“You had mentioned stocks, Your Grace,” said Mountjoy. “Oh yes,” said Gloriana. “I suppose in my position I really ought to know something about these things. But I don’t know what is a stock and what is a share and what is a bond or whether they are indeed all the same things.”
“Stocks and shares are the same thing,” said Mountjoy. “If you own stocks you own part of a company, and of course if you own all the stock you own the whole company. You share in the fortunes of the company—its profits and its losses. And this being so, you have the right to participate in the election of the managers of the company.”
“I always thought that the president and the board of directors owned the company,” said Gloriana.
“Oh no, Your Grace,” said Mountjoy. “No more than the Prime Ministers and elected representatives of any nation own the nation. They are only officials—servants. Though they may themselves own shares in the company concerned which could make them part owners as well.”
“And what about bonds?” asked Gloriana. “What are they?”
“A bond gives no ownership at all,” said Mountjoy. “It is a loan to a company—or a government—which has to be repaid by the end of a certain time at its face value. Meanwhile interest must be paid on the bond at a rate which is fixed. Bonds are safer than stocks because the interest is guaranteed and the money paid for the bond must be returned at the end of the period. But the return from bonds is not very high and in some cases it is not even high enough to offset the devaluation of the money paid for the bond.”
“So bonds are safer than stocks—for investing.”
“Yes, indeed,” said Mountjoy. “And of stocks, preferred stocks are safer than common stocks.”
“What are they?” asked the Duchess.
“Stocks which also carry a fixed rate of return. They are not a loan of money to the company concerned but an investment of money in the company. However, the amount of profit shared among preferred stockholders is limited to a certain figure, and to compensate for this, they get their money before any profit is divided among the holders of common stocks.”
“So the most risky stocks of all are common stocks?” “Quite so,” said Mountjoy. “Investing in common stocks without specialized knowledge is a form of gambling. And, as you know, only professional gamblers win and sometimes even they lose.”
“Thank you, Bobo,” said Gloriana. “Do have one of the mille-feuilles. They’re delicious. I got them at the little bakery by the market cross in Villeurbanne.”
It did not occur to Mountjoy, although of an astute mind, that he had been questioned about stocks and bonds by Gloriana because the Duchess had decided to get rid of the surplus millions by investing them in the stock market. Patterns of thinking, developed during the course of his lifetime, prevented him from reaching such a conclusion.
One pattern, firmly established, was that people invested in the stock market to make money. The contrary concept of investing in stocks in order to lose money never entered his mind. Again, although he knew that Gloriana herself had been made responsible by the people of Grand Fenwick for “getting rid” of the Gum Money, Mountjoy saw in this merely a neutralization of the money—the removing of the fortune out of the politics and economics of the Duchy by placing it in the care and charge of the Duchess, who was above all political considerations.
Handing the money over to the Duchess, he reflected, had the effect of neutralizing it, and he was a little chagrined that he had not thought of this solution himself, for in his father’s time there had been a brilliant precedent for this resort to royalty in the resolution of an enormous financial problem. The problem was that of the disposal of the Cullinan diamond—a diamond of the first water and as big as a man’s fist. Broken into small stones and sold, it would enormously depreciate the price of diamonds throughout the world. Retained in one stone, there was simply not enough money at current values available for any individual to buy it.
The problem of getting rid of the diamond without hurting world diamond prices and production had been neatly solved by giving the stone outright to King Edward VII of England. This was done by the Transvaal government and the stone, cut then into nine large stones, was used to embellish the British crown jewels. Set in the crown and scepter of England, the diamonds posed no threat to diamond prices. In like manner, the fortune which had descended on Grand Fenwick, once turned over to the Duchess, could no longer hurt the economy of the country—though whether that condition would continue for the nine years which had to elapse before the chewing gum factory could be closed down and its unwanted profits ended was debatable.
