David took a deep breath. His finger hung precariously in the air. Then he pressed enter. The program began to run.
TWO
RICK AND PETER BURNED each other back and forth as usual as the afternoon struck the trading floor.
“You see gold today?” Peter prompted.
“Just like my dick on boner pills. You can bet on it being up,” Rick replied.
“The mommas and the poppas . . . They still love metals, don’t they?”
“Wasn’t that a band?” Rick asked, apparently curious.
“Never heard of them,” said Peter.
“Just remember this. Without the idiots trading from home we got no muppets to lead to the slaughter. And with no muppets—no cash,” Rick said. The two men chuckled. It was funny to them because they weren’t joking. They turned back to the monitors as all the green numbers on the ticker turned red.
“Ah, shit. It broke,” Peter said.
On the monitors, gold had dipped into the negative for the first time on the day.
“I’m gonna get an espresso,” Rick replied.
■
Still as a grave, David continued sitting at his desk. He was having trouble focusing on anything. He finally found himself locked with undivided attention into the framed family photo sitting on his desk. He picked the frame up with his hands and studied it while his crash algorithm ran in the background on his computer monitor. His wife and son—Marina and Mikey Belov—the most important people in the entire world. They were his everything. They were also why this was happening.
David couldn’t hold onto the façade any longer. He placed his head down on top of his desk and he cried. Only a few tears came out—a small portion of the frustration he was feeling inside. But it did help. He held the frame tightly in his hands as he crumpled up in his cubicle. Almost as soon as he began, David stopped. Tears weren’t appropriate. They were also risky. He dried his eyes a little with his fists and stared across the office with the vacant expression of a dead man.
■
Meanwhile, Peter continued to carefully monitor gold’s movement on his screens. He suddenly noticed that the commodity was down 1.5 percent for the day, having ticked down over a percent in less than twenty milliseconds. Peter picked up his phone.
“Gold crashed a hundred basis points in a minute. Something’s up,” Peter announced.
A few nearby traders perked up. The outer offices of the floor began to rotate open as the news spread. One managing director conspired with another, their attention focused entirely on the gold ticker. They were all watching the beginning of the cascade with bated breath, like a ball rolling towards steps, seconds away from gravity’s full force. Within moments the entire floor was rapt as the global value of the commodity continued to fall precariously down by the second . . .
-1.5 percent . . . -1.75 percent . . . -2.4 percent . . . -3.1 percent . . .
As the price began to accelerate further, a panic set in. This sensation was something akin to pure fear, always universal and yet always personal because every person experienced it differently. Panic tends to mirror that which caused it. In this case it was a cascade of numbers. A perpetual motion machine, triggered to descend to infinity. A spaceship sucked into a churning black hole. A running of the bulls through the filter of an impossibly tight street. Time slowed down for the Montgomery traders as they contemplated the nature of what was happening. Surely it wouldn’t continue, they thought, and they held onto that notion as though it were a life preserver.
“Who’s gonna catch the falling knife?” one of them yelled out, implying the impossibility of predicting whether the price would bounce back or whether this was a one-way trip to intense losses.
“We’re too exposed today. This is some spoofing, cancel-order algo, dude,” another said.
When panics such as this occur, what happens to most human beings is that they stop thinking about the actual problem at hand and begin to fixate on the personal ramifications of the event. Each and every one of these young men and women had pressure points in their lives, whether it was saving up for that engagement ring of adequate size, or hitting their “number” and getting out of the business altogether, or simply funding monthly heli-ski trips on elite mountains in the West that didn’t even have lifts. Because who needs them? Experts hike to their own runs. While gold dropped like a rock through water, finding no bids at all, none of the traders were actually thinking about the commodity. Their minds were fixated on what they were losing. That’s why it is so difficult to make good decisions during a panic. The underlying cause that one ought to be focusing upon is far from the mind, while the effect of the potential loss is in the forefront and dominating the cerebral cortex completely.
