Free To Trade

CHAPTER 3

Tap. Tap. Tap.

I was in full stride now. My feet were making the lightest of sounds as they touched the pathways of Kensington Gardens. I focused on the Round Pond in the distance, pleased to see that it seemed to remain stationary. When I ran, the world glided by. No movement up or down. My body just moved horizontally forward, driven by the regular strides of my legs. Any jogging, any rolling, meant a loss of energy. And a loss of energy meant a loss of speed.

I enjoyed the discipline of running. Not just the will-power required to force yourself to keep going when your body told you to stop. But the discipline of ensuring that every muscle in your body was moving as it should, when it should.

The commentators had raved about my running style. But I was not a natural. I had learned it through years of single-minded concentration. And through Frank.

I had first come across Frank when I was running at Cambridge. He coached middle-distance running at a club in North London. Occasionally he would come up to Cambridge to coach some of us. More often, I would travel down on Sundays to learn from him.

I certainly had some natural talent. I had enjoyed cross-country running even as an eleven-year-old. I would voluntarily run for miles over the moors at home in Yorkshire, something my friends found very difficult to understand. As I had passed puberty, I had filled out. My leg muscles had grown in size and strength and I had picked up the speed you need to be a good middle-distance runner. At Cambridge, I had thrown myself into athletics and had achieved a blue in my first year.

But it was Frank who had really taught me how to run. Not just in the body, but also in the mind. I had the necessary determination; he knew how to channel it. We worked long and hard at my technique. During speed training, he exhorted me to put 100 per cent into each leg, when my body told me to go 90 per cent. And he taught me how to race, how to ration not just my physical energy but my mental energy as well.

And it worked. It was hard and slow, but every year I ran just that little bit faster. A year after I left Cambridge, I ran for Britain for the first time. The next season I just missed selection for the Olympics. Over the next six years, my speed and consistency improved just enough to win me a place.

That year Frank and I put everything we could into getting me to the peak of my mental and physical fitness. The bank was very understanding, my job became at best part-time.

The heats went well. I managed to run them hard enough to qualify for the final whilst still leaving a lot in reserve.

On the day of the final, I felt as ready as I ever could be. I was fit. I was determined. There were four other runners who had done times faster than me, but I was going to beat them all. My plan was simple. I would start the race fast and lead from the front. There were two or three faster finishers than me. I had to make sure they were beaten by the last hundred metres.

I followed my plan, but for the first six hundred metres most of the field kept up with me. Whenever I drew away, the others would catch up. Then, with two hundred metres to go I lengthened my stride slightly and began slowly to pull away from the others. For a hundred and fifty metres I was running five yards ahead of the best runners in the world. The crowd in the huge Olympic stadium cheered me on – I was convinced they were just cheering me alone. It was the best fifteen seconds of my life.

Then, fifty metres from the line, two green shirts barged past me as a Kenyan and an Irishman battled for the line. I told my legs to move faster, stride longer, but they didn't obey. Suddenly the crowd were cheering for the two backs a yard or two ahead of me, not for me. It was as though I were slowly moving backwards.

I made it over the line in third place and won a bronze medal.

For several months afterwards, I basked in the attention I received. From the media, from people at work, people I met in business, even from people in the street. But despite the euphoria, I could not hide a simple fact from myself. I had lost. I had put everything into that race, a year of my life had been devoted to that one-and-a-half-minute period. And I had lost.

My time was easily my personal best. As I resumed training and racing the next season, my times came nowhere close. It began to depress me. I became more and more sure I would not be able to better that one effort. And it would take all my energy just to get close.

I wanted time for other things. For friends. I wanted a job that would stretch me. I wanted a new challenge.

So I quit.

When I told Frank, I expected him to be furious with me. But he took it very well. In fact, he was very supportive.

'I've seen too many young men sacrifice their lives to athletics,' he said. 'Go out into the world and do something.'

Secretly, I think he knew, as I did, that I had got as far as I was going to go. He didn't want me to lose years of my life aiming for the gold medal which would never come.

So I gave up. And I had gone out into the world to win at something new. Trading.

I sped towards the pond, passing a couple of middle-aged, wheezing joggers moving at walking pace. A red setter bounded up towards me, ignoring the shouted plea of its owner to heel. He bounced up and down beside me for a few yards before darting off after a terrier yapping at a squirrel in a tree. He leapt over an embracing couple under a tree, who took no notice.

I still needed to run. I ran three or four times a week, usually the three or four miles round the perimeter of Hyde Park, as fast as I could. I needed my fix of adrenalin, the masochistic pleasure of feeling totally exhausted.

