A Week in December

  He coughed and looked away. It was only a little light verse; but in his long bitterness he had almost forgotten what words – the stuff from which he’d made his life – could really do.

  Through the morning John Veals stayed in his office with the door shut and his eye on the Allied Royal share price. Occasionally he would rest his gaze on Olya, as she smiled at him from the laptop on his side table. He tried to look at her for as long as possible in the hope that while his eyes were off the ARB screen the price would rise again. Steve Godley had the same theory with the Test match, which he kept going silently on a small television in the summer: if England desperately needed to take a wicket, he would leave the room; when England were batting, he could exercise seven-hour bladder control.

  Olya, her knees for once drawn up demurely beneath her chin, cast her spell on ARB. The price rose through the morning, like an air mattress being gently inflated; and by eleven, Veals could see the beginnings of a surge. He wondered if the FSA could tell from his hard drive how much time he’d spent with the Allied Royal figures up on his screen; but even if they could reconstitute his viewing history, he’d done nothing wrong by merely watching.

  He began to feel the mixture of emotions he had first experienced as a teenager: the elation of money coming his way, the self-congratulation that followed – because the gain was all down to his inspired decisions – and then the almost equal counteremotion of sickening anxiety: a fear that there was some aspect of the trade he hadn’t covered, some twist that even he had not foreseen.

  In many ways the happiest, most stress-free part of John Veals’s career had been the first. He had fared badly at his uninspiring North London school, but his maths results had got him a place at what he called a ‘greybrick’ university to study law. He stood it for two years, then left to work as a stockbroker’s clerk. It gave him a sense of the market, but the work bored him and he thought the fixed commission system antiquated. Then in 1982, when he was twenty-two, something much more congenial appeared in the City: the London International Financial Futures Exchange. He told his father, who, like his own father, ran a funeral parlour in Hendon, that he was throwing up his job as a Blue Button to go into futures trading. Morris Veals was appalled. John was only the third generation of the family to be British, and Morris was delighted to see him among the bowler hats of the Stock Exchange: that could be a job for life, and John’s sons would go to private schools and Oxford. But John sidestepped his father when his uncle Harry, who ran the bookmaker’s, said he knew an independent trader starting up at LIFFE after twenty years at Billingsgate; this man, said Harry, might need a runner.

  ‘Is your nephew numerate?’ the wet-fish salesman asked.

  ‘Is he numerate?’ said Harry. ‘He could give you the square root of the next prime number they haven’t yet discovered!’

  LIFFE was rudimentary and slow, and not English, but based on the Chicago exchanges, and full of hard-faced Americans come to make a fast buck; but Veals loved it from the first day he spent there. The trader for whom he worked was called Jimmy Johnston; he was a Gentile, from a line of fishmongers, and was excited by the new challenge. Veals watched how Jimmy was able to keep a huge amount of shouted information in his head and never make mistakes when writing tickets. It was Veals’s job, in his trainee yellow jacket, to run them back to the admin booth, where the input clerk would stamp them.

  What Veals liked about it was the brashness. Where once the City had been equities, bonds and discount houses, here there were men in brightly coloured jackets trading new products with fat margins, making real money. American investment banks, which wanted access to the European time zone, began to move in and to hire trading teams. Their basic trade was to buy interest-rate options and futures on behalf of large clients who needed to hedge their exposure to interest-rate fluctuations – dull enough, thought Veals; but what he liked much more was the way that banks traded not just to service clients’ needs but with their own money, as a bet.

  After a year working for Jimmy Johnston, Veals was hired by one of the main American banks to execute trades for its clients. His ability to calculate at speed and the tightness of the spreads he offered brought him respect and a degree of fear on the floor of LIFFE. His salary from the bank was not large, but the bonus he earned in his first January pushed him over £250,000 for the first time. After some research among the independent traders, or ‘locals’, he found a reliable clearing company who agreed to back him if he himself began to trade in dual capacity – both for his bank and as a local, on his own account.

