Trader Jack -The Story of Jack Miner (The Story of Jack Miner Series) (35 page)

'I'm sorry, I don't remember,' I said, feigning a yawn. 'Let's eat. It's getting late.'

I called the waiter and let Martin order first. Leash had bet that he would order the cheapest item. That would show that he wasn't taking advantage of me. Leash won. Martin ordered chilli con carne. I promptly chose lobster and waited for the reaction, making another bet with myself.

'You doon't mind if I change mind, do you?'

'Of course not, lobster for two,' I told the waiter.

As so often happens in fancy restaurants, there was more sauce than food. We talked about everything, except the real reason for our meeting. I waited for the right moment, a time when the noise level in the restaurant had died down and shouted loudly: 'You're struggling aren't you, Martin?'

Taken completely by surprise, he looked distinctly uncomfortable. He turned his eyes downwards, deeply embarrassed. He knew from the silence in the restaurant that people had heard me. He knew that tables nearby, were waiting, listening.

'How much do you need Martin? How much?' I asked loudly again.

Martin said nothing. He was humiliated. I could see that he wanted to run out of the restaurant, tear himself away from these people. Get away from me. But he couldn't. He couldn't afford to antagonise me.

Martin, I want to help,' I said gloating in a booming voice. 'Your business is going down, isn't it?'

Martin sat there silently. Not a word. I wondered what was going through his head. Perhaps he remembered Bill's funeral; when he said that he and Peggy couldn't take care of me. Perhaps he was regretting that he had come to London. By now the restaurant was noisy again. There were more interesting things to gossip about.

'Let me pay,' offered Martin, when the waiter brought the hefty bill. He made a mock attempt to put down his credit card, but I got in first. That's what control was all about, Leash had said. Be generous and hard at the same time. Keep them wondering.

Martin, leading the way, pushed through the narrow gaps between the tables with his eyes down and rushed for the exit. Outside he adjusted his tie and did his best to stand tall.

'Thanks for lunch and your time, Jack,' he said shaking my hand.

'Just tell me how much you want, Martin,' I said.

He shook his head and smiled sadly, as he climbed on to a bus. This time it was me who felt uncomfortable and I regretted that I had played Leash's silly game. What was the point? I had the money, but it was Martin who kept his self-respect. I never heard from him again.

*   *   *

Some weeks later, I arrived in the office and found that Aram was in a panic. Oil and gas prices were gyrating and Aquarium was down. Aram, terrified of Leash, asked me for my opinion.

'We've made a lot of money in the past two years. It doesn't matter if we've lost some,' I said.

'But investors will withdraw their money,' he said nervously. 'Leash won't like that.'

'That's not for us to worry about. It's Cy's department,' I said. 'The question for us is whether we should get out of the market.'

I went to my desk and pulled out all the statistics and charts. There were some unusual patterns. As soon as prices fell by a few percentage points, they bounced back swiftly. My stats backed the market gossip. There were some big buyers out there who kept entering the market as soon as prices dropped.

'I think we should hold on, Aram. It's probably just a short term setback. The bull market seems to be intact.'

'Should we follow the Zulu strategy and buy some more?'

'We don't have enough money.'

'We can borrow,' said Aram.

'We've already borrowed $400 million, Aram.'

'The rules of our prospectus allow us to borrow as much as investor's capital in the fund. Investor funds under management are $800 million. So we can increase our loans to $800 million.'

'And have $1.6 billion in the market?'

'Not all of it. But it gives us plenty of leeway, if the market goes our way.'

I knew that such a move would be extremely risky, but Aram assured me that many hedge funds were doing it. Making fortunes out of leverage.

'The trick is to lever performance and fees with loans,' he said.

I wasn't impressed, but to make sure, went to my desk and did a calculation on a simple, but telling example. No point in going into details, but after paying interest on the borrowings and hefty hedge fund fees, investors only do well if the hedge fund manager makes exceptional profits in the markets. If the hedge fund manager loses, the leverage goes into reverse with a vengeance. Investors can easily lose a quarter or half of the money invested, sometimes even more.

