6 February 2007: HSBC GBP9.31; DJIA Close: 12,207
I couldnt take Stanleys call this morning. I was in a meeting, trying to explain what we actually do to a potential client a big West Coast pension plan that I thought I heard looked after retired zookeepers. We have these bizarre conversations with clients and their advisors, where they always ask us about our strategy. What about portable alpha, they ask? What about it, I want to say: the strategy is to make everybody a truckload of money, but apparently thats not good form. So we talk instead about global macro, short extension strategies, and a load of other BS that they seem to like and, once theyve signed the contract and theyre out of the door, we get back to the serious business of ending the day with more money than we started it. Did I miss something?
All the time Stanley was leaving messages on my private cell phone. I buy a new one every week, just for our conversations, and then toss it into the river when Im done. What were doing probably isnt illegal, but you cant be too careful with regulators, especially near election time. Its about the only time they actually give out vital signs.
This is big, Stanley says when I get back to him.
Arent they all? Rule Three: It doesnt pay to get too excited. You lose control and before you know it youve bought the entire external debt of some African country youve never heard of, collateralized nine times over by a coffee crop that was never planted, let alone harvested.
Slightly interested now. Is this a conversation we should take offline? I ask. We have had plenty of profitable discussions in Starbucks.
No time buddy. Listen, theyre going down big time. Oh-six results are going to stink. My man says they have finally struck out on trailer park loans, and there are big provisions in the numbers.
Pause. Stanley is good at this. Build up, pause. I knew a girl like that once, but I didnt pay her as much as I pay old Stan. I know what he is thinking, and he knows I know, and I know he knows I know, et cetera.
Do you have access to any inventory? I ask, taking the bait. If I decide to short HSBC, I would need to borrow the stock from somewhere Stanley is hoping to oblige, no doubt.
Yards and yards. Give me the word and its yours.
And heres the thing, the unbelievable thing. I have an inside line from a good source. I have access to stock that I can short. I have no principles, scruples, morals or any of those other disabilities that stop otherwise talented traders from fulfilling their potential. But something says no. And when that happens, theres only one thing to do play it by the book.
Ill have to take it to Bengt, I say. Its the kiss of death to any deal. Bengt Hammar is our very own Doctor No. Apart from being so anally retentive he needs weekly colonic irrigation, hes a damn fine credit and risk man. We thought it would be good to have him on board. Six years on, he still has his uses.
Stanley gets it. Call me if you change your mind, he says, then cancels the call.
If we had a compliance officer, hed be proud of me.