Two hot shot Wall Street traders who made a bundle on the stock exchange and have now retired to an oceanfront home in Sagaponack are about to open a new trading floor here in the Hamptons. It will be called the Leaf Exchange.
“We’ve leased Water Mill’s Church Hall for five years with an option on another five,” said Tim Reese. “It’s right on the Montauk Highway, centrally located in the Hamptons.”
“We’re getting it all wired up as we speak,” Bob Honish said, “we’ll have the big board, a stock ticker, lots of computers for the traders. We should be open next week.”
Honish and Reese tend to finish sentences the other starts. Honish is blond, Reese is dark haired. Both are in their late 20s. They and their wives share a house they’ve built here, with the Honishes in the east wing and the Reeses in the west. They met in 2007 when Honish made his bundle bundling mortgage derivatives and Reese was placing a bet against them. Both won, first Honish when the bundles were originally bundled. Then Reese when the bundles unraveled. They are a one-two punch. [expand]
Reese explained how the Leaf Exchange would work. Residents from anywhere in the Hamptons could bring in the leaves that fall from the trees on their property and they would get paid for them.
“You could bring them either loose or in bags. We’d count them. We plan initially on offering .03 cents a leaf. But then the price would fluctuate with the market. We’d also sell leaves,” Reese said.
“At the same price?” I asked.
“Of course not,” Reese said. “It would be either a bit more or a bit less. It would depend on the day, or the hour or even the minute. Prices fluctuate.”
“And we’d make the spread,” Honish said.
“And that would pay for the overhead,” Reese said.
“What gave you this idea?” I asked.
“Leaves are big in the Hamptons,” said Reese. “This time of year, we did a survey, counted the number of trees, counted the average number of leaves on each tree. It’s a fantastic market. Millions of leaves. Billions.”
Reese told me that the idea for the Leaf Market came to him after reading about the controversy in the different towns about the usual fall leaf pickup. The leaves fall from the trees. The local residents rake them out to the curb. Then the town highway departments pick them up and its been this way for years. Until now.
“All the leaf pickup programs have been abandoned,” Honish told me. “Except in Southampton. But it’s on its way out too.”
“It’s been the economy,” Reese told me. “The Towns don’t have the budget for the trucks or laborers anymore.”
“So everybody is up to their asses in leaves,” said Honish. “They don’t know what to do.”
“Which is where we come in,” said Reese. “It’s lemons to lemonade. We see the leaves as a commodity.”
“How did you come up with .03 cents per leaf?” I asked.
“We’ve gotten a lot of encouragement from other laid-off Wall Street traders,” Reese told me. “So we’ve gone ahead with the initial investment. Now we have sold seats on the Exchange to some of our friends. Initially, they’ve gone for $100,000 each. That’s how we’ve bankrolled this thing. With the seat money. And from there, we’ve created a leaf price that works with the amounts we’ve collected from the people with the seats. We did the math. 6.4 billion leaves are coming down from 1.4 million trees in the Hamptons. We think after our marketing campaign hits, 1.2 billion will come in. We’re selling 100 seats. So we’re offering .03 cents per leaf.”
“Then we’re going to sell them at the bell for our first day of business at .037,” Honish said.
“And who would buy them?” I asked.
“The traders we know, for starters,” Honish said. “They’re going to buy them because they think they can sell them in the afternoon at a profit.”
“This is a no-brainer. It will be law of supply and demand, like any market. This first offering is at the low end.”
“We expect the price will rise slowly for the first few weeks,” Reese said, “but if you hold on, it’s going to go up big time. Eventually, there won’t be any more leaves on the trees to fall. And that’s when the price will go through the roof. Supply and demand.”
“So people have to haul around all these leaves?”
“Not if they don’t want to. For a fee, we can require that a small bundle represent a large bundle. For example, silver ribbons will mean you’re bringing in 5% of the total. Red ribbons will mean 8%. Gold ribbons 10%. Platinum 12%. We’re also leasing a warehouse for the storage of leaves.”
“The whole thing is built on trust,” Honish says. “It’s like everything else. Your word is your bond.”
“What about the different sizes of the leaves?” I asked.
“This is a real hornet’s nest,” said Reese. “Of course we will be buying and selling larger leaves at higher prices. And the small leaves, like leaves from bushes, they’ll go for less. We’ve thought a lot about this.”
“We’ll have teams of expert horticultural people on site,” said Honish “They’ll do the pricing.”
“Will you be able to buy anything with the leaves? Will you be able to use it as a currency?”
“At first, no,” said Reese. “But I have an in with the head of the International Monetary Fund. So I can state with confidence that leaves will become legal currency before January.”
“It’s a very exciting market,” Honish said. “Some people will bet long, others short. We’ll be starting a futures market of course. People can bid up or down the price of futures. We may even have to stay open with that market for an hour after the bell.”
“But in the end,” I said, “aren’t the leaves going to just begin to crumble into dust?”
“That’s the most exciting part of all,” Honish said. “If you believe in this market at the beginning, you will absolutely believe in this market a hundredfold when that happens.”
“Think of the shortages,” Reese said.
“When you have shortages, the prices go through the roof,” said Honish.
“But you know,” Reese said, “when there are only a few of the leaves left toward the end of December, that’s when we’re gone. We’re in for the excitement. At the end, it’s going to be slow as molasses, boring. There might be one leaf sold for half a billion. Maybe just once a week, at one of the auction houses. It’ll be stuff for museums. For collectors. That’s not for us.”
Mrs. Honish, a tall redhead with a tray of drinks came into the living room. “Anyone want some iced tea?” she asked.
We all looked out at the ocean.
“I’ll bet a hundred bucks the third wave from now is bigger than the two before it,” said Reese.
“You’re on,” said Honish.