Dearborne looked thoughtful. If he was sure the market was going to fall, it would be cheaper to let Charlie, right now, sell a fistful of short positions that reflected that belief. Dearborne’s face turned sulky as a new factor entered his thoughts. “Vega,” he said, remembering the jargon for once.
“Vega’s the fly in the ointment, all right,” Charlie said. “When the market starts to slide, volatility’s going to go up. Which will mean an increased chance for profit, but it also means the administrators at the various exchanges are going to get nervous and start calling on us to meet our margins.” Margin calls were the bane of the trader’s life, particularly if he traded on the Mercantile Exchange in Chicago, which had a system called SPAN that continually calculated margins and could call for margins right in the middle of the trading day, meaning that the trader would have to find money for the margin call right then, instead of having overnight to make the arrangements.
“How many short futures are we talking about?”
“Well, guv…” Charlie took a deep, theatrical breath. “For the plan that Carpe Diem and I suspect will maximize our profit, we’ll need a fund of between forty and fifty million.” Involuntarily, and without Charlie’s theatricality, Dearborne echoed Charlie’s intake of breath. “Jesus God,” he said.
Charlie threw up his hands. “Understand that there are ways of making this less risky,” he said. “Every time the market moves, I’m going to be hedging our position. Every minute, practically. And in a volatile market, I’m going to be able to make a lot of short trades that should keep our cash flow positive.”
“Jesus God,” Dearborne said again. He gave a glance at his bowling trophies, as if for reassurance.
“What if the Fed acts?” he said. “What if the Federal Reserve decides to lower interest rates?”
“I don’t think it’ll happen,” Charlie said. “The chairman’s too bloody conservative. But just in case, I’ll hedge by shorting Eurodollar puts. If the Fed cuts interest rates, then Eurodollars will rise and I’ll make a packet when the puts fall in price.”
“Mmm,” Dearborne said as he steepled his fingertips and sought communion with his trophies.
“Vince,” Charlie said as he leaned forward and sought Dearborne’s uneasy eyes with his own eyes of brilliant blue. “I’ve been a good lad these two years—I’ve been risk-averse—haven’t yet steered you wrong.”
“True,” Dearborne admitted. But the acquisitive glimmer in his eyes was dull, uncertain.
“You know what Carpe Diem means in Latin, Vince?” Charlie asked. “Seize the Day. This day must be seized, and soon. Because if we seize it now, I can give you profits that would make those twenty-four millions look like your kids’ milk money.”
Dearborne bit his lip, fiddled with something on his desk. Looked anywhere but at Charlie. Move, you bastard! Charlie thought. You think I spent all those hours playing golf just for the fun of it?
Slowly, a calculating gleam returned to Dearborne’s gaze.
“Well,” he said, “I’ll make some calls.”
Before Charlie even left Dearborne’s floor at the Tennessee Planters & Trust, he used his cellphone to call Deborah, his assistant at Tennessee Planters Securities, and had her begin to place his trades. Then, from the old Otis elevator as it creaked its way to the ground floor, he called Megan Clifton, who ran the “back room”—the settlements office—at TPS.
“Megan Clifton.” Her low, cool Southern voice sent a little tremor up Charlie’s spine.
“It’s on, love,” Charlie said.
The low, cool voice dissolved at once into high-pitched excitement. “Oh, yeah! Whoa, Charlie, you’re a genius’.”
“Better get ready for a long, busy day,” Charlie said. “But for later, I suggest that we call the caterers now and have them deliver dinner for two to my place. There’s some Bollinger in the fridge, and I can warm up the spa.”
“I will make the call as you suggest, sir.” Megan’s cool professional voice was back. The elevator moved uneasily back and forth as it adjusted itself to the ground floor, overshooting a little bit each time. The doors opened and revealed that the elevator was at least a half-inch too high.
