The Marketmaker

by Michael Ridpath

  God knows how many I had had that day. But it was good stuff. I nodded. ‘Please.’

  He strolled off, leaving me waiting uncomfortably. The boss was getting me coffee. Shouldn’t I be fetching it for him? In a moment he was back with two cups.

  ‘Well, what do you think? Fun, isn’t it?’

  ‘I didn’t realize this stuff could be so intellectually interesting.’

  Ricardo chuckled. ‘You thought it was all screaming down telephones.’

  ‘I suppose so.’

  He looked at what I was reading, a piece panning Mexico. ‘What’s your view on that?’

  ‘It’s well written. Persuasive. It makes sense to me.’

  ‘I know. Charlotte has that rare ability as an analyst to take facts and speculation, mix them up, and come up with an opinion that will make money. And I can assure you I value that opinion.’

  He took a drag on his cigarette. ‘Take Mexico. Charlotte’s worried about it. She sees another currency devaluation coming in the next month or two, and she thinks this one will scare investors almost as much as the last one. And I agree with her.’

  ‘So you sell Mexico and buy Argentina?’

  Ricardo smiled. ‘You’re catching on. That would be the right trade. Argentina’s a good choice, too. The bonds are much too cheap. But it’s not that simple.’

  ‘Why not?’

  ‘Because Mexico want to borrow a billion dollars. And that’s a deal we have to win.’

  ‘I see. But you don’t want to sell a billion dollars of Mexican bonds to investors when they’re scared about a devaluation?’

  ‘Dead right.’

  I thought about it. ‘Can’t you let someone else do the deal, then?’

  ‘Normally I would consider it. Of course, we’d have to be involved. This is our market, we’re always involved. Those are the rules. But maybe we could share the transaction with a couple of other houses and reduce our risk. The trouble is, Bloomfield Weiss are bidding for the whole deal. And I just can’t let them win it.’

  ‘They’re the people who stole your Eastern European team, aren’t they?’

  ‘That’s right. They’re aiming for us. They want our number-one position. Until recently they couldn’t give a damn about emerging markets, but in the last few months they’ve changed their ideas.’

  ‘You can see them off, surely?’

  ‘Not so easy. They’re the top trading firm on Wall Street when it comes to the conventional markets. And they have ten times our capital. They’ll use that to buy their way in.’

  ‘So, what are you going to do?’

  ‘I really don’t know.’ He pulled on his cigarette thoughtfully. I let him think, flattered that he felt able to share a problem like this with me on my second day.

  Eventually, he spoke. ‘So you like Argentina?’

  ‘Yes,’ I said.

  ‘Why?’

  I took a deep breath and answered him. ‘Their policy of fixing the peso to the dollar really seems to be working. And the bonds have come off a few points just because a big American money manager has been selling. They’re good value.’

  ‘Uh-huh. And which bond do you like in particular?’

  ‘The Discounts.’ These were one of the classes of Brady bonds that had been exchanged for old bank debt when Argentina had renegotiated its borrowings a few years earlier. ‘Am I right?’

  Ricardo smiled. ‘Did you know my father was Argentinian?’

  ‘Jamie told me.’

  ‘Well, I have an old rule. Never let a trader trade his own country’s bonds. He can’t be objective. Now, I usually break my rule in my own case, but this time …’

  He picked up the phone.

  ‘Who are you calling?’

  He looked at his watch. ‘US Commerce have a San Francisco office that should still be making markets. Hold on. Brad?’ Pause. ‘Ricardo Ross. Where are you in Argentina? The Discounts… In twenty million?… Of course, I’ll wait.’

  He grinned at me. ‘The guy’s panicked. But I know him. If I ask him to make a market in size, he’ll do it. He has to prove himself. Especially to me.’ Then back to the phone. ‘Sixty-seven to a half? That’s a wide market, isn’t it, Brad? … OK, I know it’s late. I’ll take twenty at a half.’ He hung up and turned to me. ‘Now, you remember to tell me when to sell, won’t you?’

  I nodded, my heart suddenly beating rapidly.