In any case, having had her little lesson on stocks from the Count of Mountjoy, and having learned from him to her complete surprise that there were very many stock exchanges in the United States other than the famed New York Stock Exchange, the Duchess felt her confidence in her ability to get rid of the money restored. Accordingly she wrote to Mr. Balche and asked him to send her the names of all the stock markets in the United States of America and a list of all the stocks traded on those markets. She was sure that heavy investment in the shares of companies so small that they weren’t even listed on the New York Stock Exchange would quickly put an end to her money problems.
Before sealing her letter, Gloriana had a brilliant idea. She loved gardening and each autumn and winter carefully budgeted what could be spent on new seed and bulbs in the coming spring. She was aware that some of the world’s loveliest roses were developed in America, where they were patented. Alsp some entrancing iris and fuchsia in varieties beyond dreaming. To all these flowers she was devoted. Her garden budget each year had to be carefully laid out in purchases of new seed and of new plants.
But now, she recollected, no such care was needed. She could have acres of new American roses in all their intriguing varieties around the castle. And she could have other acres of iris and lovely cool drooping forests of flowering fuchsia. For a second she wondered whether it would be dishonest to spend some of the money on her personal pleasure in this way. But then she reflected that she had been given the job of disposing of the money without any stipulation as to method. And furthermore, the people of Grand Fenwick would enjoy the roses in the castle gardens quite as much as herself.
And so, at the bottom of the letter asking for the listing of stock exchanges, Gloriana added a postscript asking for seed, rose and other flower catalogues. And then she added another postscript saying that she didn’t want to interfere in the slightest with the management of the Westwood Coal and Carriage Company.
“I expect the company will continue to lose money as it has in the past,” she concluded. “I am really not interested in it at all, so if you can find a buyer at any price for the stocks I hold, please sell them.”
12
LIGHT-years away from Grand Fenwick, in his business suite in Los Angeles, Ted Holleck surveyed the pattern of traffic eighteen floors below, threading its way along Sunset Boulevard. His profession was officially that of a stockbroker, and such he was, but in the new mode of that profession—a mode which would have enchanted the original brokers who first hawked shares in the Muscovy Company and the Hudson’s Bay Company, more properly called “The Governor and Company of Adventurers of England Trading into Hudson’s Bay.” For Ted Holleck was an adventurer, as had been the early Americans before the nation had decided (surprisingly for so venturesome a people) that respectability, security and predictability are the hallmarks of worth.
Ted Holleck wore his hair as long as Daniel Boone and had dark curly sideburns coming to the corners of his mouth. His eyebrows were bushy and he brushed them every morning to be sure they stayed that way. His face had the craggy look once associated with the sculptures of Sir Eric Hill and now cultivated by folk guitarists. He was dressed in a black turtleneck sweater over which he wore a grass-green corduroy single-button jacket, without lapels. His trousers were black also and fitted as tight as leotards except about the ankles where a certain looseness
was permitted. There were straps around the ends of his trousers which fitted under the instep of his shoes. His shoes were cowboy boots. He was handsome, strong, unmarried, just turned thirty, and there were throughout the United States several thousands of people who, when they prayed at all, prayed for his early death— preferably in a debtor’s prison as soon as that institution could be revived.
Ted Holleck had, in fact, bought more companies out from underneath boards of directors than he had spent years on earth. He was, in the view of many, a wolf among the fat cattle of finance. He was a blackguard, a scoundrel, an unprincipled Cro-Magnon with a heart like that of a king cobra. But this was the view only of those who had been his victims. There were others who had enormously benefited from his activities, shareholders whose flagging companies had suddenly been thrust into unbounded riches; directors of obscure concerns manufacturing outdated water pumps, automobile parts, or gate hinges who had, as the result of the activities of Ted Holleck, become captains of industry, their holdings immensely increased and (a crowning glory) their names mentioned in the astringent little paragraphs printed in the business section of Time magazine.
