Limitless

by Alan Glynn

  ‘We’re a small investment bank,’ he began, ‘about two hundred and fifty employees. We do venture capital, fund management, real estate, that kind of thing. We’ve brokered some fairly big entertainment deals recently. We did the MCL-Parnassus purchase of Cableplex last year, and Carl Van Loon himself is currently in talks about something else to Hank Atwood, the Chairman of MCL.’ He paused, and then added, as though telling me he’d just been picked for the soccer team, ‘I’m a managing director.’

  But when he elaborated on this a bit, explaining that he was one of seven or eight managing directors in the company who babysat their own deals and then came out with huge commissions, I realized for the first time that Kevin wasn’t just some Wall Street schmoe. From what he was telling me, I quickly reckoned that he probably cleared about two or three million a year.

  Now I was impressed.

  ‘What about Van Loon? Is he …’ I asked, not even having a real question here, obviously succumbing a little to the magnetic pull of celebrity that still surrounded Kevin’s boss.

  ‘Carl’s all right. He’s mellowed a lot, you know. Over the years. But he still works as hard as ever.’

  I nodded, thinking How hard could that be?

  ‘The firm wouldn’t be what it is today without him.’

  This was a man who probably cleared about two or three million a week.

  ‘Hhn.’

  ‘So … how have you been?’

  ‘Me? Fine.’

  I didn’t remember much of our previous encounter, but I was pretty sure I’d mentioned my book, and probably without saying that it was part of a cheesy series for a second-rate publisher – so, at least as far as I knew, Kevin thought I was a writer of some kind, a commentator, someone with their finger, so to speak, on the pulse of the Zeitgeist … someone he could have an intelligent, self-congratulatory but non-threatening conversation with, and about stuff like the new economy and megatrends and digitalization.

  But I got to the point fairly fast.

  ‘What do you make of all this electronic day-trading, Kevin?’

  He thought for a second. ‘It’s just noise. These guys aren’t speculators, or even investors, they’re gamblers – or else sorry geeks who think they’ve democtratized the markets.’ He made a face. ‘When this bubble pops, let me tell you, there’s going to be a lot of blood spattered on the walls.’

  He took a sip from his drink.

  I lifted my glass. ‘I’ve been doing it at home on my PC, using a software trading package I bought on Forty-seventh Street. I’m up about a quarter of a million in two days.’

  Kevin looked at me in horror for a few seconds, taking in the information. But he was also confused, and obviously didn’t know what to say. Then it registered.

  ‘A quarter of a million?’

  ‘Hmm.’

  ‘In two days? That’s pretty good.’

  ‘Yeah, I think so. But I find I’m weirdly – how can I put this? – dissatisfied with it. I feel constricted. I need to expand.’

  As he tried to come to terms with what I was telling him, Kevin shifted on his stool and maybe even squirmed a little. He was a confident guy, clearly very successful, and it was odd to see him mired in uncertainty like this.

  ‘Ehm … perhaps …’ he scratched his nose, ‘you could … why don’t you try one of those day-trading firms?’

  I asked him what difference that would make.

  ‘Well, you’re not isolated, you’re in a room with a bunch of other traders and on the principle that no one in an environment like that wants to see anyone else failing, you help each other out, and share information. Most firms also offer high leverage, anywhere between five to ten times your deposit. You get a better feel for the behaviour of the markets, as well,’ – he was getting back into his stride here – ‘because it’s often just a question of being able to gauge the collective mood, and then deciding either to go with it or … I don’t know’ – he shrugged his shoulders – ‘against it.’

  I asked him if he could recommend one of these places.

  ‘There are a couple of good ones I’ve heard about – actually on, or at least around, Wall Street itself. Though if you ask me, Eddie, it sounds like you’re doing pretty good on your own.’

  I wrote down the names he reeled off and thanked him anyway. Then we each took sips from our respective glasses.

  ‘So … a quarter of a million in two days.’ He whistled in admiration. ‘What’s your strategy?’

  I was about to give him an edited version of events when two guys in suits came up behind us and one of them slapped Kevin on the back. ‘Hey Doyle, you old dog, what’s happening?’

