Chapter 2
Driving home, Peg reflected on the day and told Jim that she had had a very relaxing time but that she had found Angelique a little tiresome in that she kept comparing the two brothers as though Jim were a failure and Pete some sort of magical financial guru. She’d even suggested that the humble Subaru Forester they’d arrived in at the marina was a little off the mark for the likes of Pete, although she said Pete had told her not to criticize his older brother.
Jim replied that he thought Pete might finally have found a woman who could be his equal in terms of drive and ambition. Angelique he said seemed to him to know exactly what Peter’s life was about and to be enthusiastic to complement his drive and ambition. She certainly had not appeared to be a vacuous bimbo as had the last couple that had accompanied the younger brother to family gatherings some years back.
“Why do you think Pete was suddenly so solicitous of your welfare?” asked Peg.
“Oh, he’s got in mind some sort of scheme to make money and he wants us in on it. He won’t tell me just what it is but it has to do with this share market behaviour called ‘short selling’” Jim replied, trying to keep things very low key and casual.
“How does that work?” asked Peg.
“Well if you know that a company’s share price is going to tank you get in before it happens and sell shares you don’t yet own, then sit back and wait until the fall occurs before you buy the shares back at a much lower price. Apart from brokerage and any financing costs, the profit is all yours” said Jim.
“Wouldn’t the people who bought the shares need to see them?”
“That’s where the brokers have an agreement that in effect means as long as they hold sufficient funds to purchase the shares back at any time there is no need to actually produce the share certificates or proof of ownership until the shares are actually repurchased” said Jim
“So why does Pete want your help?”
“He wouldn’t say just yet. I think he wants a cast iron guarantee that I’ll stick to my word and not bale out of the arrangement at an inappropriate time” said Jim.
“Okay, so at least go along with him until he tells you his plan. Then surely you can bale out if you don’t like it.”
“Not really. He wants my guarantee before he tells me his plan. I assume he has some way to cause a company share price to fall and he needs help to set it up. Probably helps that we don’t share the same surname, being really only half brothers” said Jim.
“Did Peter say that?” asked Peg.
“No, but he’s smart enough to have thought of it” replied Jim.
“I’d forgotten that. It’s so long ago that we were all together on a regular basis. I still don’t remember why we stopped getting together.”
“Yes you do. It was because Holly and I got a little drunk and had a bit of a fumble in the bathroom at that Christmas get together. You know it didn’t amount to anything but I think Pete hasn’t really quite forgiven me” said Jim.
“From what you tell me both of you got up to that sort of thing more than a few times” said Peg.
“Yes but not with each other’s wives” replied Jim.
“I never did fancy Pete but if I had would it have made a difference that he was your brother?”
“Probably, a little. It was a stupid thing to do but Holly just came on to me when she found me in the shower, and I was slow to think of the consequences. Anyway nothing actually happened then or later.”
“But if you’d been alone with her it might have?”
“Yes. But that’s all water under the bridge now. Holly’s been dead for seven or eight years now and Pete has moved on with his life.”
“I’m still surprised he got in touch and took us out for the day” said Peg.
“Yeah. I thought at first it was just to show off his new toy, but I think he is an insatiable wealth addict and doesn’t get much of a buzz from it anymore unless it’s more and more grandiose every time he makes a new move” Jim replied.
“Notice he didn’t invite us to his home. Just a straight out ‘meet me at the Cruising Yacht Club marina berth 142.’”
“Right. He doesn’t want us too involved in his lifestyle unless we become partners in his little short selling ventures. Then, I’m sure, he’ll welcome us like family and become as generous as need be to make us all subservient to his wishes” said Jim.
“Don’t be too hard on him Jim.”
“He told me he just paid four million for the new pad in Point Piper” said Jim.
“Angelique said it was ‘a cool place to veg. out’ as she put it but she didn’t say what he’d paid for it. She also said that Pete and she had a property in the hinterland where Pete has built a mansion for their getaway time.”
