The Ascendant: A Thriller (2 page)

The first six places of a CUSIP were simple—they identified the issuer of the security or bond. The seventh and eighth digits identified the issue—what it was that was being sold; numbers, usually, for equities, letters for fixed income, or bonds. The ninth—and sometimes tenth—digits were what was known as checksums, automatically generated numbers that ensured the rest of the CUSIP was delivered without transmission errors.

Garrett knew the first four digits of U.S. Treasury bond issues cold: 9128. After that, the digits varied according to type of issue: inflation-protected securities were 10. Short maturing T-bills: 08.

But this pattern wasn’t about inflation-protected securities or T-bills. It involved Treasury bonds maturing in twenty to thirty years, the longest of the government’s debt issues. Someone, somewhere, was selling off T-bonds in small packets, in lots of different markets, all over the world. That alone wasn’t so very unusual. The market for Treasury bonds was huge, and buying and selling them was a twenty-four-hour-a-day game.

But two things
were
unusual, and they both caught Garrett’s attention.

The first was that all the bonds being sold had been bought at one auction, a dozen years ago, and by one, unspecified buyer.

The second was that if you added up the net worth of all those bonds that had been bought twelve years ago, by that one buyer, it totaled two hundred billion dollars. And even to Garrett, that was a fuckload of money.

“S
omeone is secretly selling off U.S. Treasuries?” Avery Bernstein asked, brushing the few strands of thinning hair off his high, fifty-five-year-old forehead, a hint of annoyance seeping into his raspy, Brooklyn-inflected voice.

“Two hundred billion dollars’ worth,” Garrett answered. “Half that much is on the market this morning.”

“And this is a hunch? Or do you have proof?” Avery rolled his shoulders with irritation under the tweed jacket he habitually wore, even though he was no longer a college professor and could afford whatever style of Italian suit he pleased. To Avery, the tweed was a fuck-you to all the big shots on Wall Street: I’ll wear whatever the hell I please, and still make more money than you.

Garrett laid a stack of printed serial numbers on his boss’s desk. “I know it,” he said. “I checked. Absolutely positive.”

“You went through the provenance of each CUSIP number?” Avery asked as he thumbed through the ream of paper. There were easily a hundred sheets there, all in all a few million separate ID numbers. He didn’t have time for this.

“Yes. Well, no. I mean. I didn’t have to. I scan the CUSIPs when they’re issued. And if they show up again, I just . . . I can see the provenance. Not here, on the paper. But in my head. Two hundred billion dollars dumped on the market since midnight yesterday, all from the same auction more than ten years ago.” Garrett’s voice trailed off as he caught Avery’s long, slow-burning, and very dubious stare.

“You read CUSIPs when T-bonds are issued? Why? For fun?”

Garrett shrugged. “Not fun exactly. I just do it sometimes. Especially if the
World of Warcraft
servers are slow . . .”

Avery glared at Garrett. He could still remember the first time he saw the freckled eighteen-year-old slouched in the back of the Dunham Lab lecture hall at Yale, not even bothering to take notes in Avery’s advanced number theory class. Nothing pissed Avery off more than a student who thought he was too good for the course material. As a not-so-subtle warning, he made his teaching assistant give Garrett—and only Garrett—a clustering algorithms test at the end of the week, but Garrett’s scores were so high as to strain credulity—no one could pick out a sequence in that many number sets. Avery made Garrett take the test again, monitored and in a locked office, but Garrett’s scores were even higher the second time.

Humbled, the TA transferred into the art history program the next day. And thenceforth, instead of trying to scare Garrett into paying attention, Avery took him under his wing.

He mentored Garrett for the rest of that year, bumping him up to graduate-level classes when he seemed bored or distracted, making him do research on stock market return predictability and interest rate fluctuations, even taking him out for the occasional Sunday dinner. Avery had seen his share of genius at Yale, but he grew to have a particular fondness for Garrett. Yes, he was arrogant, often obnoxious, and sometimes completely oblivious to other people’s feelings, but he was honest. Relentlessly so. And when his hardscrabble roots receded into the background, Garrett could be open, even vulnerable. Over plates of lo mein and broccoli beef they had talked about family, about expectations, about disappointment. He reminded Avery of himself at that age.

