Prologue

If you prefer, consider this a work of fiction, or the ravings of a madman. Perhaps I am crazy.

I know that you will not hear what I am struggling to tell you—not yet. But, perhaps as things unfold, this writing will offer some explanation of what is happening.

In my mind as I write this is the small hope that my children might one day come to understand me a little, and, perhaps, forgive me for being who I have been. It has been unavoidable for me to see and know about unpleasant things, which are now becoming manifest.

Presently, as we well know, families are divided. People are experiencing a kind of isolation, perhaps not physically, but in spirit and mind. This has been made to happen through the dark magic of false news and narrative. This alone has been a great crime against humanity. The tactical purposes are many: to confuse and divide; to cause disengagement; to demoralize; to instill fears and to introduce false focal points for these fears; to manipulate the historical narrative; to create a false sense of the present reality; and ultimately, to cause people to acquiesce to what has been planned.

Facing this onslaught how can one know anything? Direct knowledge acquired through ones own experience and the personal experiences of others may be used to pierce these false narratives. Living memory contains clues. What has been done before can be done again.

If exposure of the personal history in this Prologue grows tedious, please go to the meat of the matter in the chapters ahead. But if you will continue reading here, perhaps you might discover that I am a human being, like you. Perhaps it will be of some use to you, to know that I have worked a lifetime to understand the forces hurting us.

For me, “being known” has never been a wise or desirable objective, unless it has been to accomplish some essential purpose. And now my purpose is this: it is so that what I am trying to tell you might be heard and understood. We are in danger. And so I will risk telling you my personal story.

How have I come to know what I am trying to tell you?

I am old enough to remember the JFK assassination. I was sitting in the little basket in the front of a shopping cart at Fazio’s grocery store on Lee Road when the announcement was made over the speaker. A woman standing nearby burst into tears.

Within a few years of the assassination, we were living the industrial collapse of the U.S. For a boy in a family of engineers, in the crane and hoist business, in Cleveland, the years ahead would be very much like living through the Great Depression. In the summer of 1966, a portion of the city was burned in the Hough Riots. The National Guard was called in and placed machine gun nests on roofs. On top of the riots, little Webb Equipment was being targeted by the Teamsters Union; windshields were smashed with baseball bats. Due to the threat of Molotov cocktails, records were moved out of the office, and roofs were hosed down at night. It was like living in a war zone, and it was going to get much worse. There would never be a “recovery.” There would be complete destruction of everything we had known.

Our extended family had been benevolent, close and happy. In just a few years, death consumed the entire older generation and some of the next. The patriarch, Grandpa Webb, died at 79. The following year, my father’s older brother, died of a heart attack at 51. As a young man, he had been captain of the Case Western Reserve wrestling team, and looked something like a god. He had left a successful career at ALCOA, to help his aging father in business, as had my father. Shortly before his death, he had confided in his wife of struggling to keep the men employed, bidding for contracts near cost. He was a man who cared deeply and felt responsibility keenly.

However improbable it seems now, Cleveland had been one of the most vital industrial centers of the world. In the 19^th century and into the 20^th, it was like all of industrial America in one city. I remember reading that, at one time, the Cuyahoga Valley was producing 2% of the world’s industrial product. The early days of the iron, steel, aluminum, chemical, automotive, aeronautics, and oil industries were all in Cleveland. Standard Oil was formed there. Rockefeller’s first refinery was there. John D. is buried in Lake View Cemetery, as are both sides of my family, who were descended from early English settlers. Some of these forebears had arrived with the first settlements in Jamestown and Plymouth. William Bradford was an ancestor. The Webbs had common ancestry with John Adams, Samuel Adams, and John Quincy Adams. We had Masonic swords and little porcelain statues of Washington and Franklin dressed in their Masonic regalia. Dad, his brother, and their father and grandfather had been Masons. Despite this, it seems they did not get the memo about what was coming.

By the early 1970’s, the family business, which had once had eighty men in “the shop”, was down to one, Ladislaus Horvath, earlier known as “Little Laddie”, being the son of the elder of the same name who had worked for my grandfather. Laddie, who had been a helicopter mechanic in Vietnam and could do absolutely everything, later told me that he had thought he would go crazy, there having been absolutely nothing even for him to do. The business activity had gone to zero.

Under extremely difficult and worsening circumstances, my father had been left without the support of his father and brother, but with full responsibility for everything, which he had never wanted. Stress was slowly killing him. He developed chronic asthma, became depressed and angry, and often stayed in bed.

Sometime after my uncle’s death, my older brother nearly lost several fingers in the lawn mower. Dad then gave me the job of cutting the lawn. I was happy and proud to be entrusted with such a big job, as indeed it was. I was nine.

