Free To Trade

CHAPTER 14

I awoke with a headache and a strong desire to leave New York. In those indistinct seconds between sleep and wakefulness, I once again saw Joe's eyes fixed in their final stare as he lay beneath the boulder in the park. Fortunately, I was booked on an early flight, so I lost no time in getting showered and dressed, and heading for the airport. It was only when I felt the aircraft leave the runway at La Guardia, and saw Manhattan Island receding into the distance beneath and behind me, that I finally began to relax.

Even at nine o'clock in the morning Phoenix was hot. It was a physical shock to walk out of the cool dark terminal into the bright reflection of the sunlight. Locals ambled past in short-sleeved shirts, sunglasses and deep tans. In less than a minute I was sweating in my suit as I carried my bags over to the large sign which read 'Bloomfield Weiss High Yield Bond Conference'.

They had laid on long white stretch limousines to take the conference participants to the hotel. Within seconds I was back in air-conditioned quiet again. I waived the Scotch in the minibar, and sat back to watch the wood and concrete structures of Phoenix glide by. I supposed that it was perfectly possible to spend all of your life in Phoenix at sixty-five degrees Fahrenheit, with only brief bursts of extra heat as you transferred from air-conditioned house to air-conditioned car to air-conditioned office.

After half an hour's drive, we reached the hotel. I dumped my things in my room, and went for a stroll. The rooms were grouped in small whitewashed buildings with red-tiled roofs, surrounding little courtyards. Bougainvillaea was everywhere, adding splashes of purple and green to the white and blue of buildings and swimming pools. There seemed to be pools everywhere. Most of the little courtyards had one, and there was a large central pool just by the main building. Sprinklers strained to ensure that the immaculate patches of green approached the perfection of Astro Turf.

I walked into the main building. Immediately, the dazzling colours outside gave way to dark muted creams and browns. The air-conditioning roared in the background. Although attempts were made to perpetuate the Mexican atmosphere, there was no disguising the impression of a financial centre in temporary accommodation. Signs abounded, telling me to do a hundred things at once. They were dominated by a large banner proclaiming, 'Welcome to the fourth Bloomfield Weiss High Yield Bond Conference'. Everywhere tables were piled with conference documentation and registration forms. I had a peek into one of the conference halls, a dark cavern bristling with electronic gadgetry.

A number of people were wandering around aimlessly. Clean-cut, with carefully ironed slacks and short-sleeved shirts, you could tell they had been plucked only a day ago from the investment offices of New York, Boston, Minneapolis or Hartford. They all had badges giving name, rank and organisation. I felt naked without one, and set off in search of the right registration desk to pick mine up. Properly labelled, I went back to my room to pull on some running shorts, and get some exercise.

It was mid-morning, and the temperature was rising steadily. I stretched, and then set out at a gentle jog towards a long low hill with two humps, which I later learned was called appropriately 'Camelback'.

I soon found myself climbing up a rocky desert slope. The only vegetation was thorny bushes and cacti. Lizards and insects scurried from sunshine to shade. I ran slowly and methodically. It was still very hot, and the temperature combined with the incline took it out of me. One of the digital thermometers that adorn buildings all over the US claimed that it was ninety-one degrees. But it was also very dry, and in a way more pleasant than the lower temperatures but higher humidity of New York in summer.

Halfway up the hill, I paused for breath. It would be foolish to push myself too hard in this heat. I turned to look at the city sprawling below me. European cities evolve over the centuries out of their natural setting, nestling in a valley or at the confluence of two rivers. Phoenix looked as though a giant hand had drawn a square grid over the desert and dropped neat blocks of buildings on to it, one by one. Which wasn't too far from what had actually happened. It was a tribute to the inventiveness and prosperity of Americans that such a city could exist in such an inhospitable climate. Of course with air-conditioning, a vast water-distribution network and swimming-pools, this unfriendly environment could be transformed into the ideal setting for the modern American dream. That was why Phoenix was one of the fastest growing cities in the country.

I decided running in this temperature was a bad idea and spent a pleasant hour or so lying on a rock alone on the hillside, letting the sun beat down on my face and remove some of the tension of the last few days.

