Bradley K. Martin and his thriller Nuclear Blues. Photo: Great Leader Books

Although a burnt-out journalist has switched careers, seeing his best friend killed drives him back into the fray. Dodging attempts on his own life, the bourbon-drinking, Bible-quoting son of a white Mississippian father and Korean mother searches for answers in the heart of darkness known as North Korea. Each week, Asia Times will publish further installments from this gripping thriller, so timely it’s positively eerie. Full-length print and digital copies available. Now read Part 1 and Part 2.

Chapter 6: In Your Face

The next morning we set out for Panmunjom. I was watching and listening intently for any clues to why and how this penultimate-day phase of the tour had cost Joe his life. We drove for an hour and were pulling into a midway rest stop when Won, as if reading from a script, made a chilling announcement through his microphone: “You are not permitted to stray from the road, due to the presence nearby of military installations. If you go where you are not supposed to go, it is permitted to shoot you.”

My heart jumped up and made a lump in my throat as I thought of Joe. Shin Mi-song was sitting nearby, although not next to me, and she was looking straight into my eyes. No surprise if my self-indulgent angry outburst at the gifts museum had led her to suspect a connection between Joe and me. I’d need to watch my step.

We stopped at the North’s DMZ briefing hall. Inside, with Shin interpreting, an army captain — the same one I had seen with Joe and company in the Joint Security Area on the fateful day — filled us in on the layout and history, pointing to a tabletop scale model of the sector. His history was the officially faked-up North Korean version, in which the South had started the Korean War by attacking the North.

The captain then accompanied us on the short bus ride to the JSA. There we looked around while he fielded more questions. To avoid calling further attention to myself, I waited to see whether any of the other journalists would ask about the Joe Hammond incident. The German did, as we were standing on a balcony of the Panmungak observation building facing the conference huts.

“Two of my comrades died because of that crazy American,” the captain spat out. “I have no idea what got into him. Even in our briefing room before we came to the Joint Security Area he said crazy things. He said my account of the start of the war was false. He lied that there is proof in the Soviet archives that Kim Il-sung went to Stalin three times and finally got permission to invade the south. I suggested to him that he and I restart the war right away, just the two of us. I also warned him that I could not guarantee his safety in our country if he insisted on saying such insulting things.”

The captain’s face grew red as he recalled the moment.

“That sounds like a threat,” said the Australian journalist. “Do you think he ran across the line because you had made him afraid of staying in the North?”

“It was not a threat — just the normal reaction of any patriot who hears such slander. But who knows what he was thinking?”

“Did you have a further confrontation with him?”

“No. Although he was extremely provocative, I managed to pull myself together. In training they emphasize that we will receive the occasional difficult tourist. My way of keeping from overreacting is to do breathing exercises. I had calmed down by the time we came here to the Joint Security Area, but perhaps he had not done any deep breathing himself.”

“So what did you see here that day?”

“I only noticed that he looked very strange, even before he acted. All of a sudden he attacked two of our men and started running. Our guards, quite understandably, pursued him. Two lost their lives. They were good soldiers and I miss them. One of them, a sergeant, left a wife and two children. I can never forgive that American bastard for what he did.”

Shin Mi-song in her translation left out the word bastard. I looked over toward the spot where Joe had died, and my stomach churned. When I turned back, I saw that Shin, her face impassive as usual, was looking at me again.

* * *

En route back to Pyongyang the bus stopped in Kaesong at a traditional inn. The sprawling old single-story, tile-roofed masonry structure overlooked a canal. That stop might have been lost on me, so intently was I trying to sort through the accumulated evidence about Joe. But the aromas brought me out of my concentration, reminding me of home on nights when Mama and Halmeoni — my grandmother — cooked Korean.

Waiters ushered us into a dining room where we sat cross-legged on a heated floor that was covered with lacquered paper. The American widow, who had undergone hip replacement surgery not long before, wasn’t up to floor-sitting and left for a chair in the lobby.

The staff rewarded those of us who stayed behind, serving us spicy roasted beef, rice, soup and a huge assortment of vegetable side dishes. I have to confess that I’d almost finished stuffing myself before I remembered the undersized soldiers at the gifts museum and reflected that there were a lot of hungry people in North Korea.

It made sense that the aromas and flavors seemed so familiar. After all, Kaesong was Halmeoni’s and Mama’s hometown. The 1945 post-World War II division of the peninsula along the thirty-eighth parallel had placed the ancient former capital city in South Korea. Then in 1950, in an early Korean War battle, enemy troops had captured the city. My grandfather and uncle had disappeared while the family was trying to evacuate southward. I wished I could ask somebody the location of the family home. Knowing I couldn’t, I refocused my thoughts on the reason I had come.

The next morning we’d be flying back to China. The other journalists would file reports on what they’d learned about Joe’s contentious encounters, adding to any already published accounts by other reporters who’d been on the earlier tour with him. I was inclined to hold off, because I had nothing better than some interesting anecdotes. I felt I hadn’t drilled even close to the bottom of his story.

Had Joe died because of his proclivity for popping off with smart-ass remarks? I didn’t imagine North Korean policymakers would take the risk of killing a U.S. civilian merely on that account. Had the army captain at the DMZ frightened him into bolting? To a stranger that might seem a plausible explanation, but I’d known Joe. He would never duck a fight. If he’d felt the captain’s offer was a serious challenge he’d have been ready to go mano a mano.

* * *

Puzzled, fast running out of time, I needed to talk to somebody. As in my high school years, Robert Posey had made it clear he was available whenever such a need might come up. Hanging around the hotel lobby after supper, I saw him arrive accompanied by his board members. When I was able to break in for a moment, I asked if there was any place where he and I could talk without being overheard. He suggested a stroll among the lobby stalls, as if for shopping. We would in fact be doing just that, because he needed to buy more cigars. As we started off, I told him I’d been trying to work out what had happened to Joe.

“I figured as much, since you two were always so close. What have you found out about his stay here?”

“As always, he gave new meaning to the term, ‘In your face.’ ”

“That’s Joe, all right, literally. Remember when I sat with you and his parents at some of his wrestling matches, to offer support? Whenever he took down another wrestler he’d be poised there with his nose no more than an inch from the other guy’s. It was all he could do to restrain himself from screaming ‘Gotcha!’ and then running a victory lap around the mat.” Reverend Bob pumped his fist by way of illustration.

“Yep. Here in North Korea, he offered ‘choice comments’ at every stop. At the Z, I imagine they’d shoot him again, for emphasis and to make sure he’s dead, if they had the chance.”

“Why do you think he made a run for it?”

“I don’t know, but he looked terrified before he started running. Something had spooked him. I guess he felt he was in some sort of danger.”

“He could have felt that way without actually being in danger. I ran into him in the lobby here the night I arrived and again the next morning, just before he left for Panmunjom. Although he was glad to see me, I could tell he was agitated. This place has a way of driving visitors temporarily insane — all the unending propaganda: the Kim worship, the tall tales that are officially passed off as truth. That, plus being confined by your minders, watched and listened in on all the time — Americans aren’t used to it.”

A sheepish grin came to Reverend Bob’s face as he recalled something. “I went temporarily nuts toward the end of my first visit here. When they were driving us down to look at the DMZ, the thought entered my head of making a run across the border to the Free World. But when I got to Panmunjom and saw those mean-looking guards on both sides I came to my senses.”

The startling image made me smile, too, but I quickly turned serious. “The crazy man theory may be the one that a lot of people draw out of Joe’s behavior while he was here but it doesn’t jibe with the Joe that his wife Evelyn and I knew. Thinking of making a run is one thing. Doing it is another, as you know from your own experience. I can’t see him going through with it out of that sort of momentary craziness — especially knowing his new life insurance policy had a suicide clause.”

