by Ken Morris
Stuart lowered the left headset while pulling the right mouthpiece up. “Take the Global offering at fifty-five,” he said.
Just loud enough for Peter to hear, a second voice said, “You want them all?”
“Fucking hell, Lloyd. I said take the fucking offering. And you’re held!”
A moment of silence followed as Stuart clocked a buy ticket and wrote:
502,000 GLTS @ $55 — Held
Peter did the math. Stuart had just purchased $27 million worth of stock. He counted the zeroes again, just to make certain he hadn’t miscalculated.
Stuart acknowledged Peter’s presence with a nod. Pinching the right handset between his ear and shoulder, he tapped a pen against one of his screens, drawing Peter’s attention. In an unmodulated voice, he explained, “This is NASDAQ. I’m buying a block of Global in London, before the stock begins trading in the U.S.”
“What’s held mean?” Peter asked.
“It means I’m not giving idiot-stick Lloyd any discretion to screw things up.”
Peter didn’t understand, but he let it slide for the time being, making a mental note about this and the infinite number of curiosities clogging his brain. Over Stuart’s shoulder, on the NASDAQ terminal, Peter focused on the letters GLTS and a long line of brokers displaying prices. The market showed a best bid of 55, a best offering of 55.15.
Stuart turned his attention back to his phones. “Fine. I’m buying five hundred and two thousand GLTS at fifty-five, double net.”
Stuart dropped the right headset but still held the other to his left ear. He stamped the GLTS buy-ticket a second time. In a box along the left edge of the ticket, he checked OTC, then scribbled the word London. In a column labeled “broker,” he wrote CKLSN. “That stands for Clarkson Securities—they’re the U. K. broker I used to buy the stock,” he explained.
Stuart dropped the buy-ticket into the out-box for processing. In a nonstop motion, he scooped up a red-sell ticket. He wrote: 302,000 GLTS. Under broker he wrote: STTN.
“STTN stands for Stratton Brothers. I’m waiting for them to come back with a bid for the stock.” Stuart again pointed to his NASDAQ machine. “Look, Glo-Tech’s already moving higher. Market opens in five minutes. Nobody wants to get caught short, not with Stratton’s analyst issuing an aggressive buy and raising his estimates—the guy’s the number-one rated industry analyst. When he opens his pie-hole, institutions listen. They’re gonna waddle in like lemmings to buy this stock. I told you, Petey: you can’t have enough information.”
Peter watched while prices in Global Technology ticked higher. First Stratton Brothers’ trader showed a 56.50 bid, up a point. Other market makers followed as the news of an important analyst’s upgrade announcement raced up and down Wall Street. By the time the market opened for trading, the bid had climbed to $57.30 per share. A couple minutes into trading, with Glo-Tech’s volumes huge, Stuart responded to a bid from Stratton Brother’s trader.
“I’m selling you three hundred two thousand GLTS at 58.20, net,” Stuart said.
Watching Stuart check boxes and scribble the details of the transaction, Peter did some quick math. In less than ten minutes, Stuart had cleared three dollars a share on three hundred thousand Glo-Tech shares, or nearly a million bucks profit.
“Not bad for a few minutes work,” Stuart announced.
“The other two hundred thousand shares?” Peter asked. “You holding out for a better price?”
Stuart brimmed as he punched the direct wire to Gordon, Ashe. “Nope. Gonna sell them right now.”
He gave an order to sell the two hundred thousand shares. Before he hung up, Stuart said to his counterpart on the other end of the phone, “And that order is to the credit of Louise Hartman and Aimie St. Claire. Thanking them for dinner.”
Stuart shrugged and explained to Peter: “Gotta pay for what you get in this business. That trade should cover their expenses. Later, I’ll shoot them more commission to cover extras.” His teeth flashed like a drive-in movie screen. “How much was getting your rocks off worth, dude?”
Peter didn’t answer. Even without understanding everything he’d seen over the last few minutes, the fog blanketing his new business began to lift. This game, he thought, just got easier to understand.
