The Warning (27 page)

Buddy accepted the hand. “Thank God, not me.”

“I do, sir. Every morning and every night and sometimes in between.”

The other man said, “I heard your message on a tape they played in our Sunday school class last weekend. I've never seen people get so excited over something on a cassette. Went out and invested every cent I had into put options, just like you said.”

“That's good,” Buddy said. “Now make sure your friends don't just listen, but also act. Tell them to remember the road to hell is paved with good intentions.”

“I'll do that, sir. I surely will.”

When the pair had shaken his hand a second time and moved off, Clarke leaned over and said, “Now is as good a time as any, I suppose. You've been invited to appear on national television.
Lonnie Stone Live
wants to do two segments with you, one next Thursday night and one the following Monday.”

“Fine,” Buddy said, and it was. “Tell them yes.”

“Buddy, these television people,” Clarke hesitated, then willed himself to say it aloud. “They want to set you up, then once the date has passed, they want to shoot you down.”

“I don't care what they want.” Buddy turned to meet his friend's gaze full on. “Thursday night and Friday morning of next week will be the last chance we have to get the message across.”

Clarke mulled that over, then asked, “And the following Monday?”

“I have to tell them to take their money and get out,” Buddy explained. “Before it's too late.”

–|
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THIRTY–EIGHT
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Eleven Days . . .

By that Friday Thad was beginning to feel secure in his position, and much more at home in New York. He was still housed in the Plaza, still living as a visiting exec on the company's expense account. But that was about to change.

From his suite high in the Plaza Hotel, New York's mythical image seemed almost true. The skyscrapers looked factory fresh as they reached up with beckoning arms to wish him a good morning.

The sordid reality was all too clear, however, down at street level. Even from the back of a limousine there was no disguising the beggars, ten to a block. The crazies were also out in force that morning. Two weeks in the place and already Thad knew to waste no time on the dregs scattered everywhere, clogging every alley and doorway, hands out like a ragged chorus line, begging for change. Ignore them all. It was the only way to survive in this town. Live like they weren't even there. Thad had already decided the city burned so bright because the darkness ran so deep.

Even so, the view from the back of a company limo wasn't all bad. The street life was as entertaining as a new Broadway musical. New Yorkers were constantly auditioning for roles they had already won, where the world was their audience and the admission was free. Laughter was canned and loud enough to carry. Everything was done at full speed. People even relaxed in high gear.

The city's energy amplified the closer he drew to Wall Street. He spent the remaining minutes of the drive going over the documents delivered from his Realtor that morning. Thad had put in an offer on a brownstone at Ninety-third and Park. Those who lived closer in called this area the hem of Harlem. He didn't mind. It was still Upper East Side, and it was a building that would soon be all his.

The objective for most New Yorkers was to rise to a higher floor. The lower down one lived, the greater the threat of being impacted by too many other human bodies. So everybody was on the move, trying to go from the first floor to the fifth, from the fifth to the twelfth, from the twelfth to the penthouse. Then it was time to keep the penthouse and buy the weekend place in Connecticut, which was as far as most New Yorkers' umbilical cords would stretch.

Thad was still enough of an outsider to prefer a bit of green to a more spacious view, and so he was looking to buy a house. The place he had selected came with a postage stamp of a garden surrounded by a thirty-foot brick wall topped with electrified barbed wire. All the comforts of home.

Upper East Side was the place of wealth in action. For about thirty blocks north and south and four or five east to west, it was a high-rent island for the wealthy. The greatest competition was over making an elegant impression. Money was less critical than the time to spend it. The pets were as decorative as the paintings on the walls. Here it was possible to believe there was nothing wrong with either New York or the world. It was a great place to have money and want to flaunt it, which was exactly Thad's aim.

He set the real estate papers back into his briefcase as the limo pulled up in front of the Turner Building. Thad bounded up the stairs, gave the receptionists a quick greeting, ignored the myriad stares that tracked his movements toward the elevator.

Upstairs Thad stopped by his soon-to-be office and checked on the workers laying the new carpet. The old carpet had been fine, but he had changed it anyway, selecting the most expensive silk-and-wool spread he could find. It was good to give the office rumor mill something big to chew on. His private sanctum was a declaration of having arrived.

The contract negotiations with the Valenti lawyers had been predictably vicious. But Thad had stuck fast, and Larry had backed him up. In the end he had gotten everything he had wanted. The day after signing, a mysterious payment had appeared in his newly opened account. That same afternoon a courier had delivered a pound of beluga caviar, a new solid-gold Rolex, and a note from Turner saying, “Glad to have you on board.” Thad reported the early bonus to Larry and then used it as down payment on his brownstone.

He entered the trading floor and did a quick scouting. Activity remained at the same fever pitch. Everybody was on edge, stretched by positions that shifted from tenable to terrorizing in the space of a few minutes.

A guy whose name he could not recall looked up from his calculations to grin as Thad passed. Thad slapped the offered palm and asked, “How's it going?”

“Awful. This market needs a daily injection of Tylenol. It's one giant headache. Been that way for weeks.” He swiveled to track Thad's progress past his desk. “Hey, what's the scoop for today?”

“Not a chance.”

“Come on, be a pal.”

Thad arrived at the final desk before the door leading to Larry's private sanctum. He dropped his case and turned to grin at the guy and feast on all the other eyes following him. “If you need a pal, go buy a dog.”

In fact, Thad was working on his third idea for Larry. It was a major deal, one that would have been impossible to get by the bank's senior monitors had the market been any less nervous. As it was, however, nobody was making much money and losses were mounting. The sort of alternatives he had offered Larry his second day here were one of a kind. There was no chance to repeat them, not without risking being caught by the SEC. No, what he needed was a new way to guarantee profits, one that remained within legal boundaries. Barely.