“Have you come up with a better explanation?”

“Joe wanted to know where the Kim wealth comes from and where they’re putting it. I was hoping I’d find some clues to what he’d dug up about that, but I’ve come up pretty much empty-handed. I can’t give up yet, because I just have this feeling the money was involved somehow in what happened to him. For Joe, whatever story he was working on was always the big thing.”

“I can see why you feel you need to go after that possibility. Tell you the truth, Heck, I don’t know a whole lot about money. Zack Nodding and others on the board handle all that sort of thing and give me a salary.”

“I understand that, Reverend Bob. It’s just good to have you as a sounding board again.”

“If you do learn something of a financial nature and you need help figuring it out, you can’t go wrong consulting Zack. He was in my church in North Carolina after I left Gulf Springs, a crackerjack Sword Driller like you and Joe. Smart as a whip. Daddy was starting up the original Posey University in Virginia and wanted a standout freshman class to inaugurate it with a bang. Zack got nearly perfect SAT scores and could’ve gone anywhere. Daddy offered him a full scholarship.”

“He took it?”

“He did, and he went on to graduate first in his class. By the way, you also met John Hyon. He ranked a close second in that same class. We’re training the best and the brightest of young Christians to become America’s leaders. We’d noticed that the Mormons had started to account for a large percentage of career U.S. diplomats. That was thanks to their custom of sending youngsters abroad as lay missionaries. A kid was thrown into interacting with the local people and had to learn the language. We started our own program like that, and Zack and John were pioneers. The two of them went to South Korea for two years, preaching on street corners, wherever anybody would listen to them. John had grown up in Korea so he didn’t have to study the language and was able to help Zack learn it. He sort of served as coordinator of our initial mission.”

“So they were preparing to be diplomats?”

“Not John. We already knew he was cut out for the ministry. In Zack’s case, we prayed over it, and the decision was that he’d go on to the Wharton School for a master’s in finance before getting a job on Wall Street. Now, nobody knows money better than he does. He went back to Hong Kong a couple days ago. Give him a shout or go see him in case you run up against something big and complicated with dollar signs all over it.”

“Thanks. Maybe I’ll do that.”

“In the meantime, I suggest you think again about the temporary insanity possibility. Some of the tour guides are ringers, sent by the police or other spy agencies including State Security — that’s the secret police outfit that corresponds to the old Soviet KGB. They watch not only the tourists but also the other tour guides. I’m not at liberty to tell you where I learned this, but I’ve been told there was somebody from one of the security agencies among Joe’s guides. Maybe the spy scared Joe, accidentally or on purpose.”

“We have the same group of guides.”

“You may want to try to scope out who that person is — not that there’s a whole lot you could do about it.” Reverend Bob’s face clouded. “Heck, it’s a great sadness to me that Joe didn’t come back to Christ before he lost his life. You remember when he wrote that letter?”

I nodded. Joe’s letter of resignation had scandalized the Calvary Church membership and the story had spread to other Southern Baptist congregations in the generally conservative town. He’d written it after taking a New Testament course his first semester in college and concluding — as he had long suspected — that the Bible was very much the work of men.

“By then, I’d been called to the church in North Carolina,” Reverend Bob said, “but Joe kept me in the loop — wrote a longer letter to me. People still sent handwritten letters then. In that personal letter, he outlined all his arguments against our beliefs.”

“He did tell me he’d written to you. I don’t recall ever hearing you’d replied. I was afraid you’d felt offended.”

Reverend Bob coughed again. “You were always the tactful one. I put that down to your upbringing as a Southerner.”

He had a point. I’d always been somewhat less inclined than Joe to rock the boat. Even though Mama wasn’t a native speaker of English, much less Mississippi English, she’d discovered a talent for picking up local dialects along with local customs. As a scholarship student at the state women’s college, she’d become known for her Southern drawl and ladylike demeanor. She preferred I call her Mama, not Eomma, except when we were talking with Halmeoni, whose English was only rudimentary. Blending in with the local culture was important to Mama. Put all that together with her love of the Golden Rule, then factor in Korea’s overlay of Confucian tradition, and you can see why she was always on Pop’s wavelength when it came to raising mannerly youngsters.

I was by no means a youngster any more but I was still so well mannered I simply listened politely as Reverend Bob returned us to yesteryear.

“As for Joe,” Reverend Bob continued, “like you, he called his elders sir and ma’am, but that’s only because he was an Air Force brat — his term — who’d been raised on bases around the world before Colonel Hammond drew Keesler as his final career posting. Brash could’ve been Joe’s middle name.”

I laughed. “Nobody ever mistook Joe for a diplomat, that’s for sure.”

“But regarding that personal letter,” Reverend Bob said, “I did start to draft a reply — never got it into shape to send to Joe before a big issue came up in my new church and distracted me. What my reply would’ve said is that I was touched that Joe had enough regard for me, as a friend and mentor, to try to save me from spending a lifetime preaching what he considered misguided doctrine. Besides, I could sympathize. I don’t think I ever told this to either of you, but when I went off to college I had my own spell of doubting. Even Johnny Posey’s son wondered if everything in the Bible was really the word of God.”

Surprised, I replied lamely. “I guess it’s what college students do.” What I was thinking, knowing Reverend Bob, was that if he’d had doubts he wouldn’t have taken them lightly. He’d always liked to do things in a big way.

“I read some things about evolution,” he elaborated. “Had to sneak the materials into my dorm at the Bible college where I was enrolled, because they didn’t approve. I started to doubt the biblical account of creation, including Adam and Eve’s original sin. If evolution was right and our first ancestors were little specks of primitive life forms, no way were they intelligent enough to understand the concept of sin.”

“Bet that upset your dad.”

“You better believe it. Some Protestant evangelicals were getting interested in demonic possession and exorcism around that time. One of ‘em was close to the college dean. The dean talked up that theory in regard to my lapse in faith. Daddy later turned sour on that sort of thing, but at that time the dean and his friend were able to persuade him to let the college tentatively schedule an exorcism for me — in case a month of prayer and intensive Bible study couldn’t drive out the demon first. Daddy rearranged his workload so he could be with me for the month.”

Reverend Bob coughed hard before continuing. “In between recitation of Bible verses I was on my knees for most of each day, my eyes closed tight in prayer — hearing stern reminders from Daddy of the fundamentals of what we believed. A week before the appointed day for my exorcism, thank the Lord, I concluded Genesis must have it right. The logic was irrefutable.”

“How did you figure that?”

“After all, everything else we Christians believe springs from the truth of man’s original sin. If that part weren’t true, none of it could be true. So the account of Adam and Eve must be true. When I yielded, the Holy Spirit entered me, granting me joy and certainty. Ever since I’ve known without a shadow of a doubt that God’s word is true.”

It hadn’t taken me long to realize that what he was saying, rather than a simple reminiscence about Joe, was a sermonette tailored as a warning to me. Subtle as he tried to be, I could understand that he felt a sense of permanent responsibility for each of the individual souls he’d registered in his ledger, even though there must be many thousands of us by now. In our two meetings since we’d run into each other, there’d been enough eloquent silences for him to suspect — if he didn’t already know — that I, like Joe, was a backslider.

“I knew you weren’t a Darwinist,” I said.