I thought of yesterday's Sweden trade. A smile came to my lips as I recalled the sweet feeling of knowing I was right and the market was wrong. Or rather Hamilton and I were right. I had done well for a rookie trader. It had been the first time I had been under pressure, real pressure, and I had come through it well. I had been scared at one point, but I had held my nerve. The fear had been a necessary part of the exhilaration. Just as a runner had to go through the pain to experience the adrenalin rush, so a trader had to feel fear.

I looked forward to what Hamilton would have to say to me when he returned. It had been my first real opportunity to prove myself to him, and I had taken it. I hoped he would appreciate it.

I dodged a gaggle of chattering Arabic women out for an evening stroll in their black yashmaks and gold facemasks, and veered left towards the exit of the park. I lengthened my stride as I ran the last couple of hundred yards to my flat, nagging doubts snapping at my heels.

I pulled the keys to my building out of the pocket of my shorts, my chest heaving, sweat soaking my exhausted muscles. I opened the door, stepped over the debris of unopened junk mail and freesheets, and pulled myself up the stairs to the first floor.

I let myself into my flat, quickly stretched my muscles, and collapsed on the sofa. I stared around me, too tired to move. It was a small, convenient flat. One bedroom, a living room with an alcove kitchen just off it, and a hallway. I kept it tidy; I had to since it was such a small space. The furniture was simple, practical and cheap. On the mantelpiece was a small selection of my most treasured running trophies, and a black and white photograph of my father and mother leaning against a dry-stone wall. They smiled down at me with the lost happiness of twenty years ago.

It wasn't much, but I liked it. A convenient bolthole.

Groaning, I pulled myself up off the sofa, and hobbled on stiffening muscles into the bathroom for a soak.

As soon as I got to work the next day, I grabbed the Wall Street Journal from Karen's desk where it was left every morning. I was surprised to see the newspaper shaking slightly as I looked down the column of stocks for the ticker GYPS.

There it was. Eleven and a quarter dollars. The stock had risen by more than 50 per cent overnight! I turned round to see Debbie coming into the trading room clutching a cup of coffee. She saw the page I was reading.

'Well?' she said.

'Eleven and a quarter,' I said with a grin.

'I don't believe it!' she said, grabbing the paper from me. She let out a whoop, and threw the paper up in the air. Everyone turned round to look.

'I'm rich!' she screamed.

'Not very rich,' I said. 'It's only a few thousand dollars.'

'Oh be quiet, you old misery,' she said. 'I'm going right out to get some champagne. We've got some orange juice in the fridge. Buck's Fizz all round.' I was dubious about this but Gordon and Rob made smacking noises with their lips. Even Jeff rubbed his hands in anticipation. He had his own reason to be happy. Overnight the dollar had finally done what his economic model said it should.

She was back in quarter of an hour clutching an ice-bucket in which nestled a bottle of champagne. I had no idea where she had got it from at that time of the morning. Glasses and orange juice were fetched from the fridge, and within a couple of minutes we were all toasting the Gypsum Company of America.

'We should have this every morning,' said Rob, staring appreciatively at the bubbles rising in his glass.

'Our lord and master would have a fit,' said Gordon.

'No chance,' said Debbie. 'I can't imagine him actually having a fit about anything. It would be more a cold stare and a quick lecture. "De Jong & Co. prides itself on its professionalism, and you, Robert, are not acting in a professional manner,"' she said in a prim Scottish accent, which somehow managed to capture the essence of a typical Hamilton put-down.

Rob laughed. 'Well you had better get rid of that,' he said, pointing to the empty magnum on Debbie's desk.

'Oh, he won't be in till lunchtime,' Debbie said.

'Oh won't I now?' said a quiet measured voice from the door of the trading room. Instantly the room was silent. Jeff turned to his sheets of computer print-outs and Rob, Gordon and Karen all melted back to their desks. It was as though the Upper Fifth had been caught misbehaving by the headmaster.

This was ridiculous. We weren't schoolchildren and Hamilton was not a headmaster.

After a long silence, I raised my glass to Hamilton. 'Welcome back. Cheers.'

Hamilton just looked at me.

Emboldened by my greeting, Debbie approached Hamilton with the bottle and a glass. 'Won't you have one?' she asked.

Hamilton's gaze turned to her. He ignored her offer. 'What are you celebrating?' he asked.

'I have just made a killing!' said Debbie, her enthusiasm undimmed.

'That's good to hear,' said Hamilton. 'What was the trade?'

Debbie laughed. 'Oh no, it's not De Jong that made the killing, it's me. I bought some shares yesterday and they are up 50 per cent today.'

Hamilton stared at Debbie for a few seconds. Then he said in a quiet, reasonable voice, showing no trace of anger, 'Just let me put down my things and let's go into a conference room.'

