The Last Hedge (5 page)

“Reagan is pronounced RAY-GAN, not RAY-GUN. I got one more quote for you fellows.” Ray picked up the marker again and began to write another quote, twelve inches below the other:

“Fuck the police!” - Eazy-E, N.W.A.

He turned back towards the traders and began to speak. “That’s easy with a Z, capitalization on both ‘e’s, abbreviations on N, W and A.” The traders all laughed. “Now, let’s get started.”

On this particular day, Ray chose to lecture the fine points of the East Asian currency markets. The traders sat spellbound as they watched.

“Over in Asia, the Thai Baht is at an all-time low. This is an excellent time to be buying this currency. I have key market intelligence telling me that both the currency will move higher, and volume on the Thai exchange will begin to pick up significantly.”

In the hedge fund world, Ray Corbin was considered something of a contrarian’s investor. Despite his Ph.D. and having been a professor of Applied Finance at Berkley, Ray often relied mostly on gut feel and information that was not of a probabilistic nature. Some felt that his disregard for mathematics and modeling was pure arrogance.

The Thai government had recently nationalized a series of banks and foreign investment had fled the country. This had forced a run on the currency. Though the government had since released its grip, investors were still wary of Thai markets. Word had it that Ray had a man on the ground counting the number of train boxcars that were moving through the provinces of Thailand. Ray’s spotter would then report back via BlackBerry. Though Ray’s train counting was said to be more accurate than the GNP, speculation on this matter was wildly inaccurate. Ray Corbin used these obscure pieces of information to trade hundreds of millions of dollars. It was enough to keep a skeptical man’s money in his wallet.

“How do you know this Ray?” Dylan asked. The other traders all looked at Dylan as if they had seen a ghost. They were now gathered around Ray in a semi-circle on the trading floor. From the way that they looked at him, Dylan could tell that Ray’s opinions were never questioned. He tried to smile though he felt like a donkey.

“My man on the ground over there has been counting boxcars for me.”

“Your man on the ground?” Dylan asked.

“Yeah, my spotter.”

“I hope he has good eyes, because many foreign economists still question the safety of investing in those markets.”

Ray smiled politely as he looked at the ground. “I’ve made a career, Dylan, out of beating the experts. We’ll see how quickly the experts forget what they said, when in six months the Baht is at an all-time high.” Before Dylan could respond, Ray had walked off of the trading floor.

After the speech, the troops went back to work. Dylan went back to his desk and began to worry. He had been there roughly a few hours and already questioned the wisdom of the boss. He was still unpacking when Ray tapped him on the shoulder.

“Got a minute?” Ray said, as he hovered over Dylan’s shoulders.

“Sure, Ray. What’s up?”

“Why don’t you join me in my office?”

“Okay,” Dylan said. Ray turned and walked towards the corner office. Dylan slowly got up and joined him.

When Dylan reached Ray’s office door, Ray had already seated himself at his desk and was smiling at Dylan.

“Listen, Ray,” Dylan said. “I didn’t mean to show you up back there.”

“What are you talking about?” Ray asked inquisitively, as Dylan stood across from him.

“I mean, I am the new guy. I didn’t mean to come across as challenging you on trading strategy.”

“Dylan, I actually want that!”

“Huh?”

“I’m glad you questioned me. As a matter of fact, that’s why I brought you in here. I need to go over a couple of things. First of all, I’m going to be out for a few days. I have a little situation that developed and I’ll be out until Friday.”

“Is everything okay?”

“Fine,” Ray said. He then took a long pause as he looked around the room. “Dylan, you know how it is. I’m not going to lie to you: We got hit pretty hard last week. I have a few jittery investors; some of my oldest clients. So I thought I’d stay ahead of the curve. Go out and see some people, soothe them.”

“I understand. What should I be working on?”

“Get everything up and running in ‘Test Mode’. I spoke to Josh already. You will run your trades as a test of your stuff versus our current system. It’s almost like a test versus a control simulation. I want you to begin building out all the statistical and mathematical work that we need to do.”

“Great.” Dylan said.

