Michael Ridpath: Free To Trade

The room had two external walls that were entirely made up of thick glass windows. They faced south-east and south-west. From twenty floors up you could see right over the City of London to the low hills beyond Upminster in the east, the needle of the Crystal Palace mast in the south and the tower blocks of Middlesex to the west. The internal walls were bare except for the obligatory clocks telling the times in Tokyo, Frankfurt, London and New York, and a large white board covered in blue scribbles recording a trade we had executed months ago.

There were eight desks in the room. Each was equipped with the paraphernalia which is necessary to move money around the world; Reuters and Telerate screens, which provide up-to-the-minute information on prices, news and markets; personal computers for analysing portfolios and historical price data; a complicated phone system with a board displaying a dozen or so lines which flash rather than ring, and large wastepaper baskets for throwing away most of the two-foot-high pile of research received every day with the post.

One of the desks was larger than the others, slightly less cluttered, and was positioned a little away from the rest. Empty at the moment, it was the point from which Hamilton controlled the room, and devised his next strategy for beating the markets. Close enough to keep informed, far enough away to keep in control.

It was five past eight, and I was the last in this morning, as I thought I had every right to be. The room was fuller, and more active than it had been the day before. Rob was back from his holiday and Gordon from his seminar. They were both on the phone, and Rob's voice was raised to a level which suggested he was already exercised about something. Jeff was glued to his computer, in exactly the same position I had left him the night before.

'Morning,' I said, as I passed. I got a grunt in return.

I walked over to my desk, and turned on the array of switches above and below it. As the machines whirred into life, Debbie greeted me, 'Morning, smuggerlugs. Thanks for the drink last night.'

'Give me a break,' I said. 'Everyone gets lucky sometime.'

I opened my briefcase, and threw the previous evening's reading on to the desk.

'Don't tell me you actually enjoy that stuff,' said Debbie, pointing to a yellow pamphlet carrying the Bloomfield Weiss logo. She walked round to my desk and picked it up. ' "The Volatility of Volatility: How Information Decays over Time", by George Feuchtwanger Ph.D. That sounds a bundle of laughs.' She opened it up to a page covered with long equations each interspersed with tortuous sentences. 'OK, so what does that one mean?' she asked pointing to a particularly long string of Greek letters and Arabic numerals.

'It means "Good morning, Paul, please can I get you a cup of coffee",' I said.

'And this one means, "Go and get your own coffee, you lazy bastard,"' she said, pointing to almost as intricate an equation just below it. But she tossed the research piece on to the desk, and turned towards the coffee machine.

I liked Debbie. We had worked together for only two months, but in that time we had developed a good understanding. She thought I was too dedicated to my work; I thought she was not dedicated enough to hers. But she was fun. She put the minor ups and downs of the bond market into perspective. You never got a chance to take yourself too seriously with her around.

She was in her mid-twenties, small, with light brown hair, which she wore tied up in a pony-tail. She was probably a little overweight, although this gave her a softness which was attractive. A broad smile was never far from her lips, and her bright brown eyes never kept still, dancing from one object to the next.

She was a lawyer by training. After a couple of years of articles for a middling firm of solicitors, she had had enough of the law, and joined De Jong & Co. There she had not entirely escaped, since she spent her first couple of years in our 'back office' devoting much of her time to working on the legal structures of our funds, and on compliance with the stream of new regulations that were intended to make sure we didn't steal any of our clients' money. Eventually she had persuaded Hamilton to take her on as a junior trader. Despite giving the appearance of doing almost no work at all, she had been quick to learn.

She got on well with everyone in the firm. Even Jeff Richards warmed to her banter. Only Hamilton seemed to have equivocal feelings towards her. For him, there could be no excuse for a lack of commitment.

I looked at the research piece lying open on my desk. Debbie had happened to pick the exact point in the article where I had finally lost track of Dr Feuchtwanger's argument. I had wrestled with it for an hour and a half the previous night before giving up. Although the article had no direct relevance to what we were doing, I was eager to learn as much about the bond markets as I could. There is a limit to how much you can pick up about bond-trading from reading, but I wanted to reach that limit. However complicated or arcane the article, I would plough through it in my attempt to catch up with the combined knowledge of all those traders and fund managers out there.

Debbie soon returned, bearing two plastic cups of gritty black liquid. She handed me one and sat at her desk, the television-review section of the Financial Times spread out in front of her. During the day, she would get through the FT, The Times and the Mail.

One of our lines flashed. It was Cash.

'Boy, you guys at De Jong are getting real lucky,' he started. 'Yesterday I bring you the sweetest of trades. Today I get you out of a hole.'

'And what hole is that?' I asked, slightly worried. I didn't realise we were in a hole. I ran through our various holdings in my mind, trying to think of what Cash could mean.

'I've got a bid for your Gypsums,' Cash said, a note of triumph in his voice. 'I will bid 80 for all your bonds.'

'Hold on,' I said. At first I wasn't sure what he meant. Then, riffling through the papers on my desk, I dug out one of our client portfolios. There amongst a group of odd lot holdings was 'Gypsum Company of America 9% 1995'. The purchase date was three years before, and the purchase price was 96 .

Covering the mouthpiece with my hand, I leaned back, and shouted, 'Hey, Jeff!'

Jeff looked up from his computer, slightly annoyed at being disturbed in his analysis. 'Yes?' he replied.

'Do you know anything about half a million dollars of Gypsum of Americas? It looks like we bought them three years ago.'

Jeff frowned for a moment. 'Yes, I think I know what you mean. Not one of Hamilton's best positions. I think he bought them close to par. Then the company got into trouble, and they were last seen trading in the sixties.'

'I've got a bid here at 80,' I said.

'Then take it.'

I thought for a moment. If Cash was suddenly bidding 80 for a bond which had been trading at a price of 60, there must be something he knew that I didn't.

'Is there anything I should know about Gypsum?' I asked Cash.

'No, nothing I'm aware of. Hey, Hamilton was belly-aching at me all last year to come up with a good bid on this position. Well, I've finally got one. He'll be pleased when he hears.'

This was the old tactic that salesmen used on junior portfolio managers when their bosses were away. Tell the junior what the boss would do in a similar situation, and make him think there is more risk in not doing a particular trade than in doing it. I had fallen for this once or twice in my first couple of months. Hamilton had given me a lecture about how I should always trust my own judgement, and never believe what others might say his views were.

'Hmm,' I said. 'I am going to need some time to think about this. I'll call you back.'