"Matt, why don't you just send your action over to the 'bean pit' for chrissake?" The phone line from Chicago crackled. "That's where the crapshooters are."
"Jerry, I wouldn't know a soybean if I ate one."
"Hell, half of those loonies over there buying and selling 'bean contracts wouldn't know one either. Come to think of it, I don't know anybody over on the Merc who's ever even seen a pork belly. Do they really exist?" He was yelling to make himself heard over the din of the floor of the Board of Trade. Futures on commodities were being bought and sold all around him. Just then he paused, followed by a louder yell. "Right, I'll buy five, at the market. Yeah. I'm talkin' one and thirteen bid. What? You've got to be kidding. No way." Pause. I could almost see the blue-jacketed floor traders frantically hand-signaling each other. Then he yelled again. "Christ, Frank, I'm already long forty at sixteen. I'm getting murdered here. You guys are killing me… All right, all right, I'll pay fourteen for ten. Yeah… Shit. Hang on, Matt. I gotta write this down on a ticket… Jesus, I should be selling Hondas like my brother-in-law down in Quincy. Sits on his butt all day, screws his bookkeeper at lunch, and the man's making a bundle." Pause. "Hell, Matt, what'd I just say?"
"If I heard right, you just bought ten thirty-year Treasury contracts at one oh one and fourteen thirty-seconds. You just agreed to loan the U.S. government a million dollars, Jerry. Very patriotic. Except you're probably going to turn around and unload the contracts in the next five minutes to somebody else."
"Oh, yeah. Right. I should be so lucky. Christ, where's my pencil? This place is driving me nuts. I think my mind's going. I've gotta shorten up some here before the close. Hang on."
He yelled at a runner to take his buy slip, then came back to the phone. "Matt, you're really shaking this place up, you know. Guys are starting to back away. And the people upstairs are beginning to wonder. You've gotta think about going off- exchange with some of this. Hit the market-maker banks. We can't keep up with you here. I could try to get the Exchange to waive their position limits, but don't hold your breath."
"No problem, Jerry. My client's got plenty of other accounts. We'll roll the next thousand contracts through a different one."
"Christ, whoever you're working for must have coconuts the size of King Kong. You realize you guys're naked here? You're getting short billions."
"I just handle the orders, Jerry."
"Your numbers scare the piss out of me just looking at them." He sighed. "Listen, Matt, take care. Get back to you tomorrow at the opening. Right now I've gotta find some greenhorn to take a few of these puppies off my hands or I'm gonna get blown out. Jesus, how'd I let myself get this long at sixteen? Forty fucking contracts. And I was sure… Hey, gotta run. Think I see some idiot over there signaling a seventeen bid. Kid must be from Mars."
"Good luck."
"Right. Maybe I'll try prayer." He was gone.
I'd known Jerry Brighton since we crossed professional swords once in the late sixties, and I'd never seen the man actually sit down. He gave up law early, and these days he elbowed the mob in the Treasury bond futures pit with the grim determination of a horse addict shoving his way to the two-dollar window. If the bonds were sluggish, he'd roam the floor looking for action. Football, you name it. He'd make up bets. Rumor has it, one slow day he even set up a wager pool taking odds on which floor trader would be the next to go broke, "tap out" in Exchange parlance. I'd guess Jerry's own number was pretty low. A reliable source once told me Jerry'd averaged a million a year for the past five, even while taking a hit year before last for over two million when a certain famous "inside trader" sandbagged him with a phony merger rumor. Maybe it was worth the ulcers. Thing is, I know for a fact he'd have done it for nothing. A born market maker, right down to his rubber-soled Reeboks.
So when Jerry Brighton started complaining that Matsuo Noda's action was growing too rich for his blood, I knew we were in the big time. It took a lot to impress a pro like him.
The thing was getting scary, but it was still perfectly legal. Let me summarize roughly what had happened over the three weeks since I had decided to play along with Matsuo Noda. First were the physical arrangements. To accommodate my new calling, I'd enlarged my operating space-the back room of the brownstone's parlor floor, looking out over the garden- into a makeshift brokerage office complete with a multi-lined telephone and quote services from S-tron and Telerate. I'd also installed a direct tie-line to the T-bill pit of the Chicago Mercantile Exchange, ditto the Note and Bond action at the Chicago Board of Trade. And because of all the computer hardware, I had to move Emma's desk out into the parlor. Consequently she could no longer listen in on my calls, which she did not take kindly. However, I was no longer forced to listen in on hers. I figure that sort of made us even.