Debbie shrugged, put down her glass and followed him to his desk, and then out of the trading room.

'Whew,' said Rob, 'I wouldn't like to be in there.'

Ten minutes later Debbie came out. She stared at a fixed point on her desk and walked straight towards it, looking neither left nor right. Her cheeks were slightly reddened. Her mouth was clenched firmly together. There was no sign of tears, but she looked afraid that if she relaxed one muscle in her face, they would break out. She sat down, stared at her screen and began to tap bond yields furiously into her calculator.

Hamilton entered the room and walked through the silence over to his own desk. He took some papers off the pile that was his in-tray and began to read. The tension was only broken by Rob, who answered a call from a broker with an elaborate display of cheerfulness.

After half an hour or so, Hamilton came over to my desk and sat in a chair beside it. Debbie studiously ignored him, punching numbers into her calculator. Although I had worked with Hamilton for six months, I always felt nervous talking to him. It was difficult to have a casual conversation; he seemed to listen to everything I said so carefully that I was always scared of saying something foolish or banal.

He just sat there leafing through the position sheets which outlined all the trades we had done whilst he had been away.

'You were back a little earlier than we expected,' I said, to break the silence.

Hamilton smiled slightly, 'Yes, I got an earlier flight.'

'How was the trip?'

'Good. Very good. De Jong is beginning to build a bit of a name for itself in Japan. There is one insurance company, Fuji Life, that I have high hopes for. They sound as though they might give us some money to manage, and if they do, it will be big.'

'Great.' It was good news. A fund management firm like De Jong is only as good as the size of funds it manages. A big new investor could really put us on the map.

'How have you been doing here?' Hamilton asked, running his finger down the position sheets.

'Well, we had some fun with a new issue, as you know.'

'Ah, yes. How is the Sweden doing?' he asked.

'Moving up slowly but surely,' I said, trying to keep the pride out of my voice.

'Well, don't be too quick to sell it, it has got a long way further to go.'

'OK.'

'And watch out for any other new issues. After the success of the Sweden, people will be looking to buy anything as long as it is at a halfway-decent price. Now, what are these two million Gypsum of Americas I see we have bought? I have been trying to sell our position for over a year.'

I paused for a moment, disappointed and a little angry. No 'Well done'. Not even a smile. I realised I had been looking forward to Hamilton's return and the approval I felt I deserved. More fool me. In Hamilton's world, taking risks and getting it right were taken for granted.

Trying to keep the indignation out of my voice, I described Cash's excited bid for our bonds, and my decision not to sell. I then told Hamilton why I had decided to buy some more.

'Hmm,' said Hamilton. 'And where are they trading now?'

'They are still bid at the price I bought them, 82,' I said. 'But the stock is up to eleven and a quarter dollars. The bonds should follow soon.'

'Yes, Debbie told me you had bought some stock as well, for your own account.' Hamilton looked hard at me. 'Be very careful, Paul. You won't be lucky all the time. And when you do get unlucky, make sure it doesn't wipe you out.'

I could feel my face getting hot. I had made good money on the Swedish issue and it looked very much like I was going to make some more on the Gypsums. I deserved some encouragement, for God's sake! Of all people, Hamilton was the last person to criticise anyone for taking risks.

'Thank you,' I said. 'I'll remember that.'

'Good,' said Hamilton. 'Now, have you got anything interesting coming up this week?'

'Actually, yes,' I answered. 'Cash is coming in this afternoon with his sidekick, to try to sell us a new deal.'

'Not another one,' said Hamilton. 'I would have thought one would have been quite enough for one week.'

'No this is different. It's a junk bond issue. It's for the Tahiti, a new hotel in Las Vegas. It's a risky deal, since almost the whole cost of the construction of the casino has been financed with debt. But it yields 14 per cent.'

'Now, that is a lot. I hope we can live with the risk. This is where you earn your crust.'

I sincerely hoped so. Junk bonds, or 'high yield bonds' as they are sometimes more politely called, can be very profitable. They can also be very dangerous. The name 'high yield' comes from the high interest coupon that these bonds pay. The name 'junk' comes from the high risk that they represent. They are usually issued by companies burdened with high levels of debt. If everything goes well, then everyone is happy; the investors in the junk bonds get their high coupon, and the owners of the company make a fortune out of an often small initial investment. If everything does not go well, then the company is unable to earn enough cash to meet its interest bills and it goes bankrupt, leaving its junk bondholders and its owners with paper fit only for the waste-basket. The secret to investing successfully is picking those companies that will survive. This was where my experience as a credit analyst came in. Hamilton wanted to begin buying junk bonds, and he had specifically hired someone with credit skills to help him do it. I was looking forward to my first opportunity to display those skills, although I knew nothing about casinos, and was more than a little suspicious of Bloomfield Weiss's new deal.

