The Trillion Dollar Sure Thing

By David A. Mallach

A Chinese super aircraft carrier with two runways – twice the size of anything the United States Navy has at sea – is steaming towards the Persian Gulf with bad intent. The Doomsday Clock is ticking towards Armageddon. Armed with elite training, political connections, and the intuitive power of a past-life, Becket Rosemore holds his ground and fights for the survival of the world.
The Middle East is about to change for the better. Century old problems will be uprooted and redirected toward a new beginning. A new future for all people in the Middle East is about to begin!

• Language: English
• Publisher: David A. Mallach
• Release date: Feb 28, 2016
• ISBN: 9781310324383

David A. Mallach

David A. Mallach resides in the Philadelphia area, where he has devoted his entire professional career since 1973 to helping investors develop strategies for income growth and capital appreciation. David has lectured to investors and professional investment advisors in the U.S.A., Europe, the Middle East and Latin America.

Book preview

An This fifth book marks a significant achievement in my literary career. When I originally set out to write a trilogy dramatizing in narrative form my three investment strategies, I had no idea how much more would follow. That was over twelve years ago. Since then, Dancing With The Analysts, Walking With The Analysts, Running With The Analysts and Myth have taken on a life of their own and constitute the bedrock of my beliefs about investing. I owe a great deal to Todd Napolitano for his craftsmanship and insight for he is, in many ways, my co-architect.

I have always had great stories to tell. Working with Todd Napolitano over the years has yielded abundant literary fruit. In my last book, Myth, and this latest offering, The Trillion Dollar Sure Thing, our partnership and collaboration have reached new heights. Working with Todd Napolitano has been, for me, a springboard to reaching new levels of insight about the fascinating, often very subtle, psychological dimensions that differentiate each of us. Together with Todd, I have broken out to explore challenging new territory as both a writer and money manager. For me, this marks time well spent as part of a life well lived.

I am also deeply indebted to the following people:

Jeanette Freudiger, to whom once again I owe special thanks for her long-term work so closely related to this novel and my previous works. She was always ready with her wit, help, and advice to insure that this novel was designed in the most thorough and entertaining fashion;

Scott Blanche, my Resident Director for his optimistic outlook and continuing support;

Sharon Cromwell, my editor who made this manuscript and all my books readable novels;

Stephanie Heckman, for her tireless editing of this novel;

Keith Schap, for his complete attention to every detail in this novel;

Chris Dougherty, the best bond trader I know;

Bob Wagner, my Costa Rican advisor whose Internet skills are equal to his generosity;

Joseph Lundy, one the best financial advisors I have had the good fortune to know;

Mary Kay Gallagher, my first home on the job. I started training with breakfast at Mary Kay’s each morning with a smile and a desire to learn;

Joanne Oplustil, made me realize that we must live in harmony and compassion;

Jim Paul, for giving up his Palm Beach pool time to help edit this novel;

Lastly, I thank all the wonderful investors I have known, who in their quest for growth chose to honor me with their trust.

Preface

A sure thing, who wouldn’t want one? Having worked in asset management my entire life, I have seen countless sure things come and go. Wall Street is littered with the mess each time one of these pipedreams bursts. And yet, we keep hoping, don’t we? We keep thinking if only....

The sure thing many people spend their lives hunting may not exist, but goodness certainly does, along with humility, generosity, and virtue. These qualities form the thematic foundation of The Trillion Dollar Sure Thing. Also hanging low on the tree for our taking are the more sinister motives of ego, greed, and deceit. Which will we choose? We can draw up the sides as such: Ego/Humility, Greed/Generosity, and Deceit/Virtue. Thus are the battle lines drawn in our daily struggles to become the people we really want to be. This has been the central drama of humanity since Cain killed Abel.

The Trillion Dollar Sure Thing is a financial thriller that stirs the pot and goes straight for the truth of a reality we otherwise choose not to acknowledge – America is vulnerable in ways we don’t even recognize. On one level, The Trillion Dollar Sure Thing tells the story of the American economy on the brink of disaster brought about by its own reckless fiscal policies. In this sense, the book is a warning call that the party cannot go on forever. Sooner or later, someone is left holding the bill.

