“George?”
He turns. Warren hands him a box of Kleenex. George has been sniffing and making whimpery throat sounds for ten minutes, but has only just now started bawling, bellowing, weeping like a child. He cries for a long time. Warren pads in and out three times and smokes a fresh cigarette before George is finished.
“There’s also Polly’s diary on there,” Warren says when he stops, nodding toward the computer, “which includes synopses of some phone calls and a couple of lunch conversations about you. If you’re not convinced.” He arches his eyebrows and twists his mouth. “Although frankly, showing you that material would carry this to a whole new level of ethical dubiousness that I’d just as soon avoid.”
“No. No. That’s okay.”
“Well, you’re cured.” He looks at his big digital watch. “And your fifty minutes are up.”
PART FOUR
November
December
January
48
Monday, November 27
“The screen market’s 1¾,” Billy Heffernan says, looking at the options scroll on one of his two screens. He has one phone in his lap, another pressed to his temple. He’s on the wire, on one of his permanently open lines, waiting for his favorite broker on the options desk at Smith Barney.
“What’s the price, Billy?” Ben Gould asks.
“Can I show my guy the whole picture?”
“If it helps, sure. Same as the others.”
“I want you to work it, but I want to get this trade on.”
Ben is impatient, even more of a flibbertigibbet than usual, and Heffernan doesn’t know why. Bennett Gould Partners is 19 percent up for the year, with a month left to go; 6 percent ahead of the Dow, 8 percent ahead of Standard & Poor’s 500. Maybe it’s personal. Ben has been having more arguments than usual with the ex-wife, simultaneously whispered and shouted in Big Room style, the latest just this morning, about their daughter. (Her fourth-grade teacher at Spence/Greenwich declined to dismiss the class early on Thanksgiving eve—even though Sasha informed him clearly at half past two that “the driver” would be there in fifteen minutes to drive her and three friends to “the secret underground tunnel under Rockefeller Center for a private showing of the giant Christmas tree by one of the Rockefellers and a professional elf.” She “fired” the teacher for keeping the class until three, and walked out.)
Heffernan holds up an index finger in Ben’s direction and snaps the phone back to his ear. “Bennett doesn’t like Microsoft,” he says to Smith Barney. “What can you show me, size, in the Microsoft 120s? We want 5,000.”
“That’s a lot of puts,” his Smith Barney pal says. “What’s going on? What should I know? You hedging a long position? Or is Microsoft in trouble? Are they preannouncing?” Companies are required to announce any major financial bad news in advance, before it would ordinarily become public at the end of the quarter, if the number looks to be a lot worse than everyone expects. Of course, the motor of the market up and down, these days more than ever, is surprises—surprising profits, a surprising deal, a surprising change in top management—but the government has decided that the world needs to be warned in advance about surprises, especially unpleasant ones, beyond a certain size.
Bennett Gould owns no shares of Microsoft common stock. “We’re not hedging,” Heffernan says to the broker, glancing at Ben, who is looking from screen to screen to screen in front of him. “We’re just not liking tech. Give me a menu.” Heffernan pivots the phone from his mouth to his forehead while he waits.
“Keep him on the line!” Ben shouts, still staring at his screens. “Keep him on the line! Don’t let him go short it himself!”
This is how Ben Gould always behaves when one of his guys is in the middle of a big trade, in the moments of flux before a deal is done. Heffernan knows that Ben knows that Microsoft will drop a couple of dollars as soon as this trade hits the tape, as it ticked down a dollar or two for a few hours after each of the other Microsoft buys they’ve made this month. The put sellers, Billy Heffernan’s broker friends (friends of a sort), will only lose money on the trades with Bennett Gould Partners if Microsoft drops twenty points in the next three weeks. This is an easy trade for them to make, a candy trade.
“Keep him on the line!” Ben says again. “Come back with something! Fuck, Billy, come on!” Ben stands, twists his neck violently, with seven quick loud cracks, then performs a tae kwan do move and slams back down in his chair. And stands up again, shoving his face close to his Bloomberg screen. This is manic behavior even for him.
