Maria Sanchez relinquished her charges into the energy vortex of Sam Conner, the head of Butterfly Investments trading floor. Sam was an American of indeterminate age somewhere between mid-thirties and forties. Her short blond hair, pencil skirt and broad shouldered jacket prompted images in Jo’s mind of a lycra-clad aerobics fanatic, but no matter what era she was ensconced in, Jo was certain few jokes were garnered at Ms. Conner’s expense.
Swigging coffee, and spilling adrenaline, Sam weaved the path of a tornado across the floor, the analysts trailing in her wake. Jo caught only half sentences and random terms such as put, straddle, OTC. Glancing at a page of scribbled notes, Jo was convinced that little clarification would have been gained from a verbatim transcript.
Sam Connor finally touched down in a relatively quiet area on the periphery of the trading floor.
“You want to know why I love my job?” The obvious lack of a pause here made it clear that this was a rhetorical question. “Because I don’t have to stand here and spout a whole bunch of theoretical jargon about what makes Butterfly superior to any fund out there. I can make the point with one number.”
Sam grabbed a pad and a pen from one of the analysts and scribbled in large letters the figure of £3 million.
“What do you think this is?” Again no pause. Jo wondered if prolonged exposure to the filtered air of the trading floor removed the inconvenient need to breathe.
“This is the profit made in the first forty five minutes after the opening of the European markets this morning. Just before trading opened, a spate of major German conglomerates including Vega, IBG, Berg, and Kortig announced significantly worse than expected quarterly earnings.”
The reference to IBG shot through Jo’s consciousness and her attention was now raptly focused on the ensuing dialogue. She scribbled the letters down in her notebook and underlined them.
“They are all apparently victims of sluggish global growth, especially in China. All very significant to the economists I’m sure, but we were focused solely on their plummeting stock prices. In the course of one hour, their stocks had dropped an average of 20 per cent as investors panicked and sent the whole German market down. Whilst distressing for shareholders, we were in the fortunate position of being able to predict the exact timing and approximate magnitude of these events.”
“How?” ventured an analyst.
“Because the market as a whole, and even the German Finance Minister, who decided to cut short his meeting with the PM this morning, were taken by surprise, but we at Butterfly used our proprietary trading models to predict the convergence of multiple factors leading to this outcome. This morning we sold short significant volumes of major German stocks in anticipation of price falls and used these proceeds to buy US Treasury bonds, predicting an investor flight to safety. As I said, the profits were large,” she continued while jabbing the figure on the paper, “on almost no capital outlay. A perfect arbitrage opportunity.”
“But,” the same analyst interrupted, empowered by the response to his earlier one word interjection, “isn’t the definition of arbitrage a riskless profit? Even the best theories can be wrong, which means these trades weren’t risk free. Just good predictions.”
“Well, I must apologize if I’ve been too occupied generating profits to adhere to exact dictionary definitions here, but if you’re looking for a technical debate then I suggest you visit Dr. Bray’s department. Ask them when their models were last wrong and then come back and tell me whether what we’re doing involves risk or not. When you’re right all the time, semantics are secondary.”
Conner’s attention suddenly switched to a nearby Bloomberg trading screen.
“Look at what happened just before the Japanese markets closed. The Far East currency desk seized on a mispricing between the spot and the three month Ringgit-Baht forward rates compared to risk free interest rates in Malaysia and Thailand. So, my friends, we were in the happy position of pulling off a covered interest arbitrage.”
“Here’s the thing. You can take all of your textbooks on the Black-Scholes theorem, the Markowitz efficient frontier and the rest of the theoretical trash they feed you and throw it into the garbage. The fact is, if you can’t spot a cross currency arbitrage opportunity in thirty seconds or less, you are useless on the floor. Good luck.”
Good luck was something all of the analysts sensed they would need as Maria dropped them off, one by one, with the traders they had been assigned to shadow for the rest of the week.
