The Daily Reckoning PRESENTS:
We all start somewhere, and for Kevin Kerr, ‘somewhere’ was with a philosophy degree and a lack of funds. Until one day, a simple question changed his life forever. Read on, and see what it’s like to be an inexperienced trader in a world of frenzied finance. 

It seems that everyone, at one time or another, asks you, “What was your major in college?” When I would answer, “philosophy”, people would often look puzzled. Quite frankly, I felt the same way. I mean, what do you do with a philosophy degree anyway? The listings for philosophers in the want-ads section are thin at best. Funny enough, years later I would come to find out that many of my colleagues in the trading and publishing businesses had been philosophy majors, too. So I guess law schools, trading floors, and publishing houses are where former philosophy majors end up.

Anyway, I graduated from the University of Southern California with my shiny new philosophy degree and promptly left for Europe for three months with my best friend. When I got back, I realized that my already strained student budget was even more threadbare. I had no desire, nor the LSAT score, to attend law school. But I was fond of eating. One day my friend Tim Butler mentioned to me that his brother David needed an arbitrage clerk on the trading floor. I said, “What trading floor?” This question changed my life.

Up until that point the only exposure I’d had to commodities was back when I saw the movie Trading Places. I truly didn’t know livestock from preferred stock. Well, when I asked what an arbitrage clerk did, my friend said, “I don’t know, but he’ll pay you $22,000 a year.” Now, for someone just out of college without two nickels to rub together, $22,000 a year sounded like a great job.

So there I was on a warm August morning in New York City, ready to launch my career on Wall Street. I headed downtown on the number four train, cramped as always, decked out in my best suit and tie. I got off at the Fulton Street station and took the short walk over to the World Trade Center. There I searched for 4 World Trade Center, which housed all four New York exchanges at the time: The New York Mercantile Exchange, COMEX for the precious metals, the Coffee Sugar and Cocoa Exchange (CSCE), and my destination, the New York Cotton Exchange.

The six-story black building was dwarfed by the Twin Towers, and few noticed the buildings that sat at the base of the towers. I found the elevators and pushed the button for the fifth floor. It was very early - around 6:15 AM. I was eager to make a good impression. Unfortunately for me, nobody was there yet. As I got off the elevator, the first thing I saw was the letters “CEC” directly on the wall in front of me. They stood for Commodities Exchange Center. I walked up to the guard and he looked at me strangely as I told him I was here to be an arbitrage clerk in the Dollar Index.

He must have thought I was nuts, dressed in a suit and tie and trying to get in at 6:00 AM. He took pity on me and issued me a visitor’s badge and told me I would need to get my credentials later. He then directed me to the entrance to the trading floor and said that nobody was in yet but I could go straight through that entrance. I headed over that way; the quiet darkness inside intrigued me.

As I approached the top of the entrance I could hear the hum of all of the equipment. There were numerous television monitors; some telephones were ringing, but most just had red lights flashing above them. Ticker tapes (electronic ones) on the walls were flashing quotes and news into the dark, empty room. I remember in the darkness hearing a big thump every once in a while. Later I found out it was the time-stamp clocks - hundreds of them-making the loud thumping noise.

The monitors hung from large poles in the center of the trading pits. The pits were all different sizes and shapes; the majority were octagons, but some, like the orange juice pit, were just circles with a wooden ring. The room itself was cavernous - almost three stories high, I found out later - although it was so dark that I couldn’t really tell then. I remember the floor was very clean-not one bit of paper or anything else. I wouldn’t realize how clean it was until later in the day.

When I found my way over to where I was supposed to be meeting David Butler, my friend’s twin brother, I sat down on the edge of the pit and just looked around. Suddenly the lights came up and it was as if someone had turned on the sunshine in a huge stadium. Now I could see just how big this trading floor was. It was enormous-like nothing I had ever seen before.

Even though I had no clue about what to do, I was put straight to work. I was shown where the phones were. Then I quickly took off my jacket and tie and was handed a trading clerk’s jacket, green with blue trim. Our clearing firm was Gelderman, and green and blue were their colors. Anyway, I was quickly shown that the phones didn’t ring; even if they did, you couldn’t hear them, so above each phone was a light. The lights indicated the phone was ringing, and when it was busy all of the lights were flashing. This was when I realized that I had stumbled into no ordinary job.

The Dollar Index market was a small pit with about 50 people, if that. To me at the time, it seemed like a very tiny, crowded space. People were coming in with their multicolored trading jackets, holding their trading cards, and nobody really said much - certainly not to me. I was instantly initiated into the fraternity once the bell rang and the frenzy in the pit began. I was overwhelmed - the noise, the kaleidoscope of multicolored jackets, the sheer volume of paper everywhere, all made my head spin.

When the closing bell rang at the end of the day I felt as if I had been through a war. Most of the time throughout the day I’d had no idea what was going on and I felt totally lost, but I stuck it out. I remember a trader, whose badge read “GAMA,” asking me, “Are you coming back tomorrow?” He must have seen the forlorn look on my face. But come back the next day I did, and every day since. And while I wouldn’t trade (pardon the pun) my experience for anything, I hope I can help you learn and understand the commodities markets from an insider’s perspective without having to go through all the turmoil I did (unless, of course, you want to!).

© 2007 Kevin Kerr
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Editor’s Note: The above was taken from Kevin’s soon-to-be-released book, A Maniac Commodity Trader’s Guide to Making a Fortune. In the book, Kevin dispels the common myths and misconceptions about these markets, offering an insider’s view of what he calls “the last bastion of pure capitalism on Earth.” Whether you’re a novice or an experienced trader, Kevin’s down-to-earth, clear-cut guidance will make you more savvy, more confident, and more able to jump right in and grab those profit opportunities that are waiting for you. The book is available for pre-sale here: A Maniac Commodity Trader’s Guide to Making a Fortune

Kevin Kerr is the editor of two highly successful and acclaimed financial advisory newsletters, Resource Trader Alert and Outstanding Investments. A veteran commodities trader, Kevin uses his irreplaceable experience to advise his readers on a variety of commodities investments on a daily basis. Widely considered one of the nation’s top commodities gurus, Kevin’s expert opinions are routinely featured in the country’s premier media outlets.

To learn more about Kevin’s commodities trading service, click here: Resource Trader Alert