tmp_f59497a75d8ceb820dc0aeddc2b436a0_SyoNZl.fixed.tidied

by Regolith (mobi)

  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 easier 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 rel
ation 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 price. 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.

  So the world’s largest brokers decided to break Henry Fucking Jackson and take his shit. Which is how they also found out that he pledged the same collateral to them all. Never had so much money targeted one guy.

  The market only needed to go up a little to bankrupt him, given the size of his bets and the virtually limitless leverage brokers gave him. So the biggest banks and brokers, those Jackson hired in the first place, turned on him by buying the thirty stocks that made up the Dow Jones Industrial Average.

  They acted in unison the day after Thanksgiving, when trading is really light, buying the thirty Dow companies as if their McMansions depended on it. Jackson already shorted a few hundred billion shares of those thirty companies (which collectively have over a trillion shares) -- meaning they were not on the open market. That left far fewer shares still available, which helped them to buy enough shares to drive prices up. After making billions off Jackson’s bet against the Dow, they planned on squeezing his margin accounts to force him to post most collateral.

  Until Jackson’s hedge fund brought it to his attention.

  All thirty Dow companies rose after the opening bell while the rest of the market fell. Sensing an attack, Jackson immediately instructed all of his brokers to cover every short of every Dow company, which released them back onto the market. Many of the owners, eager to take advantage of an uptick in prices, sold while they could, flooding the market with billions of shares.

  Their attack probably would have worked were it not for the movie. Since when can a fucking movie move the market?

  Regolith 3D held its worldwide release the day before, and theaters were packed all holiday weekend. Since the movie naturally scared the shit out of people, stocks nose-dived the day after its Thanksgiving premier, except for the thirty Dow stocks, which stood out like an erection on trading charts. Jackson’s traders noticed the obvious and Jackson acted accordingly.

  The big brokers’ attack not only failed, but they now had a shitload of stock that no one wanted to buy. Selling at a loss only aggravated their growing insolvency.

  Jackson, however, made several billion because the Dow had fallen so much since he borrowed those shares the month before. Sure, he would have made a lot more if he had been able to sell them a month later, but several billion is still several billion.

  Not that their attempt did not freeze Jackson’s bowels, who immediately made every space expert worldwide a paid “consultant” to the Jackson Space Foundation. The more speeches, interviews, and articles they did, the more Jackson paid them. He hired public relations firms in their home countries to help them get the word out and to standardize their message. Like renaming the asteroid “The Planet Killer” and predicting billions of deaths if the government didn’t move faster. Because no one ever believed their government acted fast enough. Many astronomers were already doing this, since it would lead to bigger budgets in the future, but getting extra pay redoubled their efforts. The public was so alarmed that Jackson was able to do a “full Ginsberg” by appearing on five Sunday political talk shows right after Thanksgiving.

  Jackson won the argument: the sky was falling.

  Which pissed off every national government who now had terrified rioters demanding immediate action. Which is not what government does best. People accused their government of conspiracies and cover-ups, which the global space community promoted. The movie and its disastrous predictions dominated the news around the world. All the more so because the asteroid in the movie was 12 kilometers and the one coming at them was now only half that large, after having shed so much weight. As the longtime head of Spacewatch, Jackson’s father now had a field day appearing on one TV interview after another, urging people and governments to prepare for the worst. The professor soon had one of the world’s largest Twitter and Facebook followings.

  Then the Rock blasted off another hill’s worth of dirt, which would bring it within one million kilometers of Earth, right when billions of people started to pay attention. Now, catastrophe was not just unthinkable, but inevitable. The latest positional data predicted fragments striking open ocean, and thus wash away islands. Like, say, Wall Street on Manhattan Island. Around the world, stock markets shrieked like first day felons giving unlimited anal. Currencies of island nations, from Great Britain and Japan on down, went into free fall. Currency traders joked that the pound should be renamed the ounce.

  The problem with trading $500 trillion in derivatives in a $50 trillion global economy is that financial institutions lack the reserves to cover even a tiny fraction of their losses if shit happened. And shit was definitely happening.

  When asked how it felt to be the world’s most famous person, Jackson quipped, “Well, for one thing, Paris Hilton is pissed!”

  Ironically, as much as Jackson wanted to kill the big brokers like Morgan Stanley and Goldman Sachs, he instead had to keep them alive to function as intermediaries. When your bet against everyone prevails, the last thing you want to do is kill the bookie before you collect your money. And nobody knew better than Jackson that the markets had farther to fall after the impact.

  He could, however, cash out those bets against every other counterparty not rich enough to sustain greater losses later. Jackson didn’t know who would survive the impact and the inevitable global depression, so after Christmas he covered as many shorts and derivative contracts as possible, leaving only the brokers and the richest corporations, pension funds, mutual funds, hedge funds, endowments, and sovereign wealth funds for later.

  And some of those pockets were deep. That Saudi prince lent him half a billion shares yet Citi went from trading in the 80’s in October to the single digits. Wealthy Arabs and Arab sovereign wealth funds alone lent him a couple trillion dollars worth of securities, which after the impa
ct would probably trade for 95% less. Thousands of large international companies like IBM, Intel, and Mitsubishi unknowingly bet the survival of their companies by becoming counterparties against Jackson’s currency and commodity bets. The richest financial institutions in the world unexpectedly faced trillions in losses to one fucking guy.

  Jackson made everyone but the richest pay up before the impact. If they couldn’t pay, he had the courts freeze their assets and liquidate their companies before the courts were overwhelmed.

  But Jackson could still punish the brokers without killing them, so he bled them of liquidity, capital, and credibility. Fearing for their survival, the big American bank-brokers begged the Fed for interest-free loans so that Jackson wouldn’t kill them. The more the Fed loaned them, the more they could reduce their debts to Jackson, reducing his leverage over him. If the finance sector collapsed, the global economy would collapse, so the Fed and other central banks gave the mega-banks a few hundred billion in near-zero interest loans to prop them up. Not knowing this money went towards paying off Jackson, who held a sword to their throats.

  And if the main body missed, they could quickly recover.

  But, really, they were zombie banks at this point: dead, but still scaring people. Every lender was going to take a huge hit, and the bigger the lender, the larger their loan losses would be. Property loans, student loans, car loans, credit cards, corporate loans and lines of credit -- their typical losses were going to multiply overnight, when their ability to tap private markets to recapitalize was hardest. Even if they didn’t owe Jackson billions.