Every investment bank with any pretensions to deal in the junk bond market hosts a high yield conference. They are schizophrenic occasions. The organisers, following the lead given by Drexel Burnham Lambert's notorious 'Predators' Ball', feel the need to create an extravaganza in exotic locations, where powerful controllers of billions of dollars can do deals and have fun. There is a bit of the showman in every high yield salesman, and this appeals to their ideal of what the whole thing should be about. Unfortunately for them, most of their customers are earnest young men and women whose overriding concerns are such questions as 'Will Safeway's new inventory control systems really increase margins by half a per cent?'. These people demand a gruelling schedule of presentations that start at eight o'clock in the morning and often don't finish till seven at night. This was the first such conference I had been to, and whilst I was looking forward to seeing some of the presentations by companies issuing high yield bonds, I also wanted to meet some other investors, and perhaps catch an hour or two by the pool. It might help me unwind.

I showered and just made it to lunch. I munched my way through an exotic Mexican salad, half listening to a Bloomfield Weiss economist drone on about the importance of recent non-farm payroll figures in the deliberations of the Federal Open Market Committee.

The first presentation after lunch was by Hank Duralek of Beart, Duralek and Reynolds, the kings of leveraged buyouts. Their firm had just bought the biggest biscuit manufacturer in the world, for a breathtaking $27 billion, easily the largest deal in history. Duralek was convincing, arguing that it would be easy to make enough cost savings to finance the mountain of debt which the company had taken on. I was intrigued, but I thought I would wait to see what happened to the company over the next year. It was just a little too risky for De Jong's first investment in junk bonds.

Then came an extraordinary presentation from the notorious Marshall Mills. As he himself said, his greatest achievement was to marry an actress a third of his age. He was a short stocky man in his sixties, who breathed heavily as he talked. A handkerchief was never far from his balding brow. But his eyes were tough and beady, full of energy as they darted about his audience. As he began to speak, the atmosphere in the room became electric. The earnest young men polished their glasses, stuck out their jaws and glowered. Mills's audience didn't like him. But he didn't care.

He told us the story of his success. Thirty years ago he had inherited his father's small oil company based in Tulsa, Oklahoma. Over the next couple of decades he had grown the company from a little cluster of nodding donkeys to one of the largest private oil and gas concerns in the state. He had used innovative financing techniques to achieve this growth. 'Innovative financing techniques' was a phrase which reappeared regularly in Mills's talk. I soon realised it meant finding a sucker, and borrowing as much as you could from him, in the hope that whatever you had bought with the money he had given you, went up in price. If it did, you made millions, if it didn't, then the sucker lost. It was a strategy followed successfully by a number of America's great entrepreneurs.

In 1982, after the second oil-price hike, Mills had made his boldest move. He had borrowed several hundred million dollars to finance the development of oil finds in Utah and Colorado. Mills portrayed the episode as a dramatic success. My recollection of events was that the drilling had been left unfinished as oil prices dived below $15, instead of rising above $50 as had been predicted. Somehow Mills's original businesses had ended up with all the cash, whilst the non-recourse subsidiaries held all the debt and a few half-drilled holes in the Rocky Mountains.

He had pulled the same stunt five years later in an attempt to use 'innovative financing techniques' to build a network of gasfields across the south-west of the United States. Once again, it had all ended in tears for Mills's hapless bondholders. The way Mills told it, though, they had been honoured witnesses to one of America's great entrepreneurial successes.

The audience was restless during this self-eulogising. When his speech was over and he asked for questions, a dozen people leapt to their feet. It was clear that a number of them had participated in some of these 'innovative financings'. After the fifth hostile question, Mills's patience wore thin. He interrupted an enquiry about why his refining company had failed to make an interest payment when it had $50 million of cash on its balance sheet, by saying, 'Look, you guys are lucky. You buy my bonds, and you have Marshall Mills working his guts out for you night and day. There are many people who would give their right arms to have Marshall Mills working for them. Now I have something to tell you, which really will give you something to worry about.' Suddenly there was silence in the hall. It gets worse? 'You may not have Marshall Mills working for you much longer.' The wheezing became more pronounced. 'My doctors have diagnosed a heart condition. I could live ten more months or ten more years. But I think it will be prudent for me to retire soon and spend more time with my darling wife.'

