Reid Treadwell stood on the floor of the New York Stock Exchange a few feet away from the post that would trade the initial public offering of Rockingham Corporation, a Burnham Pike client. It was a few minutes before the opening bell at nine-thirty.
O’Connell was fidgeting off to his left, while Treadwell’s attention was completely on Heather, the twenty-five-year old daughter of Keith Rockingham, the founder of the company, who was now up on the rostrum with a half dozen of his executives.
“This is like a dream come true for my father,” Heather said, almost gushing. She was a full head shorter than Treadwell, with long blond hair, a pretty oval face, green eyes, and a fabulous body, and wearing a sheer white blouse, a sharply tailored dark suit jacket, and trousers.
“I hear that you’ve made a lot of strides in the company’s marketing department,” Treadwell said. “A lot of movers and shakers have already sat up and taken notice.”
She touched his arm. “I don’t know how to thank you for all you’ve done for us, Mr. Treadwell.”
“Please, no formalities. I’d be happy if you would call me Reid. My dearest friends do.”
She was a little uncertain, but she nodded. Treadwell was the JFK of Wall Street. Don’t ask what Burnham Pike can do for you, ask what you can do for Burnham Pike was the bank’s unspoken mantra. “Okay, Reid,” she said.
“That’s better.”
The floor was busy this morning. CNN had wanted to do a live interview with Treadwell, but he had declined, patting the reporter on the shoulder. “Later in the week, okay, Mark?”
“You bet, Mr. Treadwell,” the man said, and he and his cameraman headed away.
Heather looked at him with open admiration, but then turned to look up at her dad on the rostrum with only minutes to go. “I’ve never seen an IPO go to market before,” she said. “This is exciting.”
Rockingham Corporation, founded thirty years ago by Heather’s father, specialized in rugged outdoor wear for extreme sportsmen and -women. It had carved out a respected niche in the market but had never hit it big. At least, not until three years ago, when Burnham Pike enrolled the company as a client.
In order to make money, you have to spend it was another of Treadwell’s self-serving mantras.
To start out with, BP floated $100 million in debt for the company so that it could begin a massive expansion program. And now the company was going public, hoping to raise another $25 million, this time in stock. Rockingham would be able to build a new factory in Vietnam, where labor was cheap, embark on a major ad campaign, and expand the products and equipment it offered.
“I would love to pick your brain about marketing,” Heather said, pressing closer. “Reid.”
Treadwell smiled. “That’s right—you’re Rockingham’s marketing director. Are you free for lunch today, after the opening hubbub subsides?”
“Absolutely.”
“Basel’s,” he told her. “It’s a little Swiss restaurant just a few blocks from here.” It was just around the corner from one of the apartments he kept at this end of town for clients and other pursuits. And sometimes, like now, he was almost ashamed of himself for how easy it was. Almost.
A middle-aged woman whom Heather introduced as an aunt showed up all overjoyed and gushing, embracing her niece in an encompassing hug.
O’Connell was at Treadwell’s side. “Do you really want to do this today?” she asked, keeping her voice low.
“Stress relief,” Treadwell said. “You should try it.”
“I’m wasting my time here. We have that potential problem we talked about.”
“Stay here and try to act like you’re enjoying yourself. When the shit hits the fan in the morning, let it be remembered that we were here and enjoying Rockingham’s little bullshit IPO.”
The opening bell was on the verge of ringing. The rostrum was crammed mostly with Rockingham execs, including the old man himself, the company’s name and logo on a banner on the wall behind them.
“Those poor bastards,” Treadwell muttered half under his breath, and he had to grin.
The aunt had left, and Heather was looking up at him. “What?” she asked.
“Your family is going to make a lot of money,” he said.
Heather was smiling. “You betcha, Reid, and so are you.”
On the rostrum, Rockingham, a large, barrel-chested man with a thick shock of perfectly white hair, pressed a button, and the brass, saucer-shaped bell just below where he and the others stood began ringing. Four other bells around the floor’s periphery rang at the same time.
Heather moved forward to applaud her father.
Rockingham pumped the hands of his execs; the well-wishers below applauded with abandon as just about everyone on the floor did at every opening bell.
“How long’s their lockup period?” O’Connell asked.
“Six months,” Treadwell said, his eyes on Heather, who was beaming up at her father and the others.
“Wasn’t for Abacus they would actually make some money. It’s a good company.”
“Shut the fuck up, Julia,” Treadwell said, just loudly enough so that O’Connell could hear what he was saying over the noise, but no one else could.
Rockingham and his entire executive team got a big allotment of newly public company shares for free, while a lot of friends and family had been issued special blocks that they could buy at the offering price of $7 per share. Which was a good deal, because after an IPO, the price sometimes rose dramatically, providing the company stayed healthy and the market didn’t tank.
The only problem was that IPO stocks issued to execs or purchased by friends and family were locked up for a period—in Rockingham’s case, six months. This meant that for a full half year they couldn’t sell. That was too bad if the stock price cratered in the meantime—which sometimes it did. And by tomorrow it certainly would.
“They have an interest payment due next month, don’t they?” O’Connell said.
“Five percent,” Treadwell replied absently. “Now get off the subject.”
The $100 million BP had raised for the company was in the form of seven-year bonds, which were sold to investors at 5 percent, paid yearly. At the end of seven years, and there were six to go, the company had to redeem the bonds and repay the borrowed money.
Rockingham’s executives left the rostrum and began filtering onto the floor, while the old man himself came down, shook Treadwell’s hand, kissed his daughter on the cheek, then went over to the trading post handling the IPO.
The round structure, of which there were a half dozen on the floor, was about thirty feet in diameter with banks of computer monitors and keyboards around the periphery. The market makers, as they were called, who manned each post, each with different-colored jackets—this one green—were already busy on phones and tablets. They were talking with brokers who delivered orders in person. A constant babble of voices surrounded each post. The feeling on the floor was electric.
