The Samurai Strategy Part 29

"Well, then, do something, for chrissake!"

"Our securities dealers here are in contact with the appropriate officials. Nothing is to be done without explicit instructions from Noda-san. He has not yet been in communication."

"Well, get him in communication."

"There is no cause for alarm, Mr. Walton." He continued calmly. "Noda- san has made sure that our dealers' exposure in Treasuries is covered by the futures contracts DNI has acquired. j.a.panese investors are sheltered from price fluctuations. Noda-san is most grateful for your--"

"Listen carefully," I said. "f.u.c.k Noda."

I hung up.

The rest of the morning I just sat there and watched the market crater.

After bond futures prices on the Chicago exchanges had sunk the daily limit, as far as they could drop in a single session, the action merely moved elsewhere. A cash market developed off-exchange worldwide and was going crazy, with spot quotes nose-diving. Prices now were only rumors, but the satellite services were still trying to track them. At exactly 12:37 P.M. the President finally got around to issuing an Executive Order suspending all trading at the exchanges in government bills, notes, and bonds, including futures contracts, until further notice. It turned out to have been about as effective as Prohibition. Besides, by that time I figured Noda had already cleared at least fifty billion.

Enough. I couldn't watch anymore. All of a sudden I felt like a guy who'd bailed out of his flaming F-16 only to see it total a schoolhouse. I kicked off the computer, slipped on a suede jacket, and headed for Bleecker Street to fortify myself with mussels marinara and a stiff b.l.o.o.d.y Mary. The early Post at the corner newsstand proclaimed with characteristic understatement the imminent pa.s.sing of the civilized world.

Over cappuccino I finally started to think rationally. Nothing anybody was saying added up to a full picture. There had to be more, or less, to the story. . . .

Then the truth glimmered before my eyes, yet another transcendental moment. What Noda was planning was obvious. At last I realized why he'd hired me. Like a great chess player, he could see about ten moves ahead. The question now was no longer what his next move would be. It was when.

You want to win World War III with a quick blitzkrieg, knock America to its knees? Simple. Go for the blind side. First you short a piece of the debt market, then for fun you dump the currency in advance (since it's just naturally gonna go the way of the peso when you make your opening move, and you might as well squeeze the orange if it's just lying there anyway). Next you kick things off by giving everybody the impression you're divesting all Treasury paper, which causes the dollar to predictably plummet. . . .

Christ! What about Amy's currency hedge! Three weeks ago I'd contracted to sell the banks of New York ten million dollars she didn't own. In all the pandemonium, I'd completely forgotten.

I threw down a twenty for the lunch and literally raced around the corner to look for a pay phone on MacDougal. When I finally found one that worked, I shoved in a quarter and dialed the FOREX desk at Citibank for a dollar quote.

Henderson was right. Paper money is predicated on trust. It seems that when the second largest industrial nation in the world apparently doesn't think enough of the credit rating of the first largest industrial nation in the world to loan it two cents, then talk about the full faith and credit of said first largest, etc., doesn't cut much ice. The Fed was out there buying dollars and dumping marks and yen and pounds in the billions to try and keep the dollar afloat, but n.o.body else in the Group of Five--those countries supposed to step in and buy each other's faltering currencies to prop them up--was lifting a finger.

In spite of our treasury secretary yelling fire and d.a.m.nation, all they'd done was announce an evening meeting in Paris. Period. What, they inquired, had the U.S. done lately to help out France, West Germany, Britain, or j.a.pan?

Behind our allies' diplomatic and not-so-diplomatic posturing lay a simple, rhetorical question: Who needed pa.s.sage on a sinking ship? At the moment the only thing governments around the world wanted less than U.S. Treasury debt was U.S. greenbacks. I'd contracted to swap ten million of them for other currencies back when they were worth a dollar. That afternoon I settled with bills worth eighty cents and sinking. That's right. Amy's college-fund hedge cleared two mil.

And if you think Miss Amy Walton survived the dollar's crash intact, what about Matsuo Noda, now holding tens and tens of billions in world currency forwards?

What didn't prosper that Monday was a state of mind called Wall Street.

By mid-afternoon all the market indexes were down by half; exchange trading had been halted in a good two- thirds of the Dow stocks; a major brokerage house had frozen accounts and announced Chapter 11; and gold futures were soaring. The October crash of '87 was now a nostalgia item, remembered as a few sessions of light trading with a hint of downside bias.

A lot of investors went to cash, but most switched into money funds (what else could they do?). While sophisticated players were shorting the stock indexes and futures, the newsletter gurus--who charged two hundred dollars a year for hot tips about equal in worth to those of a New York cabbie--were calling their major clients. A big sell signal was emblazoned in the streets of lower Manhattan. Everybody a.s.sumed the situation was temporary, but n.o.body needed to ride the ship down. By the closing bell the Dow had sunk over eleven hundred and fifty points.

And don't forget, the DJ Average represents blue chips; prices for over-the-counter outfits like Widget-tronics Inc. just packed up and headed south for the winter.

The way I figured it, Noda was probably more or less on schedule. By nightfall the stock exchanges had blood on the floor, a dollar was worth roughly two-thirds what it had been at sunup, and the U.S.

Treasury couldn't have panhandled a nickel anywhere in the Free World.

I've mentioned Jack O'Donnell a time or so previously, the Columbia University professor turned politico. Jack was the junior senator from New York: Irish idealism goes to Washington. I'd gotten to know him reasonably well, thanks mainly to a series of rubber-chicken dinners I'd pitched in to help him with.