In the years ahead, I discovered that something in my father necessitated that I be put to work under increasingly unpleasant and even dangerous circumstances. When I was twelve, I became seriously ill after being pressed to work when I was already ill. By thirteen, I was “the low man on the totem pole” at the shop, as described by one of the guys at my father’s funeral. It was hot, dirty, and sometimes quite dangerous. I could easily have lost fingers, my eyesight or worse. Excelling in school remained a given, but hard labor marked the remainder of boyhood.

I recall being tasked with sifting dirt from a gravel pile in the full summer sun and humidity. I was to then use the dirt to fill holes where I had pulled weeds. I was hard at work when Dad came home. Saying nothing, he kicked over the wheelbarrow, and threw tools as far as he could. There were tears in his eyes. Knowing that I had done nothing wrong, I don’t think I felt afraid so much as something else. It was my father who was in some kind of trouble. I “saw” him. I think what I felt was an intense need to understand what was happening, and why.

And so, even though Dad was hard on me, I was perhaps the only person intensely interested in what he had to say. It was the silence, and not having things explained that got to me the most. And so, I asked questions. He was an intelligent guy, and he had filled his room with stacks and stacks of books. He was trying to understand what was happening. And so was I.

Consequently, by the age of twelve, I had become a student of the Great Depression and of the mysteries of the Federal Reserve (the “Fed”). I knew then that the Federal Reserve System had been secretly planned at a meeting on Jekyll Island, that gold owned by the public had been confiscated in the Depression, and that Nixon had recently taken the dollar off the gold standard.

Coincidentally, Dad had also been twelve at a traumatic time when, in March of 1933, they closed the banks and confiscated gold. He was named for his maternal grandfather, who, in the weeks before the Panic of 1907, the crisis atmosphere of which was used to justify the creation of the Federal Reserve System, had been shot from behind, in the neck, in the middle of the night, on the staircase of his home near Euclid Avenue. The murder was never solved. While it had been mentioned in newspapers from New York to Alaska at the time, the history had been kept from my father. Dad went down to the public library and dug into microfiche of these old articles, which he copied. He showed me a shoebox full of them. His grandfather was described as a “wealthy coal operator.” I have seen records of his accumulation and sale in 1905 of coal rights on more than 800 acres in Mahoning County, having retained rights to drill through the coal seam for oil (which his descendents theoretically have still).

Dad was interested in what had happened on Jekyll Island, so much so that we drove there. I have the post card with a 1960’s era photograph of a large white building and the inscription, “The Club House”, with this further explanation on the obverse:

Paul Warburg, a member of the most prominent and ancient German banking family had led the meeting on Jekyll Island in which the Federal Reserve was planned. He later openly acknowledged that this had been done in secret. Also at that meeting was “Colonel” Edward M. House, who in subsequent years laid the groundwork for the establishment of the Council on Foreign Relations. In the quiet of Christmas Eve, 1913, The Federal Reserve Act was signed into law. The Great War followed by just seven months.

Despite boyhood years of trauma, and perhaps because of them, I went on to do some things. Early childhood formation had saved me from being crushed. This was largely thanks to Grandma Rogers, my mother’s mother. She was a Montessori School. By the age of three, I was sharpening knives and making tea. At night, she sat by my bedside, helping me drift off to sleep. She spoke softly in the darkness, remembering things to me from her childhood, and from the Great War. I realized only as an adult that they had been warnings.

She had gone with my grandfather into the Great War, she as a nurse, and he as a surgeon. They were not yet married. The U.S. had not yet entered the war. Their field hospital in Rouen had 3,000 beds, but the casualties were more than this each day. Even the cooks were attending the wounded. In the darkness at my bedside she had recalled the sound of the big guns and of the shells exploding, which she could hear from the hospital tents.

She and my grandfather were married after the war, and honeymooned in Quebec City. They were the same age, thirty-eight. She had her first child, my mother, at forty-two. To have come through so much, to marry, and to have children—it must have seemed a miracle.

Grandpa Rogers was named for a cousin who had joined the army to get away from working in his father’s shoe store; he ended up at Little Big Horn. Grandpa’s grandfather, born in 1816, had also been a surgeon. As a boy, I was allowed to handle his grandfather’s surgical kit. It is identical to one in the Gettysburg Museum. Grandpa’s great uncle is buried there; he was a Cavalry officer. Surviving 50 engagements, captured when his horse was shot in the head, he later escaped through a swamp, pursued by hounds, from a Confederate prison where the men were dying of starvation and smallpox.

My grandfather taught surgery after the war until his untimely death in 1945. We had a chair in the house that someone had given to him. It was explained to me that, in the Great Depression, he did surgeries without payment, because no one had money. They had a “Dutchman” living on the third floor of the house; he had lost his job with the factory closures, and simply had nowhere else to go.

