Crowded Trade

By George Gutowski

Wall Street assassination of a major wheeler dealer evolves into a complex battle between foreign oligarchs and corruptible financial interests. Read how the stock market could be manipulated and become a battle ground among ruthless interests with unlimited resources. One man has learnt how to fight this fight.

• Language: English
• Publisher: BookBaby
• Release date: Apr 17, 2015
• ISBN: 9781483552071

Book preview

51

1

Gregory Vandernaught was about to die. His remaining life expectancy was measureable in minutes. Vandernaught was the President and CEO of one of the most rapaciously successful private equity firms on Wall Street;PE Capital. He found himself on stage at the Metropolitan Opera House of the Lincoln Center in New York, waiting to be introduced at the annual shareholders meeting. He was about to deliver the triumphant President’s Remarks.

PE Capital was an important patron of the arts and paid a mind boggling one day rental fee of $10 million to the Lincoln Center with the express understanding that no other corporate entity would be permitted a similar privilege. The gift became a business expense and the shareholders were ahead by a couple of million; IRS behind a few million. Lincoln Center scored a fat one day rental plus set up fees.

Gregory Vandernaught sat comfortably, looking every bit the part of a modern day CEO. Part movie star, part pirate, and part trusted grandfather. He had all the necessary photogenic qualities. PR had no problems getting his mug shot into any media outlet in the world. He held his prepared script as he listened to the proceedings. A slight knowing smile affixed onto his visage, he gently nodded his head to signify agreement with the overall proceedings. This man was a media coach’s star pupil.

Gregory Vandernaught was also borderline sociopathic. If the real truth be known, he was clinically on the wrong side of that line. Over the past ten years or so he had raped, looted and pillaged over one hundred major companies. Cutting costs in the name of profitability, tens of thousands of bewildered employees had lost jobs and health benefits. Families were ruined. Small towns destroyed. Suppliers had been driven to the wall with ridiculous price cuts. Many could not survive and were bought for pennies on the dollar as PE Capital right sized its supply chains.

Organized crime normally called it blackmail. The Department of Justice called it racketeering. Wall Street euphemistically called it restructuring and financial engineering. Sometimes the term right sizing was applied. Wall Street even went so far as to call it wealth creation through creative destruction referring to an Austrian Economist who many could no longer remember. The bastard’s dead anyway.

Gregory Vandernaught worshipped at the altar of positive cash flow. He slaughtered his economic virgins there as well. Gregory Vandernaught slept rather well at night. He was uber wealthy, making the Forbes 400 list of incredibly rich people without difficulty. He politely failed to point out Forbes chronic underestimation of his wealth. He found it rather humorous when Forbes researchers tried to analyze the dark and shady corners of his personal wealth.

Wealth had enormous privileges. Wearing a bespoke suit he had previously posed for a GQ cover story that was about to hit the stands. Already printed, the magazine was in the hands of distributors and moving through the postal service. Digital release was scheduled to coincide with the beginning of the annual meeting. Newsstand release tomorrow and postal delivery nearly the same day. Another media piece that would help cement his position as one of the greatest businessmen in history.

To prepare for the photo shoot Vandernaught ordered from a top Saville Row tailor, a custom premium wool cloth which in turn was immaculately tailored into two suits. He always had a backup. To ensure no one could mimic the look, the entire cloth run was purchased from the textile mill and destroyed. Not a particularly difficult feat when you owned the mill. Perplexed middle managers aside.

The suit draped his body sublimely accentuating every positive aspect of a man’s physique. He also wore custom made lace up Italian Leather shoes with 22 karat white gold eyelets. The shoe leather was made from the soft skins of three month old baby calves who had barely learnt to walk. The belt matched his shoes with a 22 karat white gold belt buckle. In his breast coat pocket he carried a special gold pen. The pen had been used by the President of the United States to sign an executive order over some national security issue. Unlike most Presidential signings there was only one pen. The executive order had the intended side effect of solidifying some high tech contracts that the Pentagon and CIA did not talk about. An obscure subsidiary made an obscene amount of money at tax payer’s expense.

Around his neck, under his shirt, hung a special 22 karat gold chain with crucifix containing a relief of Jesus Christ suffering the final agony. The crucifix was a special gift from his Holiness the Pope. The gold chain had been personally blessed and presented at a special private papal audience thanking Vandernaught for his donation of medical equipment to Catholic Hospitals around the world. The hospitals were now tied into technologies which forced future purchases only from his companies. Many Roman Catholics would be heavily solicited and made to feel guilty if their future donations would not be generous enough.

