Chris Frewer was angry. "What's going on? I wanted to sell some bonds this morning, and somehow I seem to have ended up with twenty million more than I started with, and the price is off two points. I hope I haven't made a mistake here/'
"Relax. Ricardo's on to it, I promise. But look, do me a favor"
"Fat chance," said Frewer "I want out of Argentina."
"You will be out. In a couple of days. I just need to work out what's going on."
"You should bloody well know what's going on!"
"Chris. Trust me. Ring Bloomfield Weiss, and ask them what they think of the discos. Say you're considering buying some."
There was silence as Frewer thought about it. Jamie clung tight to the receiver and winced. "OK, OK," Frewer said, finally. "I'll be back."
"I hope this one doesn't blow up in our faces," said Jamie. He sat still staring at the phone, not touching it. Nothing was more important than Frewer's call. We waited for five minutes. It seemed Hke an hour. Then the direct line to Imperial and Colonial flashed and Jamie pounced. "Yes?"
"Bloomfield Weiss hate it. They told me they've got some bullshit computer model that shows that the discos yield a half percent less than they seem to. The guy's faxing it over now."
"You couldn't fax me a copy when you get it, could you?" Jamie asked.
"All right," said Frewer "But what am I going to do with my discos?"
Jamie winked at me. "Well, they're two points cheaper. Why not buy some more? Off Bioomfield Weiss."
"Are you sure about this?" Frewer asked.
"Course Fm sure. As I said, Ricardo's on the case."
So Frewer trotted off to buy twenty million more bonds from Bioomfield Weiss.
But first he sent through his fax. I was waiting by the machine, and I took it over to Jamie. It was written by a Ph.D. and used all kinds of arcane mathematical language to prove that the method that everyone was using to calculate the yield on Argentine Discounts was all wrong. I didn't imderstand a Greek letter of it, but I did understand that Bioomfield Weiss was trying to screw us.
"This is all crap!" Jamie said.
"Do you understand it?"
"Of course not. That's the whole point. Let's show it to Ricardo," Jamie said.
We crossed the square to Ricardo's desk. He was on the phone, but when he saw the look on Jamie's face, and the way he was holding the fax, he put it down. Pedro too hung up. Pedro's short dark hair was plastered to his forehead. He was not having a good day.
"What have you got?" Ricardo asked.
Jamie handed him the fax.
"Camjol" Ricardo muttered, and handed it on to Pedro. Then to me. "Can you give a copy of this to Charlotte? We need one of her people to come up with a response. Tlie quants out there will want some numbers to get into."
I nodded, but waited. I wanted to hear what Ricardo was going to do. He let me stay.
"OK, so Bioomfield Weiss is doing its best to screw us," he went on. "They're flooding the market with bonds, and badmouthing the deal to try to get their cus-
tomers to sell. They want to hurt us. And they have ten times our capital to do it with. Where are the discos trading now, Pedro?"
"Sixty-six and a half to sixty-seven."
"And we've got what, eight hundred and fifty
milUon?"
"Eight hundred and fifty-six."
This was turrung into a gigantic struggle. We were buying hundreds of millions of dollars of bonds, and Bloomfield Weiss was selling even more. The price was going down. That meant there were more sellers than buyers. It meant Bloomfield Weiss was wirming.
And Bloomfield Weiss had more firepower than us. With ten times our capital they could afford to carry a much bigger position than we could. We couldn't afford to buy discos forever. Bloomfield Weiss could afford to sell them.
For the first time Ricardo looked worried. He was frowning deeply, and I noticed his wedding ring flying from finger to finger of his left hand. He called together some of the other traders and told them what was happening. "We can't let them win this one," he said. "It's much too public. The world can see what's going on here. That's why Bloomfield Weiss sent out this note. They want everyone to know that this is a struggle between us and them. Those bonds Imve to go up."
"Can't we just keep buying? " asked Dave.
Ricardo shook his head. "We're way over our limits already We can hide some of it in Dekker Trust, but we can't carry a bigger position for any length of time. If we buy more, we have to know it will work."
