I knew Papa’s angle. He smelled trouble in my marriage, and just a minute or two with Mallory’s best friend could surely change the course of history. This was a man who would lock his lotto ticket away in the safe deposit box before they announced the winning numbers. He was that optimistic.
Andrea smiled, unable to refuse Italian hospitality, and pulled up a chair. Papa poured a generous glass of chianti for her, and of course he made her a plate of mostaccioli and meatballs. He had no way of knowing that, as a general rule, Mallory’s friends didn’t eat.
“Thank you so much,” she said. “I’m actually starved.”
This shocked me-a Saxton Silvers wife-to-be feasting on pasta and meatballs. She even asked for extra cheese. Since moving to New York in the winter, Andrea had quickly earned Mallory’s trust, but admittedly, I didn’t know her well. All I could say for certain was the obvious: She was pretty, like most of Mallory’s friends. I had a hunch, however, more substance was there.
“Did you see my grandson on television today?” Papa asked her.
“Yes,” she said, averting her eyes. She seemed embarrassed for me. “I did.”
“People are saying some really mean things about Saxton Silvers, don’t you think?”
“Papa, let’s not go there.”
Andrea said, “My fiancé says it’s the short sellers.”
“Short?” said Papa. “You mean paisans?”
I chuckled. “No, not short in stature, Papa. They’re going short on the stock.”
“What does that mean?” asked Nana.
“You don’t really want to know,” I said.
She grumbled in Italian. Sadly, I’d forgotten most of her dialect since leaving home for college, but she said something to the effect that I was treating my grandparents like a couple of dummies.
“All right,” I said, “here’s Michael Cantella’s crash course in Short Selling 101. Most people go long on stock. That means you buy it, you wait for it to go up in value, and you sell it at a profit. Short selling is the opposite.”
“You sell it at a loss?” asked Nana, confused.
“No. Instead of ‘buy low and sell high,’ you sell high and then buy low.”
“Explain this to me,” said Papa, putting down his fork. “How do you sell something before you own it?”
“Good question,” I said. “You borrow it. And you sell it immediately at the high price with the understanding that at some point in the future you have to give back an equal number of shares to the broker who loaned them to you. If all goes as planned, the stock price goes down, the short seller buys at the low price, and he gives back those cheap shares to his lender. He pockets the difference in price as profit.”
“What happens if the price doesn’t go down?”
“The short gets screwed. He has to cover the price difference in order to return the shares to his lender.”
Papa shook his head, wagging a marinara-soaked breadstick like a professorial finger. “I don’t believe in all this borrowing. You make what you earn, and you spend what you make. Not a penny more.”
“And then there are the naked short sellers,” I said, “who don’t even borrow the stock before they sell it-but we’ll save that lesson for Short Selling 201. Suffice it to say that a lot of smart folks think it was naked shorts that brought down Krispy Kreme.”
“That is a crime,” said Papa.
“Actually, there’s nothing illegal about it, unless you manipulate things by flooding the market with sell orders. Even then, I just read in the Journal that the SEC brought a grand total of zero enforcement actions in response to the last five thousand complaints it got about short sellers, so you do the math on getting caught.”
Papa said, “That’s all just a fancy way of saying a short seller is like some guy in Atlantic City betting that the price of Saxton Silvers stock will go down.”
“That’s pretty much it,” I said. “The farther it goes down, the more money the short seller makes. Which means they laugh all the way to the bank if they can get guys like Chuck Bell to blabber nasty rumors on television.”
Andrea said, “But the question is, who are ‘they’?”
“I wish I knew,” I said.
“You must have a guess,” said Andrea.
“I don’t like to guess.”
“Oh, come on. Who do you think it is?”
“I really don’t know.”
“You must have thought about it,” said Andrea. “Who would be able to borrow enough shares of Saxton Silvers stock to make it worthwhile to spread these rumors? And who would be that devious?”
Andrea’s fixation started to feel a little awkward. “I honestly don’t know,” I told her.
She finished her wine and smiled politely at Papa as she pushed away from the table. “It’s been lovely visiting with you. Thank you so much for the delicious food and wine. But I really do need a moment in private with Michael. It’s kind of personal.”
I looked at Papa, who of course said, “You do what you gotta do.”
Andrea said good night, I excused myself, and the two of us went to the bar, where bottles of Campari and Amaretto Disaronno had prime shelf space on the mirrored backsplash behind a long mahogany bar. We found a couple of chrome stools at the end, away from the crowd. Just then I got another rumor alert from one of my analysts; this one was serious. I asked the bartender to tune the flat screen to FNN while Andrea and I talked. The audio was on mute, but Chuck Bell somehow still managed to be obnoxious even in closed captioning.
Andrea said, “Let me first say that Mallory didn’t ask me to come here.”
“Then why did you come?”
“I’m not the type to stick my nose where it doesn’t belong, but I hate to see a marriage between two good people not work out.”
I paused to get a read on her. I’d met many of Mallory’s friends, and something about this one didn’t add up. It wasn’t just the way she took an interest in short sellers. It was the little things-like her pigging out on pasta, or her monochrome dye job, which completely lacked the array of highlights that cost Mallory the monthly equivalent of a subprime mortgage payment after a rate adjustment. I was getting the sense that Andrea didn’t belong in the club-and that she didn’t really want to belong.
“I appreciate your saying that,” I said.
My cell rang again. This time it was a red alert: TURN ON FNN!!!
My gaze shifted to the television. I started reading the closed captioning, the several-second delay from the audio giving me some time to catch up.
“More devastating news,” said Bell. “My source tells me that, earlier today, the credit department of a major trader held up a trade with Saxton Silvers because of concerns about the firm’s financial health. My source also tells me that perhaps as soon as tomorrow Saxton Silvers could be on a no-trade status that will continue until the firm solves its liquidity problems. All I can say, folks, is that compared to tomorrow, today could look like a good day for Saxton Silvers and its shareholders.”
“Mallory is very serious about a divorce,” said Andrea.
I heard her, but I was still numb from Bell’s words.
“She already has a lawyer,” said Andrea.
That got my attention, but my phone rang. It was Eric Volke. I apologized to Andrea and stepped away from the bar to take the call.
“We’re sunk,” said Eric.
“I heard. Wasn’t Bell supposed to stop spreading rumors after you let him interview me?”
“He says they’re not rumors. He stands by his source.”
“Maybe Stuart should go back on the air.”
“It doesn’t matter what the CEO or anyone else says at this point. Once a statement like that is out there-that Saxton Silvers can’t follow through on a trade-the firm is dead. Chuck Bell killed us.”
“Bell and his source,” I said.
“Fucking shorts,” said Eric.
“What’s going to happen?”
“I’m meeting with Treasury and the Fed tonight. The vibe I’m getting is that they’re going to give us until Sunday to find a merger partner.”