over Time', by George Feuchtwanger Ph.D. That sounds a bundle of laughs.' She opened it up to a page covered with long equations each interspersed with tortuous sentences. 'OK, so what does that one mean?' she asked pointing to a particularly long string of Greek letters and Arabic numerals.
'It means 'Good morning, Paul, please can I get you a cup of coffee',' I said.
'And this one means, 'Go and get your own coffee, you lazy bastard,'' she said, pointing to almost as intricate an equation just below it. But she tossed the research piece on to the desk, and turned towards the coffee machine.
I liked Debbie. We had worked together for only two months, but in that time we had developed a good understanding. She thought I was too dedicated to my work; I thought she was not dedicated enough to hers. But she was fun. She put the minor ups and downs of the bond market into perspective. You never got a chance to take yourself too seriously with her around.
She was in her mid-twenties, small, with light brown hair, which she wore tied up in a pony-tail. She was probably a little overweight, although this gave her a softness which was attractive. A broad smile was never far from her lips, and her bright brown eyes never kept still, dancing from one object to the next.
She was a lawyer by training. After a couple of years of articles for a middling firm of solicitors, she had had enough of the law, and joined De Jong & Co. There she had not entirely escaped, since she spent her first couple of years in our 'back office' devoting much of her time to working on the legal structures of our funds, and on compliance with the stream of new regulations that were intended to make sure we didn't steal any of our clients' money. Eventually she had persuaded Hamilton to take her on as a junior trader. Despite giving the appearance of doing almost no work at all, she had been quick to learn.
She got on well with everyone in the firm. Even Jeff Richards warmed to her banter. Only Hamilton seemed to have equivocal feelings towards her. For him, there could be no excuse for a lack of commitment.
I looked at the research piece lying open on my desk. Debbie had happened to pick the exact point in the article where I had finally lost track of Dr Feuchtwanger's argument. I had wrestled with it for an hour and a half the previous night before giving up. Although the article had no direct relevance to what we were doing, I was eager to learn as much about the bond markets as I could. There is a limit to how much you can pick up about bond-trading from reading, but I wanted to reach that limit. However complicated or arcane the article, I would plough through it in my attempt to catch up with the combined knowledge of all those traders and fund managers out there.
Debbie soon returned, bearing two plastic cups of gritty black liquid. She handed me one and sat at her desk, the television-review section of the
One of our lines flashed. It was Cash.
'Boy, you guys at De Jong are getting real lucky,' he started. 'Yesterday I bring you the sweetest of trades. Today I get you out of a hole.'
'And what hole is that?' I asked, slightly worried. I didn't realise we were in a hole. I ran through our various holdings in my mind, trying to think of what Cash could mean.
'I've got a bid for your Gypsums,' Cash said, a note of triumph in his voice. 'I will bid 80 for all your bonds.'
'Hold on,' I said. At first I wasn't sure what he meant. Then, riffling through the papers on my desk, I dug out one of our client portfolios. There amongst a group of odd lot holdings was 'Gypsum Company of America 9% 1995'. The purchase date was three years before, and the purchase price was 96
Covering the mouthpiece with my hand, I leaned back, and shouted, 'Hey, Jeff!'
Jeff looked up from his computer, slightly annoyed at being disturbed in his analysis. 'Yes?' he replied.
'Do you know anything about half a million dollars of Gypsum of Americas? It looks like we bought them three years ago.'
Jeff frowned for a moment. 'Yes, I think I know what you mean. Not one of Hamilton's best positions. I think he bought them close to par. Then the company got into trouble, and they were last seen trading in the sixties.'
'I've got a bid here at 80,' I said.
'Then take it.'
I thought for a moment. If Cash was suddenly bidding 80 for a bond which had been trading at a price of 60, there must be something he knew that I didn't.
'Is there anything I should know about Gypsum?' I asked Cash.
'No, nothing I'm aware of. Hey, Hamilton was belly-aching at me all last year to come up with a good bid on this position. Well, I've finally got one. He'll be pleased when he hears.'
This was the old tactic that salesmen used on junior portfolio managers when their bosses were away. Tell the junior what the boss would do in a similar situation, and make him think there is more risk in not doing a particular trade than in doing it. I had fallen for this once or twice in my first couple of months. Hamilton had given me a lecture about how I should always trust my own judgement, and never believe what others might say his views were.
'Hmm,' I said. 'I am going to need some time to think about this. I'll call you back.'
'Well, get back to me by this evening. The bid may not be there tomorrow,' Cash said.
'OK. I'll talk to you this afternoon,' I said, and hung up.
I needed to find out more about the Gypsum Company of America. I left my desk, and went through a door at the back of the trading room to the library.
'Library' was probably too grand a name for the small, windowless room. There were hardly any books. The walls were stacked high with files, and there was a computer in the middle of the room, which was linked to a host of different information databases. Alison, the part-time librarian, was out, but I knew my way round most of the sources of information. Within twenty minutes I had extracted the prospectus for the Gypsum bond we held and reports from stockbrokers on the company. I also printed off the accounts for the last five years and press reports over the last year from the computer.
I carried the armfuls of paper back to my desk.
Debbie looked up from her
'I just want to see if there is anything going on with this company,' I said.
'Typical Paul,' Debbie said. 'Anyone else would just have read the latest Valueline, and then sold the bonds.'
I smiled. Debbie was probably right. But then, as she well knew, I wouldn't be satisfied until I had analysed the accounts going back five years, and read all the press and analytical comment on the company I could find.
I spent the next three hours going over the material, stopping only for quarter of an hour to get a sandwich from the small shop over the road.
As I read, I began to build up a picture of a company which had started off mediocre and over the last two years had become a basket case. It wasn't all the company's fault. Its main product, wallboard, had been in less demand as housing construction had declined sharply. However, the company had not been helped by the actions of its chairman and 30 per cent owner, Nat Morrison. He had borrowed heavily to build factories which were now operating at half capacity. He had also fired a succession of chief operating officers over 'policy' differences. As the company's earnings had turned to losses, the prices of Gypsum's shares and bonds had fallen sharply. The market thought there was a strong likelihood the company would not survive.
The company had received a number of overtures from large conglomerates, looking to buy its modern factories cheaply in preparation for the upturn in the economy which must eventually occur. But Nat Morrison would not give up his chairmanship. And no buyer in his right mind would want the company with Nat Morrison in charge. But, since his support was crucial for any takeover to succeed, none could occur, and the company's position continued to deteriorate.
Then, going through the press reports, I came across a headline dated about a month ago: 'Wallboard King dies in Helicopter Crash'. 'Wallboard King' was perhaps a flattering term for Nat Morrison, but it did mean him. He had died in his helicopter whilst visiting one of his factories. I read the reports of the next few days closely. Not surprisingly, the share price had risen 10 per cent on the news. He had apparently left his money in a trust. His son, a successful Chicago lawyer with absolutely no interest in wallboard, was the trustee together with a local bank president.
I stood up from my cluttered desk, and wandered over to the window. I stared at the silver line of the Thames