Oliver Dawson glanced at his watch: 11:04 a.m. For two frustrating hours, he had been reviewing a stack of option trades done in advance of a recent takeover. Despite suspecting people had bought on inside information—the call option volume just ahead of the announcement was triple the normal activity—he also guessed most of these crooks had parked their gains in offshore accounts. Too many countries had banking secrecy laws: Cayman Islands, Switzerland, and more recently, Mauritius Island, off the coast of Africa, to which hedge funds had taken a recent fancy. The more sophisticated funds moved money through dummy accounts from one place to another, making the already difficult trail impossible to follow.
It was the same old story. The only ones ever nailed for insider trading had the brains of a lead-eater—like a mid-level manager using a mother-in-law to buy stock or options, figuring that because she had a different last name than his, he wouldn’t get busted.
“What’s the point?” he said to himself.
Angela Newman interrupted his frustration. “Sir, I need to speak with you.”
He took a sip of Diet Coke. “Certainly, Angela.”
“Is this a good time?”
“As good as any,” he said, anxious because his secretary’s voice wavered.
A moment later, Angela fidgeted in a straight-backed chair as Dawson locked on her expression.
“I have been your secretary for over two years,” she said through a stammer.
“And you’ve been outstanding,” Dawson replied with over-the-top enthusiasm. “I hope I’ve let you know that.”
“Yes, sir . . . yes, Oliver, you have.”
He exhaled. He didn’t care that others couldn’t appreciate her.
“But . . . but I have . . .” She turned away.
“But what, Angela? Did I do something wrong?”
She inhaled, then exhaled in a rush. “I have asked for and received a transfer to another department.”
“Why? You’re tired of my swearing, aren’t you? You must hate me.”
Angela looked surprised. “How can you say such a thing, Oliver? You do swear too much, but hate you? You are such a stupid man.”
Is that why she’s leaving? he wondered. I’m stupid? “I can change. Please don’t leave.”
“I have to.”
“Why?” he asked.
“How could you not know? I’m leaving because—” Dawson leaned on the edge of his seat, ready for a double-barrel of bad news “—because I care for you, personally, and all you do is ignore me. Being around you makes me sad.”
For the first time in his life, he felt a rush from unbelievably good news. With rare confidence, he asked, “Will you have dinner with me? Tonight?”
The tables turned. Now it was Angela Newman’s jaw that dropped.
CHAPTER NINE
AT WAR WITH THE FIREPLACE’S SIX-FOOT FLAMES, A STIFF BREEZE FILLED the room, bringing with it a hint of seaweed and salt. Gulls barked and swooped, visible through the open window making up half the west wall. The echoes of the violent Baja surf contributed a low rumble, more soothing to Sarah Guzman than music. She manufactured a smile as her guests entered her office.
“Fernando,” she began, “we were shocked to hear of the torture you endured. Unimaginable: trapped in a box, expecting to die, choking— barely enough air to breathe. Praise God for the accident of discovering you before you died.”
Carlos Nuñoz had wheeled the sixty-year old Fernando Guzman, two days rescued, into Sarah Guzman’s office, the old man’s hands already strapped to the arms of a wheelchair. His features had decomposed—the eyes reflected nothing, olive skin hung like bloated bags, and bones bent like saplings, barely holding him erect. His head rocked.
“Unfortunat
ely,” Carlos explained, “Tio Fernando has had a break-down—perhaps a small stroke. Even the joy of salvation has not yet overcome the agony of what happened. He listens and understands, but he seems so distraught that I fear he might do something irrational to himself or to others. It is sad. We are searching for those who did this dreadful deed. Former enemies of your husband’s, we suspect.”
Sarah nodded, expressionless.
“What shall we do with your husband’s brother?” Carlos asked.
“He shall live here, with me. Nurses will attend to him until he is better. Guards will surround him at all times, for his protection, of course. I will take a personal interest in his welfare. Tell the family I love my Fernando. I will take care of my Fernando. I will take care of any of my family, if necessary. Tell them for me, Carlos.”
“I shall.”