“Do you have any idea what the boat would cost as well?” asked Jim.
“Not really, but a lot I’m sure”.
“I reckon at least four or five million.”
“Do you think it’s all paid for?” asked Peg.
“Funnily, yes I do. Pete always hated borrowing money. He liked to be master of his assets and I think nothing much has changed there” said Jim.
“Well it sure would be nice to be in the money a bit after all the years we’ve struggled just to get where we are” responded Peg.
“Where’s that Peg?” said Jim, as if he needed to define his status and territorial hold on ‘terra Australis’.
“Oh well. Here we are retired and on enough pension stream to keep our standard of living up, and afford a trip every few years” said Peg, the slight sound of envy not too far beneath the surface.
“And drive an old Subaru like this, or your even older Volvo” Jim replied.
“You know the money’s there if you want a new car, Jim” said Peg.
“Yes but then the trip we are planning to Europe will have to be put on hold for several more years to catch up” he replied.
“Okay, so let’s find out what Pete wants and see if we can make a bit more cash on the side. It won’t do us any harm just to listen will it?” said Peg.
“Well the way our share portfolio has been performing lately we might really need to boost things along. The sort of money Pete is talking about making every time he has one of these short selling episodes would more than double our entire savings in a single hit” said Jim.
“Do you really want us to be back in the day to day business world worrying about your shares and all that at our age?” asked Peg.
“Yes” Jim replied. “If it will make a difference to our wealth position I think I do. It’s alright for you with your Government pension income even if it is not really keeping up with inflation, but in hindsight I suppose I should have stuck with the University system as well when I retired.”
Pulling into the driveway of their inner suburban home in Summer Hill, Peg could hear the telephone ringing but by the time she made it through the front door the ringing had stopped. Picking up the phone there was a message already from Peter.
“All fixed, Sails on the Dock, 7PM Saturday.”
“Not one for wasting words is your brother?” said Peg as Jim entered.
“Never was” Jim responded. “He sure is anxious for us not to change our minds.”
“Okay, so let’s play along with him until we know what he has in mind” said Peg.
“That’s just it Peg. He’s not going to tell us until we’re committed” Jim said, rather flatly.
“But how can we be committed before we know what the deal is?” asked Peg.
“That’s all Pete said. No way would he tell us without a full commitment beforehand” replied Jim.
“So what’s the point of going out to the restaurant in the first place?” asked Peg.
“Well it was fun today catching up and the water was great, the fishing too. I think we could give Pete a try. Won’t do us any harm and could make us a lot better off ” said Jim.
“Alright. Let’s go with it. Tell him it’s all aboard and hope to hell h
e knows what he’s doing” said Peg in her most decisive tone.
To this point in her life Peg had been proud of her role in raising a family of three children and keeping home for an increasingly successful academic husband, as well as her own career in social work. By her earlier standards their lives were successful. However, in retirement she had come to realize the limitations that fixed income might bestow and somehow had experienced, rather late in life she acknowledged to herself, a desire to step off on a quest for financial and material improvement. Peter’s invitation for the day, together with Jim’s description of his invitation to them to join his money making plans had simply served to focus her mind on the fact that it was still attainable if you knew the right way to go about things.
The week sped around. Peter met them outside the restaurant, apologizing for Angelique who was in bed with the mystery bug that was going around. Sails on the Dock was as good as its reputation. The menu included smoked Tasmanian salmon with caviar entrée followed by scallop and abalone kebabs grilled and served on a bed of rice with the lightest of saffron for colour and flying fish roe served as a dressing for exotic flavour. A shaving or two of French truffle complemented the fish, and all was accompanied by some rather expensive wines chosen by Peter. Dessert was well underway before the talk turned serious, Jim leading off:
“Pete, we’ll go with your scheme. Once in, in for good. What do we need to do?” he said.
