Chapter 48: You're Stalling!

September 7, 1984, Chicago, Illinois

"Why did I just get the 'jealous girlfriend' look?" Alexa asked quietly after Chelsea went upstairs to check on Sofía on Friday morning.

"I think you have that confused with disapproval of my lifestyle."

"Baptist or Catholic?"

"Not Catholic; some form of Evangelical."

"They're the worst. The Catholic chicks mostly figure it out when they go to college; the Baptist or Bible Church chicks mostly never do, if they even go to college."

"Billy Joel?" I asked.

"Or Frank Zappa!"

After we finished breakfast, I called a car for Alexa and walked her down to the lobby.

"OK to call in a few weeks?" she asked.

"It's always OK to call! You should join us on Sundays for Bears games."

"What time?"

"An hour before kickoff until whenever everyone leaves, though this Sunday, everyone will leave by 6:00pm because Deanna is having an art show here."

"Cool. Any objection to me showing up to Claire's class to observe?"

"None from me, though it's clothed."

Alexa laughed, "We can't have those horny little High School girls demanding you pop their cherries after seeing you in your full glory!"

I laughed, "Too young for me. Of course, you could have all the horny High School boys!"

Alexa rolled her eyes, "No thanks! I don't even have to get naked to have them drool over me!"

"True!"

The car arrived a few minutes later, and after exchanging a hug and kiss with Alexa, she got into the car, and I headed to the Spurgeon Capital offices to begin my day. The world situation was relatively stable despite numerous regional conflicts, and the market was, in effect, treading water waiting for the Fed to act, and for the US presidential election, which was about eight weeks away.

That meant our analyst reports were largely about the future, as there were few opportunities for big gains until mid-November, at the earliest. My competition with Noel Spurgeon would go down to the wire, and the difference would very likely come from one of the speculative short positions I'd taken. There wasn't much I could do at this point, as things were more or less on autopilot, and I was looking for opportunities for 1985.

Once I completed my portion of the analyst report, I decided to tackle a challenge I was certain Noel would present when he returned from Bahrain — how best to invest a potential quarter billion dollars from the Gulf. I was positive Noel would have some ideas, but I was equally certain he would ask me, and I needed to have a good answer.

The challenge was figuring out what assets to purchase without moving the market, but also allowing for significant gain. Treasuries would be one way, and might be a reasonable place to park the money until a better opportunity presented itself. That would be a conventional answer, and one that would not satisfy Noel Spurgeon. I needed something creative or innovative, though it would have to be properly hedged.

I didn't come up with anything spectacular during three hours of work, but I did find some other stocks I felt were undervalued. Rather than enter the orders myself, I went upstairs to my 'desk' to see Jack and invited him into my trading office.

"I want you to begin quietly accumulating shares in Downey Savings & Loan Association, Financial Corp. of Santa Barbara, Comdisco, Continental Information Services, Tonka, Computer Sciences Corporation, and Texas International. Do it carefully, as we don't want to move the market much, though if you can find counterparties for an off-ticker trade, it's OK to make a block purchase."

"How many shares?"

"At least 100,000 of each, but you have until the end of the year. Even with the money from Ms. Volkmer and the two New York investors, we don't have enough cash on hand to complete all the purchases, along with the other accumulations, so we're going to need to raise some capital."

"I'll keep on it," Jack said. "I've had a few more nibbles, but nothing definite. Back to the accumulation — naked or covered?"

"Naked long is OK for those shares. Give Joel Steinem a call to see what he can find in the way of large blocks. Quietly."

"Got it."

I headed back to the Research Department, and when I walked in, Violet let me know that Lyle Danforth, the insurance company CEO I'd met in San Francisco, had called, and she'd said I'd call him right back. I thanked her, then went to my desk to return the call. His assistant said he was expecting my call and put it through.

"Lyle Danforth," he said.

"Jonathan Kane from Spurgeon Capital."

