Message-ID: <14881eli$9809011417@qz.little-neck.ny.us> X-Archived-At: From: "Bill Morgan" Subject: {Morgan} NEW: Six-month Turnaround 12/16 M/F Rom, lite sex Newsgroups: alt.sex.stories.moderated,alt.sex.stories Followup-To: alt.sex.stories.d Content-Type: text/plain Path: qz!not-for-mail Organization: The Committee To Thwart Spam Approved: X-Moderator-Contact: Eli the Bearded X-Story-Submission: X-Original-Message-ID: <19980829115205.15215.qmail@hotmail.com> Author's note: If you are looking for wall-to-wall sex, look elsewhere. This book is a romance with a business setting. Beyond that, the sex is comparable to - or less than - what one would find in almost any work of popular fiction. Permission is granted to post on any free site, as long as the copyright statement is included. Please advise the author of any such postings. Comments are welcome and encouraged. Please address me at morg105829@aol.com. I hope you enjoy the book. My plan was to post a chapter each weekday; however, Eli has been having problems, so ASSM has not been posting daily. As a result, I am uploading the remaining chapters now. This is chapter 12 of 16. Six-Month Turnaround Copyright 1992, 1998 by Morgan. All rights reserved. Chapter 12 It was late July and a very hot summer day in Milwaukee when Cliff got a call from Steve Muller. Steve sounded excited and asked if he could come over to see him. Cliff told him to come anytime and a few moments later he came into the office followed by Sandy Donnell and Carlos Murphy. Carlos was their find of the year. He was a third- generation Argentinean, educated in the States. Despite its spelling, his last name was pronounced Mur-pee; Carlos told of his grandmother, a native-born Argentine, who never spoke a word of Spanish in her life. And, he claimed, never understood what she called "that heathen tongue," referring, of course, to Spanish. Carlos was from a town in Argentina named Murphy, as well. Steve was never sure if they found Carlos or he found them. He was only twenty-six years old and had earned his MBA from Babson College. He had joined the company to lead its drive to increase export sales, and had just returned from his first sales trip to South America. One look at their faces told Cliff the trip had been a success. He whispered something to Sandy who grinned and left the office. "Carlos, how did it go?" "Well, Boss, they loved our special Latin American program!" The young man grinned broadly as he said it. The special Latin American program consisted of the most elementary things: translating the packaging materials and instructions into Spanish, preparing normal export documentation, and accepting export letter-of-credit financing. Murphy Manufacturing had never done any of those things before. Moreover, as far as anyone in the company knew, Carlos's trip was the first time anyone from Murphy had ever visited Latin America on business. "I only went to Mexico and Venezuela on this trip. It was the funniest thing I have ever seen. My first stop was Mexico City. I had a couple of names and telephone numbers of companies that had bought from us in the past on our usual export terms. I called the first name on the list." The "customary terms" had been cash in advance, with buyer taking delivery at the Murphy shipping dock. Any special export arrangements were the buyer's problem. The only thing Murphy did was provide heavier-than-normal crating, and even that had been provided with great reluctance. "At any rate, I introduced myself and asked for an appointment. I thought the guy was going to faint when I said I was down from Milwaukee and actually spoke Spanish. Anyway, he wouldn't hear of me coming out to see him. He came dashing down to meet me at my hotel. I guess he made a call or two before he left his office, though. I wasn't off the phone five minutes when it started to ring. Other auto supply people heard I was in town. Anyway, the first guy, Sr. Gonzalez, arrives at the hotel, and I meet him in the bar. "Cliff, I never got out of the damned bar. And I didn't even pay for a drink. Incidentally, you know what impressed them the most? The fact that Murphy Manufacturing had an export sales manager, and was actually interested in supplying them on a consistent basis. Their history with us - and a bunch of other American auto parts companies, apparently - is we only sell them if, as and when we have a little extra capacity. They're typically turned off more than they're on. Anyway, here's what I got." He took a stack of signed orders out of his briefcase. Sandy noted that every one had a letter of credit attached. She said, "These are prepaid orders, if I understand this stuff. Moreover, every one of the LC's is on an American bank. As I understand it, we ship the stuff. When it's received in Mexico, the LC is released and we have our cash. Right?" "Right! Then I went to Caracas, and the same thing happened, only more so. They have more money and more big US-built cars. We haven't totaled it all, but it could total almost as much as the first Kaga order!" Just then there was a knock at the door, and Sandy got up. She returned to Cliff's desk with a brown paper bag that had been handed to her. Then she took out a cold six-pack of beer and opened cans for everyone. "This calls for a celebration! It's hot, this is a manufacturing company - we get our hands dirty - so beer's in order. Cheers, Carlos, and congratulations!" That afternoon, Sandy buzzed to say there was a Kelly Cameron to see them from Snyder Securities in Chicago. "Oh, shit!" Cliff said, "I completely forgot, and the tone of your voice says I never men tioned it to you, either. Cameron is a securities analyst. I think he's the only one who follows Murphy. I was supposed to see him in April but I ducked. I guess we have to see him. Do you have time to put on your treasurer's suit?" "Sure. I'll ask Betty to go bring up Cameron, and I'll join you in a few minutes." Betty Ames was looking beautiful when she showed Kelly Cameron into the office. Cliff was surprised to find that Kelly was a girl, and his surprise showed on his face. The young woman appeared to be under thirty and was very attractive. She was five feet four, with short, dark hair. She smiled and introduced herself. "I apologize for the misrepresentation, although it really isn't. My name really is Kelly. My interest is