Sunday, July 12, 2015

Chapter 3- Geneva - Fast Money and French Ladies: The Greek Crisis 2015

Chapter 3. Geneva

On Sunday morning, Jim stood outside the Geneva airport terminal on the curb waiting for a limo to pick him up, his head throbbing from too much scotch and too little aspirin. “Oh, no,” he mumbled to himself as he saw Dieter approach in his Kubel Kar with the Afrika Corp palm tree stenciled on the side. Jim could see emblazoned across the front of Dieter’s tee shirt the words “Asylum for Snowden,” referring to the renegade security spy and good friend of Dieter’s. Just what was Dieter softening him up for?

The thought flashed across Jim’s mind that possibly this was worse than he had imagined—although how much worse could it get than to be long a couple of billion euros in Greece? Next weekend Greece was scheduled to hold a referendum on rejecting the latest bailout proposal from the European Union. In short, would Greek voters give a mighty heave and pull down the pillars of the European monetary temple?

More immediate, just where was Bermuda Triangle? He’d updated his iPad every time the little executive jet had landed—Bermuda, the Azores, Lisbon—each update worse than the previous. When they ran out of scotch, the flight attendant said, “I didn’t know this was going to be a two bottle flight?”

“Jim, hop in,” Dieter shouted as he swerved the bathtub-shaped vehicle into the curb. “Enjoy your flight?”

“Not exactly. Ran out of scotch, then aspirin.”

“Uh, huh. Well, we have a complete briefing set up for you back in the office.”

“What happened?”

“We came in one morning and the algorithm was chirping away, expecting a reward…”

“I thought we had it cordoned off?”

“The algorithm hopped right over the firewall during the night…and by the time we got it back…”

“Yes, frisky little algorithm,” Jim said. “Can’t we unwind any of these positions?”

“We’re in, I’m afraid.”


“The algorithm says to stay with the positions; it’s sure a bailout is coming.”

“Sounds rearview mirror to me,” said Jim glumly.

“We’re doing deep analysis,” said Dieter reassuringly. “Really drilling down. We’ll get to the bottom of this.”

The Rubber Room

Arriving at Bermuda Triangle’s offices in downtown Geneva, Jim got off the elevator followed by Dieter and they walked down to the big padded door open to the computer room. The padding kept intrusive microwaves from spying on their highly proprietary trading techniques. Above the door was the hand-drawn sign saying “The Rubber Room: Home of the Alpha Dogs,” alpha being the shorthand Wall Street lingo for above average investment returns. If a hedge fund couldn’t earn alpha, it had no reason to exist.

For Bermuda Triangle, Jim wondered where the alpha had gone—and would it ever return? Jim and Dieter went inside and saw a lithesome olive-skinned young woman sitting at the triple-computer console in front of vast LCD screens lining the walls. “Hi, Anouk,” said Jim. “What do we have?” He eyed Anouk’s tee shirt emblazoned with “Remember Valérie,” undoubtedly a reference to Valérie Trierweiler, the former mistress of President Hollande of France. Trierweiler was the latest sympathy object of worldwide feminism.

“Still the same,” said Anouk. “The algorithm says go long Greek everything.”

“Anouk has been going over the code all day…looking for a hidden loop…an unknown cutout…anything...” said Dieter. “We’ve run every conceivable diagnostic on the algorithm…they all come up empty…”

“Strange,” said Jim. “An algorithm designed to minimize risk and it jumps the fence and makes a bet-the-house call on Greece…the shakiest proposition since the Iraq invasion,” and Jim made an involuntary shudder at that dark thought—the descent into an endless negative loop.

“We’re going through its risk-reward subroutines,” said Dieter. “We’ll find an answer.”

“Okay,” said Jim.

“Oh, while Dieter was picking you up at the airport,” said Anouk, “a message came from the Bistro. Said there was a napkin.” The Bistro was their favorite lunch place down the street. Three years ago during the last Greek crisis their secret source in a big French bank tipped them off by sending messages on cocktail napkins to the Bistro in Geneva.

“A napkin?” said Jim incredulously. “That’s from the top floor of Crédit Générale in Paris,” referring to one of the largest banks in France.

“I picked it up,” said Anouk.

“What does it say?” asked Dieter with incredible eagerness. A way out?

Anouk pulled the napkin out of her handbag and read, “Go long Greek banks…wait for the lows.”

“Cryptic,” said Jim. “Where and when will we see the lows?”

“I know,” said Dieter. “I’ll have the algorithm watch the trading of the Paris banks…and all their shady affiliates…we’ll be looking for a little front running by the insiders…and we have a new program monitoring the Twittersphere,” he added mentioning the ubiquitous short messages broadcast across electronic space by Twitter.

“Good idea,” said Jim. “Wonder where he’s getting his information? He’s UMP—“

“They’re Les Republicans, now,” said Anouk.

“I stand corrected,” said Jim. “But Alain’s not a Socialist. How would he know what’s going on in the Élysée Palace,” asked Jim mentioning the official residence of the French president. Alain Renier, their hidden source from whence the napkins came, worked just down the hallway from the chairman of Crédit Générale as director of policy planning. Before that, Alain held high positions in the French finance ministry during the last conservative administration under Nicholas Sarkozy.

“He probably has an usher on the payroll,” said Anouk.