  ‘It’s about time you went home, isn’t it? We start again in eight hours. Don’t you sleep?’

  ‘Not much. Do you?’

  ‘Not much.’ Ricardo grinned. We were kindred spirits. It was rare to come across someone else who genuinely didn’t need a full night’s sleep, and it was a pleasure when it happened. I was used to staying up into the small hours reading, or researching. Five hours’ sleep was all I needed. Especially when I was absorbed in something.

  ‘Get on your bike,’ he said.

  So I did. I pedalled home fast, my emotions neatly poised between fear that my first bond position would all go wrong, and excitement that it would all go right.

  4

  Wednesday morning was foggy. I couldn’t see the Tower as I rode my bike through the East End. Old warehouses loomed up on either side of Narrow Street. With London’s haphazard modern skyline obscured, I could almost believe I was in Victorian England, until a van ran a red light and forced me on to the pavement.

  But the trading room was surrounded by blue sky. I was drawn to the window. We were just above the fog, a choppy white surface stretching out on all sides beneath us. The tip of the NatWest tower broke through the clouds like a rock a few miles out to sea. We ourselves were an island far from England, closer to New York and Buenos Aires than Primrose Hill and Shoreditch. I looked around at my colleagues. We were a small band of colonists, immigrants from all over the world, come to seek our fortune in this strange new land.

  Well, that was fine, but where were the Argy discos trading?

  I switched on Jamie’s screen. Sixty-seven and a quarter bid. I wasn’t in the money. The rest of the market was up a point, leaving my bonds behind them. Oh, God. Maybe I’d picked the wrong issue, after all.

  Jamie was out that morning. He had to make a presentation to a large insurance company that was considering investing in emerging-market bonds. It was an important meeting; as Jamie had put it, when these boys played, they played in size. So I spent the morning at my desk.

  Except it didn’t feel like my desk. It felt like Martin Beldecos’s. To say that he was haunting it would be too strong. But when I was sitting there, I had a powerful feeling of his presence, even though I’d never met the man, didn’t even know what he looked like. A desk is a private space. In a trading room, it is the only private space, a tiny island of security. I felt as though I was a usurper of someone else’s territory. It wasn’t a comfortable feeling.

  Just then, the fax behind me chugged into life. Most of the faxes were for Isabel, but she was engrossed in one of her mammoth phone calls. So I strolled over to the machine, and picked up the two sheets of paper.

  It was for Martin Beldecos. From United Bank of Canada. My curiosity got the better of me. I took it back to my desk – Martin’s desk – and began to read.

  Dear Mr Beldecos

  Following your recent request regarding the beneficial ownership of International Trading and Transport (Panama), I thought you might be interested in the findings of a recent investigation at this branch.

  You may recall that the only name on our records associated with International Trading and Transport (Panama) was Mr Tony Hempel, a Miami lawyer Our investigations into another of our clients have shown that this Mr Hempel is closely connected with Francisco Aragão, a Brazilian financier under investigation by the United States Drug Enforcement Agency for drug-related money-laundering activities.

  While we make every effort to assist the international agencies in their investigations into money-laundering and drug crimes, we also owe a duty of confidence to our counterpa
rties, so we have not yet passed on your inquiry to the DEA. However; if you have information you would like to share with them, please call me, and I will give you my contact’s name and number.

  Yours sincerely

  Donald Winters

  Vice President

  I stared at the fax.

  Money-laundering. That meant, I believed, the recycling of illegally obtained cash through the financial system. Now I remembered from the first fax that this company, International whatever, Panama, had transferred some funds to a Dekker Trust account. And the lawyer who had ordered the transfer was an associate of a suspected money-launderer. Which meant that one of the Dekker Trust accounts might contain laundered money.

  So this was what Martin Beldecos had been working on before he died! No wonder Eduardo wanted to make sure that he received Martin’s messages personally, and that no one else saw them.

  I picked up the fax and walked over to Eduardo’s corner office. I knocked on the door, and tried to open it. It was locked.