The audience cheered up at this. No doubt many of them hoped that the actress would be more comfortable with the notion of repaying debt than Mills was. Two or three people quietly sneaked out of the conference hall. Later, on the way to dinner, I was not in the least surprised to hear that most of Mills's companies' bond issues were up five points.

I joined the two hundred other participants in a huge ballroom dotted with tables laid for dinner. I walked over to my table. Cash was there with Cathy and Waigel, from Bloomfield Weiss. Apart from myself, there were two other clients there.

'Hey, Paul, how're you doing?' Cash yelled across the table. 'Glad you could make it all this way. Let me introduce you. This is Madeleine Jansen from Amalgamated Veterans Life, and this is Jack Salmon from Phoenix Prosperity Savings and Loan. Madeleine, Jack, this is Paul Murray, my best client in London.'

We exchanged smiles and nods. Madeleine Jansen was a small quiet-looking woman. However, as she smiled and said hallo, her eyes displayed a striking intelligence. Jack Salmon was a tall thin man a few years older than myself. He had slightly buck-teeth and fidgeted nervously with his left hand as he shook mine with his right. I found I was seated next to him, with Cathy on my other side.

'I have heard a lot about your institution,' I said to Jack.

'Oh yeah?' he said, clearly pleased. 'I didn't know anyone had heard about us outside Arizona, let alone in London.'

'Ah, but you make quite an impression on the eurobond markets, don't you,' I said, consciously trying to flatter him.

'As a matter of fact we do a lot more in those markets than you would think, for an institution our size,' said Jack.

'Such as in a recent much-maligned deal for a country not a million miles north of Denmark?' I said, putting on a sly smile.

Jack returned it. 'Now you come to mention it, yes. How do you know about that?'

'I make it my business to know,' I said. 'Actually we took a lot of that deal ourselves. I think we and you were about the only investors to buy the deal when it originally came out. It's not often that one gets a chance to clean up like that.'

Jack laughed, 'As Cash would say, "That was a sweet deal!" I sure enjoyed that one.' He took a large gulp of wine.

Stroking this man's ego was not going to be difficult. 'It's strange for someone based so far away to be so successful in the London markets. How do you do it?' I continued.

'Well, we like to think we are quite cosmopolitan at Phoenix Prosperity. More so than your average investor in the States. I like to keep up with European news and events. I spent three months there when I was at school. And we know Cash Callaghan from way back.'

Ah, the real reason, I thought.

'Do you do much of your business with Cash?' I asked.

'A fair amount,' said Jack. 'He has a very good handle on the markets and comes up with some good analysis. He seems to be able to relate to my ideas.'

I bet he does, I thought. Phoenix Prosperity was an ideal account for Cash. I could imagine him inciting Jack Salmon to buy and sell all manner of bonds all day, whilst he steadily notched up sales commissions. 'Yes, we find him good too,' I said.

'Have you been involved in the junk market for long?' Jack asked.

'No, we are just starting. And you?'

'Oh, we've been doing it for a year or so.'

'How have you found it?'

'It's a blast. But you have got to have balls. If you find a good deal, and it gives you a 16 per cent return, and you are comfortable with the credit, then you have got to buy a lot of it, know what I mean?' Jack gave me a knowing smile.

I nodded. This guy is dangerous, I thought.

'But they won't let me do it,' Jack went on. 'If I buy more than one or two million they panic. I tell you, it makes it hard to make any decent money.'

So there was someone sensible, somewhere, controlling Jack.

'Are there any companies I should look out for tomorrow?'

'Yes, there is one I like. "Fairway." I think they have a good story.'

' "Fairway"?' I said. 'What do they do?'

'They make golf carts. You know, the little buggies you drive around golf courses.'

'I know. Thanks, I'll make sure I see them speak,' I said. We ate on in silence for a minute or two. 'Are your offices near here?' I asked.

'Pretty close. They are about ten miles away, downtown. But I'm staying at the hotel for the conference. It's a good opportunity to meet some of the other people involved in the business.'

'Do you have a big operation?' I asked.

