“Confused.” Perkins repeated the analyst’s comment with relish, for this was his favorite of all possible market conditions. “People are assuming that the Germans are coming to the rescue. But they aren’t. Why should they clean up France’s mess? They aren’t weaklings, like Greece and Portugal, they’re supposed to be coequals. The French spreads are going to widen. Go tell Cameron we want to short every debt or equity issue that says France. Will you do that? Right now, please.”
Fiona scrambled out of Perkins’s office onto the trading floor, where she found Cameron Cummings, the lead trader in Eurozone markets. He wore blue-framed glasses, which made him look like a model in Men’s Vogue. But he was a killer, like most of the people on the floor.
While Fiona was relaying the boss’s orders, Perkins had thought of a further refinement. He pushed a button on a microphone in front of him, which activated the squawk box; he punched two more buttons, so he was connected directly with Cameron’s desk.
“Do this carefully, please. Don’t scare the market. Do it in small bites this morning, not all at once, so the dealers don’t get it. If people see what we’re doing, they will all want to sell. Can you use a cutout, Cameron?”
“Morgan Stanley owes me. They’ll do the first fifty bucks on their account,” said the man who managed the Euro debt portfolio.
“Brilliant.” Perkins disengaged the squawk box and turned back to his market strategists. “What do we know about the ECB, Dominic? Anything new?”
Dominic Caprezzi, the balding, well-fed analyst who followed the European Central Bank, spoke up.
“I met last week with George Paternoster, the deputy chief economist at the ECB. He didn’t exactly say so, but I think they’re going to start tightening again.”
Perkins shook his head. “Paternoster is getting fired. I have it on good authority. I meant to tell you. What about the German yield curve? Did he say anything about that?”
Heads nodded around the table. German interest rates were one of the big market plays in hedge-fund land right now. Short-term rates had gone up so much recently that the curve was flattening. Many traders were betting that long rates would begin to rise, too, to restore the traditional upward-sloping curve.
“Long rates have to rise,” said Dominic, echoing the conventional wisdom. He got a bit pedantic at that point, reminding everyone that higher long yields were rational, and thus inevitable, because they were the commensurate reward for the risk of holding money for a longer period.
“Nope,” said Perkins, cutting him off. “It’s not going to happen. Here’s the narrative: Flat yield curve; ECB happy with it; wants long-term rates low. End of story. Our bet is a flat yield curve.”
“Are you sure?” asked Dominic warily. Perkins encouraged his analysts to challenge him, though they were never convinced he meant it.
“That is an epistemological question, which I cannot answer. What is certainty? But I think I’m right. And that’s enough.”
He got on the squawk box and called for Cameron again. “Watch your Eurobond maturities, please. And keep buying at these prices, even if everyone else is selling. They’re wrong.”
Perkins turned to Sophie Marx. She had been watching this drill with intense interest—not simply in appreciation of how finely the instrument was tuned, but because she was curious where the information came from: How much was normal market intelligence, how much was guesswork and how much was secret information—telephone and email intercepts, or well-placed agents inside central banks—that had been acquired by U.S. intelligence and passed on to Perkins? It was impossible to know, and that was the point.
“Do you have anything for us, Miss Marx?” he asked. “You’re the new kid, but don’t be bashful.”
“I do have a little something.” She smiled coyly. These people didn’t know her. She was the tryout.
“Delicious. Tell the class, please.” The Pacman’s mouth was open, ready to chomp another new asset before it was time for lunch.
“This would be a good time to buy oil and gas in the commodities markets, raw stocks and futures both.” She spoke slowly in a voice that quavered slightly with the anxiety and uncertainty that a newcomer would feel.
“Do you think so?”
“Yes, sir, and it would also be a good time to short the stocks of Russian oil and gas companies and any foreign majors that market Russian supplies.”
“And why is that?” asked Perkins. She hadn’t briefed him in advance, and he was genuinely curious. “Most people have been going the other way. They think energy prices have peaked for a while. And they like the Russians. Why do you think different?”