I liked Grandma and often visited her room. She had been born on the Canadian side of the lake in 1883. She told me about riding in a sleigh wrapped in buffalo robes, with bricks warmed in the fireplace under her feet. She had a picture of Queen Elizabeth on the wall in her room. With the Lakeside Unit, she and Grandpa had met King George and Queen Mary in a reception at Buckingham Palace. I learned about that from a newspaper I found among her things.

She somehow conveyed to a small boy that medicine is a profession, as distinguished from pursuits for one’s own purposes, and that, in the original sense of the word, business is not a profession. I struggled with this last bit for some time, as my Dad’s family was clearly in business. Nevertheless, I understood that one’s work should be about something more than making money.

I was welcome in her room. One day, I wandered in as she was getting out of the bathtub. I wondered at the wrinkles. She was unperturbed—completely natural, having a quiet dignity at all times. She died of a series of strokes when I was seven. I did not understand death. Half a century later, I came to understand that I had lost then the best friend I would ever have.

I would have gladly followed the certainty she had given me, that I should become a physician, as did my brother. However, in the remaining years of my boyhood, the way before me became not only uncertain; it became the unknown. I did not know how to do it, but I needed to somehow understand and get control over what was destroying our lives. I had accepted the burden of my father.

We lived in East Cleveland, which was crumbling due to the loss of its industrial base. At about the time of my uncle’s death, my older brother and his friends, playing baseball in Forest Hill Park (a former Rockefeller estate), were surrounded by a huge crowd, beaten up, and had their bicycles and baseball mitts stolen. My father reacted to this by pulling him out of the local public school and sending him to a private school. While moving out of East Cleveland was considered, it was not undertaken. So, as conditions worsened further, I eventually followed to the same private school some years later. But by this time the financial resources of the family were running thin. Each summer the uncertainty of whether I could return to school was obliquely made known to me.

Being told about bad things did not bother me so much as not being told. I needed to know. The silence was terrible. Life is more difficult if people can’t talk. Things go undiscovered, or misunderstood. If it is possible to talk, outcomes might be changed. The future might be shaped for the better.

The summer before my senior year was particularly uncertain; my mother told me that my Dad would not apply for financial assistance. I had no idea if I would be returning to school. But at the end of the summer, I started back to football practice, as no one told me I couldn’t. I delivered newspapers before school, worked as a busboy at night and as a janitor on the weekends, drove a delivery truck, and painted houses. I was reading business books, and missing no opportunities, managed to set-up an internship in marketing research at a fortune 500 company.

Many years later, after my mother’s death, I found a copy of the letter she had sent the school, which had apparently secured my final year. Perhaps due to some embarrassment, this had never been explained to me. Without Mom, I might have suddenly had no recourse but to complete high school in East Cleveland, which was then quite ahead of the times; they already had police and metal detectors in the hallways.

When I told my father that I was interested in studying business, he told me that this would not prepare me to do anything, and that I should study engineering. I had, however, observed that the engineers in our family hadn’t seemed to fare so well. And so, against my father’s advice, I chose to attend a state business school, studying finance and computer science. In my mind these pursuits were dignified with the idea that business is the science of meeting unmet human needs, and that this can only be done sustainably if it is done profitably. It later came as a difficult realization for me that people in business have no greater purpose than making money. Nothing else comes close to that, except perhaps, being important, and sexual escapades. I was an outlier. I was extremely focused on pursuing things I sensed I needed to understand. This gave me an advantage. I would come to know things that others did not know.

Coming from a family of engineers and medical people, I then knew nothing about the world of “high finance”, and had no one to guide me. I invested in a subscription to the Wall Street Journal, which in those days was actually a factual business publication. Sometimes I forced myself to go through a stack of them, page by page. I noticed the “Tombstones”, published to announce major deals. These were somehow important. The firms involved, were in New York, for the most part. I knew I needed to go there.

My wife, Valerie, and I were married two weeks after my graduation. Two weeks after that, I started work with a computer services firm. I had some experience with programming, and after a further 90-day training program, I chose to go to their office at 44 Wall Street, as a Technical Representative rather than as a salesman. The cost of the monthly rent and train pass were so high, and I was being paid so little, that we could not afford a telephone or meat. But over the next year, supporting the sales teams, I was able to go into a huge number of entities in New York working with financial information—investments banks, commercial banks, brokerage firms, bond houses, investment partnerships, rating agencies, and even Depository Trust Corp. I was allowed to be there to show them how to get the information they needed, and to make it happen. I went to meetings every day and programmed applications late into the night. Eventually, I could see where I was going.

Within a year, I somehow talked my way into a Mergers and Acquisitions group, which was a client. After a series of high-stress interviews, I was told by the head of the group, Mad Dog Jeff Beck, “If you turn out to be a psychopath or a pathological liar, we give you a bonus!” Jeff knew of what he spoke. He may not have been the former, but years later he proved to have been struggling with the latter in a big way. Lies are a trap, and perhaps especially to those who tell them. It eventually destroyed him. He once said to me in a self-deprecating way, “You are a real person!”