  Some of the red-jacketed locals were Rabelaisian figures, itching to square up to the might of the American banks. They arrived at 6.30, breakfasted in a Cannon Street tea bar on bacon sandwiches and started trading at eight. At eleven they went for a champagne break and if it had been a good day, some even went home there and then. Others were so in love with the system of open outcry, the clamour of trade, that they stayed till closing time at 4.30, come what may. Most of the traders were young men. The physical demands of rising in a house in Essex or Pinner at five o’clock and then to be in a merciless fight, on their feet, till 4.30 every day were too much for older people.

  John Veals didn’t mind getting up early to leave Highgate, where he’d bought a bachelor mews house with woodblock flooring and numerous electronic gadgets. He relished the challenge, physical, mental and financial; the hand signals and the head-and shouldertapping were second nature to the nephew of a bookie. He had more work than he could handle. Banks wishing to unwind a large position didn’t want their recognisable trading teams in cherry and white striped blazers to start selling all at once so the price collapsed; instead, they called John Veals and asked him to unwind for them, softly, bit by bit, so no one knew for whom he was working. And of course, knowing that he had an order to sell 10,000 gilts on behalf of Allied Royal, for instance, it would have been insane not first to unload a few on his own ‘local’ account, before his ARB trade began to depress the price ...

  He was playing with two decks of cards. Everyone did it, and it wasn’t the traders’ fault that it was so easy. The tickets were time-stamped and there were primitive video recordings in action, but they never seemed to catch anyone out; no one seemed quite sure whether it was even truly illegal. In any case, you’d have to be less than human, Veals thought, not to take a little personal profit up front before the bank paid you at the back end of the trade as well.

  There was a nasty term for this, ‘front-running’, but since all the proprietary bank traders were doing it – using client information they had accidentally overheard from their colleagues – Veals was doing no more in his own mind than making sure he didn’t lose the hard-won edge.

  Then, as volumes started to take off, Veals saw a problem looming: regulation. In 1987 there came word that a plodding army of legislators was on its way; so when the bank asked if he would transfer to New York, where, at a much larger salary, he could lead their team at NYMEX, the mercantile exchange, it took him less than a minute to say yes. When regulation struck, John Veals headed for the airport.

  It was in New York, at a weekend in Long Island, that he met Vanessa Whiteway. He was staying with Nicky Barbieri, a metal trader with a house overlooking the dunes in West Hampton, and there was an old-money barbeque party at a colonial mansion half a mile away that Nicky talked them into. Veals was twenty-eight and was earning, with bonus, into seven figures from the bank; he had bought an apartment on the Upper East Side to add to the mews he had let in Highgate. Vanessa was of Anglo-American family, but very much preferred the Anglo aspect after she’d been jilted by her American fiancé. She had never been a warm person, but this reverse had given her a permafrost coating that even the most dedicated skirt chasers, such as Nicky Barbieri, found chilling.

  Veals, however, was intrigued by her. She was like a market he had yet to crack, and he wanted to know her risk – her yield, her beta and her delta. She suffered his attentions over the weekend
without encouraging him; she made it clear that she thought NYMEX a vulgar place to work. Veals agreed, but the difference was that the vulgarity was what he liked: it went with money, drive and profit. He asked Vanessa out to dinner in Manhattan and took her to that week’s hot place in SoHo, but could see at once that the post-industrial decor and zingy fusion food were not to her taste. Next time, they went to a French restaurant with fluttering waiters and velvet-covered banquettes, on Park and 80th, not far from the Met, and Vanessa thawed, a fraction.

  Although he had exercised his libido from time to time in London, joining in at strip clubs and stag parties, taking his turn with occasional female City staff who seemed to have made up their minds to work their way through every member of certain trading teams (Brenda-the-overnight-lender: dear God), Veals was not interested in women. He did the deed, as they called it, to stop his colleagues gossiping and because he thought it might be good, in some undefined way, for his health. His heart was never in it. He had nothing to say to these painted creatures, and anyway he found it hard to hear in noisy bars in Moorgate and London Wall. He watched with some respect as fellow traders unfolded bricks of twenties, bellowing inanities with champagne breath into the faces of their prey, but personally found the dividend of carnal pleasure a brief and poor return for the hours of tedium he’d invested.