'No, only two or three of us on the investment side. I make most of the trading decisions. But you don't really need a lot of people to throw around a lot of money.'

'We are a small operation too,' I said. Then I started angling, 'It would certainly be interesting to compare what you do to what we do. Although we live on different continents, I get the impression we have a similar outlook.'

Jack took the bait, 'Hey, when the conference is over, why don't I show you round. Could you spare a couple of hours?'

I smiled, 'Thank you. That will be very interesting. I look forward to it.'

Cash had been chatting away to the woman from Amalgamated Veterans Life. At first she had been very aloof, but she was slowly beginning to warm to Cash's charm. After half an hour or so, her laughter was ringing out to match Cash's.

I murmured to Cathy, 'Cash seems to be hitting it off with that woman. Why does she get the star treatment?'

'Amalgamated Veterans is one of the largest investors in the US,' Cathy said. 'Madeleine Jansen is the senior portfolio manager there. She decides what strategy to follow. When she changes her mind about a market, that market moves. She's supposed to be very good.'

'I see,' I said. 'But Amalgamated Veterans isn't one of Cash's clients, is it?'

'Precisely,' said Cathy. 'But, you never know, one day it might be. Cash likes to make sure he knows as many of the major investors as possible. When he moves back to the States, he will probably call her up to see how she is doing.'

'And what will the salesman from Bloomfield Weiss who covers her think of that?'

'That's Lloyd Harbin. He isn't here this evening. A perfect opportunity for Cash.'

I didn't say anything. I supposed stealing a client off one of your colleagues was nothing compared to stealing $20 million from one of your clients. I thought of Debbie Chater. But I couldn't tell Cathy my suspicions. I shook my head. 'Cash seems like a nasty piece of work to me.'

'I can see how you might think that,' said Cathy diplomatically. 'It's true some people don't like him, but he's not always that bad really.

'OK, I admit he can be untrustworthy, he does take advantage of his customers now and then, and he is a notorious thief of other people's clients. But I wouldn't say he is the devil personified.'

I shrugged.

'Oh no. He wouldn't hurt a fly. He's quite a softy. Wants everybody to love him. Even me. Although I grumble about him, he does stand up for me. A couple of months ago, they told me I wasn't getting a pay rise this year. I had worked hard and I deserved one. Cash threatened to resign unless they increased it. So they did. There aren't many bosses at Bloomfield Weiss who would do that for their staff.'

I was impressed by Cathy's loyalty, but I wasn't convinced. I let it drop.

Cash broke off his conversation and called over to us. 'Hey, Paul, I'm getting a complex here! First of all, you conspire with Jack. That makes me nervous. Two of my clients plotting against me. There are some awkward stories you two could share about me. And if that isn't enough, you start turning my very own partner against me.'

'Yeah, you had better look out Cash, Paul here has told me all your secrets,' Jack said.

This last comment made me distinctly uncomfortable. I knew Jack was joking, but did Cash? I looked carefully at Cash, but he just laughed. I could see no indication that he was concerned.

Waigel butted in. 'There are quite a few secrets about Cash I could tell you. Remember Sheryl Rosen?'

'Hey, Dick, be fair,' laughed Cash. 'That was a long time ago.'

'You two have known each other for a while?' I asked.

'Oh yes,' said Cash. 'We go back a long ways. We both grew up in the same neighbourhood. Dick was the smart one. Always top of the class. Columbia University, then Harvard Business School. I was just good at drinking beer and getting to know girls like Sheryl Rosen.'

'You should have seen his bar,' said Waigel. 'Full every night. Lots of kids having a great time. It's a shame you had to shut that down.'

'Was that near Tremont Avenue?' I asked as innocently as I could manage.

'Right round the corner,' said Cash. Waigel looked at me narrowly. I held his gaze for a second or two, doing my best to look innocent. I wasn't sure I succeeded. Waigel thought I was up to something; I would just have to make sure that I didn't give him any evidence to back up his suspicions.

Cash went back to his task of charming the woman from Amalgamated Veterans. Waigel turned to Cathy.

'Tell me, how do you like the conference?' he asked.