“Dianne,” he shouts, “did San Jose ever call back? The analyst?”
Ben had phoned a famously skeptical analyst specializing in Silicon Valley stocks. In addition to the extra edginess, Ben’s employees have noticed, the boss has been having a lot of phone conversations with people who think computer stocks are overpriced. He’s been talking to technology bears, and lately he sounds like one himself. His tech strategy is evidently shifting. “Asia’s going back in the tank, Intel isn’t shipping the new chip, Micron’s the canary in this mine shaft, everybody’s fourth quarter looks ugly,” he’s been chanting, in various permutations, for weeks. Ben has had Heffernan and Melucci place a million dollars in stock market bets against Dell and Cisco, Micron and eBay. “Ben’s in the den,” Heffernan, Melucci, Berger, and Dianne whisper to one another. “Ben’s in the den again.” Even Heffernan and Dianne, who have been around forever, haven’t seen Ben this bearish since 1990, right before Iraq invaded Kuwait, when he insisted Dianne come as his guest to George Mactier and Lizzie Zimbalist’s wedding, so that she could stay on the pay phone with the traders back at the office.
And he’s been laying down his biggest bets against Microsoft. Microsoft!
“Yeah?” Billy Heffernan says into the phone.
“I’ll offer you 4,000 at $2, subject,” the Smith Barney guys says. Subject to final confirmation, the broker means.
Billy flashes hand signals to Ben: right four fingers, left two fingers, right four fingers, left two fingers. Ben waves to himself, his palm low, as if he’s gesturing to a child to come closer.
“Bennett wants to get something done,” Heffernan says to Smith Barney. “He’ll take the Microsoft December 120s for 2 and a teeny, but 5,000, and now.”
“Done,” the broker tells him.
“Done,” Billy confirms. “Put me up.” He pushes a button on his TradeNet telephone, his turret, and turns to Ben. “You’re short 500,000 more shares of Microsoft.”
One share of Microsoft stock is selling at this moment for $134 a share. Billy Heffernan’s options broker at Smith Barney has offered to sell Bennett Gould Partners puts on Microsoft stock for $21⁄16 per share—2 and a teeny. These December 120 puts are a bet by Ben Gould that on the third Friday in December, eighteen days from today, a share of Microsoft will be worth less than $120. If on the third Friday in December the price is, say, $100, Bennett Gould would pick up $20 a share, less the 2 and a teeny he paid. His December 120 puts will expire on Friday, December 15—although Ben’s been buying 130s, 125s, 115s, 110s, and 105s as well, some of them dated to expire in January and February. But it’s mostly December puts, a whole lot of December puts, that he has been having Heffernan buy for the last couple of weeks, a few thousand at a pop from Morgan, a few thousand from Lehman, a few thousand from Merrill. Of course, Ben isn’t required to wait until the third Friday in December to cash out—he can sell the puts anytime he wants during the next three weeks. Depending on the market. Depending on what happens to nudge the price of Microsoft stock up or down in the meantime. Or what Ben strongly believes will happen.
“Do it 5,000 times at 2 and a teeny,” he tells Heffernan. He means: buy the 5,000 puts. In other words, Ben just gave Heffernan the go-ahead to spend $1 million and change for puts on 500,000 shares of Microsoft.
“You got it,” Heffernan says.
Ben turns to his assistant, whose desk in the Big Room is a few yards away from Ben a
nd his traders. “Dianne? Where are we at on Mister Softee?”
“With that 5,000 …” she says, running her finger down a column on one of her screens, “all the December and January puts (oh, and your Februarys), from par to 125 … 24,200.” In other words, he’s paid three million dollars for puts on 2.42 million shares, or more than a quarter billion dollars’ worth of Microsoft Corporation. No one in the Big Room is very surprised to hear Dianne’s total. This is a big bet for Ben, to be sure, but not such a weird one, not an outlier like the mad week at the end of the summer of 1998, when his divorce became final and he bought 40,000 December calls on Amazon.com for $250,000, for a teeny apiece. On that trade, after the calls paid off three months later, Bennett Gould Partners cleared $153 million.