manufacturing companies, particularly automotive-related ones. A lot of your colleagues in the industry don't like dealing with women, so I guess I go out of my way not to mention that I'm female." When Sandy entered the office and introduced herself, Kelly looked at her closely. "Miss Donnell, you're the Murphy family of Murphy Manufacturing, aren't you?" Sandy was startled, but decided the meeting was essentially on the record. Lying to an analyst wasn't smart and could possibly cause problems with the SEC. "Yes, I guess I am, if you mean the family stock is mine. It is... or will be in a couple of months." Cameron took a seat and started right in. "Mr. Fitzpatrick, Murphy hasn't been going anywhere to speak of. I estimate your current sales are in the range of $500 to $600 million. For the last few years - too many years - the company has been earning about 1 percent on sales, net. That generates five to six dollars in earnings per share on the one million shares outstanding. With no growth and uninspired profits the market has been giving you a multiple of about five. The trading range for the last few years has been $20 to $30 per share. "I recently received a tip there are major problems here and came to find out. First, I will tell you what I have heard, and then you can comment. Number one: You have been cut off as a supplier to Magna Motors. That was reported on the broad tape. It's about half your valve and ring business, maybe more. I would estimate the loss at about $200 million a year in sales. Number two: You have sold off a whole bunch of your auto parts stores. I would guess maybe two-thirds of them. That's another drop in sales of about $65 million or so. Add those together, Mr. Fitzpatrick, and Murphy has lost about 50 percent of its sales give or take a bit. I'm looking for your profits to drop like a stone. How am I doing? Oops! One more thing: the word around is George Simpson of Ajax hates your guts and wants to destroy you. Comment?" "With no flattery intended, I'm impressed. You obviously know the business you follow, and not all of your colleagues do. Let me take your comments in order. First, the history is obviously correct: the level of sales, profits, number of shares, and so forth. With respect to Magna, you are also unfortunately correct. We lost the business because of poor quality." Kelly's eyebrows rose on his admission. "However, I have a letter I would like to show you. We have been named the first mainline American supplier to Kaga Motors' plant in Michigan. I have a letter here from the managing director in Tokyo I will share with you. In fact, I'll give you a copy if you promise not to show it to anyone until I can get express permission from Japan to give it to you." He took out the letter from his file and gave it to her. She read it and let out a low whistle. "Mr. Fitzpatrick..." Cliff interrupted. "Please call me Cliff. We're very informal here, and I tend to do a double-take and look for my father when someone says, 'Mister Fitzpatrick.' Will you?" "Sure, and please call me Kelly. I don't think I'm letting down the bars too much. Anyway Cliff, if I understand this letter correctly, although you lost the Magna business on quality, that's the very basis on which you got the Kaga business. And with all due respect to our friends in Troy, Kaga would throw out what Magna terms 'commercially- acceptable quality' as totally unacceptable. What happened?" Sandy entered the conversation. "Cliff Fitzpatrick happened. He junked a ton of old, unsalable product. There's a significant asset write-down I guess you didn't hear about, also. It's a write-off of finished goods inventory. He found that two of our ten production machines were incapable of producing parts within required tolerances and three others weren't a whole lot better. We had far more people inspecting than we had making. We don't any longer. We have had a huge employee layoff and almost took a strike that would have buried the company. Cliff persuaded the workers they could produce product every bit as good as the Japanese. The rest of the letter speaks for itself." Cliff smiled at the two young women. "As usual, Sandy fails to mention her critical role in all of this. She is the one who spoke to the workers. The union president was certain the people were going to walk out. Sandy spoke to them as the owner, and they believed her. They voted to stay. I think the letter from Kaga speaks for itself. Incidentally, that's half of the lost Magna volume now and growing. The latest word is the new ring our guy made is going to become Kaga's standard, so there will also be royalty income we have never seen before." "Could I go down to the factory floor?" Kelly asked. "When I visited several years ago, I was strongly discouraged from doing so." "Of course! We would be delighted. I hope you don't mind wearing a hard hat? Oh... there's something else. We've got coats for visitors, too." He looked at Sandy who went out and came back with a white coat with MURPHY in red capital letters across the back, and a neatly stitched badge saying Visitor on the breast. The hard hat was adjus table and from the way Kelly went to work to size it, this was a familiar process to her. She noticed that Cliff and Sandy had their own coats with "Fitzpatrick" and "Donnell" lettered on them. Kelly decided that Sandy looked very good in her coat with the red hat that matched the lettering. She was impressed with the coats, both in terms of Sandy's appearance and because it suggested they often visited the shop floor. When they reached the floor, she was dazzled. Every worker was also wearing a MURPHY coat. Obviously there were three colors - workers, supervisors, and managers. It was as smooth running as any manufacturing facility she had ever visited. The production machines looked brand new, and she could see where two new ones were being installed. There appeared to be substantial room for expansion. Cliff pointed out a small quantity of Spanish-language packing materials, and then took her to the cafeteria. When they closed the door, the room was silent. Kelly noted that both Sandy and Cliff were greeted by first name by everyone. No one seemed at all impressed by the fact they were on the floor. Clearly, it was routine. They got coffee and took a table in the rear. "We closed our dining room, so everyone eats