CHAPTER SIX
"Matt, why don't you just send your action over to the 'bean pit' forchrissake?" The phone line from Chicago crackled. "That's where thecrapshooters are."
"Jerry, I wouldn't know a soybean if I ate one."
"Hell, half of those loonies over there buying and selling 'beancontracts wouldn't know one either. Come to think of it, I don't knowanybody over on the Merc who's ever even seen a pork belly. Do theyreally exist?" He was yelling to make himself heard over the din of thefloor of the Board of Trade. Futures on commodities were being boughtand sold all around him. Just then he paused, followed by a louderyell. "Right, I'll buy five, at the market. Yeah. I'm talkin' one andthirteen bid. What? You've got to be kidding. No way." Pause. I couldalmost see the blue-jacketed floor traders frantically hand-signalingeach other. Then he yelled again. "Christ, Frank, I'm already longforty 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, Ishould be selling Hondas like my brother-in-law down in Quincy. Sits onhis butt all day, screws his bookkeeper at lunch, and the man's makinga bundle." Pause. "Hell, Matt, what'd I just say?"
"If I heard right, you just bought ten thirty-year Treasury contractsat one oh one and fourteen thirty-seconds. You just agreed to loan theU.S. government a million dollars, Jerry. Very patriotic. Except you'reprobably going to turn around and unload the contracts in the next fiveminutes to somebody else."
"Oh, yeah. Right. I should be so lucky. Christ, where's my pencil? Thisplace is driving me nuts. I think my mind's going. I've gotta shortenup some here before the close. Hang on."
He yelled at a runner to take his buy slip, then came back tothe phone. "Matt, you're really shaking this place up, you know. Guysare starting to back away. And the people upstairs are beginning towonder. 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 tryto get the Exchange to waive their position limits, but don't hold yourbreath."
"No problem, Jerry. My client's got plenty of other accounts. We'llroll the next thousand contracts through a different one."
"Christ, whoever you're working for must have coconuts the size of KingKong. You realize you guys're naked here? You're getting shortbillions."
"I just handle the orders, Jerry."
"Your numbers scare the piss out of me just looking at them." Hesighed. "Listen, Matt, take care. Get back to you tomorrow at theopening. Right now I've gotta find some greenhorn to take a few ofthese puppies off my hands or I'm gonna get blown out. Jesus, how'd Ilet myself get this long at sixteen? Forty fucking contracts. And I wassure . . . Hey, gotta run. Think I see some idiot over there signalinga 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 inthe late sixties, and I'd never seen the man actually sit down. He gaveup law early, and these days he elbowed the mob in the Treasury bondfutures pit with the grim determination of a horse addict shoving hisway to the two-dollar window. If the bonds were sluggish, he'd roam thefloor 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 onwhich floor trader would be the next to go broke, "tap out" in Exchangeparlance. I'd guess Jerry's own number was pretty low. A reliablesource once told me Jerry'd averaged a million a year for the pastfive, even while taking a hit year before last for over two millionwhen a certain famous "inside trader" sandbagged him with a phonymerger rumor. Maybe it was worth the ulcers. Thing is, I know for afact he'd have done it for nothing. A born market maker, right down tohis 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 thebig time. It took a lot to impress a pro like him.
The thing was getting scary, but it was still perfectly legal. Let mesummarize roughly what had happened over the three weeks since I haddecided to play along with Matsuo Noda. First were the physicalarrangements. To accommodate my new calling, I'd enlarged my operatingspace--the back room of the brownstone's parlor floor, looking out overthe garden-- into a makeshift brokerage office complete with a multi-lined telephone and quote services from S-tron and Telerate. I'd alsoinstalled a direct tie-line to the T-bill pit of the Chicago MercantileExchange, 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 outinto the parlor. Consequently she could no longer listen in on mycalls, which she did not take kindly. However, I was no longer forcedto listen in on hers. I figure that sort of made us even.
In addition, I'd set up accounts at every futures brokerage house inthe land, both coasts, to spread out the orders. We were moving a lotof contracts, and the big-time outfits like Salomon Brothers werescrambling to make a market for us. Once again, therefore, naggingquestions began to arise. Anybody who'd thought about it for more thana minute would have realized you can't make a play like Noda's withoutbeing noticed. There's no bigger rumor mill than the financial arena.The very idea of shorting the bond market to the tune of billions andremaining obscure and anonymous for any length of time was absurd.After all, there're two sides to every bet. But since I was supposed tobe fronting his move specifically to throw sand in everybody's eyes,all this attention presented something of a quandary. Although we weretrying to keep the lid on, buying small batches of Treasuries even aswe were shorting them, the price was softening and margin calls werestarting to loom on the horizon. None of this made any sense. Nodawasn't hedging or even speculating in the normal sense; he was playinga giant game of cat and mouse with the markets. This told me once againhe 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 merelybecause he wanted some innocent-seeming outsider to do his bidding inthe futures market; any number of players in this town could havehandled that action as well or better. No, he'd sucked me into hisoperation for some entirely different purpose, at the moment known onlyto him.