'Oh, it's fascinating,' she said. 'It's amazing how well a lot of these companies are run. Having piles of debt to service really seems to focus the mind.'

'Yes, there were some great companies talking today. Did you see Chem Castings. That was a deal I structured myself. Great management. That's a company that is really going places.'

I had seen Chem Castings's presentation. The management did seem to be competent, and the underlying business was a good one. But, thanks to the advice of its investment bankers Bloomfield Weiss, the company had taken on too much debt, and would struggle to meet even its next interest payment.

'Yes, I saw that one,' said Cathy.

'It's a shame we can't sell deals like that into Europe,' said Waigel. 'Why is that, I wonder?'

Cathy stiffened. She didn't say anything for a second or two. I could feel the tension rising beside me, and I focused on my plate, pretending to ignore it. 'I don't know,' she said, carefully. 'Our clients just don't seem to have any interest.'

'Of course it's very difficult to know whether it's the clients that lack interest or the salesmen,' said Waigel. He was chewing his steak noisily as he said this, staring defiantly at Cathy. The sweat shone under his thinly plastered hair. 'Selling that Chem Castings deal was very important to the firm. We were left with a block of bonds that lost us a bunch of money. If we had proper international distribution, we just wouldn't have had that problem.'

Cathy kept her cool. 'The problem is that most of our clients just don't like the risk of junk bonds. You can't force them to change their views.'

'You can't force them, but with a body like yours, you could sure as hell persuade them.' Waigel laughed as he said this, took a gulp of wine, and winked at me. I glowered back.

Cathy looked confused, unsure whether to take this as a joke or the insult it clearly was. In the end she smiled thinly.

'Aw, come on, what are you upset about?' said Waigel with a leer. 'A good-looking girl like you could sell anybody anything. I bet you have built great relationships with your clients. After an evening out with you, I'm sure I could be persuaded to take whatever you were selling.' He turned to me, with another wink. 'Am I right, or what?'

'Dick,' muttered Cathy through clenched teeth, 'remember there are clients here.'

Waigel had drunk a lot of wine. 'Paul here is a man of the world. He knows how things work. Now, listen Cathy, I'm an important man in Bloomfield Weiss, and I am going to become more important. You should get to know me. I can be a great help in your career. How about just you and me having a quiet glass of champagne after dinner?'

Waigel was sitting opposite Cathy. Cathy had very long legs. She slid down in her chair slightly. A moment later Waigel let out a cry of pain, and seemed to clutch his napkin in his lap. Cathy stood up, excused herself, smiled curtly to everyone at the table, and walked off, her sharp high heels clacking on the wooden floor.

I got up and followed her to the bar. Her eyes were smarting, and she had to bite her bottom lip to stop it trembling.

'Not very subtle, is he?' I said.

'Bastard!' she muttered.

'Still, I thought you dealt with him quite well.'

'Yes, I enjoyed that,' she smiled. 'But he's right, you know. I'm not going to get very far in my career by kicking Bloomfield Weiss's rising stars in the balls.'

'Sod him. Sod Bloomfield Weiss. Have a drink,' I said.

I got Cathy a glass of wine and myself a Scotch. Cathy sipped her drink. 'Did you hear about Joe Finlay, one of our eurobond traders?' she said.

My pulse quickened. 'No?'

'It's terrible. He was murdered yesterday in Central Park.'

'Really? How awful.' I tried to give my voice just the right amount of concern. Enough to acknowledge the awfulness of murder, not enough to suggest anything more than a brief acquaintance with Joe. 'What happened?'

'Apparently he had been out jogging. It was dark and he was jumped. He got one of his attackers. Killed him. He used to be in the SAS, so they say.' Cathy shuddered.

I was glad Joe was dead, and I didn't feel the slightest guilt about my part in it. There was no doubt at all in my mind that he had been just about to kill me. And now I wouldn't have to look over my shoulder everywhere I went. Life could become normal again. I thought of Joe's wife, Sally. And Jerry. No doubt being brought up without a father would be bad, but it must be infinitely better than being brought up with Joe.

'Have the police caught anyone?' I asked.

'Not yet, but it's early days,' she said. She took a nervous sip of her drink. 'I know this sounds terrible, but I didn't like him very much. He seemed weird. Dangerous.'

