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Adjust Your Sails: Excerpt from Chapter One

Everybody called Edward Noonan, Jr. the luckiest guy in the world.

If he wasn’t the absolute luckiest, he came pretty close. Eddie, as he was affectionately called, had about as great a job as anyone could hope for—he ran $850 million of the $20 billion dollar asset base for a money management firm called The Forecastle Group. Forecastle was one of Boston’s most successful privately held companies. The firm was based in Back Bay. Eddie’s office had a spectacular, wraparound view that included the Charles River, Cambridge, and to the west, Fenway Park. His office was steps from his condo, a Newbury Street triplex that had been featured in all the architectural magazines. His live-in, a lingerie model at Louis of Boston, the most elegant store in the city, also had a five-minute walk to work.

Perhaps Eddie’s greatest stroke of luck was that he got to work for his father, Ned Noonan, the legendary founder of The Forecastle Group. Everyone in the financial community of Boston knew his story. Ned had grown up in a small village in Ireland, raised by his father after his mother died during childbirth. His father sought refuge in a bottle and in short order, assumed the role of the town drunk. The neighbors actually took up a collection for Ned to sail to the United States, partly to get away from his father and partly because his math skills were renowned throughout the county. Everyone figured that Ned would go to Harvard or MIT and become a math professor.

Instead, he graduated first in his class at Harvard, and first in his MBA class at Wharton. Theoretical aspects of mathematics didn’t interest him nearly as much as making money, and he made tons of it. Ned and his wife, Helen, had raised Eddie in baronial splendor in a house built to look like a castle on Marblehead Neck. The family belonged to both of the best yacht clubs in Marblehead, and Eddie grew up on the water.

During the summer, it was said that Marblehead Harbor was so packed with boats that you could step from one to the next and cross from the lighthouse at the tip of Marblehead Neck all the way back to Old Town without getting your feet wet. A 65-foot schooner belonging to Ned, the Maximum Liquidity, was one of the biggest boats in the Harbor.

Eddie followed in his father’s footsteps and attended both Harvard and Wharton, although he didn’t have his father’s illustrious record in either school. To be frank, he didn’t have the motivation, although he certainly had a lot more fun than his father. To be fair to Eddie, it was hard to concentrate on studies when, thanks to his father’s fame and connections, the city was at his feet—the best seats for any Red Sox, Celtics, or Patriots game; the best table at any top restaurant in Boston, and of course, the Maximum Liquidity, which was always available during the summer months because Ned took so little time off from work.

And then one day in 2007, Ned made the decision that would change everything. He was going to sail to Ireland on his boat, with his son, whom everyone acknowledged as one of the finest sailors on the North Shore. He would retrace and reverse the voyage that had brought him to the United States, to fame, and to fortune. And he would do it with the confidence in the ability to handle any challenge because, after all, Ned was very competent and Eddie was a truly gifted sailor.

At the last minute, Eddie bailed. His model girlfriend booked a shoot in Antigua, and Eddie decided to go along, in part to be with her and in part to keep the photographers from hitting on her after (or even during) the shoots.

There was no question of the seaworthiness of the vessel or the will of its owner. The only question was whether he had the requisite sailing experience—occasional weekend jaunts off Marblehead Harbor hardly qualified even someone as certain of his own destiny as Ned to sail the Atlantic. Ned’s wife, Helen, counseled him not to make the crossing alone. After much thought, Ned decided to go on without his son, and he set sail in early spring for a voyage that was supposed to take three weeks. If the weather had cooperated, Ned Noonan might have made it to Ireland. Unfortunately, one last winter storm churned the waters off Newfoundland as Ned passed by, swamping the boat in 10-foot swells. Ned’s body was never recovered.

The Maximum Liquidity eventually found its way to a deserted beach on the Newfoundland coast, where it was discovered by a couple on a quiet walk. It was towed back to a boat-building shop in Newburyport, Massachusetts, up the coast from Marblehead, with a reputation for repairing boats that had undergone disastrous wrecks.

And suddenly, Eddie was thrust into even greater prominence, no longer responsible for just a portion of Forecastle’s assets, but the entire asset base and the firm itself.

Edward Noonan, Jr., the sudden loss of his father notwithstanding, might have been the luckiest guy in the world, but the one thing he lacked was confidence in his own decision-making abilities. Whenever he traded, he relied on the expertise of his Harvard and Wharton classmates, who had gone on to prominent positions in Wall Street’s top investment banks. Their advice might have been slightly self-serving, but it was usually on the mark. The combination of that guidance along with a strong market had given Eddie great results, but never the absolute security that he was succeeding on his own. There was always a slight hollowness to his victories, because he had the self-awareness to recognize that if he hadn’t been born to the right father, he would never have been this successful. He knew in his heart that luck had played a huge role in every aspect of his life. As long as his father was running the firm, he was content to sit back and run his financial stocks. Those who worked closely with him running money were convinced he had been very lucky. Now, he had to be more than lucky. He had to be good.

The problem was that he wasn’t. He kept his own office, instead of moving into his father’s, which remained untouched and unchanged. But that was pretty much the only thing that stayed the same in Eddie’s life, now that he was running The Forecastle Group. His father had adhered to a philosophy of steady, conservative growth, which had resulted in security and even serenity for the firm’s many clients. Because of its stability and long-term success, The Forecastle Group was the investment vehicle of choice for many of the downtown law and accounting firms that represented Boston’s wealth, old and new. Ned hadn’t just built wealth; he had built trust. Eddie now felt a responsibility to make his own mark on the business.

The market had been on an improbable tear for years. The easy money of the post-9/11 era had led to vast creation of wealth in both real estate and equities, so there was more and more money flooding into the market, pushing the Dow ever higher. When the Dow reached 12,000, 15,000 was suddenly in sight. And predictions of the Dow reaching 20,000 were written by some respected economists and analysts who made irresistible cases for such vertigo-inducing growth.

