The Prince of Risk

by Christopher Reich

  Astor took out his phone and brought up the message from his father.

  PALANTIR.

  A search on the web had offered a definition meaning “illumination” and nothing more. If the news had accurately reported the time of his father’s death, the message counted as his father’s last words. Or at least his last message. Regardless, it was to be taken seriously.

  The phone rang. Astor saw it was the office calling. “Yeah, Marv, be there in ten,” he said.

  No one replied. The earpiece filled with white noise.

  “Marv…you there? Marv?”

  Astor checked the screen and saw that he had four bars of reception. Still, he could not hear his partner. He hung up and called back, but the call didn’t go through. Phone reception in Manhattan was a work in progress. He didn’t worry about it. Marv could wait.

  Astor looked again at the text message. He’d spent the night glued to the wall of monitors, switching from program to program, hoping to glean some piece of information he might have missed, anything that might help him understand what had happened to his father, and, more important, why.

  By dawn the analysts had broken down the incident into four questions: Why had Hughes, Gelman, and Astor’s father demanded to see the president so late on a Sunday night? And why had they been meeting in the first place? Why had the Secret Service agent, a twenty-five-year veteran with a family of four, left the paved road and driven across the South Lawn of the White House? And why had the agents on the grounds seen fit to blow to kingdom come the Chevrolet Suburban in which they all were traveling?

  Answers to the first two boiled down to an unknown threat to the nation’s financial system. Most of the talking heads were in agreement that it was Edward Astor’s presence with the nation’s two highest-ranking economic officials that offered the most clues. Yet as to the nature of the threat, no one had an answer. The only other person who appeared to have known about the meeting was the vice chairman of the Federal Reserve, who confirmed that the three men had convened at the Eccles Building at 9 p.m. As to who had asked for the meeting, he did not know if it was the treasury secretary or the chief executive of the New York Stock Exchange. It was not, however, the chairman of the Fed.

  The third question involved more fertile ground for conspiracy theorists. Answers bandied about ran from the driver of the vehicle being a homegrown extremist to Hughes, Gelman, or Astor being a latter-day Manchurian candidate, a sleeper spy brainwashed by a foreign power to assassinate the president. No one could offer a credible response.

  Only the fourth question merited a quick reply. The Secret Service agents charged with guarding the White House grounds had deemed that the vehicle carrying Hughes, Gelman, and Astor posed a clear and present danger to the president’s safety and the safety of others inside the White House and had acted accordingly.

  “Q E friggin’ D,” said Astor. It was short for Quod erat demonstrandum, which was about the only Latin he remembered. Give or take, it meant “No shit, Sherlock.”

  But not once had he heard the word Palantir.

  Astor shifted in his seat. He was made uncomfortable by the notion that in his final moments, his father had reached out to him. Astor had no brothers or sisters. His mother had died of cancer when he was ten. There had been no valiant struggle. She did not “fight cancer.” She never had the chance to be a “survivor.” She was diagnosed. She went to the hospital. A few weeks after that, she died. It was over, beginning to end, in three months. It was summer, too, he remembered. A sweltering July spent inside Sloan-Kettering hospital waiting for his mother to die. It was the smell that stayed with him most. Ammonia, disinfectant, and a lemon cleaner used to polish the floors. Somehow it still hadn’t been enough to camouflage the odor of death. He had sworn never to go to a hospital to die.

  After that, it was just father and son. Astor went off to prep school in seventh grade and never really returned home again. He saw his father on vacations, but briefly, in segmented, scheduled bursts, never more than three or four days at a time. These included a few days at the beginning and end of summer, wedged in between ten-week stays at sleep-away camp in Maine. Thanksgiving, Christmas, and spring break involved travel to resorts in places such as Vail, St. Moritz, and Bermuda where outdoor activities served to maintain a respectful separation between the two.

  It was better that way.

