Free To Trade

CHAPTER 15

I dutifully attended breakfast and the morning's presentations. I made sure I was at the Fairway talk. Jack Salmon was there as promised. I sat next to him.

Of all the enthusiastic managements I saw at the conference, Fairway's was the most enthusiastic. There was nothing they didn't know about golf or golf carts. Demand for golf was growing in the US. More people wanting to play could be accommodated in two ways, both of them good for Fairway. One was to build more golf courses, which would need new fleets of golf carts; the other was to make the use of golf carts compulsory on existing courses, in order to get more people round a course in a single day.

Gerry King, Fairway's chief executive officer, knew everyone in the industry. He was unscrupulous in the way he used his contacts. He used top players to sponsor his carts and to suggest minor alterations to make better vehicles. He knew the top course-designers in the country, who could recommend Fairway machines on new courses. And he went to great lengths to explain his close ties with distributors.

The company was winning market share from its competitors and its cash flow had grown 25 per cent for each of the last two years. It had borrowed heavily to finance its growth, and I realised I would have to do some careful analysis when I got back to London to make sure it could support this debt. Provided the results of that were positive, it looked to me as though Fairway would make a good investment.

After the presentation, Jack said, 'Wow! How do you like that company? I can't wait to get my hands on some of those bonds. What do you think, Paul?'

'Hmm, it does seem rather good,' I said.

Jack laughed. 'Rather good,' he said, mimicking an English accent, 'it's goddamn dynamite!'

'I'll see you at your office tomorrow,' I said, and left him.

Outside the room there was a woman taking names for the trip to Las Vegas the next afternoon. There were to be visits to three casinos. The high point was to be the newly opened Tahiti. I went up to her table, and added my name to the list. I still wasn't sure why Debbie had been killed. It could have something to do with Tremont Capital. Or it might have something to do with Piper. I was looking forward to seeing him. There was a lot more I wanted to find out about Irwin Piper.

The lunchtime speaker was a famous American chat-show host whom I had never heard of. I decided to skip lunch and find a nice spot by a pool to have a nap.

In addition to the main swimming-pool, there were a number of small pools dotted round the hotel grounds. There was one I had noticed earlier that was out of the way, on the edge of the hotel premises. It was in the middle of a Spanish-style courtyard, and looked like an excellent place to while away an hour or two.

There was no one by the pool, and I found a spot in the sun, lay down and closed my eyes.

I must have drifted off, because I was awakened by the gentle splash of someone diving into the pool. I opened my eyes and saw the long, lithe form of Cathy gracefully stroking through the water. She was an excellent swimmer, scarcely causing a ripple as she glided up and down the pool.

After a few minutes she hauled herself out of the pool and dried herself on the other side of the courtyard from me. I wasn't sure whether she had recognised me or not, since I was lying facedown on a sunbed. Out of one eye half closed in the sunlight, I watched her as she slowly rubbed her towel over first one long, slim golden brown leg, and then the other. As she stood up to dry her shoulders, I admired the gentle curve of her back, teasingly revealed by her swimming costume.

She lay down and closed her eyes. After five minutes or so, someone else entered the little courtyard. I recognised the balding head of Dick Waigel. A spare tyre of fat rolled over the elastic of his Bermuda shorts. I don't think he even noticed me, as his attention was immediately caught by the prone Cathy. He waddled over to her, squatted down beside her, and began to talk. I couldn't hear what was said, but I could see Cathy sit up and talk politely back.

Then I saw Waigel let his hand drop almost casually on to Cathy's thigh. She brushed it off immediately, but he replaced it more firmly, and began to move his other arm over her shoulders.

Without waiting to see Cathy's reaction, I leapt to my feet and ran round to the other side of the pool. I grabbed hold of one of Waigel's arms, and pulled him to his feet. Waigel was small, surprised and off balance. I made the most of my advantage by landing one clean blow straight on his chin. He went flying backwards into the swimming-pool.