“The Russians have pipeline problems.” She spoke so quietly that people at the far end of the table had trouble hearing her.
“Is that so? Well, I haven’t heard anything about them. And I follow the energy market pretty closely.”
“It’s not really public yet, Mr. Perkins. But there was a rupture of the Russian gas pipeline in western Ukraine two days ago. They shut it down yesterday, and it’s going to take quite a while to fix. I think.”
Everyone was silent. This was big, market-moving information if it was true.
“Well, fancy that,” said Perkins. “I like it. In fact, I love it. Let’s do what the new kid says. What say, Ivor?”
Ivor Fyfe, the firm’s chief risk manager, was skeptical. He dealt in probabilities, and it was highly improbable that this new analyst, whom nobody had ever heard of, could come up with such a scoop. He enforced the firm’s self-protective trading rules, which mandated that any trader whose account was down 5 percent be put on watch, and the account of any trader who lost 10 percent be suspended. Now this neophyte, fresh off the street, was proposing to gamble with the capital of a firm she hadn’t yet been invited to join. It offended him.
“Not to rain on the parade,” said Ivor, “but how do you ‘know’ this, Miss Marx? I mean, did a little Russian birdie tell you?”
“I have a friend in Ukraine,” Sophie answered. “He just visited Lviv, near where the pipeline has one of its transit stations. He heard about the problem yesterday. They’re trying to hush it up, but people in the town know about it. He says it’s a big deal.”
Perkins goaded her.
“And why is it such a big deal, please?”
“It’s big because the rupture came just after the point where the two feeder pipelines, Soyuz and Brotherhood, join up and form the Trans-Gas line. I checked this morning. The pipeline throughput into Poland has stopped. They say it’s just routine maintenance. But it isn’t.”
Perkins’s eyes were flashing. He was excited.
“So tell us, Miss Marx: Should we make a big bet here?”
She nodded vigorously. Her ponytail flapped against the back of her neck.
“Ivor? Last chance to be a skunk.”
Fyfe looked glum, but he nodded and said, almost inaudibly, “Okay.”
“Let’s do it, then. Call Stan in here, someone. He can coordinate the trades.”
Stan Ferber was summoned: He followed Russian securities, and he helped plan the trading strategy for the day. They would move decisively, but veil their hand wherever possible, taking positions before the information got out and the markets turned. The oil and gas positions were long; the Russian equity positions were short.
Sophie went back to her desk to watch the action. There was an animal intensity on the trading floor. The whole room seemed to know within sixty seconds that they were about to make some very large bets on the strength of a tip from a newcomer who had just walked in the door.
Perkins ambled over to her desk, amid the controlled pandemonium of the trading preparations.
“I’ve corrupted you,” he said. There was a curious look on his face.
For most of that day, Alphabet Capital got killed in the markets. Gazprom put out a statement that it was conducting routine maintenance in Ukraine and Poland, and most traders accepted it at face value. By noon, the firm was down over t
wo hundred million dollars, on paper, and by early afternoon the losses had risen to over three hundred million and were still increasing.
Ivor Fyfe went to see Perkins at one-thirty. The risk manager’s job was to do just that—limit the firm’s exposure to large market swings—and he didn’t like what was happening. On a typical day, Alphabet Capital made or lost half a percentage point on its portfolio. If it limited its risk to one point a day, it stood to make a solid 16 percent return annually, in good markets and bad. If it risked three percentage points, it could make a much more exciting 48 percent return. But Perkins was blowing out even that risk-reward formula, based on the musings of a pretty new analyst, and Ivor wasn’t happy.
After the risk manager’s visit, Perkins summoned Sophie to his office. The losses were still mounting, and the whole firm watched her travel the floor, as if she were a prisoner heading for the hangman’s noose. But she walked out several minutes later with a big smile, and Perkins followed her a few moments after that and instructed his traders to double down their bets. A jokester in the back of the room sent an IM to his friends: office pool: did miss energy just give the boss (a) a blow job, (b) a rim job, (c) a spanking?