Jamie had explained to me that the regulators placed limits on the maximum size of any bond position. Dekker had developed all sorts of ways around these
limits, but apparently Ricardo was only willing to go so far.
"This doesn't make sense/' said Dave. ''It's a four-billion-dollar issue, and we know three billion is locked away with accounts who will never sell. That leaves a billion, and we've got most of that. So where is Bloom-field Weiss getting their bonds?"
"They have to be selling short," said Pedro. "I would have known if they'd been sitting on that many bonds."
"So they're borrowing them," said Ricardo. "From whom? I wonder."
There was silence. Bloomfield Weiss had flooded the market with bonds, bonds they didn't own. Pedro thought they must have done this by selling short, which meant borrowing bonds from a friendly holder to sell. Of course when this friendly holder wanted his bonds back, Bloomfield Weiss would have to buy them out of the market. Bloomfield Weiss's bet was that by then the price would have fallen so that they could make a large profit. And by that time they might have forced Dekker out of the market too.
It wasn't just fifteen to twenty million dollars at stake here, although that was important enough. It was the future of Dekker Ward in Latin America.
My brain raced. Over the previous couple of days I had read some back copies of the trade press from 1992 when Argentina had negotiated its Brady plan. I had particularly focused on the genesis of the Discounts.
"It might be U.S. Commerce Bank." My voice was hoarse, almost a squeak.
They all turned to me.
I cleared my throat. "U.S. Commerce Bank. They were the biggest holders of Argentine bank debt in 1992. During the Brady plan negotiations they insisted on swapping all their bank debt for Discounts, which
they preferred to the other classes of bonds for some accounting reason. They may still have them/'
There was silence. Ricardo was watching me closely.
''Hey, Carlos! Over here!" Carlos Ubeda stuck his head up from his desk and hurried over. "U.S. Commerce has been trying to break into our market for a while now, haven't they?"
"Yes. But they have no credibility. They were only in two deals last year."
"So how would they respond to co-lead managing the biggest deal of the year?"
"I think they'd jump at it."
"I hope you're right," said Ricardo grimly, and he picked up the phone.
I rushed off to make a copy of the Bloomfield Weiss fax for Charlotte. She was sure it was crap, and she said she had a pet nuclear physicist who would be able to prove it. I went back to the square, to find everyone subdued, waiting. Frewer and Alejo called back, asking what was going on. Jamie stalled them charmingly. Pedro was getting hit with more and more bonds. The rest of us were lying as low as we could.
It took Ricardo several phone calls. Pedro was holding his price at sixty-six, but he was hurting.
Then, at about six o'clock, Ricardo put down his phone and clapped his hands. The room fell silent. All phones went on hold.
"It turns out Nick was right. U.S. Commerce Bank has seven hundred million dollars of Argentine Discounts, all of which they've been happy to lend to Bloom-field Weiss. Until today, that is. In an hour Bloomfield Weiss will receive a demand to deliver seven hundred million dollars of discos back to U.S. Commerce by twelve o'clock tomorrow. And there's only one place they can get them. Here."
You could feel the glee around the room. Dekker Ward bought bonds long i
nto the night.
Seven-fifteen the next morning. I had slept little, and I suspected few of the others had as well. But we all felt fresh and ready to work. We gathered aroimd Ricardo.
"OK, companeros, we're up to a billion two," he said. You could hear the collective intake of breath. This was big, even by Dekker's standards. "The bonds are still sticking at sixty-seven. Bloomfield Weiss has been happy to sell us all we can buy, until just before the market closed last night in New York. Then they suddenly went quiet. We'll see what happens this morning."
There were grins all around.
"Now what about this Mexican deal?"
"The price talk seems to be ten and a quarter percent," said Miguel. "And Bloomfield Weiss sounds confident."
"Well, we need to win this one," said Ricardo.
Charlotte coughed slightly.