The people my age were the son of a billionaire, the daughter of a fantastically wealthy Hong Kong family, and the son of the chairman of a fortune 500 company. I was allowed to be there for only one reason: I could figure out how to do what needed to be done. There was a bit of pressure. I had been told by a senior vice president, “You better be sure you want to do this, because if you fuck up, you’re gone.”

For the following five years, it was a regular occurrence to work seven days a week, and for several days without sleep. Our first child was born. We were then living in Brooklyn Heights, in a tiny apartment, just one subway stop from the office at 1 New York Plaza. If I had been home and had to return to the office, reaching the elevator bank my heart would start racing, because I did not know how many days I would be there without leaving.

I thought of it as a crucible. It is through reactions under uncomfortable conditions that one comes to know oneself and others. I had encountered many such reactions, and could maintain focus under great pressure and with little sleep, when a headhunter approached me to go to work for Ivan Boesky, later dubbed, “Ivan the Terrible.” The starting compensation would have been roughly ten times what I was being paid at the time. I was considering doing it, but it was not really about the money. Through those years, I was living by Nietzsche’s, “That, which does not kill me, makes me stronger.” I was already working around the clock for extreme personalities; why not do it? I would have been on a three-man team sitting directly outside of an open window into Boesky’s office, through which he could bark orders, but which he could close for his private and sensitive conversations. They wanted me there to do quick break-up models and valuations of big companies, which I was capable of doing overnight. Fortunately for me, that discussion suddenly went cold. He was arrested shortly after that. And so I learned a bit about the lure of money, and of being careful about one’s choices and associations.

We had moved to a big old house in Chatham, New Jersey, and had invited my mother, and my wife’s mother, with her youngest son, to move in with us. I was still in survival mode, and wanted to take care of everybody. The commute into the city was an hour and a half, each way, three hours a day. One twelfth of the year was commuting. I made use of that time, but little remained to simply be at home with the family.

In 1987, I had an offer to join the Mergers & Acquisitions group at L. F. Rothschild. Instead, I chose to move for half the compensation to a private equity firm. I knew about the agency side of the deal business; I needed to know about the principal side. I also somehow sensed that there would be a crash. One month later on Black Monday, the capital of L. F. Rothschild was wiped out and the firm soon ceased to exist.

I had joined what was at that time the largest private equity firm in the world, having just raised a $1.3 billion fund (that used to be a lot of money). Most of the partners were attorneys, and were dependent upon an accounting firm to do their financial analysis. That was amazing to me, as I had experienced that the very process of doing one’s own financial analysis is critical to developing an understanding. Within a few weeks, it was noticed that I could find major errors in the financial models done by the accountants.

The first year, I managed the acquisition of a long distance telephone company, building the financial model, designing and running the due diligence, negotiating the financing, and running the legal teams. It was a complex process, requiring coordination of hundreds of people. The responsibility for all of this was crushing. The partner on the deal, having a difficult time with stress, went home and stayed in bed for six months.

Sometimes it was unavoidable that I work through the night, perhaps sleeping briefly on the floor. More regularly, I took a waiting limousine to our house in Chatham, to sleep for a few hours, only to get up again to take the train back into the city. Saturday mornings began with negotiations at 8 a.m., extending until 3 a.m. Sunday morning, and beginning again at 8 a.m. Sunday morning. This pace went on for nine months. The due diligence, filling a bank of file cabinets, and summarized in a single notebook, was selected to demonstrate the capabilities of the firm to the limited partners. This deal was to produce the largest capital gain in the history of the firm. The “deal books” fill a shelf. I signed every document. I was twenty-eight. Sometime after the closing, I was called down to the corner office and told that I could do anything at the firm.

However, my family was suffering from these many years of my intense focus. The move to the private equity side had only increased the intensity, as I could not escape the encompassing responsibility. Our second child was born in the first months of this deal. I had to be on the telephone outside the delivery room for an hour and a half, handing things off so that I could be with my wife and newborn son for two days. Some months after this deal had closed, my wife told me that if she had known that our life would be this way, she would not have signed up for it. This came as quite a blow. I had thought I was a hero to my family. I told her that we could go anywhere and do anything, and got out the road atlas of the U.S. We paged through it state by state, trying to imagine where we could be happy. Ultimately, I simply left the firm and we moved back to Cleveland in an attempt to find a more balanced way of living.

We moved to a house built in 1920 in Cleveland Heights. Two of our children were born in that house. It was within the sound of church bells I remembered from childhood visits at Grandpa Webb’s house.