It proved to be a grueling day. The traders were short on explanations and even shorter on patience when their charges failed to grasp instructions first time around. The new analysts bore the brunt of the inflammatory tempers on the trading floor. The most malicious incident Jo witnessed involved a member of her group who failed to deliver the correct coffee order to the head of the desk. The unfortunate bearer found himself wearing the offending beverage. By the end of the day a number of analysts were ominously close to tears.
Seated in her cubicle at the end of the day’s trading, Jo decided that the stack of textbooks offered a welcome respite. After gamely plowing through the predictably uninspiring multiple regression analysis, she struggled to stay awake over Monte Carlo simulation, which disappointingly failed to live up to its enticing name.
At 11.30 p.m., the phone pierced through Jo’s reverie of her comfortable, inviting bed.
“Guess I’m not in the only profession that works around the clock,” greeted the voice at the other end. “Are you working out new angles to further the cause of elite capitalism or picking out a color for your company BMW?”
“Actually, I don’t drive,” retorted Jo, trying to place the voice and already annoyed at herself for dignifying the barb with a reply.
“Fascinating piece of inside information. I’ll be sure to give it prominence in my exposé,” said the voice, audibly yawning.
There was a pause during which Jo wasn’t quite sure why she hadn’t hung up.
“It’s Ben Faber, by the way.”
“Oh.” Jo inexplicably felt her initial irritation subsiding before her mental image of Ben. “It’s Jo Lavelle.”
“Um, yeah I called you. In fact, yours is the only name I remember from yesterday. My producer is on at me to wrap up the story, and I thought some input from a new recruit might be a good angle. You know, young idealist, sold out early to materialism.”
“Now, hang on…”
“OK, I’ll be pleasant. Can we meet?”
In spite of numerous logical objections, Jo had to admit to herself that she wasn’t indifferent to the prospect of spending time alone with such a well-known celebrity as Ben Faber, but she wasn’t going to make it easy for him.
“I don’t think that’s going to be possible. We were told all meetings between employees and the press must be sanctioned in advance by Butterfly Investments’ publicity and compliance departments,” said Jo, sounding more prim than she had intended.
“Yes, yes, I quite understand Miss Lavelle. Such procedures are in place for perfectly valid reasons,” said Ben, imitating her officious tone. Then, as if daring the conscientious student to skip school “But Jo, how about bending the rules? Just a little. Please, I’d really appreciate it. You can be my anonymous source.”
Considering Ben’s reputation as a cavalier reporter, accustomed to getting both the story and anything else he wanted, Jo thought that this final plea must have taken considerable effort on his part. She relented.
“Ok, but only for ten minutes…”
“Great, see you tomorrow 6.00 a.m. The Tavern, Smithfield.” The line went dead.
Jo eventually crawled into bed at 1.00 a.m., and groaned as she set the alarm for four hours later.
CHAPTER SEVEN
Jo changed her outfit three times before leaving the apartment the following morning, blaming her fickleness on irritability due to a lack of sleep. Applying her make-up took twice as long as usual, as Jo attempted to compensate for the visible results
of sleep deprivation. Finally she set out, ten minutes late, on the short walk from the Barbican to Smithfield meat market.
Even at this early hour, the market was bustling, although some of the activity had already dispersed from the central area to a couple of peripheral pubs, which still enjoyed special licensing hours to cater for the meat traders who had worked up a thirst hauling bloody carcasses.
The Tavern was a typical old London pub where visitors were immediately enveloped in the traditional rank odor of stale beer and unwashed patrons. Some of the tables were littered with half-empty beer glasses, remnants of the previous night’s revelries.
A young girl with a pale moon face, spiked black hair, and an impressive number of piercings, was apathetically passing a grey dish rag over spilt beer and redistributing the residues over other tables as she went through the pretense of cleaning.
The establishment was currently home to a reasonable number of customers, but Jo immediately located Ben as the anomalous source of energy in an otherwise muted scene. With impressive dexterity, Ben was simultaneously talking on his phone, tapping a cigarette on the table and preparing to down the final swig of a pint of dark ale.