  These were money-scented financial-sector jocks, and when Kevin introduced me but didn’t say that I was a managing director or an executive vice-president with this or that outfit, they more or less ignored me. During the ensuing conversation about the emerging markets of Latin America, and then about the tech stocks bubble, I could see Kevin struggling with his fear that I was going to start talking again about day-trading on a PC – and in front of these guys. So when I stood up to go, I think he was a little relieved.

  I told him I’d phone him in a few days’ time and let him know how I’d gotten on with that thing we’d been discussing.

  *

  Lafayette Trading was on Broad Street, just a few blocks down from the New York Stock Exchange. In the main room of a sparsely furnished suite of offices on the fourth floor, twenty tables were arranged in a large rectangle. Each table held enough terminals and PCs for at least three traders, and of the fifty or so traders I saw there on my first morning – all male, each seated in comfortable executive-style chairs – I’d say more than half of them were under thirty years old, and of those about half again were wearing jeans and baseball caps.

  The deal was that you put down a minimum deposit of $25,000 and Lafayette then provided all the hardware and software you needed in order to trade. In return for this, they charged a commission of two cents a share on each trade you made. If you wanted it, and most people did, they also offered pretty high leverage on your deposit. I registered with them, paying a deposit of $200,000 and then arranged to leverage myself to two and a half times that amount – which meant, effectively, that I was starting off this new phase of my trading career with half a million dollars at my disposal.

  I had to do a short induction course in the morning. Then I spent most of the early afternoon chatting to some of the other traders and more or less observing the room. The atmosphere at Lafayette was – as Kevin had said it might be in such a place – friendly and collaborative. There was a sense of us all being in this together, of us all working against the big marketmakers down the street. But it didn’t take long to see that there were factions in the room, and some big personalities, and that the dynamics weren’t always going to be so easy to read. There were different trading styles, as well, of course. The guy to my left, for example, was a manic keyboard-crusher who didn’t seem to do any research or analysis.

  ‘What’s that stock?’ I asked him, pointing to a symbol on his screen soon after I’d sat down.

  ‘No idea,’ he mumbled, not taking his eyes off what he was doing, ‘it has a big spread and it’s moving, and that’s all I need to know.’

  Other traders seemed more cautious and did quite a lot of research – by watching the TV sets bolted to the side-wall, or by running from their tables to a Bloomberg terminal at the top of the room, or just by poring over endless stock graphs on their own screens. In any case, when I felt I had the measure of the room, and its mood, I went to work at my allotted table-space, looking for some likely trades myself. But as it was my first day I took it fairly easy and when I closed out my positions before the final bell I was only about $5,000 up. Given my admittedly short track record, this didn’t seem like all that much to me, but some of the other traders didn’t agree. Clearly, as the new kid on the block, I had already aroused a certain amount of curiosity, not to say susp
icion, in the room. Someone asked me rather tentatively if I wanted to join a group of them who were going for a drink to some place down at Pier 17 Pavilion, but I declined. I didn’t want to form any new alliances just yet.

  It had been a relatively slow day for me – at least in terms of mental activity and the amount of work I’d done – so when I got home I was feeling pretty restless, even a little frenzied. Unable to sleep that night, I stayed on the couch in the living-room, watching TV and reading. Against a background of cable movies, quiz shows and commercials, I ploughed through the financial sections of the day’s papers, a biography of Warren Buffet and all the text, captions, advertising copy, mastheads and photo credits of half a dozen glossy business magazines.

  *

  On my second morning at Lafayette, a Tuesday, I spent a good deal of time nosing around the various financial websites. I eventually opened up more than a dozen major positions, eighty thousand shares in total, and then concentrated on tracking them carefully.

  At about eleven-thirty, there was a slight commotion to my left. A few tables up, three of the guys in baseball caps, who appeared to be working very closely together, started punching the air and hissing yessss to each other. It took another few minutes for the ‘tip’ to filter down. The keyboard-cruncher beside me, whose name was Jay, pulled himself away from his screen for a brief moment and turned to face me.

