Limitless

On my second morning at Lafayette, a Tuesday, I spent a good deal of time nosing around the various financial websites. I eventually opened up more than a dozen major positions, eighty thousand shares in total, and then concentrated on tracking them carefully.

At about eleven-thirty, there was a slight commotion to my left. A few tables up, three of the guys in baseball caps, who appeared to be working very closely together, started punching the air and hissing yessss to each other. It took another few minutes for the ‘tip’ to filter down. The keyboard-cruncher beside me, whose name was Jay, pulled himself away from his screen for a brief moment and turned to face me.

‘Think something’s just come through on the wire about some biotech stock.’

He shrugged his shoulders and then went back to work, but the guy beside him wheeled his chair around and spoke to me as though we’d known each other since high school.

‘Medical breakthrough, hasn’t been announced yet. MEDX – that’s Mediflux Inc., a Florida drug company, yeah? – seems they’ve got some anti-cancer protein in development. It’s got the white-coats over at the National Cancer Research Foundation all excited.’

‘And?’

He looked at me as if to say, What – are you a moron? Then, pausing uncertainly, he said, ‘Buy Mediflux!’

I could see that Jay, the guy beside me, was already doing just that. I nodded at the other guy and then went back to my screen to see what information might be available about this pharmaceutical company – Mediflux Inc. It was currently selling at 43, having moved up from an opening price of 37¾. Everyone was assuming it was going to continue this upward trend, and everyone – at least everyone in the room around me – seemed to be buying Mediflux on that basis. I spent a while looking at its fundamentals – historical earnings, growth potential, that kind of thing – and at one point during this Jay nudged me and said, ‘How much did you buy?’

I looked at him and paused, quickly reviewing in my head everything I’d just read about Mediflux.

‘I didn’t buy any,’ I said. ‘In fact, I’m going to sell it short.’

This meant that, contrary to the prevailing wisdom in the room, I expected the Mediflux share price to fall. While they were all busy buying it, I would borrow Mediflux stock from my broker. I would then sell it, having committed to buying it back later at what I hoped would be a considerably lower price. The lower the price, of course, the greater the profit for me.

‘You’re going to short it?’

He said this quite loudly, and as the word short darted its way around the tables like an acute pain along a sciatic nerve, you could almost feel the whole room stiffen. There was a brief silence and then everyone started talking at the same time and checking their screens and looking across at my table. Over the next couple of minutes the tension in the room increased as the original Mediflux faction regrouped and began hurling comments in my direction.

‘Feel sorry for you, buddy.’

‘Margin call!’

‘Loser!’

I ignored these taunts and got on with executing my short-sell strategy on Mediflux, as well as looking after my other positions. For the next while the Mediflux share price continued to rise, reaching 51 points, but then it seemed to stabilize. Jay nudged me again and shrugged his shoulders as if to say, Talk to me, why did you short it?

‘Because it’s all hype,’ I said. ‘What – a couple of mice with cancer in some laboratory somewhere sit up in bed and ask for tea and suddenly we’re all into a buying frenzy?’ I shook my head. ‘And when is this new protein they’re developing going to have a commercial application anyway? Five years? Ten years?’

Jay looked worried all of a sudden and seemed to recoil into himself.

‘Besides,’ I said, pointing at my screen, ‘Eiben-Chemcorp pulled out of a takeover deal of Mediflux about six months ago, and it was never properly explained – doesn’t anyone want to remember that?’

I could see him rapidly processing the information.

‘This does not have legs, Jay.’

He turned to the other guy beside him and started whispering. Soon – as my analysis made its way around to all of the other traders – dark clouds of uncertainty descended on the room.

From the babble of muttering and clicking that ensued, it was obvious that two camps were emerging – some of the traders were going to hold on to their stock, while others were going to join me in shorting Mediflux. Jay, and the guy beside him, reversed their positions. The baseball caps held fast to theirs, but refrained from making any comments about it – not aloud, at any rate. I remained huddled over my terminal, keeping a low profile, even though the atmosphere was electric, with a definite sense that in the ecosystem of the room I was an interloper who was making some kind of a bid for power. I hadn’t intended it that way, of course, but the thing is, I was convinced that MEDX was a turkey – and so it was to prove.