by Roman Klee
Dressed in regulation uniform, there was nothing suspicious about the guy. That was until Betancourt noticed how his clothes didn’t fit well and he was certainly carrying something bulky in his vest pocket.
Betancourt realized he’d made a fatal miscalculation.
But there was nothing he could do.
He heard three shots come from inside the plane.
And then the airbase went into total lock down. Sirens blazing. Military police vehicles were suddenly everywhere.
Within seconds, an ambulance was on the spot.
After a short delay, two paramedics carried out a body, covered in a white sheet. Swiftly followed by a second.
Then a middle aged woman emerged from the plane, sobbing into a handkerchief.
Δ = T –00,320,640
Alva Grenelund looked like the boss who had everything under control. The pesky internet sightings of Budd Wright had completely dried up, after Google, Yahoo!, Facebook, Twitter and every ISP caved in to Grenelund’s demands. She threatened to sue them for conspiracy to commit wire fraud, unless they blocked all postings about Wright.
She would order her global trading desks to massively short their stocks. She would tell counterparties to cut credit lines. And she would personally bar them from ever raising a cent of new capital.
Her intervention cauterized the bleeding.
The firm’s trading book was no longer consuming life threatening amounts of capital. Grenelund felt calm enough to sharpen up her short game and was back to using her mini practice golf putter in the office again.
In most years nothing dramatic happened in global financial markets before Christmas. Traders preferred to take risk off the table. The name of the game was protect the bonus pool.
Except it was turning out to be a year when exceptions proved the rule. For the first time since making senior partner, Grenelund abandoned her tradition of buying drinks for everyone in the King Creole bar at the St. Marks. Instead, she left a couple of days earlier than usual for her Palm Beach house that overlooked the golf course.
She liked nothing better than to work down her handicap at weekends. It was now in low single digits, though she’d been known to increase it whenever she was invited to take part in charity matches.
On her first morning, Grenelund played with a group of clients, who collectively held nearly one billion dollars with the firm’s wealth management division. They were unhappy with the way Solomon was handling their investments. And they felt particularly sore, because some of their Palm Beach neighbors were enjoying spectacular returns from a rival hedge fund, which had bet big on the collapse of the U.S. housing market.
Grenelund promised her firm would do better. They had a bunch of trades that would really turn things around. But she couldn’t say any more. They would have to trust her.
After a quick lunch in the Club House, she was back out onto the fairway for an early afternoon session with Grover Harriman, the eminence grise of the Executive Management Committee.
“How are you set up for the holidays?” asked Harriman.
“Fine, just fine. I told Phil not to go overboard this year.”
“What’s your handicap Alva? I heard you’ve been practicing real hard lately.”
“Oh you know me, I like to put in the work. I play off a five. And guess what? In the New Year, I’m competing in the next Pro-Am PGA.”
Grenelund had always been a cheerleader for golf. She tried to get the Management Committee to sponsor professional tournaments.
But the majority of her fellow partners did not want the firm too heavily associated with any one sport, or any one business for that matter. Being partisan was like showing your hand first in a poker game, neither approach was a winning one.
So reluctantly, Grenelund never got her way, but that did not stop her from organizing golf tournaments for her foundation. The highlight was when she persuaded Jack Nicklaus to play at the Castle Grove Club. It was a day Grenelund never forgot and the photo of her and Nicklaus shaking hands on the eighteenth green, held pride of place behind her corner office desk.
“If you can get yours down to single figures, I’ll get you an invite if you like.”
Harriman smiled. He had not come to practice his swing or work on his short game. He had an altogether different reason for visiting Solomon’s senior partner. “Well, I’ll see how I’m fixed. You know Alva, there is something you could do for me.”
Grenelund stopped the preparations for her shot and looked up at Harriman, realizing this was the real reason why the guy wanted to meet.
“Have you given any more thought to the issue we discussed a few months back?”
Grenelund should have answered no. Harriman had asked her if she would consider retiring as the senior partner, to make way for new blood. In no way was it a reflection on how good a job Grenelund was doing, even if the firm had just got over a rough trading patch. The view of the Executive Management Committee was that the time had come to pass the baton.
Grenelund replied with the answer she thought Harriman would like to hear.
“I talked it over with Phil, he raised no objections … I mean I have no health issues.”
“We think the Treasury post is a good fit. They could use your talents. You have the full support of the president.”
What could Grenelund do? She loved her job running Solomon, but she also knew her position would not last indefinitely. In the past, one or two of her predecessors may have served long terms, only they did so in a very different era, when it was easier to keep the younger hustlers down. In the old days, they were inclined to remain loyal to the firm.
That loyalty no longer existed, Grenelund knew the score alright. If guys didn’t make partner before thirty, they were off to greener pastures. Grenelund had her shot perfectly lined up on the thirteenth, and was in two minds how to answer Harriman. She could either say no to the president, or go ahead and sink her putt.