As it was, the trading floors were structured along fairly normal lines—equities, currencies, futures, options, and so on. Thad opened his briefcase and pulled out the copy of a file he had left with Larry the day before. His plan was not to add, but rather to restructure on a massive scale. What he wanted was to shake up the entire trading operation, to put his stamp on the bank and its future in a major way. The great secret of New York was, take a chance. Thad was planning to do just that.

The over-the-counter derivatives market was bigger even than the one for money futures, and far more dangerous. Here, companies could hedge against any risk they cared to name, and for any amount. It remained almost entirely unregulated, as it essentially comprised contracts between two private parties. The crowning glory was that it was also completely legal.

Thad had watched its rise for years. He knew this sort of legalized piracy could spell major profits for years to come.

Over the previous eighteen months, OTC derivatives had suddenly started growing at an electric rate. Even so, many banks were afraid to touch them—Valenti included. Thad proposed to change all that, drawing a hundred traders from other less profitable areas and concentrating them on these ventures. The bank's first entry had already started, a project Thad had managed personally in interest-rate swaps. He was two days into the deal, and the bank already had a paper profit of $2.2 million.

If his proposal was accepted, Valenti would soon be doing a roaring business in trades whose names were a foreign language even to most bankers—caps, flaws, spreads, captions, flawtions, spreadtions, and even more exotic fare. Caps set an upper limit on the interest rate paid. Swaps typically changed a fixed rate of interest for a floating rate, or vice versa. For clients it could be a cheap insurance—or an expensive gamble. For everyone seeking to cover a risk, there was another party looking to take a chance.

Most often, people in positions of decision-making power gradually became hooked into playing the derivatives markets like others did the casinos. Metal-working companies, pension funds, insurance houses, utilities, local city governments—all were involved and actively courted by the traders. It only took one person with a penchant for fast profits and the authority to sign checks to open the company to risks it would never in its wildest dreams consider taking in its normal course of business.

If things went wrong, the results could be horrendous. Orange County lost over two billion dollars in thirty-six hours on a derivatives deal gone awry. The largest German steel company went bankrupt after just one bad trade. The oldest bank in England lost more than a billion dollars through one rogue trader and was forced to close its doors after 250 years in operation.

These and a hundred other companies had vanished without a trace, more grist for the gossip mill that circulated among derivatives traders. Here this morning, bankrupt at midday, forgotten the same afternoon. Thad was not the least bit concerned. He had no intention of being on the losing end of anything.

The magic to OTC derivatives was, there were no rules. None. Traders related the price of oil to the value of the Japanese yen to the cost of unmined Indonesian aluminum. Not even the traders themselves understood some of the risks they were setting up. Nor did it matter, so long as they got in and out fast enough. All they needed to see was the potential to win.

And if they did win, the payoff was huge. Twenty million dollars on a quarter-million-dollar hedge, payoff time of less than three days. That sort of thing was commonplace. Those who tapped out simply vanished. Their places were taken the next day. There were always more people out there clamoring to take the plunge.

Wall Street had a name for these high-risk derivatives. They were called nuclear waste.

The red light at the top of his bank of phones finally blinked a half hour after Thad's arrival. He picked it up and said in greeting, “The market's gyrating like a kid's yo-yo.”

“When this volatility finally gets a direction, it's either taking off like a shuttle launch or dropping like Niagara Falls,” Larry agreed. “Every day we don't have a direction is just adding to the explosive tension.”

“Still looking for a leader, just like you said.”

“Right. Come in here.”

“On my way.”

When he arrived, Larry pointed him into a seat and said, “I like your plan.”

“Just like that?”

He closed the file and scribbled on the cover. “Something this big will have to be reviewed by the board and okayed by Turner himself. But I want you to go ahead and start implementing the changes.”

Thad could not repress his grin. “Fantastic.”

“Just one thing.” Fleiss reached for his mug. “Korda.”

“I know.” The morning's high diminished. “The guy's becoming a bigger nuisance with every passing day.”

“The
Journal
called him ‘a phenomenon' this morning.”

Thad's gut took a bitter twist. “I missed that.”

“On the editorial page. Responding to some press conference in the back of beyond, I forget what the city was called. Made the
Times
business page yesterday.”

His gut tightened even further. “I missed that one too.”

“Just as well. Apparently it was more of the same. The twenties all over again, a major drop on the way, stuff we've heard a hundred times before.” Fleiss hit the button to bring his coffee apparatus into view and refilled his mug. “Only now he's getting national play.”

Korda remained the only dark spot in Thad's rapid assent. “I saw he got a mention in
Forbes
this week.”

“And
Business Week
.” Fleiss shook his head. “The man's gone from being a clown to a menace.”

“Just like you said.”

“Yeah, well, being right but being in the red doesn't get a win. I got a call from the old man this morning. He wants to know why we haven't done anything about this guy. After he ordered me to drag you off the case last week, it was a little hard to take.”

“But you didn't tell him that.”

“No, what I said was you'd be back on it. Seems our goons from downstairs have had trouble pinning Korda down.”

Thad nodded. He knew all about that. Wesley Hadden had become a turncoat. He was acting as a one-man security detail, on duty night and day. “Nowadays Korda's schedule is a national secret. His hotel and airline reservations are being made under block bookings. His movements are impossible to track in advance.”

“Not next Thursday.” Fleiss picked up the other piece of paper resting on his immaculate central table. “I got word from the guards this morning. There's been major advance coverage of some rally he's addressing. You heard about this?”

“No.” Thad did a quick calculation in his head. “But next Thursday is only five days before Korda's going to disappear all on his own. The following Tuesday is going to arrive and the market's going to surge despite all his sour predictions. Korda will be good for one round of Jay Leno jokes before he's buried for good.”