here, now," Cliff told her. "This is the nicest looking plant cafeteria I've ever seen!" Kelly said. Sandy noticed that the girl looked hungry. "Kelly," she said,"do I detect skip-lunch-diet hunger pangs? If we don't feed you, you look like you'll eat the table, and I'm not sure it's paid for yet." The girl grinned and accepted the invitation. They went through the line again, because Sandy and Cliff hadn't eaten either. When they returned to their table, Kelly was even more impressed. "Who runs this place for you?" she asked. "We run it ourselves," Cliff said. "We have an outstanding manager, Janet Simmons, who's been with us for years. Incidentally, I showed you the Spanish-language packaging. I'm going to tell you a competitive confidence. We have a new export sales manager who just returned from South America. He only returned this morning, and we're still totaling the orders he brought back with him. It appears, however, that we have enough business - paid in full, with accompanying irrevocable letters of credit - to increase our total sales volume significantly in spite of the loss of Magna. I mentioned it's in confidence. The confidence doesn't extend to the income effects, but I would just as soon not advertise to our competition how good Latin American business can be." When they returned to the office, Kelly said, "Cliff, I'm impressed. What you're telling me is you have more than covered the loss of the Magna business, and, I infer, although neither of you said anything, at substantially higher margins. There's been an asset write-down, but that was junk, anyway. Would I be way off base if I guessed your costs are way down, too? For example, I don't see the normal piles of scrap lying around. I would guess your raw-material utilization is very high, and your rejects are very low. I would estimate you may be looking at a 10 percent pretax profit now. Would that be close?" Sandy and Cliff looked at each other. Cliff shrugged and Sandy said, "If we think in terms of a reasonable range, I think you're in the ball park." Sandy continued, "Now, you mentioned our Stores Division. You're right, we did get rid of over two-thirds of our units. We got an excellent price for them, by and large. It seems they're worth a lot more to some other people than they were to us. The result is we plowed some of the money back into our Southern Division which is all we have left. We moved the buying function down to Charlotte for the Division, changed our merchandise assortment, extended hours, and renovated all the stores. Within sixty days, our sales per unit have tripled with profits up much more. The result is, Kelly, we haven't lost any sales from Stores to speak of, and are looking for substantially higher numbers next year. Our profits are... very pleasant." Sandy finished her comments with a grin. Kelly was listening carefully and was now wide-eyed. "What I'm hearing is that miracles have occurred here at Murphy. You will have sales roughly even with last year or better, but with much higher profits. If nothing at all happens next year, sales will be up substantially. Moreover, I saw the new machines being put in place. That looks like a 20 percent capacity increase to me. By the way, you mentioned worn-out production equipment. That's the most un-worn-out stuff I have ever seen!" Sandy grinned. "The folks at Micronics who built it just finished reconditioning the last machines. They tell us they're better than brand-new and our machinists agree. That's where some of the money went." Cliff picked up the narrative. "Then, of course, we have the confidential activities of our brilliant treasurer, Sandy, who installed a new cash management system. I think it's all in now. She picked up about $75 million, so we are in better shape on the balance sheet than we've been in years. There's essentially no debt. The cash pickup paid for the modernization." "One last question," Kelly said. "Where do you stand with Magna Motors right now? I will make an observation, and I'm not asking for comment. I think you are the low-cost producer in this industry right now. Based on the Kaga letter, I have to believe you couple that with the highest quality. When I was in business school, lowest costs and highest quality were a very tough combination to beat. That's my observation. Now back to the question. What about Magna? Do you think you'll get back in?" Cliff answered. "Yes, Kelly, I do. But you know them far better than we do. They are very slow to move... in any direction. I believe we will get back in, but I couldn't guess when it will happen. Fair?" "More than fair. Now one more question, completely off the record. When are you two going to get married?" Sandy and Cliff both started to laugh. She answered, "Does it really show that much? Of course, I *do* worship the ground he walks on, but I didn't think it was so obvious. The answer is we haven't set a date. And this whole thing is very much off the record, please?" Kelly grinned and nodded. "It certainly is. I'll be honest, though. I intend to send you a very nice wedding gift when you do because I am going to make an awful lot of money on Murphy stock. There's something else, though. I wasn't just being nosy. To a person like me who tries to figure out what makes a company tick, it's very important because I know you are *both* vital to the company. You are also great people. This has been the most enjoyable visit I have had in years, and it's going to be the most profitable one as well. "Cliff and Sandy, do you follow the market closely?" They both shook their heads. Kelly grinned. "That's great, because if you did that, too, I would be in trouble." Her face became serious. "The reason I asked is because something strange is going on. It was the reason for my comments at the beginning. I'm here because of an anonymous tip. You both know what the short interest is, don't you? The extent to which shares of a company are being sold short?" They both nodded. "Well, the short interest in Murphy is big and getting bigger. I thought I had it all figured out, and was toying with the idea of joining the bears - the folks selling the stock short expecting its price to drop like a stone. You know, I think we're seeing a bear raid." "I've heard of them," Sandy said, "but I never knew exactly how they worked. Money is made when a stock's price drops, but it