Chapter 57: That's No Secret!

September 30, 1984, Chicago, Illinois

"I don't think that was a good idea," I said to CeCi once we were in my room.

"I think the shock factor actually helped."

"I disagree. She's made great strides, but it's been a slow, step-by-step process. You wouldn't have done that with Violet."

"True, but Violet was never a Fundy!"

"I believe your approach will do more harm than good. I'm reasonably certain my slow, methodical approach relying on logic and self-discovery will be much more effective, and not risk losing our nanny."

"I'm sorry," CeCi said.

"I'm not upset with you; I just feel my approach is better. Give her some time to adapt to living here."

"Jonathanland is like a foreign country!" CeCi declared. "Contradictions seem to abound, but that's only due to not being up on the culture."

"I like the analogy, and I think it's important for you to give our new citizen time to adapt and integrate, please."

"I will, though now that I've put the idea into her head..."

While that was possible, I didn't see it happening, though I suspected that if I directly asked Chelsea to do that, she might, given she'd done everything I'd asked during our first night together. But I wasn't going to ask, because I felt, as I'd said to CeCi, I didn't think that was the right approach.

"We'll cross that bridge if we come to it! Shall we get undressed and get into bed?"

"Yes!"

October 1, 1984, Chicago, Illinois

Just before 8:00am on Monday morning, Shelly, one of the clerks in Personnel, called to let me know that Tim Owens, our new data analyst, had arrived and would be brought to Research once he'd completed his orientation and paperwork. About an hour later, Noel Spurgeon called me to his office, where I saw a new face — a guy who was around thirty-five, tall, and in good shape.

"Kane, this is Robby Gould. He's bringing $375 million in his Aurum Fund. Robby, this is Jonathan Kane, Chief Analyst."

"Nice to meet you," I said.

"And you," Robby replied.

"Robby would like to sit down with you and get an idea of what your team is able to provide and understand how you handle research requests."

"I'll make myself, Pérez, and Kirov available anytime this afternoon."

"How about right after market close?" Robby suggested.

"We'll expect you on 29."

"Thanks, Kane," Noel said. "Dismissed."

I nodded, left his office, and returned to the Research Department. I let Tony and Bianca know about our meeting, then went to my office. Almost immediately, Pete Mueller came in and shut the door.

"First Chicago is going to announce about $300 mil in bad loans by the end of the week."

"Is that usable information?"

"No, that's why it's not in this morning's analyst report and why I shut the door. It's about as inside as you can get."

"Is there any way to confirm it from another source?" I asked.

"Probably not."

"Then we can't act on it in any way; we can't even tick the banking risk meter up unless we have some other actionable information. I assume you haven't said anything to Scott."

"Correct. I only found out last night when it was mentioned while I was hanging out with some friends from the bank, playing poker. I think they momentarily forgot I was an outsider."

"That won't cause us any trouble for me, and so long as you don't put anything in an analyst report until you can confirm it through a source the SEC would accept, the traders can't act on it. I won't trade anything in the banking sector before the news is official. Once you do confirm it, a flash analyst note needs to be circulated."

"That will probably be when the press release comes out, which will be simultaneous with their report to the Federal Reserve and FDIC."

"How bad will this hurt First Chicago?"

"With their capitalization and reserves, it'll hammer their stock, but otherwise, they'll be fine. That said, I think this is your canary in the coal mine."

"Yep. Focus on those bad loan portfolio reports you've been working on. Nobody can point to that as a problem because we started those immediately following the Continental Illinois failure."

"Will do."

"Do you trade at all?"

"No. All my investments are divided between Spurgeon Select, Spurgeon Millennium, and Cincinnatus."

"Then you're safe. Thanks, Pete."

"You're welcome."

He left, and I made a note in my daily log about the conversation and my instructions not to act on the information. I had questioned the wisdom of recording such information, but Kendall Roy in Compliance felt it was a good strategy to demonstrate for the SEC that, while we were aware of inside information, we hadn't traded on it. I wondered about that, but Noel Spurgeon had signed off, so I dutifully made the log entry.

