Free to Trade (31 page)

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.