  Vanessa Whiteway was different. She was good-looking enough, Veals thought, that other men would envy and respect him: slim, with shoulder-length chestnut hair, large blue eyes, and no hint of cellulite beside the Long Island pool in her black one-piece. She drank vodka with lime and mint and smoked a packet a day; she had a private income from her American industrialist father that would be enough for there to be no irritation over dress allowances or occasional women-only holidays if she wanted them. Veals calculated that even if in cash terms she would be expensive to run, the maintenance of Vanessa would in other ways be low: she wouldn’t sap his energy; he wouldn’t find himself in the position he’d seen with a lot of promising traders: having to spend so much time servicing or reassuring his wife that it would take his mind off making money.

  At lunchtime, John Veals made a rare sortie across town. He had arranged to meet Peter Reynolds, an investment manager with Shields DeWitt, the Vatican, not because he had anything in common with the unbearably upright Reynolds, but because he wanted to see if any rumours were circulating among the Barolo and the £35 plates of pasta at Saggiorato’s, a few yards from the back end of the Burlington Arcade.

  ‘Are you going to the HOPE bash tonight, John?’ asked Reynolds, cracking a breadstick.

  Hope was the nickname of an acronym: Hedge funds for Old-Age Pensioners. No one seemed to remember the organisation’s real name, but it financed a charity evening in which the richest people in financial services competed with one another to raise money in loud open auctions, with an emphasis on helping foundations for old people. In 2005, they had taken over Tate Modern and raised £18 million.

  ‘I did my usual deal,’ said Veals. ‘Took three tables at double the going rate on the grounds that I didn’t have to fill the seats or go to the event.’

  ‘That’s the spirit, John.’

  ‘No, that’s the cash.’

  ‘I see Dougie Moon’s at his usual table.’

  ‘Yes,’ said Veals. ‘Wouldn’t you hate to be a money broker? Like being a fucking speed-dating bureau or the teaser for a stallion, always trying to manoeuvre someone into position to shaft someone else.’

  ‘Plus you have to entertain every lunch and every dinner. I don’t know why he doesn’t go somewhere else occasionally.’

  ‘I suppose it’s so people know where to find him. Mind you,’ said Veals, picking over a bite of crab and taglioni, ‘he does seem to get people into bed with one another.’

  ‘Bit of a plonker all the same.’

  ‘Total,’ said Veals.

  Nevertheless, it was next to Dougie Moon’s noisy table that he allowed himself to linger on his way to the cloakroom after lunch. He could tell from the volume of the conversation and from the colour of Moon’s face that he would be in expansive mood, but feigned surprise when Moon greeted him. Among Moon’s lunch companions was a Frenchman called Guy Desplechin who had worked for an American bank in Paris, where, so far as Veals could see, his main job seemed to be advising his colleagues on how they could tastefully part with some of their bonus dollars on houses, art and wine. He certainly had little head for finance, as Veals had discovered when Desplechin came to try to sell him his bank’s services as a prime broker.

  As they stood, raffle tickets in hand, waiting for their coats, Desplechin gripped Veals’s arm and whispered that he had some information so new and so searingly hot that he’d have to tell him outside. Veals said goodbye to Peter Reynolds and Dougie Moon and sauntered with Desplechin to the corner of Cork Street, where he found himself pushed up against a shop window with the Frenchman’s face close to his.

  ‘Swear on your children’s lives.’

  ‘Yeah, yeah, Guy. Whatever.’

  ‘No, no, John. Say “I swear on the lives of my wife and children.”’

  ‘I swear on the lives of my wife and children.’

  “‘That I will not tell a soul what I am about to hear or where I heard it.”’

  ‘All that. What is it?’

  ‘No. Say it, John.’

  ‘That I will not tell a soul what I am about to hear or where I heard it.’