“Good. And when is your guy coming in?”

“Binky starts tomorrow. He had to tie up a few things with his previous job, but he is raring to go.”

“Sounds like a great kid,” Ray said. “So by the end of the week, maybe you’ll have something to show me?”

I don’t see why not.”

“Fantastic. Dylan, I really believe you are going to breathe some new life into this place. Those guys out there, sometimes I think they would all walk blindly off a cliff if I told them to do so.”

“Really? They seem like independent thinkers.”

“That’s part of the problem. They’re loose cannons. No, let me reframe that. They’re not loose cannons. They’re passive aggressive. Yes, they would walk off a cliff for me, but then they would turn around and not listen to me. They do their own thing. Then when I question them, they get uptight about it. I call that passive aggressive, though I don’t know if that’s what it says in the dictionary. I know that it’s something. This type of behavior is something. I see you as being able to put some kind of controls in place. So, I’ve changed things around a bit. I want you to be the trading floor Czar, to corral the other traders.”

“Corral?”

“I don’t mean that literally. I just need to put some type of framework in place.”

Though there was a general trading framework, the trading managers, including King, each seemed to follow their own strategy. Some traded commodities, some foreign exchange. There were no discernible patterns. They were given high degrees of latitude. How much they were able to trade was based loosely on limits imposed by Josh and Ray. Many of the constraints of their trading were built right into the trading system. In theory, Ray was supposed to sign off on every trade, but this policy was not strictly enforced.

“Josh has done a lot of that already.”

“I know he has. But don’t get tunnel vision by focusing on the math and computers. That’s not exactly what I’m looking for. I need something to pump some life into this place … to get these guys motivated about what they’re doing.”

“Ray, these guys are traders. They should be motivated by money. It isn’t like they’re working for the Salvation Army. They should be self-motivated.”

“Well, Dylan, to be honest with you, maybe some of them haven’t been so happy with the compensation they’ve received during the last few years.”

This was Dylan’s first sign that all was not well at Corbin and Corbin. Ray had bragged fanatically about the performance of the fund and the size of the bonuses. Now, all of a sudden, he was hearing subtle signs of discontent on the dollar and cents front. He decided to withhold judgment on that issue for a later date.

“Okay, Ray. Just give me some time to get to know these guys. I like a more laid-back non-confrontational style.”

Ray laughed. “Are you afraid of confrontation?”

“Hell no,” Dylan said. “I just like to use it sparingly.”

“So do I,” Ray said. “So do I.”

“Good. Get everything going.”

“I’ll see you in a few days.”

“Okay.”

Dylan ambled back to his computer. After setting up his workstation and the programs that he was to use, Dylan looked in his mailbox and found several new messages, all with the subject of Welcome! He clicked on each item successfully.

From: Intransigence

To:
Dylan Cash

Subject:
Welcome!

New to the hedge fund game? Ever wonder why bad things happen to good people? So do I! You might die working for your present employers. So stay tuned for the latest news on fraud and general larceny.

There was a link at the bottom of the email, and Dylan clicked on it. It took him to the site: www.bop.gov, the website of the Federal Bureau of Prisons, complete with a working inmate locator. He deleted the email messages by dragging it to the trash can on the screen. Surely it was one of his old buddies playing a joke, typical of the immature Wall Street crowd. At least it wasn’t pornographic. Dylan laughed if off as a first day prank. Nothing could touch him in at that moment. After all, he was employed again.

The desk groaned under the weight of paperwork and files yet to be digested. Behind the desk sat Dan Highland, struggling to make coherence out of the mounds in front of him. At times it seemed a good thing that his office had no windows. If it did, he often thought, his progress in culling his workload would be less than it already was. He pushed the papers aside as he stared at his screen. Using the laser printer, he printed a document and placed it on his desk to examine it.

Highland was in his late fifties, with a marine crew cut graying at the sides, his powerful chest attached to fit and conditioned legs. Charles Atlas would have been impressed. He was wearing a short-sleeve shirt that might have been popular during the Eisenhower administration. Despite his appearance, Dan was one of the funniest men in the Bureau. He looked up when Conroy entered.