Finally, the large central office overlooking the entire floor opened and Howard Bergensen came bounding through the bullpen towards Rick’s desk. Howard ran like an elderly lion of equal heft and muscle. His personality followed suit. As their royal leader, Howard made it look as though he was for everyone when in fact he was for Howard. That was Howard’s secret. He created a consensus whereby he floated on top. But he also knew that crowd surfing only lasted until the music stopped, and all of them holding him up knew it too.
The phenomenon wasn’t unique to Howard. This was how Wall Street worked. The financial industry functioned because it involved vast pools of other people’s money, generally public pension funds, and a consistent set of legal procedures that boiled down to limiting liability by always operating behind LLCs and never, ever signing personal guarantees. Howard was the king of it all. He was nowhere near the most intelligent person in the building, but he was certainly the most epic. Every little last piece of financial minutiae, history, and institutional knowledge at Montgomery Noyes sat between his ears. He was indeed one of the only remaining honest-to-goodness Masters of the Universe. A subject truly worthy of Tom Wolfe’s attention, Howard ran across the floor towards the gold desk, looking for Rick and reaching Peter instead.
“Where the hell is Rick?” Howard asked immediately.
“He’s getting an espresso,” Peter replied. Peter immediately pulled out his cell phone and hastily composed a text message to Rick while Howard loomed above him, pissed as shit.
■
In the bathroom, Rick vacuumed up a line of cocaine off the granite ledge behind the toilet. His head reared up, triumphant. He noticed a text on his cell phone. He picked it up and read Peter’s missive. He raced out of the stall.
■
Back on the trading floor, Peter questioned Howard anxiously. “You want us to get out of the position, boss?”
CNBC was going nuts. The squawk boxes that connected to the futures floors in Chicago and to the NYSE were jammed. The bullpen was utterly wired with the energy of the cascade. The ticker continued to dive negative, the numbers getting deeper and darker, the knife twisting further . . . -3.6 percent . . . -5.2 percent . . .
In the middle of this critically serious moment, Howard seemed to be talking to himself. He was muttering, “It’ll hold . . . It’ll hold . . . I don’t want to get out right at the bottom.”
All of a sudden, Rick returned. “This is bullshit. It’s gonna trip the circuit breakers. The exchanges will shut it down. We gotta move before that, or we’ll get gapped out, Howard!” Rick started screaming while he watched his future and every single vacation to Nantucket for the rest of the decade disintegrate into dead dirt in front of him.
“No. No. Give it time . . .” Howard vacillated.
And then gold kept falling. It was in a full-on death riot like a barrel over Niagara Falls, one of those turn-of-the-century iterations when they weren’t outfitted with all manner of airbags and springs. Howard watched with stunned horror: -5.7 percent . . . -6.2 percent . . . It hit -8.1 percent and Howard gave up.
“Sell,” he said quietly. The lion didn’t roar, he whimpered.
The entire room erupted. Peter and Rick each pulled a phone to an ear, fingers smashing keyboar
ds.
“Sell . . . Sell . . . Sell . . .”
■
David spent the rest of the afternoon working quietly, in stark contrast to the internal arrest affecting his entire psyche. He had done this. He caused the market to collapse upon itself. That was a fact. He also knew the reason why he had done it, the justification of which he had been forced by necessity to keep only to himself. What David did not know, but surely was destined to find out, was exactly why this was all happening.
As the ominous chime of the market closing resonated throughout the building, David walked through the trading floor on his way to the elevator. After the day’s Armageddon, even the sound of the end of open-market transactions wasn’t a relief. It was more similar to funeral bells tolling. As David passed by Rick and Peter at their desks, he listened in.
“We got hurt bad. No one knows what happened. My contact at NASDAQ says they’re investigating,” said Peter into his desk phone. “Yeah. Yeah . . . Overall? Howard lost a billion nominal today—maybe more.”
Rick noticed David walking past. “You eat like a bird, Davey-boy. Until you shit like an elephant,” Rick said to him. Succinct, but true.
