Cours d’Anglais: Risking prison Spreading false rumours is illegal, yet it is often done

Traders and brokers, analysts and financial journalists, talk a lot - often with each other, even when they are not supposed to.

They discuss facts and methods and regulation and politics. And they gossip.

There is nothing wrong with expressing concerns about a bank, a company’s cash-flow problems or the abilities of a high-profile chief executive.

But it is illegal to borrow stock to short sell it and then try to depress its share price by spreading false rumours.

Investors who do this could be banged up in jail or fined, and yet there are many who still take the risk.

Indeed, the rumour mill tends to spin at its most active alongside large short-selling positions.

Max exposure

A ban on short-selling may be relatively easy to police. But it is much harder to govern word of mouth.

Given that he is breaking the law, any rumour-monger who is spreading vicious tales about a company, or indeed a country, will obviously be keen to hide his tracks.

But at the same time, he wants to maximise the impact of his story. And what better place for such activities than the cocktail party?

The story of a pre-Christmas party in New York during the early 1990s illustrates how the rumour mill can work.

It was a cold winter’s evening at a stylish Manhattan basement bash hosted by one of the major investment banks. Who the host was hardly matters. All the banks arrange similar events throughout the year.

The room was filled with a crowd of mainly young men, though there were also young women there. Almost everyone wore dark suits and discreet ties.

Tray-carrying waitresses wore dark pencil skirts and white blouses as they handed out tall glasses of champagne and small nibbles to young professionals who were busy swapping business cards.

Trading information

As is always the case in the world of finance - in a somewhat bizarre paradox, given that it is all about money - everything was free, so no cash was changing hands.

Instead, the currency of the evening was information.

Everyone was hungry for a story. The journalists were fishing for stuff they could print. The traders and brokers wanted to know who was in difficulty, and who was going for gold.

In such a pool (or perhaps cesspit is a better word?) of information, nobody is giving anything away for free. You’ve got to give to get.

And, for once, the journalists were the ones with the most currency.

Financial journalists spend their days speaking with regulators and investors, with brokers and traders. And much of what they learn is impossible to verify, so no journalist will ever print all that he knows.

But he might tell his sources.

This is why many traders and brokers are prepared to tell secrets to journalists, often in breach of their own bank or brokerage’s policy.

They do so because what the journalists give them in return is much more valuable than the information they are revealing.

In essence, they are trading information, and this was the theme of the evening in New York.

A story is born

One story in particular that soon started to do the rounds was startling. A war was brewing in a lesser Latin American country and its currency was heading south.

Moreover, the story went, a hedge fund run by billionaire investors George Soros was getting in on the act by doing his bit to push the currency over the edge using currency derivatives.

And as the champagne continued to flow the tale gathered momentum.

Our team of journalist from my employer at the time - a newsletter whose specialty it was to reveal secrets from the world of financial derivatives - heard it from a number of mouths.

We, in turn, passed it on to our sources, who no doubt told hacks from rival publications. And so a market-moving story was born.

Deliberate lie?

On Wall Street, everyone wants to be the smartest guy in the room, and this is as true in the financial newsroom as it is on the trading floor.

Yet in the sober light of day, the story that had seemed like such a scoop the night before, one that had seemingly been confirmed by a string of market officials as the evening went by, suddenly seemed less believable.

With the luxury of a weekly deadline our team did some further digging, which unveiled the truth: every single aspect of the story was bogus, and so it was promptly, as we say in the trade, spiked.

Nevertheless, we observed considerable volatility in the Latin American country’s currency during the hours and days after the party - which means some people lost a lot of money while others made a lot, and a bunch of people a few thousand miles down south were left wondering what was going on.

Now, the story may have come from a hedge fund manager who was trying to move the market in his favour, but equally it might have been made up by someone feeling a bit low on “information currency”.

Or perhaps, and this is not as far-fetched as it might seem, it was just a practical joke - albeit one with serious consequences?