Ricardo held up his hand. "Don't worry, Qiarlotte. I know Mexico's looking a little precarious right now. And this isn't the time I would choose to sell two billion dollars of their debt. But we're splitting the deal with U.S. Commerce, which reduces our exposure. And today might just be the day we fiiush off Bloomfield Weiss in Latin America for good. So we go in at rune and three-quarters, and we win the deal. OK?"
I saw Jamie wince. He would have to sell this Mexican deal. Even I realized it would be difficult at that yield. He half opened his mouth and then closed it.
"Good." Ricardo rubbed his hands. "Now, let's make some money."
There was a lot of noise and activity in the room that day. But only two phone calls mattered. The first came
through for Ricardo at eleven-thirty. It was Bloomiield Weiss's head trader. It was rare for head traders to talk to each other like this, but he had no choice. He wanted to know where Dekker would offer seven hundred million dollars of the Argentine Discounts.
The room knew instantaneously what was happening. We were all quiet, all watching Ricardo.
''Seventy-two/'
A pause.
Then Ricardo put down the headset. "Seven hundred million Argentine Discounts sold at seventy-two!"
A huge cheer met his announcement. In that second thirty-five million dollars flowed into Dekker Ward's profit and loss account.
The second call was much later, about seven o'clock London tim.e. Dekker Ward and U.S. Commerce Bank had been awarded the mandate to sell two billion dollars of five-year United Mexican States eurobonds at a yield of nine and three-quarters percent. The issue was to be launched the following Wednesday.
The Market Maker had shut Bloomfield Weiss out of his domain.
And we had a lot of bonds to sell.
12
The Brady battle tempted Lord Kerton out to Canary Wharf to inspect his victorious troops. He was chairman of Dekker Ward, a post he had effectively inherited from his father twelve years previously. He and Ricardo had come to an arrangement. Ricardo had independence, his own offices in Canary Wharf, and fifty percent of the profits he generated for himself and his people. Kerton had the other fifty percent, and ; the satisfaction of seeing Dekker Ward grow to be the most successful brokerage firm in London. He and Ri- j cardo treated each other with a mixture of civility and 1 circumspection. :
They strolled around to where I was sitting with Jamie. '
"Jamie you know," said Ricardo. "But I don't think you've met Nick Elliot, one of our new hires. He was the one who worked out where Bloomfield Weiss was ! borrowing their bonds."
My chest swelled with pride. I couldn't help it.
Lord Kerton shook my hand and looked me in the eye. He was a tall, athletic man of about forty, with fair i hair that curled over his ears and down the nape of his neck. He wore a double-breasted suit with a broad i
stripe. ''Jolly well done, Nick. Good to have you on board."
"I'm enjoying it here."
"Excellent, excellent," he said, and then he was off, looking around curiously, as if he would suddenly discover the key to our extraordinary profitability lurking under a desk, or behind a screen, if he only looked hard enough. He was gone within a half hour.
"That was a bit like a royal visit," 1 said to Jamie.
He laughed. "That's about it. Kerton is just like a monarch. A useful figurehead, with no power, who knows if he makes a nuisance of himself he'll be overthrown. He's no fool. He realizes if he leaves Ricardo alone, he can just sit back and watch the profits roll in. Nice job if you can get it."
The phone light flashed. It was Alejo. He sold his Argentine Discounts back to Jamie for a four point profit. Although most of the conversation was in Spanish, Alejo didn't sound very grateful. Chris Frewer had been much more enthusiastic that morning.
"Alejo's a miserable sod, isn't he?" I said.
"Yeah," said Jamie. "But he does some pretty big trades, so I don't complain. You've seen what we've done over the last few weeks."
It was true. Alejo had been in and out of the market many times in size. Big size. Like two hundred million sometimes. A customer well worth keeping sweet however grumpy he was.
It only took me a few minutes to pedal the mile or so from the office to the bar where 1 had agreed to meet Isabel. It wasn't exactly a secret assignation. She just didn't want to draw attention to us by leaving together, or by meeting up at the more convenient Comey and
Barrow, a wine bar in Canary Wharf that some of the Dekker crowd used on a Friday night.