Under his bespoke clothes, Vandernaught also wore luxurious women’s lingerie. Nothing too flashy today, just a white silk camisole and matching silk panties rubbing gently against his skin creating an all-day feeling of being caressed. The silk was a rare Coan silk. In ancient times, this silk was used to make the crimson-dyed apparel worn by the dignitaries of Rome. Vandernaught had reached the psychologically indulgent stage where he wanted to stop feeling anxiety and could not find another sufficiently soothing device. Clearly this man’s appetites had surpassed the champagne and caviar stage that most filthy rich people routinely enjoyed.

He checked his timepiece; an elegant antique pocket watch and chain once owned by a particularly effective Admiral who had helped Britain in her time to colonize and subjugate the globe. Vandernaught noted that the proceedings were on time. Because the company was so huge and controversial the event was being carried live by CNBC, Fox and Bloomberg TV. As well, the meeting was being live stream webcast. Any investor or interested party with a reasonable high speed internet connection could watch the proceedings in real time.

The stage was effectively a television studio complete with lights, sound systems, teleprompters and cameras. Feeding the technology very large amounts of heavy duty electrical cabling were specially installed under the especially elevated stage floor. The venue had been selected after consultants had determined the power supply was adequate, stable and had enough back up to produce a dozen annual meetings of similar scope.

The Opera House was packed with business journalists and investors, all duly noting important comments. The total viewing audience was estimated at approximately one million which for a supposedly boring business event was rock star huge.

Gregory Vandernaught listened to the Senior Vice President of Investor Relations conclude her intro and then he approached the podium. The podium had a very modern minimalist styling. Made of stainless steel the podium had a wide steel base plate for stability. Invariably speakers would plant a foot onto the plate as they adopted a confident pose. The plate was affixed through the carpet onto another much larger metal floor plate to ensure complete stability. There was a hollow neck to bring up the wiring for sound and electricity for that little reading lamp at the top. Technicians sometimes called this a rat hole. The platform could tilt to adjust to the speaker’s height. At the base of the platform was a slightly thick paper stop that would hold the speakers notes. To the right was a small innocuous matching stainless steel side table containing a glass of water should the CEO need to refresh himself.

Gregory Vandernaught politely acknowledged the applause from thankful investors whom he had greatly enriched. He smiled. His left hand lightly rested onto the podium’s paper stop and his left foot was on top of the base plate. He reached for the water with his right hand and brought the glass to his mouth. Visually elegant poetry in motion. The conquering hero needed a sip of aqua.

In the Metropolitan Opera House, watching on TV as well as live stream webcast were several people who wished this man dead. Wounded, angry, vengeful they all had sufficient motive for a thousand juries to render guilty verdicts for murder in the first degree. One individual seated in the Opera House in particular carefully watched Gregory Vandernaught. In that one person’s hand was a basic cell phone with a speed dial function.

The speed dial button was pushed. Verizon the undisputed American king of wireless communication made a very fast local connection to the electronic guts of another cell phone which had been affixed underneath the podium. The ringing tripped a pre deployed switch which triggered an electric power surge to run directly through the podium. Specific wiring had been carefully upgraded to effect an assassination. Electricity moved very quickly.

For a nano-second Gregory Vandernaught’s last thoughts were confused as to why the podium’s paper stop seemed to be so hot. While he brought the water to his mouth he started to experience electrocution as 2000 volts of Con Edison’s finest electricity surged through his body.

Quite simply Gregory Vandernaught could not let go. The voltage surged up his left hand and left foot. Religious gold chain with Jesus Christ in final agony hanging around his neck, Gold Pen close to his heart, Gold Watch Chain around his stomach, Belt Buckle and Shoe Eyelets all made of gold; one of the very best conductors of electricity that Mother Nature had to offer. The finishing touch of water also transmitting electricity directly to his mouth and head was too much.

Gregory Vandernaught died almost immediately. He never realized what hit him. Approximately one million investors watched a hideous and grotesque public execution. The Metropolitan Opera House was packed to capacity. A horrified global audience of well-heeled investors watched a man fry to death.

As is usually typical in an electrocution, the hand grips whatever it had been in contact with. This bizarre reflexive move only allowed the electrical charge to conduct more efficiently. At first the right hand shook erratically and spilled water onto the chest area. In a second or two Vandernaught crushed the glass. The water drenched his fine lingerie. Investors heard a loud and sustained sound like bacon frying. The sickly sweet smell of burning flesh permeated the immediate stage area. Gregory Vandernaught’s eyeballs began to pop out of their sockets.

Shock and horror swept through the audience. It became disturbingly clear that some kind of freak occurrence had erupted on the stage. The acoustics were impeccable and the sound of frying flesh was distinctly heard by one and all. The stage of the Opera House had been set up with huge large screens monitors. There were no bad seats in the house. In a few moments panicked investors start to run away, clambering over fixed seating and dropping annual reports and assorted corporate propaganda.