By a stroke of good fortune, she was freed from her dilemma when her cell phone started playing the Marseillaise.
Andy Kissam was calling—with an update on the L.A.Y.D.E.E.s trade.
Δ = T –00,000,011
The markets closed early on Christmas Eve. Just a half-day’s trading. It was the season to be cheerful, when everyone rushed home from work, to spend quality time with their families and loved ones.
Normally before one o’clock, the trading desks at Solomon would have been half empty. Those who drew the short straws, had to sit around willing the phone lines to light up. Clients were thin on the ground, either they’d left days earlier for their winter retreats or they were out partying around town.
But this year, for the guys occupying Solomon’s trading desks, things were looking very different. For them, the countdown to end all countdowns had begun.
They were nearing a historic moment for the firm.
All the hedges were in place in case the market moved dramatically against them. And with only minutes to go, they certainly appeared to need them. The chance to achieve trading immortality was not exactly going to plan.
Everyone was dreading the sound of the closing bell.
To start with, the price of Wright’s holding company Brenton Davenport was moving wildly, well outside its daily volatility bands.
Price movements in the last three days are twenty-five sigma events. That’s once every several hundred billion years to you and me.
Martin Gale, the chief risk officer, in charge of the DPG’s geeky risk analytics department, kept repeating this mantra, every time someone asked him why his VaR models weren’t working any more.
To say there was tension in the air across the trading desks was the understatement of the century.
No one had ever experienced anything like it.
Alva Grenelund had flown back to New York and was now personall
y overseeing all the traders’ positions. This was not standard procedure, especially since she had left the trading desk at least a decade earlier.
The Greatest Trade of All Time appeared to be slipping sylph like through her grasp … maybe the odds had never been in her favor. But Grenelund remained convinced the firm’s bets would recover in the last few seconds of trading.
Solomon’s more experienced dealers were not so sure.
They scanned their screens and double-checked the news wires. Others were clasping phones as if their lives depended on the outcome of a single piece of news—was Budd Wright dead or alive?
A spokesman for the Wright family was expected to issue a statement to the press before the close of business on Christmas Eve.
Alva Grenelund was staring at the clock, counting down the seconds to close of business.
“Does anyone know what they’ll say?”
Ten …
“What the … I can’t hear a friggin’ word …”
Nine …… Eight …… Seven …… Six …
“Turn the volume up!”
Five …… Four …
“Keep watching the screen!”
Three …
“What the … do you think I’m doing? Dumb-ass muppet!”
Two …
Δ = T –00,000,001
“It’s official—it’s on Bloomberg, full obituary. He’s died!”
“Budd Wright’s dead!”
One …
On a screen, in the middle of an array, the price of Brenton Davenport stock (which was already falling ahead of the news) closed at just eighty-one cents. Earlier in the day, it was one-hundred and eighty thousand dollars. The Street’s high-frequency trading systems were really showing their worth—average time for holding a stock, twenty-two seconds.
Across the DPG desks, multiple screens, showed multiple prices. Some were a series of big fat bagels, others a string of nines. It looked like no one was about to win the Methuselah of champagne. But as usual, nothing was straightforward.
The magic was about to begin.
Since L.A.Y.D.E.E.s were not quoted on public stock exchanges, the final prices for each tranche had to be calculated by using Solomon’s own models. Now the real work began. The firm’s geek department had the task of delivering the final profit figure.
Alva Grenelund had been right all along. Parts of the tranches with embedded market sensitive values, rose ten fold during the closing seconds of trading. One after another, the guys on the DPG desk came up to their boss and shook her hand.
She was the man! Wow! Did she have big cojones! (It was a standing joke that Alva used to have bigger cojones than all the men she ever worked with.) Grenelund smiled and acknowledged the praise, while growing ever more impatient. She needed to know how much the firm had made. Her preferred method was to use the back of an envelope, because when it came to numbers, she didn’t do detail.
If all else failed, maybe she could drawdown the side pockets, which often proved useful in covering up the activities of a rogue trader whose bets had not paid off. But there was not enough set aside to break any records.
How much? How much had they made in one afternoon? She was banking on it being several times more than the Brothers had made in their entire history. This was Grenelund’s moment to feel the warm glow of self-satisfaction. Because she had led from the front and taken Solomon to the very top.
Other people were of course involved, especially Marky Mark. He was a real hero, winning over the S.E.C. and Fed, somehow making Value at Risk sound sexy. Investors and regulators accepted the line that the firm was ultra-conservative when it came to marking up and down the value of its risky investments. His mastery of imaginary numbers was a wonder of the financial world. There wasn’t a book entry he didn’t like that couldn’t be changed.
But Alva Grenelund was not about to credit him or anyone else with Solomon’s success. She expected and demanded the spotlight shone on her, because all the attention helped suppress any lingering doubts.