'Well, let me know how it goes,' Hamilton said. With that, he stood up and went back to his own desk.

Debbie muttered something that sounded very much like 'Bastard!'.

'What was that?' I asked.

She looked up just for a second, her face still clenched with the effort of keeping control.

'Nothing,' she said and bent over her calculator. The anger radiated from her desk.

I looked at my watch. It was a quarter to twelve.

'Look, it's almost lunchtime. Why don't we go out and get a sandwich?' I said.

'It's too early,' said Debbie.

'Come on,' I said firmly.

Debbie sighed and threw her pen down on to her desk. 'OK, let's go.'

We ignored the usual Italian sandwich shop over the road and instead walked to Birley's in Moorgate. Clutching our absurdly expensive turkey-and-avocado sandwiches, we walked on to Finsbury Circus.

It was a gorgeous day. The sun was out and a gentle breeze ruffled the dresses of the secretaries who were making their way to the lawn in the middle of the Circus for a lunchtime's sunbathing. We found an empty patch of grass with a view over to the bowling-green. Young men in bright blue striped shirts and red braces were playing. The gentle murmur of relaxed conversation hovered over the lounging office workers scattered over the lawn, pale limbs and faces turned towards the July sun.

We chewed our sandwiches in silence, watching the people go by.

'Well?' I said.

'Well, what?' said Debbie.

'Do you want to tell me about it?'

Debbie didn't answer. She leaned back on her elbows and raised her face to the sky, her eyes closed. Finally, she opened them and squinted sideways at me.

'I think I should give all this up,' she said. 'Hamilton's right, I'm not suited to it.'

'Bullshit,' I said. 'You are picking it up very quickly. You're a natural.'

'A natural dilettante, according to Hamilton. I have the wrong attitude. Traders with my attitude are dangerous. They're careless. They lose money. Unless I improve my attitude, I have no future. And you know what? I don't care. I am damned if I am going to become an anally retentive Scottish robot, just so I can earn De Jong's clients an extra half a per cent. It's all right for you. He loves you. All that dedication and hard work. The sun shines out of your arse. But that's just not me. I'm sorry.'

She looked away from me as she blinked away a tear.

'Look around you,' I said, inclining my head towards the crowd of prone bodies. 'Do you think all these people are failures? The City isn't full of people like Hamilton or even me. There are hundreds of people who enjoy a good laugh and who spend their lunchtimes lying in the sun, who are very successful, thank you very much.'

Debbie looked at me doubtfully.

'Look,' I said, 'you are quick on the uptake, you always get the work done, you are 99 per cent accurate, what more do you want?'

I put my hand on hers. 'I'll tell you what you have got that the rest of us haven't,' I said. 'People love to work with you. They like to deal with you. They tell you things. They let you get away with things they probably shouldn't. They do you favours. Don't underestimate how important that is, in this business.'

'So I shouldn't just get married, have two point two children and eat ice-cream in front of "Neighbours" every afternoon? I would be good at that. Especially the eating ice-cream bit.'

'You can if you want, but it would be a shame,' I said.

'Well, it may not be my decision,' she said. 'Unless I "sharpen up" in the next month, I will be out.'

'Hamilton said that?'

'Hamilton said that. And I am damned if I am going to change my personality just for him.'

She put her head on her knees, and examined a daisy two feet in front of her.

'What did he say to you about buying the Gypsum stock?' she asked.

'He wasn't too happy,' I said. 'He didn't exactly tell me I was wrong to do it. He just said I should be careful. Come to think of it, I don't know whether he was talking about the stock I bought for my own account, or the bonds I bought for the firm. Either way, it's a bit much for him to criticise anyone for taking risks.'

'You like him, don't you?' Debbie asked.

'Well, yes, I suppose I do,' I said.

'Why?'

'It's difficult to say. He's not exactly a warm and loving person, is he? But he's fair. He's honest. He's professional. And he is probably the best fund manager in the City.'

I watched a couple slowly get up from a wooden bench opposite us, their places soon taken by two young bankers, there to check out the talent. There was plenty to look at, dotted about on the closely cut grass.

'I doubt there is anyone else like him in the City,' I went on. 'It really is a privilege to work with him. When I see him in action, I am amazed. He always sees angles others don't. And he has this way of drawing you into his thought process, making you an accomplice in whatever brilliant trade he is working on. Do you understand what I mean?'

Debbie nodded. 'Yes, I suppose I do.' She looked at me closely. 'Why do you come in to work every day?' she asked.