Then Garrett’s brother died.

Avery still winced at the memory of that bright June morning, the cold fury etched into Garrett’s face as he stood in Avery’s office and told him he was dropping out of Yale. Avery tried to convince him not to, but Garrett was beyond reason. He packed up and went home to Long Beach that very afternoon, wasting all that brilliance. Avery checked in on him from time to time; he knew that Garrett had eventually gotten his degree in computer science from Long Beach State, and then been hired as a programmer for a gaming company in L.A. Still, it seemed a squandered gift.

So when Avery left Yale for the top job at Jenkins & Altshuler four years
later, Garrett was one of his first phone calls. He knew what Garrett was capable of and wanted minds like his on the team. And he’d been right to hire him—Garrett was the firm’s best young trader—but recognizing a bunch of CUSIPs and then claiming to see a sell-off of Treasuries on a scale like this was beyond outlandish. It was, well . . .

“And you think you know who is doing this?”

Garrett nodded confidently, arching his back lazily and then plopping his feet onto the coffee table in front of Avery’s office couch. He was so bloody fucking sure of himself, thought Avery, amazed that so much arrogance could radiate from someone who had done so little—so far—to earn it. It was still what most annoyed Avery about Garrett. But then again, the older man thought, that was the trait in Garrett that most annoyed everybody. Twice in the last six months Avery had had to talk an older trader out of moving to Stern, Ferguson because Garrett kept bragging about the returns he’d made that day.

If only he weren’t so right so much of the time.

“You want to tell me?”

“You don’t want to guess?” Garrett asked with a smile.

“Damn it, Garrett, I’m the CEO of a multibillion-dollar international trading—”

“The Chinese,” Garrett blurted out, cutting him off.

Avery sputtered to a stop. He took a deep breath. “Explain.”

“The bonds were bought twelve years ago at auction through a third-party intermediary out of Dubai. Trading house called Al Samir. The People’s Bank of China uses them—”

Avery cut in: “A lot of people use Al Samir.”

“Sure,” Garrett continued, “but who else has two hundred billion in cash to throw down on U.S. bonds? In one shot? Maybe three sovereign wealth funds in the whole world.”

“Speculative. Means nothing.”

“I’m getting there.” Garrett smiled, clearly relishing the fact that he knew something Avery didn’t. “I’m like a lawyer building a case.”

“Fine. Continue,” Avery grunted.

“There’s been a pattern to the trading. Sixteen different brokerage houses. But none of them are in China, or anywhere in Asia for that matter. If you were Chinese and wanted to dump bonds, but wanted to throw off suspicion . . .”

“You’d use houses anywhere else but your turf,” Avery said, finishing Garrett’s sentence. “Interesting, but still speculative.”

“Trading started at 1:04 a.m., Greenwich Mean Time. Which is nine o’clock in the morning in Beijing. Start of their trading day. Means someone over there woke up, pushed the button, and tracked all day.”

Avery nodded, listening carefully, a ball of worry beginning to grow in his stomach. He rubbed his thumb uneasily along the worn teak handrail of his old college desk chair. “You have more?”

“Oh yeah, big time,” Garrett said. “The kicker was the sell times. After the CUSIP numbers, it’s how I knew something was up. Sell times from every one of the brokerage houses were in a pattern. Timed to the second. I didn’t see it at first, but then I just followed them for a while, and bingo, I knew.”

“What was the pattern?”

“Four, fourteen, four, fourteen. A repeating loop.”

“That means nothing,” Avery said, oddly disappointed. Somewhere in the back of his mind he’d wanted Garrett to be onto something.

“To you. And me. But if you’re Chinese . . .”

Avery squinted, the awful truth of what Garrett was saying becoming suddenly clear. Avery had spent five years teaching mathematics at the University of Hong Kong, five long years immersed in Chinese culture. He whispered: “Four means death.”

“And fourteen means accident. The two most unlucky numbers in China. If you were going to attack your enemy through numbers, and you were way superstitious, you’d sell their bonds every four and fourteen minutes. And the Chinese are crazy superstitious.” Garrett smiled, then he shrugged, a touch of humility seeping through. “I had to Google that whole last bit. I really don’t know crap about China.”