In addition, I'd set up accounts at every futures brokerage house in the land, both coasts, to spread out the orders. We were moving a lot of contracts, and the big-time outfits like Salomon Brothers were scrambling to make a market for us. Once again, therefore, nagging questions began to arise. Anybody who'd thought about it for more than a minute would have realized you can't make a play like Noda's without being noticed. There's no bigger rumor mill than the financial arena. The very idea of shorting the bond market to the tune of billions and remaining obscure and anonymous for any length of time was absurd. After all, there're two sides to every bet. But since I was supposed to be fronting his move specifically to throw sand in everybody's eyes, all this attention presented something of a quandary. Although we were trying to keep the lid on, buying small batches of Treasuries even as we were shorting them, the price was softening and margin calls were starting to loom on the horizon. None of this made any sense. Noda wasn't hedging or even speculating in the normal sense; he was playing a giant game of cat and mouse with the markets. This told me once again he wasn't showing all the cards in his hand. He had something major, and unexpected, in the pipeline.
Which brought forth the next insight: Matsuo Noda didn't hire me merely because he wanted some innocent-seeming outsider to do his bidding in the futures market; any number of players in this town could have handled that action as well or better. No, he'd sucked me into his operation for some entirely different purpose, at the moment known only to him.
But what? More to the point, why?
Welcome to Friday, and my rather disturbed life. Want to know what really disturbed me the most? Seeing my new employer on CNN's Prime News, standing there right next to the Emperor of Japan. Seemed as though I wasn't the only one now under Noda's spell. All of a sudden my mild-mannered client had become a world-class Japanese mover and shaker. And that made me very nervous.
Needing a little perspective, I decided to invite down Dr. William J. Henderson, respected thinker and booze hound. As it happened, he had a little time to kill that Friday before his "late date" with some advertising exec who was flying in from an assignment on the coast. Since three weeks had gone by since our talk up at Martell's, it seemed like a good occasion to get together and compare notes.
True to his word, he had formally resigned from the President's Council of Economic Advisers, though he'd reluctantly agreed to serve as a forecasting consultant for Wharton Econometrics. He'd also caused some unsettling rumors in the world markets by putting on some very heavy "straddles" in December gold futures and oil. He called it insurance, predicting he'd be covered no matter what happened. Looked at another way, though, Bill Henderson was quietly shifting out of paper money and into commodities. And when Henderson started hedging, you knew the weather forecast was unsettled to stormy.
It turned out he'd also uncovered a few stray elements of what might well be a much bigger game. Nothing solid at that point, but enough to stir him up.
"Know who runs that outfit you've taken on as a client?" He leaned back in one of the leather chairs in the upstairs parlor, new pair of Gucci's glistening, and sampled his third drink. "Guy by the name of Matsuo Noda."
"Henderson, who do you think I was talking to up at Sotheby's the other night?"
"You check your wallet afterward? We're talking heavy guns, my friend." He snubbed out what must have been his tenth Dunhill in the last hour. "You didn't tell me he was the honcho behind all this."
"You didn't ask. Know anything about him?"
"Not till last week. I started to do a little checking and first thing I know I'm stumbling across his name everywhere I look." He studied the glass in his hand. "Tell you something about this Noda. The man drops a quarter, you let him pick it up himself. He'll nail you where the sun don't shine. Definitely a bad news mother."
"You mean that business with the sword?"
"Nah, what in hell do I know about swords? That's your toy box. I'm talking about the real world, friend. Turns out Matsuo Noda was the prime mover in one of the biggest takeover plays of the century."
"What takeover? They don't screw around with corporate takeovers in Japan."
"They don't take each other over. They take other businesses over. Washington may think that war back in the forties is over, but somebody neglected to pass the word to MITI. Seems they've got the idea it was just the opening skirmish-the only folks who surrendered were the army and navy." Henderson grew ominously serious for a change. "Question is, where's this thing headed? Is the idea of turning our industrial base into a packaging operation for imports some kind of conspiracy, or is it just nature takin' its course?"
Conspiracy? That wasn't a word Henderson threw around lightly. In fact, he tended to scoff at conspiracy theories, claiming they were a substitute for hardheaded analysis. I agreed. So what was he driving at? I pressed him.
He paused to light a cigarette. "I bring up this unsavory possibility because I'm beginning to detect a little operation code-named 'eat an industry.'"
"Henderson, that's my game. I pitch in to help the little fish fend off the big ones."
"No offense, friend, but you probably couldn't even get into the ball park where Noda and his boys are playing. We're talking the very big leagues here."