If the Army had created an advertisement for casual wear, Tim Conroy would have been the man in the photo. He was a cop incarnate: square jaw, muscular build, and dark hair, always cropped short. His build had gone a little soft. With two kids in school, his only workout was on the rifle range, and a few pounds of soft paunch had settled around his middle. He was stocky without being overweight, though he struck you immediately as someone who you would rather not mess with.

“Hey, Dan,” Conroy said.

“Timmy, you got that twenty you owe me?”

“I forgot my wallet.”

“Asshole!”

Highland was the consummate sports pool organizer, toiling season after season through baseball, basketball, and football. It was his badge of honor. Conroy did not follow sports and always seemed to be a season behind in his payments of vig. Conroy took a seat across from Dan as he flopped his notebook onto Dan’s desk. Dan leaned back in his chair with a wide smile.

“How’s the wife and kids?” Dan asked. “Suzy still playing violin?”

“Still.”

“Johnny? How is baseball?”

“Struck out six just yesterday.”

“Good,” Dan said with a smile, “Glad to hear it.” Dan always asked about the family.

From the beginning, Dan Highland had been one of Conroy’s main sponsors, helping him bridge the gap from corporate securities law to the culture of the FBI. It had not been easy. Conroy had not been used to the cliques and procedural formality that were the hallmark of the Bureau. Though Highland was his boss and primary contact, Conroy also considered him a friend.

“So what you got for me?”

“I got this,” Highland said, as he smoothed out the piece of paper on his desk. “Dylan Cash.”

“Sounds like a movie, or at least a T.V. show.”

“I know,” Highland said with a laugh, “doesn’t it?”

“Who is he?” Conroy asked.

“He’s a trader; supposedly one of the best on Wall Street.”

“Then why are we looking at him?”

“An interesting question.” Highland leaned back in his chair. “I just printed out this document from the S.E.C. database.” He pushed the piece of paper towards Conroy.

“I have photos also. These were taken at a hedge fund convention in Lyford Cay, Bahamas, where each year, almost every important money manager flies to the Caribbean to hock their wares.” Highland slid a picture forward across his desk.

The photo showed a picture of Dylan Cash in polo shirt and khaki’s, sipping a drink on board a luxury yacht. “This is Dylan Cash, sipping a martini on the yacht of convicted hedge fund criminal Peter Shipman.” Conroy looked over the photograph. Highland was already forwarding another towards them.

“Next, here he is, standing next to Joel Johnson, another convicted hedge fund felon, at the convention jazz concert.” Dylan Cash was seated on a long bench, singing raucously. The participants at the event looked heavily inebriated. Though the giants of the hedge fund world attended, Conroy could tell that the conference was largely a boondoggle.

“Now, the story gets even better. The S.E.C. brings forth an insider trading case at Cash’s old firm. Three men were convicted, two were sent to prison and Cash walked.”

“What happened?” Conroy asked.

“They had hard evidence on the others, but what they had on Cash and his assistant was more circumstantial. Besides all this, Cash was considered a hothead who would have sued. So they canned him and called it day.”

“Was he involved?”

“You tell me. The Bible says you judge a man by the company he keeps.”

“Maybe he doesn’t read the Bible.” Highland ignored the comment.

“An FBI informant has come forward and is willing to bring forth evidence that Cash was at the forefront of the crime that took place. He’s told us he needs exactly one week to produce this evidence.”

“So,” Conroy asked. “What’s the problem?”

“Well,” Highland offered, “Let me put it this way: oOur informant has some strengths, and he has some weaknesses.”

“He’s unreliable?”

“That’s one way of putting it.” Highland got up from behind his desk, circled in front of it, and sat at the edge.

“There’s a lot of pressure on us to take a hard look at these hedge funds. We’ve even talked about starting our own fake hedge fund to really try and trap some of these guys.”

“That would take a lot of money. When you’re talking hedge funds, you’re talking millions. Many millions.”

“Hence, the problem,” Highland said. “But we need to start getting close to these guys. And this is the first step.”

“What do you have in mind?”