  The trouble began at fourteen. Astor was expelled from his first school in ninth grade, his second in tenth, and his third in eleventh. It was never a question of intelligence. When he applied himself, he received top marks. And of course there was the question of the PSAT, on which he earned a perfect score, and the fact that he was named a National Merit Finalist. The problem, his teachers agreed, was motivation, or rather the lack of it.

  Astor begged to differ, but he was in no mood to share his family secrets with strangers.

  It required the intercession of his father and a considerable donation to the school fund to find him a place for senior year. He made it all of two weeks before being dismissed for “unbecoming conduct,” namely running a sports book out of his dorm room. Alcohol and marijuana were also found. The fact that ten teachers, including the school’s chaplain, were his largest clients was not brought up at his adjudication.

  And so that was the end. At seventeen, Astor asked to be declared an emancipated minor. Broke and free of all family ties, he graduated from a public school in western New Hampshire, where he lived with the family of a close friend.

  So why me? he wondered, staring at the message. If his father had no other immediate family, he had many close friends, most of whom held positions of considerable power. Surely they were better placed to find out what Palantir meant. Why reach out to a son he hadn’t spoken to in five years?

  The question stayed with him as the helicopter banked and the sapphire surface of the Atlantic Ocean enveloped the windscreen. The radio squawked and the air traffic controller gave them clearance to land.

  “I have the stick,” said Astor.

  “The stick is yours,” said his pilot.

  Astor lifted the collective and brought the chopper over the landing pad, nose up, and the wheels touched down firmly.

  7

  Marv Shank was waiting by the elevators when Astor arrived. “Hey, Bobby. Half day? I didn’t get the memo.”

  Astor checked his watch. The time was eight-thirty, but Shank looked as if he’d been at work for hours. His shirt was untucked, his tie askew, his face moist with perspiration. Astor patted him on the shoulder. “I knew I could count on you not to bring up my father.”

  “You hated the guy. What’s to bring up?” said Shank, hurrying to keep up. “Wanted to make sure I grabbed you before anyone else. Press conference at nine-fifteen from Shanghai. U.S. trade representative.”

  “Know what he’s talking about?”

  “Not a clue. That’s what makes me nervous.”

  “Any change in the position?”

  “Nada.”

  “Then why are you so nervous?”

  “It’s my job to be nervous.”

  “If you didn’t get nervous,” said Astor, “we wouldn’t make any money.”

  “But this time…”

  Astor stopped and turned to face his friend. “This time what?”

  “It’s a little rich for my taste.”

  “Show a little faith. Have I been wrong on something this big before?”

  Shank pulled open the glass door leading into the office. “The market,” he said, “doesn’t care about before.”

  Astor walked inside. “Comstock Partners” was written in gold block lettering on a bleached maple divider behind the reception desk. He rapped his knuckles on the counter as he passed through the reception area. “Hello, ladies,” he said, addressing the receptionists, both young and male and hoping for a shot at the trading desk. “Bring me the usual. This time make sure it’s hot.”

  “The usual” was a double espresso with a lemon rind on the
side, some biscotti, and a shot of wheatgrass, in case he felt so inspired. In fact, the espresso was always piping hot, but he felt it his duty to keep the newbies on their toes. Lesson one: in this business, you couldn’t be careful enough.

  Not breaking stride, Astor continued down a corridor housing administrative offices—accounting, legal, IT. “What about my fifty grand?”

  “Check’s on your desk,” said Shank. “That was some dive. Your back okay?”

  “Don’t remind me.”

  “You could have heard that flop in the next county. Great party, though. I’m just sorry it had to end on a sour note.”

  “I thought you weren’t going to bring that up.”

  “It just slipped.” Shank took hold of Astor’s arm and stopped his progress, guiding him against a wall. Astor stood still, Shank’s compendious belly pressing against him. “Marv, what are you going to do? Give me a kiss?”

  “Really, Bobby, you doing okay? We’re talking about your father here. You can talk to me.”

  Astor looked Shank straight in the eye. “I’m fine, Marv. Really.”

  “You’re sure?”

  “Do you want me to pinkie swear?”