“Thought you might be acquiring the taste for the good things in life” replied Peter with a slight grin. Jim knew too that the look in Peter’s eye meant he was on a carefully planned mission to accomplish by persuasion what logic might realistically fail to do. But it was the younger brother’s charm that smoothed he waters. “Now here’s what it’s about. Do you remember the little seasickness tablets you took the other day?”
“The Level-C?” asked Jim.
“Well done. You even remembered their name. Well, this company that manufactures these is right here in Sydney. They also make dozens of other medicinal products, mostly what are called alternative medicines. You know: herb remedies for this or that ailment, mineral and vitamin supplements such as the fish oil tablets with Omega 3 fatty acids and vitamin E tablets and so on. Now, the company trades on the share market and has been riding pretty high for the last year or so. But I have a contact inside the company who says they’re real bastards to work for. You know, lots of demands on their workers, low pay, long hours and all that stuff. He says there are some places where the quality control is falling down and although he has attempted to bring this to the attention of senior management he has been rebuffed and told to keep his mouth shut” said Peter.
“So you think they’ll run into trouble and suffer a price fall on the stock market?” asked Peg.
“I’m certain of it” said Peter.
“So?” asked Jim.
“Well what I want to do is use this as a test case, a taster if you like, to see whether you get the hang of becoming seriously wealthy” said Peter.
“Okay. We’re with you so far” said Peg.
“Right. How much collateral can you put up?” asked Peter.
“I thought you had all the money Pete” said Jim.
“Well, I do have some, but I figured if you want in you’d be prepared to front up with some of the cash as well” responded Peter.
“How much are we talking about Pete, and how does it work exactly?” said Jim.
“Well, first you have to open a trading account with one of the share brokers. I’d suggest Comsha or BScript. Comsha is cheaper for average punters. They need security against the shares you are going to sell, so the size of your sell orders has to be matched by the size of your deposit balance with them. Unless of course you also borrow some funds with security such as your house. This is your risk stake.”
“No way” said Peg, emphatically.
“Don’t panic sister-in- law. This is only if you are seriously greedy. So how much cash could you muster for a potential doubling on the buy-back price?” asked Peter.
“We have some funds put away for a new car, not flash of course, and Jim could sell some of his share portfolio to raise more. What about if we put in one hundred thousand dollars?” asked Peg, now clearly caught between the devil and the detail.
“A start, but still small change for what we can do here” Peter replied.
“How much will you be putting in Pete?” asked Jim.
“I’m going to go ten million on this one.”
“We could never match that” said Peg.
“You won’t have to. If you put up the hundred K I’ll do the rest. But I want you to do one more thing to ensure that this business happens” said Peter conspiratorially.
“Okay. What’s that?” said Jim.
“After we have sold down our shares, I want you to go to a pharmacy near here and buy some of their natural arthritic relief tablets. Keep the receipt and bring it and the tablets to me. They’re in foil slabs of twelve tablets each, two slabs per pack. I’m going to add something to them to make the user violently ill. I’ll flush one down the John, then I’m going to fake a violent illness to a pill I haven’t actually taken. I’ll then call the doctor, or Angie will, and indicate that the tablets could be the cause of the problem. Of course, the doctor will send the tablets to the relevant health authorities and bingo!! Trouble for the manufacturer. The share price will plunge and we buy back what we have sold. Probably up to fifty percent profit. No-one’s hurt, we quietly go on with the next project” said Peter.
Peg and Jim sat in awed silence for what seemed to ages then Jim raised his glass to Peter.
“Got to hand it to you brother. Double the money you reckon?” he beamed.
“Maybe more. Once the relevant health authorities get into this company who knows what they might find. My inside informant says there’s quite a lot wrong with the hygiene of the plant. Maybe they’ll take out a shut-down order. Forget the percentages then. You might not even have to buy the shares back. They might be worthless. So your initial guarantee amount is returned as are the sale proceeds for the shares you sold. You could still do very well with your stake of one hundred thousand dollars. Remember, they’ll also lend you a margin on your initial stake, so your hundred thousand might let you sell say one hundred and fifty thousand worth of shares. So you’d cop nearly all this as profit if the company went down” Peter explained.