The bar was big and noisy, converted from a warehouse during the yuppification of the Docklands. It was full of young men and women in suits drinking designer beers. Some of them were on their way home west from Canary Wharf, and some were the new inhabitants of the area who had moved in to the speculatively priced waterfront apartments. No sign of a true East Ender of course.
Even though I was wearing one myself, I still felt uneasy surrounded by this sea of suits. I was more used to the pubs around Bloomsbury or Kentish Town, where scruffier men and women talked in quieter tones over pints of bitter.
Isabel arrived a few moments after me. We hadn't spoken much during the week. I had spent most of the time at Jamie's desk, and Isabel had been very busy.
I ordered two extortionately priced bottles of Bud-var, which seemed to be the local beverage of choice, and we perched on stools at the end of a crowded table.
"That was a long week!" I said, taking a swig of the malt-laden beer. "In fact, so was last week. I feel like I've been at Dekker a year already. Is it always like this?"
"Basically yes," Isabel said. "There's always something going on."
"Are you working on anotherfavela deal?"
"Yes. Sao Paulo sounds as if they might be interested." Isabel sighed. "But it's hard to motivate myself to put in all that work after what happened to the Rio deal."
"It must be," I said.
"I still can't believe it!" Isabel's face reddened with indignation. "Or I can believe it of Ricardo. That's just
the trouble. OK, so I blew it. I lost the deal. But that's no reason to destroy it for the people of Rio!"
"I agree," I said. "I spoke to Ricardo about it on the
plane."
"What did he say?"
"He said that he knew the favela deal was a good thing. But he had to teach Bloomfield Weiss a lesson. He had no choice."
"Bah!"
"I find it difficult to get used to," I said. "What I was doing before had a purpose that had nothing to do with making money. We were teaching something important. And we were trying to understand a bit more about literature and language. We were paid just enough to be able to do that. But now everything we do is to make money for us and our firm. So if it makes money we do it, if it doesn't, we don't, and if it makes money for a competitor, we destroy it."
"What did you expect?" muttered Isabel.
"I suppose, that's what I expected. It just takes getting used to."
"It's a dirty business," Isabel said. "I hoped with this one deal I would finally be able to do something good as well as make money for the House of Dekker. Stupid of
me." She sighed. "Still, there's no point getting depressed about it. We've just got to go on to the next deal. It's a mistake to question what we do too closely, Nick. You'll never like the answers."
I knew she was right. In a perverse way it encouraged me that someone like Isabel, who seemed to share some of my misgivings about the money business, should have found a way to come to terms with it. I found the work at Dekker Ward fascinating, and I was determined to succeed. If Isabel could deal with her conscience, so could I.
But there was still one thing I wanted to ask her.
''Do you think Dekker is involved in money laundering?''
She thought for a moment before replying. "No, I don't," she said. "Ricardo sails very close to the wind, but he knows when to stop. Money laundering is illegal. It can get you into too much trouble if you're caught. Ricardo has worked hard to maintain a reputation for being aggressive but always legal, and I don't think he would jeopardize that."
I listened to her words closely. She seemed convinced of what she was saying, and I trusted her judgment.
"Why do you ask? That article in IFR7"
"Yes. And there was Jack Langton's comment about Dekker and the Rio drug gangs," I said.
"I know there's nothing in that," said Isabel. "I know everything we do in Brazil."
"Well, it's not just that," I said. "Do you know Lu-ciana's maiden name?"
It was a question I had been meaning to ask someone ever since I had spoken to her at Ricardo's party. With all that had happened over the last week, I hadn't quite got around to it. Now I wanted to know the answer.
Isabel was puzzled, but she answered my question. "Aragao. Luciana Pinto Aragao."
"I thought so," I said. "So her brother is Francisco Aragao?"
"Yes. That's right."
I had guessed as much. The Brazilian financier who had been mentioned in Martin's fax. The one under investigation by the DEA for drug-related money-laundering activities.
"What is it, Nick?" Isabel asked.
I told her about the second fax for Martin Beldecos, and about my suspicion that it had been taken from my
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