Holleck had studied business law7 not at Harvard, where it is taught in the Wall Street or Back East fashion, but at UCLA wThere the same law takes on some of the excitement of Hollywood. And indeed he was a living proof that the surroundings in which a subject is taught are at least as important, if not more so, than the substance of the teaching itself. For, viewing, in his school days, the swirling opulence of West Los Angeles, the vigorous, childlike delight in whatever is new and daring and costs lots of money w'hich is the atmosphere of West Los Angeles, Ted Holleck had absorbed much of this into his own spirit.
His law training was imbued with sparkling sunshine, movie affluence, surfboards and real estate development, and he early discovered that secret creed of all truly great lawyers, ‘‘The law is only the law when you get it into court. And then it is a matter of manipulating the jury.” Except in fed-deral cases. In federal cases, if guilty, the only real defense was to work for a mistrial and that could be relied upon to succeed at least 30 percent of the time. Odds of three to one against never quailed Ted Holleck.
This was the man who, surveying the swirl of fast traffic on Sunset Boulevard—the hippies and their successors, the producers, the actors, the agents, the real estate developers, and the construction tycoons, the clerks and the waiters and the cooks, and the television hopefuls; the whole mass whose job on earth it was to entertain, house, clothe, or feed their fellows at the highest rate procurable—meditated on the tax problem of Sunrise Space Enterprises, whose profits had fallen to a miserable thirty-five million dollars in the first quarter of the year. The prospects for the second quarter were poor for the reason that the company had neglected to undertake a serious market-research program in the past eighteen months. One was under way now, but its results could not be applied until the following year and so would not be reflected in current earnings.
He knew what Sunrise Space Enterprises had to do. It had to fire half of its top management because any management complex which could clear only thirty-five million dollars in the best quarter of the year, with the resources of Sunrise Space at its disposal, just wasn’t doing its job. But rumors of management being fired would have an effect on shares and would bring thousands of wrathful shareholders around Ted Holleck’s ears, so the cleanup there would have to be done quietly.
Meanwhile he decided he had better find a turkey somewhere for Sunset Space to merge with. If he could find a turkey which hadn’t made a profit in years, in fact had been running at a loss for years, and which therefore was entitled to a vast tax write-off, and if he could merge with that turkey, then he could take advantage of the tax write-off for Sunset Space and that would be the equivalent of an increase in profits.
He glanced about his office, every item of which, he was glad to know, was tax deductible, including four pictures by Rouault which he personally abhorred and which were uninsured in the hope that they would be stolen, when he could deduct their greatly increased market value on his federal return as an uninsured loss.
It was not difficult to think of a candidate for absorption by Sunset Space. Holleck, like most in his profession, could reel off without hesitating a list of twenty companies whose earnings were negligible and who, under one provision of the law or other, were entitled to vast tax benefits. Oil companies, he was well aware, were particularly favored here, and among them he favored Rimrock Oil, which had managed to drill thirty-five dry holes before it got one in production—a feat which earned for Rimrock the respect and the sympathy of other oil operators most of whom reckoned to drill, on an average, five dry holes to one producer.
Rimrock, it was figured, could now bring in a further six producing wells without having to pay a penny of tax to the government, so concerned were the authorities over sustaining United States domestic oil production. The trouble about Rimrock, however, was that there were already three oil companies in the Sunrise Space conglomerate and the Antitrust Department just might block a further acquisition in that field as tending to monopoly.
Also in the Sunrise Space complex were several sulphur mining companies, four lead mines, two toy manufacturers, a drug company, cotton mill, refrigeration corporation, mo-tion-picture producing company, motion-picture distributing company, a chain of movie houses, a publishing company, a chain of third-class newspapers, a pulp mill, shipping company, airlines and two night clubs—one in Los Angeles and the other in Boston. The capitalization of these companies was in the neighborhood of ten billion dollars and, the profits on this enormous capital investment being down to a few millions, they needed, as stated, a tax write-off.
