Free to Trade (2 page)

A light flashed. It was Cash.

'We are launching it now. What do you think, buddy? Do you want ten? I feel lucky on this one. Let's make some dough here!'

I felt my throat tighten as I said slowly and deliberately, 'I'll take a hundred.'

Even Cash was silenced by that one. I could just hear a whispered 'Wow!'. He put me on hold for five seconds.

'We can't do a hundred at 99
.
We can sell you fifty at 99 but we will have to do the second fifty at 99.20.'

I was damned if I was going to let them get away with that.

'Look. You know and I know that the rest of the market hates this deal. I just happen to like it, but only at a price of 99. It's a hundred at 99 or none at all.'

'Paul, you don't understand the way these things work. If you want to buy that many bonds, you've got to pay up for them.'

Cash's wheedling voice was irritating me.

'A hundred at 99 or you have a dog on your hands.'

A pause. Then, 'OK, you're done. We sell you one hundred million dollars of the new Sweden at a price of 99.'

My hand shook as I put down the phone. This was by far the biggest position I had run in my life. Betting a hundred million dollars against the opinion of the rest of the market made me more than a little nervous. My mind conjured up the awful possibilities. What if we had got it all wrong? What if we were to lose hundreds of thousands of dollars in the next few minutes? How would we explain it to Mr De Jong? How would we explain it to the institutions who trusted us with their money?

This wouldn't do. I had to banish all the what-ifs from my mind. I had to transform my brain from an emotional jumble of wild conjectures to a totally reliable calculating machine. I had to relax. I noticed that my knuckles were white as they clutched the handset of my telephone. I forced my fingers to loosen their grip.

The lines were all flashing. I picked one up. It was Claire.

'What did I tell you? A howling dog. Did you buy any?'

'We did buy some, actually, yes.'

'Oh no.' She sounded sympathetic. 'You really must be careful of that Cash. But, if you want any more, you know where to come. We are offering them at 98.90.'

'No thanks. Bye.'

So BLG was already offering bonds below the initial offering price of 99. But Claire had mentioned that they would try to sell short bonds they didn't have in the hope of buying them back later. No wonder their offer was low.

I picked up another line.

'Hi Paul, David. Have you bought any of these new Swedens?'

'A few.'

'Well, this thing is falling out of bed. We are bidding 98.75 and offering bonds at 98.80. None of my customers like it.'

Oh God. This was all going horribly wrong. The price was falling fast. At a bid price of 98.75, I was down $250,000. Should I take my loss? I remembered an old maxim, 'Cut your losses and let your profits roll.' Then I remembered another. 'If you have a view, stick with it.' Great help. Think, Paul, think.

Another line flashed. Claire again. 'This doesn't look good, I'm afraid. We are now bidding 98.50. There are sellers of bonds everywhere. This bond is only going to go down. Do you want to do anything?'

Ninety-eight fifty! My losses were now half a million dollars. A voice inside me screamed, 'Sell!' Fortunately I managed to answer in a quiet, hoarse voice, 'No, nothing right now, thank you.'

I called Bloomfield Weiss. Cash answered.

'What's going wrong with this deal? I thought you had placed most of it?' I asked, just winning the struggle to keep my voice below a shout.

'Relax, Paul. We sold the three hundred million into Japan. We sold you a hundred million. We sold an American fifty million. And we just bought about fifty million from the other dealers. That makes five hundred million. There are no other bonds around.'

I could have screamed at him. I could have shouted foul abuse at the telephone. But I didn't. I just murmured goodbye.

I felt cheated, betrayed. Worst of all I felt stupid. Anyone can read a market wrong. Only a fool would trust a hundred million dollars to Cash Callaghan. He hadn't even admitted his lie when the collapse of the bonds had shown it up for what it was. I tried to call Hamilton in Tokyo, but couldn't reach him. I left Karen to keep trying whilst I tried to work out the best way to limit the damage of this mess.

During all this I had been totally absorbed in the world at the other end of the telephone. For the first time I looked up to see Debbie watching me. She had been following everything. The smile that always seemed a second away from her lips was nowhere to be seen. Her face was concerned.