  ‘He’s not in today,’ said a middle-aged woman, presiding over a corral of desks just outside his office. ‘Should be in tomorrow. Can I help?’

  I dithered over giving her the fax. Eduardo had said I shouldn’t let anyone else see any of Martin’s messages. But she was his secretary. But, then, this was clearly an important message. I remembered the implied threat in Eduardo’s voice, and decided the safest thing was to wait until I could give Eduardo the message personally.

  ‘No, that’s all right,’ I said, and made my way back round the square of trading desks to my own seat.

  ‘One nil!’ Dave flung his phone down on his desk, and stood up in triumph, his arms in the air, his stomach thrusting out in front of him. He attracted only a quick glance from the other traders around him. Another small victory over the market. Another dollar made.

  Suddenly I felt cold. Perhaps Dave had been right. Perhaps Martin had been murdered by a contract killer. If he knew about money-laundering at Dekker, someone might have wanted to shut him up.

  No. I was just being fanciful. I returned to my desk clutching the fax tightly. I should just give it to Eduardo and forget about it. He could sort it out.

  But Eduardo? Perhaps he already knew all about it. If someone was laundering money through Dekker Ward, it wouldn’t surprise me if Eduardo did know all about it.

  What the hell should I do?

  I looked round for Jamie, but he was still out at his meeting.

  Then I saw Ricardo moving towards me.

  ‘Still want to keep that Argentine position? They’re lagging the market a bit, aren’t they?’

  I dropped the fax on to my desk, and wrenched my brain back to the market. ‘The reasons we bought the bonds still hold good,’ I said. ‘So yes.’

  ‘OK, fine. We’ll see what happens. Now, what are you doing at the moment?’

  The fax to Martin Beldecos was right there, face up on my desk, partially covered by my left arm. Now was the time to tell Ricardo about it. Just give it to him, and forget it.

  But something made me hold back. I think it was because I couldn’t foresee the consequences, although I was sure they would be important. I needed time to think it through first.

  So, keeping my arm on the desk, covering Martin Beldecos’s name on the title sheet, I said simply, ‘Reading.’

  ‘Uh-huh. Don’t you think it’s about time you got involved in a real deal?’

  ‘Yes. That would be great.’

  ‘Good. Isabel is going down to Rio tonight to sort out this favela deal. She’ll need some help. Can you go with her?’

  ‘Of course.’ My pulse quickened at the prospect of working closely with Isabel. Besides, this was a great opportunity; my first business trip at Dekker, and a big deal. One that Ricardo was personally interested in. Although I had to admit he seemed to be personally interested in every deal.

  I glanced towards her. She was leaning back in her chair talking on the phone, but she had seen Ricardo with me, and gave me a quick smile of encouragement.

  ‘Good. I’d like you to see how we operate in the markets we know well before I set you on to Russia,’ Ricardo said. ‘See what you can do.’

  A voice interrupted. ‘Ricardo! Vasily Ivanov from the Russian Finance Ministry on twelve!’

  ‘Ah, the Russians are coming.’ Ricardo smiled, and returned to his desk to take the call.

  Isabel put down her phone. ‘Pull up a chair,’ she said. ‘I’ll tell you what we’re doing.’

  ‘Just a second,’ I said. I picked up the fax, and looked at it once again. Then I opened the bottom drawer of my desk, which was still empty, and tossed the fax inside. I’d deal with it later, when I had had a chance to think about it.

  I pulled over the chair from my own desk, and sat next to her. I could just smell her perfume. Concentrate!

  ‘I said all this would get easier once you started doing it, rather than just reading about it, didn’t I?’ She smiled, a shy flash of teeth that came and went. ‘Well, I may be proved wrong. This deal isn’t a good one to start on.’

  ‘I’ll do my best.’

  ‘OK. Let me tell you the story. First of all, do you know what a favela is?’

  ‘It’s some kind of a slum, isn’t it?’

  ‘That’s right. In Brazil there’s been massive migration from the countryside to the towns over the last forty years. People arrive in the cities without anywhere to live. So they find some empty ground, and build a shelter there. They make them out of pieces of timber, corrugated iron, things like that. As more people come, their homes become a bit more substantial, and these areas grow into large communities, some of them with thousands of inhabitants. These are the favelas.’

