Diamonds and Cubes by Patrick Mansell - Read Online
Diamonds and Cubes
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Summary

Sometimes the stock market moves in unexpected ways. When the Fed publishes a statement that shatters stock vaues all over the world, many of the good traders at Market Makers in San Diego are financially decimated. Nick Anthony, the owner of the firm steps up and launches a scheme to recover losses through insider trading, but has to move carefully when he discovers that his counter-parties are on Interpol's radar.
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ISBN: 9781626757028
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Diamonds and Cubes - Patrick Mansell

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someday

CHAPTER ONE

At 2:45 PM on Wall Street, the NASDAQ was down 200 points. It was flirting with a new bottom. This had been going on for weeks, up 300, 400, sometimes 600 points in a week, only to lose it all the following week. Six months earlier Federal Reserve Chairman Martin Schwartz had told the American public, the entire world, that the market was over-heated. That it needed a breather. Inflation was a concern. There was too much wealth. Too much wealth. How can that be bad?

Nick Anthony sat in his office at Market Makers, Inc., a day trading firm he had founded four years ago in San Diego for those gamblers who lived for the adrenaline rush of a fast trade and a quick buck in a market that would never let you down. There were fifteen work stations rented out for $135 per day each to registered reps, all trading for their own accounts. Their high speed, on-line computers gave them instant, real time information about the movement of stocks, futures, options, bonds and derivatives. The traders bought and sold their favorite security of the day going in and out of those positions sometimes within a few minutes or seconds. Rarely would any of them remain in a position for as long as it took to go to lunch and return. And never would they stay in over night.

For the type of commerce it conducted, Market Makers was an upstanding organization. All its traders were required to sit for the challenging Series Seven examination and were licensed by the National Association of Securities Dealers. They had much more than a passing knowledge of the markets: they were pros. Nick had seen plenty of day traders come and go through Market Makers’ doors over the few short years of operation. Most had brought small fortunes and left them behind. A few lucky ones brought very little and left with small fortunes. But these were the exceptions. Invariably when Nick interviewed prospective reps, he would be told that they wanted to get into the action for a while, build up a modest nest egg, perhaps two or three million dollars, and get out. He would watch those traders meet their goals; but they never got out. They were hooked on the action, smarter than the market, invincible. They had expensive lifestyles to support, big houses, big mortgages, fast cars, margin accounts, and lines of credit to support their trading addictions.

This day was a turning out to be a disaster. Losers were outstripping winners five to two, and there was still more than an hour of trading left in the day. Nick was not himself a day trader; he was an investor who believed that well managed mutual funds would outperform most markets. He jumped on opportunities when he saw them, and stayed away when he sensed that the mood was negative.

One of the day traders in the office who Nick respected a great deal, and who shared Nick’s investment philosophy, was Clyde Courts. Clyde had been in banking for may years and tended to be a conservative investor. His strength was in bond trading, but on this day he thought he saw an opportunity looming that he could not pass up. He had been studying a particular Mutual Fund, Hanover Emerging Markets, a tech fund specializing in the stocks of web based companies. It was going to get killed today. Clyde estimated that the NASDAQ had another 100 or 200 points to lose in the last hour of trading and he would pick up HEMIX at the price at the close. This morning’s Net Asset Value for the fund was $40 per share. He would be surprised to see it close above thirty seven, a 7.5 percent hit. Tomorrow or the next day the NASDAQ would turn around and the NAV for HEMIX would head north again, giving Clyde a tidy profit in a very short time. Nick Anthony’s Market Makers acted as his investment bankers. From a $10,000,000 line of credit that they had established through the Capital Markets area of a major trading house, Nick had created a margin account for Clyde. He would extend up to $2,000,000 in credit, based upon a fifty percent loan. Clyde would match that with his own funds in an equal amount.