'To earn a crust,' I replied.

'That's not all, is it?'

I reflected a moment. 'No, I want to learn how to trade. I want to learn how to trade better than anyone else out there.'

'Why?'

'What do you mean, why? Isn't it obvious?'

'No, not really.'

'I suppose it isn't.' I sat back and rested on my elbows, squinting into the strong sunlight. 'I need to push myself all the time, as hard as I can. And then a bit harder. I have always been like that, ever since I was a boy. When I ran, I wanted to be the best. Not second or third, but the best. I suppose the habit just doesn't go away.'

'I envy people like you. Where do you get all that drive from?'

'Oh I don't know,' I said. But I did know. There was a reason for those bitter hours of self-inflicted pain I had suffered as an adolescent, that single-mindedness which Debbie said she envied, and which had cut me off from the carefree enjoyment of life that I saw in other 'normal' people. But I wasn't going to tell Debbie or anyone else at De Jong what that reason was.

Debbie was looking at me intently. Then her face creased into a broad smile. 'You're weird. No you're not, you're nuts. You should see a psychiatrist immediately before you end up as a Hamilton Mark II. You are the one with an attitude problem.'

She stood up and wiped the grass off her dress. 'Anyway, I have got to go back to the office to polish my nails and you have got to charge into battle for your lord and master. Let's go.'

We walked back to the office in much better spirits. It was difficult for Debbie to be depressed for long.

I stopped at the coffee machine to replenish my caffeine level. As the gritty brown liquid flowed into my plastic cup, Rob came up beside me. 'Did you see Reuters?'

'No,' I said, my curiosity aroused.

'Have a look.' He grinned at me. Bad news I thought.

I returned to my desk and looked. There was a message on the screen that Congress was considering a change in the United States's double-taxation treaty with the Netherlands Antilles, a favourite tax haven and domicile for entities which issued bonds. IBM, General Electric and AT &T had all issued bonds through their Netherlands Antilles subsidiaries, as had a lot of less well-known borrowers.

I sighed. We would have to analyse these tax changes. Someone would have to go through the prospectus of every Netherlands Antilles issuer in our portfolio. It was a pig of a job.

'Debbie? A very interesting situation has just arisen…'

Debbie interrupted. With her legal background, and the time she had spent in De Jong's administration department, she was uniquely qualified, and she knew it. 'I know what you want me to do. You want me to read every Netherlands Antilles prospectus ever printed.'

'Well, er…'

'Don't deny it. The things I do for this firm. Morons like you blow bucketfuls of money on silly trades, and I get left to do the really glamorous stuff.'

But she seemed in good humour as she set off to collect the prospectuses.

Rob had followed me to my desk and perched himself on it, cup of coffee in hand. He grinned at Debbie's retreating figure, and began idly leafing through some of the research which had accumulated on my desk. Boring stuff. He had his own pile to go through, should he be so inclined.

'Can I help you?' I asked.

'No. Oh no. Just looking.' Rob said.

After a minute or so, he said, 'Up to anything?'

'Not really. This and that. And you?'

'Nothing much.'

'Are you doing anything interesting today?' he asked.

'Just the usual.' I wasn't going to help him.

Silence. More leafing through pages. Rob coughed slightly. 'Did I hear you say Cash Callaghan was coming in with his sidekick today?' he asked.

So that was it. 'Yes,' I answered.

'By "his sidekick", do you mean Cathy Lasenby?'

'I think that was her name. Why do you ask?' I smiled. I could guess very well why Rob asked. He had an intense passion for women. It was not the sort of passion that lies inside most young single men. It was not at all physical. Rob was always in love. The more unattainable the object of his love, the better. In fact, whenever he got too near to consummating his desire, his ardour would cool, and he would find someone new. He had only just recovered from Claire Duhamel. Having finally persuaded her to have dinner with him, he had been driven wild with jealousy by her constant references to a boyfriend in Paris. She had told him that Gaston was the only man for her. He had been inconsolable for two weeks.

He carried his energy and enthusiasm into areas other than his love life. He was a very emotional trader. He had a 'feel' for a market. He would claim his views were based on logic, but that was just rationalisation on his part. He either loved the market or he hated it. He was by no means always right, and when he got it wrong the world was a very dark place. However, like Gordon our chartist, he got it right more often than he got it wrong, which was the important thing.

Looking at him, you would never have guessed that he was tormented by such strong emotions. He looked very ordinary; light brown to fair hair, a chubby face, a little under medium height. But the frankness with which he displayed his passions had a certain charm. Women found him 'sweet' and seemed to be drawn to him, at least at first. I must admit that over the last few months I had found myself developing quite an affection for him. He was fun when he was making money, and I had learned to avoid him when he wasn't. I am afraid to say I often found his romantic tussles amusing, there was always a new crisis to hear about.

