do whatever you can to not be seen. Jump behind a
couch if you have to. Just make sure he does not meet you,
or he will send you home because of your age."
Mike and Ryan were handed nothing, but a chance, and
will be forever grateful. Looking back they are convinced
they did not succeed despite those obstacles, rather
because of them. Their first year’s salary came to
$36,000 - combined. Yet, they still smile more about those
first few years in this business than you could imagine.
When they speak to interns, classrooms, or graduating kids
these days, they have one piece of advice – "While
your friends look for good jobs, figure out instead the
one thing you might be great at and offer to do it for
anything in return. If you are right, you will never have
a job for the rest of your life."
The Chosen Few That Grew
Each of them spent years picking as many brains as they
could, studying every market they found, and testing all
of their trading theories. But the harsh reality in this
business is that somebody still has to trust you with
their money to become a money manager. They were handed no
clients. All they knew how to do was share ideas that
could make people money. This approach was an unusually
simple formula in those days on Wall Street. To the
firm’s dismay, shunning the products it wanted sold,
Mike and Ryan made a lonely decision which they now owe
everything to. They decided to build and manage their own
stock portfolio and do all their own research and trading.
To explain how rare that was at the time is hard for
either to do. To realize they had not even met yet and
were living these parallel lives is even more difficult to
believe. Each will describe a cheap apartment and no
social life as key ingredients to learning this business.
They were simply consumed by the markets. Spending six or
seven days in the office every week and countless evenings
working might have been interrupted by a house or
girlfriend. "Another lucky break," they’ll say
only half-kidding.
Once they did meet, almost immediately a few minutes of
conversations grew to hours of sharing ideas. It will
sound terribly goofy to anybody who does not know them
now, but it was as if they had their own language they had
never heard spoken outside their own minds. Notes on
tickers turned into sketching their designs on yellow
legal pads and comparing them back and forth day after
day. Two years of this went by until they decided each had
pieces of a puzzle the other did not, so they decided to
combine their two management programs.
Ryan will describe Mike as the best old-fashioned stock
picker he knows. "There is no one with better
instincts. He spins the globe too. He has an insatiable
appetite for world history and politics and then puts
together the stock market’s chess board around it
all."
Mike will explain Ryan’s ability to design his
"traps" to run stocks into, in combinations that
would yield selections few others would even consider.
"He is fascinated by unusual possibilities and
under-scouted industries and is able to organize it all in
a disciplined process that was unlike anything I had ever
seen."
After forming a partnership in 2001, they combined what
they had been doing individually. They began actively
managing their own portfolio together, built out their own
technology platform, ran their own research department,
and completely designed a proprietary trading methodology.
Their trading success allowed for a small number of
people to follow their advice and let them manage their
money. They can each tell you precisely how those first
few came to trust two guys with nothing but ideas they had
tirelessly questioned and tested. And they worked.
Their goal was always to share a combination of bottom
line performance together with candid communication about
what was going on, in a way that would be unrivaled
anywhere in the industry. In doing so, those few clients
grew and lived in dozens of cities, several states, and
different countries around the world, thanks simply to the
kind words from those who knew Mike and Ryan best. They
shared with friends and colleagues their track record and
how they were treated.
The Birth Of Our Firm
Mike and Ryan decided to open their own firm to serve
those who trusted them. They left under the best of
circumstances as Senior Portfolio Managers at Citigroup,
the parent company of the same firm where Mike and Ryan
started in 1985 and 1996, respectively.They still enjoy a
great relationship and manage money for some of the
bank’s clients and senior employees to this day. They
opened Krueger & Catalano Capital Partners LLC in
March of 2006.
Those who originally trusted them might appreciate how
much money they have made over all the years since, but
may never know just how grateful Mike and Ryan remain for
earning the privilege of their loyalty. Each will say
quite often, "It’s impossible not to be motivated
every morning and truly inspired to do great things for
people who completely trust you. We feel like we must earn
it again tomorrow; and that’s a perfect combination for
a true team to be formed, which is pretty rare these
days."
Trust is not a word they throw around lightly. It does
not take long for Mike or Ryan to explain the formation of
this firm. The entire deal was structured with one
handshake. The only paperwork anywhere close was a stack
of napkins on the table at an International House of
Pancakes where they met that fateful morning. Whenever
asked about the key to their partnership, they will
explain the answer was the absence of attorneys,
accountants, consultants, or clauses that morning. Simple
trust and honesty can trump them all.
They opened their offices about five minutes from their
Memorial homes to complete their favorite trade of all,
which is no commute from their biggest inspirations - five
little ones. The ends of their days unite them as much as
their pre-dawn huddles on the trade desk. Mike and Ryan
learned they had always been bound by the same belief
system, set of personal values, and the desire to enjoy
each family moment they work so hard to create. They leave
for homes that are only a few blocks apart and play with
their kids as hard as they worked that day – a strict
company rule.
Kids from all over the neighborhood know which two
yards will have an umpire, coach, fill-in, or dad,
whichever is needed until well after dark and usually
until one of the moms yells at the two biggest kids of all
that it is time to stop playing - until tomorrow.
Their business requires attention and tireless work,
usually six days a week to accomplish the standards that
Mike and Ryan have set and promised each partner. But if
work is described as what you do when you’d rather be
doing something else, then they have truly never worked a
day in their lives. Their families get everything else
they have in a balance that will never be compromised.
Their stated ultimate goal is: to never finish.
When the door was opened to their new firm, in the very
first week over $100 million was entrusted to their care
before their assistant even started. Thankfully, they knew
exactly how to set up a back office and mail room.
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