OK, here goes. Clyde’s chubby fingers slid the mouse across the rubber pad and clicked on the trading screen on his computer. He punched in a buy order. His hands shook slightly as he tapped out the letters H E M I X in the security field. The readout came back ‘buy Hanover Emerging Markets’. In the appropriate field asking ‘number shares’ Clyde entered ‘90,000’. The verification screen came back ‘buy 90,000 Hanover Emerging Growth at market close’. Enter pin number and hit ‘execute’. Clyde’s breath was coming in short bursts. He sat back for a minute and wiped his sweaty palms on his trousers. Then he took in two deep cleansing breaths. His heart was still racing and his brain was working at light speed. He did the calculations again in his head. Ninety thousand shares, even if it closed at forty, that would be a $3,600,000 trade. He was more than covered. He looked at the big board one more time. The NASDAQ was still down 192 points. A little improvement, but certainly not enough to be concerned. He moved the curser over to the identification field and left clicked his mouse. The curser blinked on the open field. Again Clyde’s hands were shaking slightly. He tapped in the code ‘win435x4t’. His pin number now appeared in the verification field. He moved the curser over to the enter button. He clicked. It was that simple. He blinked and saw that there was no great change to the screen. It was still glowing back at him in that bright blue light that was so familiar. In the lower right corner a red field blinked with the words ‘click here for verification’. Clyde clicked on the blinking red field. A new screen appeared in the familiar blue color but in a completely different format. The screen only contained a few lines of text. Clyde grabbed a pen and wrote down the critical information, ‘you ordered HEMIX, 90,000 shares at market close. Account number 45365-8786. Confirmation number BB696-HX.’

It was done. The biggest trade of Clyde Court’s life, and representative of nearly all of his net worth. Counting it up, he should be ahead by easily a half million dollars within thirty to sixty days, maybe less if the market continued to crap out today and began to improve tomorrow. His margin would cost him about $18,000 per month to carry, but he could handle it. In his heart he believed he would be out of this position within two or three days. He knew that if he could get ahead by only $200,000 or $300,000 dollars he would sell the shares and take the quick profit. It was more than most working men made in years. Clyde was going to do it in a few days. He would get out, his money would be safe and he would wait again for another similar opportunity.

Clyde’s reverie was broken when a cheer came up from across the room. What was the commotion? He came out of his trading cubicle and looked around. The traders were all turned around in their seats talking animatedly among themselves, smiling and celebrating. Several of them got up to straighten their legs and stretch, while others worked feverishly at their computers trying to quickly take advantage of the news coming across the ticker.

This type of thing happened every day, sometimes two or three times. An earnings report from Microsoft or news on the Producer Price Index would send the room into a frenzy. This time it was a little bigger than that. The President himself had visited the floor of the Chicago Board of Trade and given a speech. In that speech he had praised the free market system in America, and had a few encouraging words for the CBOT for their role in maintaining an orderly commodities market. He took this opportunity to announce an initiative that would open trade markets with China and two other Asian nations. The feeling in the trading room was that this would be good for the tech stocks which had been beaten badly during the past ninety days.

This was no great earth shattering news to Clyde. He did not see what all the elation was about. Every time the President spoke on the subject of markets, the trading room would erupt. It was true that the Dow, the Standard and Poors Index and the NASDAQ, frequently responded favorably to announcements of this type, but the euphoria never lasted. Clyde thought the traders were acting immaturely. He returned to his seat and looked at prices again. The NASDAQ had returned seventy more points and was trading down 108 points on the day. This would not be good for the position Clyde had just executed. He would keep watching for a few more minutes and then decide what to do. He still had time to cancel the purchase of the HEMIX shares. He watched and waited.

At 12:40 PM, 3:40 in New York, the NASDAQ was down only fifty points but on very heavy volume. It had been bouncing around, down sixty five, down seventy, down sixty-eight and so forth, taking a little and giving a little, all on very heavy volume. Now it was 3:50, only ten minutes to close. Clyde looked at the indexes again. The Dow was up 112 points, the NASDAQ was down sixty. It was not too late to get out. He considered for a moment and decided. His lifelong philosophy kicked in: you can’t win if you don’t play. Clyde had been waiting for a month to do something like this. He was not going to stop now. He noticed too late that the ticker was running six minutes behind the trades. When 1:00 o’clock rolled around and the market closed, Clyde’s last chance to change his mind had passed. But the index values kept coming across his screen. Only at 1:10 were the final values posted. The Dow was up 230 points. The NASDAQ was thirty-eight points into positive territory. Clyde’s hope to buy mutual funds on a very down day had dissipated and serious doubts invaded his mind.

