The Billion Dollar Sure Thing

by Paul E. Erdman

  Rosen turned to Fezali. “Mr. Fezali, let me tell you my investment philosophy in a few words. I don’t gamble. I take very carefully calculated risks. I do not promise to make 5 percent or 10 percent return on your money each year. But I can promise you that I won’t lose half of it. I don’t run either a casino or a mutual fund. I hate major downside risks. I am willing, however, to put money into anything, anywhere, provided the downside risk is measurable and acceptable and the chances of a good profit are better than 50 percent. If I am wrong on the profit, at least the capital base remains intact for the next round. Finally, I try not to work with my clients from behind a screen of mystery. If I intend to make a major move with their money, I explain my reasoning and intentions to them. If they don’t fully buy the idea, I will not proceed. One last thing. I put my own money into the same projects as those which I develop for my clients.”

  Radazan translated all this for his uncle. Fezali was apparently impressed and in agreement.

  Rosen continued. “I further feel most strongly that there is a specific time for every type of investment. There is a time to be in common stock and a time to stay completely out. There is a time for property investments, and there are periods when property should be avoided like the plague. There are times when one should be investing in Japan and others when one should be concentrating on Western Europe. I do not believe in spreading risk across the board, since I feel it is illogical to put money into things just for the sake of diversification, when you know full well that they will be losers. I believe that you must search out those very positive situations, and until you find them, park the money at a good solid rate of interest. Good opportunities do not fly in through the window and hit you on the head. They are developed through hard work. The implementation of an idea demands even harder work. That’s what I get paid for, and I expect to get paid well.”

  Radazan again translated, and Fezali again nodded his agreement.

  “All right,” continued Rosen. Once he got started on his favourite subject it was impossible to stop him. “I believe that I have developed one of these opportunities. To you, it will no doubt sound like bringing coals to Newcastle. Nevertheless, I’ll explain it to you. If you like it, fine. We can do business together right now. If not, fine too, and no hard feelings I hope on either side.

  “O.K. My idea is quite simply the following. I feel that the time is here to make a very big play on gold bullion and against the United States dollar. All the signals are go—for the first time since the early 1930s. There have been innumerable false starts on this. And the suckers have lost their shirts more than once. But this time I think it will be for real. The absolute key to success will be timing; timing is more important in this field than any other investment area, bar none. If you are wrong in your schedule, when the target date passes the only answer is to bow your head in shame, pick up your marbles, and go. Otherwise you just bleed a slow death.”

  Rosen paused again. Apparently Radazan was having a bit of trouble with the Arabic term for “marbles.” Finally he appeared to have once again caught up with Stanley’s rush of words.

  “Normally, I do not like one shot deals,” Stanley continued, “but this one looks too tempting. The downside risk is very low relative to the potential profit. At worst we would stand to lose a maximum of 15 percent, but more probably 10 percent. If we win, we will quadruple our money within the next two months.”

  Fezali, after once again listening very carefully to Radazan’s repetition of Rosen’s words—all the while with his eyes on Stanley, did not exactly appear overwhelmed by the last part. Through Radazan he voiced his doubts.

  “Mr. Rosen, for decades now we in the Near East have been investing in gold. To be sure, our capital remained intact. But for decades it brought us neither interest nor capital gains. Only very recently did the free market price finally move up, hardly by enough to make up for those many years of no income, but still up. The younger people in our family, our organization, came to me. They said that this was the time to get out of gold; to find new and better ways of placing our funds, so that they do not lie sterile for another generation or two. This is one of the reasons why we sought advice in America.”

  “The logic was right,” interjected Rosen, “but the timing wrong. In fact, very wrong. Because now, right now, the price of gold could explode. It’s an investment that should bring a sure capital gain, with no downside risk, or an extremely small one. My case is very simple. The American dollar is again in trouble. The reason is that nobody around the world trusts it, because since 1971 it has not been convertible into gold. The American government must do something to restore confidence if the entire world monetary system is not to break down in a way which would make what happened in 1971 look like a Sunday School picnic. The only solution will be to restore dollar convertibility. That will require a massive increase in the price of gold—to at least $125 an ounce and maybe higher. This will then represent the new governmentally guaranteed price for that metal. You can buy gold now for $74 an ounce in London or Zurich. That’s what I suggest we do. After this is over, forget about gold. Permanently. Your young people I understand. But after all these years, they certainly should be able to be patient for just a few more weeks.

  “One more thing. You can be sure that when the Americans devalue the dollar relative to gold they will also force through a dollar devaluation relative to the currencies of those countries which have been giving the States such a hard time in the monetary area, like France, Germany, Switzerland, and Japan. Sure, it will hardly be anything near as drastic as with gold, but I figure that at least 10 percent is in the cards.”

  There seemed to be no violent disagreement thus far, so Stanley continued. “But now I come to the heart of the matter. Maximum leverage. We squeeze everything we can get out of our $100 million in cold cash. Money like that talks very loud. And I’m thinking in terms of what we back home call a double whammy. First step, we deposit our $100 million in a Swiss bank. Second, we take out a credit of a matching $100 million, and put everything into gold: $200 million worth.”