Jim looked at her with open-eyed amazement and exclaimed: “How did such a smart girl wind up with him,” and Jim nodded at Dieter. Dieter beamed. Anouk had been the flight attendant on Bermuda Triangle’s executive jet back when it could afford an executive jet. Then she became a computer data analyst with Dieter. A trip together to a worldwide hacker convention put romance in their relationship. The doe-eyed French beauty with the Moroccan background had the gift, everyone admitted. It was that or let her waste her talents being a runway model in Paris.

“Here’s what I want you to do, Anouk,” said Jim, following up. “I want you to contact Édouard Soisson at Strategic Intelligence International in Paris. He was Sophie’s business partner when she was a consultant there…back before she was elected to the European Parliament. Have Soisson check it out.”

“Will do,” said Anouk.

“You better go to Paris in person,” said Jim. “We don’t want a whisper of this on a telephone line.”

“Great, I can catch up on my shopping,” said Anouk, bright-eyed with expectation.

“Okay. Other business?” asked Jim. “Where’s Jack?”

“Jack’s in Athens looking for bargain deals in the collapse,” said Dieter, referring to Jack Hawkins, their British partner.

“Well, you better call him and tell him some of those collapsing buildings belong to us.”

“Will do,” said Dieter.

“And Jürgen?” said Jim, referring to their German partner.

“He’s in Frankfurt. Mario Draghi has asked him to intercede with Bundesbank and see if they’ll soften their position on Greece,” replied Dieter. “The ECB needs some room to deal.”

“Melt the iceberg,” said Jim with a smile. Jürgen was exceptionally tough minded; he thought the top German bankers at Commerzbank and Deutsche Bank were marshmallows for having bought all those Greek bonds in the first place during the run up to the 2008 financial crisis. And he didn’t cry any crocodile tears for poor supervision by the Bundesbank; he had long suspected the central bank wanted the euro project to fail so Germany could go back to the beloved Deutsche Mark.

“Yeah, they’re pretty rigid…even for Germans,” said Dieter with a shrug, unselfconscious of his own nationality.

“Give Jürgen a heads up, too,” said Jim. “I’m going home and take a shower.” As Jim started to walk out, he turned around said, “If we can’t maneuver our way out of this, our worst nightmare might come true…”

“What’s that?” said Anouk with genuine concern.

“Wind up as a long-term investor…” said Jim, shaking his head in disbelief at such a dismal prospect. “I’m going to my flat. Call me if anything comes up.”

Sunday Night

“Okay, what’s up,” said Jim as he sat down in the big armchair in front of Dieter’s triple-screen computer console. He had received Anouk’s telephone call a half hour before rousing him from a deep sleep, a reverie of gentle blue waves breaking on the white Laguna Beach sand, small clouds gliding across the blue sky of his mind. The telephone call broke through like lightning on a gray, cloud-strewn day. He had raced over to the Bermuda Triangle offices.

Jim looked up at the big LCD screens on the fall, a news ticker with flashing messages racing across the screen. The Greek prime minister Alexis Tsipras was going to address the Greek nation on TV. “What do you think, Dieter?”

“The Twittersphere says the European Central Bank is freezing the level of emergency loans being supplied to Greek banks,” said Dieter.

“No more cash for the Greek ATMs,” added Anouk.

“That means capital controls for sure,” said Jim.

“Here it comes,” said Dieter as he pointed to one of the big LCD screens. The Greek prime minister came on the TV screen while an English-language translation started to scroll across the bottom of the screen.

They all watched as the message that Greek banks would be closed through the following weekend when the referendum would be held scrolled across the screen.

“That will make for a very long week for the average Greek,” said Jim.

Words flashed across the screen that the Athens stock exchange would also be closed.

“Understandable,” said Jim. “Avoid needless chaos.”

Then they watched as the prime minister assured Greek citizens that their bank deposits were safe.

“How do you tell when the Greek prime minister is lying,” said Dieter with a grin. “When his lips are moving.”

“I think Angela Merkel has already discovered that,” said Jim. “I can’t get Sophie to tell me, but the body language says that lack of personal truthfulness in one-on-one conversations has been a problem.”

“Here comes the bottomline—ATM withdrawals are limited to sixty euros a day per depositor,” said Dieter.

“What about tomorrow’s markets?” asked Jim.

Dieter punched his keyboard and the Monday morning future prices flashed on the big screens.

“The euro is okay,” said Jim as he scanned the screen.

“Wow, look at that,” said Anouk, “the Greek 17s are pegged to yield 38 percent.” The Greek bond with a coupon rate of 3.8 percent maturing in August 2017 was one of the principal bellwether bonds still trading in international markets.

“We’re in that?” asked Jim.

“No, it’s too small a float. The algorithm doesn’t do small change.”

“Always nice to play god with something else’s money,” said Jim. “Well, thanks for small favors.”

“We’ve got major positons in the outlying maturities.”

“Look at that,” said Anouk, “the algorithm says to buy—it’s really blinking!”

“Dieter, you have to seriously debug that subroutine…wherever it’s hiding…” said Jim with a sigh.

“Will do, boss,” said Dieter.

“I’m going back to bed. Tomorrow will be a big day. This week will be a long week,” said Jim with a shrug.

“And Sophie?” asked Anouk.

“She’s up in the B-sphere, you know, the bureauscratisphere…communicating between all those little boxes at the top of the European Union organization chart,” said Jim. “Unlikely I’ll see much of her this week.”

“The Twittersphere said a high level French emissary was in Washington speaking with the IMF,” said Dieter.

“That was her,” said Jim. “The invisible emissary.”

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