The Hedge Fund

by Burton Hersh

  Burton Hersh

  Tree Farm Books

  Contents

  Untitled

  Chapter 1

  Chapter 2

  Chapter 3

  Chapter 4

  Chapter 5

  Chapter 6

  Chapter 7

  Chapter 8

  Chapter 9

  Chapter 10

  Chapter 11

  Chapter 12

  Chapter 13

  Chapter 14

  Chapter 15

  Chapter 16

  Chapter 17

  Chapter 18

  Chapter 19

  Chapter 20

  Chapter 21

  Chapter 22

  Chapter 23

  Book Two Sneak Peek

  24. Chapter 1

  Untitled

  Acknowledgments

  Untitled

  By Burton Hersh

  Nonfiction

  Edward Kennedy: An Intimate Biography (2010)

  Bobby and J. Edgar (2007)

  The Shadow President (1997)

  The Old Boys (1992, 2002)

  The Mellon Family (1978)

  The Education of Edward Kennedy (1972)

  * * *

  Fiction

  Wet Work (2017)

  Comanche Country (2017)

  The Hedge Fund (2014)

  * * *

  Copyright © 2017 Burton Hersh | Treefarm Books

  All rights reserved.

  U.S. Copyright Reistration Number: TXu 1-868-357

  www.treefarmbooks.com

  1

  I think I first caught on that something was roiling Dad up Christmas afternoon of 2007. By three o’clock the carnage of wrapping paper and discarded ribbons had already been swept out of the Music Room and we were starting to wake up after gorging on Anastasia’s super-succulent free-range turkey and key lime pie. The brothers-in-law had headed home. Our Dad and I were settled into Dad’s Jacuzzi. Beyond the lichen-covered timbers of the sea wall some kind of makeshift regatta was trailing into the yacht basin.

  Dad repositioned the base of his spine against one of the surging jets and slumped into the cascading bubbles. “For what it’s worth,” he opened up, “the accountants have been all over my vulnerable old ass all week. They’re starting to break the tax year down.” Steam started Dad squinting, heavy beads erupted across his tonsure. Dad was a stocky sixty-plus-year-old, still muscular from fighting it out most mornings with his elliptical machine followed by laps in the regulation-Olympic pool that overlooked the Bay. “Stillman says he needs a lot more paperwork than he’s got. Especially regarding your hedge fund.”

  “My hedge fund?”

  “You drew up the contracts.”

  “I reviewed the contracts. Kicking and screaming every minute, if you remember.”

  “Could that be true, Michael? At my age the memory is very selective.”

  I knew Dad was giving me the business, but it was hard not to overreact. I was still dumbfounded at how skillfully our recently acquired brother-in-law Ricky’s glamorous Cuban-emigre father, the financier Ramon Perez y Cruz, had played Dad over the months since his son Enrique married our sister Wendy.

  Looking back I now think Dad had been doing so well moving in on the exploding local real estate market that nothing seemed out of the question. Highly regarded professor and writer in economics that he was, Dad understood the multipliers immediately when Ramon showed us how – once the embargo got lifted -- his ascendant Sunrise Capital Partners hedge fund could cut us in on miles of choice Cuban beaches picked up for pennies on the dollar.

  We had to pledge to Ramon’s hedge fund most of Dad’s choicer up-market acquisitions . Following up the trust work as Dad’s personal lawyer, I had squeezed whatever protections I could into the paperwork. A real-estate boom was raging from Tokyo to Dublin; Citigroup and AIG seemed positioned to gobble up the known world

  Then the panic started, months before that fateful Christmas of 2007. Pumped up with subprime mortgages, on the line for billions in unsustainable credit default swaps, Lehman Brothers had burst like a giant piñata. Soaking in his Jacuzzi I realized that even a romantic optimist like Dad was terrified.

  Dad regarded me balefully over the heavy brine of bubbles and attempted to confess, in his way. “I suppose every great man makes one big-time blunder. With Churchill it was the Dardanelles.”

