Limitless

Suddenly, after a long bout of intense concentration and intermittent key-stroking – during which I sipped my espresso – Holland started speaking. ‘Many people believe that when you buy a share of stock you are buying a proportional share in a business.’ He spoke slowly, as though delivering a lecture, but continued to stare at the screen. ‘Consequently, to figure out how much any proportional share is worth, you have to determine how much the business is worth. It’s known as “fundamental” analysis, and it’s where you look at the company’s basic financial health – growth potential, projected earnings, cash flow, that kind of thing.’ He paused, stroked a few more keys and then went on. ‘Others look at the numbers only, with almost no regard for the underlying business or its current valuation. These are quantitative analysts, or “quants”. Number crunchers. They consider judgements about things like management expertise and market potential to be too subjective. They buy and sell on a purely quantitative basis, using sophisticated algorithms to find minute price discrepancies in the markets.’ He glanced at me briefly. ‘Yeah?’

I nodded.

‘Then you’ve got technical analysis. That’s where you study price-and-volume patterns and basically try to understand the psychology surrounding a stock.’

He continued looking at the screen as he spoke, and I continued nodding.

‘But trading is not an exact science, Eddie. I mean, the stock market can’t be pinned down to any one system, which is why you get fuzzy talk of “irrational exuberance”, and people trying to explain market behaviour in terms of psychiatry, biology, and even brain chemistry. I’m not kidding you – there were actually suggestions recently that investor caution was being inhibited by the high percentage of brokers and dealers on Prozac. So,’ he shrugged his shoulders, ‘given that no one knows anything, it’s not surprising that most investors use a combination of the three basic approaches I’ve outlined to you.’

Over the next hour or so, still standing at the table – and looking like he’d just stepped in from a vigorous game of tennis – Bob Holland expanded on these ideas and also went into the minutiae of options, futures, derivatives, as well as bonds, hedge funds, global markets and so on. I took a few notes, but when I heard the explanations I realized that in a general way I did understand these terms, and that furthermore, just by thinking about this stuff, a large store of knowledge was being unlocked in my brain, knowledge that I had probably accumulated unconsciously over the years.

When he’d done with the big picture – how the investment banks and fund managers operated – he started in on day-trading.

‘Then you’ve got guys like me,’ he said, ‘the new pariahs of Wall Street. Ten years ago it was the LBO types, the Gordon Gekkos. Now it’s the geeks in baseball caps who sit in front of computers at home and trade thirty or forty times a day, picking off eighths, sixteenths, even thirty-seconds of a point per share, and then closing out their positions before the end of trading.’ He looked away from the screen and directly at me, for maybe the second or third time since I’d arrived. ‘We’re accused of distorting the markets and causing volatility in share prices, but that’s bullshit. It’s what they said in the Eighties about the takeover guys. We’re just the new wave, Eddie – electronic day-trading is the spawn of technology and regulatory change. It’s that simple, it’s flux, it’s the nature of things.’ He shrugged his shoulders again and turned back to the screen.

‘I mean, come here – look at this.’

I stepped over quickly and stood behind him. On the middle screen, the one he was working at, I could see tightly packed columns of figures and fractions and percentages. He pointed to something on the screen – ATRX, a stock symbol for a biotech company – and said, ‘This one opened at around sixty dollars a share and has just pulled back a little so its bid is now 59 … and its offer …’ he pointed to another part of the screen, ‘is 59¾ – that’s a spread. Now the thing is, thanks to the latest software, and to regulatory changes introduced by the Securities & Exchange Commission, I can trade within that spread, and right here in my living-room.’

He highlighted the row of figures after the ATRX symbol and stared at it for a while. He checked something on one of the other screens, came back to the first one and keyed something in. He waited for a couple of moments and keyed something else in. He waited again – one hand held up in mid-air – and then said, quietly, ‘Yes.’