Needless to say, O'Donnell's well-known att.i.tude toward fiscal sleight- of-hand in the corporate sector had made raising money on Wall Street a decidedly uphill endeavor. His Insider of the Month award was especially unpopular. That was a large gold-plated screw, suitable for mounting, which he regularly bestowed on any corporate board members who'd just happened to dump big blocks of their personal holdings about a week before a disappointing quarterly report sent their company's stock price through the floor. For some reason Jack never seemed to buy their collective "Gee, we had no idea" explanation.

Jack always a.s.sumed that corporate managements would walk off with anything not securely riveted to the floor. He also believed most of the corporate takeovers these days were about as helpful to America's compet.i.tiveness as masturbation was to population growth, a viewpoint I tended to share--which is one reason why I helped him raise money from time to time. More than that, though, I admired him immensely. The man was a real samurai. Unfortunately, however, he was his own worst enemy half the time when it came to soliciting campaign checks; he could never understand why executive dining rooms weren't necessarily the optimum terrain to start raising h.e.l.l about shareholders' rights. I once sent him a dog muzzle for Christmas after he pulled just that trick at a CEO fundraiser I'd carefully set up in one of those private suites atop the World Trade Center.

He'd been especially busy this session. When he did come to New York, he spent most of his time up at the West Side apartment of a female aide of his, where they reportedly were polishing a lot of position papers these days. Monday, however, he had only one thing on his mind: how to keep the U.S. monetary system from going belly up. Trouble was, he had no idea what to do. Naturally he immediately canceled his subcommittee hearings for the day--an inquiry into how charge cards and the banks touting them (loving those wonderful loan-shark rates) were lofting consumer debt to dizzying heights. That afternoon he began working on a speech for the Senate floor, a h.e.l.lfire preachment intended to shame the administration into some kind of action.

After thinking about it awhile, he'd decided that, since all the nervousness in the market was traceable to an apparently total j.a.panese loss of confidence in U.S. government obligations, he'd have his staff call around concerning what other j.a.panese moves were underway. He had questions such as: If they're pulling out of Treasuries, are they dumping corporate bonds too? Real estate? Where in blazes is it going to stop?

Simple questions, maybe, but tough ones to attack on short notice, given the clampdown at the source. So his people started making calls, and finally one of them got hold of Charlie Mercer, an Executive VP at Shearson. Purely chance. Did Charlie happen to know any big j.a.panese players in town?

Well, yes and no, replied Charlie. Strictly off the record, one of his biggest personal clients lately was an attorney here in New York, who always paid with corporate checks bearing the logo of a j.a.panese- sounding outfit. But it was a purely private arrangement and he was sure . . .

The staffer immediately told him to please hold while she switched the call to Senator O'Donnell.

Actually I'd known Charlie for years, and I also knew the poor guy's wife had some kind of esoteric bone cancer that meant ten thou a month in radiation therapy. So I'd let him set up an account on the side and do some full commission churning in the name of one of Dai Nippon's dummy fronts. Why not?

Then Jack came on the line. "Mr. Mercer, am I to understand you've been handling heavy trades for a j.a.panese firm?"

"Nothing illegal about that, is there, Senator?" Charlie was growing nervous, suddenly seeing himself under the hot glare of TV lights in Jack's finance committee. "Truthfully, the man I actually deal with is an American attorney here named Walton."

"Matt Walton?" roared Jack.

"You know Matthew, Senator?" inquired Charlie, stunned by the sound of the august public figure abruptly bellowing in his ear.

"Know him? I may kill the p.r.i.c.k for not talking to me sooner."

Approximately five seconds after this conversation my phone erupted.

"Tell me, Judas," he yelled, "is it true you're helping them out? I want the G.o.dd.a.m.n truth and I want it now."

"Jack?" I finally recognized the voice. "Helping who?"

"You know who, you f.u.c.ker. Our good friends the G.o.ddam j.a.ps, that's who. They're--"

"Jack, calm down a second," I interrupted. "It's just possible this whole thing is some kind of scam. Not at all what it seems."

"Talk to me."

"Not over the phone. Client confidentiality. But if you're coming up anytime soon, I'm mad enough to give you a full rundown of all I know, strictly off the record."

"I'm scheduled in on the six o'clock shuttle. Where can we meet?"

"How about the club? I promise you an earful."

"The Centurion?" He inquired sourly. I knew how he hated it.

"Jack, wouldn't kill you to rub elbows now and then with an actual capitalist. Don't worry. There won't be any photos to sully your reputation."

I suggested the place partly to pay my respects to a wounded ward after the day's carnage and partly for Jack's convenience. It was a combined press hangout and "new money" convocation, located just around the corner from his New York office in one of those old mansions right off Fifth, midtown. They'd just begun allowing the fair s.e.x to cross their hallowed doorstep (after a lawsuit), a move certain diehards felt signaled the curtain raiser on the West's Decline. For my own part I'd actually put up Donna for membership as pan of the test case. We eventually established that the Centurion's unwritten membership criteria were actually pretty simple: in addition to being white and male, you also needed to be either rich or well-known. Being all four made you a shoo-in.

A couple of us fortunate enough to have friends on the circuit bench called in a few favors and arranged for a black, female judge to hear the case. The proceeding was over in time for lunch.

"Is eight okay?"