  “Churchill? Why settle for Churchill. Didn’t Jesus ever do anything wrong?”

  “Right. How about Moses? Mustn’t look too grandiose, Michael. I want you to remember that.”

  “Modesty. You’re pushing modesty now?”

  This exchange was wearing thin. Even through the steam I could see that Dad’s attention was drifting off. “If this goes bad it will be mine to sweat, we can agree on that,” he grunted finally in a subdued voice. “Taken to the cleaners by greaseball economics.”

  The moment he said that I could tell Dad regretted it. It was the first racist dig I’d ever heard come out of him. “Don’t tell your mother I said that,” Dad muttered. “You know how she is. I’m convinced that if some coked-up paisano were slicing off her pearls with one hand and hiking up the hem of her nightie with the other she’d find some elaborate sociological justification.” Dad swabbed his flushed face with one stubby hand. “I think that’s guilt, too many generations on trust-funds.

  “It’s going to get more complicated than I thought,” Dad rumbled on. “Stillman says a couple of the properties had already been earmarked for the charitable endowment. We could get buried in retroactive penalty and interest payments.”

  Just then we both became aware, through the steam, of Cybil. The folks were putting Cybil up for the holiday. She was the pert, divorced sister of one of our newly acquired brothers-in-law, Buckley Glickman. An impudent ectomorph in a string bikini, Cybil’s hipbones now yawned like jaws as she squatted behind the tray of gin and tonics she had trotted out from the main house.

  “Whose endowment are we talking about here, Sylvan?” Cybil giggled, peering over her long nose into the maelstrom of bubbles. She had a baseball cap on backwards.

  “Mine,” Dad said. He all but growled; Cybil had crossed a line. Mostly friends his own age addressed Dad as Sylvan.

  “I should have guessed that.” Cybil tittered. “Well, you are a special case.”

  “Nothing that out of the ordinary.” When Dad felt condescended to he could get outrageous. “If you’re hung like a rhinoceros.”

  Cybil stepped back, still carrying the tray.

  “Keeps the womenfolk on edge,” Dad acknowledged, grinning up. “But I have got quite a following in the rhinoceros population.”

  * * *

  We have come into a time when great wealth is all we take very seriously. The infatuated young public relations trainee you pick up in an East Side club is much more likely to permit you a run at the back door than show you her bank book. Within families of well-established means, once outsiders start marrying in, the rule remains: Kiss, but don’t tell. Checks from remote brokerage offices turn up in the mail every month, there is some indication on the basis of which outsiders can attempt to guess how the investments are allocated among sectors and specialty funds. From time to time the still-intimidated newcomers are presented with papers to sign.

  Things weren’t that different in our family until the dog days of the Reagan Administration. Even as a kid I thought Dad took our finances over by way of a fatigue duty, as if he’d come upon a waterlogged manatee on one of our beaches here and performed mouth-to-mouth resuscitation to keep the ugly old mother heaving and snorting. Until 1987 he’d seemed to like life well enough throwing his intellectual weight around, publishing books and teaching the post-graduate economics seminar at Temple. There was a
lot of gratification in posturing for the coeds, and Dad obviously enjoyed his role as The Iconoclastic Hebrew at Main Line dinner parties.

  My parents originally ran into each other at Yale. Dad had stayed home for college to study economics at the University of Minnesota. He was a precocious student and moved on after graduation by winning a Fulbright Grant to the State University of Styria in Graz to pick over the archive notes of the dandified young Josef Schumpeter. There Dad’s draft board cornered him, on semester break skiing the Obertauern.

  The Viet Nam war was boiling, Lyndon Johnson was scrounging for bodies, and Dad’s stratospheric General Technical score had doomed him to eighteen months as a radio operator. By early 1968 Dad was one more grunt in ‘Nam nursing hopes of getting through his hitch alive. He wound up a lackadaisical staff sergeant presiding over a perimeter communications trailer the night the North Vietnamese went for Tan Son Nhut Air Base, hours into the Tet Offensive. The breech and trigger housing of the 50-caliber machine gun he grabbed got so hot from the thousands of rounds of suppressive fire Dad poured into the attacking Viet Cong that both Dad’s forearms got scorched, repeatedly, and never again grew hair. All that scar tissue was especially fascinating to my nosy little sisters growing up. Dad won the Silver Star.