The markets began to turn that afternoon, just after two-thirty when the New York exchanges opened. Word was out that Alphabet was making some large bets, and traders were spinning rumors. A little after three o’clock, Bloomberg carried a story saying there were reports that the Russian pipeline problem might be more than regular maintenance. At four, the first story appeared citing rumors that the pipeline had ruptured. Gazprom still wasn’t commenting, but anything Russian was getting pounded now, as the markets began to bet the rumors might be real.
Gazprom issued a statement at eight forty-five p.m., London time, as the New York markets were about to close, confirming that its main supply pipeline to Europe had ruptured. Full repairs might take three weeks to a month. There was a global trading frenzy. Alphabet’s positions, which at midday had been down three hundred million dollars, were now up by nearly three times that amount.
Sophie Marx had just made Alphabet Capital nearly a billion dollars. Stan Ferber, the chief Russia trader, went over to Marx’s desk with a bottle of champagne after the Gazprom announcement moved on the wires. He poured a glass for his new energy analyst, to applause from the traders nearby.
While Sophie was drinking her champagne, Perkins emerged from his office. People thought he had come to join in the celebration, but his face was tight. When he reached Sophie’s desk, he spoke into her ear and asked if she might be free for dinner that night, as soon as the closing bell rang in New York. He looked oddly glum. Ferber and the others pulled back and returned to their desks.
“What’s wrong?” she asked. “You’re a winner.”
“This used to be more fun when we were making real bets,” Perkins said quietly. “It’s too easy playing with a marked deck.”
“So quit,” she said.
He stared at her for a long moment, as if he didn’t think that were possible.
23
LONDON
Perkins wanted to get out of London. He proposed flying to Paris in his G5 for a late dinner. He would call Jean-Marie at Taillevent, who would hold a table for them. Sophie thought he was joking, but she didn’t understand: She had just made Perkins’s firm a billion dollars. If she spent a million dollars a day, five days a week, it would take nearly four years to work through that stash. Why shouldn’t she fly on a private jet to Paris for dinner? Money truly didn’t matter when there was so much of it. That was unnerving for Sophie, who had grown up wishing for the things that money could buy. But as she was packing her overnight bag in her room at the Dorchester, her phone rang. It was Perkins.
“It’s too late,” he said. She wasn’t sure at first what he meant. “My pilot says we can’t get a landing slot in Paris until tomorrow morning. He thought I was daft.”
They settled on the River Café, which was outside central London, but only barely. It was a stylish place on the Thames, up near Hammersmith. The interior was shades of blue, a sea-bright carpet and an aquamarine wall, set against the gleaming stainless steel of the open kitchen. Perkins was a regular; he went to places he liked, where risk of a bad meal was low.
Perkins took off his jacket and rolled up his sleeves, and in the low light of the restaurant he didn’t look quite so much like the Pacman. Sophie had been wearing a tight, tailored jacket over a blue blouse. She threw her jacket over a chair, too. One thing about being rich, momentarily, was that you could afford to be untidy. She was a handsome woman: supple, bright-eyed, her face always on the verge of a mischievous smile. And on this evening, relaxing in the afterglow of a successful day, he was a handsome man: shy in the way that famous people are, looking for the things in life that didn’t have a price tag.
Perkins knew the menu, and he ordered everything he thought she would like: roasted yellow peppers; bruschetta with wild oregano; risotto with white peach; and grilled fishes whose Italian names, spiedino and branzino, made them sound much tastier than monkfish and sea bass. He couldn’t resist ordering another lovely bottle, this one from the Alto Adige. It wasn’t like Sophie to allow herself to be spoiled, but she acceded quite happily in this case, and devoured what was put before her.
“Tell me about Sophie Marx, if that’s permitted,” said Perkins. “I don’t know anything about you, except that you seem awfully good at your job.”