“Now, if you could wheel poor Fernando to the kitchen, the maid will feed him flan. Perhaps a cup of tortilla soup.”
“Ciertamente.”
The wheelchair’s rubber wheels rolled silently across the tiled floor, their suspension absorbing the tiny indentations between the clay squares, then handling the trip’s remainder over thick area rugs. Before Fernando vanished, Sarah Guzman imagined a small spark in his eye.
“Good,” she said to herself. “That will save so much time in the future.”
At the end of his first month, Peter graduated from probationary status. Stenman personally called to inform him that he had an impressive report card. His salary jumped not to one hundred thousand, but one hundred twenty thousand.
“The largess,” she said, “is meant to keep you motivated.”
And she knew what she was doing. Peter often stayed behind at the end of Stuart’s shift, and sometimes well into the night—seventy hours many weeks, displaying stamina that qualified as extraordinary, even by Stenman Partners’ warped work standards. He even managed to endear himself to a couple of the late traders—enough to sit as a piece of furniture and observe. He learned that the trades done on behalf of Stenman marched around the world as the night progressed. Tokyo, Australia, Malaysia, Hong Kong, Singapore, Korea, Thailand, in the afternoon and early evening. Later, the activity migrated to Eastern Europe, Norway, Finland, Sweden, Switzerland, overlapping with France, Germany, Italy, Spain, and the UK. In each of these and dozens of other markets, Stenman had local relationships—brokers, bankers, politicians, company CEOs, and military leaders.
In addition to trading and back-office professionals, Stenman employed fourteen analysts whose job it was to maintain a steady flow of information. These researchers occupied half of the second floor and did fundamental balance-sheet and income-statement analysis, as well as top-down economics—estimating country and regional GDP along with assessing sovereign risk. Their most important job, though, was to dig for insights like good investigative reporters. They sought tips, uncovered significant sexual indiscretions, identified greedy executives and politicians, and did whatever they could to provide Stenman and her traders an informational edge. These resolute people, Peter discovered, also displayed no more social skills than their trading counterparts—at least to those lacking the information they craved.
It took longer than Peter had hoped, but around the end of his fifth week, he managed to put together a thorough analysis of the commissions-paid project assigned him by Howard Muller.
Throughout, Muller never warmed to Peter, but that didn’t matter— the CIO treated everybody like hammered shit. That Morgan Stenman had received a positive report on Peter was much more important to his professional prospects.
From his assigned project, Peter confirmed that the commissions paid were even more than Stuart had estimated. In fact, they were mind-boggling. Adding in Muller’s trades, the total payout amounted to nearly two hundred million a year. No wonder brokers brown-nosed Stenman on a constant basis.
As Peter wrapped up his work, he had one unexplained item. Nobody seemed willing to discuss why Stenman Partners paid a number of small regional-brokers—many of whom Peter had never heard of—an inordinate share of commission dollars. Of particular interest, because ofrecent events, was the firm of Jackson Securities. In the last six months, Stenman Partners had paid them eight million dollars, but had ceased doing business with this third-tier firm after the explosion at their La Jolla branch. As he did with all outstanding curiosities, Peter solicited Stuart for an explanation.
“You in a rush, Stu?” he asked, having finished reconciling the last of Stuart’s trades—a job he had begun a week earlier as part of his training. “I’ve got some questions regarding that project Fat-Head gave me.”
Stuart surveyed the trading room. Few people remained. Worldwide markets had closed and, since it was Friday, would not reopen until Sunday afternoon on the West Coast. “No problem, Petey,” he said. “Conference Room. Put our feet up and shoot the shit.”
Stuart led the way. Looking at the back of Stuart’s blue tee-shirt, Peter felt gratitude and admiration. After the close of business, Stuart always took time to review his trades. As a result, the confusing language began to make sense, as did the various financial instruments routinely used by Morgan’s employees. Stuart even allowed Peter to participate in some of his transactions—like working orders on the NYSE whenever Stuart traded a listed stock.
