The Icarus Prediction: Betting it all has its price (4 page)

After years at Morgan Stanley and another hedge fund, he’d settled in to a comfortable life in Greenwich and was contemplating a return to teaching. That’s when a young man had approached him at a technical conference and asked him to come to work at Blackenford Capital. Ordinarily he’d have dismissed an overture from a boutique firm, but something about this fellow named Stryker told him he was cut from a different cloth. The garden-variety hedge fund managers had such frail egos that they tried to make up for it with bluster or the latest Lamborghini. Jarrod had that intangible of self-confidence that no amount of money could replace, and to his surprise, Sergei found himself signing on with this junior trader. The combination of Russian KGB academic and Alabama CIA alumnus created a formidable team. They generated extraordinary results throughout the Great Recession because they refused to accept conventional wisdom—and they catapulted Blackenford into a sought-after wealth management firm.

“Have you seen William this morning?” asked Sergei tentatively.

Jarrod shook his head. “No. I’ll see him at the department head meeting at two.”

Sergei stubbed out his Marlboro. “I hear he on warpath today.”

Jarrod chuckled. “Is William ever not on the warpath?”

“Today it sound different.”

The younger man shrugged. He’d always been able charm William Blackenford into his fold. “The firm is making money hand over fist, so maybe it’s male menopause. What could be the problem?”

“Have no idea.”

“Oh, well, as long as the results come in this, too, will pass. But maybe that explains Pippin this morning.”

“Pippin? Our chief bottle washer?”

“Yeah. Saw him in the elevator this morning. William must have ripped him a new one for some infraction. Ordered the wrong kind of paperclips or something.” Jarrod looked at his Rolex President wristwatch—a birthday present to himself. “Speaking of the department meeting, I need to touch up my PowerPoint.”

“I look at numbers. We 93 percent of firm’s profits this month.”

Jarrod grinned. “Nothing succeeds like success.”

Sergei had returned to his computer. “Hmmm.”

“What is it?”

Looking at his screen, the Russian said, “The company party on the firm’s yacht for Friday night.”

“Yeah, what about it?”

“Just got canceled.”

“Canceled? Are you kidding?”

Sergei peered at the screen. “Apparently some mechanical problem. Sounds like BS, da?”

“Too bad. I was looking forward to it. That vessel is a beauty.”

Sergei nodded. “And a floating art collection. William has a Pissarro on board more than the boat is worth.”

“Speaking of William, I better get on with it.” And Jarrod walked into his adjoining office.

He didn’t spend much time in his private abode, preferring to be out on the floor, but with his department $90 million ahead on the firm’s capital account, this was the juncture to really “seal the deal” in ascending to his partnership. Jarrod wouldn’t toot his own horn. He would subtly let the numbers do the talking. There would be envy from the other partners, of course, but that was their problem, not his. And beyond the numbers, there was his relationship with William. William was in his late fifties and divorced twice with a few estranged daughters to boot, and Blackenford Capital had been William’s entire life—except for the yacht, the Gulfstream, the art collection, the Hamptons estate, the lodge at Gstaad, the race horses, and the other toys that made his life worthwhile. William spoke so fondly of past memories with his daughters, especially “Lynn” and an apparent former family life that seemed to have taken a turn for the worse years before Jarrod had even joined Blackenford. The conversations, however, never revealed any details, and William apparently never had enough time to visit his family. Other folks had portraits, paintings, and ugly arts and crafts on their desks; William just had a six-by-eight frame of Winston Churchill adorning his. Nevertheless, It was an open secret he regarded Jarrod as the son he never had. Jarrod was the only one who could push back—respectfully, but firmly—in management meetings on issues that ran counter to William Blackenford’s myopic view of reality. But no pushback needed today. Just cruise control and collect the accolades. He was brushing up the presentation when a fresh cup appeared at his elbow. He leaned back and smiled at Gwen.