Rob ignored my expression. 'I've always been fascinated by junk bonds. It sounds as though it will be an interesting meeting. Do you mind if I join?'

I laughed. 'No, of course not. It's at three o'clock. Plenty of time to get to the flower shop across the road.'

Rob scowled at that, but couldn't prevent his scowl spreading into a grin as he walked away. I was looking forward to the meeting. Partly I was eager to be getting my teeth into some credit analysis again. Partly I was curious to see the woman who had aroused so much interest in Rob.

They arrived at three on the dot. It was difficult to imagine two more different people. Cash led the way, bustling his short, slightly overweight frame through the door of the conference room and bellowing hallos in his hoarse, loud Brooklyn voice. Cash Callaghan, originally Charles Callaghan, had established a reputation in New York that he had built upon since he had moved to London. He was the 'top producer' in Bloomfield Weiss, meaning he sold more bonds than any of the other hundred or so salesmen at the firm. His life style matched this success. The name 'Cash' reflected the large amounts of cash he earned, and the large amounts he so obviously spent. If ever anyone was larger than life, it was he. His personality seemed to fill any room he was in. His good humour and his throaty chuckle drew people towards him. He made you feel that you were a special friend of his, and that it was an honour to be a friend of someone so popular, who had so many other friends who were not quite as important to him as you. You wanted to please him, show him you appreciated his friendship. You did business with him.

Everyone felt this pull, myself included. I did my best to fight it. I didn't trust him. Partly it was because his small, blue piggy eyes seemed totally detached from his wide grin and bright white teeth. When he and everyone around him were smiling and laughing, those hard little eyes would be darting around, weighing up those around him, looking for opportunities to make the sale. Partly it was because I had suspected him of trying to pull one over on me once or twice. No doubt he succeeded with other clients, and no doubt they were still drawn back to doing business with him.

Behind this rush of energy came Cathy. She was tall and walked into the room with an awkward, angular grace. Her dark hair was tied tightly back behind her neck. She wore a crisp white blouse under an expensive looking blue suit, with a delicate set of small pearl earrings. She had a figure designed to wear elegant clothes, slim with sharp edges. But I couldn't help noticing her eyes; large and brown, they carefully avoided contact with anyone in the room. I could see what Rob meant. She had a mixture of untouchable beauty and vulnerability that must have been giving him all sorts of problems.

As we sat down, Cash began, 'Paul, I'd like you to meet my new colleague Cathy Lasenby. Cathy, this is Paul Murray, one of our more successful clients.' With this a broad grin in my direction. 'Rob, I believe you have met before.'

Cathy gave us both a thin smile, barely twitching the corners of her mouth. I nodded to her, and Rob smiled inanely and mumbled something incomprehensible in her direction.

'It's not many of our customers who are able to spot opportunities as good as the recent Swedish deal, and have the balls to make as much out of it as Paul here did,' Cash continued.

'Even the foolhardy get it right sometimes,' I said. 'There was that other customer, the American who bought fifty million. He must have made good money. I wonder who that was.'

'Oh that was a small savings and loan from Phoenix, Arizona,' Cathy answered. She had a clear, throaty, slightly haughty voice, betraying an expensive education. I have a weakness for voices like that, hers struck me as remarkably sexy. 'He often takes that sort of risk. Actually, he is quite good at it.'

For a moment Cash frowned in evident disapproval. Customers are not supposed to know what other customers are doing. In theory this is supposed to protect client confidentiality. In practice, I suspected that it was to prevent them ganging up on the investment bank in the middle. Cathy had shown her inexperience by breaking this rule.

She noticed Cash's disapproval and reddened. 'But I am sure you can keep that to yourself,' she added, glancing towards, but not quite at, me.

'Oh, of course,' I said.

Cash's grin returned to his lips. He cleared his throat. 'As you know, we have come here today to talk about the new high yield bond issue we are going to launch for the Tahiti Hotel. Cathy will outline the details of the deal to you. Before she starts, I just want you to know that we at Bloomfield Weiss think that this is a great deal. It's going to be oversubscribed several times. This'll be a blow-out. There's a lot of money to be made here for the smart guys who can decide fast.'

I wondered if there were ever any deals Cash sold that were not 'blow-outs'. 'Please go on,' I said.

Cathy began. 'You may be wondering what can be riskier than investing in a casino. You've heard about "the man who broke the bank at Monte Carlo". Why should you finance an operation that can be bankrupted by any lucky punter coming off the street?