"Now hold on a second. Noda's not interested in companies. He's just shooting a little craps. From what I've seen so far, the guy seems to be completely on the up-and-up. In fact, looked at from the long view, you might even say he's putting money into this country, never mind it's just the Wall Street casino."
"Sure he is. It's like he first kicks the shit out of you, then hands you a Coke so's you'll feel refreshed."
"What in hell are you talking about?"
"Well, let's back up a notch. Since I don't want to bad-mouth your new client, why don't you let me give you what I'll call a purely hypothetical case." He sipped at his Scotch. "Let's suppose you were a Japanese guy, like Matsuo Noda for instance, and you wanted to take over some strategic American industry and ship it to Japan. How'd you go about it?"
"Well…"
"Have a drink, counselor." He plunged forward. "And let me tell you a little fairy tale. About how Matsuo Noda ate the American semiconductor industry."
"Noda?"
"It was MITI actually. But Noda was running the Ministry when they did it, and he was the guy who set up the play."
"Noda ran MITI?" This was news to me.
"Yep. Vice minister. Then he went on to greener pastures, being the Japan Development Bank, and left the details to another MITI honcho by the name of Kenji Asano. According to my sources, though, it was Noda who handled the tricky part, the money, after he went over to the bank. Got it together, laundered it, and dispensed it."
"Laundered it?"
"Can't think of a better word. MITI carefully made sure the kickoff funding from the Japan Development Bank got passed through a shell organization called the Japan Electronic Computer Company, hoping nobody would trace it back to the government."
"I think you're starting to see things, but I'd like to hear this little fantasy."
"Okay, off we go to the land of make-believe. Once upon a time not too long ago and not too far away, a few guys at Intel or Bell Labs or some damn place got the mind-boggling idea you could shrink down a computer's memory and put it onto a little sliver of silicon no bigger'n a horsefly's ass. Various outfits tinkered around with the concept and eventually it got commercialized. Lo and behold, Silicon Valley was born, where they start turning 'em out by the bucketful. By '78 we're talking a five-billion-dollar industry. Kids barely old enough to drink legal got so rich they just gave up counting the money."
"The American dream, Herr Doktor."
"That it was. Now, they were making a memory chip called a 16K RAM, that's sixteen thousand bits of Random Access Memory storage. Orders are pouring in, and they can't buy the BMW's fast enough out in Silicon Valley."
"I know all about that."
"Well, there's more. Seems Noda and Asano and their honchos at MITI had been watching this and thinking over the situation. They decided, probably rightly, that whoever's got the inside track on these computer chips has the future by the balls. Twenty years from now there's nothing gonna be made, except maybe wheelbarrows, that don't use these gadgets. So round about '75 they concluded they ought to be the ones in the driver's seat. MITI 'targeted' integrated circuits."
"Well, why not? We're the ones told them they were supposed to be capitalists."
"In truth. But just like in fairyland, our princess had a problem. See, these chips weren't as simple to copy as an internal combustion engine, or even a transistor. They're a heck of a lot more complicated. And to make things worse, back when America was inventin' these silicon marvels, nobody in Japan would've known one if it'd bit him on the butt. So it's a tall order." He crumpled an empty cigarette pack and reached in his coat for another. "Now, imagine you're these guys in MITI. You want to take over an industry you don't know the first thing about. How're you gonna start?"
"I'd probably begin by licensing the patents."
"Nice try, but you don't want this job to be too straightforward. Then everybody'll suspect what's happening, and besides, it wouldn't be as much fun. So if you're this guy Noda, you decide to set up a sort of Manhattan Project, like America had to make the first A-bomb. You go over to see Nippon Telephone and Telegraph, their AT amp;T, and you say, 'Boys, we just decided you're gonna pitch in with all you got. After that, you commandeer some labs at Toshiba and NEC. Then you get yourself a batch of these little American gizmos and start trying to figure out how the hell they work."
Henderson poured himself another drink, then turned back. "Now, since you need to catch up fast, you do a little 'reverse engineering,' which means you steal the other guy's R amp;D. You take a bunch apart and decide you'll go with the 16K RAM chip made by Mostek-a big outfit here that's since gone belly up, by the way, thanks to our friends at MITI. And by 1978 you've made yourself a Mostek clone. Bingo, you've got the technology."
"I think I'm beginning to get the drift."
"Whoa, buddy. You're just starting to get rolling." He forged on. "By this time everybody's wanting these chips, so all of a sudden Silicon Valley can't keep up. Now you and your boys at MITI are ready to move. You've got the know-how, so all you need to do is start turning them out by the truckload. Of course that takes millions and millions in plant investment, so you do what Asano did, bring your old pal Noda back into the picture. Since he's now running the Japan Development Bank, he obligingly lines up a whole shit-load of cheap money for these outfits gearing up to chop America's nuts off. All in all, he gets together what amounts to a subsidy of low interest bucks to the tune of about two billion dollars. All carefully laundered. Ready, set, go.