“Prepping for this afternoon, are we?” she asked, somewhat smugly.

“You got that right. But then, you usually do.”

Gwen Birnbaum was not immune to her boss’s charms as she peered over her reading glasses. “You flatter me.”

“And why not?” He pulled on the coffee. “Anything on the grapevine before I go into the management meeting?”

She chortled. “Just the
ooohs
and
aahhhhs
about your numbers this month. The partners are grumbling about the new ‘golden boy.’”

He grinned. “That kind of grumbling among the troops is the kind I can take. And they’ll swallow the bitter fruit when they get their piece of it in their bonus distribution.”

“Nothing like a healthy sense of entitlement,” she observed.

His mood turned. “Anything else? I don’t want to get blindsided by anything at this meeting.”

She shook her head. “No. Just that Rosita looks white as a ghost. Probably, you know…”

She didn’t finish the thought and didn’t have to. Rosita Suarez had been William Blackenford’s saving grace for a quarter century—no mean feat in itself. A single parent, she’d bootstrapped herself out of the Puerto Rican barrio and into a secretarial job and then to a beachhead at Blackenford. But her twenty-something son was every mother’s nightmare: in and out of every rehab there was and now in and out of jail.

A secret side of William Blackenford’s crusty exterior was that he personally underwrote the cost of treatments and lawyers for Rosita’s son—all to no avail.

“What a shame,” he observed.

Gwen nodded and left.

CHAPTER TWO

New York City, 2:00
pm

There was no such thing as being fashionably late to a meeting with William Blackenford. Those who arrived late would find the door locked. And there would be a tangible slice missing out of your bonus that year. Let it happen twice and you were no longer with the firm. It was one of many methods Blackenford used to whip oversized egos into line—and it proved you really could herd cats if you used a big enough whip.

So partners started filtering into the Nimitz conference room fifteen minutes before the appointed hour. Jarrod took a seat next to Warren Menefee. At fifty, Warren was looking toward retirement and taking his ketch on a North Atlantic crossing. Bald, burly, and a former guard on the Fordham football team, he ran Blackenford’s “special situations” division. His minions canvassed the globe looking for what William liked to call “asymmetric returns”—i.e., you put two million in and got twenty million out. Even on a worldwide basis, those special situations were rare, but when it worked, it was sweet. The Fordham alumnus had made a killing on a bundle of auto loans in Thailand, but currently Warren wasn’t feeling so special because the firm had taken a powder on a tanker filled with palm oil, which turned out to be more rancid than not (“Shoulda checked
all
the tanks, Warren”). That was too bad, because Warren was basically a solid player and a good guy. In other words, he was something of a rarity on Wall Street.

Jarrod sat down and fired up his laptop for his PowerPoint deck when he heard, “Jarrod, mind if I sit by you?”

He felt the bile rise in his throat as he smiled and said, “Sure, Sheila. Sit yourself down.”

Sheila Madsen was head of the firm’s investment banking division, and Jarrod positively loathed her. Being the only woman (well, the jury was still out on that), Sheila wore her balls on the outside, looking like a New England school marm as she peered over a pair of half-moon reading glasses with black and bloodless eyes. Her brown hair was pulled back in a tight ponytail. She never wore makeup on her chalky skin. Her clothes were always prim and relatively cheap.

Sheila was treading water at the moment. While merger and acquisitions activity had picked up a little since the Great Recession, and her crew was shopping a couple of companies on “sell side” engagements, she hadn’t closed anything for the better part of a year. So she was sitting next to Jarrod to somehow try and siphon off some of the golden boy’s glow during the meeting.

The rest of the partners filtered in and took their places around the table, a few of them also firing up laptops. The term “partner” at Blackenford was something of a misnomer, for although they were partners, they were
limited
partners or LPs. There was only one general partner and that was William Blackenford. In plain English, only one rooster was in the barnyard: William.