Something inside Eddie rejected the possibility of Dow 20,000, but he, like everyone else, wanted to believe. He could still hear his father repeating his favorite maxims, “Trees don’t grow to the sky” and “They don’t ring a bell at the top.” Indeed, Eddie’s intuition told him that, for one reason or another, the run-up was done and it was time to take money off the table. But he was not the kind of person to make his reputation on caution—that was his father’s legacy. He wanted to be known as a game-changer.

So Eddie set his intuition aside and solicited the advice of his Harvard and Wharton classmates yet again. They told him exactly what he wanted to hear—that the future for equities was bright—that things would be different this time. They told him that no one in his or her right mind would jump off the train right now. If the Dow does go to 20,000, or even a measly 15,000, would you want to be the guy on the outside with his face pressed to the window? How severely would Jim Kramer or the rest of the TV talking heads be trashing Eddie? Was that any way to treat a legacy of his father’s success?

“So what do I do?” Eddie asked.

“Invest in us,” came the siren song from his Wall Street friends. “Buy any big investment bank on Wall Street you can get your hands on. Trees may not grow to the sky, but have you ever visited a redwood grove? That’s high enough, isn’t it?” He resisted at first, but as those stocks pulled back in what he viewed as a correction, he began to see great value. At 20 percent off he jumped in with both feet. He became so convinced that he was right, he began to use leverage. For every dollar that went in, three went to work. Thirty-five percent of his allocation was to financials.

Eddie did something his father would never have dreamt of doing. He made a huge bet on financials, with the majority weighted toward investment banks. The move unbalanced all the portfolios of The Forecastle Group, as others at the firm whispered to each other (but not to Eddie). These banks have been around forever, Eddie reasoned. Even if there is a downturn, they’re all about allocating capital. They’ll know what to do. My downside is protected and my upside is unlimited.

But instead of going up, the market continued to drop, pulling the financial stocks down another 30 percent from where he had started buying them. It didn’t take a financial analyst to figure out these numbers. He had lost everything—for his clients, for his friends, and for his family. If they had all their money with him (and close to half did), they were broke.

The Forecastle Group ended up making a very, very big bet on the shares of some great financial institutions that, as fate would have it, had but months to live. The year 2008 arrived, and with it the economic collapse, which took down not only the banking houses like Lehman Brothers but also all those who had invested in them.

Like The Forecastle Group.

By 2009, just eighteen months under the direction of Eddie Noonan, Jr., The Forecastle Group was bankrupt.

It was the biggest investment shock in Boston in decades. This hit the heart of Boston. Forecastle’s clients were the people that controlled the city. They were the wealth; they drove Boston’s economy.
Edward Noonan, Jr., who had told himself and anyone who would listen, “It’s always better to be lucky than good,” was suddenly neither.

It got worse. His personal fortune, and the money that Ned had left Helen, had all been invested with The Forecastle Group. Now it was all gone. Eddie’s Back Bay triplex was also owned by The Forecastle Group, not outright by Eddie, which meant that creditors got it and couldn’t get him out fast enough. Even the castle on Marblehead Neck belonged to The Forecastle Group, which meant that it, too, went under the hammer in a bankruptcy auction, forcing Helen out of the home where she and Ned had lived for 20 years.

And when the money disappeared, so did his girlfriend. Eddie had gone from the top of the world to a situation for which he had no training or preparation. Even his classmates from Harvard and Wharton couldn’t help him now. Who in finance would even think of hiring the son of the owner of The Forecastle Group, now mocked as The Foreclosure Group?

The only thing Eddie owned outright, as it happened, was the boat, the 45-foot schooner called the Maximum Liquidity, restored to pristine condition, bobbing gently in the waters of Newburyport Harbor. Since The Forecastle Group didn’t own it, Eddie still did. He might not have had the money to keep up with marina fees, but out of respect for Ned, the boat was allowed to keep its place in Newburyport Harbor.

Eddie went back to Marblehead, where he rented a room in a house in Old Town and where he got a job tending bar at Maddie’s, the name by which locals knew a bar half a block from the harbor. The bar’s real name was the Sail Loft, but no one called it that. Eddie took his lunches and dinners at the restaurant upstairs and poured the 16-ounce mixed drinks for which Maddie’s was justifiably famous. He avoided the yacht clubs, where his memberships had lapsed anyway, since they were paid for by The Forecastle Group. The last thing he wanted to do was run into anyone whose money he had lost. He would lower his eyes and all but duck under the bar whenever anyone from his past life as an investment professional entered Maddie’s.

And then one day his landlord told him that the house where he was renting a room was about to be sold, and Eddie had to be out by the first of the month.

No job, no girlfriend, no money, no relationship with his mother, who had not forgiven him for losing all her money as well as destroying the family firm, no options.

He only had two things left in life. One was the 65-foot yacht, bobbing on the water in Newburyport, twenty minutes north of Marblehead. The other was a shaggy but amiable black lab mix that began following Eddie around after he left the bar. The wait staff had looked after the dog for years, but the dog had a special affinity for Eddie. They were two lost souls, simply scraping by with no real home.

For Edward Noonan, Jr., it was a no-brainer.

It was time to get away.

And not just anywhere. One night, behind the bar, his destination became obvious. He wanted to complete the journey his father never could, sailing solo to Ireland. The trip he should have taken with his father. The trip for which he was wracked with guilt—maybe if he had been on board, he might have been able to keep his father alive.

Once in Ireland, he could sell the boat, live cheaply, maybe tend bar somewhere, and figure out what exactly he was going to do with the rest of his life.

Eddie made up his mind.

He was going to sail to Ireland.