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.
Comstock Newton was a quantitative fund. Frankly, Astor had no idea what its team did, except that they did it with lots of math and sophisticated algorithms that predicted whether stocks or gold or oil, or whatever you might want to bet on, would go up or down. Much of their work involved high-frequency trading, which meant buying and selling stocks hundreds of times an hour. Competition among high-frequency traders to see who got their orders in first had become so intense that the New York Stock Exchange even allowed firms to position their computers in the same building as the Exchange’s, a prisonlike facility in the wilds of New Jersey. Even a delay of a millionth of a second could mean significant losses.
Astor’s quant team didn’t work in Manhattan but in a locked-down bunker in Greenwich, Connecticut, where they could bang out code day and night. Rumor was that from time to time they threw geek orgies, which involved drinking the latest microbrew, gobbling Slim Jims, and formulating new and ever more sophisticated algorithms. All math, all the time.
Together, these three funds managed $2 billion. Quant was doing best this year, boasting a 27 percent return. The Risk fund was faring poorest, returning only 4 percent.
And then there was Comstock Astor, the fund that Astor managed himself. Comstock Astor was a macro fund, which meant that it bet on the bigger picture, specifically the direction of currencies. Since currencies didn’t move very much, the Astor fund relied on leverage to amplify its bets. Borrow enough and a 2 percent move up or down meant a 20 percent gain or loss. Keep borrowing and the gain could become 200 percent. Leverage was a drug. The more you used, the more you wanted to use. Making money…up your leverage and hit a home run. Losing money…borrow more and make your money back.
Traders were never wrong…until they were.
The Astor fund managed $3 billion on its own. As of this morning $1 billion was invested in “the position.”
Finally, at eleven o’clock, there was the weekly Monday review, when Astor’s managers met to discuss the status of their funds, what had gone up, what had gone down, to bitch about the market if things were going badly, and to brag if things were going well.
“Time for the conference to start,” said Shank.
Astor checked the screen. A news feed ran across the bottom: Press conference rescheduled to 0800 Chinese time. “Looks like we’re out of luck.”
“What?” Shank shuffled over and read the banner. “Oh eight hundred Chinese time, that’s nine tonight our time. I’ll have to catch that at-” Shank ended his words midsentence. “Holy crap.”
“What is it?”
Shank stood transfixed in front of the currency monitor. “The position.”
“What about it?”
“6.295,” said Shank. “6.292. The fucker is strengthening.”
Astor rolled his chair closer to the screen. “It can’t move that fast.”
“It” was the Chinese currency, officially named the renminbi but better known as the yuan. And the 6.292 referred to how many yuan it took to buy one American greenback. If the number went down, the yuan was said to be strengthening versus the dollar. Fewer yuan were needed to buy one dollar. (Conversely, the dollar was weakening.) If the number went up, the yuan was weakening. More yuan were needed to buy one dollar. (And conversely, the dollar was strengthening.)