As Jo approached, Ben cut short his phone conversation and motioned with a raised glass to the pale girl that he would like two more of the same. He was indifferent to the response of sullen irritation. Jo was concerned that Ben’s request might earn their table some special cleaning attention.
Ben stood up and greeted Jo with an enveloping hug and an effusive, “Jo, darling, thanks for coming.”
Jo couldn’t decide if the welcome was Ben’s natural enthusiasm or if he was slightly drunk. She concluded it was probably both.
Two pints arrived on the table, some of their contents obligingly slopping to maintain the pub’s aroma. Ben handed one to Jo and raised the other.
“Cheers,” he said, “here’s to clandestine meetings.”
Jo managed a smile, but was determined to remain guarded. She was sure Butterfly’s compliance department wouldn’t be raising a glass to this meeting.
Ben patted all the pockets of the battered jacket laid out on the bench next to him and eventually produced a crumpled sheet of notes.
“Prepared by one of the staffers,” he explained, “sure to be scintillating. Now, where shall we start? Do you have a pen?”
Jo obliged and Ben began scribbling out most of the typed text. “Some of these questions are so dull as to be a potential career hazard. Let’s see what’s left.”
He then proceeded with a list of fairly predictable questions about how Jo got the job with Butterfly, what the interview process involved, and worked up to what Jo knew about how Butterfly achieved their returns and what was to be made of the firm’s known political connections. Ben read the questions, obviously for the first time, like an unenthusiastic game show compere.
Jo provided some answers that were not particularly informative and in some instances declined to answer at all. She observed Ben’s expression of boredom turning to one of exasperation as he stuffed the list of questions into his empty beer glass. Beckoning over the shuffling waitress, he ordered two full English breakfasts and two more pints, even though Jo hadn’t touched her first.
As the conversation stalled, Jo felt annoyed at having put herself in this situation. After a minute or so, Ben was the first to speak. His tone was teasing, but Jo could sense the antagonistic edge.
“Well, Jo, what is it you actually do? Since your professional life is shrouded in such mystery, how about telling me what you do for fun? A few rowing club reunions perhaps? Drinks with old chums to reminisce about the high jinx of running around college grounds after a couple too many Pimms?”
Jo had finally had enough. She downed half of her beer and launched her rebuttal.
“You really want to know what I do, or are you having too much fun with your stereotypes?” she started, her voice shrill. “Well, I like to scuba dive, drink cheap rosé wine from Provence and sing Queen songs – after the rosé. I speak reasonable French and in my final year at Cambridge I submitted my thesis on advanced methods for correcting conditional heteroskedasticity. And this one you’ll find amusing, in school I played the scarecrow – yes, the one with no brain – in the Wizard of Oz.”
Jo took a deep breath as she prepared to continue, but she was interrupted by the arrival of the full English breakfasts, sliding in pools of grease. She looked up to see Ben looking amused, but uncharacteristically lacking a quick retort. She held his gaze defiantly, but ended up smiling at her own outburst.
Ben’s phone rang. He checked the caller ID and raised his eyebrows slightly.
“Hi beautiful,” he drawled, before proceeding to listen to what appeared to be a long rant, during which he occasionally made placating noises. Three minutes later, Ben briefly put down his phone, thus gaining some respite from the monologue while he lit his cigarette. Jo reached over and took it from his mouth, extinguishing it on a beer mat before they got thrown out.
She picked at her fried bread, with wistful thoughts of a latte and croissant. Ben eventually extricated himself with a “See you later. No, I won’t forget”. He looked weary.
“Sorry about the cigarette. So many countries, so many different laws, it’s hard to keep track. And that was the drama of decorating, episode forty-seven. Apparently the artisan factory near Valencia didn’t quite appreciate the exact degree of tumbling required for the bathroom tiles and the original Louis XIV draperies are two inches too short – such lack of foresight on behalf of those sixteenth century seamstresses. The perils of remodeling, and,” he added wryly, “the perils of Purdy”.