"I've read through your prospectus, and I'd like to give you half a million to invest."

"That's excellent news. I'll just need a notarized application form; I included two with the prospectus. You can fax a copy, then put the original in the mail. I can get things started with the faxed copy. There's also a form for transferring assets, though that one doesn't need to be notarized."

"I'll take care of that today. How long does it take to open the account?"

"About ten business days. That gives Legal and Compliance time to complete their review, and then for New Accounts to get everything set up in the computers."

"OK. I'm considering moving some of our reserves to your fund. To do that, I'd need you to speak with our Board of Directors. Please don't take this the wrong way, but your youth is going to raise significant questions."

"I completely understand. What size investment are you considering?"

"We'd have to hash it out internally, but between $50 million and $100 million."

"With that amount on the table, I have no doubt Noel Spurgeon himself will accompany me, along with my team."

And likely Murray Matheson as well, if I asked both of them. It would also resolve my concerns about having enough capital to buy the speculative positions I had just discussed with Jack.

"That would make the right impression," he said. "When can you be here?"

"I'll need to coördinate with Mr. Spurgeon. He's traveling today, but I'll speak to him over the weekend and then give you some proposed dates on Monday."

"Sounds good. Look for my application form later today."

"Thank you for your confidence."

"You're welcome. I do have a favor to ask."

"Name it," I replied, having a strong suspicion it was about Deanna.

"I'd like a chance to buy some paintings from Miss Haight," he said. "When she completes works, send me photos, and I'll make offers on the ones that interest me."

"I'd be happy to do that, and she'll be even happier!"

"Fantastic!"

We said 'goodbye', and after I hung up, I called Jack to come down to my office. When he arrived, I invited Violet in and shut the door.

"We have a new client with half a mil," I said. "But even better, he could bring between $50 and $100 million in insurance company reserves to the fund."

"Hot damn!" Jack exclaimed. "That would solve the capital squeeze!"

"Yes, it would," I agreed. "The fly in the ointment is that a twenty-one-year-old whiz kid hedge fund manager isn't going to play well with an insurance company board. I'll give Noel a call on Sunday so I can set up a meeting in San Francisco. All three of us, plus Noel and possibly Murray Matheson, would fly out."

"That's amazing, Jonathan!" Violet exclaimed.

"The money isn't in the bag, but we're going to do everything possible to get it. He did ask to have a chance to purchase some of Deanna's future work, and I promised to facilitate that."

"What do we need to do?" Jack asked.

"Nothing until I speak to Noel. Well, Lyle Danforth will send his personal application by fax today, so let's get that to New Accounts immediately."

"I'll make sure it gets to Jack as soon as I have it," Violet said. "It's coming to your private fax, right?"

"Yes. Jack, don't let up on the capital raise — diversity of clients is key for the future."

He nodded, "Understood."

They left, and I called in Tony, Pete, and Scott and had Tony shut the door.

"I need every bit of information you can dig up on Sierra Nevada Reinsurance," I said. "And I need it yesterday."

"OK to ask the play?" Tony inquired.

"We have an opportunity to win some of their business for investing their reserves. Please don't discuss this outside my office."

"It's almost noon on a Friday," Scott observed. "Is Tuesday afternoon OK?"

"That should be fine. I can do the preliminary work, including setting the meetings, but before we get on the jet, Noel Spurgeon will want a full analysis."

"That big?" Tony inquired.

"That big," I replied."

"We'll get right on it!"

They left my office, and I continued working until 11:30am, when I went up to the condo to wait for Marlena Volkmer to arrive. Marlena would be leaving Vesper with Chelsea while we had lunch, so she was coming to the condo. She arrived a few minutes later, and once Vesper was settled, we left the condo and headed downstairs to hail a cab to take us to Star of Siam, a change from our usual upscale fare.

"How was your trip to San Francisco?" Marlena asked once we were in the cab.

"Successful. How are things going with you?"