Alejo’s fifty was done at a price of sixty-eight and a half.
‘I thought you said the price would go up,’ I said to Jamie.
‘Don’t worry,’ he said. ‘Give it time. This is good. We’ve got our people in at a good price.’
I looked round the room. It was buzzing. People were buzzing, phones were buzzing, bonds were buzzing. It was intoxicating. The Dekker machine was in action and it seemed unstoppable.
But it turned out Dekker’s wasn’t the only machine in action that day.
‘I’m sixty-eight offered in the discos!’
It was Pedro. We turned to look at him. He was talking rapidly to Ricardo, who was frowning.
‘What’s going on?’ Dave shouted.
‘I don’t know!’ said Pedro, running his hands over his close-cropped hair. ‘I’m getting hit with bonds from all directions!’ He grabbed a phone. I watched as he hunched over it, and slammed it down.
‘Hey, Pedro! Where do you offer ten discos?’
Pedro rubbed his chin. ‘Sixty-seven and a half!’
The price tumbled. Pedro kept lowering his price, and he kept being sold bonds. We could see the green figures on the screen in front of us winking. Sixty-seven and a half. Sixty-seven. Sixty-six and a half.
‘Jesus!’ whistled Jamie. ‘We’ve got to own five hundred million by now.’
Five hundred million! And a two-point loss. I did the sums. ‘That’s ten million we’re down.’
Jamie nodded grimly.
Ricardo strolled over. He leaned down next to Jamie. ‘I don’t know what’s going on here. Kent has spoken to the Shiloh Fund, and they’re definitely cleaned out. Someone is selling a lot of these bonds. We need to find out who.’
‘I’ll see what I can do,’ said Jamie. He thought a moment and then called Frewer at Colonial and Imperial.
Chris Frewer was angry. ‘What’s going on? I wanted to sell some bonds this morning, and somehow I seem to have ended up with twenty million more than I started with, and the price is off two points. I hope I haven’t made a mistake here.’
‘Relax. Ricardo’s on to it, I promise. But look, do me a favour.’
‘Fat chance,’ said Frewer. ‘I want out of Argentina.’
‘You will be out. In a couple of days. I just need to work out what’s going on.’
‘You should bloody well know what’s going on!’
‘Chris. Trust me. Ring Bloomfield Weiss, and ask them what they think of the discos. Say you’re considering buying some.’
There was silence as Frewer thought about it. Jamie clung tight to the receiver and winced. ‘OK, OK,’ Frewer said, finally. ‘I’ll be back.’
‘I hope this one doesn’t blow up in our faces,’ said Jamie. He sat still, staring at the phone, not touching it. Nothing was more important than Frewer’s call. We waited for five minutes. It seemed like an hour. Then the direct line to Imperial and Colonial flashed and Jamie pounced. ‘Yes?’
‘Bloomfield Weiss hate it. They told me they’ve got some bullshit computer model that shows that the discos yield half a per cent less than they seem to. The guy’s faxing it over now.’
‘You couldn’t fax me a copy when you get it, could you?’ Jamie asked.
‘All right,’ said Frewer. ‘But what am I going to do with my discos?’
Jamie winked at me. ‘Well, they’re two points cheaper. Why not buy some more? Off Bloomfield Weiss.’
‘Are you sure about this?’ Frewer asked.
‘Course I’m sure. As I said, Ricardo’s on the case.’
So Frewer trotted off to buy twenty million more bonds from Bloomfield Weiss.
But first he sent through his fax. I was waiting by the machine, and took it over to Jamie. It was written by a Ph.D. and used all kinds of arcane mathematical language to prove that the method that everyone was using to calculate the yield on Argentine Discounts was all wrong. I didn’t understand a Greek letter of it. But I did understand that Bloomfield Weiss were trying to screw us.
‘This is all crap!’ Jamie said.
‘Do you understand it?’
‘Of course not. That’s the whole point. Let’s show it to Ricardo,’ Jamie said.
We crossed the square to Ricardo’s desk. He was on the phone, but when he saw the look on Jamie’s face, and the way he was holding the fax, he put it down. Pedro, too, hung up. Pedro’s short dark hair was plastered to his forehead. He was not having a good day.
‘What have you got?’ Ricardo asked.
Jamie handed him the fax.
‘Carajo!’ Ricardo muttered, and handed it on to Pedro. Then to me. ‘Can you give a copy of this to Charlotte? We need one of her people to come up with a response. The quants out there will want some numbers to get into.’
I nodded, but hovered. I wanted to hear what Ricardo was going to do. He let me stay.
‘OK, so Bloomfield Weiss are doing their best to screw us,’ he went on. ‘They’re flooding the market with bonds, and bad-mouthing the deal to try to get their customers to sell. They want to hurt us. And they have ten times our capital to do it with. Where are the discos trading now, Pedro?’
‘Sixty-six and a half to sixty-seven.’
‘And we’ve got what, eight hundred and fifty million?’
‘Eight hundred and fifty-six.’
This was turning into a gigantic struggle. We were buying hundreds of millions of dollars of bonds and Bloomfield Weiss were selling even more. The price was going down. That meant there were more sellers than buyers. It meant Bloomfield Weiss were winning.
And Bloomfield Weiss had more fire-power than us. With ten times our capital they could afford to carry a much bigger position than we could. We couldn’t afford to buy discos for ever. Bloomfield Weiss could afford to sell them.
Now, for the first time, Ricardo looked worried. He was frowning deeply, and I noticed his wedding ring flying from finger to finger of his left hand. He called together some of the other traders, and told them what was happening. ‘We can’t let them win this one,’ he said. ‘It’s much too public. The world can see what’s going on here. That’s why Bloomfield Weiss sent out this note. They want everyone to know that this is a struggle between us and them. Those bonds have to go up.’
‘Can’t we just keep buying?’ asked Dave.
Ricardo shook his head. ‘We’re way over our limits already. We can hide some of it in Dekker Trust, but we can’t carry a bigger position for any length of time. If we buy more, we have to know it will work.’
Jamie had explained to me that the regulators placed limits on the maximum size of any bond position. Dekker had developed all sorts of ways round these limits, but apparently Ricardo was only willing to go so far.
‘This doesn’t make sense,’ said Dave. ‘It’s a four-billion-dollar issue, and we know three billion is locked away with accounts who will never sell. That leaves a billion, and we’ve got most of that. So where are Bloomfield Weiss getting their bonds?’
‘They have to be selling short,’ said Pedro. ‘I would have known if they’d been sitting on that many bonds.’
‘So they’re borrowing them,’ said Ricardo. ‘From whom, I wonder.’
There was silence. Bloomfield Weiss had flooded the market with bonds, bonds they didn’t own. Pedro thought they must have done this by selling short, which meant borrowing bonds from a friendly holder to sell. Of course, when this friendly holder wanted his bonds back, Bloomfield Weiss would have to buy them out of the market. Bloomfield Weiss’s bet was that by then the price would have fallen so that they could make a large profit. And by that time, they might have forced Dekker out of the market, too.
It wasn’t just fifteen to twenty million dollars at stake here, although that was important enough. It was the future of Dekker Ward in Latin America.