To this day, I have no idea where the story originated, but I do know this: for a regulator to prove that someone has deliberately created a false rumour in order to profit from someone else’s misfortune is a mammoth challenge.

Cours d’Anglais: Planes to collect British holidaymakers

The Civil Aviation Authority is arranging for planes to collect British holidaymakers stranded following the collapse of the tour operator XL.
The business’s 21 planes were grounded, leaving some 90,000 people abroad.
The Air Travel Organisers’ Licensing (Atol) scheme said “repatriation aircraft” were being organised.
A spokesman said many passengers were expected to return on specially chartered flights and on pre-scheduled flights that have spare seats.
The CAA is chartering planes from airlines including British Airways, Easyjet and Thompson.
Virgin Atlantic has said XL passengers who are stranded at airports in Florida and the Caribbean will be offered special one-way fares to fly home until the end of September.
Peter Long, chief executive of Thomson and First Choice owner TUI Travel, said his firm would also assist with helping stranded passengers.
And airlines Flybe, Easyjet, BMI and Ryanair had also offered various forms of assistance.
BBC reporter Nicola Pearson joined one specially chartered plane in the Egyptian resort of Sharm el-Sheik.
She said its passengers applauded when the captain said they had come on a rescue mission, and that the cabin crew was made up of staff from two different airlines - some had been called in from a day off.
There will need to be hundreds of flights like this to bring back the tens of thousands of British tourists stranded abroad, our correspondent added.
The decision to place XL Leisure Group into administration has also left thousands of staff facing the axe.
Chairman Phil Wyatt said he was “totally devastated” by the failure which has grounded XL’s 21 planes. The company flies to about 50 destinations.
There are 67,000 stranded who booked directly with XL, and another 23,000 who booked via other companies.
The CAA also said the firm had 200,000 advance bookings.
David Clover, a spokesman for the CAA, said it was making arrangements to help customers of the four tour companies within the XL group.
“In respect of people who are currently abroad we’re making arrangements and working very closely with the travel industry to organise repatriation flights.
“Clearly, though, with XL Airways no longer operating, we’re having to bring in substitute aircraft to bring people home.”

‘Big Bang machine’ fires up

The Large Hadron Collider is not just an extraordinary science experiment, it is also a remarkable engineering undertaking. As BBC science reporter James Morgan relates, just getting it built is an astonishing story in itself.

How do you build a “Big Bang Machine”? That was the challenge which scientists at Cern began to ponder in the early 1980s, when the idea for the Large Hadron Collider was born.

Cern’s governing council wanted to build a kind of time machine that could open a window to how the Universe appeared in the first microseconds of its existence.

If it could recreate the fleeting moments 13.73 billion years ago, when the fundamental building blocks of the cosmos took shape, then the world we live in today would be brought into much sharper focus.

It could discover how matter prevailed over antimatter, learn how dark matter was formed, and catch our first glimpse of the elusive Higgs boson - a “missing jigsaw piece” in our model of the universe.

We might even find evidence of the existence of other dimensions. But to conjure up these conditions, the Cern council knew it needed to perform an engineering miracle.

To generate the necessary high energies, the designers required a particle accelerator more magnificently complex than any machine ever built.

Beams of protons would be hurled together at 99.9999999% of the speed of light, in conditions colder than the space between the stars and each travelling with as much energy as a car at the speed of 1,600km/h.

And yet the fruits of these explosions - high-energy particles - would decay and disappear from view in less than a trillionth of a second.

To “photograph” these valuable prizes would require a detector as large as a five storey building, yet so precise, it could pinpoint a particle with an accuracy of 15 microns - 20 times thinner than a human hair.

How on earth do you build a machine like that? The journey took 14 years, more than 10,000 scientists, from 40 countries, and a financial injection anticipated at up to 6.2bn euros - four times the original budget. But it was achieved, on time. Well, almost.

The plans for the Large Hadron Collider began to gather momentum in the early 1980s, inspired by the success of its predecessor at Cern, a collider known as the Large Electron Positron (LEP).