But what? More to the point, why?
Welcome to Friday, and my rather disturbed life. Want to know whatreally disturbed me the most? Seeing my new employer on CNN's PrimeNews, standing there right next to the Emperor of Japan. Seemed asthough I wasn't the only one now under Noda's spell. All of a sudden mymild-mannered client had become a world-class Japanese mover andshaker. 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 alittle time to kill that Friday before his "late date" with someadvertising 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 seemedlike a good occasion to get together and compare notes.
True to his word, he had formally resigned from the President's Councilof Economic Advisers, though he'd reluctantly agreed to serve as aforecasting consultant for Wharton Econometrics. He'd also caused someunsettling 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 anotherway, though, Bill Henderson was quietly shifting out of paper money andinto commodities. And when Henderson started hedging, you knew theweather forecast was unsettled to stormy.
It turned out he'd also uncovered a few stray elements of what mightwell be a much bigger game. Nothing solid at that point, but enough tostir him up.
"Know who runs that outfit you've taken on as a client?" He leaned backin one of the leather chairs in the upstairs parlor, new pair ofGucci's glistening, and sampled his third drink. "Guy by the name ofMatsuo Noda."
"Henderson, who do you think I was talking to up at Sotheby's the
othernight?"
"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 thingI know I'm stumbling across his name everywhere I look." He studied theglass in his hand. "Tell you something about this Noda. The man drops aquarter, you let him pick it up himself. He'll nail you where the sundon'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'mtalking about the real world, friend. Turns out Matsuo Noda was theprime mover in one of the biggest takeover plays of the century."
"What takeover? They don't screw around with corporate takeovers inJapan."
"They don't take each other over. They take other businesses over.Washington may think that war back in the forties is over, but somebodyneglected to pass the word to MITI. Seems they've got the idea it wasjust the opening skirmish--the only folks who surrendered were the armyand navy." Henderson grew ominously serious for a change. "Question is,where's this thing headed? Is the idea of turning our industrial baseinto a packaging operation for imports some kind of conspiracy, or isit 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 asubstitute for hardheaded analysis. I agreed. So what was he drivingat? I pressed him.
He paused to light a cigarette. "I bring up this unsavory possibilitybecause I'm beginning to detect a little operation code-named 'eat anindustry.'"
"Henderson, that's my game. I pitch in to help the little fish fend offthe big ones."
"No offense, friend, but you probably couldn't even get into the ballpark where Noda and his boys are playing. We're talking the very bigleagues here."
"Now hold on a second. Noda's not interested in companies. He's justshooting a little craps. From what I've seen so far, the guy seems tobe 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 mindit's just the Wall Street casino."
"Sure he is. It's like he first kicks the shit out of you, then handsyou 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 newclient, why don't you let me give you what I'll call a purelyhypothetical case." He sipped at his Scotch. "Let's suppose you were aJapanese guy, like Matsuo Noda for instance, and you wanted to takeover some strategic American industry and ship it to Japan. How'd yougo about it?"
"Well . . ."
"Have a drink, counselor." He plunged forward. "And let me tell you alittle fairy tale. About how Matsuo Noda ate the American semiconductorindustry."
"Noda?"
"It was MITI actually. But Noda was running the Ministry when they didit, 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 theJapan Development Bank, and left the details to another MITI honcho bythe name of Kenji Asano. According to my sources, though, it was Nodawho 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 kickofffunding from the Japan Development Bank got passed through a shellorganization called the Japan Electronic Computer Company, hopingnobody would trace it back to the government."
"I think you're starting to see things, but I'd like to hear thislittle fantasy."
"Okay, off we go to the land of make-believe. Once upon a time not toolong ago and not too far away, a few guys at Intel or Bell Labs or somedamn place got the mind-boggling idea you could shrink down acomputer's memory and put it onto a little sliver of silicon nobigger'n a horsefly's ass. Various outfits tinkered around with theconcept and eventually it got commercialized. Lo and behold, SiliconValley was born, where they start turning 'em out by the bucketful. By'78 we're talking a five-billion-dollar industry. Kids barely oldenough to drink legal got so rich they just gave up counting themoney."
"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. Ordersare pouring in, and they can't buy the BMW's fast enough out in SiliconValley."
"I know all about that."
