Houston Chronicle

Oligarchs and sociopaths rule ‘Undermoney’

- Michael Taylor THE SMART MONEY Editor’s note: Michael Taylor’s column has moved to Texas Inc. You can read Chris Tomlinson on Wednesdays and Sundays in the Houston Chonicle and at houstonchr­onicle.com

This spring, my top book recommenda­tion is the zeitgeist-capturing financial thriller “Undermoney” by first-time novelist Jay Newman.

This has everything you want.

Sociopath billionair­es. A beautiful adrenaline junkie with the fighting skills of a special forces assassin. Deep state operatives conspiring to steal billions of U.S. taxpayer money to buy an election and undo American malaise. Murderous Russian oligarchs deploying mercenary armies, serving Vladimir Putin, the puppet master. A Medici descendant who controls a financial fortune to rival his descendant­s. Conspiraci­es within conspiraci­es.

And in his mastery of military detail, Newman channels Tom Clancy’s Cold War novels of the 1980s. With his forays into spy craft and double-dealing among competing militaryin­dustrial complexes, Newman nods to John le Carré. Conspiraci­es hatch more intricate conspiraci­es, as baroque as anything in Dan Brown’s “The Da Vinci Code.”

If you enjoy financial/military/spy/conspiracy thrillers, you will love “Undermoney.”

Published in January, the fictional descriptio­n of Putin and his use of mercenarie­s to do his dirty work seems ripped straight from current headlines. The dark money fueling U.S. hedge funds are equally nefarious. Newman understand­s how kleptocrac­y and oligarchic excess — both in Russia and in the West — repel and attract us in 2022. This is fun stuff and extremely of the moment.

Jay Newman is not just any firsttime novelist. Newman describes the world of the ultra-rich and connected hedge funders because he worked, fought and emerged victorious from this world.

He holds a legendary place in the hedge fund world, having endured decades-long battles against countries unwilling to pay their debts. He writes about big money, internatio­nal political intrigue and maniacally focused hedge funds managers; he has lived through it all.

In 1999, Newman managed to win a court case and change internatio­nal bond-market precedent against countries that do not pay their debts to bondholder­s.

A brief financial history of sovereign debt: In the 1980s, many Latin American countries defaulted on their debt to U.S. and European lenders. In the 1990s, debtholder­s swapped their defaulted loans for “Brady bonds,” named for then-U.S. Treasury Secretary Nicholas Brady. The settlement­s allowed much of Latin America to rejoin internatio­nal financial markets, even though debtholder­s had to accept less than full value with the Brady bonds.

Newman, however, had purchased some Peruvian debt and withheld it from the Brady bond debt swap. He joined forces with a very patient hedge fund named Elliott Associates. With Elliott, Newman sued for full payment of the debt. After years of appeals, he got a New York court to agree that Peru could not pay its Brady bonds without settling Newman’s debt in full as well. For a few weeks in 1999, he threw the entire country into default until he got paid.

Newman became known as is the ultimate hardball negotiator of sovereign debt.

When Argentina had the largest sovereign debt default of all time in 2001, Newman used the same playbook. He famously managed to seize an Argentine naval ship in Ghana with 200 sailors aboard, using a Ghanian court order.

Usually, when I watch a successful financier turn out to be a great writer, I turn picklegree­n with envy. I do not resent Newman, however, and maybe now is time for my own quick name-drop humble brag.

Newman was briefly a client of mine when I worked on the emerging market bond desk at Goldman. We followed along in real time as he engineered the Peruvian bond default.

I tried my darnedest to sell him really cheap defaulted Argentine bonds in 2001, anticipati­ng what his eventual strategy would be. It took him and Elliott 15 years to succeed, but eventually Newman prevailed with a $2.4 billion settlement in 2016, an estimated tenfold return on investment.

The word I kept returning to while reading “Undermoney” is prescient. Newman published the book in January, before most of the Western world had to reckon with Putin’s murderous, kleptocrat­ic regime. This guy sees the future.

Russian bonds will likely default in May because Western bondholder­s have frozen reserves or blocked payments.

I haven’t spoken to Newman in 20 years. There’s a high probabilit­y he would not remember me, as I wasn’t a particular­ly good salesman and he barely needed Wall Street to do his thing.

I may send him this column, however, as a pretext — I need to find out what he is going to write about in his next novel. He clearly anticipate­s the future better than anyone. That might make me money some day.

 ?? Francisco Ubilla / Associated Press ?? Earlier this month, civil guards stood watch over a yacht in Mallorca, Spain, that is owned by a Russian oligarch. “Undermoney” dabbles in a Putin-esque plot, months before the Ukraine conflict.
Francisco Ubilla / Associated Press Earlier this month, civil guards stood watch over a yacht in Mallorca, Spain, that is owned by a Russian oligarch. “Undermoney” dabbles in a Putin-esque plot, months before the Ukraine conflict.
 ?? ??

Newspapers in English

Newspapers from United States