Ben nods, and returns to his screens. He regrets the playacting. But he has no choice. He doesn’t really want to own the Januarys and Februarys, of course. He doesn’t really believe that technology stocks are all going to disintegrate this quarter. He has always been straight with his traders and analysts, or at least never actively deceitful. But this could be the Perfect Trade. The Perfect Trade demands discipline and secrecy. Only he knows. Only he can know. Hey! Don’t commanders tell white lies to their troops, and don’t presidents keep secrets from the people, even from cabinet members, when it’s for their own good? Hey! Don’t all parents perpetrate elaborate fantasies, Santa Claus and the Tooth Fairy and the Easter Bunny—or, in the case of his only child, the best little Sasha in the whole world?
Billy Heffernan is standing at Ben’s side. “Can we talk?” he says quietly.
Ben shoots out of his chair and walks the ten steps back to the Mess, where the chef is already setting out the bottles of Perrier and cans of Coke, her platters of perfect maguro sushi and fresh Caesar salad.
“Am I going to hurt somebody?” Billy asks. “With these Microsoft puts? I mean, I can’t bag my guys at Lehman and Smith Barney and Morgan.”
Billy Heffernan knows the answer. He has worked here thirteen years. How many more times will Ben have to say the plain zero-sum truth of this business? Why do they force him to put the fine point on it? Because he’s the grownup.
“Somebody always gets hurt on the other side, Billy. That’s how options work. That’s how we make money. I told you, on these Microsoft trades just be sure your guys aren’t going to principal it.” In other words, the brokers selling Bennett Gould Partners the puts on Microsoft should be warned to lay off the bets a few hundred here and there, spread around their risk, to insurance companies and the other great bovine financial institutions too big and stupid to feel the pain.
“You know, all these guys think you’re smoking something,” Heffernan says.
“Hey! I got conviction. Like I said, all you can do is be honest with your guys, and warn them not to be the losers.”
Heffernan, whose salary is approximately thirty times that of his brother the police sergeant, does not go the next step. His Navy machinist father and Roman Catholic mother raised him to stick with the chain of command and to accept the mysteries of faith. He nods and heads back into the Big Room. He assumes his boss is operating in some gray zone. Maybe he knows that an analyst or two are about to announce radically negative new opinions of Microsoft’s prospects, and Ben is front-running those research downgrades. Maybe his friend Lizzie Zimbalist discovered some problem on the inside before she quit. Who knows? Heffernan would never ask Ben on any trade, ever, to explain exactly why his faith is so strong.
Heffernan is back at his station, talking to his Smith Barney man again, who has rung back, now eager to feed Bennett Gould Partners’ hunger.
“I’m in good shape on the Microsoft puts,” the broker says. “I’ll do another 2,000.”
“Where?” Heffernan asks.
“At two dollars.”
“Done.”
It is ten degrees below zero, a little chilly even in Minnesota for a sunny afternoon at the end of November. Before she left for work down at LoveMart, next to the new Cubby’s SuperHole crafts store out by the Mall of America (she’s manager now, and needs to leave by eight), Jodie Eliason Taft carried down a big Vikings thermos full of hot cocoa to Fanny and the German boys. Humfried and Willibald arrived last week, stopping over on their cross-country vacation, and Jodie encouraged them to stay as long as they want in the basement guest bedroom. Fanny really seems to get along great with them. Jodie smiles and shakes her head whenever she hears her daughter down there, talking and laughing with the boys and tap-tap-tapping away all night long, way after a normal person’s bedtime. Jodie doesn’t know if it was the learning experience of the legal trouble, or the summer in New York City on her own, or turning eighteen and flushing some hormones out of her system, or what. But she’s been getting good grades all fall at Adlai Stevenson, and she even dragged Humfried and Willibald to the last Stevenson football game over the weekend (the Liberals beat the Cheetahs!). Fanny is enthusiastic about life again. If she stays up a little late surfing the web and playing games on her computers, well, fine.