In this book, however, the people we owe can be some very nasty fellows indeed. The story that emerges redefines terrorism in chilling ways. Remember, there was a time when nobody but Osama Bin Laden considered a 767 to be a weapon of mass destruction. What a different place the world is now. So much has changed for better and for worse. A few men can have so much power over so many. Indeed, what prompted me to write this fifth book is my fascination with the way the cult of personality has become our central religion. The Trillion Dollar Sure Thing is, for me, a story about powerful people and the immense good and bad they can bring to the world. Powerful people have power; what they choose to do with it is the measure of the life well lived. This is the duality of our karma, and we struggle with this, too, every day.

Karl Marx called religion the opiate of the masses. I dare say he was a bit off target. Charisma is the opiate of the masses. Without charisma, there is no religion as Marx meant it. Those few who possess charisma can have their way with the masses. But charisma is neither good nor bad in itself. Charisma gives us power. What we do with that power makes all the difference, for each of us will react very differently when we come face-to-face with our own destiny, a tremendous force within each of us that is never fully tapped.

What makes writing a book like The Trillion Dollar Sure Thing such a difficult challenge is the necessity of confronting the Arab-Israeli conflict head on. In writing this book, I am not positioning myself as an expert on Middle East politics, and I am certainly not taking sides. Quite the contrary, The Trillion Dollar Sure Thing¸ like all my novels, highlights the shortcomings inherent in being human, the essential flaws in ourselves we all struggle to overcome. And while I am certain I have glossed over many historical details that fuel the conflict, I am more interested in the idea of change rather than documenting the historical facts of the past that have fossilized over time.

My intention here is not to belittle or ignore important events on the level of individual people who suffer daily. To the contrary, my goal is to respect the individual by respecting hope. As a novelist, I build my plot through explosion, by smashing together different people with different beliefs, different needs, and different agendas. For here, in the narrative turmoil, arises the cacophony of human existence which is, for me, understood as the conflict between Self and Other, the conflict between Ego and Humility. It is my purpose as a writer to go one step farther by envisioning the great possibilities for something bigger and better through transcendence. It is my purpose as a writer to discover virtue where we may otherwise too hastily throw it out.

Since the formation of Israel in 1948, we speak of the Arab-Israeli conflict matter-of-factly, as inevitable, as something that transcends time and place. But looking back today at the history of the area we call the Middle East, it seems like its people have been fighting each other for thousands of years. Indeed, the history of conflict between and among different people living in the Middle East did not suddenly arise with the effective end of the Ottoman Empire in 1918 or the World Zionist Congress of 1919. Nor has the history of conflict in the region been only Arab versus Jew. After all, in the 7th Century, Caliph Umar conquered Mesopotamia, Syria, Iran, and Egypt largely independent of any so-called Arab-Jewish antipathy.

No matter what perspective on the Arab-Israeli conflict one adopts, it seems to me that both sides are mired in the past, a past full of terrible conflict and bloodshed. This is so often the case when complex, nuanced socio political issues are reduced to an overly-simplified dichotomy of one side against the other. Conflict of this sort, conflict spanning thousands of years, requires forward-thinking solutions. But the tendency has been for the people involved to become entrenched in the past of conflict rather than liberated by the promise of future change.

This supra-historical petulance provides the backdrop to The Trillion Dollar Sure Thing for it is assumed a priori that neither side wants to give an inch to better their next generations. To provide both a thematic and narrative catalyst, I imagine two powerful countries, the United States and China, stepping in with a forceful hand to impose resolution that has heretofore not occurred. What arises is the spirit of possibility. And while I fully understand the inherent problems with nation building and, to a greater extent, one country imposing its will on another, I am more interested in the potential for positive change, even that which arises from a problematic approach.

China's intervention as I envision it here will allow a generation of Jews and Arabs to start living in the present. Maybe with time and hope, both sides will start to discuss the importance of providing a positive, fruitful, rewarding future. While the problematic issue of nation building provides the catalyst here, I feel both sides of the Arab-Israeli conflict need this time out from the game of ideologies that does more to halt progress than anything else. My idea of intervening for a few generations will change the Middle East.