"Well, there's more. Seems Noda and Asano and their honchos at MITI hadbeen watching this and thinking over the situation. They decided,probably rightly, that whoever's got the inside track on these computerchips has the future by the balls. Twenty years from now there'snothing gonna be made, except maybe wheelbarrows, that don't use thesegadgets. So round about '75 they concluded they ought to be the ones inthe driver's seat. MITI 'targeted' integrated circuits."
"Well, why not? We're the ones told them they were supposed to becapitalists."
"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 tomake things worse, back when America was inventin' these siliconmarvels, nobody in Japan would've known one if it'd bit him on thebutt. So it's a tall order." He crumpled an empty cigarette pack andreached in his coat for another. "Now, imagine you're these guys inMITI. You want to take over an industry you don't know the first thingabout. 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. Theneverybody'll suspect what's happening, and besides, it wouldn't be asmuch fun. So if you're this guy Noda, you decide to set up a sort ofManhattan Project, like America had to make the first A-bomb. You goover to see Nippon Telephone and Telegraph, their AT&T, and you say,'Boys, we just decided you're gonna pitch in with all you got. Afterthat, you commandeer some labs at Toshiba and NEC. Then you getyourself a batch of these little American gizmos and start trying tofigure out how the hell they work."
Henderson poured himself another drink, then turned back. "Now, sinceyou need to catch up fast, you do a little 'reverse engineering,' whichmeans you steal the other guy's R&D. You take a bunch apart and decideyou'll go with the 16K RAM chip made by Mostek--a big outfit here that'ssince gone belly up, by the way, thanks to our friends at MITI. And by1978 you've made yourself a Mostek clone. Bingo, you've got thetechnology."
"I think I'm beginning to get the drift."
"Whoa, buddy. You're just starting to get rolling." He forged on. "Bythis time everybody's wanting these chips, so all of a sudden SiliconValley 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 themout by the truckload. Of course that takes millions and millions inplant investment, so you do what Asano did, bring your old pal Nodaback into the picture. Since he's now running the Japan DevelopmentBank, he obligingly lines up a whole shit-load of cheap money for theseoutfits gearing up to chop America's nuts off. All in all, he getstogether what amounts to a subsidy of low interest bucks to the tune ofabout two billion dollars. All carefully laundered. Ready, set, go.
"Silicon Valley glances up from countin' its receipts and all of asudden, from out of nowhere, here come your Japanese chips. Reeealcheap, since you've got all these cheapo 'loans' to capitalize yourplants. Inside a year you've got nearly half the market.
"Now, you figure somebody's surely going to blow the whistle, so youcan't believe your luck when Silicon Valley thinks you're some kind ofjoke. Come on in, they say, and sell as many of those crappy 16K modelsyou can, since we've got ourselves a hot 64K version cooking, andthat's where we're gonna make our real killing. When you hear t
his, youdo a quick retool. And while the Valley is seeing how sexy andexpensive a design they can come up with, your thrifty gang back homejust sticks together a bigger version of that 16K chip you stole fromMostek in the first place--and you're out front with a 64K. Now it'stime for hardball, so you flood America with these things. You drop theprice of your 64K RAM chips from thirty dollars down to half a buckwhen they still cost over a dollar to make. Before you know it, you'vegot 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. Whatyou're going for is the big fish, market share." Henderson lit yetanother Dunhill. "And sure enough, when it comes to the nextgeneration, the 256K memory chip, you've got ninety percent of theaction. In very short order most of your American competition folds.You ate them. Matter of fact, Intel, which started it all, dropped outof RAM chips altogether--which is kind of like Xerox throwing in thetowel on copiers. This is less than a decade after MITI's start-up, inan 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 happilyever after, my friend, just like in fairyland, because big, badAmerica's dead and gone in the high volume end of semiconductors."
"But MITI can't use dumping as a regular strategy. After all, it isillegal."
"Well, now, ain't that a fact." He exhaled a lungful of smoke andcoughed. "So's selling your ass. But just take yourself a cruise downEleventh Avenue and you'll meet up with a lot of entrepreneurial ladieswho understand the reality of market forces. You've gotta get caught,tried, convicted. If it ever does get that far, the most that's gonnahappen 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. Andyour buddy Noda ain't exactly a pussycat either, the way he launderedthe Japanese taxpayer's money into them low-interest, _manana _loans."
As he returned to his Scotch, I sat there trying to think. WhatHenderson 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 wayto knock out a country's high-tech research capability. Take away thevolume end of an operation and there goes your cash. Pretty soon youcan't afford to finance any more R&D. Which means that sooner or lateryou're selling yesterday's news. You can kiss good-bye to yourtechnological edge, right across the board."