  “Screw you,” said Shank, dismissing Astor with a shove down the hall. “Shows what I get for caring.”

  “If you want a friend…” began Astor.

  “Buy a dog,” the two men said in unison. Astor raised his hand and Shank high-fived him.

  “Thought you were getting soft on me,” said Astor.

  “Thought you had a heartbeat.”

  “Never.”

  The trading floor was a long open space, a floor-to-ceiling window that looked over Ground Zero and past Wall Street to the East River making up the outer wall. A desk ran the length of the room. Fourteen traders sat across from one another at uneven intervals. A host of flat-screen monitors demarcated each post. Workspaces varied from immaculate to chaotic. He counted three boxes of Pepcid, two containers of Tums, and a bottle of Maalox. Pro ball players got concussions. Traders got ulcers. If you weren’t playing injured, you weren’t playing hard enough.

  Aware that the room had gone silent at his arrival, Astor stopped and addressed his team. “Okay, everyone, listen up. I know you’ve all heard about my father. I have no more idea what happened than any of you. If I find out anything, I’ll announce it over the hoot-and-holler. Your condolences are appreciated, but as most of you know, we had a falling-out a while back. Don’t expect me to hide in my office while I get over it. I’m going to be out here on the desk riding your ass like any other day. So get to work and make some money.”

  Astor waited, but no one made a move. He clapped his hands. “That means now.”

  The room came back to life.

  Astor continued to his office. He had founded Comstock Partners fifteen years earlier, at the age of twenty-six. The firm’s name was a lie from the beginning. There were no partners. There was just Robert Astor, sole owner and principal investor. In the world of finance, Comstock was technically classified as a hedge fund. Hedge fund was one of those funny terms that meant everything and nothing all at once. Simply defined, a hedge fund was “a private partnership that invested in publicly traded securities or financial derivatives.” That meant he bought and sold stocks, bonds, commodities, currencies, and just about anything you could legally speculate on with a view toward making a profit. But that was only a beginning.

  Most hedge funds had four things in common. First and most important was fee structure, since traders, Astor included, cared about only one thing, and that was making money. Comstock, like the majority of its competitors, used something called a “two and twenty model.” Comstock kept 20 percent—a full one-fifth—of all profits for itself. On top of the 20 percent, it charged a management fee of 2 percent on all funds invested with Comstock, win or lose. In this last regard, Astor was a gentleman. He charged the 2 percent only on the funds actually invested in his positions. Any money sitting in a bank got off scot-free. He even credited his investors the interest.

  The other three things hedge funds had in common had to do with the way they invested the money entrusted to them. As the name implied, Astor often hedged his investments, meaning that if he bet that one stock might go up, he bet another might go down. The idea was to guard against swings in the market. Hedging might limit your returns, but it provided the investor with a margin of safety. It was never smart to put all your chips on red or black.

  Next, Astor used something called “leverage” to jack up the value of his bets. Leveraging just meant borrowing to increase the size of your bet. Back in the day, an investor would buy stock “on margin,” which meant he used the value of the stock he had bought to double-down and buy some more. That was old school. These days an investor leveraged. Astor borrowed billions of dollars to amplify his bet on anything: stocks, bonds, oil, wheat, pork bellies, and especially currencies.

  The last element was freedom. Hedge funds like Comstock operated in a nether region where regulation held little sway. When an investor signed a disclosure agreement and transferred his money into a hedge fund, he was giving Astor his trust to make money the best way he saw fit.

  And that’s why Astor loved the business. Hedge funds were a license to bet—and to bet big—without Big Brother looking over your shoulder telling you what to do and how to do it, and, worse, demanding an outsized share of your profits when you won. God bless the U.S.A.