The Trillion Dollar Sure Thing is my attempt to write a story about the good, the bad, and the karmic. This is no easy task, for karma is a strange partner – at the same time dominating and aloof. Karma can leave us hanging or bury us with its immense weight. In the end, our actions define what we find in life. Inevitably, this leads each of us to our own experiences with other people. When we understand ourselves in these terms, in the language of interconnectedness, we see things in an entirely new light.

There are universal laws at work here, decisions about life and death that must be made, spiritual debts that must be paid. Needless to say, the characters you will meet in this book are a colorful cast indeed. They all have their virtues, and they all have their demons. They aspire to reach new heights of personal achievement, but this sometimes leads them to behave in questionable ways as they struggle with something far bigger than themselves – namely, their place in this world.

Perhaps more than anything else, The Trillion Dollar Sure Thing is my tribute to the undying spirit of possibility and the vastness of human potential to bring sweeping goodness to the world. At the same time, I must acknowledge the probability that most of us will fall far short of the mark. The intellect that fuels our ego wants to believe we are all doing just fine, thank you very much. But the ominous voice that occasionally opens up inside us like a maelstrom into which certainty disappears serves as a constant reminder that the world as we know it could be a very different place indeed.

Chapter One

The whole affair could have marked the beginning of the end. Nobody saw it coming. At times of cataclysmic change, we rarely do. The signs were everywhere, written large in a multitude of ways. But that didn’t mean anybody was watching for them, putting the pieces together until, of course, it was too late. Nobody interpreted the events as a foreshadowing of something catastrophic – the complete upheaval of the world’s economic system. The repercussions would have reduced the once-powerful United States to a quivering patient on the verge of a systemic shutdown, wheezing in a raspy death rattle. Nobody really worried about the country’s massive debt service as something that was about to fester into something fatal.

Code Blue.

Crushing, debilitating debt was only one of the symptoms. The root cause was the American people themselves. They wanted more and more….of anything and everything. When the bills finally came due, they supported any politician in favor of putting it all on credit, passing the buck as it were to their children. Let them eat cake. Until the day, of course, when the credit finally dried up and liquidity evaporated overnight. But the cake only lasts so long when the cupboard is bare.

Would this be the end for the world or a wake-up call and a new beginning? Was a new beginning even possible for a world that had grown so fat and careless gorging itself on the next generation’s dime without contributing themselves? Like the rest of the Euro-Socialist world, the United States had undermined itself by issuing so much debt it became fatally vulnerable. By 2014, the United States debt ballooned to 115% of GDP, putting the country into negative cash flow. By 2015, there was $15,000 in government debt for every United States household. Simply put, the United States was drowning in debt not unlike other countries that had recently gone insolvent before it. The other countries were Argentina, Russia, Greece, Ireland, Pakistan, Spain and Iceland. The United States government literally borrowed itself into a position of weakness the likes of which had never been seen.

The Chinese liked it this way. In fact, they loved it this way. It suited their ego and also their penchant for feeling superior. The Chinese knew they could do whatever the hell they wanted now to America and, by extension via the global economy, to the world as a whole. If, one day, the Chinese suddenly decided they had grown tired of the United States and wanted a new plaything, all they had to do was unload the two trillion dollars they owned in United States government bonds at once, and the United States financial system would collapse, bringing the rest of the world down with it. The entire world teetered on the precipice.

Most people saw the Chinese as a growing military threat, an indefatigable manufacturing machine capable of producing soldiers like widgets, a new Mao-rality, so to speak. The cavalcade of analysts in United States intelligence worried about the obvious threats to global stability like a massive Chinese invasion of Korea or Taiwan. The sheer number of Chinese soldiers alone would be more than any conventional force could handle. They could be armed with chopsticks for all it would matter. Others worried that the Chinese economy was becoming too powerful and would displace United States financial dominance, especially in a double-dip recession like the one during the Obama years. Only a small, barely-audible minority worried about issuing too much debt to a foreign country like China, but they were dismissed as conservative whackos.

For the most part, nobody was looking for the other obvious risks, risks that had become so overblown it was only a matter of time before they burst. Thus, no one seriously considered that the Chinese could simply dump so much in United States treasuries onto the market that it could precipitate a complete collapse in the global economy. That would lead to the immediate illiquidity of the banking syndicate and the United States federal banking system as a whole. It just didn’t seem like a weapon of war. Neither did a Boeing 767 before 9/11.

