Michael Ridpath - Free To Trade

An argument was in progress right then.

'Look, Chris, you can bid higher than 88. My client has to sell. He's been told by his management to sell today. We put him into this bond, we've got to take him out.' The speaker was a blond, youngish man, well groomed with a friendly face. His voice was reasonable but firm. A salesman.

He was talking to a short hyperactive man, who was almost frothing at the mouth. 'Hey, this is the asshole who took me short the Krogers last week, and then went round and lifted the rest of the Street,' he shouted. 'I still haven't been able to buy them back. Let him suffer. It's about time we made some money out of him for a change.'

The salesman turned to Lloyd, 'Do something with this jerk, will you,' he said quietly.

Lloyd walked up to the trader, who was bristling for a fight. 'Where did you make those bonds this morning?' he asked him.

'Ninety to 92, but the market's down.'

'Fine, we will bid the customer 89.'

Howls of protest from the trader, and a disappointed shake of the head from the salesman. Lloyd's voice rose in volume just a touch. 'I said we will pay 89. Now get on with it.'

They got on with it.

Lloyd came back to his desk. We talked for a few minutes as Lloyd explained how his group worked. He then introduced me to the traders. There were five of them, all on edge. Although they were all polite, they couldn't keep their attention on me for long. After thirty seconds of conversation, their eyes would wander back to their screens or their price sheets. There followed a few painful minutes of small-talk at which all the traders said they loved to do business with clients, especially those based in London. Lloyd pulled me over to another desk.

'Why don't you spend a few moments with Tommy here. Tommy Masterson, this is Paul Murray from De Jong.'

Tommy Masterson was the salesman I had seen arguing earlier. Despite that, he had a much more relaxed demeanour than those around him.

'Take a seat,' he said. 'So you are from London?'

I nodded.

'Not many people buy junk bonds over there, I bet.'

'Not many,' I agreed. 'In fact we are just starting. Your traders seemed very anxious to help us get into the market.'

Tommy laughed. 'You bet they are. They can't wait. They will take advantage of you so bad, you'll forget how many fingers you were born with.'

'How will they do that?' I asked.

'Oh, quoting low prices when you are a seller and high prices when you are a buyer. Trying to offload their worst bonds on to you with stories about how great they are. It's difficult for them to get away with that sort of thing with the large US accounts. But a small foreigner? Lamb to the slaughter.'

'Well, thank you for the warning.' I had known I was going to have to be careful dealing in the junk market, but I didn't realise I had to be that careful.

'If you have a good salesman, you should be protected,' said Tommy. 'Who is your salesman?'

'Cash Callaghan,' I said.

'Oh dear. Now, there is a slippery customer. But I'm sure I don't need to tell you that.'

'I have seen him in action,' I said. 'But you tell me what he was like in New York. We hear he was the top salesman in the firm.'

'He was. But that doesn't mean he was the straightest salesman. He was like a good card shark. He would let the punters have some successful trades, make a bit of money, get the hang of trusting him. Then he would persuade them to do very large trades which generated Cash a fortune in sales commissions. The customers lost their shirts. He could fool even the smartest customers. Usually they didn't even realise they were being taken and would come back for more.'

I thought of Hamilton. Cash had even managed to hoodwink him.

'Was any of this illegal?' I asked.

'Not that I know of. Unethical? Yes. Illegal? No.'

'Would you be surprised if Cash did something illegal?'

'Yes, I would. Cash is too smart for that.' Tommy sat up in his chair and smiled. 'Have you got anything specific in mind?'

'No,' I said, although I could see Tommy was not convinced. I changed the subject. 'Cash still does a lot of business with one American customer. It's an Arizona savings and loan.'

'That would be Phoenix Prosperity,' Tommy said. I was thankful for his frankness.

'Oh would it? Does he con them too?'

'I don't know. I don't think so. They have always done a ton of business with him. In fact it's amazing how much business they do for such a small institution. They are pretty aggressive. They used to be covered by a fellow called Dick Waigel. He developed them into his biggest account, and then Cash took over when Dick moved to Corporate Finance.'

'I've heard of this chap Dick Waigel,' I said. 'What's he like?'

'He's a real jerk,' said Tommy emphatically. 'He thinks he is the smartest thing on earth. To hear him talk, you would think he was personally responsible for half this firm's income. But he and Cash are good buddies. Go back a long way. Lloyd thought the sun shone out of his ass.'

'Did he? I wouldn't have thought Lloyd suffered bullshit gladly,' I said.

'He sure doesn't. He's not very smart though, so he doesn't always recognise it. But he's tough. He can be a real asshole. He is going places in this firm, and that's because anyone who stands in his way gets mowed down. It's not talent. Management by fear is his style. Every now and then he'll fire someone, just to encourage the others.'

'But not you.'

'No, not me,' Tommy smiled. 'He'd love to. He doesn't like my attitude. Too Californian. Not gung-ho enough. But he can't afford to fire me. For some strange reason, I'm the top salesman on the desk. And I don't even lie and cheat to achieve it.'

I looked at Tommy and could believe him. I had no doubt that his friendly, frank manner encouraged people to deal with him. And, unlike Cash, I doubted whether he would betray their trust.

'We can't sit around here chatting all day,' said Tommy. 'You've got lunch at one o'clock with Lloyd, haven't you?'

'Yes, I think so,' I said.

'OK, well it's twelve thirty now. Tell you what. It's the ten-year auction today. The US Treasury are auctioning nine billion dollars of new ten-year government bonds at one o'clock. Do you want to see the Bloomfield Weiss machine in action?'

I certainly did. Bloomfield Weiss were renowned for their trading muscle in government bonds. He took me over to the other side of the room and introduced me to a grizzled grey-haired man in his fifties.

'Fred, have you got a minute?'

'For you Tommy, always,' he grinned.

'I'd like you to meet Paul Murray, one of our clients from across the ocean. Paul, this is Fred Flecker. He is our head government bond salesman covering New York accounts. He has been in the market for ever. I bet the first long bond you sold matured long ago. Right, Fred?'

'Just about,' replied Fred. He held out his hand and I shook it. 'Have a seat,' he said. I found a small stool, and squatted between him and the other men frantically working the phones around him. I felt a bit like just another rubbish bin, there to get in the way. 'Do you understand what's going on?'

'No,' I said. 'Tell me.'

'OK. At one o'clock our firm, together with all the other investment banks on Wall Street, will be bidding for a certain amount of ten-year treasuries at a certain yield. There are nine billion dollars' worth for sale. The bidder who bids the lowest yield will be sold bonds first, then the next lowest bidder, and so on.

'We will be bidding on our own and on our clients' behalf. Obviously, the more demand we see for the bonds, the more we will bid for on our own behalf. My job is to talk to the major New York clients and reflect their bids to our head government bond trader, John Saunders. He is sitting over there.' He pointed to a thin man frowning with concentration, at a desk thirty feet away. People were constantly hurrying up to him, passing messages and hurrying back.