never seemed like a lot of money. After all, if a stock trades at 50 and then the price falls to 40, all the short seller made was ten points. There's a lot more room on the upside." Kelly smiled at the question and explained, "You're numbers are correct, Sandy, but you're overlooking something. Big money is made because the deal involves massive leverage. Let's take a guy with $1,000 and your example. If the guy bought the stock at 50 he would have 20 shares. Selling at 40, he loses $10 a share, or $200. To keep it simple, I'm ignoring transaction costs. Now take a short seller. What does he do? First, he sells 1,000 shares at 50. But he doesn't have 1,000 shares; he has none in the classic situation. What he does do is borrow the 1,000 shares to deliver against his sale, paying interest on the borrowed shares. Now the stock price drops to 40. He buys 1,000 shares at 40 using the $40,000 of the $50,000 he got when he sold the 1,000 shares. After returning the 1,000 shares he's just purchased to the owner of the borrowed shares, he's made $10,000 less the interest expense that he paid to borrow the shares in the first place. He's made a profit of nearly $10,000, on virtually no investment. His ROI is enormous." Looking at Sandy she asked, "Did you follow that?" "I sure did," Sandy replied. "But what's a bear raid?" "That occurs when an individual or a group starts selling lots of shares in a company short, betting the price will fall. First of all, the mere act of selling lots of shares serves to drive the price down, other things being equal. But couple that with the expectation of bad news about the company, and the share price can drop like a stone. Clearly, that's what the bears expect," Kelly explained. "But guess what? Based on what I just learned from you and Cliff, the raid is almost certain to fail. And you know something else? I'm buying. Could I use a phone outside, quick? Then I'll tell you more." Kelly left the room, and Sandy looked at Cliff thoughtfully. "Now who do you suppose would be doing that?" she said. "It bothers me - although not for the usual reasons of ego. One of the finance department classics is a bit of doggerel, 'He who sells what isn't his'n pays the price or goes to prison.' It refers to short sellers. The bothersome thing is there is so little float in the stock. There are only one million shares out, and the family has more than 65 percent. It's a prescription for a classic squeeze on the shorts. They borrow the shares they sell against the prospect of a price decline. When the price drops, they buy the shares in to replace the shares they borrowed from the original owners at a lower price. However, what happens if the price rises - sharply? The short- sellers get killed: They have to buy the shares at a higher price, and lose their shirts! And I think that's what's about to happen as a result of Kelly's report. Honey, would you humor me if I do something dumb? Like losing a ton of money? It is mine, though." He grinned at her and said, "Darling, I never mentioned it, but I bought 10,000 shares of Murphy Manufacturing before I even started work here at prices that average about $22 a share. It represents just about every dollar I have been able to beg, borrow, or steal. We've never talked about money, but you must get a pretty nice income from your stock. Do you, or does it go somewhere else?" "Mostly it comes to me. You can see I don't spend a lot. And we've been saving on entertainment by mostly spending weekends in bed! No, I'm okay. Cliff, one thing. Would you please humor me and ask Bill to beef-up security? I'm thinking of getting a big agency like Pinkerton to send some plain-clothes people in. What do you think?" Before she even finished, as soon as she mentioned the word security, Cliff was on the phone. "Bill, it's Cliff. Here's the story: Someone is selling our stock short, and it's about to start moving up strongly. It's a classic situation for industrial sabotage. See about getting a big security team in for the next eight weeks. No, make it ten weeks. I want to be sure the extra coverage extends past October 1. And Bill, I want it to start right now! They may want a short-notice premium for a few days, but I don't care." He hung up the phone. "Is that enough humoring for you? I think you're absolutely right." Kelly returned to the office with a big grin on her face. "I have a question. Has either of you sold any stock?" They both shook their heads. "How about buying?" Sandy said, "Cliff bought 10,000 shares before he joined, and I have been buying off and on for years. I don't remember when the last transaction was. Is it important?" "Not really. I just sent out a bulletin on the company, and on to Dow-Jones for the broad tape. My prediction is for earnings higher than last year's. Cliff, I took the liberty of using your name. I said you had announced today that Murphy had been designated the first American preferred supplier to Kaga Motors. The selection had been made on the basis of quality of product. I know you didn't announce it before, but technically you should have. Did you buy any stock, or did anyone else in the company buy between the Kaga letter and today? "Actually, I don't think it matters because the price has been slowly drifting down. If they bought, they sure in hell didn't tell their friends. Or else their friends are as financially naive as you two!" She grinned broadly as she said the last words, but Cliff and Sandy were both chagrined. They knew about insider trading, but it had never occurred to them to make an announcement. Yet they both knew they should have. "I'm sorry, Kelly, and thanks a lot. For that matter, I guess we should have announced the loss of the Magna business, too. That was certainly material." "It was, but don't worry. Ajax did that for you. Anyway, there's no harm done. Incidental ly, I'm liquidating everything I own to go against the short sellers. I can see a classic squeeze coming. There won't be any shares to buy to cover their short position. I remember reading a case in Financial Markets on a flooring company. In fact, I think it was quite similar. Like Murphy, most of the stock was held by the family. I think it started with the shares trading around $10. When the squeeze hit, trading was suspended at about $25. When it reopened, it jumped to about $60 in thirty minutes or so and