“All that stuff about evolution, embryology, Big Bang theory is nothing but lies, straight from the pit of hell — lies to try to keep all the folks who are taught to believe such things from understanding that they need a savior. There’s a lot of scientific data showing that this is really a young Earth, between six thousand and thirteen thousand years old.  I believe it was created in six days. That’s what the Bible says.  And what I eventually learned is that the Bible is the manufacturer’s handbook, that’s what I call it.  It teaches us how to run our lives individually, how to run our families, how to run our churches, how to run our country.”

He paused to cough again. “That’s a long way of saying that, having struggled with my own doubts, I certainly understood what Joe was going through.”

“So you didn’t take offense that time at the lake retreat, the summer after our high school graduation when we swam to the raft and Joe hollered at you to walk out and join us?”

He laughed. “That’s just the way Joe was — like you said, in your face. I had him figured out long before that and never took his comments personally. Even when he sent those letters to the church and me, I prayed he would see the light as I had done, rediscover God’s purpose and be reborn in Jesus.” Reverend Bob had lost his smile. “I’m afraid he never did, and now it’s too late.”

* * *

Leaving Reverend Bob in the lobby, I thought over what he’d said about the tour guides. If there was one spook among them, my vote went to Shin Mi-song. Glancing over at the lobby beer hall I saw several of my tour mates and two of the male guides quaffing the local microbrew. I joined them for a farewell mug, hoping Shin would show up and join us. She didn’t, so I went upstairs.

My room was at the end of a dogleg hallway. Approaching, I heard a door closing. As I rounded the hall corner, the North Korean man I’d seen lurking near Reverend Bob’s room the first night walked by in the opposite direction. I unlocked my door and went in. On the bedside table was a Beijing Airport duty-free bag. Inside the bag were three pocket-sized spiral notebooks, the reporter’s kind that flip open vertically. Opening one, I saw that it was filled with Joe’s handwriting. I wanted to let out a happy whoop.

As I examined each of the notebooks, I sniffed to see if it gave off the telltale cigar odor. None of them did, but I figured nevertheless that my Santa must be a certain cleric, his heart as big as his frame. Joe — maybe nervous about something he’d jotted down, retaining his own fond recollections of Reverend Bob — must have handed the notes over for safekeeping that last morning when they’d met for the second time in the lobby.

Being a journalist, of course, I had to ask myself why Reverend Bob hadn’t mentioned the notebooks or passed them to me directly. Maybe for the sake of protecting his own enterprise he needed to keep as much distance as possible from Joe’s case.

I faced an early wake up the next morning so I left it at that, stuffing the notebooks into my bag and going to bed thinking grateful thoughts.

* * *

On the bus to the airport, as Barbara Lee had instructed us was the custom, some of us presented our guides and driver duty-free loot we’d brought along, as farewell gifts. To the men went cigarettes — Mevius, as Japan Tobacco had incomprehensibly renamed its Mild Seven brand, or Marlboro — along with any booze remaining in our bottles. To Shin Mi-song went chocolate in various forms.

As we said our farewells, it occurred to me to worry that an exit search would turn up the notebooks. Although I could make a strong guess, I couldn’t be completely sure who’d given them to me and why. Just conceivably it was a setup. Langan Meyer had sent me to do a job, though. Other than those notebooks, there was nothing to show for my efforts. I had no choice but to tough it out.

In the end, no one opened my bag. Still, I didn’t dare pull out the notebooks and look at them until after we’d alighted from the plane at Beijing and completed our final meeting with Barbara Lee — who cocked her head flirtatiously and told me, “I hear you behaved yourself, mostly.” Her erratic behavior annoyed and mystified me. Only with an effort could I hold my tongue.

Finally, I boarded my flight to Incheon, where I would pick up my stored equipment and connect to a Tokyo flight. I had a window seat, next to a snoring man who’d covered his head with a Chinese newspaper to block the light. I opened my bag and got to work reading the notebooks. The first two proved disappointing, merely confirming what I’d heard about Joe’s encounters in Pyongyang. Ditto for the third — until I reached the last entry: “N: NEVER HAPPEN. IRS, SEC, WRLD FIN SYST DWN TON/BRICKS. REP RISK 2HUGE!!!!”

Joe had scrawled those final notes in larger letters than he’d used earlier. That suggested that decoding the passage would be a good use of my time. I mouthed the word “Yes!”

For context, I returned to the entry just before that one, “REVB FOUNDED COLLEGE!!??” Filling in the blanks I guessed that, having seen Reverend Bob in the lobby, he’d also met and put a question to financial specialist “N,” the very same specialist Reverend Bob more recently had urged me to consult.

It was a clue. Still, knowing I was about to see Evelyn, I sorely wished I’d managed to come up with more.

* * *

Joe’s parents had arrived in Tokyo and were staying with Evelyn, awaiting the Foreign Correspondents’ Club memorial gathering. There was only a day to go before the big evening but everything was under control.

Evelyn had contacted my agent and made sure I was free to play at the memorial. My only commercial gig for the week was scheduled for the night of my return. For that I didn’t need to perform until nine, so there was time for an early supper with the family plus Lang Meyer. The next day the editor would interview candidates to fill the bureau’s sudden opening. Then, in the evening, he’d show the AsiaIntel flag at the memorial.

They filled me in. The uncharacteristically helpful North Koreans, across a table at Panmunjom, had handed over to an American official Joe’s luggage along with his phone, his laptop and his nonprofessional camera. As in the case of my tour group, the authorities had confiscated all phones and GPS-equipped laptops that members of Joe’s group carried and kept them for the rest of the visit. Joe had left his camera on the bus while visiting the Panmunjom Joint Security Area.

“Maybe he figured he wouldn’t need his own since you’d be there shooting with yours,” Colonel Hammond said.

My hunch was different. “He could’ve decided already to make the run, and felt a need to travel light.”

The consulate in Seoul had released Joe’s gear to Evelyn, along with the notebook found in his pocket. “I’ve gone through the camera card and the notebook,” Lang said, “but found no clues other than some notes on his argument with the army captain. Joe’s account of that was pretty much the same as the one some reporters on your tour reported today based on the captain’s version. Do you suppose that was what made him run?”

“It wouldn’t have been like him to get scared off that easily.”

Colonel Hammond agreed. “Joe could take care of himself in a fight.”

Joe’s parents had scheduled a funeral at Calvary Church to follow their return from Tokyo, with burial in a local family plot they’d bought. I could sense that Evelyn was OK with that, although she didn’t say so. Joe had told the two of us one evening that he wanted to be cremated, with “no preacher permitted within a mile of the oven.” But she didn’t have to spell it out for me that she’d figured there could be no harm in letting the Hammonds do it their way. After all, Joe hadn’t expected to be sentient as they disposed of his mortal remains. The family’s arrangements, on top of what we were planning at the club, would make them feel better.

The Hammonds badly needed some sort of morale booster. News dispatches that day had reported details of Joe’s reign of verbal terror in North Korea, adding fuel to the earlier speculation that he’d had a breakdown. Meanwhile I was there to tell the family I didn’t buy that — but I’d failed to bring back the grail of contrary facts that they all wanted so badly.

I described my fortuitous receipt of Joe’s first three notebooks. But as I told them, “The only clues to the meaning of the ‘CDs’ notation on his palm seem to be the last two entries.” I read those to them.

“Who’s N?” Colonel Hammond asked.

“My vote goes to Zack Nodding, the Goldberg Stanton Asia boss. He was in Pyongyang because he’s also the financial honcho of the Poseys’ mission board. We know from Joe’s notes and from Reverend Bob himself that Joe had just spoken to the reverend in the hotel lobby. Joe then probably turned to Nodding to ask about a hypothetical financial scenario. The answer Joe got was that whatever scheme he imagined would be impossible. Government regulators would never allow it, and ‘rep risk’ — I don’t know what sort of risk that is — was too great.”

