The Kabbalistic Murder Code: Mystery & International Conspiracies (Historical Crime Thriller Book 1) (13 page)

              There was dead silence at the other end.

              Finally, Gabi asked him, "What exactly is it that would you like to know?”

              Elijah began stammering, a clear sign that he was nervous. He had not thought out exactly where he hoped his line of questioning would lead. He tried, using his all-too-limited experience, to recall what one asks about investment companies.

              “Nothing in particular. I’d just like to know if it’s a good idea to invest in the company. Do they pay a decent dividend? Is the management sound? What’s their background? You know - just the standard background information.”

              “Why would you consider investing in them?”

              “Well, it’s not that I’m seriously considering investing, but I wanted to know if I should even consider them as a reasonable prospect,” replied Elijah cautiously, inwardly praising himself for how he had weaseled out of revealing anything while at the same time posing the question that he wanted answered.

              “Elijah, that’s not something I can answer just like that over the phone,” said Gabi. “Come on down to my office and we can really discuss the question properly.”

              “When would be a good time?”

              “Now would be great. Why don’t you come over right now and I’ll be waiting for you. I have a couple of very important meetings, starting in an hour and a quarter from now. How long will it take you to get here?” Elijah said he would set out directly.

              Elijah flagged down a passing cab, and was in Gabi’s office twelve minutes later.

              Gabi was a partner in the firm Kaufman, Eichler, and Moldovan. The scuttlebutt was that Kaufman had contributed the money left him by his father, a noted diamond merchant; Eichler, the contacts he had made while working at the Finance Ministry; and Moldovan, the business sense and silver tongue.

              The offices were in a refurbished old Arab building in central Jerusalem. The entry hall led to a magnificent, large lobby, adorned with paintings by modern artists. Plush wall-to-wall carpets covered the entire floor surface. A few clearly expensive couches had been placed at various strategic places in the lobby. The overall impression was one of affluence, of partners who had “made it” and who would be as successful on your behalf if you entrusted them with your money. A corridor led to the enclave of the “holy of holies” where the offices of the high priests of investment were located.

              Elijah had not yet reached the receptionist’s desk when Gabi burst into the lobby.

              “Elijah!” he yelled out, taking Elijah by the arm and more or less dragging him into the corridor.

              Amazed, Elijah noted the elevator that went up a single floor to the partners’ offices and those of their senior employees.

              “Why bother going up a single floor?” asked Elijah. “Why don’t we just climb the stairs?”

              “How would people know that we are senior executives if we did that?” Gabi smirked.

              With his shock of fair hair and smiling face, Gabi radiated an aura of sincerity, like a naive farmer’s son. That and his vaunted sense of humor were enough to captivate widows with large estates to invest. Elijah noted that Gabi’s legendary shock of hair had begun to thin with age, and he took a furtive look at his own hair in the mirror in the elevator. He was not exactly impressed with what he saw, and quickly turned back to Gabi, who was addressing him.

              “Elijah, what’s the sudden interest in investments? What do you know about stocks and futures?”

              “Sorry,” said Elijah as he realized that Gabi was speaking to him. “Could you repeat what you just said?”

              “Well, when you asked me about investing in Luria, I figured you must have finally given up on earning a decent salary at the university. I thought you must have joined the many university lecturers and professors who have seen the light and have left academia. I believe that Luria is staffed by just such people. They were highly intelligent and probably unparalleled in their knowledge of what makes things tick - or alternately, they had exceptionally good inside contacts. In any event, they excelled in their performance on the market.”

              Elijah noted the use of the past tense, but decided not to say anything. He would first see where all this was leading.

              Still groping, Elijah asked: “Could you explain to me their exact line of work?”

              “Luria specialized in futures, and was known for the meteoric rise in the value of its portfolio. In the futures market, both sides agree that one will sell the other a specific commodity at a specified price on a specified date. For example, I might sign an agreement to sell you a hundred kilos of gold at a specific price six months from now. In other words, we agree on the quantity and the price today, but the deal will only be consummated in six months’ time. At that time, I will hand over the gold and you will hand over the price we agreed upon.
Capisce?
”

              “I understand,” said Elijah, “but what purpose does it serve? Why can’t I buy it now or wait six months and buy it then?”

              Gabi laughed. “Eli, where do you live? In the stratosphere? Come back down to the real world. Your comment shows me how abysmal your knowledge of finance is.”

              “Well, you know my background. Start with the assumption that as far as I’m concerned, everything you have said makes about as much sense to me as if you’d been speaking Akkadian.”

              “Where do they speak Akkadian nowadays? In Pakistan?”

              “In Pakistan they speak Urdu, an Indo-Iranian language which was originally written in Arabic characters. There’s no place where it’s spoken these days. Akkadian came from Akkad, an empire in northern Iraq. It’s the first written Semitic language, and was originally written in cuneiform. Although that empire was only in ascendancy for about a hundred and fifty years, between 2350 and 2200 B.C.E., Akkadian served as an international language in the Mesopotamia region, and in actuality was still used as late as the 6
th
century C.E. Eventually, it was replaced by Aramaic.”

              Elijah hadn’t planned it that way, but from the way Gabi looked at him, he could see that his answer was a retort to Gabi’s gratuitous denigration of academia. The answer surprised Gabi somewhat, but at the same time caused him to have a certain amount of respect for his learned friend, as if his extensive knowledge of extinct languages made up for his almost total ignorance of economics.