was suspended again. At that point, I think the two sides negotiated surrender terms. The shorts were wiped out." She smiled. "I have always remembered that story. It always seemed like a great way to make big money, so I'm going to try it with you. Do you mind?" Sandy looked at Kelly thoughtfully. "You are a registered rep, aren't you? You can handle customer's accounts directly?" Kelly nodded. "I sure am. I don't have many, though, but I am trying." Sandy avoided Cliff's eyes. "Kelly, do me a favor? I propose to call my bank and ask them to send you $2 million to open an account in my name. Could you do that?" Kelly's jaw dropped. "Sandy, you're saying you want to open an account with me at Snyder Securities for *$2 million*! Cash?" Sandy grinned. "My, you're a fast learner! That's exactly what I said. Is that enough for an account with Snyder?" "Enough? You're joking! Just a minute." She picked up the phone on Cliff's desk and called her office and asked to speak to her manager. She told him she was being given $2 million to open an account for Sandra M. Donnell, the Murphy Machinery heiress. There was silence from Kelly for a few minutes. Then she essentially repeated the story for someone else. Finally, she spoke again, "I'll ask her, sir. I don't think there's a problem. Just a minute." She turned to Sandy, "This is Jack Snyder, the managing partner of Snyder Securities. He would like to speak to you, if he may." Kelly appeared very nervous as Sandy took the phone. "Hello, Mr. Snyder, this is Sandra Donnell." She listened with a smile on her face for a few moments, then said, "I only met Miss Cameron this afternoon, and I'm absolutely delighted to have had the opportunity. I invest money from time to time, and was most impressed with her knowl edge of our industry and my company." Kelly and Cliff laughed at the face she made when she said "my company." She continued, "Miss Cameron makes a great deal of sense to me. I was prepared to wire money to you now, but I will be happy to give her a check to bring back." There was a period of silence while Snyder was talking. She ended by saying, "Thank you, Jack. I look forward to meeting you in Chicago, soon." She hung up the phone and looked at the others. "He welcomed me as a customer of the firm." She rummaged through her purse, took out her checkbook, wrote a check, and gave it to Kelly. The girl looked at it in awe. "My God! Two million dollars! I sweat more than that writing a check at the supermarket! Sandy, thank you! Now, who do I have to kill?" "Kelly, there are only two strings: First, for now it's a treasury for you to use to buy into the bears' selling. The market is still open. Can we start right now? I don't want to move the price up. I just want to keep it from going down. The buying will come from others, and we may push it up to... what do you think? Thirty? Maybe thirty-five?" Kelly just grinned and picked up the phone again. This time she asked for the trading desk. "Bill, it's Kelly. I have a good one for you. Buy Murphy Manufacturing on the Amex. We have two and a quarter million dollars to use. At today's prices that's about 90,000 shares. Just push, Bill. I don't want to see a down-tick. Regardless of the money you have placed, stop buying at thirty-two if it gets that high. If it does, put a buy in with the specialist for the balance of the money at thirty-two coming down. Okay? I think we're going to have some fun. And Bill, this is most important: Time-stamp the order right now! For you privately, this is insider money. An announcement went out about thirty minutes ago on the broad tape. It's essential that we are all covered on this. Buying came *after* the public announcement. Bill, I'm in Milwaukee imposing on some folks. Call me at this number if it starts to move, or if anything interesting seems to be happening. In any event, call me after the close and let me know what happened." She hung up the phone. "Kelly," Sandy asked, "are you a beer drinker?" "I sure am, but don't you have a bar?" She looked around. "No," she answered her own question, "Not in this place. This is the home of precision parts, and alcohol doesn't mix well with precision." Sandy left the office, and Kelly followed her out. "Sandy, I have a favor to ask? Could your secretary make a hotel reservation for me here in Milwaukee for tonight?" Sandy laughed, and picked up the phone. She made a reservation for that night and guaranteed it to Murphy for late arrival. "Kelly, since you know everything else, you ought to know I am Cliff's executive assistant, otherwise known as his secretary. I would invite you to stay with me but Cliff and I... Well, things get a little rowdy once in a while." "You're a very lucky girl, Sandra Donnell. I think you caught one of the live ones." Kelly looked at Sandy carefully, then grimaced. "What a stinking shame. I couldn't even give you a fight. My God! To have your looks and money on top! It's just not fair." Then she grinned and added, "On the other hand, maybe it's a good thing. You're a one-man woman, and it's obvious he's a one-woman man. So he's out of action, but so are you. I guess that's some consolation for a working girl. And besides, you two are going to make me rich!" The two girls shook hands, and went back to the office after Sandy made another call. When they reentered the office and sat down, Cliff told Kelly about the increased security. He grinned at her. "I might as well tell you about it, since you're one of the family now. By the way, Sandy said two million, and I heard you tell Bill two and a quarter. Where's the rest of the money come from?" Kelly blushed prettily. "That's mine. All I can say is that's every dime I've got... and then a few. You two have a hell of a business going here. There aren't too many oppor tunities in the Rust Belt." A few minutes later there was a knock on the door. Sandy brought back another brown paper bag and opened three cans of beer. "Cheers!" she said. "Kelly, this is twice today. The first time was just before you came when we found out about the South American orders." "Damn!" Kelly exclaimed, "I forgot to mention it earlier. I also added in the announcement that 'other full-price orders' had been received fully covering the lost Magna Motors business. Anyway - even though us investment types aren't supposed to drink beer - cheers! You know," she