Whenever something pleased Lang, his ears shot up toward his buzz-cut hair and his green eyes twinkled. He raised his glass in a salute. “You’re getting somewhere, Heck. Stay on it, first by flying down to Hong Kong to talk to Nodding.”

* * *

We sent Joe out in style at the Correspondents’ Club the next night. The club president got much of the serious part out of the way, talking about what a fine journalist Joe had been and how the Board of Directors and the Freedom of the Press Committee wanted answers about the mystery of his death.

A traditional club memorial was more roast than funeral — something on the order of an Irish wake, with the booze but without the body. Joe’s friends knew that he, of all people, would have wanted things that way. In fact, he had written it into his will, which he’d composed a year or two earlier while sitting in the club bar, making sure to finish before his second martini so the witnesses could certify he was of sound mind. He’d requested “a foot-tapping, dirty-dancing, good-humored, irreverent hoe-down in the club, with eats and drinks on the house all around, to be charged to my estate in case the board is too cheap to spring for them.”

Mourners including me found it hard, at first, to put aside the still raw horror attending his death in order to move into the fun of celebrating his life. But after the first couple of speakers got things rolling, one after another of Joe’s old friends and colleagues went to the microphone to tell tales about the Joe we were remembering. Most of those tales were funny, and each contained at least a little truth.

The Hammonds managed some smiles and even laughed several times. So did Evelyn. By the time she bravely if tearfully delivered an oral tribute to Joe, a couple of the guys from my band had joined me, gratis. We soon had the crowd whooping and hollering.

Our set featured Woody Guthrie’s “Hard Travelin’,” one of Joe’s favorites. I couldn’t help reflecting on all the hard traveling of the previous week, wondering if it was going to get harder.

Chapter 7: Hong Kong

Flying to Hong Kong the next morning, I took along the newspapers that had piled up in my absence. The technologies of tablet devices and e-readers were impressive, but I still liked reading printed newspapers and magazines. A lot had happened around the world.

Jerusalem — Senior rabbis today presided at a groundbreaking ceremony for the replacement of Judaism’s main temple, on land that archeologists earlier had demonstrated was the site of the first two ancient Jewish temples.

The archeologists had determined that the temple — last destroyed in 70 AD — was never on the Dome of the Rock as previously has been supposed. The evidence they had unearthed showed that the temple actually stood a short distance south of the Dome.

The Dome of the Rock since 691 AD has been the site of Islam’s third holiest shrine. Because there is no competing Islamic structure standing on the recently identified piece of land, rebuilding the temple is set to proceed with far less controversy than would be the case if it were attempted at the Dome.

The announcement by the archeologists and the ensuing preparations for rebuilding the temple have electrified evangelical Christian Zionists in the United States, who believe the temple must be rebuilt and its animal sacrifices resumed to fulfill Bible prophecies and pave the way for Jesus to return to earth.

Reverend Bob must feel vindicated, I thought, he and his red heifers.

There was news from Korea, too. A few days before, North Korean and South Korean officials had met to at least talk about coordinating plans in case of a widely predicted eruption of Mount Paektu on the China-North Korean border. The South’s interest arose from its proximity to the volcano and fears that a major eruption could damage the Southern economy.

At more than 8,000 feet the highest mountain on the Korean peninsula, Paektu is sacred in national mythology. In North Korean propaganda, founding ruler Kim Il-sung is mythologized as having fought to victory over the Japanese on the slopes of the mountain.

The Northern regime claimed falsely, as part of its efforts to build a cult of personality, that the late second-generation leader Kim Jong-il had been born in a secret guerrilla camp on the mountain. Current ruler Kim Jong-un is officially described as the legitimate successor because he represents “the Paektu Line.”

A serving cart bumped my left leg, which I had deployed into the plane’s aisle to keep it from going numb while squeezed into the allotted economy-class legroom.

“Would you care for a beverage, sir?”

“Tomato juice, please.”

The volcano’s historic eruptions have kept to a cycle of roughly one per century, the last occurring in 1903. Earthquakes in the area have become more frequent and serious, and the mountain is growing measurably higher as its magma pool expands.

North Korea set off demolition explosions at its old testing site in May of 2018, announcing that it would cease testing. After the peace and denuclearization process failed, however, it resumed testing using secretly prepared facilities.

After each of the last several nuclear tests, a Russian satellite detected higher than normal temperatures atop Mount Paektu. Some scientists worry that the tests trigger changes in the volcano’s core.

The North-South volcano coordination meeting had ended in an eruption of acrimony, the newspaper story said. The North side’s delegates had walked out when a Southern delegate dared to bring up the possible connection to nuclear testing.

One of Reverend Bob’s board members was mentioned in a short article about a “study session” in which activists from the American religious right discussed the Korean peninsula.  Most speakers focused on the human rights situation in the North and favored harsher sanctions. Preacher and lobbyist John Jae-ho Hyon offered a contrarian view: “Negotiating a peace treaty with the DPRK is in the best interests of the United States — and as a welcome bonus it will help open the North to the word of Jesus.” The accompanying photo captured Hyon’s gentle visage.

That brought me to the end of my stash of print news. I checked the breaking news on my laptop screen and found that the top story was a doozey. A North Korean mouthpiece website, based in China, had threatened to attack the United States by using a nuclear explosion to trigger an electromagnetic pulse that would emit gamma rays to fry the imperialists’ electric power grid from sea to shining sea.

Backing up that threat, foreign monitors had detected a brand new, unannounced North Korean nuclear test, carried out underground that very morning. Prior to launching its peace offensive the regime had announced creation of a hydrogen — thermonuclear — bomb, compact enough to use as the warhead of a missile. Some skeptics had questioned that claim, but foreign analysts unanimously judged that this new one was unquestionably a hydrogen bomb whose total energy released was vastly greater than the yield of bombs the North Koreans had tested before.

The regime said additional testing had been needed because of plots to invade North Korea from U.S. bases on the soil of neighboring countries. Its statement  singled out Japan.

“If the Japanese think Hiroshima, Nagasaki and the 2011 earthquake, tsunami and nuclear meltdown were devastating, they have not seen anything yet,” said North Korea’s official Korean Central News Agency. “We warned earlier that we would sink all the islands of Japan. This is the weapon we will use to turn the  entire archipelago from Hokkaido to Okinawa into a sea of fire.”

U.S. financial markets had closed for the day, but Japanese markets were taking a major hit. I read enough to understand that the test and North Korea’s commentary on it had united friend and foe alike in renewed outrage. As usual, it seemed no one could come up with an effective response that wouldn’t risk a hugely destructive war — but that was not stopping the American president from using his Twitter account to warn that a preventive attack on North Korea was “on the table.”

I still had time before our landing to do an Internet search on the man I was about to interview, Zack Nodding. He had enjoyed a whirlwind career with Goldberg Stanton in New York, Europe and Asia and was tipped to advance in due course from Asia CEO to the bank’s top global job. Meanwhile, he served not only as vice chairman of the Posey organization but also as a member or officer of several Korea-interest groups in the United States. He’d been president, for example, of the Committee for Engagement with North Korea, and remained on its board. One article included a photo of Zack at a formal dinner hosted in New York by CENK, as the group called itself for short. He was presiding at the head table, seated between John Hyon and the ambassador who headed North Korea’s United Nations mission.

* * *

My appointment with Nodding was for eleven thirty and I got to the Goldberg Stanton offices in a waterfront skyscraper by eleven ten. His secretary ushered me into the vast and opulently appointed room where we were to talk. She left me with nothing to do but gaze out the window at the drop-dead harbor view and roam around appraising the museum-quality Chinese antiques.