Reaching the conference room, Stuart began by saying, “You’re catching on fast, Asswipe.” Both men grinned. For several weeks, nobody, including Muller, had used that name when referring to Peter.
“How come Muller still calls you Numbnuts?” Peter asked.
“Term of endearment. Not many of us get permanent nicknames.”
“Lucky you.”
“I never told anyone this . . .” Stuart shook his head. “Forget it.”
“What? You can’t start a confession, then just drop it.”
“Yes, I can. What’s your question?”
Picking up a remote lying on the table, Stuart aimed and pressed. The curtains, bunched in the corners of the glass-walls, slid shut, granting them complete privacy. With a second shot, Stuart adjusted the lights, making the room dusk-dark. Reaching into his pant pocket, Stuart removed a vial. He tapped white powder onto the glass sheet protecting the oak table. He then removed a freshly-minted hundred-dollar bill from his wallet. He used the edge of the bill to line up the powder. Rolling the bill, he bent over, inserted the tube into a nostril, and sniffed. The first line disappeared. Without looking up, and shifting to the other nostril, he inhaled the second of four lines.
Sighing with satisfaction, he ran the back of his index finger along his upper lip and blinked at Peter. “A Friday ritual. Your turn, dude.”
Peter showed no reaction. He’d seen coke ingested a hundred times at school and parties, and in the back of buses on the way to football games. He shrugged. “Not my poison,” he said.
“You’ll change your mind once you start carrying some hundred-million-dollar positions . . . whatever.”
Stuart did a repeat and consumed the final two lines. He leaned back with his feet propped on the table, his breathing seeming to keep time to a hip-hop or rap beat, every sense enjoying the rapture. With both hands, he raked his fingertips across his scalp. Under the lids, Peter saw his friend’s eyes dart in violent circles.
When the spell broke, Stuart spoke again. “Your project—what is it you want to know?”
“How come our fund did so much business with a firm as small as Jackson Securities? What do they offer that’s worth millions of dollars a year in commission?”
“Drop this one, Peter.” Stuart’s body tensed as he shook his head.
“Drop it? Come on, Stu. Don’t treat me like an outsider. What’s the story?”
Stuart sniffed, then brushed the back of his hand across his nose. He said, “Don’t quote me.”
“If you say so.”
“Several reasons. First, they’re a local firm—we get community goodwill.” Stuart reproduced the vial from his pocket.
“I didn’t say that was the main reason. Next, more importantly, they do tons of small cap deals—many of them micro-cap, below fifty million. They give us whatever allocation we ask for.”
“Their deals tend to go up in price in the aftermarket?”
“Temporarily. You heard of churn and burn?”
Peter wagged his head.
“It’s also called pump and dump.”
“That doesn’t help me,” Peter said.
“It’s simple. Jackson Securities brings a company public—they did a ton of Internet crap before the sector went baballoo. You know, companies with no earnings, no revenues, no business plan, but with dot com at the end of their name. We take a million shares of Bum-fuck Dot Com at ten bucks. Jackson’s brokers then hype the company to all these crackerjack mom and pop clients of theirs, get them excited thinking this is the next Amazon.com in its heyday.”
“That’s the churn in churn and burn and the pump in pump and dump?” Peter asked.
“Yup. These yahoos jump into the stock and it opens at twenty-five bucks a share when it starts trading. We sell our shares to all these shit-for-brains piling in at inflated prices.”
The light went on in Peter’s head. “We dump our stock at a big fat profit. Later, when the stock drops like a rock, they get burned,” Peter said. “Ergo: churn and burn, pump and dump. Very descriptive phrases.”
“Exactly. We clear fifteen million in low risk profit. We do that with them twenty, thirty times a year.”
“For a total profit of some three hundred million dollars over twelve months.”
“That’s it, genius. We also did business with them for another reason.”
Peter leaned forward, cupping his chin.
“They’re owned by a Swiss bank. They have overseas clients who like to lose money.”
“That makes no sense,” Peter said.
“Through their Swiss parent, Jackson brokers for phantom offshore interests.”
