Saving Jason

by Michael Sears

  We worked in my father’s new apartment on 115th Street in College Point with a view of the airport and the city jail on Rikers Island. It was a constant reminder to not make any mistakes. Manny piggybacked on the Wi-Fi at St. Agnes High School—closed for the summer—so that if any watchdog entity tried to search back through the Internet to find where the selling pressure was coming from, they would run into a dead end.

  Pop and Estrella stayed in my apartment and kept an eye on the Kid. Manny and I ate microwaved Lean Cuisine and never went out. We spelled each other during the night, keeping an eye on the overseas markets. By the weekend we were beginning to develop cabin fever, so we both agreed that a twelve-hour break was in order.

  I flagged a livery driver on College Point Boulevard and paid him cash for a ride to West 110th Street in Manhattan. Skeli and I ordered Chinese, watched Bogie and Bacall in To Have and Have Not on TCM and went to bed early. Sunday, I rode the subway all morning, switching lines and cars until I was sure I wasn’t being followed, and then took the Number 7 all the way to Flushing, Main Street, where I caught a bus that let me off eight blocks from Pop’s place. Manny arrived an hour later, wearing a dark brown ankle-length djellaba. In the multicultural, polyethnic mixing bowl of Queens, he fit right in.

  “The Pacific markets open in a few hours. I want to be ready,” I said.

  “We’re ready,” he said.

  He was casual, relaxed. I was paranoid, anxious, and a nudge this side of explosive. It felt good.

  We tracked the Sydney market, then switched to Singapore and Tokyo. The markets felt heavy, but at the same time somewhat skittish. It was perfect weather for a breakout session. By the time that London began trading, the world markets were all slightly lower on light volume. I was too hyped to sleep, so I made a pot of coffee and let Manny sleep for six hours. When he awoke, he scrambled eggs for us as we waited for New York to open. We ate while watching Bloomberg News on my father’s giant flat-screen. Becker Financial got a mention for the meeting on Friday evening.

  “I think that whatever the results of the shareholder vote, they want the markets to digest the news over the weekend,” the guest talking head said. The banner at the bottom of the screen said that he was the chief portfolio manager at Boyle & Co.

  “Do you have a stake in the vote, Tim?” the TV reporter asked.

  “We’re in the contrarian camp. We own BFG. I think Virgil Becker has done a good job and I hope he is reinstated once this vote is out of the way. He’s been tainted by the investigation, but I believe he can weather it. And remember, the Beckers still own a large block of shares. I think the market will be very surprised if the vote goes against them.”

  “And markets hate surprises, don’t they, Tim?”

  They both got a good chuckle over that. The conversation switched to the restaurant industry and why those stocks’ performance was tied to the price of oil. I hit the mute button.

  “Shall we surprise them, Manny?” I asked.

  He grinned. “Photon torpedoes ready, Captain.”

  Computerized trading has affected all markets, and the jury is still out on whether this is a good thing or a bad thing. My take is that it doesn’t matter. You can’t undo technological change. Celebrate the positive effects—greater liquidity, speed of execution, improved price discovery, transparency of information—and accept the fact that the guy with the biggest, fastest computer is always going to have an edge over the rest of us mere mortals. And also suck it up when, as will occasionally happen, the computers read the same signals and all lean the same way at the same time.

  We started sending out those signals.

  “It doesn’t matter how far above the market you make your offer. Just do it large. The computer programs scan the order books of the floor traders, and size means more to them than price.”

  The program placed orders to sell Becker Financial two or three points higher than the market price. If any one of them had been executed, we would have been in deep trouble; Manny was offering tens of thousands of shares at a clip. I had him place similar orders to sell the S&P index on the Chicago futures exchange. Well above the current market, but again huge in size.

  By midday, my adrenaline was starting to fade. I lay down and tried to nap for an hour, but I couldn’t relax. Though exhausted, I was still flying on nervous energy. I made another pot of coffee.

  The bulls tried pushing the market up late in the day on the weekly car sales report, and for a few minutes I felt a stab of panic as the market ticked up. They were getting dangerously close to our sell orders on the S&P index. If I told Manny to pull the orders, the market might read it as a bullish sign and really take off. Rather than watch the tape and fret, I went in the kitchen and made turkey sandwiches for the two of us. We hadn’t eaten since breakfast.

  “I hope you take mayo on your sandwich, because that’s the way I made it,” I said.

  “Thanks,” Manny said, though he had only been half listening. “They had a little rally a while ago, but it didn’t amount too much. The market is back down to the opening levels. What do you want to do?”

  “What’s the time?” I asked.

  “Is this mayo? There’s no mustard?”

  “I’ll get you mustard. What’s the time?”

  “Three thirty-one,” he said.

  Less than a half hour to the close of business on the New York Stock Exchange. Futures would stay open longer, and the aftermarkets would kick in right away, but the next day’s margin calls for BFG would be based on the four o’clock price.