He stayed in the office long after the market close. Net Asset Values were not posted until the value of the shares within the fund were counted up after the trading day ended. He waited and worried. The NAV had been $40 per share at the opening. He now owned 90,000 shares. He silently prayed for a price of forty but knew that was not going to happen. HEMIX had a track record of outperforming the market on most days. He checked the price every five minutes from 3:00 PM on. Forty, forty, come on, forty. No news yet. At 3:20 the change was posted. The net asset value of a share of Hanover Emerging Growth Funds was posted at $40.82 cents per share. He had committed to pay eighty-two cents per share more for HEMIX than he would have paid the day before. It cost him $73,800 more today than it would have yesterday. It cost him a quarter of a million dollars more than he was expecting to pay at 11:45 AM when the NASDAQ was down 200 points.

Clyde was normally a somewhat unhealthy looking man. He was not tall at five feet seven, he was slightly balding and his jowls tended to sag. His pale eyes, and pasty skin were evidence of his disdain for exercise and a decent diet. Even those weak features were now distorted. He felt nauseated. His head pounded and his face blanched. His eyes were showing fear and his normally erect posture had given in to a slouch. He looked like he wanted to hide. He would have to settle this trade tomorrow, and he had no confidence that the market would continue to support the price he had paid. He leaned over and wretched into a trash can.

CHAPTER TWO

Four blocks north of the trading offices of Market Makers was Nick’s Anthony’s favorite watering hole, a richly furnished leather and brass bar named Rising Sun. The subtle lighting and soft music created a comfortable and friendly atmosphere. The cocktail waitresses wore trashy looking costumes of low cut, sleeveless, scoop necked sweaters, mini skirts that did not come close to covering the goods, fishnet stockings and four inch spiked heels. They looked pretty much like hookers, a fact which helped keep the bar full of men and generally devoid of women from noon until midnight most week days. Sarah Palmer was Nick’s favorite. He had a discriminating eye and had sighted Sarah as a unique beauty among a sea of beauties. She was friendly and attentive to Nick, always making him feel special. She was also the most beautiful of all the girls. Her soft blue eyes, fair complexion, shoulder length ash blond hair and perfect features would have spelled instant stardom in Hollywood, had not an indiscreet affair rewarded her with a look alike daughter twelve years earlier. Sarah had spectacular dancer’s legs and cleavage that was neither the biggest nor the smallest of all the girls, but it was the most perfect. She made certain that Nick always got to peek at her generous bosom whenever she got an opportunity to reach over him to clean a table or serve a drink. At times like this Nick would sneak a whiff of her perfume and hope that some part of Sarah’s body would brush up against his.

What Nick was not certain of was his own ability to attract the opposite sex. He was above average height at six feet one inch with a handsome chiseled face, black hair and blue eyes that were his heredity from many generations of ancestry from Southern Italy. His hard body was a testament to a ritual of two hour trips to the gym at least three times per week. He had no reason to doubt his attractiveness to women. His sense of uncertainty most likely stemmed from diminished feelings of self worth on account of his recently failed marriage.

As he entered the room, Nick could see that three of the traders from his office were sitting at their usual table discussing what they always discussed: the market. He took up a seat and looked around for Sarah. He felt he could use a strong drink this night. He was more than a passing witness to Clyde Courts’ earlier folly. Because of the $2,000,000 in credit that Clyde had borrowed from market makers, Nick had a vested interest in this unfortunate trade. Nick felt empathetic, emotionally beaten up, and downright fearful. The conversation had turned to economic statistics that would be published the day after tomorrow, housing starts, purchasing managers report and unemployment numbers. If the number of housing starts were lower by more than a half percent, and if unemployment numbers were up by one tenth of a percentage point or more, the market would rally and Clyde would be out of trouble. Nick had no faith that this was even a remote possibility. He believed that it was more likely that the statistics would be strong, making the Federal Reserve adopt a firmer bias toward tighter credit. With the resultant market reaction being catastrophic for Clyde.