A CNBC reporter and camera crew came over and did a brief interview with Rockingham then moved off. The old man turned and gave Treadwell a nod and a big grin. This was his day.
In Treadwell’s estimation it was actually a waste of time being here, but he had to admit that it was exciting. Got his blood stirring, especially with Heather Rockingham at his elbow.
She turned to him, a huge smile on her face. “Isn’t this wonderful?” she said. “My dad is so happy. But tell me something: I thought that most stock trading was done by computers. So why all the people here?”
“You’re right about one thing, most of it is done by computers. Eighty percent of the New York Stock Exchange’s trades are done digitally, in fact. But the exchange likes to have some live humans—market makers—at the posts who make trades, especially the more complicated ones. Trades where the guys in the bright jackets get the feel for the deal. They can haggle sometimes, and they have an instinct for what they can get in a trade. Computers don’t have instincts. Just numbers.”
“And all the TV cameras,” Heather said. “It’s almost like we’re on a movie set in Hollywood.”
Treadwell had to smile. “Yeah, and just about everyone here knows it.”
An exciting murmur went up from a number of Rockingham’s execs who were staring at the monitors on top of their post.
“We’re not trading yet?” Heather asked.
“New issues like yours start trading around eleven, in an hour and a half. Right now the market makers are dickering among themselves about the opening price. A lot’s going to depend on the market’s direction. But everything is up to this point, which should help you.”
“Fantastic,” she said. “I bet the farm—my farm—on our stock. Daddy said it was too risky, but I put everything I had—a hundred thousand—into it.” She looked up at Treadwell. “I believe in Rockingham, and I believe in Burnham Pike,” she said. She rose up on her tiptoes and kissed him on the lips. “I have to mingle. See you at lunch.”
O’Connell was at his shoulder. She nodded at a passing TV camera crew. “Aren’t you worried that Bernice will see you kissing some young girl on the flat-screen?”
“My wife hasn’t gotten out of bed yet,” Treadwell said. He spotted Seymour Schneider just a few feet away, and he gestured for the man to join them.
Blue-jacketed Schneider, a Burnham Pike broker who’d been a fixture at the NYSE for more than twenty years, was one of the old men in the business. A couple years ago a Fox News analyst made the comment that “What Schneider doesn’t know about the market isn’t worth knowing.”
The nearly bald man in his mid-fifties, with a look of mild surprise etched on his round, pale face, as if the world had just taken off on some strange tangent, came directly over, and he and Treadwell shook hands.
Schneider had an intuitive feel for the market and had predicted the dot-com bubble’s bust in 2000, which had led to a recession and the subprime mortgage collapse of ’08, which in turn had led to the Great Recession.
He looked like he was in a funk.
“So how is it shaping up this morning?” Treadwell asked.
“Like a house of cards.”
“The market’s up,” Treadwell said.
“It’s the debt, like a plague. And I don’t have to tell you how fast it’s spreading. But something’s just around the corner that’s going to send us past the point of no return. War, some earthquake or something, or maybe just someone screws up somewhere, and we’ll be swallowed whole.”
O’Connell went pale and was about to say something, but Treadwell held her off with a gesture at the same time he spotted Spencer Nast, who was here visiting old friends and, like Treadwell, wanted to be seen cheering on a healthy market. Earlier that morning Nast had been telling them about the same thing that worried Schneider.
“Okay, Seymour, you have my attention,” Treadwell said. “Talk to me.”
“Do you need me to tell you how many trillions in debt we are in, just in this country, let alone the entire world market—Europe, Russia, hell, China? The amounts are staggering. It’s a debt we can never pay, and the market’s not going to like it. Could be a crash is coming.”
“But the market can’t crash,” O’Connell said, which Treadwell thought was one of the dumbest things he’d heard in a long time, especially now when Abacus was ready to be released.
“The market’s too high,” Schneider said. “It could be a repeat of twenty-nine when overnight it lost, what, a quarter of its value? Everyone was poor in an instant. Guys jumping off the roofs of their office buildings. The banks were carrying too much debt, and when people went for their money, it wasn’t there. Almost like the subprime mortgage crisis in ’08, only no one in 1929 thought to save the banks like we did. Too big to fail? Well, they did.”
Treadwell had an ominous thought that Schneider knew about Abacus.
“And don’t count on the circuit breakers, if this happens,” Schneider said.
To prevent panic selling, the Securities and Exchange Commission required that when the market dropped 13 percent, trading on all exchanges had to stop for fifteen minutes. If the slide were 20 percent, all trading was canceled for the rest of the day.
“Things aren’t going to get that bad,” Treadwell said. “Trust me.”
“From your lips to God’s ears,” Schneider said, and he turned and walked away.
“Do you ever feel guilty about what we’re going to do?” O’Connell asked.
“Never,” Treadwell replied.
“Well, I think of all the misery that’s coming to ordinary people and I…” She stopped, realizing she had said too much.
Treadwell gave her a stern look. “Are you going soft on us?”
“No,” she said, clasping her hands together.
“The entire world economy is teetering on the brink, and it’s going to collapse anyway. You heard Schneider, and you heard Nast. We’re just speeding it up a little.”
“And making a profit from it.”
“Yes, and making a profit. We’ll be the last investment bank left standing in the ruins. It’ll be up to us to guide the economy back to health, so why shouldn’t we profit from our foresight and ingenuity? We’ll be saving the world.”
“After we destroy it,” Julia said. But then she smiled and nodded. “But I see your point.”
“We’re not ordinary people, as you call them,” Treadwell said, leaning closer. “Never forget it. We’re more like gods.”