  ‘Think something’s just come through on the wire about some biotech stock.’

  He shrugged his shoulders and then went back to work, but the guy beside him wheeled his chair around and spoke to me as though we’d known each other since high school.

  ‘Medical breakthrough, hasn’t been announced yet. MEDX – that’s Mediflux Inc., a Florida drug company, yeah? – seems they’ve got some anti-cancer protein in development. It’s got the white-coats over at the National Cancer Research Foundation all excited.’

  ‘And?’

  He looked at me as if to say, What – are you a moron? Then, pausing uncertainly, he said, ‘Buy Mediflux!’

  I could see that Jay, the guy beside me, was already doing just that. I nodded at the other guy and then went back to my screen to see what information might be available about this pharmaceutical company – Mediflux Inc. It was currently selling at 43⅓, having moved up from an opening price of 37¾. Everyone was assuming it was going to continue this upward trend, and everyone – at least everyone in the room around me – seemed to be buying Mediflux on that basis. I spent a while looking at its fundamentals – historical earnings, growth potential, that kind of thing – and at one point during this Jay nudged me and said, ‘How much did you buy?’

  I looked at him and paused, quickly reviewing in my head everything I’d just read about Mediflux.

  ‘I didn’t buy any,’ I said. ‘In fact, I’m going to sell it short.’

  This meant that, contrary to the prevailing wisdom in the room, I expected the Mediflux share price to fall. While they were all busy buying it, I would borrow Mediflux stock from my broker. I would then sell it, having committed to buying it back later at what I hoped would be a considerably lower price. The lower the price, of course, the greater the profit for me.

  ‘You’re going to short it?’

  He said this quite loudly, and as the word short darted its way around the tables like an acute pain along a sciatic nerve, you could almost feel the whole room stiffen. There was a brief silence and then everyone started talking at the same time and checking their screens and looking across at my table. Over the next couple of minutes the tension in the room increased as the original Mediflux faction regrouped and began hurling comments in my direction.

  ‘Feel sorry for you, buddy.’

  ‘Margin call!’

  ‘Loser!’

  I ignored these taunts and got on with executing my short-sell strategy on Mediflux, as well as looking after my other positions. For the next while the Mediflux share price continued to rise, reaching 51 points, but then it seemed to stabilize. Jay nudged me again and shrugged his shoulders as if to say, Talk to me, why did you short it?

  ‘Because it’s all hype,’ I said. ‘What – a couple of mice with cancer in some laboratory somewhere sit up in bed and ask for tea and suddenly we’re all into a buying frenzy?’ I shook my head. ‘And when is this new protein they’re developing going to have a commercial application anyway? Five years? Ten years?’

  Jay looked worried all of a sudden and seemed to recoil into himself.

  ‘Besides,’ I said, pointing at my screen, ‘Eiben-Chemcorp pulled out of a takeover deal of Mediflux about six months ago, and it was never properly explained – doesn’t anyone want to remember that?’

  I could see him rapidly processing the information.

  ‘This does not have legs, Jay.’

  He turned to the other guy beside him and started whispering. Soon – as my analysis made its way around to all of the other traders – dark clouds of uncertainty descended on the room.

  From the babble of muttering and clicking that ensued, it was obvious that two camps were emerging – some of the traders were going to hold on to their stock, while others were going to join me in shorting Mediflux. Jay, and the guy beside him, reversed their positions. The baseball caps held fast to theirs, but refrained from making any comments about it – not aloud, at any rate. I remained huddled over my terminal, keeping a low profile, even though the atmosphere was electric, with a definite sense that in the ecosystem of the room I was an interloper who was making some kind of a bid for power. I hadn’t intended it that way, of course, but the thing is, I was convinced that MEDX was a turkey – and so it was to prove.

  Late in the afternoon, just as I had predicted, the stock collapsed. It started slipping at about 3.15 p.m., much to the consternation of about two thirds of the traders in the room. MEDX closed at 17½ points, a drop of 36½ points from its high, earlier in the day, of 54.