Avery tried to take in the enormity of what he was hearing. The implications of Garrett’s speculation were vast.

“If this is true . . .” Avery hissed.

“It’s true,” Garrett interrupted, rolling up his white shirtsleeves as if to signify how much hard mental work he’d done. “Guaranteed.”

“Then you know what it means?”

Garrett nodded enthusiastically. “Flooding the market with U.S. debt will make interest rates skyrocket. Economic panic. And the dollar will crater.”

Avery frowned. “You seem happy about this.”

“Happy? Not happy? I don’t give a shit. But I know it’s a way to make money. And that’s what we do, right? Make money?”

“You want to bet on a falling dollar?” Avery said slowly, carefully. The ball of worry in his stomach had exploded; a wave of nausea was rising in his throat.

“Fuck
yes
!” Garrett said, popping out of his seat with excitement, arms waving. “I want to short the shit out of it. I mean, if the Chinese are dumping secretly now, that means they’re going to dump openly later. Probably pretty soon. So, hell yeah, I want to bet on a falling dollar. Bet the farm.”

Avery looked out the window, gazing due west. A plane was on its final descent into Newark Liberty airport. “Garrett, you realize it has the potential to destroy the American economy?”

“But we’ll be stinking rich,” Garrett said. “So who cares?”

Avery turned to look at the young man, whom he had taught as an eighteen-year-old, nurtured and cared for, and was suddenly overwhelmed by the desire to pack it up and head back to Yale, to give teaching another go-round, because it was clear to him that in his twenty years behind the lectern, he had fallen far short of his goal of imbuing the youth of tomorrow with even the most basic sense of morality.

M
ajor General Hadley Kline could barely keep still. His compact, barrel-chested body, which usually twitched and jerked in rhythmic time to his continuous train of hyperactive thoughts, was now a blur of motion. His arms whirled like windmills as his head shook, his thick tuft of black hair bobbing as he circled the long table at the center of the bland conference room in the basement of the Defense Intelligence Agency’s Office of Analysis Building. A large, white, unremarkable structure tucked in a corner of suburban Washington, D.C.’s Bolling Air Force Base, the DIA building housed the American military’s nexus of all spying, planning, and reconnaissance, and General Kline was the head of the Analysis Directorate. His group’s job was to track all of the voluminous information that flowed into the military’s intelligence machine and make sense of it. In a nutshell, General Kline was there to figure things out. And he loved doing it.

“First question,” Kline barked excitedly in his thick, South Boston accent. “Is it true?”

The table was crowded with two dozen staffers, young men and women from all the different services, all in uniform, scanning laptops and open file folders. Howell, a young Air Force captain from Texas, snapped an answer: “High probability, sir.”

“High? How high?” Kline focused in on Howell. “
Certainty
high?”

“Ninety percent, sir.”

“How’d we find out?”

“NSA intercept of a phone call to the Treasury Department, sir,” a female lieutenant called out from the back of the table. “Made from an unsecured cell phone.”

“And the call came from”—Kline stopped briefly to tap on an open laptop set at one end of the table—“Avery Bernstein? I know him, don’t I? How do I know him?”

The analysis staffers knew the drill. Kline used his own form of the Socratic method, holding a long, engaged, combative argument—with himself—in front of everyone who had any chance of adding information to The Pile. That’s what Kline called the imaginary open box into which his team dropped useful intelligence: The Pile.

A young black Army captain, Caulk, projected a corporate PR photo of Avery Bernstein onto a flat screen. “CEO of Jenkins & Altshuler, a New York trading firm, sir. Was a professor of advanced mathematics at Yale before that. Served on the previous president’s Council of Economic Advisers . . .”

“Yes. Right. That’s how I know him. We did a deep background on him, didn’t we?” The conversation came quickly now.

“We did, sir.”

“He was clean?”

“He was, sir.”

Kline wheeled again, hands scratching at his neck, as if digging out an unseen mosquito bite. “How’d they react at Treasury?”

A broad-shouldered captain shouted from the back: “No official word—”

Kline interrupted angrily: “Official word is for fucki—”

The captain didn’t let his boss finish: “—but my inside source said that the advanced warning will allow them to buy up the excess supply in the market before word leaks out. Sir.”