Eleven thirty came and went but Nodding didn’t show up. Around 11:50 I finally started to suspect that intimidation was his game. I was used to it. He was by no means the first suit who’d played with me that way. At least Nodding, unlike a certain world-renowned Japanese management consultant I’d been sent to photograph, hadn’t made me wait in front of a wall of books he’d authored so that I could look them over for forty minutes in stunned appreciation of his brilliance. Still, I was irritated. Normally I’d have let it go, simply filing a mental note to myself about this character, but maybe I was starting to channel Joe’s in-your-face ways.

Nodding deigned to enter the room at three minutes past noon, offering no excuse for his tardiness as he gave me that bone-crunching handshake of his.

“Nice room, Zack,” I said. “With the water view and the antiques and all, it reminds me of my getaway in Japan.”

His face reddened. I’d ruined his power-strutting moment. I could almost hear the synapses popping in his brain.

“What brings you here?” he asked, jaw clenched.

“I’ve been retracing Joe Hammond’s steps to find out what got him killed. In one of his notebooks, he indicated you two spoke in the Koryo Hotel lobby — he tried out his hypothesis about the source of the Kims’ money. He quoted you as pouring cold water on the theory, in view of regulatory problems and other risks. I was hoping you could reconstruct that conversation and tell me more about why you were skeptical.”

“How detailed were his notes?” With his high-pitched voice, he brayed like a jackass.

“Not very — just a few key words. That’s why I hope you can remember what you two said.”

He looked at me intently. Finally, he said, “I had never met Joe Hammond before that trip. I didn’t get a good impression of him. He seemed to be reaching for a big story that was nothing more than a figment of his imagination. I wondered if, instead of a story, he was looking for a get-rich scheme to use for his own benefit.” Zack stopped talking.

I kept looking at him. Joe had told me about that trick of the interviewer’s trade. Silence makes interviewees uncomfortable, and eventually they speak.

Nodding finally did. “We only talked for a moment. I had to rush off. I don’t remember much about his theory.”

“Did he talk to you about certificates of deposit?”

Nodding raised his eyebrows. Again he took his time organizing his thoughts before replying, “I don’t recall, but the news media keep reporting that the Kims have set up hidden accounts here and there at dodgy banks around the world. Those might be invested partly in CDs, but what would that tell us?” This guy was not being overly generous in dispensing information.

“So when he quoted you as saying the scheme he was thinking of was impossible because of regulatory reasons and risk, what did you mean?”

Nodding appeared deep in thought. “I’m having trouble dredging up anything specific, but I think his overall premise was that foreign financial institutions must be helping the North Koreans make money despite the international sanctions. I told him he was asking the wrong person.” Zack stopped talking again and looked at his watch.

I didn’t take the hint but stood there until he picked up the thread again.

“My bank has a huge compliance department that works all day making sure we don’t run afoul of regulators, especially U.S. regulators. That’s true of all the other major banks, American or otherwise. I told that Hammond fellow as much. But my impression was that my answers didn’t point to anything big enough for him — no Pulitzer Prize or instant riches, whatever it was he was looking for.”

That irritated me. “Joe Hammond wouldn’t have been after a Pulitzer. For one thing, AsiaIntel isn’t an American organization and therefore isn’t eligible. Anyway, he wasn’t a prize-hound. Knowing he’d done his job well was the main reward he looked for. Certainly, I never knew him to spend much thought on how he could make piles of money.”

A phone beside Nodding’s chair rang. He picked it up, listened a moment and hung up. “That was my secretary reminding me I have another appointment. I’m sorry I can’t be of more help.”

“If you think of something else, please let me know.”

As I waited for an elevator, I realized that beyond confirming that Nodding was the person who’d spoken to Joe, I’d learned only one thing — but it could be important. Joe’s premise, as Nodding characterized it, had been that “foreign financial institutions must be helping the North Koreans make money despite the international sanctions.” But how would that relate to Nodding’s suspicion that Joe had been looking for a get-rich scheme for his own benefit? I wished he’d given me more time for follow-up questions – figured maybe he would have, if I hadn’t started off with that smart-ass comment about his reception room.

* * *

An elevator door slid open and I got on. A TV monitor showed a financial network anchor interviewing someone. Glancing at the interviewee I recognized the tinted aviator glasses and thin-lipped smile of Helmut Fassler, the German head of the Hong Kong office of a London-based financial research company that prided itself on being independent, not part of any bank or brokerage company. I normally wouldn’t pay much attention to the financial news, but Helmut was somebody I knew. He had been Joe’s friend and regular news source. I had lifted a glass with the two of them in the club in Tokyo on more than one occasion.

Before the elevator door opened onto the lobby, I caught a snippet of what Helmut said: “In response to the accounting scandal, all the major red chip oil companies’ CDS spreads have widened this morning.”

Within an hour I was sitting in Helmut’s Victoria Peak apartment. “I watched you on TV at the DMZ when Joe died,” he said. “I’d been hoping to talk to you about that, but detected on the phone that whatever brought you here is more urgent. I have a lunch appointment, but I’ve postponed it.”

“Much appreciated, Helmut. I’m trying to figure out why Joe imagined foreign investors would be interested in North Korea. How could anybody make money out of a country that sees farmers’ markets as the sinister leading edge of capitalism?”

“You have a point. North Korea has no stock exchange, no bond market. Did Joe leave any clues to what he might have been after?”

“Not many. He did write on his hand, in ink, the letters C, D and S. I got all excited imagining that somebody had flogged thousands of my band’s compact discs to the wholesalers who supply North Korean street markets.”

“Yeah, yeah.” Helmut gave me his tolerant grin. “Would you like a cup of tea?”

“No thanks. Financial illiterate that I am, I did know about certificates of deposit. I worked on that angle and didn’t get anywhere. Then when I was coming out of the Goldberg Stanton office I saw you for just a second or two on TV talking about something called CDS, all the letters pronounced separately. That could have been what Joe wrote on his palm. The S was smaller than the D, but the D was also smaller than the C, so it could have been sort of a wedge-shaped scrawl of an all-capital-letters term.”

I wrote it on a page of my notebook and showed him. “Problem is, I have no idea what it might refer to. That’s why I’m here.”

Helmut flashed me one of those kindly, pitying smiles that he reserved for people who weren’t as smart as he was, meaning just about everybody in the world. “I don’t suppose you know the term credit default swap.”


“Not many do. These things weren’t invented until 1994, didn’t catch on until around 2003 and are still the province of financial specialists.”

His phone rang. He glanced at it and shut off the ring. “My lunch date grows impatient, as beautiful women are inclined to do. Let me give you a simple explanation. Let’s say you own Ford Motor bonds — you’re lending Ford money in exchange for its documented promise to pay back the principal on a given date, along with interest at the stated percentage.”


“You’ve been hearing bad things about Ford and worry that Ford will default on those bonds. You consider selling, but others have the same concern, so the bond’s price has dropped.”


“But on the other hand, the value of your bonds could soar. Rumor has it that Ford is close to a breakthrough on the alternative fuel front and the company might prosper.

Helmut’s household servant, a middle-aged Chinese man, entered the spacious room, whose panoramic wraparound vista looked as expensive as the view from Goldberg Stanton’s office. “Your lunch appointment has been trying to reach you. She says meet her at Ritz-Carlton Lounge & Bar instead of Amber in Mandarin Oriental. She likes Ritz-Carlton pinky drinks better.”