'Well, when you are on the side of the house at the gaming tables, then your winnings no longer depend on luck, they depend on reliable percentages. Over the long run, the proportion of total bets placed that is won by the casino is remarkably constant. Different games have different percentages. Slot machines are a high-volume, low-margin business. The biggest profits are made from the high-rollers, the top thousand or so gamblers in the world, who bet, and lose, large amounts of money.

'So the secret to running a very profitable casino is to make sure that, when the high-rollers come to town, they spend as much time in your casino as possible. It is with this in mind that the Tahiti was conceived and built. It will be the most exciting and luxurious hotel and gaming complex in Las Vegas. The hotel has a South Sea theme with palm trees, lagoons and a specially regulated indoor climate that adds to the effect.'

She handed Rob and me a folder with glossy photographs of models of the new casino. The building did look impressive. Its two most distinctive features were a tall white tower, and a large glass atrium filled with trees and water. Rob, I noticed, scarcely looked at the folder, but kept his eyes firmly on Cathy.

'A good location is important to ensure that the casino attracts as many of the casual passers-by as possible,' she went on, handing us maps of Las Vegas. 'The Tahiti is located on the "Strip", between The Sands and Caesar's Palace. These are two of the most popular casinos in Las Vegas, and we expect that many visitors to these locations will want to step into the Tahiti to see what it is like.

'The casino has two thousand five hundred hotel rooms, including twelve luxury Imperial suites which will be made available free to the target list of the biggest high-rollers in the world. There is also parking space for four thousand cars and a one-thousand-seat showroom, where famous entertainers will perform every night. The aim of all this is not to make money, but rather to attract people to the tables.

'The whole complex will cost three hundred million dollars. It is just being completed now and is due to open at the beginning of September. I would like you to look at the financial forecasts I have here.' Cathy passed Rob and me two documents. 'As you can see, the casino's cash flow is expected to be twice as high as its interest costs in the first year. As you look further into the future, you will see that this ratio rises as the casino becomes more profitable.

'The new bonds will have a coupon of 14 per cent and a maturity of ten years. They will be secured with a first mortgage on the casino, so that if it does not make enough money to pay back debt, then you will become owners of a very attractive property.

'Any questions?' The haughtiness in Cathy's voice rose a notch as she threw this out like a challenge.

There was silence for a minute whilst I quickly looked over the numbers in front of me. The deal did look as though it might be interesting, but there was a lot more I would have to find out.

'I have to admit that I don't know very much about the casino business,' I said. 'And there is a lot more research which I will have to do. But I do have a couple of initial questions. Firstly, what happens to these wonderful forecasts if there is a recession?'

'It's well known that the industry does not suffer in a recession,' said Cathy. 'In fact, occupancy rates increased in the recession of the early eighties. The reason is that people actually like to gamble more when times are hard.' She looked at me, daring me to contradict her.

I looked steadily back at her, and didn't say anything for a moment or two. I don't like being patronised, however good-looking the patroniser may be. I wasn't going to let her put me off. 'I can see that may be true,' I said. 'But hasn't much of the development in Las Vegas in recent years been aimed at making it a destination for the family holiday?'

'Yes. In fact, in addition to attracting wealthy gamblers, the Tahiti is expected to be one of the top destinations for families in the next decade.'

'Little junior has got to learn his poker game somewhere,' said Cash with a laugh.

'I see,' I said. 'But isn't the family holiday one of the first things to be cut back in difficult times?'

'Perhaps.'

'In that case, won't there be fewer people coming to Las Vegas in a recession, and won't profits fall sharply?'

There was a short silence as Cathy shuffled the numbers in front of her nervously. 'As you yourself mentioned, you are new to this business. Analysts are unanimous that the effect of a recession on the gaming industry would be negligible. It is well known that during the depression of the 1930s, gambling actually increased.'

She was floundering, but she clearly wasn't going to concede my point, so I let it drop. 'I have a second question. Whenever you are lending money to someone, no matter what business they are in, it is important to know something about them. Who owns the Tahiti?'

Cathy was quick to answer, on surer ground again. 'A man named Irwin Piper. He is a well-known investor on Wall Street. He is generally recognised as a winner, his purchase of Merton Electronics ten years ago was one of the great successes of the eighties; he quadrupled his money in three years. He has also been involved in a number of leisure projects in the past, and he has made money out of them. He is a good man to back, believe me.'

'I see.' I asked another question, 'Doesn't Las Vegas have a reputation for attracting organised crime? How do I know this man is clean?'