'What was that you said about jumping out of a window?' I said, struggling to keep my voice steady.

She forced a brief smile and then the worried look reappeared.

'Any ideas?' I asked.

Debbie frowned for a moment. It was wrong of me to ask her. There was no magic solution to this problem, and I couldn't shift the burden of responsibility for such an enormous cock-up on to her. But as she paused, I found myself daring to hope that she would point out a simple solution that I had overlooked.

'You could sell,' she said.

I could sell. And lose half a million dollars. And maybe my job. Or I could do nothing and risk losing more.

I developed a sudden craving for a cup of coffee to help me think, or at least to occupy my hands with something. I stood up and walked over to the corner of the trading room where a machine dispensed 'real' filtered coffee. It tasted worse than instant, but was strong on caffeine. I pressed a button and pulled a lever. Nothing. I banged the machine with the side of my hand. Still nothing. I kicked the base of the machine hard, and deriving some satisfaction from the small dent that appeared, stalked back to my desk.

Think! If Cash had lied, which seemed most likely, then there would be a lot of unsold bonds for sale, and the price would not move up for a while. But at a price of 98.5 the bonds now yielded 9.49 per cent, which was more than any other eurobond of similar quality. In time they would trade back up in price. If Cash had lied, I shouldn't sell, but should hang on. With patience I should be able to recoup my losses and maybe even make a profit.

What if Cash had not lied? What if all the other dealers were wrong? What if Bloomfield Weiss really had sold $300 million of the issue into Japan? Then, once the other dealers had realised their mistake, they would be forced to cover their shorts, in other words buy back the bonds they had sold short earlier. The price would scream upwards. There would be a fortune to be made for anyone brave enough to buy more bonds now.

The more I thought about it, the more possible it seemed that Cash was telling the truth. I didn't trust him, but I did trust Hamilton. If Hamilton believed the Japanese would buy an attractive new issue, there was a strong probability that they had. How could I tell who was right?

I had an idea. It was an enormous risk, but the pay-off would be big if it worked. I had no time to check it with Hamilton. If it was going to work I would have to act now.

I rang Cash. My heart rapped half a dozen times in the second it took him to answer the phone.

'I'd like to buy another fifty million if the price is right.' I was amazed at how steady my voice sounded.

Cash laughed, 'Way to go, Paul! Let's make some money here! Hang on.'

That didn't tell me anything. More sales meant more commission for the salesman. Cash, at least, would be making money. The real test would be when Cash came back with a price. If there were still millions of the bonds to sell, then he would be right back with a cheap offer. In that case I would have a fight on my hands to wriggle out of my purchase. If they really had sold the whole issue, then there would be lots of excuses and a higher offer.

I hung on for what was probably only a minute, but seemed like ten. Finally Cash came back on the other end of the phone.

'I'm sorry about this. I'm afraid we can only manage ten million, and then only at a price of 99.'

I could tell from Cash's voice he was expecting protests from me for offering fewer bonds than I wanted at a price half a point above his competitors' offer. He didn't get any. I wasn't angry. Here was an opportunity and I was going to make the most of it.

'OK, I'll take ten at 99
.'

I had to move fast. Next call was to Claire.

'Are you are still anxious to sell the new Sweden?' I asked.

'Oh, but yes of course,' she purred. 'I can get you some at 98.50.'

'Fine. I'll buy twenty.'

After two more phone calls I had managed to buy another $15 million at 98.60. That took my total holding to $145 million. I sat back and waited. I still felt tense, but this was the tension of the hunter, not the hunted.

It didn't take long. Within two minutes the lights began to flash with dealers bidding for bonds. Their bids rose from 98.60 to 98.75 to 98.90. Then David Barratt called.

'I'd like to buy twenty million of those Swedens at 99.10,' he said.

'That's a very high price for a bond with such limited prospects,' I teased him, unable to keep the euphoria out of my voice.

'It's a funny thing,' he said. 'The price fell as I thought it would. Then someone somewhere bought some bonds. Since then the dealers have been scrambling to cover their shorts, but haven't been able to find bonds anywhere. So they have driven the price up. The really funny thing is that a couple of my English clients who have been sitting on their hands for a month have just taken it into their heads to buy. They think the bond has value, and the rapid run up in price makes them afraid they might miss a move up in the whole market.'

