Kat sat in Zachary’s office a few hours later, stunned by what Zachary had just told her.
“You bet it all?” Kat’s mouth dropped open, astounded that Zachary would bet everything on one trade. “Why, Zachary?”
Zachary stood in front of his computer terminal, his shirtsleeves rolled up. Coffee stained the front of his wrinkled shirt, and he looked like he hadn’t slept in days. For the first time, Kat felt better dressed than him.
“I can get it all back, Kat.” He smiled. “My model works. I just need to prove that—”
“Zachary, it’s too late. It doesn’t matter anymore whether your model works or not. Edgewater investors and the authorities need to know about Nathan’s Ponzi scheme. Now.”
Zachary pointed at his trading screen. “They will, after I get the money back. Watch the screen. The Euro’s up, and I’ve already made back some of the losses. Almost a billion so far.” He pulled a handkerchief from his pocket and wiped his forehead. “A billion, Kat. I’ve got to ride this thing while it lasts.”
The television droned on behind Zachary. The dollar was collapsing against the Euro. Dozens of harried-looking traders sat glued to their computer screens, the polar opposite of the scene playing out in front of her with Zachary.
“It’s the investor’s money, Zachary. Cut your losses and get out while you can.”
“That’s crazy. I make a hundred million for every ten basis points the Euro appreciates against the dollar. Why stop now?”
A hundred basis points equaled one percent in trading terms. A billion dollars equaled half of Edgewater’s losses from Nathan’s fraud. “It can easily go the other way, Zachary. Let it go.”
Gone was the naked panic etched on Zachary’s face when she told him about Nathan’s Ponzi. His expression had changed from vulnerable to smug.
Kat stared at the graph on screen. The Euro’s trend line was green, already up one percent against the greenback today.
“Sell it, Zachary. Get out while you’re ahead and report the fraud. The investors will understand that it was all Nathan and not you.”
“Not yet.”
“What if you lose what little is left? It’s a gamble you’re sure to lose.”
“Don’t jinx me. It’s not a gamble at all. My bet is big enough to move the market by itself. Once it gains momentum, I’ll be back in the black within days, if not hours.”
“You can’t be serious. After complaining about Nathan ruining Edgewater, you’re about to do the same.”
Zachary snorted. “Rich people won’t understand a loss this big, Kat. They’ll be out for blood once they hear what Nathan did. They’ll assume he’s taking the fall for me too. Or that I’m a complete idiot, too stupid to notice a massive fraud right under my eyes. I’m either incompetent or a thief. Either way, I lose.”
“With enough proof they’ll believe you.” Kat pointed to the screen. “Those profits aren’t locked in. They can easily swing the other way. Instead of a two billion loss, you could lose much more. Unload your position, Zachary, and face the music. You haven’t done anything wrong—yet.”
“And I’m not going to. This is perfectly legal. There’s nothing in the fund prospectus that says I can’t.”
Technically it was legal, but was it right? “But surely your investors don’t want you to bet everything on one trade. What would they do if they knew?”
Zachary didn’t respond, so Kat answered her own question. “They’d pull their money out.” The Euro’s graph line plunged again, reversing all of the gains from a few minutes ago.
Zachary was just as morally bankrupt as his father—the only difference was that he didn’t cross legal lines.
“They don’t have to know,” Zachary said.
“This isn’t a Las Vegas crap shoot.” Kat stared at the screen. The graph line had turned red. Now it showed a one percent loss. Almost all the gains of yesterday were gone too. “Just like I said—you’re losing.”
“Will you shut up?” Zachary waved his arms in the air. “It’s not a hunch—it’s my model and it’s working. At least it was until you interfered.”
He waved her over to a chair opposite him. “You’re distracting me. Either take a seat or leave. If you want to watch history take its course, you’ll see what I mean.”
Kat sighed and sat down. The last thing she wanted to see was Zachary making history. Disaster loomed as the Euro dropped another hundred points. Now the loss was two billion.
They stared at the trading screen in silence.
Then, just as all seemed lost, the Euro stopped dropping. Slowly it rebounded, a few basis points, then a dozen, then thirty. Now the loss was only 1.7 billion. Only.
“See that, Kat?” Zachary’s panicked expression from a few minutes ago had changed to a smug one. “That’s me. My bet’s working now.”
“How can you be so sure?” To Kat, the graph line angled like the steepest climb on a never-ending roller coaster. In a few seconds it would plunge off the precipice, repeating the wild ride of the last twenty minutes.
“Momentum, Kat. It’s turning around.” Zachary pointed to a sharp trough on the graph line. “Everything works if the bet’s big enough.”
In less than ten minutes it was up again. Now Zachary needed a billion.
“How can it be that simple?”
“It’s a zero sum game. Whatever I win, someone else loses. If I bet enough, I can move the market in any direction I want. When it moves, others follow.”
The graph line continued its ascent. Now it turned green as Zachary’s fortunes continued to rise.
“But the economists are predicting—”
“Who cares what the economists think? Traders make the markets. Anyone who thinks otherwise is a fool.”
“What about Svensson and the other economists? If their work is meaningless, why don’t they give Nobel prizes to the traders?”
“You think markets are based on science?” Zachary laughed. “It’s more like poker. You can bluff your way to a fortune.”
Zachary leaned back in his chair. He clasped his hands behind his head and smiled.
According to the green line, Zachary was up two percent. He had made back all of Edgewater’s losses. Kat wouldn’t have believed it could happen so quickly. But it did.
“But your model—you said it was based on quantum game theory. That it was infallible.”
Zachary laughed. “Just marketing hype. I tell people that to impress them, and it works like a charm. After all, what I’m really betting on is greed. No one wants to miss out on a sure thing.”
“But it’s not a sure thing at all.”
“Au contraire. Who do you think creates the currency fluctuations in the first place? If they’re big enough, I can lock them in. I sell once all the little people follow.”
“Just like the World Institute would? At the expense of the Edgewater investors?”
“Sophisticated investors who know what their risks are. And if they’re not sophisticated, they shouldn’t be in the game. It’s that simple. Everyone’s out for self-interest. It’s just a matter of whose interest has the most clout.”
“Everything’s manipulated? The end result a foregone conclusion?”
“Of course. Everything’s decided, Kat. Just like Las Vegas. Only I’m the house.”
Kat remained silent, transfixed by the screen. The Euro continued its climb, seemingly unstoppable. Zachary hadn’t just recouped all of Nathan’s losses; he had also made an extra billion.
“I’m back.” Zachary clapped his hands together and let out a whistle. “Not only is the fund whole, but I’ve made a profit. And a nice little fee for Edgewater. How do you like those odds?”
Las Vegas odds. In favor of the house, naturally.
Kat stared at the screen. “Time to lock in your profits?”
“In a few minutes.” Zachary turned to Kat. “Now—about my divorce settlement. We’ll need to rework the numbers, go back to court. Victoria’s not getting a red cent.” Zachary was more concerned about the dollars than Victoria and Nathan’s affair.
Since the divorce settlement had been based on falsified numbers, Victoria was entitled to even less than she had been awarded. But could the case be re-opened?
“I can have something for you tomorrow.” Kat rose and turned to leave.
But Zachary wasn’t listening. He hunched over his computer terminal, biting his lip until it bled. “What the hell—?”
Kat stopped and leaned over to view the screen. Though it wasn’t her money, she still felt physically sick. The graph line had changed from green to red. Once again it plunged in the wrong direction.
This time, Zachary wasn’t the house. Edgewater’s reversal of fortune was just as sudden as the gains. Someone else had bet even bigger.
And won.