Aram's plan was even more risky that! He intended to deposit a quarter of the $1.6 billion as margin to buy oil and gas futures and options. The remaining money would be placed in oil, gas and mining shares and high yield junk bonds and the money market to earn dividends and interest. Generally our margin was about 10 per cent of the value of oil and gas futures. Some $400 million placed on margin for futures and in options, would enable us to control oil and gas worth around $4 billion. A price rise of only 10 per cent would make us $400 million and push the value of our fund from $800 million to $1.2 billion. If prices were to fall, however, Aquarium could lose half its capital and if they fell further, we could be wiped out. That was far too dangerous for me.

'I don't think Leash will accept your proposal,' I said tactfully, sure that our boss wouldn't accept that extent of risk.

'Don't worry Jack, I've got all sorts of trading tactics to protect us from losses. It means that we won't get as much profit, but it will be a lot safer.'

Aram then explained several complex futures and options trades with weird and wonderful names such as 'butterflies and wingspreads', 'straddles and strangles', 'caps and collars' and Delta, Gamma, Theta and Vega. I tried my best to follow him as he wrote down all the formulae, but I'm afraid it was Greek to me. I had always thought that Krishna and Tong were the mathematicians, but Aram was pretty good too. All this mathematical quantitative derivatives trading in the energy market was impressive stuff. It seemed that Aram had closed all the gaps.

'That's not all,' said Aram, noticing that I had a glazed expression. 'I know who's buying.'

'I heard that there are four to five hedge funds,' I said.

'Yes, some hedge funds have been big buyers, but they're small fry compared to the ones I know.'

'Who are they?'

'I'm sworn to secrecy. It's confidential. All I can tell you is that they are operating through Swiss banks. They're worth multi billions.'

'Aram if you're so certain, why are you nervous?' I asked.

'It's been a bad couple of days. That's when your nerves are tested,' Aram said. 'I'm worried because I have to explain all this to Leash. He's a difficult guy.'

Aram was very secretive, but after working with him for a long time, I now respected and trusted him. We didn't joke around or go out for a drink. But I didn't mind. He was smart and worked very hard for his family and mistress; had lots of good ideas. He watched the market all the time, was always on his mobile, always dealing. Aram was committed. The best thing of all was that he found a new dentist and had got rid of his halitosis.

We walked over to Leash's office. Through the glass walls we could see the boss having yet another row with Cy. This one looked terrible and we wondered if we should enter. We knocked on the door and Leash stopped screaming. I was amazed when I saw Cy. He seemed so relaxed and happy. He smiled at us as he left the office.

Leash sat there silently. He looked shattered. We waited for a while before Aram showed him the file of Aquarium and explained what he intended to do. Instead of grilling us about the fund and high risk trading strategy, as I had hoped, Leash merely nodded his head absently. Aram was given the go ahead. Leash wasn't concentrating. His mind was elsewhere and when I tried to warn him about the risks, Aram swiftly dragged me to the door.

After wild swings, the market recovered during the next few weeks and I felt more comfortable. Prices took off again and Aquarium's assets jumped through the magical mark of $1 billion towards $1.5 billion. Some investors, who were uneasy about the boom and our trading tactics, took profits and withdrew their money from the fund. Aquarium's investor capital was back to $800 million again. I went to several presentations to help Cy raise money. Despite all our efforts we weren't succeeding, but even though it was disappointing, and Aram's strategy was very risky, I was relaxed. We had banked lots of money and our performance fees were enormous. Moreover, under the Aquarium system, oil, gas and several other commodities were still pushing upwards. They were penetrating the upper membranes of the tank. Our computer system picked up the signals and Aram borrowed and invested. The following months, Aquarium made huge gains and Leash was more than satisfied with the profits and his booming business.

*   *   *

Cy's mother died suddenly and he and Leash returned to the States to attend her funeral. I sent Cy's family a sympathy card and flowers. Cy was touched and called me.

'Jack, some Boston pension fund consultants are interested in our fund. Can you meet me there?'

'Sure, Cy.'

'I've got a great idea. We can see them after Labor Day. My wife and girls are in Martha's Vineyard. Fly to Boston on Friday and I'll pick you up at Logan International Airport. You and Sandy can come with me to the island and spend the long weekend with us.'