He was momentarily unconscious, but as his head submerged under water he spluttered and came to. He gasped for breath and waded through the water to the opposite side of the pool from where I was standing. He hauled himself out, water and fat slopping on to the paving-stones. 'What the fuck did you do that for?' he screamed at me, his wet face red with anger. 'I was just talking to the bitch. You can't hit me like that and get away with it. You had better watch your ass! I'll trample all over you, Murray!'

He picked up his towel and stalked out of the courtyard, still muttering insults and threats. I just watched him go.

Cathy was sitting hunched up on the sunbed, her chin resting on her knees.

'Do you think Waigel is finally going to get the message that every time he makes a pass at you he is going to get hurt?' I said.

'I hope so,' she said, staring at a point on the ground just in front of her feet.

I sat next to her on the sunbed. Neither of us said anything. I could feel the anger seething within her slowly subside.

'I hate this company, and I hate the people who work for it,' Cathy muttered.

I didn't reply. I felt sorry for her, having to work for scum like Waigel, to be at his beck and call, to put up with his lechery. No wonder she hated it. I didn't know why she took it. She seemed a strong person. Why didn't she just tell them to shove it, and walk out? She just didn't like to give up, I supposed.

We sat together for several minutes, both wrapped in our own thoughts. Finally, Cathy uncurled herself and stood up. She gave me a quick, nervous smile. 'Thank you,' she said in a small voice. Biting her lip, she grabbed her clothes and ran out of the courtyard.

Presentations began again at two o'clock. I watched the chief executive of a cable-TV company explain his plan to operate the biggest and best network in the country, but none of it sank in. Nor did the presentations of the two companies that succeeded him. My mind was preoccupied with Cathy. In those few minutes by the pool, I had felt so close to her. Her vulnerability still tugged at me. The aggressive corporate woman I had first seen in De Jong's offices in London had become a brave but persecuted girl who needed a protector.

The programme for that evening was drinks and a barbecue by the main swimming-pool. A breeze blew down from the Camelback, cooling the air and ruffling the surface of the pool. The reflections of the glowing charcoal, the white tablecloths and the milling crowd of blazers and summer dresses, danced across the water as I approached. The sound of relaxed laughter carried across the pool towards me, mingling with the chuckling of the crickets. All this was under a starlit sky that looked like the backdrop to a Hollywood musical.

It was a lovely evening, and I drifted amongst the earnest young men and women who were winding down after a hard couple of days. I chatted lightly and pleasantly to a number of people, always keeping one eye open for Cathy.

Looking over the crowd, I caught Waigel's eye. This man is not going to forgive and forget, I thought.

'Paul?' I heard a woman's voice call my name from behind me. I turned round. It was Madeleine Jansen.

'Oh hallo.'

'How are you finding the conference?'

'Oh, um, very interesting,' I said, looking over her shoulder.

Madeleine said something else, and looked at me expectantly.

None of it sank in. 'Sorry, I'm afraid I didn't catch that. It's been a busy day,' I said.

'Did you see any companies you liked?'

'Yes, there was one. Fairway. I thought they were good.' Where was she? She had to be around somewhere.

'Oh yes?'

Finally I saw her. 'Excuse me,' I said to Madeleine and pushed my way through the crowd towards her.

She was talking to Cash amidst a small group of people. I stood for a moment, just looking at her, admiring her. The glow from the barbecue danced across her face, lighting up her smile. The shadows made her dark eyes even larger than usual. I fought my way over to her. 'Cathy,' I said.

She turned and looked at me. For a moment, her smile changed from polite to radiant. She reddened a little and said, 'Hallo.'

'Hallo.'

A pause. Not awkward or difficult, just a pause.

'Are you feeling better?' I asked.

'Oh, you mean after this afternoon?' she said. 'Yes, I'm fine. Thank you for what you did.' Her voice told me she meant it, she wasn't just being polite. She smiled.

I looked around at the crowd of people under the canopy of the desert night. 'Have you ever been to anything like this before?' I asked.