  Desplechin put his lips to John Veals’s ear. ‘First New York have agreed to buy Allied Royal. The chief execs dined together two days ago. It’s a perfect fit.’

  Veals nodded. ‘Interesting.’ He began to walk away.

  ‘Remember the oath.’

  ‘Sure.’

  ‘And ...’ Desplechin had to raise his voice to reach the departing Veals. ‘We can do business! Call me! Lunch!’

  Without turning round, Veals raised a hand in affirmation. He was almost smiling. God, some fucking people.

  In Pfäffikon, Victoria Gilpin’s fingers were going rapidly over the keys in her stealthy style. She was finding it hard to keep up with the volume of trades that Kieran Duffy was putting on.

  Duffy didn’t know what Veals had done and would never ask, but the shape of the ARB graph had a familiar look: it was the initially gentle but then accelerating rise that went with a well-based rumour. Duffy could picture something being said or written in London, exaggerated later in New York, then calmed but basically accepted by the soberer heads of Asia. The market across the world had convinced itself that Allied Royal shares were going up; a move to buy, orderly at first, was by three o’clock beginning to look like a frenzy.

  Duffy knew that he and Veals couldn’t be the only people who’d noticed a marginally sick edge to ARB over the last nine months or so; but as the price rose Duffy could sense that many fellow bears had lost their nerve. It was a short squeeze: a question of buy now while you still can.

  He waited till about three o’clock before putting on the bulk of his own trade.

  ‘Steady as we go, Victoria,’ Duffy said, trying to conceal how much he was enjoying himself. ‘Tell Simone to bring me some tea, will you?’

  With the puts and the calls bought and sold, it was time to put on the commodity leg of the trade. It was delicate in Duffy’s opinion, and a little risky, but it was clever; it was the sort of thing that made working for John Veals tolerable.

  In 2001, Allied Royal had bought the ‘African assets’ of a French colonial bank fallen on hard times, and this, together with its own historic presence in the region, meant that ARB effectively financed two thirds of the cocoa crop.

  ‘Well, that much is GCSE geography,’ Veals had said. ‘The good bit is this. The warehouse which stores the cocoa before it flogs it on to the chocolate people in the West, they have to borrow money to buy the stuff from the farmers. And who do they borrow from?’

  ‘ARB.’

  ‘You got it. A hole in one, as Godley would probably say. Twa
t. But it gets better. ARB has the whole market sewn up from the seed in the earth to the paper export docket. There’s a network of financial relationships among thousands of not only farmers, but agents, brokers, shippers, insurers across the whole of Africa. No bank or group of banks, even the World Bank, could replace it overnight.’

  ‘So no one can buy the crop,’ said Duffy.

  ‘Yes. So the price of what’s already in the warehouse goes through the roof. This is not just Belgian chocolate, this is the last fucking Belgian chocolate you’ll eat for six months.’

  Duffy sipped the milkless tea Simone had brought him. What he fancied was trading with some MIT-trained geeks who believed in ‘rational markets’ and relied on fancy formulae to back them up. If one price – cocoa, coffee, whatever – went what they called ‘off campus’, these guys would buy or sell enough of it until it obeyed the rules of their formula again. It was what Veals called the Long Term Fallacy – a reference to the beliefs espoused by Nobel prize-winning economists that had caused a single hedge fund, Long Term Capital, to blow a trillion-dollar debt-hole in the American economy. The next generation seemed not to have learned the lesson.

  ‘Bring on the geeks, Victoria!’ called out Duffy, rubbing his hands together.

  There would be public recriminations when the world saw others profiting while African farmers watched their crop rot in the earth; but such attention would focus on the regulated futures markets, rather than the twilit world in which Duffy was trading. It was great, just great, that hedge funds were not regulated. The legal counterparty to the trade was not even High Level Capital, but its prime broker – the American investment bank in London.

  It was true, Duffy thought as he hung up the phone to New York, that several million Africans would go hungry, but that was nothing to do with him; it was the fault of an imminent banking failure at Allied Royal.