Ted Holleck knew that the Sunrise tax experts had been over every aspect of operations to see that the fullest advantage had been taken of all permissible deductions. The ball had been passed to him and he had to come up with a tax write-off of ten million dollars.
Unlike Gloriana, Holleck did not use a pin when seeking guidance on the stock market. He used a computer. He was one of the pioneers of computerized stock predictions, having devised a set of coordinates concerning companies which, when fed into his computer, resulted in a prediction concerning future earnings or future losses. The computer had so far proved comfortingly accurate. He flicked the button on the intercom on his desk and said, “Tell Jim to feed the coordinates on all the turkeys into the Think Tank. That would be Rimrock, Zigler Glass and Resin; Twenty Foresters; Isinglass Screens ... he knows the list. Oh, and don’t forget Westwood Coal. Yes, I know there was that stock flurry and the shares have trebled in value. But I still think it’s just some smart promoter who had better get out while he can. What I want is a rating showing the worst performers, say, over the past ten years. How long will that take? Tomorrow afternoon? Hell, I need it in a couple of hours. We are talking about money here, man, money. Ten million United States dollars and tomorrow won’t do.”
He snapped off the intercom and picked up a copy of Blount's Financial Intelligencer. It was a weekly magazine and this copy was two weeks old, but someone had brought it to him and said he should read some article in it. He leafed through the magazine and found a squib marked in red pencil at the bottom of one of the pages toward the end. It read:
Golden Gum
Overlooked in the recent surge in prices on the New York market has been Bickster and Company, operated at a loss for several years but now showing handsome profits with even greater earnings expected. The company manufactures a chewing gum with a wine flavor and the principal single shareholder is the Duchy of Grand Fenwick. Common shares are quoted at around 8^, up five points from last year. Increased sales are laid to the anti-smoking campaign coupled with national advertising, particularly on television.
Bickster and Company, he reflected. That would be a nice little plum to steal. It could be added to the Sunrise Space network, or he might pull off a deal for Hastings Enterprises, or maybe he could
do a little something for himself—broker’s fees were fine and fat, but there were times when Ted Holleck wished he could get some of the action for himself. A few more words spoken into the intercom set his staff assembling all the pertinent facts concerning Bickster and Company. By the time he had returned from lunch at the table permanently reserved for him at Scandia’s on the Strip, the full details of Bickster and Company were on his desk together with the information that the Think Tank believed that of the companies surveyed, Westwood Coal was the most likely to continue losing money.
Holleck considered these two pieces of information with care. This was the critical moment when, like a pirate captain in sight of a fast merchantman, he had to decide whether to attack immediately, bearing in mind the condition of the wind and set of the tide, or wait for a slight change of weather. Also if he were going to attack he must decide which of many possible plans to employ.
He could arrange a merger between Bickster and Westwood Coal which would be of enormous tax benefit to the former. He could propose to Hastings Enterprises to buy a majority of shares in the gum company to raid its profits and get Westwood Coal for Sunset Space as a tax write-off. The data before him indicated that Bickster was in the healthiest of financial conditions. There were no bank loans and no mortgages on equipment. It would not be difficult, just in the prospect of buying the company, to raise sufficient money as a loan to put the deal through, the loan to be secured by shares of stock when the deal was made. No deal, no loan and nobody hurt. He could in fact buy into Bickster himself.
The best plan of all, of course, would be to get a majority of the shares in Westwood Coal and a majority of those of Bickster. Then he could force a merger, as a major shareholder, of the two companies which would make him an immediate profit of several millions when the losses of Westwood Coal were written off against the profits of Bickster and Company.
He looked over the balance sheets of both companies, the comforting statements issued annually to stockholders, and taking out a solid gold propelling pencil with a small Cross of Amenhotep on top of it—it matched a larger cross which hung around his neck on a gold chain—he started scribbling on a block of eggshell-blue paper sparkling with golden glints.
The Mouse on Wall Street Page 9