Within seconds Sarah was leaning over him serving a Manhattan, straight up with no cherry. How’d you know? asked Nick.

Sarah pulled up a chair and sat next to Nick for just a moment to get off her feet. She sat very close and spoke quietly and privately to him, You come in here most days after work. You order either a vodka tonic or a Manhattan. The second you walked in I could see the strain in your face and tension in your body. It must have been a difficult day for you, it looks like you need something a little stronger. She squeezed his hand and held on to it. He squeezed back and leaned closer to her. Her perfume was intoxicating. Then she did something that sent Nick into another universe. She placed the hand she was holding on her thigh and released it. She ran her hand up the inside of his arm and pulled him closer. He could not resist nor did he want to. His arm was now being pressed firmly between her breasts and his hand was only inches from the area where her two perfect legs joined. Nick allowed himself to be swept away in the momentary pleasure. It was only five seconds until Sarah slowly and gently removed herself from the caress, but it was an eternity of pleasure for Nick. She then whispered into his ear, I hope the rest of your day is better.

At that moment Nick felt an almost irresistible urge to take Sarah home with him and live out his innermost fantasies. How could any woman do this to him, make him feel so good? His mood was now one of total elation and well being. The miserable mood induced by Clyde’s bad trade only a few hours earlier was replaced by images of what he would do if he could spend just one night with the beautiful Sarah.

Nick and his three trading associates watched every move as Sarah got up and returned to the bar. When Nick turned around to enter the conversation, he noticed there was no conversation. The three men were sitting with their mouths agape, watching Sarah as she moved away. To a man they wished they could have been the one to go through the experience Nick had just enjoyed. He looked at them and it made him laugh.

Put your eyes back in your head, he said to Edward Fisk. Edward was also a good looking man but he had ‘married’ written all over him and encounters like that just did not happen to him, nor did he encourage them since his marriage was a good one and he had three sons who he adored.

You’re the luckiest bastard I know, said Edward. That woman likes you. Why don’t you do something about that?

Yeah, agreed Clyde. He had never been married, and for the most part his sexual experiences had been the $300 kind. Women just weren’t interested in putting out for him for free. That was, in fact, an arrangement he liked. He had a day trader’s mentality and ‘commitment’ was not in his vocabulary. You should go after her now that you’re single again. What’s holding you back?

Nick was in no mood to pursue this discussion. He tossed off the comments and decided to change the subject. What do you think the numbers will be on Thursday? he asked to no one in particular.

Edward, ever the analyst and scholar, was quick to give an opinion. I think the Fed is serious about slowing things down. They’re going to squeeze until it hurts and this round of rate hikes is only the beginning. I think the unemployment numbers are going to be down and the market is going to take a dump. I’m betting the NASDAQ will be down 350 points before the end of the week. Edward was usually correct about these things and had made a nice fortune, an amount in excess of $10,000,000, in only a few years by betting correctly. Nick respected his opinions and listened to, and frequently bet on, whatever Edward said.

Now Clyde was turning white again. He needed a rally to make anything on his position. If Edward was right and the NASDAQ lost 350 points, Clyde would be down nearly a half million dollars. Market Makers would have to take action to protect themselves against the eroding value of Clyde’s portfolio. Nick hated the thought of Clyde getting hurt this way, but he had to remember that Clyde had made a dumb mistake and Nick could not be expected to be the one to pay. He would be forced to sell whatever he needed to extinguish his risk in Clyde’s position. Clyde would not be broke, but he would lose everything he had made for the past year and a half. It would be a hell of a setback.

What do you think, Mark? asked Edward. You expecting a rally or what?