Jarrod had read all 313 pages of the firm’s partnership agreement, which essentially pounded home that
real
power within the firm—to hire, fire, award compensation, encumber with loans
etc.
was vested in the general partner. Limited partners had to ask permission to use the washroom. Indeed, under the agreement, they didn’t even have the right to look at the books. All the limited partners got at the end of the year was a brief “financial summary” and a staggering bonus check, which was the reason the limited partners put up with William. He paid them more than they were worth. Indeed, it was amazing how much abuse people would take when paid above market value.

Jarrod watched as the wall clock clicked over to two o’clock. As if on cue, Jason Utley—William’s bright young assistant—entered carrying a portfolio and stood to one side. The room rose and William Augustus Haversham Blackenford, Mayflower descendant; graduate of Deerfield, Dartmouth, and Harvard Business School; former board chair of the Bridgemount Yacht Club; patron of the arts; oenologist extraordinaire; and owner of a Preakness winner, entered.

The man’s temper was legendary. The only thing worse was his ever-so-discriminating attention to corporate social order that ensured that there was a place for everyone and everyone was in their place. Most folks in the room didn’t know William also had a much-guarded softer side. He’d recently pledged $95 million to a local children’s hospital over the next five years and another $8 million to a foster home in upstate New York. Perhaps he was atoning for the sins of the past or perhaps they just made him feel good, but those endeavors were made anonymously. William thought charity would be viewed as weakness in a cutthroat Wall Street crowd, so he stayed as far under the radar as possible.

As William walked into the room, Utley held the general partner’s custom-made high-back leather chair, and without acknowledging the group standing in his honor, William Blackenford sat down.

Jarrod had to suppress a smile as he distinctly heard the floorboards groan. Then without a word, everyone sat down and looked at the general partner for direction.

William Blackenford had a worn but attractive face, a slightly crooked nose from a lacrosse stick at Deerfield (which he wore as a badge of honor), and wavy salt-and-pepper hair. He was not one to suffer in silence, and his emotions were always close to the surface. The color of his skin was always a telltale sign of his attitude, and today his face was a slight shade of pink, perhaps closer to red. Not a good sign.

Utley tapped a few buttons on a console and a screen came down from the ceiling with a display that said Agenda.

The longtime chairman of a large multination back in the seventies was a legendary figure in American business named Harold Geneen. He took manipulating quarterly earnings to a high art form and along the way assisted the CIA in toppling the democratically elected Allende regime in Chile.

Every month, Geneen would summon his division managers to a meeting, where they’d all go into a gigantic room and painstakingly go through the financial performance of each division. The pecking order was such that the best performing manager went first and the worst last. And if you were on the caboose, you were likely toast.

Blackenford followed the same idea except he reversed the order: worst first, best last. In that vein, Utley said, “It looks like Martin is not able to attend today. Therefore we will begin with the Special Situations unit.”

With a muted moan, Warren Menefee stood up and began. “Unfortunately, I have to report that the acquisition of the tanker of palm oil at a distressed price was, in fact, distressed.”

Nothing like a little gallows humor to lighten the mood, and a couple of people chuckled.

“The tanks on the vessel were sampled as part of our due diligence process, but the damaged goods were adroitly arranged to preclude their easy access. While we can pursue legal remedies, the seller is based in Malaysia, and doing so would be problematic and costly. Therefore, I recommend we absorb the loss and move on.”

“Bottom line?” asked Sheila. Such a sweetie. She never passed a chance to shove it in and break it off.

“After the sale of the unspoiled oil, net loss is four million,” replied Warren.

William turned a darker shade of pink.

“Investment banking,” chimed Utley.

Sheila Madsen rose. Jarrod and everyone else knew that Madsen had turned a spotlight on Menefee’s loss so her department wouldn’t look so bad. Even so, it was her turn to squirm.