'Just because he owns a casino, it doesn't mean he is a crook,' said Cathy sniffily. 'It's true that there were cases of organised crime in Las Vegas in the fifties and sixties, but nowadays the Nevada Gaming Commission runs very strict checks on people before granting them licences to own or manage a casino. If an applicant has ever been involved, or even been suspected of involvement, in any criminal activities at all, then the Commission won't grant a licence. I can assure you Irwin Piper is clean.'

'Nevertheless, I feel uncomfortable lending someone money if I have never met them,' I said.

'Look, if the Nevada Gaming Commission's thorough investigations aren't good enough for you, then you will never be satisfied,' Cathy snapped.

This was getting seriously annoying. After all, I was the customer. And I wasn't going to buy these bonds until I could get completely comfortable with the owner, his casino, and the industry.

Cash sensed this. He had not become Bloomfield Weiss's top salesman by bludgeoning alone. New junk bond issues carry the highest sales commission, and he was prepared to go a long way to try to land a sale, even if there was only a half-chance of success.

'Look, Paul. If we can get satisfactory answers to your questions, will you buy these bonds?'

'Well, I would need to think about it some more. But there is a good chance I would, yes,' I said.

'OK. Let me suggest two things. First, Irwin Piper is passing through London in a couple of weeks' time. I've met him. He's a great guy. I may be able to fix for you to meet him. Have an informal drink. How does that sound?'

'That would be very helpful. Thank you.'

'OK, I'll call you tomorrow to tell you where and when. The other thing I wanted to mention was our annual High Yield Bond Conference. It will be in Phoenix at the beginning of September. There will be an opportunity to visit the Tahiti in Las Vegas at the end of the conference. You will also get a chance to see the management of a number of other companies that issue high yield bonds. Would you like to come? It should be fun. Cathy and I will be going.'

'Well, thank you very much,' I said. 'I will have to check with Hamilton first, but that does sound interesting. I suppose I will get a chance to see the savings and loan Cathy mentioned earlier.'

Cash's blue, piggy eyes looked at me questioningly for a moment. Then he coughed uncomfortably, and looked at his hands clasped in front of him.

'I'm sorry, client confidentiality. I understand,' I said, although I didn't quite understand.

With that, the meeting broke up.

As soon as the lift doors had closed on Cash and Cathy, Rob turned to me. 'Phew! Don't you think she's gorgeous? Can you believe those legs?'

I couldn't argue about the legs. I could argue about the girl.

'She's all yours, Rob. Talk about arrogant. She makes Cash look as sweet as a kitten.'

'You just didn't like her showing you up like that,' said Rob. 'She obviously knows her stuff. Beautiful, and intelligent too. I'm sure she was looking at me all through that meeting. I think I'll give her a ring and see what she's doing tonight.'

'You must be out of your tree. She'll eat you alive,' I said. But I knew it was no use. When it came to women, Rob was definitely out of his tree, and he would probably enjoy being eaten alive.

As we walked back into the office, Hamilton called me over. 'How did it go?' he asked.

'Pretty well,' I said. 'I'll need to do a fair bit more work on it, but I may well get comfortable with the credit in the end.' I told him some of the details of our discussion. 'It certainly will be worth while seeing the owner. Cash also invited me to their high yield conference in Phoenix. He said there would be a number of companies that issue junk bonds present. What do you think?' Hamilton could be tight on expenses and I feared the answer would be no.

But I was wrong. 'You should go. I'd like to begin buying a few junk bonds soon, and it will be a lot easier if you have seen the managements speak. You might learn something from other investors, too. It's always worth gathering information.'

'Fine,' I said. The idea of going to Arizona appealed, although I wasn't sure whether I would be up to prolonged exposure to Cash's geniality and Cathy's lectures.

'Whilst you are over there, you may as well stop off in New York. It's always worth finding out what's going on there.'

'I will. Thank you very much.'

I had been to New York before, but I had never visited any of the investment banks there. Their trading rooms were legendary, the centre of the world financial markets.

I went back to my desk, and opened the Tahiti documentation. I could use some help with this.

'Debbie?'

'Yes?'

'Are you feeling helpful?'

'No.'

'Would you do me an enormous favour?'

'No.'

'See what you think of this.' I tossed her the prospectus for the Tahiti. 'I'll do the numbers, but see what you think of the covenants.'

'Oh great, thanks,' she said, waving at the pile of prospectuses already surrounding her. 'I'll squeeze it into the half-hour between when I go to bed and when I get up.'

For all her complaining, I knew she would do a thorough job. And although she would never admit it, she approached the Tahiti documents with obvious enthusiasm.

'Oh, by the way,' she said, 'did you see the Gypsum of America stock price is up to thirteen dollars. Not bad, eh?'

'Not at all bad,' I smiled.

At least that little investment seemed to be going right.