The intensity remained. Eventually, I started with partners in a small investment management business. I had developed the view that the public markets offered greater inefficiencies and better opportunities to both buy and sell than the private markets. I knew how to do deep research and analysis. I needed to know how the markets and the broader financial system worked. From the beginning of my involvement, I handled all trading, and went on to develop the trading processes, strategies and teams. At first I managed long only equity, and then long/short equity. The firm grew from $2 million to $2 billion in assets over nine years.

While it was not then and is not now generally understood, decline in the Velocity of Money marked the beginning of the Asian Financial Crisis, eventually leading to the Ruble Crisis and failure of Long Term Capital Management. Through direct handling of all trading, I could see that something significant had changed in the internals of the market. It was plain to me that this was not just an atmosphere of crisis but the beginning of a real crisis. Few had the same sense, and this was the cause of conflict within our firm. It is best in a turbulent time to sell the peaks and buy the dips. Some people like to do it the other way around. At about this time, our third child, a pre-reader, picked up the stock listing from the newspaper and exclaimed, “This says oh no!”

On Thursday, August 27^th, I left with my children for a long-weekend canoe trip in Canada, this being our only vacation for the summer of 1998. I called into the office Thursday morning from the canoe livery, and was then without access to telephones. While I was away, instructions were given to remove the entire short position protecting the hedge fund from loss, and the employees were called together to announce that I would be leaving the firm. This was all unbeknownst to me as I was enjoying a tiny bit of life with my family.

Arriving early in the office on Monday, August 31^st, I was stunned to learn of what had transpired while I had been in the wilderness. To my further amazement, I was informed that there had been a “palace revolt”, and that from that moment going forward I would have unquestioned, sole responsibility for the hedge fund. Perhaps this was due to the grim fact that all of the hedges had been removed, in combination with the imminent possibility of a full-blown market crash.

This day would see the largest ever point declines in all market indices, other than the Dow 30, which suffered the second highest point decline in history. Our hedge fund would have lost 10% on the day. However, at the open, I shorted the entire value of the fund. Late in the day, I could see sheer panic selling. We were then in a position to buy into the panic. I covered the entire short position at the low. Only through these extremely stressful moves was the fund miraculously protected from loss, ending flat on the day. The NASDAQ composite finished down 8.6% on the day.

At this time, the assets in the hedge fund were approximately $60 million. Over the next three years, this grew to more than $1.3 billion.

By the late 1990’s, I had understood that money creation by central banks was dwarfing real economic activity, and that the actions of the Federal Reserve were determining the direction of financial markets. This was considered to be conspiracy theory at the time, even by my partners.

I developed a way to anticipate changes in the direction of the financial markets based on changes in the rate of growth of the money supply. This was being driven by open market operations of the New York Fed.

By the time of the Dotcom Bubble, I knew that the velocity of money had begun collapsing; I saw incredible escalation in money creation engendering little growth. I believed that, in some great unfolding over many years, there would be a major depression, and that the only question was whether or not there would be a global war. This was prior to 9/11.

I developed a way of using hundreds of carefully selected positions on the short side, dubbed “the cream of the crap.” Using this system, no one position could hurt us badly, and, if I did it right, it would work much better than an index. The long side was more concentrated. Altogether, at any moment, we typically had on more than 350 positions. Working such a large number required a specially designed trading desk and team technique. We regularly positioned on the other side of trading flows, patiently drawing size to us across the bid/asked spread. Observing and probing this many positions gave us broad, real-time market sensitivity, or “granularity.” We could move size without moving the market, utilizing available liquidity across many positions. The trading desk functioned as a newsroom, seeing everything as it was released, and conducting continuous research. If a position was moving without news, we moved to find out why with urgency.

It was necessary to carefully and continuously feed and challenge an integrated model of how the world was working, and of all of our positions. This model was not on paper; it was in my head. This allowed us to act immediately when confronted with significant developments. But it was absolutely vital to focus immediately on any information or development which did not comport with the mental model. When sifting new information, I did not focus so much on things that fit my ideas as on those that did not, that threatened my understanding.

The intuitive mind, when adequately and correctly informed, can be miraculously powerful, knowing immediately what the rational mind cannot yet see. On the other hand, if it is given bad information, and if incorrect assumptions are not surfaced and challenged, it is a dysfunctional disaster. The rational mind can be employed to inform the intuitive with vetted information, and to continuously test what the intuitive mind thinks it knows. With cooperation between these aspects of the mind, one can drill down to examine detail, zoom out to see bigger implications, and vice versa.