I sold David $20 million and unloaded a further $75 million over the rest of the day. Claire had been especially imploring. BLG had lost a lot on that one. I decided to keep $50 million on the basis that it could move up further over the next week or two, and sold some other bonds to raise cash for the purchase. I totted up my profits. I had realised nearly $400,000 profit over the day, and had unrealised profits of $300,000 on the remaining $50 million.

I slumped back in my chair. I felt drained. It was as if I had been physically beaten up. The tension, the adrenalin, the sweat of the last few hours had left me limp. But I had got it right. In a big way. No matter what Hamilton might say, he couldn't deny that. For the first time in my life, I knew what it felt like to take on the market and win. And it felt good. I had shown myself that I could be a good trader, as good as the best. I hoped I had shown Hamilton too.

'Come on, smug features,' Debbie interrupted. 'If you have any more afternoons of successful spivving, let me know. I am sure the second-hand car business would give anything for one as talented as yourself. In the meantime, why don't you buy me a drink?'

'How come I always get to buy the drinks? Don't they pay you a salary here?' I said, putting on my jacket.

I had a thought. 'Just a moment, I have got to make one more phone call.'

I dialled the Imperial Hotel. When I asked for Hamilton McKenzie the operator told me he had left a message specifically asking not to be disturbed. I marvelled at the man's coolness. So much at stake, and he had deliberately taken steps to avoid hearing about the outcome. He had enough confidence in me to let me handle it by myself. As usual, he had been right.

With my smug look intact, I switched off the machines and followed Debbie to the lifts, leaving Jeff still engrossed in his statistics.

CHAPTER 2

The train lurched to a halt at the Monument station. Silently, about a quarter of the passengers stood up and picked their way through the carriage to the doors. I was one of them. We dropped on to the platform, and climbed the short flight of steps through the ticket barrier and out into the July sunshine. There our company of office workers split, and was met by a much larger battalion marching out of step across London Bridge. I joined a contingent striding up Gracechurch Street towards my offices in Bishopsgate. A few lost individuals struggled against the advancing army in an attempt to fight their way down the street. They were jostled and pushed for their temerity. Since 'Big Bang' the commuting crowd had started earlier and earlier, as salesmen, traders and settlements staff struggled to ensure that they were not the last to their desks to talk to Tokyo, or Australia, or Bahrain.

Although the army seemed unified by one purpose, getting to work and making money, each individual carried his own concerns, worries and responsibilities with him or her. Some days I would thrust myself through the crowd, eager to get to my desk and work on the problem that I had mulled over in my disturbed sleep the previous night. Other days I would drag my feet, jostled from behind, as I delayed the inevitable confrontation with yesterday's bad position. Often, I would just drift along with the others, my mind still asleep, shutting out the expected events of the day until I was sitting down with a cup of coffee in my hand.

Today, though, I rode above them all. I had made $400,000 in the last twenty-four hours; who knew how much I would make in the next? I had an irrational conviction that any trade I did would turn money into more money. I knew this would not last. But I should enjoy it while I could. Eventually luck would abandon me. Fifty-fifty trades would all go against me. Certainties would be blown away by the unforeseen. My computer would develop undetectable bugs. My job was like a drug with highs and lows. Was it addictive? Probably.

It was certainly more exciting than the large American bank I had joined after Cambridge. I had spent six years in the credit department, analysing companies that borrowed from the bank. I had to decide whether the companies would be in a position to give the money back. The job was intellectually interesting, but the bank had done its best to make it boring. It felt like a grey factory, staffed with grey workers who had weekly quotas of a certain number of pages of analysis to produce.

It had suited me though. The bank had been very understanding about the hours I kept. They obviously thought it was good public relations. The general manager of the London office was an American, an ex-college football player and a devoted sports fan. It was fine with him if I arrived at work late or left early. Holiday days were not counted scrupulously; I could have as much unpaid leave as I wished. The whole office was proud of its Olympic eight-hundred-metre bronze medallist.