The Ascendant: A Thriller (47 page)

He opened the door, and Mitty gave him a surprised look. She sniffed at the air wafting out of the bathroom. “Damn. You blow chunks?”

Garrett nodded. “I saved some for you.”

“You can still talk shit,” she said. “So you must be feeling okay.”

Garrett walked slowly down the hall toward their operations room. He ran his finger along the wall, casually, as if just to touch it, but really because he was afraid he would fall over.

Mitty put a gentle hand on his shoulder. “I gotcha, boss,” she said. Normally, Garrett would have swatted her hand away, but now he let her help him. He was glad she was with him. More than glad—grateful. No one looked up when he entered the computer room, and Garrett took his seat at the main bank of monitors. The screens surrounding him were lit up with activity. Garrett tried to speed-read the information, but his eye sockets ached. He couldn’t do it.

“What’s the news saying?” he asked Mitty quietly. “I’m having trouble seeing.”

It was Bingo who answered: “Just about what we expected. North Korea leading, China censorship wall next, then protest at the embassy, then riots over there. But they’re busy, can’t keep up with the flow.”

“Good,” Garrett said, opening his online trading account. “Let’s make ’em even busier.”

I
t used to be—two hundred, a hundred, even fifty years ago—that the shares of a company were traded on the company’s local stock exchange, often manually, by traders working regular hours and selling blocks of shares to each other, for clients who had instructed them to do so in person, or more recently, by phone. Trading volume was steady, slow, and, compared to today’s numbers, minuscule. Big players could move the market with a relatively small amount of capital, and sometimes they could even corner the market.

Panics still raced through the markets—runs and bubbles and crashes have been a feature of capitalism since humans first started trading products for money—but they took longer to build, longer to play out, and often longer to recover from. The notorious Tulip Bubble of the 1630s, when Dutch tulip prices soared to a hundred times their normal market value, led to widespread deflation in Holland for more than a decade. The bubble in the South Sea Corporation stock burst in the 1720s, wiping out thousands of British speculators for a lifetime. The Great Depression held sway over the American economy for more than ten years, lasting until the start of World War Two.

Today, with the growth of instant global communications, and the appearance of massive tranches of free-flowing capital, the stock market is global, and instantaneous. It is also a twenty-four-hour-a-day proposition. And it’s incomplete to call it a “stock market”; there is a global market in equities, but also in bonds, insurance, debt, mortgages, currency, commodities, and almost anything
else that someone, somewhere, can affix a price to and then turn around and sell to somebody else. Money of all types, from every country, sloshes around the globe, constantly seeking out higher returns. If two percent on U.S. Treasuries won’t do, money sprints across the ocean to German corporate debt at three percent; if three percent is considered anemic, then that same money slides out of Europe and splashes into African commodities at five percent; if Africa convulses in corruption or revolution, then it races right back to the relative safety of U.S. Treasuries. All this in the blink of an eye.

A modern trader can make thousands of transactions, all in less time than it took a stock broker on the New York Exchange in 1929 to yell “Buy!” or “Sell!” or “I’m going down in flames!”

And not all of the transactions on the global marketplace are visible to all onlookers. Vast swaths of the deals being done are brokered and consummated in so-called black pools, nontransparent, off-the-record negotiations and sales conducted by third parties and anonymous brokers. The market for debt—government and corporate bonds—is particularly opaque, with no governing body making sure that prices are known to all the players. It is a murky pit of “buyer beware” action, an instant economy where fortunes can be made or lost in the blink of an eye, and nobody is any the wiser. At least not right away.

But word eventually does get out. Huge sums of money are not made or lost without some steely-eyed observers taking note, either to seethe in envy or revel in coldhearted gloating. And therein lies the other difference between today’s market and that of a century ago. Information flow can travel almost as fast as the money itself. News of a stumbling stock, a faulty product, a debt ceiling, or an impending bankruptcy flashes around the globe with lightning speed. Often rumors travel across borders faster than real data: a stock can rise or crash on the most hastily formed opinions. And those opinions are not always based on fact. And the result can be devastating.