Parts of the stage started to smoulder. The sprinkler system kicked in. Water on electricity was not a good idea. Stampeding investors were also drenched courtesy of one of the most sophisticated fire retardant systems known in the western world. Chaos ensued.

In the director’s booth, technicians working the show watched in helpless horror, as what was arguably one of the most sophisticated electronic production studios of the 21st century, become a hideous death trap. Mercifully, a shaken but still sufficiently lucid theatre technician pulled the correct switch and killed the power. Gregory Vandernaught’s body crumpled to the stage floor. With this high voltage he had begun to burn. Inmates put to death by electric chair suffer the same horrific death.

2

By killing the power source or perhaps because of the electrical fires that were starting, the Metropolitan Opera House went momentarily dark, prompting emergency lighting to switch on. This widely accepted symbol of disaster only served to further panic 2,738 investors, as they stampeded out the doors. Doors had been shut to prevent entry by unauthorized participants. Normally the doors were wide and gracious entranceways, designed to accommodate well-dressed theatre and opera patrons.

Today the doorways could not accommodate the maximum capacity screaming panicking investors who wished to leave the Metropolitan Opera House immediately. The sweeping stair cases had always provided an elegance that was unmatched in the world of opera. Art and culture hounds could see and be seen. Now investors stampeded fearing for their lives. Some fell or tripped and were trampled to death by the panicked flow of humanity that followed.

The Grand Tier Restaurant and nearby Revlon Bar were being prepared for a reception. Catering staff worked feverishly setting up tables of lavish food, drink and floral arrangements. Special exhibits were assembled to display new corporate products. There was to be a festive atmosphere to the whole affair. Much money had been made. It was a time for triumph and celebration.

Wet, distraught and panicked, a sudden tsunami of normally sober business people surged through the lobby. Tables and serving carts were tipped over. Confused caterers handling large platters of delicacies were knocked over. More tripping and trampling ensued. The chaos just multiplied by the minute. High over the entire scene hung two extremely large Chagall’s. They were gifts to the Lincoln Center from Mark Chagall. The paintings were 30 by 36 dating back to 1966. Alert Lincoln Center staff not understanding the reason for the commotion opted to close protective curtains around the priceless works of art. The symbolism of a closing curtain over the pandemonium was missed by most.

Outside in the front of Lincoln Center was a very small park called Dante’s park. Named after a disgraced Italian nobleman, Dante had written The Inferno describing and mocking the Roman Catholic Church influenced power elites of the time. Today Greenpeace and other activist organizations were demonstrating against the various sins perpetuated by and on behalf of Gregory Vandernaught. The list of sins was a long one. Greenpeace had occupied Dante Park toppling over the Movado time piece statue at the north end. A tow truck with heavy metal cables had appeared suddenly to pull it over. News media had been alerted in advance and captured on live video what they thought was the compelling imagery of the day.

A heavy police presence had been called for and several demonstrators had already been arrested. The tow truck dropped the steel cable once the Movado time piece tumbled and sped away into Manhattan traffic before the gridlock kicked in. The police had set up steel barricades to prevent special action protestors from entering the Lincoln Center. Special action protestors are the ones that pull off the dangerous stunts that gain all the publicity. Dante Park was becoming an inferno. Police estimated the demonstrators to number 3,000. They outnumbered the seated capacity of the Opera House.

Surprised police officers were suddenly confronted by thousands of panic stricken stampeding suits. Cameramen covering the demonstration shot live footage of what appeared to be an attack by corporate types onto the street demonstrators. If the Gangs of New York were to have a 21st century rumble, this is what the opening scene would look like.

The police had not contemplated an insane rush out of the Metropolitan Opera House. An opera house was not a plausible flash point for street violence. The Riot Squad were facing the demonstrators with their backs to the Lincoln Center. They were deployed at the top of a set of public stairs just off the sidewalk. They had the tactical advantage of the high ground. Chanting demonstrators were stopped in their tracks as they watched the corporate crowd stampede out of the building. Activist leaders tried to point out to the police there was a problem behind their backs. But the cops were not going to fall for that one. Making them turn around was just not on the agenda today. They all stood firm, unwavering and disciplined to the task at hand. Stop the protestors. They shall not pass was on the lips of many a police officer.

A few sensible activist leaders, realizing something was not going according to corporate plan called for the demonstrators to fall back and get the hell out of the way. A handful of demonstrators tried to pull down a barricade or two to make room for their sworn enemies. The police responded with swinging batons and ensured the barriers stayed up. The police were thinking that they had won. The barricade had been successfully defended. The activist leaders continued their calls for retreat. The police tensed and were certain the rabble was about to regroup and storm the barricades, just as a snake recoils and then lunges.

