Regolith

by Brent Reilly

  “Jesus says the meek will inherit the Earth, which rules out Republicans. Imposing rigid reactionary Southern values upon the rest of the country leaves them no time for anything else, like winning wars and rebuilding American cities. Republican pollution-promotion policies have heated up so much global warming that minorities, veterans, and the poor flock to DC just to get the cold shoulder. And remember: no one pissed off Jesus more than hypocrites. Good thing those fiscally responsible, small-government, limited-spending, get-government-out-of-our-lives, humble foreign policy makers are living up to their principles.

  “Republicans complain that immorality keeps them on their toes, but I suspect the kinky bastards secretly enjoy it. Republicans hate dirty sex but love dirty money. Republican superlobbyist Jack Abramoff alone conned American Indians out of $80 million. Republicans don’t like porn – unless acted out by naked Iraqi men on dog leashes. Republicans sure are prude when they are not sexually humiliating naked civilians. It’s no coincidence that Republican House Majority Leader Tom Delay looks like a big, fat Hitler without the mustache.

  “Republicans represent traditional American family values, like the young should abandon the old, the healthy should abandon the sick, and the rich should abandon the poor. The Bible says that you can either serve God or Mammon -- Republicans serve Mammon. How do you know Republicans are near-sighted? Because they can’t see any middle ground. Truth, shame, decency – Osama bin Forgotten is not the only thing Republicans cannot find. Republicans are against cloning because their candidates are already exact copies. Deficits are a Republican aphrodisiac – what else can explain their excitement in bankrupting the country? My dog must be a Republican: he’s always barking up the wrong tree, pretending to be tough, and peeing on my property.”

  16

  Jackson couldn’t believe that Cooper was fucking with him like this, yet knew he had to tread carefully.

  “I am not really building spaceships. My father just wanted to get more accurate details on how much they would cost. It’s really just an academic thing at this point.”

  Which was two truths followed by one big lie.

  “But why, Henry? I know you. You don’t do things without a reason. And anything that costs $100 billion must be worth a hell of a lot more than that. What billion-dollar business are you cooking up?”

  Ah, money. Cooper was obsessed with money, since he himself had none. Born poor, raised poor, like Nixon he was permanently scarred by poverty. Like George Bernard Shaw, he believed that lack of money was the root of all evil. Cooper had always seemed envious of his ability to make money. Maybe he was embarrassed that his investment manager wife supported him in the rich lifestyle he wanted to deserve. Well, hell, that’s why he married her. His father-in-law owned a bank.

  “Dan, you ungrateful fuck, I’m making you and your campaign millions. Your wife she has been shorting everything she can get her broker’s hands on. I cut you in on the action and you pay me back by shutting me out.”

  Gratitude was a core Jackson value because he believed that those who appreciate their blessings continue to be blessed, and those who do not, do not.

  “Ah, shit, Henry. Don’t get started on that again.”

  Cooper was dead tired of Jackson urging him to short stocks. For the last few months Jackson was telling anyone who would listen to short, short, short. Cooper let his wife, the investment banker, handle all that crap. Cooper just couldn’t buy all the doom and gloom that Jackson and his father were selling. As long as the main body missed, we would recover, and everyone but Jackson agreed that the asteroid was not going to crash into us.

  So what the fuck was everyone freaking out about? Not a day passed without another city overwhelmed by food riots. Governors, himself included, were forced to deploy the national guard because too many cops were quitting right when people needed them the most. Unlike cops, soldiers cannot quit. They can run, but not quit.

  Everywhere Cooper looked, it seemed like the world had lost its freakin’ mind. And the Jacksons were the most to blame. Sure, evacuate the coasts, like he did as best as he could in Texas, but get some perspective, people.

  “I’m running for president!” Cooper wanted to scream. “Reporters should report stuff besides the fucking asteroid!”

  Astronomers first saw the Rock pass in front of Mars over a year ago, but it remained just a curiosity outside of the space community because it would not come close to Earth. But its orbit changed dramatically at perigee last September, when it passed closest to the Sun. Although it missed the Sun by 30 million kilometers, that extra heat torched frozen liquids that resulted in massive out-gassing, like explosive mountaintop removal by coal companies. The thrust from these explosions changed its orbit such that it would miss Earth by just several million kilometers. Huge news for the space community. As Gabrielle raced from the Sun, a plume of dust and rock thousands of miles long trailed it, much like millions of miles of gas follow a comet.

  Or, put in layman terms, the Rock farted.

  Using the world’s most powerful laser ranger, Jackson’s father had accurate positional data far sooner than the rest of the world’s astronomers, who had to take positional measurements over many days with radio telescopes, since optical and infrared scopes don’t work Sun-ward. The greater the stakes, the harder it is to reach a consensus because being wrong can be fatal.

  Hence, the professor was the first to conclude that the asteroid “fart” would carpet bomb our stratosphere like Dresden, riddling everything in orbit. Like, say, satellites. But alarming the public would have been irresponsible without other prominent astronomers backing him up, and they all wanted more time. So the director of Spacewatch had to wait for the rest of the space community to catch up.