“And you’d cop about ten million dollars I take it?” said Peg.
“Yep, that’s about the strength of it. Of course that’s before taxes and expenses.”
“So why not just do the dirty deed yourself?” said Jim.
Then Jim saw the weakness.
“Won’t they think it strange that you are a known market player and here you are selling down shares in a company that you are somehow connected with as the source of their problems? Surely they’d all smell a rat?” he asked.
“You always were slow on the uptake Jim. I’m too well known. You don’t even have the same surname as me remember, and you live miles away. Why do you think my hands need to be clean? They won’t know I’ve sold down the company because you will sell all our shares. So the real killing might be mine but they’d have no leads of any consequence to pin anything on me” replied Peter.
Jim contemplated for a few moments then said: “Pete, there are risks in this. I want another one hundred thousand dollars from your side of the equation if we pull it off. What do you say?”
“Okay by me. I’d have been disappointed if you hadn’t suggested that” replied his brother.
“Before we go ahead Pete, I want you to guarantee our original stake. If you can raise ten million for this caper, we are fully stretched at one hundred thousand and we want you to agree that we won’t lose any money” said Jim.
“Okay, but you can have either the extra one hundred K if we make one hundred percent gain or the return of one hundred K if we fail to pull it off. Not both.”
“You al
ways did bargain hard younger brother, but we’ll accept the guarantee option, won’t we Peg?” said Jim.
“Yes, I suppose so” replied Peg, “so long as no-one is going to get hurt in this whole thing” she added.
“It’s a done deal then” said Peter, and motioned for the bill.
“Come over to the apartment at Point Piper when you have the trading account opened and the cash deposited. But park up the street and walk the last couple of blocks so your car is not on any of the security cameras. You never know what the Big Brother things will be used for if they ever smell a rat. We’ll go over the details when you do, but the sooner the better so we can move on to another project.” Peter handed a card with his apartment address to Jim.
During the drive back to Summer Hill, Peg looked at Jim and said “I never thought I’d be feeling so much like a louse. What do you think Jim?”
“I think what we are going to do is basically wrong but when you consider how the market as a whole is full of sharks that have been doing this to us all the way along I just think we have little choice but to join the throng and get in for our cut of the cake. Otherwise, we’ll end up on poverty street wishing we’d had the good sense to be at least a bit more like Pete” responded Jim.
“What, totally ruthless?” Peg replied.
“Oh, he’s not so bad. His bark is a lot worse than his bite. Did you see the tie he was wearing tonight? No-one who is really ruthless would be seen dead in a tie like that” said Jim.
Inside, they turned on the late night television to have an advertisement from one of the most highly respected banks with a finance yuppie saying: ‘Give yourself an unfair advantage. Trade CFD’s.’
“There you are” said Jim “they’re all at it. CFD’s are a way of ripping off the market. They’re no different to us. You obviously have to have some sort of unfair advantage these days or you’ll go down the gurgler.”
“What are CFD’s?” asked Peg.
“They’re a financial instrument based on sharemarket betting and are actually like a complicated bet on a share that is going to decline in value or at least not rise in value. They’re just like we plan to do with ‘To Your Health’ said Jim.
“They’re all immoral” said Peg.
“It’s the real world” said Jim.
Deep inside however, Jim knew that the path upon which they were to embark was one whose ending might not be predictable and at best might lead to little increase in the real satisfactions of a comfortable retirement; at worst a nightmare of incalculable proportion. The pleasant day aboard Peter’s boat however had worked more than a little magic. Jim wanted some of the trappings of the good life. He had, he felt, a right to extract a little more from the world than it had supplied so far, and if Peter had found a way to do so it was just fine with him. Peg, also a little afraid of stepping over the brink into the unknown also found herself forcing her conscience into quiescence as she contemplated some of the benefits of being a little more wealthy as she put it to herself.