It didn’t start with the Chinese. They weren’t even on the scene yet. They still had the world believing theirs was a conventional military might. No, the first tremors came from an unlikely source, the Arabs. In a way, then, someone should have seen it coming.

Chapter Two

The government-bond desk at First American Investors (FAI) had been popping for the last two days. Volume was unusually high in United States treasuries. Unlike the stock market, bond trading occurred in a negotiated market. Pairing off buyers and sellers involved much more than simply clicking a mouse as one did when buying or selling stocks. The traders manning the bond desks had to match up buyers with sellers before a transaction could occur. Sometimes, the institutional sales reps posted their buy and sell orders to the desk; other times, the desk made calls out to the reps looking for buyers and sellers. It all depended on the situation. More often than not, it all happened simultaneously.

Prices were fluid, constantly in flux, and could move erratically if ever there was any trouble pairing off buyers and sellers. This made bond trading a tricky business indeed if it happened to be one of those days when the shit hit the fan. And today was clearly one of those days. Rates were rising fast as billions in United States treasuries were being sold short faster than the desk could fill them on the buy side. The more the shorts came in, the lower the prices dropped. As rates rose inversely, there was some buying interest but not enough to counterbalance the immense wave of shorts streaming in. The lower the prices dropped, the bigger the spread on the incoming shorts. It was an ugly downward spiral.

Frank Bourne was running one of the desks at First American Investors. Being one of the larger wire houses, FAI boasted a large institutional staff. Bourne and his fellow traders occupied an entire floor. Distinctly clad in their Brooks Brothers shirts, khaki pants, and green fleece Columbia vests bearing the company logo, each trader was an army of one, an incredibly adept thinking machine capable of processing large amounts of data simultaneously while making high-dollar trades averaging about two-hundred-million dollars per trade. To the layperson, it looked like Mission Control at NASA; to the bond trader, it was another day at the office. The stress could be tremendous, enough to reduce a man off the street to emotional rubble in a matter of minutes.

Frank Bourne was an exemplary bond trader. An entirely different breed of man from the stock-trader roaming the halls one floor down, Bourne never raised his voice or threw anything across the room. He didn’t curse at his screen or cut his coffee with bourbon. He didn’t even have a nervous tic like most of the stock jockeys downstairs. As a bond trader, Frank Bourne was always focused on minimizing risk. He had perfected the art of making profitable trades without exposing First American Investors to unnecessary risk. This was his primary mission. He was a cash cow and, more importantly, a risk manager at one and the same time. Thus were the psychological complexities of a bond trader.

Bourne surveyed the three computer screens in front of him. On the right was his Bloomberg system, where he monitored any market information he required in real time. He used the screen directly in front of him to survey the bid/ask for any and all United States government issues and found buyers and sellers as needed. The screen on his left displayed the messaging system he used to communicate with his institutional sales force via instant message and email. Jutting out from beneath the center screen was a flexible microphone that looked like an alien tentacle enabling him to squawk immediately with his institutional reps, any other employee, or the entire firm for that matter.

He didn’t like what he was seeing that morning. It was the second day in a row in which the short selling on United States treasuries was frenzied. The shorts were still coming in steadily with no signs of abating. The prices were conveyed in yield which moved inversely to the price. Thus, if the price of the bond went down, the yield went up. He felt uncomfortably exposed and found himself squawking to his derivatives desk to put on more hedges – more in the last two trading sessions than he had in the entire year to date. Something was definitely up.

One of his institutional guys in Chicago squawked in. He was looking to short a block of treasuries maturing in 2032.

Frank, I need to short a $100,000,000 block of 32’s at 3.17. That was the yield, as a percentage of the face value, the seller was looking for. Do you have anyone who can lift it right now? My guy’s real antsy. A hundred million is a lotta freakin’ money to be shorting.

Bourne checked his system. It’s moving really fast. All these short sales are bringing the price down, but we’re not there yet. Bourne grunted and plugged the 3.17 yield into his Bloomberg calculator to determine the Bid/Ask required to hit that yield. He ran some quick calculations. We’re wrapped around 3.24. Who’s the seller?