Ultimately, deep due diligence requires spelling out one’s own assumptions and rigorously testing them. Primary source documents may provide irrefutable information. Biased sources can be used, but one must recognize the bias and account for it in vetting the information. A statement that is consistent with the bias is of little significance. However, something acknowledged which runs counter to the bias is likely factual. To really know something, one must go directly to people with immediate experience of the situation. You can’t really know by talking with someone who has only read about it. If I suddenly realized that I needed to know something critical, I sometimes went directly to the airport with just the clothes on my back, flew across the country, and waited for the person with whom I needed to speak, even though I had no meeting scheduled. That actually worked rather well. It helps to hear things directly from people when they are a bit surprised and off-script.

Dad had told me that understanding terminology is the key to functioning in any field. I had found through my due diligence work that it was possible to become conversant within a surprisingly short period of time even in technical issues with leaders in a field. It was done by doing it. After the first conversation, I was better equipped for the second. With each conversation, I was able to better hone in on the substantive questions. By the third conversation, the other person actually became interested in speaking with me, because I had just spoken with two people in their field about some interesting issues. And it built from there. I could do this with physicians, chemical engineers, and even neuroscientists. They sometimes asked if I had trained in their field.

There was a small medical device company growing at a high rate, on which I had done a great deal of deep due diligence work. We had a large position. It was thinly traded, and so I monitored the situation very carefully. I had a detailed model of the monthly sales ramp built up by the reorder rate at individual hospitals. One day, the company reported sales which missed my projection. They were still growing at a high rate, but in adjusting my model, I could see that the reorder rate must have fallen at some hospital. No one else seemed to have noticed this, and the company was acknowledging no issues. I started cold-calling into hospitals. I managed to get an OR nurse on the phone who had just come out of surgery. She told me all about why they had stopped using the device. I knew then that the sales of this company would go to zero.

I now had a big problem: how to get everybody out. Not only did the hedge funds have a big position, but also a large number of accounts for individual clients, which I still handled at that time. On top of that, close friends were also heavily in the shares, as well as a school I had supported. It took weeks to patiently work down positions and get everyone out without loss. We handled it all from our trading desk, including coordinating sales for friends and for the school. I made sure it was all done. Then the people at our desk could sell their shares. When that was done, the second to last sale was for my mother. The last shares sold were those of my immediate family. I made sure everyone on the desk saw how I had handled it. To front-run your clients and everyone you say you care about—that is trashy. Some people operate with the certainly that they should help themselves first, especially in important matters. I know it is done, but it is something I would not do. I would not allow it.

In the course of this, I flushed out certain institutional brokers at a certain prime broker who had arranged to be secretly copied on my trades and were piggybacking them. I now suspect that, toward the end, the prime brokers were allowing traders to front-run my month end liquidations.

We used the entire balance sheet. On days with big market moves, we traded millions of shares, and might have gained or lost tens of millions of dollars. Handling this required emotional calm and intense focus. I have told my wife that it was like performance art. The ego clouds judgment, and particularly when much is at stake. I made a practice of focusing outside of myself, and of actually placing duty and responsibility to others ahead of my own interests. For me, my work was not about making money. It had to be about more than that, or I could not have carried the immense burden of it all.

My clients included a former U.S. Treasury Secretary, a former president of the New York Federal Reserve Bank and some of the largest institutional investors. People from Switzerland flew into Cleveland. They were trying to understand the secret of how I was doing what I was doing. But there was no secret algorithm. It was a way of thinking. My mother asked what courses I had taken or books I had read to teach me to do what I was doing. I responded, “Mom, there are no books explaining this.”

Busying oneself with absorbing the pronouncements of media, government officials, business executives, and such mouthpieces, creates an illusion of being informed. As Samuel Clemens said, “It’s not what you don’t know that kills you; it’s what you know for sure that isn’t so.” Through hard experience, I came to know that, while it may be quite difficult to know the truth, it is fairly easy to detect lies.

People behave in disappointing ways when large amounts of money or unrestrained ego are involved. With both, there is sure to be trouble. When I discovered that I had been the target of a long-planned betrayal, I was dismayed and chose to begin again.

Starting over meant liquidating the hedge funds I had been managing. Between September 1, 1998 and November 9, 2002, when I liquidated the funds, the total return on these funds was 258%, net of fees (the gross return was over 320%). In comparison, the S&P500 and the NASDAQ indices had declined over this period, which spanned the extremes of the dot-com bubble and bust. If there were any funds in the world that did as well through this period as did mine, they were few.

These results were audited. Further, they were now cash on cash returns, and so clients knew them to be absolutely and stunningly real—it’s one thing to receive statements; it’s quite another to actually have received the funds. One client called immediately and offered to back me with $1 billion, explaining that I then would not need to raise money. It was an extraordinary moment for me. I was hugely flattered, but ended-up declining the offer, when I learned of a side-letter that would have put other clients at a disadvantage.