“I’ll see you in a few minutes,” Charlie said, and snapped the phone shut as he stepped into the lobby. He didn’t work in the same building as the bank. His own office, and that of TPS, was in a different building, a modern steel-and-glass office building two blocks away. The Glass-Steagal Act prevented banks from dealing in securities, and Tennessee Planters & Trust was nothing if not law-abiding. Tennessee Planters Securities—originally Bendrell Traders—was a separate firm which the bank just happened to control, having picked it up for the cost of its office furniture after Bendrell went smash in the wake of Black Friday in 1987. The bank also just happened to provide TPS with most of its operating capital, including that which TPS used for proprietary trading and for meeting its margins. The separation between the bank and TPS was more than just physical. There was a difference in culture as well, between the cautious, conservative bankers in their mahogany offices, and the traders with their glass-walled cubicles and blinking computer monitors. The bankers were wedded to prudence, to circumspect accumulation of capital, to safety. The traders were after the money, and knew that big profits occasionally required big risks. The bankers dealt with long-term loans, with gilt-edged stocks, with thirty-or twenty-year mortgages. The traders’ deals sometimes were constructed so as to last for mere hours. Successful bankers drove Lincoln Towne Cars and belonged to the country club. Successful traders drove Ferraris and spent every night at the disco.
Successful traders also made a lot more money than successful bankers. Charlie Johns had done his best to bridge the gap between the two cultures. He knew that traders could offend their conservative bosses with their flash and their style—not to mention their profits—and so he took care to present a facade that was more in harmony with Tennessee Planters & Trust than with TPS. He bought his suits from the same tailor that Dearborne used, though his natural style ran more toward Armani. His Mercedes E320 was a calculated degree less ostentatious than Dearborne’s S500. Ferraris and Lamborghinis were too flash, even if he didn’t drive them to work. He joined Dearborne’s country club, and he lost regularly to Dearborne at golf. He had lunch with Dearborne once a week, and consulted Dearborne on trades that he had the authority to make on his own, just to make Dearborne feel his opinion mattered.
And he made Dearborne money. Which was probably better than anything at cementing their relationship.
And, if Carpe Diem and Charlie’s own instincts were anything to go by, he was about to make Tennessee Planters enough money to gold-plate their office building.
By the time Charlie swept into the TPS offices, he had called his three largest clients and convinced them it was time to commit to some major action.
He grinned as he boomed through the big glass doors and gave a jaunty wave to the salesmen and traders sitting behind their desks. Once he was at his desk, he shorted nearly forty million dollars of S&P contracts. As a hedge, he shorted ten million dollars’ worth of Eurodollar puts, just as he’d promised Dearborne he would.
It was a great way to make a living.
FOUR
This morning at eight o’clock, another pretty severe shock of an earthquake was felt. Those on the 16th ult. and since done much damage on the Mississippi river, from the mouth of the Ohio to Little Prairie particularly. Many boats have been lost, and much property sunk. The banks of the river, in many places, sunk hundreds of acres together, leaving the tops of the trees to be seen above the water. The earth opened in many places from one to three feet wide, through whose fissures stone coal was thrown up in pieces as large as a man’s hand. The earth rocked—trees lashed their tops together. The whole seemed in convulsions, throwing up sand bars here, there sinking others, trees jumping from the bed of the river, roots uppermost, forming a most serious impediment to navigation, where before there was no obstruction—boats rocked like cradles—men, women and children confused, running to and fro and hallooing for safety—those on land pleading to get into the boats—those in boats willing almost to be on land. This damning and distressing scene continued for several days, particularly at and above Flour island. The long reach now, though formerly the best part of the river is said to be the worst being filled with innumerable planters and sawyers which have been thrown up from the bed by the extraordinary convulsions of the river. Little Prairie, and the country about it, suffered much—new lakes having been formed, and the bed of old ones raised to the elevation of the surface of the adjacent country. All accounts of those who have descended the river since the shocks give the most alarming and terrific picture of the desolating and horrible scene.