  Dad was a stand-up guy -- everybody depended on that. I think at some level he was never completely at home in what our mother would teasingly refer to as the “Evil East.” For Dad his Minnesota origins were bedrock – he’d toughened up dealing with his starchy Episcopalian prep school and the brutal YMCA canoe camps and fist fights with freckle-faced Mick youngsters in empty lots visible from the cornfields. That was the real America. The Philadelphia Society he’d married into was nervous, held-in, mannered. And as for Florida? Florida was built on sand. On slime.

  But I’m definitely getting ahead of myself. The father I remember first was on the make in academia. His break-in book, Josef Schumpeter and the Paradox of Creative Destruction, would lead directly to a tenure-track offer at Temple University in 1980, where he was just settling in when I was born. By then he had been married a matter of months. Our mother, Louisa Winant, had wandered into his life late in the seventies at Yale while he was still attempting to put the emotional convulsions of too much combat behind him and break in as a section man.

  Mother had been bored too long at Wellesley and transferred to New Haven to explore her fascination with the Weimar-era expressionists. This tempted her into Dad’s seminar in Twentieth-Century Central-European economic thinking. Yale during the seventies struck her as pretentious but sterile, and Mother – never too outspoken, even then, but devoted to nursing her appetites -- was on the prowl for something authentic with a sperm count. She absorbed Dad effortlessly, casually – like a Jewish hors d’oeuvre. I doubt he noticed at first. He was uninhibitedly ribald, emphatic, all shoulders with a dark torrid gleam in his bulging eyes and a big head of bristling coal-black hair that my sisters later giggled over as Dad’s Afro.

  Our mother -- Louisa -- Weezee – came from the oldest money around Greater Philadelphia. There had been a seventeenth-century interlude of discreet trafficking in slaves, but the prerevolutionary fortune came largely from tanneries and, throughout the nineteenth century, Western land speculation. By World War II the bulk of the Winant capital was locked up in what was still referred to as merchant banking.

  A speculation in Nazi bonds had cost the Quaker branch of the family the bulk of what they’d inherited. My mother’s grandfather had been astute enough to pool up at the last minute with Joe Kennedy and the notorious Ben – “Sell ‘em Ben!” – Smith when the economic tremors started in 1929 and speculate under a bogus name against the collapsing markets. When his sons – “The Uncles,” in Winant family parlance – resigned their Navy commissions in 1945 and returned to their chilly Dutch Colonial mansions along the Main Line the important capital was intact.

  The first time my father ever saw the inside of one of those mausoleums was the November weekend in 1979 when my mother took him home to meet her parents. My mother could see at once that they did not approve. She really hadn’t thought they would. In any case, Weezee was already pregnant with me.

  That weekend was the first time Dad ever watched our mother ride. Horses are a passion most young women manage to outgrow. Mother never did. She was a lissome, understated young debutante with short, sculpted chestnut hair and a quick response to the idiocy of the passing world -- her deep, snuffled laugh told all of us immediately what was going on. She had a profile like the goddess Minerva -- strong chin, powerful brow, a nose with definition and character. The presence of a horse enlisted something ancient in her. Her favorite horse, Monument, travelled on the train with mother to Foxcroft and he was still alive during my childhood.

  She rode that weekend when Dad met her family, if carefully. She and my father were married on April Fools’ Day in a private civil ceremony. There was some sort of hotel reception afterwards during which Dad’s new father-in-law, normally as austere as the headmaster of a third-rate boarding school, knocked back his fourth Scotch and blurted his deepest feelings to a pair of well-oiled cronies. It just might develop, Edward Winant IV pontificated just before he passed out, that a dose of Hottentot blood would wake up this goddamned flea circus of a family. When this got back to Dad he was more amused than offended. Black, white, niggers, Jews – everybody else was third-world to Weezie’s lovable father. That was Big Eddie, he assured me many years afterwards. You could always depend on that tight-assed old cocksucker to improve on garden-variety anti-Semitism.