David turned to spy Howard Bergensen through the open door in his office, which resembled a war room. Howard sat on a couch surrounded by a handful of senior Montgomery executives. His white shirt was soaked to the bone with sweat. He was bawling his eyes out, a powerful man reduced to tears by the devastation of the market. David couldn’t believe it. He wanted to race over to Howard and tell him everything he knew—spill all his guts out across the crystal table. But he knew very well that he couldn’t. That wasn’t part of the plan. Then he reminded himself that none of this was part of the plan. More importantly, it wasn’t his plan at all. David hadn’t chosen this. He hoped that meant it wasn’t his fault, but he wasn’t quite sure. He only knew that he had been given no choice.
■
David stepped out onto the street. Mother Nature had obviously sensed the market cataclysm and had begun to provide punctuation. Lightning splintered across the thick black-and-blue clouds that patterned the sky, like wounds from the gut punches of the day. The rain pelted down on David and all the other inhabitants of the city. He actually loved the rain. It reminded him of being home, ensconced in love and family. He stared into the sky at the raindrops. Time slowed down, and he felt as though he was watching each droplet in slow motion. He took a step off the street into the moving traffic. He decided that he’d see his wife. He’d see his son. Nothing would stop him. Nothing would separate him from them. It was settled.
A taxi beeped at David as it passed, but he didn’t seem to notice. Brakes squealed as a large delivery truck slid across two lanes to avoid him. Angry honking erupted. A large grey sedan came screeching towards him like destiny. But then the vehicle magically slowed to a stop with only inches to spare as it pulled up in front of David. The sedan’s back door opened.
“Get in,” a voice ordered from inside.
David didn’t hesitate. The car was there for him. He obliged. He shut the door behind him and the vehicle swiftly faded into the watery ether of Manhattan.
■
Inside the grey sedan—his every move watched by an impassive masked man gripping an immense shotgun—David prayed.
THREE
A SHROUD OF STEAM rushed vertically through the pavement vents in front of Montgomery Noyes’ stately headquarters. Nothing out of the ordinary for a city that often smelled as though it still had an open sewer system—for an urban landscape that reflected a Batman set on any given street. But if one were to dive down through the vapor and literally descend into the sidewalk vent itself, cascading through the sub-surface infrastructure of the building, he or she would rip along a nerve mass of neon pink, green, and yellow cabling—the true guts of the operation. A serpentine path of ethernet, phone and electrical wires wound its way throughout multiple levels of the bank’s sub-basement. The cables plummeted through a series of server rooms, generators, and router stacks. They tracked around HVAC and other industrial systems. And finally the serpent burst through the ceiling of Montgomery Noyes’ gargantuan commodity vault.
The Montgomery Noyes bullion and currency depository was built like a fortress. No humans were permitted into the vault itself. The contents were accessed by a robotic forklift stacking system nicknamed the “Stacker,” inside an air-sealed corridor of shelves the length of a football field. The Stacker was solely responsible for lifting large pallets of gold and silver bars, and domestic and foreign currency, and moving them from one part of the vault to another for storage. At one end of the vault, a conveyer-belt system led to a secure airlock portal for shipping and receiving.
The security procedures for an actual live person to enter the vault rivaled those of a nuclear-launch control site. After passing through multiple biometric identifiers including eye and hand-vein scans, personal recognition by the guards, and a card swipe, a physical key was required. Two individuals, read in at the highest levels of the bank, had to insert their keys simultaneously within the vault’s command center in order to open the airlock. This was rarely necessary, except in the case of servicing or construction, because the Stacker was so powerful. But in case any humans were inside, each bay within the vault contained a built-in scale, accurate down to one-thousandth of an ounce. The scales and sensors monitored any physical movement and cross-checked the bullion weight with a computer database. If any vault was unimpeachable, it was this one. One of the few men who held a key to the vault was Howard. Another was Roger O’Neill.
