Chapter 25: Hardball

July 24, 1984, Chicago, Illinois

"You have to explain the cat's behavior," I said to CeCi on Tuesday morning.

"No pussy can resist you!" she smirked.

"True," I grinned. "But that is NOT the kind of pussy that interests me!"

"Good thing!" Violet smirked.

"Well, there is that Steve Martin skit," I grinned. "But seriously, CeCi?"

"I have no clue. Neither does Deanna. For whatever reason, she's attached herself to you."

"Maybe she's a voyeur?" Bianca suggested with a smirk.

The door opened, and Chelsea came in, which meant the risqué conversation had to end, lest we offend her. We could continue, but I felt there was no point in deliberately giving offense.

"Good Morning!" she said.

We greeted her, and she went right upstairs to check on Sofía. Twenty minutes later, I headed to the office, leaving Violet with Bianca, as was the norm when Violet spent the night. The usual schedule for the data analysts was to start at 8:00am, and that was when Violet usually arrived.

I preferred to be in the office no later than 6:45am, as that gave me plenty of time to speak to Rich and Mark, the overnight traders who handled Asian and morning European trading, and to have my global political and economic risk analyses done by the time the other analysts arrived. They usually came into the office between 7:00am and 7:15am, which afforded plenty of time to put together the daily analyst report. It was published at 8:15am, forty-five minutes ahead of the 'big bell' that signaled the New York opening.

I quickly completed my morning routine by making a pot of coffee after hearing things had been relatively quiet in Asia and Europe overnight. Things in New Zealand seemed to be calming down, which led me to lower my global economic risk factor by one point, with the biggest risk being the US elections, even more so than terrorism.

We were relatively certain Reagan would win, as his poll numbers showed him with more than 50% of the vote, fairly consistently through May, June, and July, though they had tightened a bit after the recent Fed action. But where his real advantage came was in the Electoral College. He was simply not going to lose California, New York, Texas, Pennsylvania, Illinois, Ohio, or Florida, which would give him 205 Electoral Votes as a base, and he only needed 270 to win.

There were so many ways to accumulate the additional 65 votes that I didn't see how Mondale could prevail. Reagan was likely to accumulate at least 60% of the popular vote in Utah, Idaho, Nebraska, Wyoming, New Hampshire, and Oklahoma, which would provide twenty-nine of those sixty-five. We didn't see him losing Alaska, Arizona, Kansas, Nevada, North Dakota, South Carolina, or Colorado, worth another 43 votes, taking him to 277. Mondale could win the rest, which was highly unlikely, and would still lose.

That said, there were enough questions about Reagan's age — he had turned seventy-three in February — and the debates that it was possible for Mondale to make the race competitive. Reagan was an expert at giving prepared speeches — no surprise given his experience as an actor — as well as during press conferences, which were somewhat controlled, but there were questions about his abilities in a back-and-forth debate.

The only other thing which might derail Reagan was the Federal Reserve. If Paul Volcker continued to tighten, Reagan's polling advantage on the economy might disappear, and in the end, no matter what else was true, the American public voted their pocketbooks. The economy had been a major issue in the 1976 and 1980 elections, in both cases leading to the defeat of the incumbent party, though Gerald Ford had been something of a special case.

Our report went out on time, as usual, and I began my daily detailed analysis of currencies, interest rates, and precious metals. There were no major elections scheduled in the next thirty days, which tended to create more stable conditions in the FX and precious metals markets.

The main short-term risks were from terrorist acts, but Europe had mostly run the Red Brigades and the Baader–Meinhof Gang to ground. The IRA was active, but its campaigns were typically against military and government targets in Britain, and tended not to have a major impact on the financial markets. On a global scale, the biggest concern came from the two largest member groups of the PLO — Fatah, run by Yassir Arafat, and the PFLP, run by George Habash.

What was more concerning was the complete destabilization of Lebanon, with various factions fighting a ten-year-long civil war. With the US withdrawal in May and June, Muslim factions, together with Syria, had gained the upper hand. From everything I read in foreign policy journals, there was no end in sight, and no proposed resolution that might resolve the differences between the factions.

In addition, the Iran-Iraq War continued to rage, also with no end in sight, with both sides conducting significant military operations, both on the ground and in the air. The analysis of the journals was that the sides were about equally matched, with each side having advantages and disadvantages. Iraq had more matériel, but Iran had more ground troops and better commanders. What was even more concerning was the extensive use of chemical weapons by Iraq, especially poison gas — specifically mustard gas and phosgene gas.

There were also lower-level conflicts, including insurgencies in Central America, South America, and Africa. Those, at least for the moment, had little effect on the global risk factors, but did create regional risks. After reviewing everything, I decided that our daily global economic and political risk reports needed regional components, not just global ones, given many Spurgeon desks were making investments overseas. That was something of a change outside of FX, for which that had been the norm since its inception.

I called Bianca and Steve Smith into my office to discuss it with them.

"Easy-peasy," Steve said. "We can create what amounts to a dashboard in Lotus 1-2-3 that shows gauges for each region, along with an overall gauge that is a synthesis of the others. How do you want to divide the regions?"

"North America, Latin America, Europe, the Middle East, Asia, and Africa. I don't think we need anything specific for Oceania, and I doubt penguins are going to form a government and issue currency for Antarctica anytime soon!"

Steve laughed, "Probably not. I assume you'll want the same criteria for each region?"

"For now."

"Mexico in North America because of the continent, or in Latin America?" Steve asked.

"North America, because we share a border with them. Instability there could cause massive northward migration."

"Got it. What are you considering to be the Middle East?"

"The Arab nations, Israel, Turkey, Egypt, and Iran."

"What about the Sovs?"

"Europe. I mean, sure, the majority of Russian territory is in Asia, but the majority of people are in Europe. It's also the case that any risk with the Soviets is more towards NATO than the Chinese, who have their hands full with their internal problems."

"The synthetic global number can't just be a sum and average," Bianca observed. "Overthrowing the government of, say, Zaire is not nearly as impactful as, say, a landslide loss for Thatcher would be or the death of a Soviet leader."

"I think we'll have to play with that quite a bit," Steve said. "I suggest we expose the weighting in fields so Jonathan can change it until it reflects what he feels generates the best results."

"I like that idea," I said. "We'll publish the weighting factors so that the desks are able to make their own judgment if they disagree with us on the global numbers. Make it happen!"

"Will do!" Bianca said. "We're absolutely going to need another data analyst for next year."

"I agree. Just get me your Christmas wish list and justification, and I'll submit it with the budget request."

"Justification?" Bianca smirked, then faux whined, "I want a Sun-2 workstation, and I want it NOW!"

Steve laughed, "OK, Veruca!"

"What did I miss?" I asked.

"It's from Willy Wonka & the Chocolate Factory," Bianca said. "I take it you didn't see it?"

"I know a bit about it, but didn't see it. Early 70s, right?"

"Yes."

"I basically never went to the movies growing up. I saw four in theatres — Star Wars, Star Trek: The Motion Picture, Animal House, and Superman. I tried to watch movies on TV, but I worked after school from the time I turned twelve, mowing lawns and shoveling snow, and had formal jobs once I turned fifteen."

"I'll absolutely see if we can rent it," Bianca said. "It was awesome. Anything else?"

"That's all, thanks."

"I'll get started on that sometime this afternoon," Steve said. "I don't want to stop in the middle of the program I'm writing now. That is, unless you prefer to defer to other requests."

"Given the impact, I'd like you to take care of that first. How long?"

"By the end of the week."

"Sounds good."

They left, and about a minute later, Violet contacted me by intercom.