'No, but I've been to Phoenix once,' she said, 'on a Greyhound bus. It was several years ago. I was a student then, so we didn't stay anywhere like this. We slummed it all over America.'

'Did you go alone?'

'No. With a boyfriend.'

I pictured Cathy as a student travelling through the Arizona heat. Jeans, a T-shirt, long hair tied back, carefree. 'Lucky chap,' I thought, and then reddened myself as I realised I had spoken it out loud.

Cathy laughed. 'I haven't seen him in years.'

'Is there anyone you do see? Now, I mean?' I blurted it out. Only once I said it, did I realise how important the question was to me, and how desperately I hoped for the right answer.

She gave it. 'No,' she said. 'No one.' She paused, and looked up at me. 'And you?'

I immediately thought of Debbie. Her round face, her smiling eyes and the conversation we had had the night before she died. That conversation had unlocked something. A realisation that life was there to be enjoyed, and to be shared with other people. One of those other people could have been Debbie. But although she was gone, her vitality lived on; I could almost hear her urging me on with Cathy, teasing me for being shy. But I couldn't explain all this.

'No, nobody,' I said. It seemed to me that Cathy seemed to relax at this. I was encouraged. 'So, where else did you go on your bus?' I asked.

She told me all about her trip round America, and about many other things besides. Friends, family, university, books, men. And I talked too, long into the night. We sat on a grassy bank overlooking the pool, watching the other conference attendees slowly drift off to bed. Finally, at two thirty, long after everyone else had gone, we got up to leave. Afraid of risking anything that might ruin the evening, I said good night, kissed her cheek, and made my way back to my own room, singing softly to myself.

I took a taxi downtown to keep my appointment with Jack Salmon. I looked out of the window at the forest of billboards and sun-baked wooden stores which lined the road into Phoenix, and thought of Cathy, her dark eyes and intelligent face glowing softly in the starlight, and of the vulnerability I had felt in her as we had sat together by the pool the day before.

But she was not the only one who was vulnerable. My own feelings were exposed, laid bare to the open air, for Cathy to do with them what she wished. Since my father's death I had been careful to protect my emotions, to shield them from outside events, such as my mother's mental illness. I had channelled my emotional energy first into running, and now into trading. Will-power, determination and self-discipline. That is what had got me an Olympic medal. That is what would make me a great trader.

And now I found myself wanting to loosen this iron grip that I had developed over the years. I was a bit scared, but also exhilarated. Why not? The risk was worth it. I was curious to see what would happen.

But would she have me? Rejection would be hard to take. Very hard.

Phoenix Prosperity's offices literally shone in the sunlight as the taxi approached them. They seemed to be built of the same type of glass as those sunglasses in which you can see your own reflection. The giant gleaming cube rose above the debris of concrete, tarmac, wood and dust that was the undergrowth of a modern American city.

The taxi pulled into the carpark which was three-quarters empty. I got out and walked towards the building. Despite the traffic speeding along the road near by, the building had a quiet menace about it. No one walked in or out. It reminded me of one of those secret evil installations that crop up towards the end of James Bond films. I expected to be greeted by impassive automatons in exotic uniforms. In fact an overweight security guard glanced up from his paper, and waved me towards the lift.

The investment department was on the second floor. I was met by a secretary who asked me to sit down in one of a cluster of four leather armchairs set in the middle of a vast empty reception space.

I sat and waited. Phoenix Prosperity's annual report rested on the low table in front of me. Under the caption 'Bringing you Prosperity from the Ashes' was a picture of Phoenix's office building set against an unnaturally azure sky. I leafed through the document. There was lots of worthy coverage of work Phoenix Prosperity had done in helping to build the community. The savings and loan had twenty branches throughout the Phoenix region.

The chief executive, one Howard Farber, had written a statement. In it he referred to the financial difficulties that had been faced by the institution two years ago, but then mentioned a substantial capital injection which had strengthened the balance sheet. No mention of where this capital injection had come from.

