“A daiquiri, please.”
A few sharp words sent the barman scurrying. The grin on his face had totally disappeared. The prince was drinking champagne. He raised his glass to Debbie after her daiquiri had arrived.
“To a most charming surprise. You have brightened my evening considerably.”
Debbie actually shivered. Not with cold, but with the thrill of it all. This was Europe, the one she had been searching for ever since landing in that dreary Zurich. God, she thought, I hope he doesn’t go away. Better talk to him.
“Are you from here?” Not exactly clever, but it kept the options open.
“No, no. I’m from Sicily. From Syracuse.”
“You are here on business?”
“I suppose so. Although I am not really a businessman. And you?”
“I’m with my, eh, husband. He’s in banking.”
“In Lugano?”
“No. In San Francisco. But he is trying to buy a bank in Lugano.”
“Ha,” exclaimed the prince. “Well, tell him to be careful.”
“Why do you say that?”
“Because, my dear, I have had some slight experience in that regard.” Then he looked at his watch.
Debbie’s eagerness suddenly subsided.
“I’m so sorry. I must be keeping you.”
“Not at all. Quite the contrary. I have been expecting a friend, but he seems to have been delayed. May I suggest something?”
He did not wait for an answer.
“Why don’t we dine together. Unless, of course, you are expecting someone. Your husband, perhaps?”
“No, no,” she replied. “He’s in the Near East somewhere.” She hesitated then. “I would be most happy to dine with you. But I must confess something. I did not get your name. Everyone seems to speak so quickly in Italian.”
“Just call me John. All my American friends do. And now I suggest we move to a table. It will be more comfortable.”
Almost as soon as they had changed places, the restaurant started to fill up: with people, laughter, noise, confusion. For Debbie, the next three hours passed completely unnoticed. She had decided to switch to champagne, they were already on their third bottle, deep in conversation, when a man touched the prince on the shoulder.
“I’m sorry to be so late.”
“Doc! I hardly expected you any more.”
“Nor did you miss me, it would seem,” said Doc, as his eyes shifted across the table.
This brought the prince to his feet.
“Excuse me,” he said, “I must introduce you.”
“Mathew, this is Deborah Luckman. She is from San Francisco.”
Doc extended his hand, and Debbie took it delicately. This one, she thought, is even better. Gawd, what an evening it is turning out to be!
“Delighted to meet you,” said the deep mellifluous voice, “I do hope I may join you.” With that he drew up a chair from an adjoining table, and waved at the waiter.
“Just bring another glass,” he said, “and another bottle of champagne.”
Now it was Debbie who looked at her watch.
“But . . .”
“No buts,” said Doc. “If you have been kind enough to make up my unforgivable lateness to the prince, the least I can do is offer you a nightcap.”
“The prince?”
“Ah, he didn’t tell you?”
“No,” she said, now looking at John with awe.
Annunzio stammered something about it not being very important.
“Doc,” he continued, searching for a diversion of interest, “her husband is in banking. And he is trying to buy a bank here in Lugano.”
“Oh, any particular bank?”
Debbie replied, “Yes. One that has something to do with Sicily and America.”
“How very interesting. What bank is your husband with in America?”
“The First National of California.”
“Yes, I’ve heard of it. Very big, I think.”
“Yes it is. Are you also in banking?”
“We . . .” started the prince, but he was immediately cut off.
“We,” said Doc, “are in the investment business. But we hardly want to start talking about business at this hour of the evening, do we?” The glance he shot at the prince was deadly. Debbie didn’t notice a thing. In fact, after so much alcohol she was starting to have trouble keeping anything in focus. The conversation shifted abruptly to the delights which the Italian part of Switzerland offered to visitors and residents alike. It was agreed that Debbie should be shown some of the sights. Doc volunteered to serve as her guide. He would phone her hotel.
All three were on somewhat unsteady legs as they left the restaurant fully two hours later. Debbie insisted on pecking both men on the cheek as they said their farewells in the parking area above the village. The one she gave Doc was, however, a bit too extended to qualify as a simple peck. And the pat he gave her behind was too lingering to be accidental. All the way back to the hotel she hummed a tune over and over again. The driver was tempted to turn on the radio to drown her out. But simple greed held him back. The fifty franc note she pressed on him as a tip, mistaking it for a ten, proved his Italian instinct correct.
The International Bank of Sicily and America opened its doors at nine. Within minutes, it was bustling with tourists exchanging money, local businessmen arranging transfers, housewives depositing savings. Around ten o’clock the more important type of clients began arriving. They were discreetly ushered into an elevator and were met on one of the upper levels by a bank executive. The issues they discussed were the state of the American economy, the weakness of the dollar, the strength of the German mark, and the boom in cocoa prices. The decisions they reached often led to shifts of millions of dollars from one market to the other, from one currency to the other. The commissions generated as a result of these switches, the fees charged for advice given—the interest charged if margin was involved—all added up rapidly. Less than a year after the takeover, the Bank of Sicily and America had become an enormously profitable institution. The reason: the bank seemed to possess an almost uncanny knack for being in the right thing at the right time. The word had spread. The money poured in.