"Silicon Valley glances up from countin' its receipts and all of a sudden, from out of nowhere, here come your Japanese chips. Reeeal cheap, since you've got all these cheapo 'loans' to capitalize your plants. Inside a year you've got nearly half the market.
"Now, you figure somebody's surely going to blow the whistle, so you can't believe your luck when Silicon Valley thinks you're some kind of joke. Come on in, they say, and sell as many of those crappy 16K models you can, since we've got ourselves a hot 64K version cooking, and that's where we're gonna make our real killing. When you hear this, you do a quick retool. And while the Valley is seeing how sexy and expensive a design they can come up with, your thrifty gang back home just sticks together a bigger version of that 16K chip you stole from Mostek in the first place-and you're out front with a 64K. Now it's time for hardball, so you flood America with these things. You drop the price of your 64K RAM chips from thirty dollars down to half a buck when they still cost over a dollar to make. Before you know it, you've got seventy percent of the American market."
"You're selling at a loss. Dumping."
"Exactly. 'Cause at this stage you don't care beans about profit. What you're going for is the big fish, market share." Henderson lit yet another Dunhill. "And sure enough, when it comes to the next generation, the 256K memory chip, you've got ninety percent of the action. In very short order most of your American competition folds. You ate them. Matter of fact, Intel, which started it all, dropped out of RAM chips altogether-which is kind of like Xerox throwing in the towel on copiers. This is less than a decade after MITI's start-up, in an industry born in the USA. Hi ho, silicon, away."
"But it cost a bundle."
"Short term, sure, but now the future's wide open. You live happily ever after, my friend, just like in fairyland, because big, bad America's dead and gone in the high volume end of semiconductors."
"But MITI can't use dumping as a regular strategy. After all, it is illegal."
"Well, now, ain't that a fact." He exhaled a lungful of smoke and coughed. "So's selling your ass. But just take yourself a cruise down Eleventh Avenue and you'll meet up with a lot of entrepreneurial ladies who understand the reality of market forces. You've gotta get caught, tried, convicted. If it ever does get that far, the most that's gonna happen is a fine. A lot of folks claim MITI's dumped TVs, cars, steel, textiles, you name it. So when they decided to move on memory chips, Asano was given a free hand to do it the quickest way he knew how. And your buddy Noda ain't exactly a pussycat either, the way he laundered the Japanese taxpayer's money into them low-interest, manana loans."
As he returned to his Scotch, I sat there trying to think. What Henderson had just described was a fundamental insight into how high-tech industries operate.
"Henderson, do you realize what you're saying? That's a beautiful way to knock out a country's high-tech research capability. Take away the volume end of an operation and there goes your cash. Pretty soon you can't afford to finance any more R amp;D. Which means that sooner or later you're selling yesterday's news. You can kiss good-bye to your technological edge, right across the board."
"Correct. America's semiconductor boys were figuring to use the profits from memory chips to pay for research in logic chips, where you put a whole computer's wiring on a chip. But now the money's gone. What it really means is, end of ball game in information processing. Maybe it won't happen tomorrow, but there's no doubt it's just a matter of time. You dominate semiconductors, sooner or later you're just naturally gonna control computer technology and all that goes with it. I even met a guy a while back who claimed that whoever's ahead in computers is eventually going to have the say-so about who has advanced weapons technology."
Could be, I thought. But that last extrapolation was a stretch. "Bill, I think you're talking a pretty long line of dominoes. For one thing, we've still got plenty of computer research here. The U.S. has a big lead in logic chips."
"True, true. Who the hell can crystal-ball this one? All I know is, Intel was claiming exactly the same thing about memory chips a few years back, just before Asano and Noda and their pals chewed them up and spit them out. All I'm saying is, you'd better watch your backside." He examined his drink and reached for the ice bucket.
About that time Ben came lumbering up the stairs to observe our maudlin ruminations. I watched as he settled himself near my feet with a grunt, then plopped his chin down on his paws.
"Well, your fairy tale about MITI may or may not be true. But that's water over the dam. Besides, who are we to be pointing a finger? The U.S. has done its share of tinkering with foreign governments, making the world safe for American shareholders."
"Hey, I make a profession of separating pious pronouncements from reality. I never take an official story at face value."