“‘The CIA—we make a world of difference.’ That’s the slogan the recruiters use.”
“And does it? Make a difference, I mean.”
“Enough to keep me interested. I’m sort of an action junkie. And I like keeping secrets. I’ve had lots of practice.”
“You still haven’t told me anything. Where did you grow up? Let’s start there. That’s not classified, is it?”
“In Florida, mostly. And then in St. Croix for a while. And then I ran away from home. Just your normal childhood.”
“I think you’re going to have to explain yourself, madam.”
“I never explain myself.”
But then she did. In the flush of that summer evening, she told him the story that she never told anyone outside work. She trusted him, for reasons she only half understood. She sensed that he was caught, like her, in a world in which he was successful but not entirely happy. He was chasing a glowing filament that receded even as he advanced. Perkins was a good listener, and he let her tell the tale.
“My parents were hippies, sort of,” she began. “They were on the run. I was never sure who from, the cops or the FBI, or just from normal people. And they pulled me along with them. We had a lot of things we couldn’t talk about with anybody. I guess that’s how I got started with the secrecy thing.”
“What was your mother like? She wasn’t a spy, I take it.”
“Do you really want to know? This is private, and it’s sort of embarrassing.”
“Yes, I really want to know. I want to understand what makes a woman turn out like you.”
“My mother was a rebel. She looked like those sixties pictures you see of beautiful girls at Woodstock, or Joni Mitchell album covers. And she was a daredevil. If you told her she couldn’t do something, then she had to do it. Unfortunately, she had a habit of wandering off. I thought she wanted to get away from me and my father, but she said she was just a free spirit. When she was having a good time, she forgot about going home.”
“Would she come back?”
“Usually, but sometimes it took a while. I had to take care of things while she was gone. Cook, and do the shopping, and pay the bills. And take care of my dad when he was blue. I was like Junior Mom. No wonder I’m weird, right?”
“You’re not weird in the slightest. I’m sorry to break that to you. What was he like, your father?”
“He was a dreamer. A romantic, I guess. He was very handsome, sort of impulsive. He did his share of bed-hopping, too. His big problem was that he wasn’t very well organized. He had
gotten busted for selling LSD in New York when he was still at Columbia, and then he violated his parole, so we had to move a lot, and sometimes he used false names, and it was a big mess every fall when I had to go to school and we had to fill out all the forms.”
“Where did you live?”
“We started on the Gulf Coast, in Naples, then in Daytona Beach on the Atlantic side, and then in Key West. In the summers I would sometimes go up north to stay with relatives. But the school thing was a problem every September. That’s why we moved to Christiansted in the islands. Some of my parents’ screwy friends were setting up a private school there, so that their children could be freethinkers and not have to study reactionary subjects like spelling and grammar. We lived on a houseboat in Christiansted Harbor. It was the only thing they could afford. I hated it. Every day was like the cast party for Hair.”
“How did you end up so normal, Sophie? I don’t get it. With a childhood like that, you should be in a mental hospital.”
“I have a nonstick coating. What saved me was that I ran away. I knew I couldn’t live like that anymore, and my parents weren’t going to change, so finally I just left. I was fifteen. I had a rich aunt, my father’s sister, who lived in Chicago. She took me in.”
“Is that where the Marx family came from? Chicago?”
“Not exactly. Marx wasn’t our real name. My father changed it to that when he was on the run. The family name was Devereux. My aunt wanted me to change it back when I came to live with her, but I said no. The next year she arranged for me to go to a boarding school in New Hampshire. That’s where I learned how to act normal. But believe me, I’m not.”
“You could have fooled me. From the moment you walked into Edward’s, I thought you were Greta Garbo.”
“I’m a good pretender. That’s one of the survival skills I learned. And having lived that crazy life, I knew things the other kids didn’t, so I was popular. And I did well at Exeter, too. Somehow, all those years of bad schools and listening to my parents’ dopey ideas hadn’t made me stupid. So I was a ‘success.’”
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