  A graph in the upper right-hand corner of Manny’s screen showed an ever-growing spike. Order flow toxicity, the measure of the relative imbalance in sell orders versus buy orders, was close to record levels. Hedge funds, market makers, and day traders would all be focused on that graph. And they’d be nervous. Soon, they’d be scared. Fear and greed, in the end that’s what moves markets.

  “It’s time,” I said. “Let ’er rip.”

  Manny hit keys on the laptop and all of our above-market offerings ticked lower. We still had not made one sale. We didn’t need to. All we needed to do was to give the appearance of many different sellers all leaning in the same direction at the same time.

  At 3:34, the computers kicked in.

  I had timed it perfectly. The market was tired. Traders were bored, or off the desk, or complacent; very little had happened and the close was less than a half hour away. They never saw it coming.

  A nanosecond later, the market got hit with thousands of sell orders. Prices on the terminal all switched to red, and minus signs appeared on the tape. The selling continued. S&P futures dropped by two percent. Then three, and four.

  “Manny, put your ear up to the computer, and if you listen really carefully, you will hear the screams of traders in crisis.”

  “Cruelty has a human heart, Jason.”

  The market continued to plummet, overloaded with sell orders from computer-driven hedge funds. There were times when the market would move so quickly that a human trader had no time to panic and react. He or she could only sit frozen in awe. Sometimes, like this day, that was a good thing. Computers don’t panic at all and they can react to market changes in an instant. So while humans watched, the computers behaved like lemmings and leapt off the cliff.

  I checked the market for Becker Financial Group. After hitting a recent high of 52.1 a week earlier, BFG had been trading listlessly all morning between 50.06 and 50.12 with good size offered at 52.5. When the order came in to show twenty thousand shares at 51.5, all of the bids pulled out. The next sell order was from a computer to sell one thousand shares “at the market.” Not a particularly large order, but there were no longer any resting customer bids and other sellers were jumping in. There were a few trades in the high forties, then nothing down to 42.4, 42.2, and 42.0 as a few human traders tried to stop the flow. The computers blew ri
ght through them. In another few seconds, BFG was down to 38, where stop-loss orders began flooding the market and trading was halted.

  The other financial stocks were getting a beating also, but none as badly as Becker.

  The only thing that stopped the market from trading lower was that there were no more buyers anywhere. The selling stopped and everyone got to take a deep breath. It was 3:43. Nine minutes had passed and the stock market had given up half a trillion dollars in value.

  The pause continued. At 3:46, the S&P futures market ticked up. It was the first uptick trade since the selling began. That was all it took. Despite the instantaneous flash of information through the Internet, through cable and ether, and by methods more ancient, the human animal responds at its own speed. Once the information was digested that the market had suddenly, and without reason, become vastly cheaper, the buy orders came back in. The markets began trading back up again, and by the time the final bell rang on the New York Stock Exchange at 4:00 p.m., most stocks were back where they started the day or slightly higher.

  But not the financial sector. Those stocks lagged. And Becker lagged the most. When the closing price for BFG hit the tape, it read 39.8. Down twenty percent.

  “Is that too much?” Manny said.

  “It’ll get a pop tomorrow. Maybe we overdid it just a tad.”

  “You never know what is enough, unless you know what is more than enough.”

  “You’ve pulled all of our orders out, haven’t you?”

  “Aye, aye.”

  “Then I’m going to bed. See you in the morning. Nice work, Manny.”

  75

  Leverage is the great equalizer. It can make you or break you. Wall Street can’t function without it, and yet it is behind every crash the market has ever seen.

  The margin calls went out the next morning.

  When you pay cash for a stock, the most you can lose is the amount you put up. But when you borrow money from your broker—on “margin”—and the stock goes down, you can find yourself in an ever-deepening hole. Of course, if the price goes up, your profit is magnified considerably, but so is the risk. If you lose, the broker will demand that you post more money to cover the drop in value of the stock. And if you don’t come up with the cash in record time, the broker has the right to sell the position—usually right at the bottom.

  Virgil met us in Manny’s chat room. He was keeping his ear attuned to any and all rumors about the firm and the stock.

  “I’m hearing that a couple of the bigger shops are already calling around, trying to round up buyers.”

  “If I had the money, I’d be one of them,” Manny said.

  “The market knows there are some big blocks that will have to be sold. We won’t get an uptrade until that’s out of the way.”

  “How’s your mother taking it?” I asked. Almost all of her remaining wealth was tied up in Becker Financial Group stock.

  “Mother is the proverbial immovable object. She called me last night to talk about Wyatt’s birthday next month. She refused even to discuss the sell-off.”

  “The price will be back up by next week,” I said.

  “Or next month, or next year. Just as long as I’m at the helm,” Virgil said.

  “Is there any chance that Nealis will find some way to come up with the cash?”

  “This is where his secretive system of blinds and false owners comes back to bite him on the butt. The margin calls are going out to lawyers and offshore bankers, who then have to scurry around individually to get hold of someone up the line. And they have no contact information. Nealis and his co-conspirators are stuck.”

  “I don’t want to have to try and do this twice.”