said with a grin, "I much prefer pizza and beer to white wine and Brie." Sandy and Cliff looked at each other, made a thumbs up sign, and laughed. They were still chatting when Cliff's private line rang. It was the number Kelly had given her trader. Cliff answered the phone and passed it to her. "Hi, Bill, what's up?" She listened intently and nodded her head. She took out a pad and started writing down numbers as a big grin started spreading across her face. Finally she said, "Thanks, Bill. Keep me posted." She hung up the phone and exclaimed, "Damn! It's moving. There's heavy action, with a lot of selling. Bill thinks it's more short selling. It's trading at twenty-seven now, up a point and a half. The important thing is, other people are starting to buy, too. We're going to win this one. I can feel it." "What do we do now? Just wait?" Sandy asked. "I guess so. Incidentally, you have invested about $200,000 at this point, Sandy. Why don't we fill out these dumb forms I need to open an account while we wait for the closing?" She took forms from her attaché case, and Cliff went down the hall to Steve Muller's office. Betty Ames gave him a big smile as he walked in. Cliff noticed how beautiful and happy the woman was now that John Flood was gone. Steve was on the phone. He waved and gave Cliff a big grin. "Yes, sir, I'm sure he'd be happy to talk to you. In fact, he just walked into my office." He put the phone on hold and said to Cliff, "It's Jack Crowther of Magna. He said he just received a report on the broad tape - what's a broad tape? - of our contract with Kaga. I told him it was true. He wants to talk to you. Do you want to take it? Since I blew it by telling him you're here, I guess you have to." Cliff took the instrument, and Steve punched the line button. "Hi, Jack! This is Cliff Fitzpatrick. What can we do for you?" "I just saw on the Dow-Jones broad tape an announcement of your selection as the first American prime supplier to Kaga in Michigan. Is that true?" "Yes, it is, Jack, I'm proud to say. We also developed a ring for them that seems to be on its way to becoming their new world standard. Of course, we get all the business on that we want and a royalty on the rest." "But, Cliff!" Jack said, "I shouldn't say this, but their quality standards are light-years ahead of ours! And you *meet* them!?" "No, Jack. We don't meet them, we exceed them! Based on information faxed to us today, we are now the top-quality supplier to Kaga USA. That, of course, is a field made up almost entirely of Japanese suppliers. I am delighted to tell you we are entering discussions at long distance about our ability to supply their domestic production. I don't expect much, honestly, but it's an honor to be considered. Then, of course, there is the very strong yen..." Crowther had obviously been doing some fast thinking as Cliff spoke. When Cliff finished he said, "How soon could you ship trial quantities of rings and valves? I'm sure you still have the specs and everything." "I'll have to check with our production people, Jack. How fast would you like to have them, when, and where?" Crowther responded quickly, "Cliff, could you call me tomorrow with availability? I'll have the rest of the information for you then. And of course, I will need a price quote." "We will be happy to quote, Jack. What quantities?" Crowther told him the quantities, and Steve saw Cliff's eyebrows raise. "Thanks, Jack. I'll call you in the morning." Cliff hung up the phone. "Steve, the *low* number he quoted for quantities was our old production number. The high number is *triple*!" The two men cheered and started dancing around the office. Betty came in to find out what had happened. When they told her, she joined the dance. Bill picked up the phone to call Bill Stevens. He asked Bill to get Max and join him in Steve's office. Moments later the two men arrived. As Cliff told him what had happened, Bill's eyes widened. When he told them the quantities, they both cheered. Cliff said to Max, "I would like you to use our handy portable PA system, Max, and tell the guys what's happened. It's strictly your show. Without the quality those guys have been turning out, it couldn't have happened. Do you mind?" "Mind? My God, this is the best news in weeks, and you want *me* to announce it? Not you or Sandy?" "No, Max. This is yours. Bill, how soon could we add machines to double our capacity? And Max, I don't have to tell you this is a quality sell. Our quality can't slip... not the tiniest bit. What about people?" Max beamed. "That's not a problem. Guaranteed. When can the machines be in?" "Bill?" Cliff asked. "I'll have to check with Micronics, but largely due to the way Sandy has been handling things, they honest-to-God love us! I don't know how long it will take, but I double-your- money-back guarantee you, no one - *no one* - could get them faster. What about the trial order? How soon, and how much?" "I'll know tomorrow for sure, Bill. But you know Magna's trial quantities. What do you think?" Bill looked at Max and held up five fingers. Max nodded. "I can have normal trial quantities in five days. The quality will blow them away. They have never seen stuff as good as they will be getting." "Okay, guys. It's a deal. Bill, did you speak to Max about security? He and all the people need to know. Why don't you brief him, and he can add it to his speech?" Bill quickly reviewed the short selling of Murphy stock and the fear that someone - about to lose a fortune - might stoop to industrial sabotage to prevent Murphy from performing on its contracts. He ended by saying, "Max, I think we have a real family here. The nice thing is everyone pretty well knows everyone else. You and your people will be alerted to the Pinkertons. You will know who they are. If anybody sees *anyone* he doesn't recognize - whether he's acting suspicious or not - we want the Pinkertons alerted." Max laughed loudly. "What's that saying, 'Things that go around, come around?' The irony is wonderful. Pinkerton really grew as a company of strikebreakers one-hundred years ago or so. Now they are on our side. I think it's great! But you know what? I'm afraid it is one only a few of us old-timers will appreciate. Cliff, I'll do it! And, I don't need to tell you this, but I will anyway. It's our company, too." Cliff went back to his office. Checking his watch