Free To Trade

'Thank you very much, I'll have to check whether I am doing anything that weekend. I'll let you know.'

'OK. Give me a call.'

I hung up. Effusive American meets polite Englishman, and neither is comfortable with the result, I thought, feeling slightly guilty.

'What's up?' asked Rob.

'I've been invited to Henley by Bloomfield Weiss, and I feel bad about saying no.'

Rob perked up. 'Bloomfield Weiss, eh? Will Cathy be there?'

'Yes,' I said.

'Well, I think you should go. And I think you should take me with you.'

I protested, but it was useless. The persuasive powers of Rob and Cash combined were too much for me. I rang Cash back to say I would be delighted to come, and I would bring Rob. Cash sounded pleased.

I was sitting at my desk watching the market struggle through the summer doldrums, ably assisted by Debbie. I was bored and irritated. Debbie seemed quite happy with the situation. I watched her work her way through the Financial Times crossword. I was struggling to keep myself busy. I scanned our portfolio, hoping for some ideas.

There were one or two bonds with NV after their name. That reminded me.

'Debbie.'

'Not now, can't you see I'm busy,' she said.

'Did you check the Netherlands Antilles issues? Do we have to worry about those changes to the tax treaty?'

Debbie put down her paper. 'Amazingly enough, I did.' She pointed to a pile of prospectuses. 'I've checked over all our portfolios, and we are all right. None of our bonds is affected. The only Netherlands Antilles bonds we hold are trading below a hundred, so we will make money if the issuer calls them at par.'

'That's a relief. Well done. Thanks very much for doing all that,' I said.

'Hang on a moment. We may be OK on the tax legislation, but I have stumbled across one bond that smells fishy, very fishy indeed.'

'Go on.'

'It's this one.'

She put a bond prospectus down on to the desk in front of me. I picked it up and looked at it. Written on the cover in bold was 'Tremont Capital NV secured 8 per cent notes maturing 15 June 2001', and underneath in slightly smaller type 'guaranteed by Honshu Bank Ltd'. Beneath that was 'Lead Manager Bloomfield Weiss'.

'Well, what's wrong with this?' I asked.

'It's difficult to say exactly,' Debbie began. Then she sat up bolt upright in her chair. 'Christ! Did you see that?'

'What?' I said.

'On Reuters.' She read from the screen in front of her,' "Gypsum Company of America announces agreed offer from DGB…" Who the hell are DGB?'

'It's a German cement company, I think,' I said. 'We were right. There was something going on.'

The lines began to flash. I picked one up. It was David Barratt.

'Did you see DGB has bid for Gypsum?'

'Yes,' I said. 'Reuters suggests it's a friendly. Any reason why the bid shouldn't go through?'

'I don't think so,' said David. 'DGB doesn't have any US operations, so there won't be any anti-trust problems.'

'What's DGB's credit like?' I asked. If DGB was a strong credit, then the risk on our Gypsum bonds would be much less. The bond price would soar.

'Double A minus,' said David. He was like a computer when it came to the details of even the most obscure companies. 'Hold on, my trader is shouting something.' I could hear a fair amount of noise in the background. 'He says DGB is paying for the acquisition with cash and a share placing. That shouldn't harm the credit.'

'Where are the bonds trading?' I asked.

'Hang on.' He was back a moment later. 'He's bidding 95. Do you want to sell your two million?'

I thought for a moment. Ninety-five was too low. 'No thanks. They should be higher than that. Let me know if they move up.'

I put the phone down and shouted across to Debbie. 'What are you hearing?'

'Everyone is looking for these Gypsums. Bloomfield Weiss are bidding 97. I have got Claire on the line here. She is bidding 97½.

Shall I sell?'

I tapped the buttons of my calculator. By my reckoning we should be able to get 98¼. 'No hold on.'

'Let's just take the profit,' said Debbie.

'No, these things are worth three-quarters of a point more.'

'You are so greedy,' she said.

We spoke to three more salesmen, but none was bidding more than 97½. I was close to giving up when Karen shouted, 'Debbie, Leipziger Bank on four!'

'Who the hell are Leipziger Bank?' said Debbie. 'Tell them to go away, we're busy.'

Leipziger Bank? Now why would an obscure German bank want to talk to us, I wondered. 'I'll talk to them, Karen,' I shouted.

'Good-morning. This is Gunter here. How is it with you? It is a fine day here.'

'Good-morning,' I said. Come on, Gunter, get to the point.

After a little more polite conversation Gunter asked me if I had heard of an issue for the Gypsum Company of America.

'As a matter of fact, I happen to own two and a half million dollars of that issue.'

'Ah good. My trader is bidding 95. This is a very good bid, I believe.'

An appalling bid – at least two points below the market! 'Listen very closely, Gunter,' I said. 'My colleague is on the other line and is just about to sell these bonds to an old friend of ours at 99. If you bid 99½ right now, then I will sell them to you. Otherwise you will never see these bonds again.'

'Can I have an hour to work on that?' asked Gunter, shaken.

'You can have fifteen seconds to work on it.'

Silence. I looked at my watch. After thirteen seconds, Gunter was back on the line. 'OK, OK we will buy two and a half million Gypsum of America 9 per cents of 1995 at 99½.''

'Done,' I said.

'Thank you,' said Gunter. 'I look forward to doing a lot more business with you in the future.'

Fat chance, I thought, as I put down the phone.

'How on earth did you get him to pay 99½? asked Debbie.

'The only reason I could think that an outfit like Leipziger Bank should be buying these bonds is if they are DGB's local bank. If DGB are desperate to buy the Gypsum bonds, then they can afford to pay up for them. Can you believe that guy only bid 95 when he was prepared to pay 99½? Remind me not to deal with them again.'

'So how much are we up?' asked Debbie.

'We bought those two million at 82 and sold them for a 17i point profit,' I said. 'That's three hundred and fifty thousand dollars we've made! Not bad. And we got rid of our original half-million position. I wonder where our shares will be when New York comes in?'

Debbie looked thoughtful.

'What's up?' I said.

'Someone must have known about the takeover,' she said.

'Of course they did,' I said. 'They always do. That's the way the world works.'

'Maybe we shouldn't have bought those shares,' she said.

'Why shouldn't we? We had no knowledge there was going to be a takeover. We just guessed. We haven't broken any rules.'

'Somebody knew. Why else would the stock shoot up?'

'Look,' I said, 'You are the compliance officer. You know the rules. Have we broken any of them?'

Debbie thought a little. 'Technically, I suppose not,' she said.

'Good. Now pass me some tickets so I can log this trade.'

The next day, Wednesday, was an infuriating one. I was supposed to produce a report for one of our clients, and I was having severe trouble reconciling the performance figures produced by administration with what I knew we had achieved. I spent two hours in the afternoon staring at the same columns of numbers before I spotted the mistake, which had been staring back at me the whole time. Cursing myself for my stupidity, I went through to administration to point out the error. There was still many hours' work involved to straighten it out, and what with constant interruptions from salesmen, I would be lucky to get out before midnight. Debbie offered to help me, and I accepted with relief. Even so, it was not until eight o'clock that we finished. I put the report on Karen's desk, ready to be sent out first thing the next morning. Debbie and I looked at each other. 'Drink?' she said.