  “No, I would imagine not. How are you holding up, Manny?”

  “It’s a shame. No one will ever know what we did. I can see myself years from now at a hackers’ convention, listening to some blowhard tell the story of how he once crashed the market from his laptop. And I will have to keep my mouth shut.”

  “I’ll know, and I do not forget favors,” Virgil said.

  76

  Manny and I walked down to the shore and took turns smashing the laptop on the rocks, laughing happily at the devastation. When it had been reduced to a sufficient number of pieces, Manny threw them out into the East River—he had the better arm. There were many secrets resting on the bottom of the East River; ours would be comfortable resting there with them.

  “I hope Larry comes up with some good news for you soon,” I said.

  “Yeah, well, I miss my girls.”

  “I understand. It’s been great working with you.”

  “Keep me in mind if you ever want to make another attempt at destroying the capitalist system.”

  I laughed. “Is that what we were doing?”

  “Think about it. It was you, me, and an HP. Imagine what could be done by someone who put some real effort into it. We’re turning the world over to the machines, my man, and they’re really not up to the task.”

  “That’s a scary thought,” I said.

  “We weren’t the first, and we won’t be the last. But someday . . .” He didn’t finish the sentence. Neither did I.

  “See you,” I said.

  “Be in touch.” He turned and walked back through the park and across Poppenhusen Avenue. I stayed there and watched the river flow. I had a lot to think about.

  77

  The Becker Financial Group Annual Shareholders Meeting was held in a secondary conference room down the hall from the main banquet hall at the New York Hilton on Fifty-third Street. There were not enough of those shareholders to warrant a bigger space. The hotel staff had set up one hundred straight-back chairs in neat rows with a central aisle that led to a solitary microphone stand. Facing the room, on a raised platform, was a dais for the board members, chief counsel, and Nealis. Two video cameras had been set up in the corners to capture the festivities.

  BFG was not a widely held stock. Other than the family and the Rose Holding cutouts, the owners were all old creditors of the father’s empire. They had been forced to accept stock in place of their missing cash. Other investors remained shy of supporting a name—Becker—with so much negative history attached to it.

  I arrived a few minutes early and checked in with the two smiling interns who were outside the door, handing out badges on purple-and-gold-striped lanyards. My badge read SHAREHOLDER, which was accurate. I held one share, which I had purchased the week before, expressly for this purpose. Other badges read GUEST, PRESS, STAFF, BOARD, and EXECUTIVE, with the exec’s title underneath.

  “Might I take a look at your list?” I asked.

  The two young women looked at each other and frowned. They were not prepared for the question.

  “I won’t steal it,” I said. “I just want to take a quick look.”

  They still weren’t sure.

  “It’s all public information, you know. I can find it all online. How about if I just look over your shoulder for a minute?”

  That closed the deal. They really couldn’t prevent someone from standing behind them and having a quick look, could they?

  Rose Holding was not on the list, but all of the false fronts were there. Not one, as far as I knew, was a shareholder, their positions having been sold off by the banks, but the list had not been updated. At that moment, no laws had yet been broken. The list had not been updated in time for the meeting. There would be no securities fraud until those shares were voted. But the moment the results were announced, Nealis would be guilty of stuffing the ballot box. By itself, it was a serious charge, but not a fatal one. But it would be enough. His whole edifice of lies and manipulation would tumble.

  I smiled at the two women. “Thank you again, ladies. You have made my day.”

  One of them handed me a printed agenda and smiled back. I showed my credentials to the hired security
guard at the door and took a seat in the back of the room. I pulled my brand-new Yankees cap lower and slouched down in the chair.

  There were a few people there ahead of me. Livy and Wyatt sat with Virgil in the front row. I recognized a grizzled, alcoholic reporter who had interviewed me for the Wall Street Journal back when we were both much younger. He had been grizzled even then.

  At ten minutes to six, the room began to fill up with print- and digital-media reporters bearing notebooks, shareholders—most of whom were professional money managers who worked for the corporations or funds that were the true owners—and senior staff. Not one of the television channels had sent a team. I wasn’t surprised. Blackmore would have alerted them all that the real news wasn’t happening until after the meeting was over.

  I read over the agenda. It was the usual bore. Speeches followed by speeches. The vote was the last item before New Business. It was the only piece of business of interest to anyone but the wonkiest of analysts. The big banks and major corporations made their annual meetings into industrial shows, some with Broadway stars, full orchestras, movies, laser-light shows, and performances by Bruce Springsteen or Elton John. BFG wasn’t in that league, and I hoped it never would be. I thought shareholders should be scandalized by the waste, rather than bedazzled by the sequins. Maybe I was just becoming cranky.

  An earnest young woman with a name tag that read PRESS: REBECCA FRANCIS—BLOOMBERG NEWS came in, looked around, and approached me. She was young, good-looking in a middle American farmgirl way, and very tall. I tried to repel her with body language and more cranky thoughts, but she put on a smile and kept coming. Good reporters are like guard dogs. They’re relentless and they have an incredible sense of smell.