he found it was nearly quitting time. Then he told the girls it was time to pack it in but didn't tell them about the talk with Crowther at Magna. As usual, they went out through the plant. His timing was perfect. Max was just about to start his speech, and Sandy stopped to listen. They heard Max tell about the test order from Magna. "We got it, folks! We really got it! Now all we have to do is give them our usual product. Those turkeys will freak out when they see the quality we routinely ship to Kaga." He went on and ended by telling the workers about the chance of sabotage. He finished by saying, "Remember, those clowns are out to destroy *our jobs*! We know one another. You'll know the Pinkertons. Anyone else - and I mean *anyone else* - tell the Pinks. Any questions?" There were a few, but the thing Cliff noticed immediately was they understood the threat to their jobs. The noises he heard were ugly. He wouldn't want to be a person found trying to tamper with the machines. They walked on out to the car, leaving Kelly's rental in the lot. "Cliff," Sandy said sweetly, "You are a bastard. We hear we're back in at Magna - at up to triple the old volume - from our union president, for chrissakes! Just for that, you get the check tonight. We are celebrating with dinner and dancing. Kevin O'Rourke is joining us. I may - or may not - be speaking to you!" Cliff just grinned and said nothing. They went to Kelly's hotel, and she checked in. He smiled at Sandy while they waited for her to wash up. Sandy tried to glare at him, but without great success. When Kelly returned to the car, Sandy was in his arms. "Golly, folks," Kelly said. "I hope I'm not interrupting anything." Sandy stretched broadly and gave Cliff another kiss. "Nope. He wasn't very nice, so it's too early to go to bed with him. Are you all set? And are we corrupting your morals?" "Corrupting, no. Jealous, yes. Let's go. Who is Kevin, by the way?" "Kevin O'Rourke is a delightful guy. Of course, you'll have to talk to him in equations or hexadecimal language. I think that's what computers speak, isn't it Cliff?" Sandy asked. "Anyway, it's something like that. Maybe you can baffle him with some interesting regression equations on earnings growth or something," she finished airily. "Sandra Donnell, I thought I liked you, but now the real you comes out. You are hateful! Just because you have captured a girl's dream is no reason to rub it in. I'll have to think about it for a while, but I'm pretty sure I am not speaking to you ever again. Or at least tonight. Or at least until we get to where we're going," Kelly said with the grin audible in her voice. When they arrived at another hotel, Kelly was surprised. "Why am I not staying here?" she asked. "Because I thought as a young professional woman you would be interested in getting your rest. This place has rooms that are reputed to be noisy: the guests running from room to room and that sort of thing," Sandy replied. "Now I *know* I hate you," Kelly said in a very flat voice. "You didn't mention that my hotel serves tea to maiden ladies at four-thirty every day. I missed it, by the way." "Kelly, dear, I just wanted you to feel secure." Sandy replied. Cliff was finding it was all he could do to try to keep a straight face as they went to the main dining room where a combo was playing. From the girls' banter, it was obvious they liked each other a great deal. Kevin was sitting at the table waiting for them, and he rose as they approached. Cliff heard Kelly say in a whisper to Sandy, "I don't care if he only speaks Gaelic! My God, where has he been all my life?" It hadn't occurred to Cliff that Kevin was also six feet three with brilliant blue eyes and very dark hair. Kevin was introduced to Kelly and it was obvious he liked her immediately. "With a name like Kelly, there's got to be some Irish in your family, Miss Cameron," he said. Kelly smiled at him warmly. "My mother's maiden name was Kelly. Indeed there is. I must get my interest in finance from my father who is a Scot, as I am sure you guessed." The combo was playing, and Sandy and Cliff got up to allow the other two to become acquainted. Every time he held her in his arms on a dance floor Cliff was dazzled. She just seemed to float. He whispered in her ear, "A penny for your thoughts?" "Darling, I am so happy, it's sinful. This was such a wonderful day! First, the South American orders, then Kelly, then Magna, and finally getting her together with Kevin. Would you care to bet they spend the night together? Unless Kevin's fifty times dumber than I think he is, of course. That girl is in love!" As she said it, she saw Kevin and Kelly on the dance floor together. Because of the height difference, even with high heels she scarcely reached above his chin. But the look on her face was one of rapture. "Mr. Fitzpatrick, you didn't respond. Do you care to lose some money? Ten dollars, perhaps?" She whispered up to his ear as she felt herself floating around the dance floor. "Sandra Donnell, you are impossible! My meager fortune is tied up in this company, but you insist on having everything. If I end up working nights as a gigolo, just remember: it's all your fault!" he replied. They went back to the table and their drinks. Kelly and Kevin joined them a few minutes later. Even Cliff, who was normally impervious to such things, could see the stars in both of their eyes. Without saying anything, he took out his wallet, folded up a ten-dollar bill and passed in under the table to Sandy. She took it and quietly smiled at him. "Thank you, dear," she whispered. It was obvious Kelly had explained the short sale and its implications to Kevin. Cliff looked at the young analyst and said, "I assume that news of the Magna work will really cause problems for the short sellers. Am I right?" "You certainly are," Kelly replied. "In the vernacular, they're in deep shit! As usual, the rule of the day is 'bulls make money, and bears make money, and pigs get slaughtered!' Nevertheless, I'm sorry we didn't buy even more than we did. By the way, Sandy, with all that garbage we were fooling with this afternoon, I forgot a basic question. I have been assuming you want the stock you buy in street name, that is, the registered owner will be Snyder Securities?" Sandy let out a little yelp. "Good grief, yes! Absolutely! I have a feeling... Cliff, if I had