And that was exactly what Garrett was counting on.

It was the rumors that started first, at 11:00 p.m., East Coast time, a day earlier. They were very real-sounding bits of information concerning the solvency of a handful of Chinese companies, all of them traded on American exchanges. They came in the form of postings on financial blogs and stock-trading bulletin boards; official-looking analyst reports from Moody’s and Standard & Poor’s
were suddenly ping-ponging across the Web. But since both of those companies were closed for the night, no one was around to authenticate the reports, and plenty of investors decided to take them at face value.

Then a trading house in lower Manhattan—and people suspected it was Jenkins & Altshuler—sold off a big chunk of Chinese holdings, and they did it in not particularly discreet blocks of selling: thirty million dollars of Star Hong Kong Holdings; twenty-five million dollars of Han Le Manufacturing; fifty million of Ace Software. People noticed. People in every corner of the globe.

By one in the morning, the rumors were ricocheting, growing more extravagant with each retelling: the Chinese companies were actually shell accounting entities, with no factories or real product. The stories morphed: the firms had product, but they were dangerously faulty and were under investigation by the U.S. government. A new PDF appeared at 2:00 a.m., this one bearing the seal of the attorney general’s office of the Southern District of New York, verifying the rumor: those Chinese companies were indeed coming under investigation, and in fact the AG was pushing to have them delisted from the New York Stock Exchange altogether.

The tipping point was reached at 4:30 a.m., when Alvin Montague’s
Value Trade
newsletter sent out a “sell all China” blast on its first Twitter feed of the morning.
Value Trade
had more than two million subscribers; when Alvin Montague said sell, people sold. And sell they did. They dumped Chinese equities listed on American and European exchanges.

The problem was, Alvin Montague never tweeted any such words.

His account had been hacked. So had the account of the AG of lower Manhattan. As had Moody’s. By whom, no one could say. And it didn’t matter: the damage had been done; the companies’ stocks started to crater. First in after-hours trading in the U.S. and Europe, then in live trading on the Asian exchanges. These rumors, along with the mounting international crisis involving an American jetliner in North Korea, and the growing speculation that the Chinese government had lost control of its country, started a run on the Shanghai Stock Exchange. By ten in the morning, Beijing time, all the on-air reporters for CNBC had gathered in their New Jersey studios to narrate the course of these extraordinary events. They jabbered and screamed about the panic—they also replayed the YouTube videos of Chinese rioters throwing rocks at policemen in
a dozen different cities. It was clear to anyone watching—or trading stocks—that the great global slosh of capital had become a tidal wave, rushing away from China, and looking to land someplace else. Anywhere else.

By the time the talking heads on CNBC paused to catch their collective breath, the value of the Shanghai Stock Exchange had dropped by seventeen percent. By noon the drop was twenty-seven percent.

By three in the afternoon the Chinese government pulled the plug and shut the stock exchange down. But the global marketplace no longer sleeps. Or pauses. By the closing bell on Wall Street, every Chinese equity, anywhere in the world, on a multitude of exchanges, had been scorched. The trading day had been a disaster.

And it was all built on lies.

G
arrett watched the run on the Chinese markets with undisguised glee. It wasn’t that he liked to see other people suffer—although he didn’t mind that terribly—it was more that he loved the concept of global mischief, and he loved that it was
his
mischief. A grand hoax had been perpetrated on the Powers That Be, in all the corners of the globe, and it had all come from his twisted brain: his planning, his feints, his misdirects, lies, and forgeries. As Mitty Rodriguez said as she watched the circuit breakers kick the Shanghai exchange off-line: “Garrett Reilly is
fucking legend
.”

It made his head hurt a little less, but only a little.