Helmut nodded agreement and turned back to me. “Because Ford might pull through, you’re inclined to hang onto your bonds and buy more at bargain basement prices. But in case Ford fails, you buy a credit default swap to protect the bonds. The issuer promises that if Ford defaults within five years you can surrender the bonds and be paid their face value.”

“So a CDS is a way to hedge my bet, an insurance policy with a fancy name?”

“Something like that.”

“And the cost?”

“You pay an initial price for the CDS and an annual fee based on a percentage of the bond’s current market value.”

“To a high roller, wouldn’t insurance seem like a dowdy, middle-aged, conservative, not-likely-to-make-him-a-billionaire-in-a-hurry kind of thing?”

“No. There are important differences between a CDS and an insurance policy. For one thing, the CDS issuer usually isn’t an insurance company; most are banks.”


“And the bigger difference is that you can buy a CDS on something you don’t own. A CDS on a particular bond can be bought and sold over and over with none of the buyers and sellers ever owning the bond itself. The swaps outstanding may total many times more than would be necessary to insure bondholders against loss.”

“I don’t see how that make sense.”

“It makes infinite sense in the world of high finance. Let’s change the scenario. You don’t own any Ford bonds. The market consensus is that the future of Ford looks rosy because everyone knows Ford is on the verge of a breakthrough on the alternative fuel front. But you hear a rumor that the company is in such deep financial trouble no new car model will overcome its problems and Ford will likely default on its bonds. For a certain price, you buy a ‘naked’ CDS. The negative rumor gets around, and the CDS price goes up. You sell yours for a profit.”

“Where I come from they’d call that flat-out speculation.”

“They would be correct. Naked swaps leave more room for speculation than stocks, bonds or currencies. And speculation is mostly what it’s all about. The CDS, like the futures contract, is a type of derivative. CDS traders can be compared to the guys who have never seen a live pig but specialize in sitting in front of computer terminals, buying and selling contracts for future delivery of pork bellies.”

“Was it Warren Buffett who said derivatives are ‘financial weapons of mass destruction’?”

“In 2003.” Helmut sipped at his tea. “He also called them ‘time bombs.’ By 2008 the financial crisis had quite a few others agreeing with him.”

“Oh, yeah. I saw The Big Short. Great movie. There were a lot of losers.”

“Some big winners, too, like John Paulson, who foresaw that sub-prime mortgages would turn out to be toxic.”

“It shouldn’t take a psychic to predict selling a house to someone who can’t afford it isn’t going to work out.”

“True enough, but Paulson also had the vision to persuade Wall Street to package those mortgages and sell the mortgage-backed securities to others. That way, the banks could write credit default swaps insuring against default. Then Paulson went on a CDS buying spree, betting that the people buying the mortgage debt were suckers.”

“The bastard must’ve hit the jackpot when the crash came.”

“He made billions.”

“And others are still cashing in big time?”

“Credit default swaps have been going out of fashion, but the market is still enormous. The total amount of credit protection at risk in case of default is counted in fourteen figures. The amount invested in the swaps themselves ― the ‘premiums’ ― is smaller but still in the trillions of dollars.”

I stopped myself from remarking that Leadbelly’s Twenty-Five Cent Dude would be way above his pay grade messing with that stuff.

Helmut glanced at his watch. “It’s time for me to leave. Why don’t you come along and have lunch with us?”

“All right, thanks.”

As we were standing, Helmut’s house man returned. “Your lunch engagement has cancelled. She became tired of waiting.”

“Sorry, Helmut.”

“Don’t worry about it. There’s an amusing spot we can go to, just us guys.”

* * *

We exited the taxi in Wanchai’s red light district and headed down a stairway, which discreet lettering on an arched overhead sign identified as Soi Awol. At the basement level, a small sign on a metal door told us we had arrived at Boon Doc’s 2050 Club. After Helmut held his microchip membership card up to the peephole for inspection, a hostess in a skin-tight dress showing deep cleavage unlocked the door and exulted, “Oh, Dr. Fassler, we so happy you come back.” Wiggling her tits and ass, to the point she seemed about to spill out of her dress, she ushered us to a table, cooing, “You handsome man, me so horny.”

Sober as I was, I recognized right away that she was a manufactured creation. But the quality was impressive enough that I figured if I’d been guzzling booze for a while I might not have caught on so quickly.

Once she’d seated us in a vinyl booth, with a ceiling fan sending a breeze our way and additional babes headed toward us, Helmut gave me a fill on the setup. “No humans work here. The Japanese were desperate to keep their lead in both robotics and love dolls. A joint venture brought the leading massage-chair designers in, as well, and they all worked long and hard developing secret proprietary techniques for mounting a love-doll body on a robot chassis. I bought a substantial share holding last month, as soon as I learned about the breakthrough, and I’m recommending that relatively adventurous types among my clients do the same.”

“These look Thai, not Japanese.”

“Special order. The proprietor of this place is a fan of the Canadian novelist Collin Piprell, who features a generated-reality Bangkok girlie bar called Boon Doc’s in his futuristic masterpiece MOM. The future is now and I think Piprell is getting a licensing fee.”

Wall decorations included a neon Singha beer sign. Helmut ordered a Singha for each of us, and a few lunch items starting with fried grasshoppers.

Brushing away the gorgeous but programmed ladies, who kept calling us “butterfly” and promising to “love you long time,” I urged Helmut to return to our earlier topic: “You said there’s no North Korean bond market.”

“No. There are no true North Korean bonds. There are a few billion dollars in outstanding debt and accumulated unpaid interest left over from Western bank loans to North Korea in the 1970s. The Norks quickly defaulted and no one has been willing to lend to them since.”

“So I’m wondering if maybe they’ve skipped ahead and there’s now a North Korean CDS market that’s attracting speculators.”

The creature snuggling against my right side chose that moment to grab my crotch and chirp, “You, me, short-time, go upstairs.”

I looked up and saw that a staircase from beside the bar led to a second-story balcony with doors and windows, which presumably led to rooms. Back-lit window shades were showing shadow plays consisting of sexual gymnastics. “No detail too small,” I remarked to Helmut, bowing my head briefly in tribute to his genius in choosing this venue.

He nodded acknowledgment. “There aren’t any North Korean credit default swaps. No one would issue such a thing, because the North Koreans have already defaulted.”

“Pardon me if I’m not getting it, but why would Joe have thought about the CDS market in connection with North Korea?”

From a curtained door behind the bar, four more bar girls headed for our booth, each of them exquisitely beautiful. At that awkward time of day between normal people’s lunchtime and the cocktail hour, we were the only customers. All the attention was coming to us automatically, along with the food and drink. I might’ve gone for a human version of one luscious member of the entering quartet — a ringer for my Pyongyang tour guide Shin Mi-song except that this one had a darker complexion, wore oversized round eyeglasses and carried a book. But I’d had my fill of the place.

So had Helmut. “I’ll show you when we get to my office.”

As we exited to find a taxi, I wondered briefly what the mentors of my youth would have said about Boon Doc’s women. Reverend Bob, I imagined, would have cautioned against the sin of casting one’s seed into a machine — although I’d never heard him sing the Monty Python song, “Every Sperm is Sacred.” As for Fatback, I could practically hear him opining that, “in a pinch, poontang’s poontang.”

Helmut’s office was packed with technological miracles somewhat longer in the tooth than the ones we’d experienced in Boon Doc’s. He wheeled his chair around to face the keyboard and four monitors of his Bloomberg data terminal, which took up the top of his rear desk. “Although no North Korean CDS market exists, Joe was likely working under the assumption that what happens in North Korea affects financial markets in other countries.”