"Correct. America's semiconductor boys were figuring to use the profitsfrom memory chips to pay for research in logic chips, where you put awhole computer's wiring on a chip. But now the money's gone. What itreally means is, end of ball game in information processing. Maybe itwon't happen tomorrow, but there's no doubt it's just a matter of time.You dominate semiconductors, sooner or later you're just naturallygonna control computer technology and all that goes with it. I even meta guy a while back who claimed that whoever's ahead in computers iseventually going to have the say-so about who has advanced weaponstechnology."
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 biglead 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 fewyears back, just before Asano and Noda and their pals chewed them upand spit them out. All I'm saying is, you'd better watch yourbackside." He examined his drink and reached for the ice bucket.
About that time Ben came lumbering up the stairs to observe our maudlinruminations. 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'swater over the dam. Besides, who are we to be pointing a finger? TheU.S. has done its share of tinkering with foreign governments, makingthe world safe for American shareholders."
"Hey, I make a profession of separating pious pronouncements fromreality. I never take an official story at face value."
"Okay, so Noda says he's just playing the market. But if he's actuallyplanning something else, then what is it?"
"Don't have the foggiest. Wish I did." He glanced at his watch. "But Ido know duty's about to call. I'd better get uptown if I expect to haveany female companionship for the apocalypse."
"Take it easy. Nobody flies on schedule anymore." I settled back intomy chair and glanced up at the large Japanese screen I had mounted onthe wall opposite. It was Momoyama, around 1600, the time when the mostrecent crowd of shoguns took over Japan. Against a gilded backgroundwas a fierce eagle, perched menacingly on a pine branch. The thing wasso powerful I just kept the rest of the room bare; nothing else I ownedcould stand up to it. "You know, Henderson, the trouble with yourpattern is that it doesn't quite fit this time. Shorting Treasuryfutures is not exactly going after an industry. So what's the newangle?"
"Damned good question." He stared at his glass, probably
wondering if one more for the road would impair his performance lateron. I guess he concluded yes because he didn't budge. "Speaking ofangles, what do you make of that sword business last week? Caused onehell of a flap in Japan, so I hear."
"Major event. That sword should tell us a lot about early Japanesemetal technology. I've been trying to find out more about it, butnobody's talking. No pictures, anything." I reached over and gave Ben apat. "Curious though. I think I remember Noda's mentioning that swordthe night I met him. Eight hundred years ago, the emperor gets caughtat sea and loses the imperial symbol. But he didn't breathe a wordabout 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 thewall. "Take a good look at the eagle on that screen. You'd think it'sjust a picture, but actually it's an important subliminal message. The_daimyo_ who commissioned this piece had that eagle put on it to leteverybody know he was cock of the walk. Means you cross him and you'redead. Symbols are important in Japan. Noda and this woman Mori talked alot about shoguns and emperors. Maybe they hope the sword will somehowbring 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 likethat could make a man real nervous." Henderson rose and strolled to thefireplace. He examined his reflection in the large mirror over thefireplace, 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'tbelieve anything I hear and only half of what I see." He sighed. "Beenone 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 thewaistline."
"Still no complaints in that department, friend. No, this actually goesback a ways, to a few months ago down in Washington, when I bumped intoa long-haired professor coming out of a committee session. Guy Imentioned 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 somecomputer hotshot from Stanford. He'd been testifying, I think, and hewas still wound up. Probably I got to hear all the stuff he'd preparedand nobody'd asked."
"What was the pitch?"
"Defense semiconductor dependency. Claimed that if we keep on the waywe're going, relying more and more on foreigners for advanced chiptechnology, we may as well kiss the farm good-bye. I had a little timeto kill, so I invited him to have a drink. He good as chewed my earoff. Finally had to fake a dinner date to get loose. Man had a bug sixfeet up his ass about the U.S. buying half the latest chips for ourhot-dog military hardware from Japan. Ne
xt war we fight, says he, we'llbe buying high-tech weapons systems from the Far East. Problem withthat is, anybody else could buy them too. And we'd get replacementparts whenever MITI feels like getting around to it. Today I happenedto remember him, so I decided to give him a call, ask him if he stillsaw things the same wav."
"And?"
"No answer at his office, but since I had his home number, I decided togive that a try. Best I can tell, a lot of academics goof off half thetime anyway."
"You get him?"
"Some police detective answered, wanting to know who I was, what thehell 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 somequestions 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 internalsecurity committee this morning. Wife says she put him on the red-eyeto Washington last night around ten. He was carrying some document hesaid he wanted to hand deliver. Something about it had him scaredshitless." Henderson paused. "Tell you, this is the kind of guy whotakes security seriously. When _he's_ worried, we all better beworried."
"So what's the problem?"
"Cop claimed he's just disappeared. Not a trace."
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