Rally my ass, said Mark. Mark Spikes was the younger, flashier member of the day trading fraternity. Well educated, with a razor sharp intelligence about trading, he was inclined toward impressing beautiful woman, and often not so beautiful women, for the reward of a one night stand. He was not the kind of guy to get a second date. His self centeredness and driving ego was a turnoff. I agree with you. I’d be surprised if we don’t lose another 500 by the end of the week. The Fed will see to it that if it doesn’t happen this week, it will next or the next. Soon enough the market is going to crap out. That bastard Schwartz won’t be happy until we’re all broke.

What do you think, Nick? Bulls or bears? asked Clyde. Everyone respected Nick’s opinion if for no other reason than that he was a very successful trader and was the owner of the shop in which they worked. He had been a banker in his previous career and had a thorough understanding of the bond market. He liked the more complicated trades in derivatives based upon foreign currency. It made him look smart among his peers, because he was the only one in the office beside Edward who understood it.

Bears for me, said Nick. I see no joy in this market. You saw what happened just today. The market is fickle. All that buying this afternoon is a fluke. I agree with Ed, this market will lose 350 points in no time at all, and it’s not coming back for a long time. There was no attitude in Nick’s expression that would lead Clyde to think that Nick had developed an unhealthy attitude towards him. They were all merely sitting around philosophizing. No malice toward Clyde was intended.

But this was all bad news for Clyde. Nobody was betting in his direction. He was worried and it showed on his face. Mark looked at him and could tell there was something seriously wrong. What’s the matter with you? You look like hell, Clyde. Did you fuck up or something?

Only if you guys are right. When the market was falling today I thought that was the end of it for a while. I got bullish on HEMIX too early in the day and jumped in with both feet. Four million bucks. HEMIX is volatile as hell and if the market craps out I’m fucked. Even if the NASDAQ closed down only 100 points tomorrow and I get out, I’ll still lose a couple of hundred grand.

That’s about the dumbest thing I’ve ever seen you do, said Mark. What the hell are you doing trading mutual funds? I thought you were too smart for that. How’d a genius like you let something like that happen? You know that mutual funds settle at the market close each day. You’ll have to ride a whole day of trading tomorrow before you can get out. You’re completely exposed for a full trading day. His sarcastic words bit into Clyde. It was a stupid move and Clyde should have known better, but it didn’t help to be called an idiot.

Then Edward spoke up, You could be in serious trouble very soon. If I were you and there was an opportunity to get out, I would at any price short of a quarter million bucks. The NASDAQ is going below 2,400 and staying there for a good long time. Between the market moves and the interest on your margin, you’ll be looking up to see down for the rest of the year.

You think this is going to happen as early as tomorrow? I mean, you don’t think there will be the slightest rally in the meantime? asked Clyde. Now he was talking exclusively to Edward and hoping he would hear some good news.

Hell, interrupted Mark, the numbers come out day after tomorrow. If they’re not good then it’s all bears. I don’t think there’ll be much enthusiasm tomorrow, the day before the numbers. I’m betting it’s going to be down and down and down.

Thanks for the encouragement, said Clyde sarcastically. It makes me feel much better.

Don’t be a wise guy, said Edward. You’re in every bit as bad a shape as you think you are. If your loss tomorrow is two or three hundred grand, take it and feel fortunate you got off easy. I’m telling you, Schwartz wants to put us all in the poor house and if you bet bulls, you’re going to get fried. Listen, friend, here’s the only way to look at it . . .

You’re fucked, interrupted Mark. Take your medicine . . .

Shut the fuck up, said Nick. Ed is talking and I want to hear what he has to say. Nick was feeling his Manhattan and all these negative scenarios were making him feel mean and irritable. He turned away from Mark and looked at Edward. Sorry, Ed, finish what you were saying. And to Mark he said, Let the man talk.

Edward spoke, "I think I have something very important to say and everybody here could benefit from this. Here it is. We’re all in a business that allows us to make lots of money. Everyone at this table has had a year where he has made a million dollars or more. Hell, I once made five million in one year, two million in one month. We’re all in the same boat. We make a lot of money. What