He didn’t even regret that he was leaving money on the table, which normally would have chafed him to no end. He could have shorted every one of those Chinese companies that had tanked. But, he reminded himself, profiting off a stock plunge that he had created—with lies and forgery—was indisputably stock fraud, and you could go to jail for a long time for that shit. He was better than that.

Garrett let his eyes trace over the cascade of tumbling numbers on the French CAC 40 and the German DAX, the Hang Seng in Hong Kong and the JSE in Johannesburg. Panic was in the air; panic on a global scale. Panic about Chinese companies, panic about war, and panic about China itself. Some of it was real, some imaginary; it really didn’t matter. What mattered was the confusion. The bolts from the blue. If you kept people off balance, if you kept them guessing, then they didn’t have much of a chance to strike at you. Sooner or later they would have to start circling their wagons.

News outlets from around the globe were all in a frenzy; some still led with the plane down in North Korea, others with the Chinese riots, a few with the crash of the Golden Shield, but in the past few hours the stock sell-off had crept into most lead positions. Analysts were coming on the air to weigh in on why it had happened, and whether this was a fundamental slide for China or merely a whiff of momentary panic.

Again, Garrett didn’t care how they spun it—the job was getting done.

A
very Bernstein watched the sell-off in Chinese stocks with a mixture of horror and admiration: horror that the supposedly “smart” money in the markets could be so easily misled, and admiration since he knew that Garrett Reilly had planned it, and then pulled it off. Perhaps Garrett’s genius was being put to a good cause. What that cause was, Avery wasn’t exactly sure.

But Avery knew Garrett had orchestrated it. He was like a conductor leading a symphony, moving bits of digital information here and there, melding it all into a weird, almost magical piece of music. Hacker music. That music seemed to be having a devastating effect on people and countries. But to what end?

He replayed in his mind the conversation he’d had with Garrett over the phone two days earlier. Garrett had promised that if Avery agreed to participate, any losses at Jenkins & Altshuler would be made whole by the U.S. Treasury. That seemed a tall order, but Avery guessed that Garrett was now playing in a world that he, Avery, barely recognized. Which brought him to another thought, one that had been bouncing around in his head for the past few days now—how safe was it for Avery to be playing
in that world
?

Garrett might have promised the full backing of the federal government, but could he come through on that promise? And, still more important, were there other forces out there, like that Metternich character, who might not be so happy with Garrett’s antics? If people found out that Avery had been helping Garrett, would they come down hard on him?

It had made him paranoid. So much so that three days ago he’d had his
office swept for listening devices by an electronic security company. Then he replaced all the old servers at Jenkins & Altshuler with brand-new ones—at quite a cost—and had those new servers jam-packed with security software. He changed the locks on his town house, and even toyed with the idea of getting a dog, even though Avery hated dogs.

Okay, the dog idea was probably a bit much.

Avery shut down his computer, turned off the office television, said good night to his secretary, Liz, and waved to a few lingering employees. It had actually turned out to be a profitable day for Jenkins & Altshuler: by selling Chinese equities early he had been ahead of the curve, and had avoided panic losses. But the Securities and Exchange Commission would come knocking after all the detritus had been sorted through, and they would want to know what he knew, and when he knew it. At that point, lawyers would be called in, and the shitstorm would commence. He hoped Garrett would be good as his word then, because it would take more than just money to keep him, and his company, in the clear.

He rode the elevator down, and said good night to the doorman at 315 John Street, then stepped out of the front door and looked up and down the street. The sidewalks were mostly empty, and a thick darkness was settling on lower Manhattan. It was a forty-block walk back to his West Village apartment, and it used to be that Avery took the trip on foot, every morning and evening, partially to make sure he got some exercise, but also because the beauty of living in New York City was walking the streets. But since the whole business with Metternich and his trip down to D.C., walking out in the open had seemed less inspiring. In fact, it scared him. He had started taking car services, both ways, jogging from his front door to the car, and then sprinting from the car to his office lobby.