  At the closing bell, a cheer went up from a small group sitting at the table directly opposite me. They came over afterwards to introduce themselves – and I realized that with them, Jay, the guy beside him, and one or two others, I had formed my own crew. It wasn’t only because they were happy to have taken the tip from me, but it was also, I think, because of what they saw as the sheer, ballsy scale of my own trade. I had shorted 5,000 MEDX shares and come away with over $180,000. This was more in one trade than most of them could hope to make in a year, and they loved it – loved the sanction it gave to risk, loved how it confirmed that scoring big was possible.

  One of the three baseball caps nodded at me from across the room, a gesture that I think was meant to indicate he was conceding defeat, but then he left quickly with the other two and I didn’t get a chance to say to him – magnanimously, or, perhaps, patronizingly – that hey, they had come up with the stock in the first place. I still refused to go for a drink with anyone, but I did stick around for ages, chatting and trying to find out as much as I could about how day-trading firms like this one operated.

  *

  On my third morning at Lafayette I was the centre of attention. But I was also, undeniably, on trial. Was I a one-hit wonder – I’m sure they were all thinking – or did I actually know what the fuck I was doing?

  As it turned out my period of probation only lasted a few hours. A position with a data-storage company, JKLS – not unlike the one of the previous day – soon presented itself, and I whispered to Jay that I was about to initiate coverage of the stock at its current price with an immediate short-sell. Jay, who had quietly assumed the role of my underboss, passed on this information to the next table up, and within less than a minute it seemed that the whole room was shorting JKLS. During the course of the morning, I fed out a few other tips that some people, but certainly not everyone, picked up on. Early in the afternoon, however, when the JKLS price began falling rapidly, and a cheer went up, a quick review of my other tips took place, and the doubters joined in.

  By the closing bell at four o’clock,
it was my room.

  Over the next couple of days, the trading ‘pit’ at Lafayette was packed to capacity – with all of the regulars in attendance, as well as quite a few new faces. I stuck to my short-selling strategy and led an onslaught against a whole series of overhyped and overvalued stocks. My instinct for identifying these stocks appeared to be unerring and it was thrilling to watch them all behave exactly as I had predicted. In turn, people were watching me very closely and naturally wanted to know how I was doing it, but since these same people were also making a lot of money from my recommendations, no one had the temerity to come out straight and simply ask me. Which was just as well, because I wouldn’t really have had an answer.

  It did seem to me to be instinct, though – but informed instinct, instinct based on a huge amount of research, which of course, thanks to MDT-48, was conducted more rapidly and comprehensively than anyone at Lafayette would ever realize.

  But that also wasn’t enough to explain it – because there were plenty of well-resourced, well-financed research departments around, from the windowless backrooms of investment banks and brokerage houses throughout the country, stuffed full of pale, nameless ‘quants’ number-crunching till dawn, to places stuffed full of Nobel-prize winning mathematicians and economists, places like the Santa Fe Institute and MIT. For an individual, I was processing a huge amount of information – it was true – but I still couldn’t compete with outfits like those.

  So what was it?

  After the first day of my second week at Lafayette, I tried to evaluate the various possibilities – maybe it was superior information, or heightened instinct, or brain chemistry, or some kind of mysterious synergy between the organic and the technological – but as I sat there at my table, staring vacantly at the screen, these ruminations slowly coalesced into an overwhelming vision of the vastness and beauty of the stock market itself. Grappling for understanding, I soon realized that despite its susceptibility to predictable metaphor – it was an ocean, a celestial firmament, a numerical representation of the will of God – the stock market was nevertheless something more than just a market for stocks. In its complexity and ceaseless motion the twenty-four-hour global network of trading systems was nothing less than a template for human consciousness, with the electronic marketplace perhaps forming humanity’s first tentative version of a collective nervous system, a global brain. Moreover, whatever interactive combination of wires and microchips and circuits and cells and receptors and synapses was required to achieve this grand convergence of band-width and brain-tissue, it seemed to me in that moment that I had tumbled upon it – I was jacked in and booted up … my mind was a living fractal, a mirrored part of the greater functioning whole.