was the final release of all that tension, the realization that, yes, Virginia, it really was over. He saw people bringing in yet more champagne. It was pretty good stuff, and he fully intended to have his share of it. CNN would soon tire of the party, but these people would not. All the uniforms, and politicians, and spies, and diplomats. Hell, maybe they would all really be friends.
19—Strike Two
Though the overall timing was fortuitous, the plan for exploiting the chance was exquisite, the product of years of study and modeling and simulation. In fact the operation had already begun when six major commercial banks in Hong Kong started going short on U.S. Treasury bonds. These had been bought a few weeks earlier, part of a complex exchange for yen holdings done as a classic hedge against monetary fluctuations. The banks themselves were about to undergo a trauma—a change in ownership of the very ground upon which they stood—and the two factors made their massive purchases seem an entirely ordinary move to maximize their liquidity and flexibility at the same time. In liquidating the bonds, they were just cashing in, albeit in a large way, on the relative change in values of dollar and yen. They would realize a 17 percent profit from the move, in fact, then buy yen, which, currency experts all over the world were now saying, had reached a hard floor and would soon rebound. Still, two hundred ninety billion dollars of U.S. bonds were on the market briefly, and undervalued at that. They were soon snapped up by European banks. The Hong Kong bankers made the proper electronic entries, and the transaction was concluded. Next they wired the fact to Beijing, uneasily happy to show that they had followed orders and demonstrated obeisance to their soon-to-be political masters. So much the better, all thought, that they had taken a profit on the deal.
In Japan the transaction was noted. Fourteen hours off the local time of New York City, still the world's foremost trading center, it was not terribly unusual for Tokyo traders to work hours usually associated with night watchmen, and in any case the wire services that communicated financial information never ceased transmitting data. It would have surprised some people to learn that the people in the trading offices were very senior indeed, and that a special room had been established on the top floor of a major office building during the last week. Called the War Room by its current occupants, it had telephone lines leading to every city in the world with major trading activities and computer displays to show what was happening in all of them.
Other Asian banks went next, repeating the same procedure as in Hong Kong, and the people in the War Room watched their machines. Just after noon, New York time, Friday, which was 2:03 A.M. on Saturday in Tokyo, they saw another three hundred million dollars of U.S. bonds dumped into the market, these at a price even more attractive than that just offered in Hong Kong, and these, also, were rapidly bought by other European bankers for whom the working day and week were just coming to an end. As yet nothing grossly unusual had happened. Only then did the Japanese banks make their move, well covered by the activity of others. The Tokyo banks as well started selling off their U.S. Treasuries, clearly taking action to firm up the yen, it appeared. In the process, however, the entire world's ready surplus-dollar capacity had been used up in a period of minutes. It could be written off as a mere coincidence, but the currency traders—at least those not at lunch in New York—were now alerted to the fact that any further trading on those notes would be unsettling, however unlikely that might be, what with the known strength of the dollar.
The state dinner was reflective of traditional Russian hospitality, made all the more intense by the fact that it celebrated the end of two generations of nuclear terror. The Metropolitan of the Russian Orthodox Church intoned a long and dignified invocation. Himself twice the victim of political imprisonment, his invitation to rejoice was heartfelt, moving a few to tears, which were soon banished by the start of the feast. There was soup, and caviar, and fowl, and fine beef; and huge quantities of alcohol which, for just this once, everyone felt free to imbibe. The real work of the trip was done. There really were no secrets left to hide. Tomorrow was Saturday, and everyone would have the chance to sleep late.
'You, too, Cathy?' Jack asked. His wife was not normally a heavy drinker, but tonight she was knocking it back.
'This champagne is wonderful.' It was her first state dinner overseas. She'd had a good day of her own with local ophthalmic surgeons, and had invited two of the best, full professors both, to come to the Wilmer Institute and acquaint themselves with her specialty area. Cathy was in the running for a Lasker Award for her work with laser surgery, the product of eleven years of clinical research, and the reason she had not accepted a department chairmanship twice offered by University of Virginia. Her big paper announcing the breakthrough would soon be published in
'You're going to pay for it tomorrow,' her husband warned. Jack was going easier on all the drinks, though he had already exceeded his normal nightly limit, which was one. It was the toasts that would do everyone in, he knew, having been through Russian banquets before. It was just a cultural thing. The Russians could drink most Irishmen under any table, something he'd once learned the hard way, but most of the American party either hadn't learned that lesson or simply didn't care this night. The National Security Advisor shook his head. They'd sure as hell learn it tomorrow morning. The main course arrived just then, and deep red wine filled the glasses.
'Oh, God, my dress is going to split wide open!'
'That should add to the official entertainment,' her husband observed, earning a glare from across the table.
'You are far too skinny,' Golovko observed, sitting next to her and giving voice to another Russian prejudice.
'So how old are your children?' Yelena Golovko asked. Also thin by Russian standards, she was a professor of pediatrics, and a very pleasant dinner companion.
'An American custom,' Jack replied, pulling out his wallet and showing the pictures. 'Olivia—I call her Sally. This is little Jack, and this is our newest.'
'Your son favors you, but the girls are the image of their mother.'
Jack grinned. 'A good thing, too.'
The great trading firms are just that, but it's a mystery to the average stockholder just how they trade. Wall Street was a vast collection of misnomers, beginning with the street itself, which is the approximate width of a back alley in most American residential areas, and even the sidewalks seem overly narrow for the degree of traffic they serve. When purchase orders came in to a major house, like the largest of them, Merrill Lynch, the traders did not go looking, physically or electronically, for someone willing to sell that particular issue. Rather, every day the company itself bought measured holdings of issues deemed likely to trade, and then awaited consumer interest in them. Buying in fairly large blocks made for some degree of volume discounting, and the sales, generally, were at a somewhat higher price. In this way the trading houses made money on what bookies called a 'middle' position, typically about one eighth of a point. A point was a dollar, and thus an eighth of a point was twelve and a half cents. Seemingly a tiny margin of profit for a stock whose share value could be anything up to hundreds of dollars in the case of some blue chips, it was a margin repeated on many issues on a daily basis, compounded over time to a huge potential profit if things went well. But they didn't always go well, and it was also possible for the houses to lose vast sums in a market that fell more rapidly than their estimates. There were many aphorisms warning of this. On the Hong Kong market, a large and active one, it was said that the market 'went up like an escalator and down like an elevator,' but the most basic saying was hammered into the mind of every new 'rocket scientist' on the huge computertrading floor of Merrill Lynch headquarters on the Lower West Side: 'Never assume that there is a buyer for what you want to sell.' But everyone did assume that, of course, because there always was, at least as far back as the collective memory of the firm went, and that was pretty far.
Most of the trading was not to individual investors, however. Since the 1960's, mutual funds had gradually assumed control of the market. Called 'institutions' and grouped under that title with banks, insurance companies, and pension-fund managers, there were actually far more such 'institutions' than there were stock issues on the New York Stock Exchange, rather like having hunters outnumbering the game, and the institutions controlled pools of money so vast as to defy comprehension. They were so powerful that to a large extent their policies could actually have a large effect on individual issues and even, briefly, the entire market, and in many cases the 'institutions' were controlled by a small number of people—in many cases, just one.