Her most profitable teams created financial products so unbelievably complex, only they knew how to value them. But beneath the complexity of the math, Grenelund was aware of the real game her traders played, even if she didn’t understand the finer points.
The traders programmed the firm’s models to work in their favor. It was as if they decided how much they wanted their bonuses to be at the end of the year, and then marked-up prices to arrive at the exact figures.
The rules of the game allowed traders to cash in many fat years of bonus payouts, before the nightmare scenario struck—a double-digit sigma event! Then their whale of a secret would be exposed—they had been making up the numbers all the time.
But before getting found out, they planned on being long gone, leaving behind a series of ticking time bombs for some unlucky sap to defuse. With tens of millions of dollars safely stashed away in treasuries and TIPs, only the truly greedy needed to work beyond the age of forty.
And Alva Grenelund was proud to be a member of that club.
Δ = T +1
Nathan had visualized the scene many a time, because for him, the moment could not come soon enough. He had practiced his technique using a Confederate Cavalry sabre. (A seller of civil war collectibles told him, it once belonged to a recipient of the Southern Cross of Honor.)
Nathan removed the silver foil and wire cage from a chilled bottle of champagne. He located the seam and with a series of practice motions, ran the blunt side of his sabre from the neck to the top of the bottle.
Then with one firm swipe, he struck.
Swoosh … pop … the cork and a lump of green glass flew across the room.
Nathan knew that Budd Wright was alive, so the outcome was a no-brainer.
It was a sure thing. A slam-dunk. Bet the ranch, bet the farm. Bet whatever you liked, the outcome was certain. Like night followed day.
He didn’t need to ask, “How much?” because they would all have more money than anyone could ever spend.
But the question still needed asking, how much had they made? The geeks were doing the calculations. The trades were not officially settled. Final broker-to-broker settlement would only be completed later in the New Year. There was no need to get official confirmation that a critical event had occurred.
Okay, but what about an indicative price? That would be fine to be getting on with. Then they could count their winnings and mentally tick off the shopping list all the things they promised themselves they wanted to buy—not one day, but NOW!
Money aside, there was another reason to celebrate.
Antonio Orofino would be off his back. Permanently. Nathan had repaid the guy’s generosity. He was forced to make a choice and in his opinion he’d made the right one. Screw Orofino was what it came down to. And he didn’t need an advanced degree in math to work out the right option to pick.
And there was more—he’d got his revenge on Solomon. Live by the market, die by the market was the unwritten rule. Everyone knew it. Except for the guys at the top, who believed in divine birth right and their belief that the market must always function according to their will.
When they were winning, the big boys found the rule easy to follow. But when the day of losses inevitably came, it was the hardest one to obey.
Nathan had left Solomon holding the bag. And now he knew what to get Alva Grenelund for Christmas. What are you gonna fill your bag with Alva, huh? Air? Dust? Fool’s gold?
This was surely one of the best days ever.
But although Nathan had visualized success many times (just like his therapist told him), all his mental images would only ever amount to dreams.
Because the reality was, he had lost.
The news of Wright’s death shocked the entire financial world. It meant a massive payout for investors who had bought protection via L.A
.Y.D.E.E.s and anyone who shorted Budd Wright’s holding company. But for Nathan, the value of his highly leveraged positions was now zero.
His bet the ranch idea (how could it possibly go wrong?) had left him broke for a second time. And if there was one maxim above all others workers on Wall Street applied unfailingly, it was that no one liked a loser.
Nathan was forced to come to terms with failure on his own. He knew no one would come and commiserate with him, let alone raise his spirits.
The loser’s enclosure was always the loneliest place.
Δ = T +2
The grooms at Alva Grenelund’s East Hampton stables were working overtime to get her prized collection of Arabian horses in perfect condition for the extra special event. No one knew precisely what all the elaborate preparations were for, so it didn’t take very long before the gossips started speculating.
Someone said the Grenelunds had money troubles and he had ordered her to sell up. Someone else said the marriage was on the rocks and she was obviously getting ready to make off with the horses, before he sent them to the glue factory.
The grooms applied special soap and leather conditioner to the saddles and polished the gold-plated bridles. In the tack room, a new recruit cleaned rows of jodhpurs. A local carpenter had made wooden trays about two feet square, and specially adapted them so they fitted the saddles.
He had also finished several low platforms, designed to make mounting the horses easier for all the riders.
On Alva’s orders, the details of what they were doing had to be kept secret until the very last minute, because if anyone caught even the faintest idea, it would ruin the sense of occasion. Alva told the grooms, they were getting the horses ready for a special out of season polo charity match, in support of a hospice for the homeless.
But the truth was a little different.
They were taking part in a spectacle that would become the stuff of Wall Street legends. Solomon’s senior partner (with a great deal of help from her husband) was planning the best Christmas Eve party of all time. Period.