“Can you get down to cases?”

“North Korea did a nuclear test early today and threatened Japan with nuclear destruction. Let’s look at the effect on Japan Airlines bonds.”

In the upper left corner of one of the middle monitors, he typed WCDS, the letters glowing orange. Seconds later a new screen came up. He tapped away some more. Finally, happy with the page that appeared, he turned and beckoned me to lean forward.

“OK, I called up the world CDS market by country, narrowed it down to Japan and then to this graph, which shows the price fluctuation of credit default swaps on JAL bonds.”

He pointed to a spike at the right end of the graph. “Here’s the result, which I talked about this morning at the beginning of my TV interview. I guess you tuned in too late to catch that. But look. The reported trading price of the CDS on JAL debt went up by almost fifty bips.”

“What’s a bip?”

“A basis point: one hundredth of one percentage point. Fifty basis points is one half of one percent — of the price of the bond, not the price of the CDS. That translates into a huge percentage increase in the price of the CDS.”

“So let me see if I analyze this right. The market thought the risk of a nuclear war against Japan increased. Therefore the risk that the flagship airline would default on its bonds increased. And so the CDS price went up?”

“You get the picture. And if we switched from JAL to some other Japanese corporate bonds you’d see movements in the graphs similar to what we saw here. There were large movements for South Korea, as well, although not as large as those for Japan.”

“So could somebody have made a pile?”

“Yep, if he guessed ahead of time that the test — and the threat — would happen right around now, so he could buy enough swaps to make a killing. If he guessed — or if he . . . ” Helmut gave me his cynical, conspiratorial grin.

“You mean if he was in receipt of the inside skinny, from the guy who pushes the button, that the test was coming soon and that North Korea would issue those explicit threats — and if, knowing what that would do to the CDS markets, he went out and bought himself a trainload of swaps?”

“Exactly. The ultimate insider trading.”

“Maybe Joe was really on to something and getting so close somebody was after him, so he had to make a run for it. That would be good news for Evelyn — speaking of insurance. But I wonder how I’m going to prove that much.”

“We can talk about that, but right now I need to get back to work. Can we continue the conversation over drinks tonight?”

* * *

I went to the AsiaIntel office and briefed Langan Meyer. Lang agreed that this could be the angle Joe had gone after. He wanted to hear an expert think aloud about how we could nail down the story. When the cocktail hour approached, we went together to meet Helmut.

Holding forth in his favorite bar in Kowloon, Helmut began by reminiscing about Joe. Lang brought up Sword Drill and Helmut was curious; somehow he’d missed being treated to a demonstration. I briefed him on how the competition worked, explaining that the name came from Ephesians 6:17: “And take the helmet of salvation, and the sword of the Spirit, which is the word of God.” Some commentators interpreted that to mean that the Bible is the Christian’s sword.

“The way we did it to begin with, you’d stand at attention holding a stiff-backed King James Bible in one hand down at your side.” I stood to demonstrate with my notebook. “On the command ‘Draw swords,’ you’d bring the Bible up to your waistline, one hand on the front cover and one on the back.”

“Which hand where?” asked Helmut, a southpaw.

“Either hand could be the top one, but you couldn’t extend your thumbs over the edge of the cover to the pages. The leader would call out the address of the verse — for the young kids it was likely to be a well-known verse that they wanted you to learn by heart, like John 3:16. Then came the command, ‘Charge!’ You’d find it as quickly as you could” — I leafed frantically through my notebook — “and then hold the Bible up in the air with a finger on the verse to signal you’d found it. The one who found it first got to read it aloud.”

“So it helps to pretty much memorize the Bible, I guess,” Helmut said.

“Right. Joe and I kicked butt in Sword Drill from the start because we learned songs that listed the books of the Bible, in order, so we didn’t have to waste time trying to figure out whether Obadiah was closer to Exodus or Corinthians. The church youth minister, Robert Posey, coached us: ‘Remember that Psalms is halfway through the Bible; Matthew, three quarters.’ Knowing all that kept us from wasting time flipping through the pages.”

The Robert Posey?” Helmut asked.

“Yeah. Our church was an early stop in his career. We called him Reverend Bob. I ran into him in Pyongyang, of all places. He’s the one who sent me to Zack Nodding, who’s vice-chairman of the Posey organization.”

Lang smiled as he remembered something. “Joe said you and he had been the top Sword Drillers in coastal Mississippi — then you beat him out for the district title and went on to win the state championship.”

“At that stage, we were on our way to knowing the Bible well, so we competed according to more complicated rules that applied to older kids who stuck with the program — the unfinished quotation drill, for example. Or the doctrinal drill. ‘Find a verse proving all have sinned.’ The winner who came up with an appropriate verse first would call out the scripture reference before and after he read it.”

Helmut, who’d begun his working career as a German naval cadet, was fascinated. “So you and Joe were like theological cadets. Looks like journalism’s gain was the evangelicals’ loss of a pair of major league Bible thumpers.”

“Reverend Bob did see us as leader types and strong prospects for the ministry. He usually let people come to their own decisions, but he worked on the two of us, together and separately. He sat us down during a youth retreat our junior year in high school and told us we should become missionaries. Otherwise, think of all the souls who wouldn’t hear the word that they needed to accept Jesus as their savior so as to avoid eternal damnation.”

“I visualize the two of you preaching in Timbuktu.” Lang smiled.

“Being missionaries hadn’t figured in our career planning. But Joe and I agreed that Reverend Bob’s logic was absolutely correct — assuming it was really God who’d laid down those rules. That was when we started taking a more questioning attitude toward the scriptures and church doctrine.”

* * *

A blond Russian hooker who was passing by the table spoke to Helmut. He stood and accompanied her to a corner to chat privately. After she walked on and he sat down I remarked, “You’re obviously well known in this establishment.”

“She’s a regular here who bugs me for investment advice whenever she sees me. She follows up with her broker. She’s been on a roll. That emerald ankle bracelet is new.”

“Speaking of advice, can we resume the finance lesson?”

“Where were we?”

“You follow the CDS market, I gather,” Lang said.

“I keep an eye on it, mainly for macro research purposes. Most of the swaps trades are still OTC ― over-the-counter — bilateral transactions. For my clients, who are conservative institutional investors, I stick to recommending less exotic — and more closely regulated — stuff.”

He turned to me. “We were talking earlier about how the insurance analogy is appealing but limited. There’s no one saying how much of a reserve you have to hold against the CDS contracts you’ve written. In insurance, you very much have to do that.”

There was something I wanted him to expand on: “Earlier today you seemed to be telling me it’s easier to screw around with the CDS market than with other markets.”

“It’s far more conducive to insider trading than stocks, bonds or currencies. For one thing, it would be much harder to get caught — especially if you had enough lead time to put together your CDS positions carefully, over a period of days or weeks or even months, giving you more reason to hope no one would catch on to what was happening.”

Helmut told us that a sophisticated scammer would be placing trades on swaps keyed to as wide a variety of bond-issuing entities as could be usefully fit into the overall scam. The scammer would not do the trading only in one place but would spread it out in London, New York, Singapore and Hong Kong. Given the fragmented nature of the CDS market, it would be very difficult to find a paper trail across multiple cities and counter parties.

“As if anyone were watching,” Lang said, looking disgusted.

“You have a point,” Helmut said to him. He turned back to me. “The markets in stocks, bonds and currencies are more or less tightly regulated in developed countries around the world. The prime regulatory agency, I’m sure you know, has been the U.S. Securities and Exchange Commission, which does statistical analysis to look for clues that somebody’s cheating. There hasn’t been that sort of serious regulation of the CDS market.”

