“The largess,” she said, “is meant to keep you motivated.”
And she knew what she was doing. Peter often stayed behind at the end of Stuart’s shift, and sometimes well into the night—seventy hours many weeks, displaying stamina that qualified as extraordinary, even by Stenman Partners’ warped work standards. He even managed to endear himself to a couple of the late traders—enough to sit as a piece of furniture and observe. He learned that the trades done on behalf of Stenman marched around the world as the night progressed. Tokyo, Australia, Malaysia, Hong Kong, Singapore, Korea, Thailand, in the afternoon and early evening. Later, the activity migrated to Eastern Europe, Norway, Finland, Sweden, Switzerland, overlapping with France, Germany, Italy, Spain, and the UK. In each of these and dozens of other markets, Stenman had local relationships—brokers, bankers, politicians, company CEOs, and military leaders.
In addition to trading and back-office professionals, Stenman employed fourteen analysts whose job it was to maintain a steady flow of information. These researchers occupied half of the second floor and did fundamental balance-sheet and income-statement analysis, as well as top-down economics—estimating country and regional GDP along with assessing sovereign risk. Their most important job, though, was to dig for insights like good investigative reporters. They sought tips, uncovered significant sexual indiscretions, identified greedy executives and politicians, and did whatever they could to provide Stenman and her traders an informational edge. These resolute people, Peter discovered, also displayed no more social skills than their trading counterparts—at least to those lacking the information they craved.
It took longer than Peter had hoped, but around the end of his fifth week, he managed to put together a thorough analysis of the commissions-paid project assigned him by Howard Muller.
Throughout, Muller never warmed to Peter, but that didn’t matter— the CIO treated everybody like hammered shit. That Morgan Stenman had received a positive report on Peter was much more important to his professional prospects.
From his assigned project, Peter confirmed that the commissions paid were even more than Stuart had estimated. In fact, they were mind-boggling. Adding in Muller’s trades, the total payout amounted to nearly two hundred million a year. No wonder brokers brown-nosed Stenman on a constant basis.
As Peter wrapped up his work, he had one unexplained item. Nobody seemed willing to discuss why Stenman Partners paid a number of small regional-brokers—many of whom Peter had never heard of—an inordinate share of commission dollars. Of particular interest, because ofrecent events, was the firm of Jackson Securities. In the last six months, Stenman Partners had paid them eight million dollars, but had ceased doing business with this third-tier firm after the explosion at their La Jolla branch. As he did with all outstanding curiosities, Peter solicited Stuart for an explanation.
“You in a rush, Stu?” he asked, having finished reconciling the last of Stuart’s trades—a job he had begun a week earlier as part of his training. “I’ve got some questions regarding that project Fat-Head gave me.”
Stuart surveyed the trading room. Few people remained. Worldwide markets had closed and, since it was Friday, would not reopen until Sunday afternoon on the West Coast. “No problem, Petey,” he said. “Conference Room. Put our feet up and shoot the shit.”
Stuart led the way. Looking at the back of Stuart’s blue tee-shirt, Peter felt gratitude and admiration. After the close of business, Stuart always took time to review his trades. As a result, the confusing language began to make sense, as did the various financial instruments routinely used by Morgan’s employees. Stuart even allowed Peter to participate in some of his transactions—like working orders on the NYSE whenever Stuart traded a listed stock.
Reaching the conference room, Stuart began by saying, “You’re catching on fast, Asswipe.” Both men grinned. For several weeks, nobody, including Muller, had used that name when referring to Peter.
“How come Muller still calls you Numbnuts?” Peter asked.
“Term of endearment. Not many of us get permanent nicknames.”
“Lucky you.”
“I never told anyone this . . .” Stuart shook his head. “Forget it.”
“What? You can’t start a confession, then just drop it.”
“Yes, I can. What’s your question?”
Picking up a remote lying on the table, Stuart aimed and pressed. The curtains, bunched in the corners of the glass-walls, slid shut, granting them complete privacy. With a second shot, Stuart adjusted the lights, making the room dusk-dark. Reaching into his pant pocket, Stuart removed a vial. He tapped white powder onto the glass sheet protecting the oak table. He then removed a freshly-minted hundred-dollar bill from his wallet. He used the edge of the bill to line up the powder. Rolling the bill, he bent over, inserted the tube into a nostril, and sniffed. The first line disappeared. Without looking up, and shifting to the other nostril, he inhaled the second of four lines.
Sighing with satisfaction, he ran the back of his index finger along his upper lip and blinked at Peter. “A Friday ritual. Your turn, dude.”
Peter showed no reaction. He’d seen coke ingested a hundred times at school and parties, and in the back of buses on the way to football games. He shrugged. “Not my poison,” he said.
“You’ll change your mind once you start carrying some hundred-million-dollar positions . . . whatever.”
Stuart did a repeat and consumed the final two lines. He leaned back with his feet propped on the table, his breathing seeming to keep time to a hip-hop or rap beat, every sense enjoying the rapture. With both hands, he raked his fingertips across his scalp. Under the lids, Peter saw his friend’s eyes dart in violent circles.
When the spell broke, Stuart spoke again. “Your project—what is it you want to know?”
“How come our fund did so much business with a firm as small as Jackson Securities? What do they offer that’s worth millions of dollars a year in commission?”
“Drop this one, Peter.” Stuart’s body tensed as he shook his head.
“Drop it? Come on, Stu. Don’t treat me like an outsider. What’s the story?”
Stuart sniffed, then brushed the back of his hand across his nose. He said, “Don’t quote me.”
“If you say so.”
“Several reasons. First, they’re a local firm—we get community goodwill.” Stuart reproduced the vial from his pocket.
“That’s thin,” Peter said. “There’s lots of local firms we don’t do squat with. Why them?”
“I didn’t say that was the main reason. Next, more importantly, they do tons of small cap deals—many of them micro-cap, below fifty million. They give us whatever allocation we ask for.”
“Their deals tend to go up in price in the aftermarket?”
“Temporarily. You heard of churn and burn?”
Peter wagged his head.
“It’s also called pump and dump.”
“That doesn’t help me,” Peter said.
“It’s simple. Jackson Securities brings a company public—they did a ton of Internet crap before the sector went baballoo. You know, companies with no earnings, no revenues, no business plan, but with
“That’s the
“Yup. These yahoos jump into the stock and it opens at twenty-five bucks a share when it starts trading. We sell our shares to all these shit-for-brains piling in at inflated prices.”
The light went on in Peter’s head. “We dump our stock at a big fat profit. Later, when the stock drops like a rock, they get burned,” Peter said. “Ergo: churn and burn, pump and dump. Very descriptive phrases.”
“Exactly. We clear fifteen million in low risk profit. We do that with them twenty, thirty times a year.”
“For a total profit of some three hundred million dollars over twelve months.”
“That’s it, genius. We also did business with them for another reason.”
Peter leaned forward, cupping his chin.
“They’re owned by a Swiss bank. They have overseas clients who like to lose money.”
“That makes no sense,” Peter said.
“Through their Swiss parent, Jackson brokers for phantom offshore interests.”