While the dot-com bust was underway, I was asked to meet with George Soros at the offices of Soros Management in New York. I carried into the meeting a single piece of paper. This was a graph showing that the growth rate of U.S. capital spending had blown through five standard deviations above the mean, having never in history broken above three standard deviations. I explained that this meant there would inevitably be a historic bust.

Soros looked closely at the piece of paper, looked up at me and said, “This is good!” He studied the paper further, looked up at me again and said, “This is very good!” He did not disagree with me about the bust, but said “They cannot allow the equity culture to fail.” I said, “What can they do that they haven’t already done.” He said in answer, “You don’t know what they can do.” So, in such a moment, even George Soros spoke of a they.

He then smiled and said “Thank you!” meaning this was the end of the meeting. One of his handlers followed me out of the room and said, “How did you do that? I have never seen anyone do that!”

I was amazed and flattered to have anything to do with George Soros, and that he took me, this kid from Ohio, seriously. He certainly knew a great deal that I did not know. But on the other hand I knew things he did not know. Early in 2003, I met with him again at his office, showed him a one-page chart of the astounding growth in Asset-Backed Securities, and predicted that this would be the basis of the next bubble and crash. He said, “You’re crazy.” But he was very interested in how I was doing what I was doing, and I explained it to him. He said, “You have rhythm. Other people can get rhythm too.”

I started again in January of 2003 with about $300 million in assets and a further $300 million in commitments, taking on twenty-four employees, which meant that no one lost their job. Through the peak of the Dotcom bubble, I had been able to “fight the Fed”, because I could see the acceleration and deceleration in their liquidity injections. I could already see that there would be another even bigger bust. I felt I had the responsibility to protect people, to keep going, and to do it again. But it would be different this time. The next couple years nearly killed me.

The markets had always functioned largely as a closed system (excepting the open market operations of the New York Fed, which I had learned to monitor and interpret). I could see flows from one sector of the market to another. In order for some areas of the financial markets to rise significantly, other sectors were being sold to provide the funds. I looked for opportunities to work opposite to these flows and rotations, buying what others had orders to sell, and selling what others wanted to buy, but drawing them through the bid/asked spread.

In March of 2003 I started seeing a phenomenon I had never seen before. On individual days, everything went up, with no apparent source of the fund flows. There was no rotation. All sectors went up, as did bonds. This was not being driven by open market operations because money supply growth was falling. Something unprecedented was happening in the internals of the market. The only explanation was that created money was now being directly injected into the financial markets; I wrote about this at the time. It is not understood even now that this was the actual beginning of “Quantitative Easing” (QE), more than five years before it was officially announced during the Global Financial Crisis. I saw it as an act of desperation, and again felt my responsibility to protect people.

Money supply growth was falling sharply. Commercial and industrial loans were falling. I suspected that the growth in Asset-Backed Securities and derivatives was highly unsound, and that inevitably there would be an epic bust.

By the end of the year, despite easy availability of credit, signs of economic stress were growing, but people did not understand this, with the exception of those being hurt directly. One could not have known from listening to the media narrative. And, if the stock market can be made to go up, people think things must be good.

The number of people late in paying their utility bills was increasing. Foreclosures as a percentage of total residential loans outstanding were going straight up to record levels. In the spring of 2004, I was preparing to write about this in my quarterly letter when I found that the DLQTFORE Index on the Bloomberg system had been changed to instead show that foreclosures were going straight down. I asked one of the guys on the desk to dig into what had been done to the data series. He called into the agency responsible for the data. Eventually he was told that, while the data series had been calculated consistently in the same way since the 1970s, the methodology had recently been changed, and that this change had been applied retroactively; indeed the methodology was now being tweaked with each data release. Doing so made it possible to publish any desired trend line.

Post 9/11, other important economic data series were being similarly corrupted to fit the script of economic strength and growing prosperity. An unprecedented level of deliberate government disinformation was being implemented. Having been a “God and Country” Republican who had voted for George Bush, I was shaken. Why would our own government work to give the public a false understanding of what was happening?

Bush gave a televised speech in a Texas warehouse, standing in front of what appeared to be shipping boxes stamped “Made in America.” The image was a fake backdrop, and so, it inadvertently symbolized the epic fraud which was then being perpetrated. I regularly called business people with insights into the real economy. Some ran industrial businesses. A bankruptcy attorney, who had been a friend since we were twelve, was handling workouts for one of the biggest middle market lenders. Viewing their database of more than 2,000 middle market companies, he told me the commonality was that they were all shutting down U.S. manufacturing as quickly as possible and outsourcing to China. Tens of percentage points in gross profit could be picked-up by doing so. It was about chasing short-term profits; but then you’ve lost your industrial base and more.

