had yet to come. Exactly why it came will remain a mystery. Perhaps investors were bothered by the evening news footage of disgraced dignitaries being slapped into handcuffs. Maybe it was the thundering speech of denunciation by an opposition leader. But whatever the reason, when the market opened the following day, bond prices began to tumble and the stockmarket followed suit. A slip became a landslide. By the end of the day, the bond market had fallen three percent, the stockmarket fifteen.
European investors saw the chaos in Japan and wondered if they would be affected. Trading was anxious and indecisive. If New York opened strongly, there was nothing to fear. If American investors took fright, there could be catastrophe. It was an edgy morning.
The headline in the Wall Street Journal that day read: ‘Fifteen percent fall in Nikkei index – US investors nervous’. The best-known TV pundit filmed his morning comment from a mock-up of a Wall Street window ledge. He predicted calamity, then jumped. It was only a stunt, but hardly calming.
The market opened quietly. Nobody wanted to make the first move. But then, one by one, investors decided to play safe. Playing safe means selling out, and when everyone sells, there’s no one to buy. Bit by bit, the screens glowed red. Bond market nerves tipped over into the stockmarket, which made up for lost time by falling even faster. By the end of the day, the bond market was down three percent, the stockmarket eighteen.
Soaked in sweat, traders left their desks and stumbled outside for a drink. Eighteen percent. Some traders had cause for celebration. These were the ones who had started the day ‘short’ – owing securities instead of owning them. Their debts had collapsed in value and their profit on the day looked incredible. Many more were as miserable as these traders were happy. Even careful traders were reporting huge losses. These unhappy souls watched their hard-won annual profits blown away in a single day. Their bonuses had certainly gone, their jobs in doubt. They pondered the injustice and avoided the bars where winners drifted on rivers of champagne.
And on an upper floor of a Wall Street skyscraper, a committee sat down to think. This was the Madison Market Risk Committee, chaired by Dan Kramer, Chief Executive and Lion of Wall Street.
The bank had had a bad day. It had chosen to bet on a rally in US markets. It hadn’t bet much, but even a small wrong bet produced a big loss. The bank’s computers indicated that Madison had lost around $80 million, before tax.
Nobody on the committee was too upset. Next to annual profits of way more than a billion, eighty million wasn’t much more than a blip. These things happen. But there were other things to consider. In the wake of a violent upset, business goes quiet for banks like Madison. Firms on the point of issuing bonds or equity pull out of the deal. Investors trade less. Phones fall silent.
Until nine in the evening, the committee deliberated. Madison was famed for its prompt and decisive management, and it wanted to issue a press release in time for the morning news. In the end the verdict was unanimous. A press release was quickly drafted and approved.
The key paragraphs ran as follows:
Madison reports that today’s correction in the financial markets has resulted in a pre-tax loss of approximately $80 million. The bank is confident that no further losses of any magnitude are expected and the bank continues to believe that the long-term outlook for the financial markets is positive.
Nevertheless, to ensure that costs remain firmly under control during the adjustment period, the bank intends to implement an immediate review of staffing levels throughout the firm. Significant down-sizing is anticipated. A further announcement will be released in due course.
The announcement was covered extensively in the press the next morning. It was taken as a very positive sign that Madison had publicly stated its confidence in the markets. Once again, the bank’s management was held up as a shining example of leadership and decisiveness. One of the popular papers covered the story under the caption ‘Markets breathe easy as Lion roars’. The battered markets nudged upwards once again.
On the training programme, the students were less enthusiastic. Rumour had it they would all be dismissed that very day. The American students left their desks to lobby the people they hoped to work for after the course. The foreign students hung on the phones, trying to find out the mood in Tokyo and Buenos Aires, Paris and London.
Matthew and Sophie, happily and publicly in love, dived downstairs for coffee after coffee. They talked about the news, the rumours, the gossip from home. Matthew had called Luigi Cuneberti, who sounded despondent. Matthew tried to laugh it off as Italian overreaction, but Luigi corrected him.
‘Hey, Matteo. I’m Italian-Swiss you know, and when we Swiss get depressed we really mean it. This is bad news and especially tough for you new guys. But don’t do anything dumb. If you don’t make it this time, you’ll always get another chance next year.’
Matthew didn’t have a year to spare, but he could hardly tell Luigi, let alone use it to plead with McAllister. Sophie was anxious too. The Paris office had been in the midst of a major expansion, and it looked as though all that would be put on hold. New recruits would be distinctly unwelcome.
Matthew and Sophie held hands across the table, kissed, and worried. At least they had each other.
8
The bagpiper finished playing. A champagne cork popped and there was a round of applause. Hank Daggert, Chief Executive of Tominto Oil, and now Chairman of Aberdeen Drilling too, raised his glass.
‘Here’s to our newest subsidiary and to a long and profitable future as part of Tominto Oil.’
Douglas Mackenzie, Chief Executive of Aberdeen Drilling, beamed, resplendent in his kilt. In place of the dirk traditionally worn on the leg, he wore a miniature drill bit complete with diamond tip. Daggert loved the idea, and Mackenzie had ordered him one from the same silversmith as a present.
‘And here’s to young Gradley,’ added Daggert after everyone had drunk, ‘without whom, none of this would have been possible.’
Everyone lifted their glasses again and drank. There was a sprinkling of applause, which he acknowledged with his usual thin smile.
The evening following his row with Hanbury had been an eventful one. Once Zack had decided not to apologise, he had to move fast. From his mobile phone, he called a few numbers. The first person he reached was the head of the energy group at Weinstein Lukes.
Weinstein Lukes is a big league investment bank, one of a handful of global big-hitters. This group of banks – Goldman Sachs, Madison, Morgan Stanley, Merrill Lynch, maybe a couple of others – dominates the financial world. Whenever and wherever a major corporate upheaval takes place, whenever companies are born, married or die, you may be sure that one of this select band will be hovering at the bedside or altar, sickly smile and can-do attitude firmly in place.
Zack told his contact, a businesslike American called Amy-Lou Mazowiecki, what he wanted and what he had to offer. Mazowiecki listened to Zack and answered briefly.
‘OK. Get over here now.’
Zack leaped into a cab, arriving at eight in the evening. A secretary whisked him up to the tenth floor, which was given over to meeting rooms. She left him in one with a view of the river and a tray of tea and coffee. Mazowiecki came in soon after.
‘OK. Shoot,’ she said.
Zack said his piece. He was currently an employee of Coburg’s.