  Astor continued to the end of the desk. Though it was summer, most of the traders wore fleecies and sweatshirts. Astor kept the room chilled to a brisk sixty-two degrees. He liked his boys and girls alert. Many of their sweatshirts bore names of alma maters. There were more Stony Brooks than Whartons. Astor couldn’t care less where someone had gone to college. (After all, he hadn’t managed to get a degree anywhere.) He cared about smarts. He’d cherry-picked the twelve men and two women who worked for him from the best firms in the world. He had two Brits, a few Indians, a gal from Shanghai, an Israeli, even a few Americans. They ran the gamut in personalities from extroverted jerks to introverted jerks. Talented traders were not renowned for their people skills. Or, as Alex had often commented, “It takes one to know one.”

  Astor’s office occupied a corner of the building adjacent to the trading desk. The door stood open and he was greeted by a view south across Battery Park to the Statue of Liberty, Staten Island, and New Jersey.

  New York City. The center of the universe.

  Astor set down his satchel and dropped into his chair. An electronically tinted glass wall allowed him to look onto the floor. This morning the wall was opaque. His first order of business was a check of the markets. He spun to face the panoply of monitors that took up half his desk. Futures showed that the market would open strongly on the downside, a bit more than a 3 percent drop. European markets were mixed. Asian markets had closed down a percent. The fall in the U.S. market was a knee-jerk response, and the market would bounce back in a day or two.

  Viewing the numbers, Astor experienced an immediate and visceral thrill. With $5 billion in the game, he wasn’t merely an observer but an integral, albeit tiny, part of a bigger, immensely powerful and efficient machine. A vast, seething highway of ever-changing, ever-evolving information. Some people got off on scaling granite cliffs or jumping out of airplanes. Astor got his thrills in this chair. It was a game of intellect and daring, with chance in the guise of unforeseen events always dangling above your shoulder. A Damocles sword fashioned of gold and greed. Sit down. Buckle up. And plug in. He’d been doing it for fifteen years, and it never got old.

  Astor skipped past the futures to the one symbol that concerned him most.

  The position.

  “Six-thirty,” he said, looking over his shoulder at Shank, who hovered nearby. “No worries.”

  “I still want to look at the press conference.”

  Astor punched a button and a slim screen emerged from a credenza situated against the wall. “Bloomberg, right?”


  Shank said, “Yes.”

  Astor opened his drawer and began digging through the contents. There were small orange prescription bottles of Lipitor, Xanax, Imodium, Ambien. He settled for a box of Altoids and popped three into his mouth. Another screen showed his morning schedule.

  At nine there was a meeting with Septimus Reventlow, who managed the Reventlow family office. Family office was the term used to describe money passed down from generation to generation and managed on behalf of the heirs. Think Rockefellers, Rothschilds, or even Astor’s namesake. When he’d first started in the business, family offices invariably involved “old money,” money earned fifty to a hundred years before by a long-dead tycoon. These days it was the opposite. Family offices handled the billions earned by private equity mavens, software billionaires, and Internet entrepreneurs, all of whom were still very much alive.

  At ten he had a meeting with Pacific Ventures, a private equity firm that managed about $10 billion. Pacific Ventures’ main game was buying up companies, restructuring them (trimming the deadwood and invigorating what was left), and selling them for a profit several years down the road. It also invested in hedge funds like Comstock. Astor punched in the account and saw that as of this morning Pacific Ventures had just over $100 million invested in his Astor fund. Pacific Ventures was a good client.

  Comstock operated four funds. Comstock Alpha was a long/short fund. This was the classical hedge fund, which didn’t seek to demolish the market return but was satisfied to beat the major indexes—the Dow, NASDAQ, and S&P—by a few percentage points.

  The team that traded the Alpha fund lived life glued to their monitors. When the market got frothy on the upside or fell through the floor, they couldn’t afford to leave their desks for a moment, not even to use the john. People liked to joke that they kept a motorman’s caddy at the ready. As for the other thing, they’d fart it out. True on both counts. No one said a trading floor was a nice place to work.

  Comstock Risk was an arb fund, and arb funds invested in two areas, company takeovers—both announced and rumored—and currency plays. It used leverage to double the bets, maybe triple them, but never more than that.