'I don't think that sounds terrible at all,' I said, a little too positively.

Cathy noticed my tone, and eyed me inquisitively. Then something caught her eye behind me. 'Look at that!' she said.

I turned to see the bulky frame of Marshall Mills weaving his way through the crowd towards the bar. On his arm was a tall curvaceous woman with fluffy red hair, big green eyes, and full bright red lips that never quite closed. She swung her whole body as she walked, her hips bumping gently into Mills's side with each step.

Just before the couple could make it to the bar they were stopped right next to us by Cash.

'Marshall!' Cash shouted.

'Who the hell are you?' spat an angry Mills.

'My name is Cash Callaghan. I'm a salesman at Bloomfield Weiss. And I would just like to say what an interesting and thought-provoking presentation you gave this morning.'

'I hate salesmen. Go away!' growled Mills.

Cathy giggled. 'Cash has finally met his match here,' she whispered.

But Cash wasn't going to give in that easily. He thought for a moment, trying to figure out Mills's weak point. Finally he said, 'Mrs Mills, I loved your latest film. What was it-Twilight in Tangier? I always knew from your photographs in the press that you were beautiful, but I had no idea you were such a great actress.'

Mrs Mills was as taken aback by this as Cathy and I were. But she recovered enough to dip her eyelashes and reply in a languorous Texan drawl, 'Why thank you, sir.'

'Not at all, not at all. I trust there will be a sequel soon?'

Marshall interrupted, his voice full of pride, 'We are planning Moonlight in Marrakesh. We should start shooting in a couple of months. I'm glad you liked Twilight. I think most of the critics missed the film apart from some illiterate bozos who wouldn't recognise Meryl Streep if she appeared in a school play.' Mills was breathing heavily, sweat pouring from his brow.

'Now now, Pooky, watch your blood pressure,' Mrs Mills drawled.

'Sorry, Poppet,' replied Mills.

'Let me introduce you to two of your most loyal bondholders from England, Cathy Lasenby and Paul Murray.'

My mouth gaped open for a moment, but Cash winked at both of us, and I found myself playing along. We both made polite noises. Mills was clearly surprised that he had any loyal bondholders left, even as far away as London.

'I hear you are looking for some finance for your latest development,' said Cash.

'Yes, it's a great property off the coast of Ecuador, but I'm told that none of these dumb idiots here want to give me any money. I could teach them a thing or two about investing. What these idiots don't realise…'

'Pooky,' admonished Mrs Mills.

'I'm sorry, dear.'

'Well, I think I know someone who may be able to help,' said Cash. I was shaking my head furiously, determined that I would not let Cash railroad De Jong into this one. The revenues from the oilfield might look good, but only a fool would trust Marshall Mills. Fortunately, Cash pulled Mills and his wife off towards where Madeleine Jansen was standing.

'He must be crazy if he thinks he can get her to even talk to Mills, let alone give him any money,' said Cathy. 'Amalgamated Veterans lost a packet on one of his companies a year ago.'

We watched them talk for several minutes. After about a quarter of an hour, the group broke up and Cash walked back up to us. He had a huge grin on his face and was literally rubbing his hands with glee.

'Barman, a bottle of Dom Perignon please,' he called. 'And three glasses.'

As he poured the champagne, Cathy said, 'Surely you don't expect us to believe that Madeleine Jansen agreed to give him any money.'

'Fifty million,' Cash said.

'How on earth did you manage that?' she asked.

'Partly price. He's going to have to pay 2 per cent more than the average yield for a new junk issue. But the key is the security. If Mills defaults, or tries any funny stuff, Amalgamated Veterans will have the right to take possession of the copyright of both Twilight in Tangier and Moonlight in Marrakesh and prevent any further distribution of the films. That ought to keep him straight.'

'Oh, I see. And if his heart gives out, it should keep his widow in line as well,' I said.

Cash laughed. 'Having seen Lola Mills in Twilight in Tangier, I am surprised his heart didn't give out long ago. That woman sure is some gymnast.'

I couldn't stop myself laughing with Cash. I had to marvel at his amazing ability to get two such totally different people to do business together.