I took a look at the balance sheet. Capital had grown from $10 million two years ago to about $50 million. This must reflect the new funds. Assets too had grown sharply, from $100 million two years ago to $500 million now. The report was studiously vague about what all these assets were. Perhaps Jack would be able to enlighten me.

He came into the waiting area just then. 'Hi, Paul, good to see you,' he said, holding out his hand.

I shook it, 'Nice to see you too,' I said.

'Come on through.' He took me down a narrow passageway and into a spacious office with four fully equipped dealing desks in the centre of it. 'This is it,' he said. 'Take a seat.'

'So, tell me what you do all day,' I said.

'Do you know how a savings and loan operates?' asked Jack.

'Isn't it a bit like one of our building societies?' I said.

'Well, that's how many of them started out,' he said. 'Small community savings banks, raising money locally to lend for local mortgages. Everything very conservative, everything very boring.'

'You don't look like the kind of chap who writes mortgages all day,' I said.

Jack grinned. 'I'm not. Several years ago, savings and loans were deregulated. Now they can invest in all kinds of things: speculative real estate, eurobonds, even junk bonds. We can make all kinds of interesting investments.'

'But why would depositors place their money with you if all you are going to do is gamble with it? What if your investments went wrong? Local people would lose everything.'

'That's the beauty of the whole thing,' Jack said, smiling. 'All deposits are guaranteed by the US government through the Federal Savings and Loans Insurance Corporation. We can borrow as much money as we want, to play with however we want. The depositor doesn't care because he can rely on Uncle Sam to bail him out. It's easy.'

'But what happens to the shareholders? They may lose everything, surely?'

'Yes, that's true. But the potential returns are huge. For every $10 million they invest, they can borrow another $90 million, government guaranteed. That means, if they invest well, they can earn several times their original investment. As long as they can afford to lose the original stake if they are unlucky, then it's great odds for a bet.'

So, that was it! Uncle Sam's Money Machine was a savings and loan! The $40 million investment on Waigel's diagram referred to Tremont Capital buying a savings and loan. Using a government guarantee to borrow money, it could turn the initial $40 million into several hundred million dollars. And if the savings and loan got it wrong, well, then Tremont Capital would just have to default on its bonds. It was just the kind of innovative financing technique which Marshall Mills himself would be proud of. I had a pretty good guess which Money Machine Tremont Capital had bought. I hoped Jack would confirm my suspicions.

'I was reading your annual report outside,' I said. 'It mentioned a sizeable capital injection a year or so ago. Where did that come from?'

'I'm sorry, I'm afraid I can't tell you that,' said Jack.

Oh well, I thought. I could probably check it up later.

'What are the more interesting things you invest in?' I asked.

'Oh, real estate, junk bonds, a theme park, even a casino.'

'A casino. That sounds fun. Is it one I might have heard of?'

'Well, it's this really neat place in Las Vegas,' Jack began. Then he cut himself off. 'I'm sorry, I think some people would be quite upset if they knew I talked about it. Let me just tell you it's big. Real big.'

I was sure Jack was sorry too. He was dying to brag about his investment.

'Sounds interesting. I'm sure you can tell me something about it. No need to tell me the name,' since I could guess it already, I could have added.

'It's a great deal,' he said. 'We teamed up with a top-class operator to build one of the best, if not the best casino in the country. The project is almost completed. All we need to do is wait for the junk bond financing to be closed and we will get paid out.'

'What sort of return will you make?' I asked.

'Oh, double our money,' Jack said, smiling.

'Whew! Not bad, not bad at all,' I said. So Uncle Sam's Money Machine was taking government guaranteed money from local depositors and using it to buy a piece of Irwin Piper's Tahiti. The question was, who was behind Phoenix Prosperity's investments? It was obvious Jack Salmon wasn't the brains behind the operation. 'Are you given guidelines on what you can invest in, or can you do what you like?'

'It varies,' said Jack. 'Sometimes they tell me what to buy. Sometimes they just accept my suggestions. I think they value my judgement. Hey, tell you what. I've been thinking about that Fairway deal. Do you want to help me buy some bonds? I'd like to pick up five million.'