Fanny’s at home this morning. She’s sitting at one of the four computers in her basement headquarters. Three of them, two boxes installed with Microsoft NT and the other with Slackware Linux, are up and running. One, the Virgin, will remain turned off until sometime Wednesday. Humfried is standing, looking over her shoulder. She sips her mug of chamomile tea, a taste she acquired in New York from Lizzie Zimbalist, and puts it down on one of the laminated WACKO PRACTICAL JOKERZ badges she and the Germans printed up. She and Humfried are both eating chunks of cold, leftover turkey stuffing with their fingers, straight out of a pink Tupperware bowl. The little Sony in the corner is tuned to ZDTV, the cable channel devoted to shows about computers. It has been muted since a lamer infomercial came on, something about using the web to buy stocks.
“Willi,” Fanny says, staring at the screen. “I still don’t get how IP spoofing works. The sequence-number prediction thing.”
“RTFM, Miss Taft.” She keeps looking at the screen, smiles, and flips Willi the bird across the room. RTFM stands for “read the fucking manual.”
Willibald is sitting on a high rattan stool at the terminal on the former wet bar, downloading yet another “amazing, fantastische sniffer” from his friend Big Bob back home in Karlshorst. Big Bob, the son of an old Stasi spook, whose real name is Hermann, has sent them several pieces of amazing, fantastic, industrial-strength, KGB-tested software. They used his stealth-scanner programs, which Bob/Hermann calls Grosser Bruder 2000, to connect with the virtual ports in the computer system of the Reuters news service.
Over the summer, when they were first planning Project 11/29 in earnest, they made their way into the Reuters system somewhat more straightforwardly, by sending pseudonymous e-mails to several likely reporters. They offered to tell Willibald’s stories of hacking the East German secret police computers when he was in junior high, and Fanny’s account of what she has discovered in the Kennedy School computers about Henry Kissinger, Al Gore, a Harvard professor friend of Gore’s, and three other current and former high government officials. After they led the reporters to a web site run by Big Bob in Karlshorst, Willibald not only dug out passwords contained in the cookies on their web browsers, but planted trojan sniffer programs on their computers. One of those reporters was Carlos Petersen, whose laptop and office computers now also contain copies of software that notifies Willi and Hummer and Fanny in their Minnesota basement anytime he goes online, and another piece of software that lets them read all of Petersen’s internet communications.
And so, during the last few days, they’ve used scanning software on the NT boxes at Reuters, run a password-guessing program against the administrators’ accounts at Reuters headquarters, and installed trojans inside those computers. Each time any of the computer system administrators logged on, a thweeep-thweeep alarm went off in Fanny’s basement—sending one of the hackers lunging for a terminal to log on right behind, piggybacking, copying every password and protoco
l the administrator typed in.
Late on Thanksgiving night, hours after they came home from a movie with Jodie and her friend Alice Koplowitz, Willibald announced their breakthrough. “I have root!” he said. “We’ve rooted them!” To have root is to control a target computer. After that, they piggybacked from one machine to the next and the next, installing root kits on each one, until they owned all the machines they needed on the Reuters system. For four days they’ve had unfettered access, quietly romping among Carlos Petersen’s laptop in the Mexican bush, a PC on a desk in the Mexico City bureau, and the big servers at headquarters.
Right now on the black screen of their VT100 terminal emulator, Fanny and Humfried are watching some keystroke logging in real time. From two thousand miles away they’re reading the words of Carlos Petersen, the Reuters war correspondent in the Mexican village of Unión y Progreso, as he composes an e-mail to his bureau chief about a disputed expense account. They are way inside.
“It’s funny, but it seems like almost an easier hack than the system at my school. I mean, I was young then, but this system,” Fanny says, nodding toward the screen, meaning all the interconnected Reuters computers, “is so powerful, and has so many servers and scripting languages and everything, it’s like, whoa, there are ways in all over the place.”
Turn of the Century Page 68