Jo was reminded that the Purdy in question was Perdita Llewellyn, celebrity chef extraordinaire and longtime girlfriend of Ben Faber. The pairing was hard to miss given the constant celebrity magazine coverage of the couple. Purdy was both desired and emulated for her voluptuous curves and ability to infuse food with both salacious and comforting qualities.
Jo glanced at her watch and jumped up. She risked being late again for the 7.30 a.m. meeting on the trading floor.
“Look Ben, I’m sorry I couldn’t be more helpful with your story,” she apologized, already moving away from the table. Ben caught her arm.
“Wait a second.” He turned over one of the beer mats and scrawled his cell number on the back.
Ben held out the mat to Jo but didn’t let it go once Jo had it in her fingers.
“This comes with a caveat,” he explained.
Jo rolled her eyes. “No, I won’t post it on your fan forums.”
Ben laughed. “A few adulatory stalkers hitting up my phone wouldn’t be all that terrible. But seriously, I have a rule – no texting. I can’t abide it. If it’s important enough for me to know, it’s important enough for you to call.”
Ben released the mat.
“Well, I enjoyed meeting you again Miss Lavelle,” Jo looked for evidence of teasing in his eyes, but discovered something close to sincerity.
“Call me if you are in a position to be more revealing.” Ben looked Jo up and down, with a half-smile. Jo was immediately reminded of Daniel Ives, but this time the liberties taken were more welcome.
As Jo was leaving, Ben called out, “seven three three five.” Jo looked around quizzically.
“What the FTSE closed at last night. Never know when you might need that kind of information.”
CHAPTER EIGHT
Outside the pub, Jo hailed a black cab for the three minute ride to Butterfly’s offices. The cabby wasn’t overly pleased with the paltry £3.50 fare, especially since Jo delivered most of it in small coins scraped from the bottom of her purse.
On the trading floor, Jo sidled up to the group of fellow analysts, her slight tardiness unnoticed. She tried to pay attention as a trader, with a distracting lavender shirt and crimson tie ensemble, summarized the performance of the Asian markets overnight. Jo flicked through the many notes she had taken the previous day on the floor and noticed th
e underlined reference to IBG. She reminded herself to do some quick research on the company later.
The analysts were scheduled to attend another lecture after lunch, this time to be given by the head of options trading. In preparation, the attendees had been requested to study sections five through ten of the Futures, Options and Swaps material, sections one through four presumably considered insultingly basic. The analysts had generously been given the rest of the morning to wrap up this study.
Back at her cubicle, Jo located the assigned book among the stack and opened at chapter five. She was pleased when Serge stopped by to take requests for a coffee run and she ordered a large latte with two extra espresso shots, grateful that the French could be relied on to share her morning caffeine fixation. She just managed to refrain from offering a “Merci,” honoring Serge’s request to converse in English.
At 9.30 a.m., a message appeared on her computer screen reminding Jo that her individual meeting with Simon Wright and Charles Bray was scheduled in an hour’s time. She downed the last cold dregs of her coffee, but this only served to heighten the nervous anticipation of being alone with the two financial legends.
Already confused by chapter six in option theory by the seemingly limitless combinations of put, call, straddle and, the alarmingly named strangle, investment positions, Jo’s attention returned to the German company IBG, and she googled the company’s name.
Numerous news results came up confirming that Johann Schmidt, CFO, had unexpectedly resigned following heavy downward trading on the stock resulting from the negative earnings surprise. Schmidt had declined to make any official comments and had in fact, reportedly left the country. Apparently the resignation had come as a surprise to the German conglomerate, which was now scrambling to compile a list of possible successors, and which was proving to have a further negative consequence for the stock.
Combined searches on IBG, Johann Schmidt and Butterfly Investments failed to reveal anything. Since Jo didn’t have any clear idea about what she was looking for in the first place she decided, at this point, to drop the search and try to forget the conversation that she had overheard between Bray and Ives.
The Girl Inside Page 4