Walter Williams - The Rift

In the years since the New Madrid quakes of 1811-12, millions of people moved into the danger zone. Major cities, like St. Louis and Memphis, were built close to the fault, supported by a complex infrastructure of bridges, dams, reservoirs, power stations, highways, and airstrips, few of which had been built with earthquake in mind. Industries flourished: factories, chemical plants, and refineries had been built on the yielding soil of the Mississippi Delta. Billions of dollars in commerce moved up and down the river every year. Millions of acres of farmland, fertile as any in the world, stretched from the rivers, protected by man-made levees.

It had only been in recent decades, when geologists began to study the mid-continental faults, that the true scope of the danger was known. The New Madrid fault, and other faults beneath the Mississippi, were still seismically active, although the vast majority of its quakes were so small as to be undetectable by humans. To judge by historical precedent, a much larger and more destructive earthquake was inevitable.

If the faults should snap again, Jessica knew, millions of lives, and billions of dollars in property, were in jeopardy. The Corps had been striving to reengineer its public works so as to make them resistant to earthquake damage, but the procedure was far from complete.

In her briefcase, Jessica had the Corps’ earthquake plan, released in February 1998, as well as reports concerning the regular inspections of Corps facilities and reports relating to the floods in Iowa. The floodwaters would inevitably channel into the Mississippi from Iowa, and would inevitably test Corps structures farther south as they progressed to the Gulf.

Jessica looked at the stack of papers, at the heavy report.

The earthquake, she thought, was in the indefinite future. The floods were now.

She put the earthquake plan back in her case.

She would deal with it when she had the time.

*

“I’ve got a proposition for you, Vince,” Charlie said, “and- I warn you-I am talking risk here.”

Vincent Dearborne steepled his fingertips and looked at him with a little frown. His eyes, however, were not frowning, not frowning at all … Charlie could see a glimmer of interest, and the little lines around the eyes were smiling. Vincent Dearborne, Charlie knew, had been hoping that this moment would come.

“Tennessee Planters and Trust,” Dearborne said in his cultured Southern voice, “is, generally speaking, risk-averse.”

“I know, Vince,” said Charlie, and smiled with his white, dazzling, even, capped teeth. “But you’re not averse to taking a little flyer now and again. When I told you about those straddles two years ago, you backed my play.”

“Yes. And I wondered if doubling the bet was sound. But…” The glimmer in Dearborne’s eyes increased in candlepower. “You made us twenty-four million dollars.”

“Twenty-four million dollars in three days,” Charlie reminded.

“And almost gave me an ulcer.”

Charlie laughed. “You can’t fool me, guvnor. You can’t get an ulcer in three days.”

Dearborne grinned and tilted his noble graying head quizzically, the way he always did when Charlie let his East London origins show. It was as if he were amused and puzzled both at the same time. Here was this strange Englishman who talked like a movie character, and who could make tens of millions in a matter of days, and who amounted to … what?

It was as if Dearborne couldn’t figure Charlie Johns out. Charlie came from … some other place.

Whereas Dearborne’s place in the world was not only clear, it was on display. His office was a monument to mahogany and soft brown leather, subdued lighting and brass accents. Golf trophies stood on display in the corner- golf was a safe sport. Certificates and awards were ranked elsewhere on the walls. Chamber of Commerce, Lions, United Way- safe organizations. There were pictures of ancestors on the walls: judges, legislators, bankers. Safe ancestors. His pretty wife, displayed in photographs, wasn’t too pretty, and his well-scrubbed children, pink-cheeked in school uniforms, looked- well- risk-averse.

Tennessee Planters amp; Trust was a safe place to put your money, and Dearborne was a safe director for a bank to employ. That was the message sent by the office decor, by the Memphis skyline visible through the office windows, by the ten-story Planters Trust building of white Tennessee fieldstone, even by a bright turquoise pattern in Dearborne’s tie, which was laid to rest next to another, more tranquil shade of blue, like a moment’s bright, shining thought being smothered beneath a reflex of conformity.

But Charlie, who prided himself on his discernment, knew that Vincent Dearborne was not quite as sound as his calculated environs made him out to be. A little over three years ago, when Charlie was working in New York for Citicorp and Tennessee Planters Securities flew him out for a secret weekend meeting with the directors, Dearborne had taken Charlie not to the office but to the country club, and made him part of a foursome with two of the other directors.

It had been Dearborne who suggested the wager, “to make it interesting.”

Charlie was hopeless at golf. He’d always thought it a sport for wankers, and he’d never really learned to play; but he knew this was a test, so he flailed his clubs with a will until at last the horrible afternoon was over and he could relax in the clubhouse with Boodles and tonic.

And he could whip out his pen and write Dearborne a check for four hundred and thirty-two dollars, and hand it over with a smile.

Dearborne’s eyes had gleamed, then. Just as they were gleaming now.

The conclusion that Charlie had drawn was that Dearborne liked a fling, but was only happy with a sure thing. Before Charlie’s arrival on the scene, Dearborne’s idea of a fling had been to spread some money on the Cotton Exchange.

Charlie played golf with Dearborne on a regular basis now. And regularly wrote him checks afterward. He considered it a form of investment.

An investment that he hoped was about to pay off.

“Since those straddles,” Charlie said, “you know I’ve played it safe, no flyers. Too many conflicting signals, mate. Too much vega in the market, right?”

“Vega.” Dearborne repeated, the gleam in his eyes fading, going a little abstract. “You mean volatility.”

“Almost. Vega is the impact of changes in volatility,” Charlie said. Too much jargon only confused the man. “I’ve made a nice profit for you, but it was nickel-and-diming, a little bit here, a little bit there. I wasn’t taking any flyers- I was, as you say, risk-averse.”

Dearborne nodded.

“I was waiting for a clear signal.” Charlie grinned, twisted the diamond ring on his finger. “This morning, just as the markets opened, Carpe Diem gave me the signal.”

“Ah.” The gleam returned to Dearborne’s eyes. “Your new program,” he said.

The convoluted business of trading options required a lot of calculations, and traders depended on sophisticated computer programs to mash the numbers and spew out the complex answers they needed to make their trades. The programs had names like Iron Butterfly and Jellyroll, and they could assemble raw data at lightning speed and configure awesomely complex combinations of options.

Carpe Diem was of the next generation of trading programs. A trading whiz Charlie knew from his days at Citi had slipped Charlie a beta test version of the program. His program was ahead of the market. And he planned for his purchasing to be ahead as well.

“What’s Carpe Diem telling us?” Dearborne asked.

“The economy’s going to tilt into recession,” Charlie said.