The aircon hummed in the background as Barton sat hunched over his sleek Bloomberg terminal trying to make sense of the shocks that had rippled through the markets after Lehman’s collapse. His Bloomberg was several generations removed from its ancestor, the Market Master, first installed at Merrill Lynch in the late eighties. The Bloomberg terminal had become a real-time tool for trading, market research and investment banking, offering investors and traders an extensive range of financial tools and software for risk assessment.
Barton realized, as he typed on the colour coded keys, he ran the risk of becoming irretrievably addicted to his recely acquired toy, hypnotized by the flow of data and market information that endlessly flashed across the terminal’s screens. He like many of the two hundred and fifty thousand users across the planet paid for the privilege of using the machine; anything from one thousand five hundred dollars a month upwards.
Even when not seated before the twin screens he could access Bloomberg on his BlackBerry. It was a service that provided him with real-time financial data, trading tools and news, plus the analytical software needed to understand and use the massive and uninterrupted flow of data.
The terminals, invented by Mike Bloomberg, were installed in trading and financial institutions around the globe forming the foundations of the inventor’s business empire. These platforms, as they were known, served as conduits for real time financial transactions of every kind. The inventor’s New York based company had grown to more than ten thousand people based in more than one hundred offices scattered around the world, operating twenty four hours a day and three hundred and sixty five days a year.
Market volatility was the driving force for the kind of trader Barton had become, buying and selling exchange-traded funds, contracts for difference and equities, using spread betting to play the markets where investors were able to react quickly to changes as they happened.
He was not into the kind of commonly traded so-called vanilla equities, which many small traders concentrated on. Speculative investments were his predilection; oil, gold and sterling. His Bloomberg helped him keep a finger on the pulse using a variety of options, something that required not only discipline but a good dose of foresight. Sifting through world news twenty four hours a day he looked for the signs that were the forerunners of revolution, manmade calamities and other upheavals such as natural disasters that would influence prices and exchange rates.
Barton had also started to experiment with frequent trades and micro profits, slowly building up the part of his capital he had allocated to investing in second to second, minute to minute, and hour to hour trades. The technique was known as algo trading, some called it scalping. He employed software tools similar to that used by investment banks and hedge funds taking real-time share prices and calculating their movements from second to second with an algorithmic programme adapted to his own specific trading strategy to generate profits.
The key was latency, or the time that elapsed between a stimulus and the response, more precisely the delay between a trading signal being given and the trade being made. Low latency was what banks and hedge funds were interested in, the milliseconds it took light to travel along an optical cable.
The days of buying shares for their long term values were so far away that the notion was forgotten, in the same way as research on a company’s performance and value. Whether a company made a profit or not was totally irrelevant what counted for traders like Barton was speed, whether it was instantaneous upward or downward movements of share prices or being ahead of the crowd when geopolitical crises broke out.
It was midnight when a news flash appeared at the bottom of his screen: Grupo Martínez Construcciones had been suspended from the Madrid bolsa. A few clicks informed him the Spanish group was expected to file for bankruptcy protection after being declared insolvent, unable to roll over its debts of over seven billion euros, the biggest corporate failures in the history of Spain was in the making.
Barton knew the group from the time when he had put mortgages together for Martínez’s British buyers in Spain. Grupo Martínez Construcciones had been principally involved in residential construction and development. About twenty per cent of its activities were in commercial property, including hotels, resorts, shopping centres, medical complexes, and land for industrial development. The group had more almost two hundred thousand homes in its portfolio and almost three thousand hectares of land. Its foreign operations covered Morocco, Poland, Mexico and Portugal.
Martínez had obstinately concentrated his group’s activities on the needs of Spain’s tourist industry; vacation homes in the Canary Islands, golf courses in Andalusia, marinas on the Costa del Sol. One of its latest developments was an entirely new tourist resort on the Mediterranean coast of Morocco, a diversification after prices in Spain had climbed to an average annual rate of fifteen percent; the seventh year in a row of rising prices.
The Spanish group had failed to secure new loans from its banks to refinance debts of billions of euros, even though the market value of its assets were said to exceed its debts. Unfortunately for Martínez asset values had plunged with the sudden collapse in property values, a fact that had not escaped his bankers. What was worse more than forty per cent of the group’s land was without building permits, at a moment when the Spanish authorities were clamping down on illegal construction, meaning an endless tangle of legal difficulties which would discourage potential buyers, if they existed, for the land the group owned.
This news was of little immediate value to Barton; he had decided to bale out of property related business almost a year earlier, but it was a clear sign of things to come. In spite of Spain’s government spokesman reassuring comments, it was an unequivocal warning that Spanish property was now in deep trouble. Barton had made the right decision in getting out when he did. The worst was evidently yet to come.