As the vault’s head of security, Roger observed the entire operation through a large window in the command-and-control office situated above the vault. Roger was a second-generation American whose father had emigrated from Northern Ireland in the late seventies, due to rumored affiliations with the Protestant side of the “the Troubles” that were affecting the country at the time. The O’Neill name, of course, had been synonymous with Northern Ireland and Belfast in particular for hundreds of years.
It was in Belfast that Roger’s great-great-grandfather had operated a successful ship-building enterprise during the golden age of that region’s maritime industry. They had been a family of water people, masters of the seas and adventurers both on and off it. But with the crumbling of the old industry in favor of taxless locales farther east, Roger’s family took a few hits. Maybe it came from their experience on the high seas, but there was no male on Roger’s side of the family tree who wasn’t willing to go down with his ship. Especially if it meant the preservation of the family name. That’s how Roger’s great-grandfather perished—leaving the family empire in tatters. At that point the O’Neills found it easy to blame others for their misfortune. Especially the Catholics. It was ultimately unclear whether Roger’s father was a victim or an aggressor of the religious lines that eventually descended upon Ireland, but it was clear that he was willing to take risks. That’s why Roger’s father left the homeland. The family bundled up and left for the United States by boat.
The American dream immediately provided Roger’s father a job on the local Hingham, Massachusetts police force, a small house on the outskirts of Boston, and a life without the risk of daily car bombings. That peace would last for decades and now was entrenched completely, to the point that the “Boston O’Neills” became a known quantity unto themselves. They were the side of the family who had brought honor back to their lineage. Roger’s uncle and cousins owned a few bars and a popular gastropub. His sister operated a general store. His brother was still in the Hingham police force. Roger himself went through the academy in Boston proper and spent twenty years displaying exemplary service for the Boston Police Department. Although Roger enjoyed being a big-city cop, ultimately the lucrative revolving door appealed to him more. And he had no fear of a career change, especially when it might contribute to the continued reascension of the O’Neill family name. When presented with the opportunity to act as head of security for
Montgomery Noyes—a bank at the bedrock of the financial system—Roger didn’t think about it. He grabbed it with both hands and hung on tight.
With a bit of a paunch from ten years in the office, but a nice strong beard and an accent that still reflected the lingering aspects of his Irish heritage, Roger couldn’t help but shake his head as he stared incredulously at the printout in his hands.
“Shite,” Roger said simply. He grabbed the paper, reviewed the accounting again, and immediately picked up the telephone on his desk. Sometimes the guys upstairs made clerical mistakes.
“Howard? We’re moving a hundred thousand troy ounces?” Roger asked. He nodded as he listened to the affirmative response. He hung up. Two armored truck drivers stood next to him in the office, and others milled outside. They were all intent upon Roger’s next command. “Howard confirmed it. The number’s right for the overnight transfer. Guess the price of gold ran away from the boys upstairs today. It was carnage. A handful of their counterparties are demanding physical delivery of their allocated metals,” Roger said. He turned to the drivers and a handful of his own plain-clothed, former cop, security staff. “Let’s use a follow car tonight. You’re delivering sixty thousand ounces to J.P. Morgan’s vault and then forty to the Fed, okay?” Roger checked his men.
“Over four tons?” the driver asked. His name was Leo.
“Yep.”
“Quite a load,” Leo said. “That’s, like, a hundred million dollars.”
“More than that—hundred and twenty million, plus. It’s the biggest load we’ve ever run,” Roger replied.
“Right,” said Leo.
“So be safe. Run well. Run fast. Don’t stop the run—for anything.”
■
A steel gate rolled up from the otherwise unimpressive garage exit adjacent to Montgomery’s headquarters. The armored truck, filled with approximately a hundred and twenty million dollars’ worth of gold bullion, emerged from the garage at street level and carefully navigated across traffic towards Pearl. An unmarked security vehicle exited the garage as well, driven by Roger’s tight security crew. They followed close behind the armored truck.
Flash Crash Page 2