  But just because he couldn’t warn the public didn’t mean he couldn’t warn his family.

  Few stock analysts appreciate how satellite-dependent the developed world had become. But his son did. Jackson and his wife immediately traveled the world opening accounts at every major and minor brokerage in every market possible, even small regional financial markets like Singapore and Dubai. He pledged everything he owned, which included several multi-billion dollar companies, as collateral to maximize how much leeway they would give him on his margin accounts. Which is why he brought the wife, who needed to sign off on using deed, title, and corporate ownership papers to maximize his leverage.

  They also applied for the biggest possible loan or line of credit from every lender they could find, pledging that very same collateral. Which is illegal since there would be no clear title if he defaulted. Business loans, personal loans -- he didn’t care. He maxed out credit for himself, his family, his companies, and Democratic organizations like the DNC, DSCC, DCCC, and DGA.

  Although he referred to their trip as their “second honeymoon”, he expected to score more than just trim.

  Before they traveled, he formed a hedge fund called The Great Bear where he sent all this cash and through which he would place all of his trades (hedge funds are only taxed at 15%). Naturally he never told those giving him loans that he intended to gamble with their money.

  With tens of billions in his hedge fund account, the Great Bear borrowed the maximum possible from major lenders who were impressed that Jackson could raise so much cash so quickly, never guessing that all the money was his. Ponzi-like, the more borrowed money he poured into his hedge fund, the more loans the hedge fund qualified for. A billionaire securing the loans against everything he owned minimized the risk.

  He hired traders, analysts, and research specialists who shorted every publicly-traded satellite-dependent company on the planet, starting with News Corp, Sirius XM, TerreStar and SkyTerra. News Corp has 40 million satellite subscribers to BSkyB, Star TV, and Sky Italia. Making billions while destroying Fox News, the propaganda arm of the GOP, was very satisfying.

  Brokers first borrow stocks from their own clients, so having an account with every broker in every market made it that much easie
r to make big moves quickly, while disguising the actions of just one player. Traders loved it because they made money on every share, and they could borrow millions of shares with just one phone call or email.

  But then in October it farted again.

  Although the media referred to it as the Rock, the asteroid was really more a mountain of ice with dirt and rock held together by frozen volatiles like carbon dioxide, nitrogen, and methane, which act like jet fuel when heated. As surface gases boil off, the mass contracts and the density increases, often shifting its center of gravity, which changes its spin and destabilizes its orbit. Sunlight can cook its surface unevenly, like a two engine plane with one engine barely functioning, or even penetrate deep enough to explode deep pockets of gas like a rocket.

  Late night comics joked that the good news was that the Rock was a bit smaller, but the bad news was it’s gonna come closer to hitting us.

  The change in “delta V” shocked astronomers. Instead of missing Earth by several million kilometers, they now expected it to pass Earth by just a few million. And its tail now contained several million miles of rock and dirt, much of which Earth would plow through in early January. At relative velocities of 50 kilometers per second.

  The Jacksons were therefore the first in the world to realize that millions of people were going to die. It was only a matter of time before astronomers developed a consensus strong enough to justify terrifying the public, so Jackson started auctioning off his fish farms, his lumbar and bamboo businesses, and his condos in the Caribbean island of San Andres. He also instructed his insurance broker to over-insure every remaining business and property using as many different insurance companies as possible.

  Jackson sought out the owners of Freddie and Fannie mortgage securities, which were about to lose trillions in market value, and companies that insure securities like stocks, bonds, and mortgages. Ambac and MBIA, the two largest monoline insurers, each insure $700 billion worth of securities, so he went after them just like he shorted every publicly traded insurer in the world.

  Under the cover of a registration drive, Jackson bought three months of life insurance, comprehensive auto, and home property insurance on behalf of every registered Democrat, with the Democratic National Committee as joint beneficiary, and offered three months of free supplemental health, accident, and disability insurance for everyone who signed up. All they had to do was complete, sign, and return the forms. Sure enough, several million more people immediately registered as Democrats. To not bankrupt any one insurer, Jackson spread out these policies evenly among the biggest national insurers, while his hedge fund shorted them and their reinsurance companies.

  Republicans ridiculed this as a very expensive way to register voters who may not even vote Democratic, while the Democratic establishment naturally freaked out that he essentially bankrupted the DNC. But Jackson didn’t care because he had access to the raw data, which spooked him. Astronomers, by temperament, are patient, cautious, and reluctant to terrify the public, so the people still had no idea what was coming. Governments who had a clue like the Europeans looked for the United States to claim the sky was falling. When President Palin repeatedly blew off the dangers, there was no one to rally the world behind disaster preparations. While Jackson instructed his brokers to short everything.

  Except they didn’t believe him. So he had to repeat it: in person, on the phone, and via fax and email: every-fucking-thing. Any publicly traded security at any price in any country.

  With the CEO’s of the mega-brokers like Citi and JP Morgan along for credibility, Jackson personally visited the heads of the world’s largest sovereign wealth funds, mutual funds, pension funds, hedge funds, endowments, and private equity firms to ask them to borrow every security that they planned to hold for the next 3-6 months. He offered to short everything they lent, meaning they got to choose what he shorted and how much.