A new guy from some Swiss boutique. I don’t know what his deal is. I don’t even know how he found me.

Bourne rubbed his eyes. He didn’t like this at all. Strangers tapping his team with short after short going on two days now. Let me see what I can do.

Perhaps there was something sitting out there away at another firm he was seeing. He leaned into his microphone and squawked the entire trading floor.

I need color on a $100,000,000 block of 32’s. Anyone have any pricing away? Treat the subject to a quick call. Our guy’s antsy. This is a short position. Some very heavy hitters are coming out to play again this morning, people. Let’s look sharp out there. Be careful. Don’t screw around. Put your hedges on.

After a minute or so, the market was still moving down and no one was getting back to him with any pricing from the other brokerage firms. Bourne quickly assessed that the short-selling would not abate and yields would reach 3.17 by day’s end. That meant he had to find a buyer for the bonds knowing they would probably sink lower as the trading day progressed. This didn’t concern him because he would turn a profit on the transaction. But he would have to put a hedge on until he found a buyer.

His guy in Chicago squawked back. Hey Frank, got anything yet? I’d like to fill this guy. It could turn into a nice account. Who the hell knows?

Tell him we’ll lift him at 3.20, and he should thank me.

Make it happen. I’ll soft circle you for $100,000,000 32’s at 3.21. Try to grow it. Tell him we’ll lift $125,000,000 at 3.21.

Hang on. Thirty seconds later, the trade was confirmed with the Swiss seller. Book it. A 125 block of 32’s at 3.21. Thanks, man. I don’t know this guy, but he seems like a solid dude. He wasn’t looking to pound us. I need a couple more like him, and I could actually enjoy this crap.

Frank Bourne now had to re-sell the bonds he thought would continue to drop in price as the day progressed. This was no easy task. Basically, he had to sell huge amounts of government bonds he knew would soon go down further in price. The trick was finding a buyer who didn’t see it that way. He had been watching the shorts streaming in. He was pretty certain the price would drop steadily as the day progressed.

He squawked out to the entire floor. Okay, boys, we have a $125,000,000 block of 32’s. We’ve seen incredible short-selling pressure for the last two sessions. I think we’re going lower today, maybe 3.25. We own them at 3.21. Put them out there at 3.19 and see if we can squeeze a teeny out. Push it hard, guys. We’ll get it at some point today before they drop.

Bourne punched another button on his phone and squawked his boy Bill G. on the derivatives desk. Guess who?

Billy G. was laughing. Franky! Yo, bro, what’s with you? You’ve been bugging the crap out of me for two days.

Tell me about it, said Bourne. I need a hedge on $125,000,000 maturing in 2032.

Done and done, said Bill G. This can’t be good for your heart, man. Whenever we get this many calls from you bond guys, we know someone’s about to have a massive coronary.

It’s all these shorts, Billy. They keep rolling in. It’s very strange. Massive numbers.

Yeah, I know. We had a quick meeting about it after the morning call. Where’s it coming from?

My guys are telling me it’s mostly Switzerland.

Really? I thought those smug bastards are usually pretty conservative. This doesn’t seem like their usual M.O..

It’s not, said Frank Bourne. That’s what worries me. These aren’t your run-of-the-mill positions. I get the feeling somebody out there is taking a huge short position against the long bond.

Think it’s Soros? Billy wondered. Remember South Korea? And Thailand? And England?

Bourne was stumped. I honestly have no idea.

Yeah, well, you’re gonna owe me one hell of a Christmas present this year, man. This morning, The other brokerage firms saw about half a billion in shorts on United States treasuries yesterday, and it looks like we’re shaping up for the same today. That’s a billion-dollar short position in two days. So what’s going on?

Bourne rubbed his eyes again. The stress was definitely getting to him. I don’t know. That’s why I’m calling you. What else are you hearing?

Well, the Feds are definitely onto it. You don’t take a one billion-dollar short position against the United States and go unnoticed.

Bourne looked back through his trading notes. But most of what I saw came from smaller firms, some we’ve never even done business with.

Exactly. They’ve been placing trades with all the other brokerage firms as if nobody will notice.

We haven’t seen too much of the action, said Bourne. But we took more than enough to make me nervous.