to bet money, I would bet it's Ezra Stiles who's behind all this. Incidentally, Kelly, I will make arrangements to transfer all my holdings at the other broker to you tomorrow. There's just one thing: On September 30, I'll need something very official from Snyder Securities saying I am the beneficial owner of X–thousand shares of Murphy Manufac turing." "Sandy, I have a question," Kevin asked. "How big a percentage of the company are you going to inherit?" "About 66 percent. Why?" she answered. "What's the percentage to change the bylaws of the corporation? To call a special election, or to change the term of directors?" Kevin continued. "I can answer that!" Cliff interjected. "Before I became... familiar... with Sandy I read that stuff. It's two-thirds." "That's sixty-six and two-thirds," Kelly said, excited now. "Sandy, you said you bought stock off and on in the past. How much do you have?" "I'm not sure. About seventy- or eighty-thousand shares. Something between seventy and eighty, I'm sure. Why?" "Bingo! We've won already," Kelly said elatedly, "And those turkeys don't know it. Your other shares are in street name, Sandy?" she asked. "Yes, but I don't understand... Oh, yes I do! If it's only 70,000 shares - and I'm sure it's more - that's seven percentage points! Along with the family's sixty-six, that's 73 percent! My God! Cliff, you will support me, won't you?" "Only if you give me my ten bucks back," he replied loftily. She reached in her purse and took out his ten-dollar bill and handed it to him. It was all she could do to keep from laughing. Nevertheless, Cliff kept a straight face. "Since you asked so nicely, the answer is yes." Kelly looked puzzled. "What is the ten dollars for?" she asked. "Oh... nothing!" they replied together. Then they started laughing. Their laughter grew in intensity to the point they ended hugging each other to keep from falling off their chairs. Kelly and Kevin looked at each other and then looked at the other two. They didn't understand a thing. Sandy regained control and said, "So it's over?" "I really think so," Kelly replied. "What I heard from Cliff is your attorney, Stiles, may be trying to pull a fast one. Didn't I hear something about Cliff having performance targets to reach?" "You sure did... or at least, you could have. They exist, and it doesn't look like there is a snowball's chance in hell of reaching them. Although the way things are going, we might reach them a couple of months after the deadline. But why do you ask?" "Cliff, as a schemer, you're a great business strategist," Kelly replied. "Let's say I'm shorting the stock. It starts to rise on the basis of a complete operations turnaround. Then the word gets out that the guy who made it all happen is out and some of the turkeys who caused the problems in the first place are back in. What does the stock do?" "Yeah, I know: three guesses, and the first two don't count. It goes in the tank. But what can we do?" he asked. Kelly smiled at Cliff affectionately. "It's a damn good thing you are going to have a very smart wife. Just remember to do what she tells you. Cliff, with 70 percent of the stock, you can do anything! For example, you can call a special meeting of stockholders to elect all the directors. Does Murphy have staggered terms for directors, by the way?" "Yes," Cliff answered, "it does. As a matter of fact, it's over a four-year span. Only 25 percent of the board is up for election each year. In fact, the numbers are two, one, two, and two." "We're there! That's it, I'm sure. Sandy, even if you wanted to use the family shares to throw out the Board, it would take four years to do it, and three years to get a simple majority. *But* with 70 percent, you're there!" "Of course!" Sandy picked up, "I can call a special meeting of the Board to consider bylaw revisions, and use my 70 percent to waive notice of the meeting. I then use it to amend the bylaws to have all directors serve one-year terms. Then I call for a special election of directors, and replace them all!" Kelly stuck out her hand. "I love a smart woman! Damn it, Sandy, this smells right! One more thing: Do you know how a corner on a stock works? Or should?" Sandy's face fell. "I have no idea. How does it work?" "Let's look at the Murphy situation because the numbers are so easy: First, let's say you own 78 percent of the stock - that's 780,000 shares. Now, there are two kinds of shorts: The first are the ones who sold Murphy, rented stock from an owner - usually an institution or a brokerage firm - and delivered the rented stock to the buyer. He must replace the borrowed stock. The second type is what it looks like we're seeing now. These are people who put in sell orders assuming they can borrow shares to deliver. But we are already pretty sure that the total number of shares sold exceeds the total number of shares outside the family holdings. Murphy will almost certainly be in that position in a day or so if things don't change. They can't deliver. It's numerically impossible! "Now here's where the fun begins. It's really the same in both cases. The short seller must deliver shares to the buyer or to the owner from whom they were borrowed *or the value of the shares*. We have some free shares - more than you need for your control positions. We can sell those shares *at any price*. And the price at which we sell becomes the market. We have the only shares available to anyone at any price. The price we set becomes the settlement price for those who need to settle their positions in cash. "Sandy, you *never* sell your stock to the shorts. You ransom their position. In other words, instead of selling them enough stock to cover their position, you get a huge price from them to repay their lenders. The important thing is to *never* let the shorts actually get their hands on the shares. They must go from you to the lender: the one who loaned shares to the short to deliver against his original sale. Understand?" "Of course! If the short has the shares, for even a couple of hours, he can use them for their votes. And what you're saying, Kelly, is a burned lender is unlikely to make the shares available to the same person again. Right?" "Absolutely!" -- +----------------' Story submission `-+-' Moderator contact `--------------+ | | | | Archive site +----------------------+--------------------+ Newsgroup FAQ | ----