              “It’s always good to learn something,” said Gabi. “I get your hint, and I promise to improve. Let me explain to you in simple terms about the futures market and how it operates. Let us assume, strictly for argument’s sake, that I am a company that represents orange growers in Israel. We are interested in growing oranges for sale in the winter, but are afraid of the price dropping by then. Nowadays, there’s a futures market where one can, for example, sell a ton of oranges at $1000 a ton. As it’s possible to have a rough idea of our anticipated crop yield, we would like to sell fifty tons of oranges right now, at today’s price. If torrential rains in Morocco or Spain cause a reduction in their crop yield, the global price of oranges will rise six months from now, in which case we will not have earned as much as we could possibly have earned had we waited until then to sell. If, on the other hand, the other countries have a bumper crop and flood the world market with oranges, the price will drop. In that case, our decision to sell at a fixed price now will be very much to our advantage and will save us much grief. If our company prefers stability and isn’t interested in surprises – either good or bad – we’ll prefer to sell our crop in the futures market. This way, we can plan our production goals without having to worry about unexpected surprises.

              “Of course, you can simply insure your crop. As you know, nowadays you can insure anything, from a football player’s feet to a singer’s voice, but insurance is more expensive and can only compensate you for a bad crop without giving you the oranges you might need.”

              “I understand, but who’d be willing to buy tons of oranges months in advance?”

              “That’s a good question. Suppose, for example, that you have a factory that produces orange juice, and you know that you need a certain quantity of oranges each summer. You need to buy the oranges in the winter in order to manufacture orange juice and orange concentrate. Here, too, you don’t know what the future price will be, and you want to avoid unpleasant surprises. The best way to do this is through the futures market, by purchasing a specified quantity of oranges at $1000 a ton. The advantage to you is that you guarantee delivery of the oranges to you six months from now at a price you already know, even though in actuality you will only pay for and receive the oranges at that time. In a futures transaction, we match up a person who wants to buy in the future at a fixed price to a person who wants to sell in the future at the same fixed price.”

              “I still have a few questions,” said Elijah. “First of all, what happens in the event of a crop failing? Or if the buyer goes bankrupt? In such a case, the sides have not guaranteed anything for themselves.”

              “Also an excellent question, but in reality such futures transactions are not really made between two parties – the seller and the buyer – but through an agent, who is like a middleman or a broker. It is he who is responsible to both the seller and the buyer. The buyer buys from the broker, and the seller sells to the broker. The broker receives a percentage for his work and is responsible for having the terms of each contract carried out.”

              “But how does he ensure it?”

              “The fact is that anyone who enters into a futures transaction has to put down security for part of the amount. Let’s take our example. Let’s say the price of oranges right now is $1000 a ton. We can be almost positive that the price per ton will not go up or down by more than $200. In such a case, the broker will require both parties to the agreement to offer a security of $200 per ton. Let’s say that you go bankrupt and cannot buy the oranges. The broker will sell the oranges in the summer at whatever the market price is. The most the price can go down is $200 a ton. If the broker can only sell the oranges for $800 a ton, he’ll use the buyer’s security of $200 a ton to pay the seller, so the seller gets the $1000 he was guaranteed.

              “Let’s say someone has $1000 to invest and the price of oranges is $1000 a ton. He’s convinced that the price of oranges will go up within six months to $1200 a ton. He can buy a ton of oranges now and store them for six months. He’ll then gain $200 when he sells them at $1200. Still, there’s an alternative. He can take a risk and with that $1000 he can buy five tons of oranges on the futures market, for six months from now. In such a case, each $200 of his money serves as security for a ton of the oranges that he guarantees to buy. In six months, if the price goes up to $1200, he can sell the five tons for $6000 and wind up with a $1000 profit – not bad for a $1000 investment!”

              “Yes, but what happens if the price drops below $1000?” asked Elijah.

              “Then he’ll lose his entire investment,” Gabi replied. Investing in futures offers the prospect of making a sizable profit – but also of losing your entire investment. Life is hard.”

              “And can one actually buy oranges in Israel on the futures market?” asked Elijah.

              “Funnily enough, to the best of my knowledge one can’t buy oranges on the futures market in Israel. You have to realize that the Israeli market is small with only a few big players. On the other hand, there are many other commodities that can be bought or sold that way. Throughout the world there are markets for platinum, gold, silver, and many other metals. Also many agricultural products, such as wheat, barley, coffee, sugar, flour…there are also markets for shares, various currencies… all based on the same principle.

              “If, for example, you’re a US company that sells goods to Thailand and your contract specifies that you will be paid in bahts, which is the national currency of Thailand, in thirty months from now, how can you be sure that the baht doesn’t suddenly depreciate? You can take out insurance, which will guarantee that you receive a certain exchange rate, but an easier way is to enter into a futures transaction for the money you will receive, and sell it now. That way you can protect yourself against any depreciation. Theoretically, you can regard a futures transaction in currency as a way for your company to protect itself from any danger in the future.”

              “I understand,” said Elijah, “but who are the buyers and sellers in these deals? Are they the people who need the goods? Or just speculators? Or gamblers?”

              “Not necessarily. Most of those involved don’t really want the items themselves. When the time of the actual sale arrives, the buyers and sellers pretty much balance one another out, and only a few percentage points change hands. Most of those in the futures market are businessmen and risk-takers. I don’t think the word ‘speculators’ is appropriate here. We’re dealing with businessmen who see which way the market is moving and act accordingly. The market needs these businesspeople and investors in the futures market. They can be regarded as a certain kind of insurance agent.”