  * * *

  I was pushing one when Dad and Weezee relocated to Philadelphia. My sisters arrived promptly. Mother found a skinny bowfront on Society Hill within walking distance of The Philadelphia College of Art. She limbered up Monument on weekends. Dad had wangled an associate professorship at Temple. Big Eddie died unexpectedly of cirrhosis of the liver, and a couple of the Winant trust funds became irrevocable. Mother had been named as a trustee, along with one of the Quaker uncles and a Philadelphia bank. Every couple of months she was expected to stop by the bank and rubberstamp the investment decisions. She started taking Dad along.

  So we were bona-fide trust-fund bambinos. For several years Dad wasn’t really paying attention – his second book, Adam Smith and the Advent of Zombie Capitalism, got a lot of press as a leading-edge refutation of Reaganomics . He was in and out, lecturing. Then one late afternoon the two of them came in from one of those conferences at the bank and Mother was close to tears. I was six.

  “Nobody wants any trouble,” Dad said. He banged down into the Queen Anne armchair. “Why do you drag me into those things, Weez?”

  “It’s not what you said, Sylvan. It was your tone of voice. Almost…snarling. Didn’t you see Lionel’s face?”

  “Just emphatic. Just trying to make a point.”

  “But wasn’t there some other way--? The kettle had started whistling; Mother crossed over into the kitchen and poured two cups of green tea. On her way back she noticed the sisters and me through the door to the study, playing pick-up-sticks but listening. She put Dad’s tea down on a candle-stand. “Lionel is very fragile. First they lose what little he had left on those disappointing German securities, and now he told me the other day he’s worried about his position at Fahnestock.”

  “So where does that leave us?” Dad yawned and wove his fingers and turned his palms inside out and stretched. “Did you see your list of holdings?”

  Mother didn’t say anything. She started to rub the butterfly-shaped discoloration on her left cheek.

  “A debt issue by some godforsaken Louisiana parish as likely as not below flood level. Nicaraguan railroad bonds! Have you looked at the papers this week? This administration is this close to taking out every foot of trackage down there before the end of the month. They’ve already mined the harbor.”

  “But isn’t that why the interest payments are so high? To compensate for the risk? Wasn’t that Lionel’s point?�
�

  ”It won’t matter what they pay if they stop paying it.”

  Mother looked beseechingly at Dad. She hated fights.

  “Yours is a trusting nature, sweetie pie” Dad said, lowering his voice. “Angelic. That’s why people like you are attracted to pit bulls like me. Enough of a mujik not to roll over just to keep the peace in the family.” Dad grinned up into her face, that notorious grin. “I’m merely an economist, what do I know from life on the Street? I’d give you odds that Fahnestock is either underwriting directly or at the very least loaded to the gills with a hell of a lot of the garbage in your portfolio. Saintly old Uncle Lionel is no doubt dragging down a pisser of a commission dumping it on you.”

  “I really don’t care for sweetie pie,” Mother said. Her lovely face darkened. “You actually think he’s doing that intentionally?”

  “With the best of intentions. He intends to keep his job.”

  Mother looked at Dad. “That’s really disturbing,” she said after a long moment. “Awful. Really, really awful. Just thinking about it that way makes me sick to my stomach.” Mother looked up and breathed heavily through her mouth. “I’m tired. Everything makes me tired these days,” she stated, idly. Dad set his teacup aside and put his arms around Mother.

  2

  By 1987 Dad was committing more and more of his time to looking after Mother and the complications of her inheritance. His nerves depleted, Uncle Lionel had reconciled himself to rubber-stamping Dad’s recommendations rather than push back and jeopardize his honorarium. Dad socked away most of Mother’s capital in high-yield triple-A municipals, which threw off a lot of interest. The financial community was still spooked by the Carter era.