'Wow, thanks Cy. Must be a great place. Do you have room for us? We can book a hotel.'

'No way. The girls want to meet you. We've got more than enough space.'

'What flight should I get?'

'Get the early one. You should arrive soon after lunch. It's less than a two hour drive to Hyannis, Cape Cod and we then take the ferry to Martha's Vineyard. You'll love it.'

On Friday afternoon we were on the ferry to Oak Bluffs, one of the island's ports.

'We cycle here. No cars. Think you'll be OK with those backpacks?' said Cy when we arrived.

'You must be joking!' murmured Sandy.

'Sure am. We'll hire a taxi. But after that, you guys are going to cycle or walk. OK? The Vineyard has lots of cycle paths.'

'Sounds fun.'

The house overlooked a long beach, not far from Edgartown, a former whaling port. The sea was darkening and the sky was already changing from yellow to orange red; the sun a sphere to the naked eye. The house was modern with massive windows and skylights, very different from the quaint buildings in Oak Bluffs and Edgartown. Cy's wife gave him a big hug when we arrived. Elaine, pretty with dark hair and a long elegant nose, shook our hands warmly.

'Cy's told me a lot about you,' said Elaine in a light American accent. 'Lucy, Nikki, come meet Jack and Sandy.'

Their two daughters ran down the stairs and Cy went down on his knees as they rushed into his arms. Nikki shook my hand tentatively, but Lucy was shy and kept close to her Mum. She ran into another room, opened a door and their white Highland Terrier, with a red ribbon on her neck, ran up barking. I bent down and tickled the dog under her neck. She lay on her back as Lucy petted her.

'What's her name?' I asked.

'Polly. I asked for a parrot and got her instead,' giggled Lucy.

'Come downstairs into the basement Jack, I'll show you your room,' said Cy. 'I hope you like it.'

We certainly did. There were some amazing seascapes and Shaker furniture. After freshening up, we joined them downstairs. It was the first time that Sandy and I had experienced the homely warmth of a traditional Jewish Friday night meal. Nikki blessed the wine in Hebrew, had a sip from the goblet and passed it to me. The red wine tasted sweet and warm. Lucy then blessed the bread that they called challah and we ate some. I preferred the chopped liver to the herring. The next courses were chicken soup and a large roast chicken, with lots of potatoes and green vegetables. They chatted about all sorts of things, especially school and art, Elaine's favourite subject. The paintings in the guest room were hers. We ended the meal with apple meringue. No wonder Cy found it difficult to lose weight.

'Daddy, what's going to happen to Polly when we go to San Francisco?' asked Lucy.

'Dogs aren't like cats,' said Sandy, smiling and leaning down to pet the dog. 'They don't run away and try and go back to the old house. Polly will get used to the smell of the new home and new walks. I'm sure that she'll love it there.'

'Are we opening up a branch in California?' I asked, wondering why I wasn't told about an important change in the business.

Cy looked at Elaine and I could see from his expression that he didn't want her to say anything more.

'I'll talk to you about it later,' said Cy.

Sandy and the children picked up some dishes and took them to the kitchen. I offered to help clear the table, but Cy pulled my arm and we went into the TV room. He poured out some twelve year old malt whisky and we sat down on a largish pink sofa.

'I'm leaving the firm,' he said. 'Leash told me to keep it quiet until September.'

I virtually swallowed the entire contents of my glass in one gulp. 'Why?'

'I've had enough; commuting between Europe and New York; the constant treadmill; being away from the family. I want to do something else.'

'So that's what that big row with Leash was all about a couple of weeks ago,' I said thoughtfully. 'When are you leaving?'

'After I finish training the new marketing manager. She arrives in a fortnight.'

Elaine, Sandy and the girls came in and Sandy snuggled up to me while we watched a movie on TV.

*   *   *

Cy woke me up early the next morning to go for a walk and a swim. It was the end of August and the weather had already become fresh and cool. The house's garden was fairly small, with a gate leading to a sandy narrow path that went down a bank towards the beach. The dog ran ahead of us, chasing some seagulls. We took off our trainers and left them with our towels alongside some rocks and started our long walk, half paddling in the shallows.