  ‘They sound grim.’

  ‘They are,’ said Isabel. ‘They have no sanitation, open sewers run through the streets. No running water. No garbage collection. If there’s a fire, the fire service can’t get in to put it out. There are very few schools or clinics. There are drugs and gang wars. They’re horrible. No humans should be allowed to live in those conditions.’

  ‘So why don’t the authorities do something about them?’

  ‘They’ve tried. Whenever they move the residents on, they just build a favela somewhere else. Sometimes the city will build cheap housing for some people, but then these are replaced by thousands more. And you know how little money Brazil has to spend on anything, these days.’

  ‘OK, so what’s the solution?’

  ‘Well, the Municipality of Rio de Janeiro think they’ve found one. It’s called the Favela Bairro project. Bairro means neighbourhood. The idea is that instead of trying to move or replace the favelas, they will try to change them. Turn them into proper neighbourhoods. So they will build roads, health centres, schools, parks, water systems, electricity. But, most important of all, they’ll give the inhabitants of the favelas title to their properties.’

  ‘What, ownership?’

  ‘Not quite. But a long leasehold, which is more or less the same thing. This should make a big difference. Once these people know they’re not going to be turfed out of their homes they’ll improve them. And, just as importantly, they will have an incentive to stop newcomers building on their land. It should make a big difference. They should turn into proper bairros.’

  I’d heard this argument before somewhere. ‘Sort of like Margaret Thatcher selling off council houses in this country?’

  Isabel smiled. ‘That’s right.’

  I thought about it. ‘Will it really work?’

  ‘It should do,’ said Isabel. ‘It’s certainly worth a try. We have to do something.’

  ‘And how will all this be financed?’

  Isabel leaned forward, eager to explain. ‘That’s where we come in. Although the World Development Fund are happy to help, organizing the financing for these projects can be quite a problem. Usually it has to go through the Municipality. There, it can be mixed up with funds for other projects, and all kinds of budget-related bur
eaucratic restrictions have to be met. In the past there have also been accusations of contracts being awarded at inflated prices in return for kickbacks. Also this project could be partially self-financing from taxes raised from the favelas, but the Municipality is not allowed to pledge tax revenues to any specific source. So the whole idea got bogged down.’

  ‘Sounds like a nightmare.’

  ‘It was. Until we thought of the idea of a trust.’

  ‘A trust?’

  ‘Yes. A trust will be set up to fund the project. It’ll be called the Rio de Janeiro Favela Bairro Trust. It’ll be funded with one hundred million dollars from the Municipality, and two hundred million dollars from a ten-year bond issue guaranteed by the World Development Fund.’

  ‘And arranged by Dekker Ward.’

  ‘Precisely.’

  ‘And this trust is responsible for financing the project?’

  ‘That’s right. There will be trustees from the Municipality, from the favela, and from the World Development Fund.’

  ‘Very neat.’ I thought a moment. ‘How will the money be repaid?’

  ‘The trust will receive the rental payments under the long leases. Because they’re rental payments, not taxes, they can be applied to the bond issue. Of course, if that isn’t sufficient, then the Municipality or the World Development Fund will make up the difference.’

  ‘I see. But won’t the Rio authorities be unhappy about losing control of the funds?’

  ‘That’s been the problem,’ said Isabel. ‘But the current mayor of Rio really does want to do something about these places. And he and the new Finance Secretary are quite strict about not awarding contracts to political allies. This will help them clean the whole thing up.’

  ‘So everyone gains?’

  ‘That’s the intention. Brazil needs foreign capital. This is a way of making sure it gets to where it’s needed most.’

  I was impressed. ‘Was this your idea?’

  ‘Yes. Or, at least, the trust structure was. I’ve wanted to do something like this for a long time, but no one took any notice. Then Ricardo put his support behind it, and it looks like it will finally happen. If we can squeeze it through the Brazilian bureaucrats, that is.’