'I'd love to,' I said. 'But I think I should just watch. You go ahead.'

'OK. Just a minute while I call the boss.'

Jack dialled a number and drew away from me so that I couldn't hear. Up until then he had been all braggadocio, but now he took on a sort of submissive posture, rather like a naughty puppy expecting a beating from his master. After a few minutes of solemn conversation in which Jack did most of the listening, he put down the phone, his eyes shining.

'Wow, he really liked that one,' he said. 'He doesn't want me to buy five million, he wants me to buy twenty million. At last these guys are beginning to appreciate my ideas. Let's get to it.' The puppy was wagging his tail. His master had given him an unexpected bone.

I watched as Jack set to work to purchase his $20 million of Fairway bonds. For all his claims of extensive experience, he did a lousy job of it. Buying $20 million of bonds in the junk bond market requires extreme delicacy. I knew how Hamilton would do it. He would subtly nose around the market trying to find dealers who owned the particular issue he was looking for. He would disguise his enquiries by throwing in several red herrings, so none of them could be sure what he was about. Then, when he had found the dealer who seemed to be able to provide him with the most bonds at the cheapest price, he would open up to him, telling him exactly what he wanted to do. The dealer could then work hard to try to buy the bonds from his customers quietly without disturbing the market.

But Jack wasn't Hamilton. He started off by asking ten brokers for prices in the issue. He bought two million each from those three which had the lowest prices. So far, so good. The problem was that when Jack tried to buy the rest, lo and behold, the price had gone up three or four points. All the dealers had worked out what he was trying to do, and what was worse, they knew that every other dealer knew. Jack spent most of the rest of the morning shouting at dealers for putting up their prices against him. When I left him, he still had eight million left to buy and was in a thoroughly bad mood.

I took a taxi back to the hotel. Before checking out I made a quick phone call to Tommy in New York.

'Good to hear from you,' came Tommy's voice, relaxed as ever. 'I trust you are sporting a nice tan after your vacation in the sun.'

'If I hear one more smug chief executive talking about operating synergies and enhancing shareholder value, I think I will explode,' I said. 'How are you getting on?'

'Nothing, yet. The police aren't very co-operative. Also, it's difficult to get hold of Shoffman's files. But don't worry, I haven't given up. Have you found anything?'

'Yes, I have done rather well.' I told him about my chat with Jack Salmon and my discovery of what Uncle Sam's Money Machine was. 'I wonder if you would do me one more favour,' I said.

'Sure,' said Tommy.

'See if you can find out who it was who took over Phoenix Prosperity sometime in the last two years. They paid forty million dollars. Some of the press-cutting databases may have something, although I suspect that the deal was kept private. I bet Bloomfield Weiss had something to do with it. They could have been advisers to either Phoenix Prosperity or the purchaser. See if you can find anything about it there.'

'It's tricky stuff snooping through corporate finance files like that. You can go to jail for that sort of thing.'

'I know. I can have a good guess who the purchaser was, but I need evidence. Sorry, Tommy. If you don't want to do it, I will understand.'

'Oh no. You can't get rid of me that easy. This is fun. I'll have the information for you. Where can I get hold of you?'

'I'll be at the Tahiti for a couple of days,' I said. 'You can get in touch with me there. Good luck.'

I was glad Tommy thought the whole thing was a lark. I felt bad about asking him to do something which carried so much risk, but he seemed genuinely eager and willing. It gave him a chance to get his own back on Bloomfield Weiss. He had been fired, what else did he have to lose?

I was not quite so happy about the whole thing. Whoever was behind it all was dangerous. Debbie and Greg Shoffman had both died on the trail of Tremont Capital. I didn't feel at all safe following in their footsteps. But I was getting somewhere, especially with the discovery of what Uncle Sam's Money Machine was. If Tommy could get answers to my questions, I would be a long way towards figuring it all out. I was doing well; it would be impossible for Hamilton not to concede as much. I would show him he had been right to place his trust in me.