“So much for Buffett’s warnings,” I said.

“There was talk of banning naked swaps after the sub-prime mortgage crisis started in 2007, but Wall Street blocked that. The pro-banks juggernaut in Congress pushed the street’s argument that the CDS market is an efficient way to get early warning of a crisis that’s developing. For example, they pointed out that bond rating agencies including Moody’s and Standard & Poor’s had lagged far behind the CDS market in detecting that Greek government debt needed to be downgraded drastically. There was something to that argument. I recall checking one day and finding that the Greek sovereign CDS was priced at almost 23 percent of the bond price.”

“Naked swaps are still OK, then?”

“The European Union since 2012 has forbidden naked swaps on the bonds issued by its member country governments. But corporate bonds aren’t affected. And in the U.S. and the rest of the world you can still do naked swaps on either corporate or sovereign debt. A ban didn’t make it into the major U.S. law signed in 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act.”

Lang turned to me. “Dodd-Frank was supposed to clean up the financial system. No one seems to think the results so far are any better than mixed.”

“That’s a fair assessment,” Helmut chimed in. He explained that some credit was due to U.S. regulators trying to use Dodd-Frank to clean up the markets. The Commodity Futures Trading Commission in Chicago had issued final rules that would apply to “a variety of CDS involving indexing of multiple borrowers’ debt instruments.”

He got me there. “Huh?”

“You don’t need to know.”


Moving right along,  Helmut told us that the SEC had been working on rules to require more reporting, more transparency, more use of clearing houses for the CDS category that Joe probably was primarily interested in: the “single name” swaps covering debt of individual countries and companies.

“But the current administration in Washington is full of Wall Street veterans,” he said, “and Congress is awash with their sympathizers. Whether or not they gut Dodd-Frank, as  threatened, it’s highly unlikely they’ll let tough new regulations go into effect. Even if they did, I doubt that we would see much resulting change. After all, the very nature of the CDS beast is insider trading.”

“You mean the sort of case we hypothesize regarding North Korea is routine?” I asked.

“No, what I mean is simply that the lenders who issue and trade swaps know far more of the intimate details about the credit-worthiness of the debtors than any investor would likely know. Given the failure to ban naked swaps I’d have to predict that CDS trading will remain the Wild West of the financial markets.”

“You talk about needing more reporting and transparency,” I said. “But your Bloomberg terminal already seems to have an idea what’s going on.”

“It knows only up to a point. The bankers who broker the trades haven’t been required to report much of anything. I showed you a graph. The truth is, nobody takes those numbers without a grain of salt. Individual brokers give their numbers voluntarily when the Bloomberg or Thomson-Reuters data people call and ask for current trading prices.”

With no mandatory clearing house exposure, Helmut explained, there was no guarantee that the brokers polled would give the right numbers. “They may see it as in their interest to try to fool the rest of the market.”

“So you call up the graph but the numbers it’s based on are likely to be fake,” Lang said. “That I did not know.”

“A speculator can get a general idea of market direction from the data on his Bloomberg or Reuters data terminal, but you wouldn’t trade on the basis of the specific number the terminal lists for today. Any savvy market player would follow up by calling a broker and asking directly for a price. The misreporting of CDS prices is an open secret among insiders — but it would be hard for the regulators to change that situation.”

“Sounds like, at the moment, there’s nothing whatsoever to stop someone from doing a huge insider trade through one of those banks,” I said.

“There are some constraints. Swaps are legally subject to insider trading prohibitions. But to bring a case, the authorities not only have to find out about the insider trading and narrow down who’s involved; they also need to assemble evidence to back up the charge. There are bound to be serious problems adjudicating a case because, as I said, insider trading is the essence of what the CDS is about.”

“As if they were trying to ban sinners from hell?”

“You’ve got it. But the second constraint is more important. Bankers have to think constantly about their reputational risk.”

“Ah! Now I know what Joe meant by that reference in his notebook to ‘REP RISK 2HUGE.’ Zack Nodding was telling Joe the risk to their reputation would keep banks from getting involved.”

Helmut nodded. “Fewer than twenty banks are serious players in the over-the-counter single-name CDS market and just a handful take care of the majority of the trading. I can’t think of even one bank whose managers would feel relaxed about doing a gigantic and obviously fraudulent trade — a trade that surely would come back to haunt them once word got out. The non-U.S. banks have their home country regulators to worry about. And banks around the world are scared to death of attracting the attention of the long-armed U.S. authorities.”

“Or as Joe quoted Nodding as saying, the IRS and the SEC would come down like a ton of bricks.”

“Nodding’s right about that. And if a customer hit the jackpot more than once, going really big on days when some North Korean weirdness occurred and making multiple fortunes, the banker-brokers representing that customer might figure it was no coincidence. If they knew what was good for them they’d raise a public stink right away and make sure all the blame fell on the customer.”

“So if someone wanted to make a killing in the CDS market using insider knowledge from North Korea,” Lang said, “the first step would be to find a compliant banker-broker willing to take the risk of handling the trades?”

“Exactly. Next to impossible to find one, I’d say, especially after the first time the customer hits it big and it becomes obvious he had to have insider information. Otherwise, we’d be talking about the perfect crime.”

“If what the North Koreans are up to isn’t a perfect crime,” Lang reminded Helmut, “there’s a way to expose it. Can you help us figure out what that is?”

That proved easier said than done. We agreed that the details we needed to nail down might not be available outside North Korea. Next step was to figure out how to get me in again, not for a sightseeing tour but in some capacity that would permit me to sniff around. Coming up with no magic bullet for that, we agreed to give it a rest and think further. I’d return to being a musician in Tokyo for the time being. Lang’s staff would watch CDS market movements, with advice from Helmut.

Back in Tokyo, it turned out somebody had other ideas.

Copyright: Bradley K. Martin, Nuclear Blues

Read: Part 1 and Part 2 here

Next week: Part 4 – The Gang’s All Here

About the Author: Growing up in the southern United States, Bradley K. Martin studied Asian history at Princeton University and went on to serve as a Peace Corps volunteer in Thailand before starting his news-reporting career on The Charlotte Observer. The two-time Pulitzer nominee has been an Asia correspondent, bureau chief and/or editor for Asia Times, the Baltimore Sun, the Wall Street Journal, Newsweek, Asian Financial Intelligence and Bloomberg News.  Since 1979 he has made seven reporting trips to North Korea. He’s the author of Under the Loving Care of the Fatherly Leader: North Korea and the Kim Dynasty, which won the Asia-Pacific Special Book Prize – and which the New York Review of Books called “simply the best book ever written about North Korea.” His new novel Nuclear Blues, set in North Korea and conceived as a fiction sequel to his earlier nonfiction work, has won a 2018 Readers’ Favorite Book Award: the Bronze Medal for conspiracy thrillers. Keep up with him on his Facebook author page.

“Bradley Martin wrote the book on North Korea – literally. His 2006 look at the inner workings of the Kim dynasty, all 912 pages of it, remains an unequaled primer on the most isolated regime. For his Kim family follow-up, turning to fiction has a perverse logic. Political scientists, after all, have failed to explain, predict or translate what’s afoot in the Hermit Kingdom. The sprawling Central Intelligence Agency was just as shocked as investors in 2017 to find how much Kim’s nuclear program leaped from theoretical to operational. When basketballer Dennis Rodman knows more about Kim than Donald Trump’s cabinet does, you might as well turn to a work of fiction. Martin’s vivid read, centering on a journalist trying to get the real story in Pyongyang, has all the makings of a great Coen brothers film.” – William Pesek, LiveMint

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