Are you getting jammed on anything? asked Billy.

No, thank God. Nothing is screwing me yet. So far, I’ve been able to move everything I bought and squeeze out a profit as we tick down.

With the hedges, you’re fine.

Yeah, but sooner or later, people are gonna get wise and stop buying. Spreads will jump. Then we’ll be stuck with a massive position in bonds that are continuing to fall.

Billy thought for a second. It’s like musical chairs. Someone is going to be left standing, holding the bag on a disaster. Let’s hope your ass finds a seat when the music stops. Otherwise it’s sayonara, sucka.

Billy laughed.

That made Bourne a bit chippy. Glad you find this all so funny. Obviously, somebody knows something. Call me a cynical bastard, but this is the kind of trading that only comes from knowing something you’re not supposed to. It’s not just the size of the trades, it’s the positions as well. They are massively shorting the United States long bond. That’s bad news, man. And look how they’re doing it. Using small Swiss banks to move chunks with a bunch of United States firms.

Covering their tracks, right? said Billy. I’m sure as hell not a compliance guy, but that’s what it looks like to me. Let me tell you something from what I hear, the Feds are all over it. Someone’s gonna get their butt reamed. I bet it’s Soros.

Bourne nipped his friend’s exuberance in the bud. Like I said, I have no idea. But this will hit the media’s radar big time real freakin’ soon. You don’t just cover up one billion in shorts. Looks to me like something big is setting up very big.

Bourne flipped through some more screens on his computer. Damn, they’re still coming in from all the other brokerage firms. I bet we hit 3.25 today.

Billy got excited for a moment. Yo, bro, you know we can make a killing, right? Just pop ourselves right in there in the middle before all the shorts are filled. Nobody would notice. We’ll totally get lost in the shuffle. We can make our freakin’ year in a couple of hours. But we’re just a couple of angels who would never do anything like that, right?

Bourne did not take the bait. Dude, no wonder they put you derivatives guys on the same floor as Compliance. You’re asking for trouble. They’re gonna have to pin this on somebody. Maybe you’re right. Maybe its Soros.

Billy seemed underwhelmed at the prospect. They wouldn’t be able to touch him even if it was. Lest we forget, he put the current administration in office.

I’ll tell you this, though, replied Bourne. You don’t want to be anywhere around when the Fed figures out somebody’s trying to shove it up our ass big time. Whoever is responsible may wake up one day with the Federal Reserve screwing them so hard, they’ll be asking the Chairman for his phone number afterward.

Billy shuddered. That’s a disgusting thought, man.

Bourne was getting squawked again from one of his guys looking to place another short. Hey, gotta go, man. Let me know if you hear anything.

Hey, what if the shorts keep coming after tomorrow? asked Billy.

We’ll fill the orders. That’s what we do, said Bourne. That’s our job. Why do you give a crap, anyway? Just take the orders and worry about it later. It’ll be the Fed’s problem in the end.

Billy was uncharacteristically quiet for a moment. Yeah, but imagine if, like, the Chinese or some other government decided to flood our market with redemptions instead of shorts? You know what if, say, the Chinese decide they want to stick it to us and demand their cash all of a sudden? How the hell would we find the liquidity to buy trillions in bonds?

Frank Bourne laughed nervously. Well, whoever has all those shorts will be trillionaires.

I’m serious, man. Where’s the Fed gonna get trillions of dollars in a matter of hours? I’m just saying….

You read too many spy novels.

Billy laughed. Actually, I don’t read. It takes too long.

Anyway, Billy, as long as you don’t screw up one of my hedges, this ain’t your problem. The Fed will just print more money like they always do. Why do you think there’s so much damned debt in the first place? Anyway, it’ll never go down like that with the Chinese. It would totally throw off the balance of power.

People kept trying to squawk Bourne. Hey, man, I really gotta go.

He hung up with Billy and moved to the next shit storm.

Frank Bourne and Billy G. were no different from everyone else. They were focused on their immediate needs, consumed by their here-and-now circumstances. Who could blame them? They had a job to do, and they would do it. Neither of them recognized the looming devastation. That would create a vacuum; after that, it would be everyone’s worst nightmare – a complete run on the United States banking system caused by massive redemptions of government securities.