Every morning at ten the executive committee of the bank met in the boardroom. Often these sessions lasted no longer than five minutes, and usually consisted of everybody listening carefully to Albert Fiore as he meticulously outlined the day-to-day adjustments in the bank’s strategy and tactics. At first, fresh recruits—Swiss bankers provided by executive headhunters through periodic raids of other banks—were highly skeptical of what Albert told them to do. He was much too young to know anything, he was American, and he looked and acted more like a budding professor than a smart money manager. But such doubts were of short duration. Because, his ideas worked.
This particular morning the meeting started late. The reason was that Doc had insisted that Albert hear about the happenings the prior evening in Gandria. They talked softly in the corridor—rather Doc talked softly. Albert just listened, nodding his head occasionally. Finally, when Doc had completed his narrative, he stated his conclusions:
“Doc, this could be either good or bad. In any case, it’s all too flimsy to act on at the moment. Let’s wait until you get something in greater depth. Then we can figure out our response. Now let’s get that meeting going.”
The prince was waiting patiently at the head of the table as they entered. The moment everyone spotted Doc and Albert, the murmuring ceased. As usual, the prince, as Chairman, officially greeted everyone, and then turned the proceedings over to Albert.
“Gentlemen,” he started, “this morning we are going to discuss commodities. I suspect that some of you are not too familiar with the workings of commodities markets, so I will explain the essentials. They are really quite simple. It will not be necessary to take notes. If anyone has questions or problems later, you must simply come to me.”
Albert always said almost exactly the same wo
rds when explaining a new area of finance. It was simple.
“You have to really understand only three basic concepts. These are: long, short, futures. Three words.”
In spite of his suggestion to the contrary, everyone at the table, including the prince and Doc, wrote down the three words.
“Let’s start with ‘long.’ When you go long in the commodities market, it simply means that you are the buyer. You are entering into a contract to buy a commodity from another party for delivery at some time in the future. Like: ‘I agree to buy 10,000 ounces of silver from you, at $1.60 an ounce, for delivery three months from now.’ Any problems with that?”
He looked around the room. No problems. Going long meant you were a buyer.
“Good. Now ‘short.’ Going short means that you are a seller. You agree to sell those 10,000 ounces of silver, at $1.60 an ounce, to the other party of the contract. And you agree to deliver that silver three months from now. Got it?”
They got it.
“Futures are simply the name given to these types of contracts, where the commodity involved, though contracted for now, will be physically transferred at some time in the future. In our example, those 10,000 ounces of silver will first have to be delivered three months from now from the seller, who went short, to the buyer, who went long. Got it?”
More or less.
“Now we come to the heart of the matter. Normally, the fellow who is selling in the commodity futures market does not own any of that commodity. And the fellow who buys usually never intends to ever really use that commodity. O.K.?”
No. That one definitely did not get across.
“How,” said one of their account executives, “can you sell something you have not got?”
“Because the actual contract is done through a commodity broker, who guarantees that you will be able to get it when the time comes to deliver.”
“Why should he do that?”
“Because you give him a guarantee to do so. A cash down payment. They call it margin in the commodity business. But don’t let that confuse you. It’s just a cash guarantee.”
Now the youngest member of the group spoke up. He had a beard, but this did little to conceal the fact that he was only twenty-three.
“Why should anybody sell anything he has not got?”
“To make money,” was Albert’s prompt response.
“How?”
“Let’s go back to silver. Say I went short and you went long on that futures contract. You agreed to buy 10,000 ounces of silver from me three months from now, and I agreed to deliver it to you then. We also agreed that you would pay me $1.60 an ounce. Right?”
“Right.” One had to give the kid credit. He was not afraid to ask “stupid” questions.
“O.K. During the next three months, the price of silver falls. Say to $1.30 an ounce. The day I have to deliver that silver to you—the silver I never had—I go out and really buy it. Then a minute later I hand it over to you. And you pay me. But you have to pay me $1.60 an ounce. I only had to buy it, a minute beforehand, for $1.30 an ounce. Voilà. I’ve made thirty cents an ounce. On 10,000 ounces that’s $3,000 dollars.”
“What about me?” asked the young man.
Now Doc broke in. “You have been screwed!”
The laughter broke the ice. Now other men, the older ones, started to ask questions.
“Could you explain what would have happened if the silver price would have gone up, instead of down?”
“Sure. Then I, who went short, would have had to actually buy the silver when the contract became due, at a higher price. Say $1.90 an ounce. But I would have had to hand it over to our friend here a minute later for $1.60 an ounce. Then he would have been the one who made $3,000.”
“What determines which way the price goes in something like silver?” asked another man.
“Supply and demand like in any other market. But in commodities it is more complicated. There the determining factor is what people expect the supply/demand picture will be in the future, since almost all commodity trading is done for future deliveries. Let’s say there’s shortage of silver now. Some people may think that this shortage will get even more acute in the future, driving the price up. So they’ll go long. Others may feel that a new flood of silver may be about to hit the market, driving the price down three, or six, months from now. They’ll go short. So it’s future expectations that are the key here.”