But it was not until 1994 that the formal proposal for the LHC was ratified by Cern’s member states, and the engineering work began.

The accelerator would be housed in a near-circular 27km-long tunnel, buried 50m-175m underneath the Jura mountains, criss-crossing the Swiss-French border. The tunnel was already in place - being the once occupied by LEP, which was eventually disassembled in 2000.

Inside the LHC vacuum pipe, two parallel beams of subatomic particles (protons or lead ions) would hurtle in opposite directions at record energies.

Crashing together at specially designated junctions, they would release unstable, high-energy particles - including, perhaps, the elusive Higgs Boson.

To generate a magnetic field powerful enough to steer the high-energy particles around the pipe requires 1,740 superconducting magnets, which together required some 40,000 leak-tight welds and 65,000 “splices” of superconducting cables.

If you added all the filaments of these strands together, they would stretch to the Sun and back five times, with enough left over for a few trips to the Moon.

In order to conduct, the magnets must be cooled to within a couple of degrees of “absolute zero”, the theoretical limit for how cold anything can get. This requires a constant supply of liquid helium pumped down from eight over-ground refrigeration plants - about 400,000 litres per year in total. Enough to fill 1000 swimming pools.

At the junctions where particles collide, four enormous detectors have been designed to observe the microscopic wreckage.

Between 1996 and 1998, approval was granted for four giant “experiments” - Alice, Atlas, CMS and LHCb - to be housed in four enormous underground caverns, dug strategically around the collider loop.

Excavating these caverns out of sand, gravel and rock was a considerable feat. In the case of the 7,000 tonne ATLAS detector, it took two years to burrow a cavern large enough to hold a 12-storey building.

But while Atlas may be the largest cavern, it was CMS - 10km up the ring below the village of Dessy - which proved the most problematic at the excavation stage.

The cavern shaft had to be bored through a 50m layer of glacial deposits, including fast flowing water, which threatened to flood the shaft. Engineers repelled these underground rivers by piping super-chilled brine down the shaft, allowing a wall of ice 3m thick to form around the circumference.

It took six months to freeze the walls of the two CMS shafts. But while the barrier worked initially, the water eventually broke through, forcing engineers to first pump down liquid nitrogen to turn the area into “Siberian permafrost”, in the words of Austin Ball, CMS Technical Coordinator.

Building the components of both the accelerator and the detectors was a truly international effort.

In the case of the 12,500-tonne CMS detector, the coiled strands of its central solenoid magnet - all 50km of them - began their life in Finland, before travelling to factories in Grenoble, Neuchatel and Genoa, to be braided, coated, and welded.

After being shipped to Marseille, they went up the river to Macon, where they were unpacked and driven by lorry under the mountains to Cern.

In fact, the diameter of the magnet was restricted to ensure it was just narrow enough that components could squeeze through the tunnels. The clearance was a matter of centimetres.

The CMS magnet is the most powerful solenoid ever built - conducting a current of 12,000 amperes - to create a magnetic field 100,000 times stronger than the Earth’s.

Though the LHC was originally slated to begin operations in late 2007, the entire project was set back after a failure in one of the quadrapole magnets used to focus the beam, which buckled during testing.

This meant all similar magnets would have to be redesigned and replaced.

Other, less serious problems arose due to with leaky plumbing of liquid helium, and also when some copper “fingers” used to ensure electrical continuity between magnets buckled when the magnets were warmed up.

The final tab for the LHC is expected to come in at a colossal 6.4bn euros, four times the original budget set by the Cern Council in 1995.

But that sum still represents good value for money, according to Dr Chris Parkes, of Glasgow University, UK, who works on the LHCb detector.

He said: “Tom Hanks is to appear in the movie of Dan Brown’s Angels and Demons, which involves scientists at Cern making anti-matter. But the new experiment at the LHC to understand anti-matter cost less than Tom Hanks will earn from the movie.”