Obviously, nobody was seriously connecting this to a fiscal death blow orchestrated by the Chinese. Nobody read in the tea leaves this prelude to a complete fiscal collapse somewhere in the near future. Billy G. was right when he noted that all this leveraged selling came from Switzerland, which was a bit unusual. It was not like the Swiss to make sudden and drastic moves like this. They were generally more conservative.

This could be seen as a very threatening move against the perceived economic stability of the United States. It wasn’t the typical Swiss way of doing business. They usually preferred stability, status quo. In fact, the orders weren’t coming from the usual large Swiss banks. Instead, they were coming in through a few mid-sized financials out of Zurich which were also set up in Dubai and Singapore for the express purpose of protecting the assets of a select group of the world’s über wealthy. Distinct from the traditional global giants that made Switzerland synonymous with clandestine bank accounts, these small boutique firms were redefining the way Swiss banks managed assets for their affluent clientele. They were more aggressive, venturing into the risky, elusive world of options, hedge funds, and private equity deals. Not surprisingly, these smaller firms have helped Switzerland become the third-largest commodities trading center in the world. At the same time, they attracted a bit too much unwanted attention, as was the case here.

Nevertheless, there were enough orders coming in from Swiss banks shorting big blocks of 30-year bonds with one-hundred-to-one leverage to raise suspicion. Somebody knew something, perhaps some bit of inside information, and they were in one hell of a rush to set their positions. If they were right, a short position like this could make trillions.

As with everything that happened on Wall Street, it would come down to who knew what and when.

Chapter Three

When cell phones ring at 3 a.m. in Washington, D.C., stomachs turn. It is never good news. Good news comes after breakfast, at least after coffee and the morning paper. Only bad news comes in the middle of the night. Not answering is never an option. Like fate, bad news doesn’t leave voicemails; bad news keeps on calling and calling until you finally answer. And during an election cycle like this, even the slightest bad news can prove to be a Pandora’s Box capable of toppling an administration.

Harry Pierson looked very concerned and more than a little dazed. He was groggy and annoyed at the same time. His irritability was evident in his tone of voice.

I don’t understand. Three months ago, you advised the president that the first Chinese aircraft carrier in history was a floating bathtub barely capable of supporting basic-training exercises. About as threatening as a large chow mein was how you worded it, I believe. Now you want me to call the White House, ask his people to wake him up in the middle of the night, and tell him the Chinese have a supercarrier you think is steaming toward the Middle East? Do I have to remind you about the last time we woke the president at 3 a.m.? My ass is still on fire. I don’t like it when my ass is on fire, Walt. I don’t like it one bit.

Admiral Walter Benson remained firm on the other end of the line. I appreciate your situation, Harry. I wouldn’t call you in the middle of the night if I didn’t think the matter required immediate attention. He was silent for a moment. Harry, there’s something happening here. I don’t like it.

Harry Pierson didn’t like it either. But what he disliked more was having to rouse the President of the United States in the middle of the night for the second time in the past three months. Pierson had been appointed a top Department of Defense official only four months earlier, and this was certainly not the way to ingratiate himself with his Commander and Chief, especially with an election looming a year away.

Are you sure about this, Walt? The last time you pulled something like this, it turned out to be a bunch of Afghani sheep herders at a freaking wedding. And we blew up half of them with a drone strike. A wedding party, Walt.

Admiral Benson was in no mood for niceties. He scratched his short, salt-and-pepper hair. I’m staring at the satellite tracking system, Harry. This isn’t a Class 16 training vessel like the Liaoning they launched two years ago. This carrier is called the Sun Shili. It’s Mandarin for power, gigantic and has two hulls, just like a catamaran. Two carriers glued together in the middle. Two totally usable flight decks. Nasty. It’s a floating arsenal filled with bad intent. So you do with the information what you want. I’m doing my job on my end. Now it’s time for you to do yours. It’s an occupational hazard. Welcome to the club.

Pierson exhaled deeply. His wife turned over next to him mumbling something about Winnie the Pooh in her sleep. He sat up and slid into his slippers. Great, that’s exactly what we need going into an election. A bunch of crazy Chinamen waving their dragon at us.

"This looks like the real deal, Harry. But with the