  He was interrupted by Radazan. “You call that maximum leverage? Remember I’m a banker, and as one from the Near East I know more than a little bit about gold. You’re talking about putting up 50 percent cash margin on gold bullion. I know 20 percent will be enough—not that I’m suggesting we go that far.”

  Rosen cut in. “Hold on. I’m not through. The final stage of the operation is that we go massively short on the American dollar. I figure that if we block all that gold as a guarantee, we can sell at least $1.5 billion short, and maybe $2 billion in the forward market. If my calculations are correct, we would stand to make $100 million on gold, and another $200 million on our short dollar position. That’s not as much as Howard Hughes made when he sold his TWA stock in the 1960s, but it comes as close as anybody else has managed since.”

  The two Arabs went into a huddle.

  “Before we get down to the principle involved,” said Radazan, “I’d first like to point out that if, and I say if, your theories are right, we would stand to make almost the same money by simply putting everything into gold bullion. If we operate on a 20 percent cash margin, we could buy half a billion dollars worth of gold—which, you say, is sure to move up 50 percent in price almost immediately thereafter. Then we would not have to run any risks in the foreign exchange market.”

  “Aha,” replied Rosen. “I see you’re with me all the way. But you forget one little factor. The gold bullion market is a delicate one. Even the purchase of $200 million will push the price up. To try to buy half a billion dollars worth could wreck the market.”

  “The Libyan government did it a couple of years ago.”

  “Yeah. And they pushed the price up $15 an ounce in the process.”

  “What makes you think it will be that easy to sell $2 billion short?”

  “Easy it will not be. But also not that difficult. In the forward foreign exchange market billions of do
llars are bought and sold every day in the week. Sure, we might cause a flurry in the market—but only that.”

  Again Radazan consulted with his uncle.

  “If everything turns wrong, how much would we lose?”

  “On the gold, nothing. We would just have to take our time unloading, that’s all. On the currency operation, about 1 percent of the face amount. On $2 billion, that would be $20 million.”

  Rosen smiled. “That’s the kind of game Stanley Rosen likes to play. I figure that if the entire deal goes haywire, we’ll drop a maximum—remember, maximum—of $20 million on the foreign exchange side. It could just as well be nothing, however, and it is not impossible that we could even luck through with a tiny profit. But still, we would have a $100 million loan outstanding for perhaps a half year until we could prudently unload that gold. So that would mean, say, $5 million interest. But against that we have a $300 million profit potential. Three hundred to twenty-five—them are the odds I like at the race track, but believe me, this is not a race track.”

  “Fine, Mr. Rosen,” said Radazan. “But that still leaves us with what you yourself termed the most important factor in this type of operation—timing. What makes you so sure you’re right on that?”

  “I’m not sure. But I intend to become surer. You understand me? That’s what you pay me for. Right?”

  “And if you change your mind?”

  “I’ll come back to you. This is not the only idea I’ve got. But it is by far the best one at the moment. Sure, I’ve got a complete alternative program in my briefcase back in the hotel. But let me put something real straight to you fellows. Essentially you’re not buying a plan or a program. You’re buying Stanley Rosen. As simple as that.”

  Radazan translated all of this once again for his uncle. Then the two of them entered into a dialogue which lasted a good fifteen minutes. Stanley just sat there on the horsehair couch.

  “My uncle agrees to work with you,” stated Radazan. “He wants us to immediately work out the contract.”

  Both Arabs rose, and within ten minutes, after an enormous number of handshakes, smiles, and headnodding, Stanley and Radazan were back in the Cadillac.

  By early afternoon the next day Rosen was on an airplane, with a power-of-attorney over a portfolio of cats and dogs in New York worth just over $100 million, and the usual management contract appointing him—or rather one of his companies in Bermuda—as an investment advisor to the Commercial Bank of the Trucial States. For a whopping fee, of course.

  Stanley was bound for Paris. He planned to spend one night there. His purpose, to use an airline expression: reconfirmation.

  6

  THE Air France flight reached Orly at five o’clock local time, and less than an hour later Rosen entered the lobby of the George V. He asked for a suite in the north wing, facing the garden, and the hotel condescended to give him one, at the modest rate of only $135 a night, plus 22 percent service, 15 percent tax, and a $10 surcharge, the latter representing rather good value since it was subject to neither service nor tax.

  Step two in Rosen’s check-in procedure was to slip a $20 bill to the head concierge. Stanley also slipped him the name and telephone number of the lady he wanted to contact. Long ago he had learned that it was suicidal to try to take on the French telephone system without the expert aid of local consultants. It went somewhat against Stanley’s grain to pay an average of $10 for each local call, but in this instance he felt it worthwhile in view of the millions which were at stake.

  No less than three minutes after he was installed upstairs, the phone rang. It was Jean-Paul, his telecommunications aide. “Monsieur Rosen,” he said, “the young lady is out, but her maid expects her back within the hour. She promised that madame would return your call at that time.”

  “Fine, fine,” Stanley said. “Now could you do something else for me?”

  “Certainly, Mr. Rosen,” was the oily response.

  “I’d like a table at the most expensive restaurant in Paris.”