The group seemed satisfied. But then another man spoke up.
“Albert, explain that margin business again.”
“I will, since it’s highly important. It’s what makes commodities so interesting, and so dangerous. Key to all commodities futures trading is that, normally, you only put up margin, in other words a cash guarantee, of 10 percent of the actual value of the commodities you are buying or selling. Now in our case of silver, the actual value of the 10,000 ounces at $1.60 an ounce of silver would be $16,000. Right?”
Albert paused.
“But you only would have had to put up 10 percent. Or $1,600 in cash. Get it?”
“Yes,” somebody volunteered.
“That means that I would have made $3,000 profit on just $1,600 in three months. That’s almost impossible to do in any other market.”
“Exactly. You can double, triple, or quadruple your money in a very short time in commodities.”
“Or get wiped out!” said the young man with the beard.
Albert now looked at his watch.
“Gentlemen,” he continued, “the reason I’ve brought this up is the following. We shall be recommending to our clients that they buy, or go long, on silver. For delivery in three months. Because the price of silver is going to go up. Now let me show you exactly where it appears to be headed.”
Albert unrolled a huge chart, and with the help of the prince tacked it on the wall.
“This shows what has happened to silver during the past six months. It came from $1.29 in July, moved all the way up to over $2.40 at year end, then retreated almost all the way back to $2.00. Now it’s starting to climb again. It’s a buy for two reasons. First, a silver craze has developed among the small investors in the United States. Hundreds of thousands of people are trying to get a piece of the action before it’s too late. Last summer, speculators held future contracts amounting to well below 200 million ounces. Today, it’s a half billion ounces. Times two bucks. That means they have over a billion dollars on the line. And it’s rising every day, as more and more suckers pour in. I use the word suckers advisedly, because those that are long are going to make a lot of money. At least for a while. Because in addition to the little guys, there seems to be some big guys, or big guy, that is rigging this market. On the upside. When both the little guys and the big guys are pushing in the same direction, that’s the time to join them. Which is what I propose we do.
“Now look at this chart once again. The little ‘x’ is where we are now. The big ‘X’ is where I think the silver price is heading. If I’m right, $10,000 invested today, on margin, should triple by summer.”
He paused.
“I think our clients might like that.”
The faces of everyone in the room shone. Albert was out to do it again. The clients would not like it—they’d love it!
“How should we go about this technically?” asked their most senior account executive, one that they had gotten from the Union Bank of Switzerland by offering him twice his former salary.
“Just give the orders to my office,” said Albert. “I’ll keep an eye on them after that.”
Within five minutes the switchboard of the Bank of Sicily and America lit up like a Christmas tree. With outgoing calls to selected clients in dozens of countries. Silver futures were hot!
The only man in the bank with any lingering doubts was Doc. He stayed behind in the boardroom with Albert after everybody else had left.
“Albert, one thing puzzles me. Our mine down in Iran is starting to pump out silver like crazy. Won’t that start affe
cting the price?”
“Probably. But not until late summer. That’s when Firdausi plans to achieve full output. Then we’ll look at the whole thing again.”
Doc shrugged. He knew it never paid to ask Albert a question.
“In the meantime,” Albert continued, “by getting speculators to buy we push the price up, don’t we. So we make it both ways. We sell our physical silver from Iran at better and better prices, and we make profits for our customers in the futures market. It’s what the Europeans call one hand washing the other.”
That answer fully satisfied Doc. And it pleased him to see that little Albert had more than a little larceny in his soul.
As the Europeans also say: the apple never falls far from the tree. Joe Fiore could be proud of his boy.
12
DEBBIE was in her bath at the Hotel Villa Castagnola. But she was involved in purely ablutionary activities. Why indulge in childish practices, she had told herself firmly, when the real thing was close at hand. At least it had better be!
Funny about Debbie. She was by no means promiscuous. Aside from Donald, she had only slept with two other men in her life; boys, really, since it had happened in college, almost twenty years ago, long before she’d even met Donald. But somehow, somewhere along the line, something seemed to have snapped inside her. It was hard to say exactly when, but certainly no more than a year ago. What gave way was her determination to stay faithful to Donald no matter what. Up to that point, she had been resigned to getting along quite nicely for the rest of her life on a low-key limited diet of sex. But suddenly it had dawned on her that within a few years, after forty, she would probably have no choice in the matter. Who wanted to screw old women these days? The trouble was that in Los Altos Hills nobody seemed terribly interested in screwing relatively young ones either! Not that she’d exactly put herself on the market. But she’d given a few broad hints at more than one cocktail party. The most brazen had occurred in Roger Wright’s kitchen, while she was helping him with the drinks. His only reaction was to drop ice cubes all over the floor, and flee to the safety of numbers in the living room. Maybe he’s a latent fairy, she thought. Those goodlooking ones often are, it seems. If that turned out to be the case with Mathew!
The Silver Bears Page 14