  To speed things up, Jackson posted proof on his hedge fund website that he had $50 billion in cash and had pledged everything he owned to cover these shorts. After various investor news media verified the documents firsthand, the markets talked of little else.

  Henry Fucking Jackson invented bulk shorting.

  He started with Prince Alwaleed bin Talallisted, the world's 22nd richest person, who lent Jackson his huge stakes in Apple, News Corp, eBay, and 180 million Citigroup shares. Harvard University, still trying to recoup the $11 billion they lost betting on interest rates, lent nearly their entire portfolio, as did thousands of other large institutional investors. Institutions hold three-quarters of the world’s stock, and the bigger they were, they quicker they jumped on the bandwagon because lending stocks you planned on keeping was just free money. Or so they thought. So while several thousand institutional investors called the big brokers or Jackson’s hedge fund directly to offer their shares, thousands of traders at dozens of firms contacted virtually everyone else. Virtually overnight, Jackson exhausted the market for short selling.

  But Jackson also used derivatives to place huge bets on currencies and commodities. All his brokers needed were companies willing to be on the other side of his bets. Thousands of corporations, hedge funds, and speculators routinely hedge currencies and commodities worth trillions in nominal value. Manufactures hedge the price of steel, Big Ag hedges wheat. If Disney is making a lot in Europe, it may hedge the Euro. Virtually every big international company hedges either currencies or commodities to minimize unpredictable losses.

  So finding counterparties was easy. The universe of players in this particular sandbox is relatively small, and brokers know everyone by past trading or reputation. After all, just 10% of Americans own 75% of American stocks.

  He instructed his brokers to focus on shorting lenders, brokers, credit card issuers, insurance companies, shippers, airlines, parcel delivery services, port managers, real estate investment trusts, coastal resorts, and small island stocks. In particular he wanted to short big banks because Goldman Sachs, Wells Fargo, Citi, Chase, Bank of America, and Morgan Stanley handle 95% of the derivative market, issue over half of all American mortgages, and two thirds of all credit cards. Citicorp alone wrote down over $100 billion in losses around 2008, so Jackson knew that the bigger the lender, the harder they would fall.

  Jackson also bet against island nations, their currencies, their corporate and government bonds, and their sovereign credit-default swaps (betting that the cost to insure their government debt would rise). Once the menace became clear, trading in third world currencies would basically dry up as investors fled to more liquid money. Professional traders found lots of institutional investors happy to become counterparties to bets against England, Ireland, Iceland, Taiwan, and mighty Japan.

  Jackson missed one opportunity of a lifetime and he promised himself that he would never miss another. Especially not a sure thing that now stared at him in the face. Under Bush’s housing bubble, Goldman Sachs sold $135 billion in subprime mortgage securities, while at the same time using derivatives to bet against those same mortgages. Sachs made so much betting against their own securities and clientele that they paid a record $20 billion in bonuses in 2009. Apart from salaries.

  This time Jackson was not going to miss out or wimp out.

  But that kind of return required complex financial instructions called derivatives, whose value derives from something else, so he instructed his brokers to underwrite any derivative for any amount against any stock, stock market, any debt-backed security, and all third world currencies. To avoid legal and public relation problems, his stipulated that his brokers only deal with “Qualified Institutional Buyers” in the United States, a class of sophisticated investors afforded fewer protections than small investors under federal securities law.

  He bet long only on gold, the dollar, the Euro, and food futures, while buying and storing as much food staples as possible (wheat, rice, grains, etc). He literally bought as much bulk food like wheat and grain that he could get his hands on, which single-handedly drove up their pr
ice. Not future crops, since he expected them to die, but stored grains that he could ship to his strategically-placed amorphous metal warehouses in the United States.

  Jackson quickly discovered that few big financial institutions wanted too much risk in any one area. So when they met their limit on, say, third world currencies, Jackson’s brokers would max them out on commodity futures or junk bonds. If they didn’t like bets against the dollar going up, maybe they’d take bets on oil, corn, or copper. Many traders thought themselves smart by diversifying their risk, like a balanced portfolio of stocks, bonds, and REITS, so Jackson had his brokers maximize their appetite for every possible niche.

  Who could predict that virtually all currencies, commodities, stocks, and bonds would fall at the same time? Well, aside from the director of Spacewatch, really, who could have predicted this?

  Unfortunately, brokers underwrite juicy derivative contracts with the expectation of reselling them to the usual suckers -- pension funds, hedge funds, and sovereign wealth funds. Occasionally a university endowment or corporate hedging department. But with so many of his derivatives sold to so many financial institutions, brokers found themselves increasingly unable to resell all of the huge bets they took on. Which scared the hell out of them because no one wanted to become the next AIG. Taxpayers sure as hell weren’t going to give $182 billion to one fucking company like Bush did with AIG.

  Banking is about managing risk. And as the 2008 collapse of Wall Street proved, the only risk bankers avoid is to their own paychecks (Wall Street paid out a record $140 billion in bonuses for 2008 after costing their companies and their country several hundred billion). So Jackson’s bets against their companies really hit their bottom line: the value of their stock options.