  “The most expensive?”

  “Yes.”

  “Well, I’m told that the Tour d’Argent—”

  “That sounds fine. And make sure we get the best table. For two. I’ll make it worth your while, Jean-Paul.”

  “Ah yes, you can most certainly depend upon me, Mr. Rosen. Rest assured that it will be arranged. For what time, sir?”

  “Around eight-thirty would probably be all right.”

  “Yes sir, and will you be needing a car?”

  “Now that’s an idea. Sure, why not?”

  “A Bentley, perhaps?”

  “Great. But make sure the driver speaks English.”

  “Certainement, monsieur. The driver is a friend of mine.”

  “Now one more thing. I want two—no, make it three bottles of the best champagne you’ve got put on ice and sent up to my suite around, say eleven. I won’t be back then, so just have them leave it. Understand?”

  “Of course. Should I make the selection for you, Mr. Rosen?”

  “Certainly, Jean-Paul. And merci beaucoup!”

  With that linguistic flourish he hung up and went to take a shower.

  Just forty-five minutes later the phone rang again. Stanley picked it up cautiously.

  “Hello,” was all he ventured.

  “Stanley, darling, is that you?”

  “Claudine! I’m so glad you could call back.”

  “But of course. Now tell me, what brings you back to Paris so quickly?”

  “You of course.”

  “Oh la la,” she said and sounded pleased.

  “Claudine, I’ve arranged a table at the Tour d’Argent for eight-thirty and I’ll pick you up at eight. And I won’t take no for an answer.”

  “But Stanley, at such short notice—”

  “Claudine, I only have one night in Paris. And somehow, I thought you enjoyed our last evening together.”

  “But I did,” she replied with enthusiasm.

  “Good. Then let’s make it even better tonight.”

  There was only the slightest of pauses. “I’ll come.”

  “That I will arrange also.”

  “Stanley! We’re on the telephone!”

  “I’ll see you at eight. Until then, Claudine.”

  “Bye, darling.”

  A couple of hours later, as she stepped from the Bentley in front of the Tour d’Argent, Claudine de Beauchamp made a smashing impression. The exquisite pure white mini, and the stunning pair of legs which emerged below, flashed through the dark mink coat, leaving even the doorman somewhat breathless. Her rich red hair flowed from beneath the fur cape, as she swept through the small entrance hall into the elevator. Stanley, a good six inches shorter, trotted behind, and almost gasped when he found himself enclosed in a small red velvet cage, operated by a young person with white hair sitting on a stool beside the controls, a white poodle in his lap. A large red ribbon adorning the poodle rounded out the picture of superb decadence. Claudine chatted gaily with the person of quite indeterminable sex as the lift moved up to the first floor. She was obviously well known there. In fact, when they emerged from the elevator, the head waiter paused hardly a second before coming over to bow before Claudine. Stanley stepped forward to identify himself but was completely ignored as Claudine moved toward the windowed alcove at the far side of the room, with most eyes in the room upon her.

  “This is my favourite table,” she said to Stanley, as with great fuss the head waiter removed her mink and eased a chair toward her poised popo, taking most careful note of the target in the process.

  The fawning bastard, thought Stanley, as the head waiter disappeared without once acknowledging Rosen’s presence. But his flagging mood was immediately revived when, for the first time, he looked beyond Claudine. There, perfectly framed in the alcove windows, was the Notre Dame, its towers and buttresses glowing in a soft light. Rosen, beneath the veneer a sentimental man, choked up for a fleeting instant, for it felt good, very good, to be near so m
uch beauty. It was, he felt, a moment to be remembered, for it was perhaps symbolic of a new and better life which was now within his grasp.

  The arrival of the menus brought Stanley back to reality rather quickly, for not only were they exclusively in French, but no prices were indicated either. To gain time, Stanley ordered two dry martinis on the rocks.

  “Chéri,” asked Claudine, “are you hungry?”

  “Yes,” he replied, “but frankly I can’t make head or tail out of this goddamned menu.”

  “Stanley darling,” said Claudine, reaching out to touch Rosen’s hand, “that is why I liked you so much from the first moment. You are the only honest American I’ve ever met, the only one who would dare admit that he knows very little of the French language, even less about French food, and absolutely nothing about French wine. Would you be terribly hurt if I did the choosing?”

  Stanley could not have been more relieved. “Claudine,” he said, now squeezing her hand, “go right to it, baby.”

  And she did. The delicate filet de sole cardinal was followed by their famous caneton Tour d’Argent and topped off with soufflé Valtesse. The 1959 white Burgundy was succeeded by an absolutely superb 1949 Haut-Brion. The cognac, from the restaurant’s special reserve, proved to be as golden in flavour as in colour. The only deviation from Claudine’s suggestions upon which Stanley insisted was coffee. He refused to touch the stuff. The memories of Beirut were still too strong.

  The bill proved staggering, but Stanley paid it with a flourish worthy of the Aga Khan. Back in the Bentley, Claudine took his head between her two gloved hands and pecked him ever so slightly on the nose.

  “That was lovely,” she said, “and now let’s go back to my apartment.”