Winston Churchill once said that Germans were either “at your throat or at your feet.” The same could be said of investment bankers. With a big deal in play, they were distilled arrogance. Without a deal, they had their tails between their legs and were painfully solicitous. Jarrod remembered walking by Sheila’s office one day when she was on the phone sucking up to a potential client. The vacuum factor was so bad he thought the window was going to implode from the pressure differential.

Sheila was solicitous now as she quickly moved through her “pot of gold at the end of the rainbow” routine that when all these deals close we’ll be rich,
etc.
Then she sat down, glossing over the fact that no cash was generated this month.

Then the pecking order continued—underwriting, private wealth management, foreign exchange trading, and equity trading. Finally Utley said, “Energy trading.”

Jarrod rose and began. “Sixty days ago, we identified some anomalies in the oil markets and a domestic security issue deep in the interior of Saudi Arabia.”

With a smooth, matter-of-fact delivery, the partners were at first curious and then enthralled at how he pulled together the disparate threads of data, jawboned the tanker crews in the bars, mined out the Saudi situation from his spy buddy in Dubai, cranked the numbers, placed the bet, and rode the upward arc of the reverse parabola.

“This resulted in a net gain for the month of $90 million,” Jarrod concluded, and then he sat down.

Awed silence followed as the partners realized that the downward arc of the reverse parabola would come in the next thirty days or so, and he’d be back next month with another ninety million. They further realized that Jarrod Stryker was a shoe-in to become general partner and now could likely receive the mantle of heir apparent to William.

It began with Warren Menefee at his elbow, but a ripple of spontaneous applause echoed in the room, in recognition of the most lucrative month in the firm’s history.

Jarrod nodded modestly in acknowledgement, then turned to William to receive his accolade. But the general partner’s face was crimson as he stood and brought his fist down on the ebony table. “This is
unacceptable
!”

A stunned silence fell on the chamber as the outburst washed over the table like a tidal wave. No one said anything, trying to absorb what had just happened.

Blackenford drew a breath and unleashed a second salvo. “I brought you people from nothing, and you are nothing without me! I’ve paid you millions, and what have you brought me?
Nothing
!”

The shock was still in full bloom when he looked at Jarrod and grudgingly said, “While the results from energy trading were…adequate…the rest of you are not worth a sack of shit! Do you hear me?”

How could they not?

“You have one week to bring in results that are tenfold better than this. Do you understand? Tenfold, or you are all on the street!”

And with that, the general partner stormed from the room, leaving an astonished group of limited partners in his wake.

*

“Got a minute?”

Sergei Dobrinin looked up from his computer screen. “Da.”

“My office.”

Sergei walked next door, where Gwen had already taken a chair.

“What is up?” he inquired.

“We all know what William can be like,” Jarrod began.

Everyone nodded in reply.

“He can be short-tempered, irascible, goading, and God knows what else. But there is always a method to his madness. That is to say, I’ve always seen through his behavior for the act it was. It’s just a management style to keep a bunch of bright, oversized egos focused on the goal line.”

More nods.

“Well, I’m not sure what happened, but I’m thinking maybe William has had a stroke.”

“A stroke?” echoed Gwen.

Jarrod nodded, then recounted the scene in the boardroom where William had blown a gasket. “Seeing as it was the best financial performance for any month in the firm’s history, everyone was taken aback. And what’s worse, the whole room was looking to me for some kind of explanation, and I had none. In fact, I’m at a loss as to what to do. Something like this can make a small firm like this come apart at the seams.”

Sergei leaned back, trying to calm his younger boss. “Well, let us not to conclusions jump. We can speculate into infinity. Perhaps this a solitary episode. Perhaps some health matter. We need better information. Gwen, see what find out you can from your secretary network.”

She nodded. “Will do.”

He then turned to Jarrod. “Why don’t you go to Bridgemount this evening? Buy drinks. William’s buddies there. Maybe they tell you someting.”

“Good idea. What are you going to do while I’m gone?”

“You no want to know,” replied the Russian.