The morning was relatively quiet, with the market still in the doldrums and not much out of the ordinary going on in the world. I had lunch with Jack, Bianca, and Violet, as I usually did, then the four of us went to the gym. After my workout, instead of heading back to the office, I went up to the condo.

"Hi!" Chelsea exclaimed. "Is something wrong?"

"No, I just wanted to check on you."

"Sofía and Vesper are both napping, so I'm reading a book I found on your bookshelf. I hope that's OK."

"It is. Which one?"

"Stranger in a Strange Land. Deanna strongly recommended it."

"What do you think?"

"I just started, and it's a bit confusing."

"Some of the concepts there are going to seriously challenge you," I said. "Not in the sense you won't understand them, but they'll be at odds with what you believe."

"Deanna made that clear, but she said if I read it, I'll understand you better."

"Maybe," I chuckled. "But I'm not from Mars! Anyway, I need to get back downstairs. I'll see you just after 5:00pm."

"Can I ask a quick question?"

"Yes."

"Can I get a regular night?"

"Wednesday is free."

"Thanks!"

I left the condo and returned to Spurgeon, where I spent the afternoon on research and analysis. At 3:40pm, Robby Gould arrived in my office. I called Tony and Bianca in and had them shut the door.

"I think we'll allow Bianca to start," I said. "All of our work relies heavily on the work of the data analytics team."

Bianca explained how her team worked and the data they produced. Robby asked a number of insightful questions, and once he was satisfied he understood, I had Tony explain the process behind our daily analyst report. That, too, led to some questions, and when Robby was satisfied, the discussion turned to custom research.

"How quickly can you turn around specific stock analysis and sector analysis?" he asked.

"We usually fulfill sector analysis reports within two business days," I replied. "Individual stock analysis is one business day. We accommodate rush requests, but those require approval from Noel Spurgeon or, in his absence, Murray Matheson. The biggest challenge at the moment is computer time, but by the end of November, we'll have a much more powerful system in place. What sectors do you trade?"

"Mostly commodities futures, along with companies that source or purchase those commodities."

"If you'll send me a list of your current holdings, we'll flag news, as well as price and volume changes, for inclusion in our daily reports."

"I'll get you that list tomorrow."

"Sounds good. If you have any questions or need anything, just call me, or if I'm not here, call Tony."

"Thanks. Noel Spurgeon says you trade your own fund as well."

"I do, but to ensure there is no question about holding back information, I won't trade on any information until it's included in an analyst report and that report has been distributed."

"I was actually more interested in why you're sitting here when you have over $400 million in AUM."

"I promised Noel Spurgeon I'd build the Research Department and run it for two years, and I'm a man of my word."

"Thanks for taking the time. I'll get you the position list."

"You're welcome. As I said, let us know if there is anything you need."

He and I shook hands, and he left, though Tony and Bianca stayed behind at my request.

"He had his own analyst at his old firm," I said. "So he's used to more personal attention. Tony, I'd like you to check in with him a few times a week – just to make sure he's happy."

"Got it," Tony replied. "His fund will make up some of the difference from the loss of most of the Wabash Street Fund."

"I'm pretty sure that's why Mr. Spurgeon brought him over," I replied. "Mr. Spurgeon has a big capital raise underway, but it's taking longer than he had hoped, so he did this, and the total firm AUM will go up, despite the losses in the Wabash Street Fund and the clients who pulled their money. Bianca, let me know if there is even a hint of a delay with the new computer system."

"Count on it! We're utilizing nearly every overnight CPU cycle of the current system as it stands."

"I do read your reports, you know," I chuckled.

Bianca and Tony both laughed, and as the meeting had concluded, they returned to their desks. I spent the rest of the afternoon reviewing banking stocks, trying to discern my strategy for when First Chicago made its announcement, or before, if Pete found actionable information.

At 5:00pm, Violet and I left the office to head to her house for dinner, and after dinner, we both went to class. After class, we met for pie as usual, then we headed back to the condo.