"Okay, so Noda says he's just playing the market. But if he's actually planning something else, then what is it?"
"Don't have the foggiest. Wish I did." He glanced at his watch. "But I do know duty's about to call. I'd better get uptown if I expect to have any female companionship for the apocalypse."
"Take it easy. Nobody flies on schedule anymore." I settled back into my chair and glanced up at the large Japanese screen I had mounted on the wall opposite. It was Momoyama, around 1600, the time when the most recent crowd of shoguns took over Japan. Against a gilded background was a fierce eagle, perched menacingly on a pine branch. The thing was so powerful I just kept the rest of the room bare; nothing else I owned could stand up to it. "You know, Henderson, the trouble with your pattern is that it doesn't quite fit this time. Shorting Treasury futures is not exactly going after an industry. So what's the new angle?"
"Damned good question." He stared at his glass, probably wondering if one more for the road would impair his performance later on. I guess he concluded yes because he didn't budge. "Speaking of angles, what do you make of that sword business last week? Caused one hell of a flap in Japan, so I hear."
"Major event. That sword should tell us a lot about early Japanese metal technology. I've been trying to find out more about it, but nobody's talking. No pictures, anything." I reached over and gave Ben a pat. "Curious though. I think I remember Noda's mentioning that sword the night I met him. Eight hundred years ago, the emperor gets caught at sea and loses the imperial symbol. But he didn't breathe a word about having a project underway to locate it."
"Well, you're my Japan expert. What's it all about?"
"Never assume you understand the Japanese mind." I pointed up at the wall. "Take a good look at the eagle on that screen. You'd think it's just a picture, but actually it's an important subliminal message. The daimyo who commissioned this piece had that eagle put on it to let everybody know he was cock of the walk. Means you cross him and you're dead. Symbols are important in Japan. Noda and this woman Mori talked a lot about shoguns and emperors. Maybe they hope the sword will somehow bring back the good old days."
"Well, he's got enough money to do it."
"Looks that way."
"Hope we're not about to get kamikazes with a checkbook. Thoughts like that could make a man real nervous." Henderson rose and strolled to the fireplace. He examined his reflection in the large mirror over the fireplace, then set down his glass on the mantelpiece and turned back. "You know, Walton, I think I'm starting to lose my touch. I don't believe anything I hear and only half of what I see." He sighed. "Been one hell of a day."
"Pretty standard Friday, far as I could tell."'
"Well, a damned strange thing happened this afternoon."
"Some woman turn you down? Maybe you ought to start working out, Henderson, trim that little spare tire creeping in around the waistline."
"Still no complaints in that department, friend. No, this actually goes back a ways, to a few months ago down in Washington, when I bumped into a long-haired professor coming out of a committee session. Guy I mentioned a minute ago."
"The linkup between computers and weapons?"
"Him. We got to BS'ing in the men's room, and it turned out he was some computer hotshot from Stanford. He'd been testifying, I think, and he was still wound up. Probably I got to hear all the stuff he'd prepared and nobody'd asked."
"What was the pitch?"
"Defense semiconductor dependency. Claimed that if we keep on the way we're going, relying more and more on foreigners for advanced chip technology, we may as well kiss the farm good-bye. I had a little time to kill, so I invited him to have a drink. He good as chewed my ear off. Finally had to fake a dinner date to get loose. Man had a bug six feet up his ass about the U.S. buying half the latest chips for our hot-dog military hardware from Japan. Next war we fight, says he, we'll be buying high-tech weapons systems from the Far East. Problem with that is, anybody else could buy them too. And we'd get replacement parts whenever MITI feels like getting around to it. Today I happened to remember him, so I decided to give him a call, ask him if he still saw things the same wav."
"And?"
"No answer at his office, but since I had his home number, I decided to give that a try. Best I can tell, a lot of academics goof off half the time anyway."
"You get him?"
"Some police detective answered, wanting to know who I was, what the hell I wanted, whole nine yards. Shook me up, don't mind telling you."
"So what'd your pal do? Rob a bank?"
"I was about to start wondering. Finally, though, I got to ask some questions of my own, but it was a little hard to swallow the story. What I mean is, I don't necessarily buy what I heard."
"Which was?"
"Well, seems he was supposed to meet with the Senate's internal security committee this morning. Wife says she put him on the red-eye to Washington last night around ten. He was carrying some document he said he wanted to hand deliver. Something about it had him scared shitless." Henderson paused. "Tell you, this is the kind of guy who takes security seriously. When he's worried, we all better be worried."
"So what's the problem?"
"Cop claimed he's just disappeared. Not a trace."