The first wave of stampeding investors gravitated to the only reasonably open spot which had just been vacated by street activists. They then began to run over riot police clad in heavy gear. Surprised officers were knocked over and trampled by the dozen. Some police officers fearing that they had become encircled began violently slashing with batons as they struggled to regain something called sanity. Wealthy individual investors as well as Wall Street Professionals all suffered serious injuries normally incurred in a riot.

New York’s Finest were beating the crap out of New York’s Wealthiest.

The stampeding flood of investors finally dissipated. Coming to their senses riot police stopped beating wealthy investors. Too many well-dressed innocent victims lay bleeding on the pavement. More than one police officer was also seriously injured. Some activists across the street started to make attempts to help the injured. Several overreacting police officers responded by beating them. Passersby on the side walk also tried to help and called out to the police to stop.

Sirens were now heard from all directions. Emergency vehicles were responding to calls for an electrical fire in a public venue. A fire marshals’ worst nightmare was in the making. Fire in a public venue with attendant stampeding and panic would draw all available emergency response resources from Manhattan. Soon calls for dozens of ambulances and para-medics were sent to all Manhattan precincts. Resources from Harlem were mobilized and sent to help rich white guys.

A general police alarm had also gone out and numerous police officers were responding on foot in ones and twos leaving their squad cars parked uselessly blocks away from the carnage. Some officers carried shotguns. The traffic was so snarled it took thirty minutes before a properly equipped fireman entered the Metropolitan Opera House. Many of the elderly investors began to go into shock and cardiac arrest.

Numerous ailments and infirmities betrayed the very wealthy in this critical time of crisis. Riot equipped police officers could barely offer rudimentary first aid. No one had sophisticated lifesaving equipment. Oxygen tanks were uselessly sitting on fire trucks and emergency vehicles bogged down in traffic blocks away from the scene. No one could provide any individual care that an informed personal physician could render. The rich lay on the steps and side walk dead and dying. The police had been prepared for battle not mercy.

If you were not physically injured, you were in a border line state between hyper confusion and shock. Battle hardened military veterans felt a previous conditioning kick in as they did what they could or needed to do. Many others psychologically overwhelmed but physically unhurt broke down and sobbed like babies. Everyone tried to comprehend the insanity that had just engulfed them. Police officers, investors and corporate activists were strangely fused together in the surrealistic task of helping each other.

Somewhere in this bizarre scene was one exceptionally dangerous assassin. In Dante Park from the ranks of the activists a young man searched for signs of his father. The father was unaware his son was on the other side of the barricades.

3

Investors around the world watched Gregory Vandernaught die. Until that moment, the company he managed was such a sure bet everyone had wanted to own PE Capital shares. Every investor and portfolio manager held some of this stock.

Trading rooms around the world usually had several TV monitors turned onto CNBC, Fox Business, Bloomberg TV, CNN, BBC even Al Jazeera frequently was wired in. They were poised for breaking news as it developed. The monitors would be watched casually out of the corners of their eyes until something compelling came on. In the meantime their faces were glued to the computer screen in front of them, as they traded.

The electrocution qualified as compelling. For a few seconds horrific scenes flashed around the world and etched themselves in investor’s headspace. Normally hard-nosed and savvy, traders became momentarily disturbed. Many people screamed at their screens in utter horror, as if sheer will power could stop the insanity. Instead of the normally dispassionate financial news flow that they knew how to rely on, traders were attempting to analyze a spectacular and gruesome public assassination. No business school program could prepare you. News monitors were now going to static as the chaos in the Metropolitan Opera House broke up feeds. In studio anchors and newscasters scrambled to replace the feeds with ad hoc reporting.

But what could be said?

Somebody had brutally killed Wall Street’s Chief Son of a Bitch.

They say the market hates uncertainty. This was the mother of all uncertainty. The sell orders began. Everyone wanted out. The market wanted out now. The market wanted out of this stock completely. It was as if a man on fire wanted to rip his clothing off. Investors and day traders who had clever predetermined buy orders at below market prices entered on computerized trading programs were filled en mass.

Algorithms designed by Nobel Prize winning geniuses delivered the ultimate in Black Swan events. Black Swan had become a Wall Street term for highly unlikely. A Flash Crash erupted. The latest in technology merely accelerated the insanity. There was no break down in the trading technology. The market wanted to sell everything right now. The stock cascaded downwards accelerating by the second. NASA understood the graph as an orbital recovery gone wrong. The space capsule was incinerating on re-entry orbit.

Hedge funds and traders (Sometimes called Flash Boys) use sophisticated quantitative trading models frequently called Black Box Trading. The Black Box actually issues buy and sell orders based on esoteric mathematical algorithms. The black box traders suddenly saw their order books fill with huge purchases. The black boxes were combinations of proprietary trading software and the fastest processing power money could buy. They became the digital highway to financial hell in a flash.

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