In Senate testimony, Alan Greenspan was talking about the “productivity miracle” supposedly being driven by technology investment. In those days, “The Maestro” was implicitly regarded as possessing superhuman wisdom, which he, of course, used benevolently in his role as the guardian of the U.S. economy. Perhaps then he was smart enough to know that Productivity is simply calculated as Sales/Hours Worked. As Fed Chairman, and as an economist, could he have not known that this was being driven by falling hours worked, by people losing their jobs as U.S. manufacturing was being shut down and outsourced, and that spending was only being maintained through massive money creation and debt expansion. People were permitted and invited to go deeper into debt while losing their livelihoods; that was the “miracle.”

While the tax bases of state and local governments were being gutted, the Fed’s monetary policy was inflating a massive bubble in financial assets. In recognition of these two facts, what could The Maestro have advocated? If the objective had been to serve the interests of the public, one would have recommended taxing the windfall financial gains being driven by the monetary policy, and cycling the proceeds into fiscal support to communities, which were losing their tax base. The opposite was done. Taxes on dividends and capital gains were cut substantially. State and local governments were forced to increase taxes, while cutting services. This deliberate choice would destroy cities, towns, communities, and the people in them. This is why home foreclosures and utility delinquencies were going to record levels. And this is why the calculation of economic data was being changed, including that of the DLQTFORE Index.

What is the job of the Fed Chairman? In the case of The Maestro it seems to have been to obfuscate what was really happening. Why would he do that? Answer: The Fed chairman does not work for the public; he works for the people who own and control the Fed. You are not allowed to know who these people are. Why would the people who control the Fed wish to obfuscate what was happening?

Now we are getting somewhere. There is something much, much bigger behind this. That’s what this book is about.

How was debt expanded while credit conditions were deteriorating? It was necessary to create a massive, audacious illusion: that there was no risk, specifically that there need be no concern about the ability of borrowers to repay financial obligations. The scheme worked so well that banks discontinued their risk underwriting functions, while offering mortgages for more than the purchase price of a home, so that borrowers received cash back at the closing. Loans could even be given to people who were unemployed and had no income—just what was needed.

The entire global financial system was moved aggressively to origination and securitization of loans into Asset-Backed Securities, and to filling balance sheets with these securities. With the illusion of risk-free return, demand for these Asset-Backed Securities was so high that they were sold many times over on a synthetic basis, i.e., as derivative instruments. There was a Dilbert comic in which the evil Dogbert said, “’Prospectus is Latin. It means close your eyes and open your mouth.”

This was enabled with remarkable sophistry, and with Credit Default Obligations (CDOs), “miracles of modern finance”, as Greenspan called them. When questioned about the risk exposures, he said, “Presumably, the risk will be born by those best able to bear that risk.” In laying the groundwork for this, Robert Rubin and Larry Summers had joined Greenspan, billed by Time Magazine as the “Three Marketeers” and as “The Committee to Save the World.” They had presided over the repeal of key sections of the Glass-Steagall Act, which had separated commercial and investment banking since 1933. By 2002, the notional amount of derivatives outstanding had reached twice the size of the global economy; just six years later it had reached ten times global GDP. About 10% of this was Credit Default Obligations; CDOs alone had reached the size of global GDP.

Invented in the 1990s, Asset-Backed Securities were created by forming a pool of financial obligations (e.g., mortgages, credit card receivables, boat loans) and then carving up the pool into a series of tranches with ascending risk ratings. The idea was that any defaults would be absorbed by the lowest-rated tranches. This would allow the highest tranche to be rated AAA. But there was a problem. Wall Street had difficulty selling the lower-rated tranches, which bore the risk of default. This is why the Credit Default Obligation became so important. It was the linchpin. With a swap of the default risk, the entire pool could be rated AAA.

I wondered at the time, who, in their right mind, was signing up to take any of that default risk? Eventually, it was possible to know that it had been the biggest banks themselves, and that these had been allowed (or directed) to form hedge fund subsidiaries. These entities had apparently enthusiastically taken on the default risk, knowing that they would be allowed to use valuation models at year-end showing there was no default risk, based on the simplistic logic that there had never been a default. The General Partner of one of these funds would have pocketed 20% of the resulting paper profits each year. This was being done on an enormous scale.

With a significant short side in the rising market, we were losing money, but I felt it was my responsibility to continue. I knew that if we could just be positioned when the intervention ran its course, we would be among the very few able to survive the bust. I could see that this coming global collapse would be much bigger than the dot-com bust, and I began to worry that the insolvencies would be so enormous and widespread that the prime brokers, the custodians for our hedge funds, would fail. If you are using shorts, your assets are pledged in a collateral account. There is no way to be hedged without being exposed to the failure of the prime broker. I often awoke in the middle of the night, and, knowing that I could not get back to sleep, would simply get up and continue working. I had chronic heartburn, which may lead esophageal cancer, the disease which had killed my father. Like my uncle before me, I was being crushed by my sense of responsibility.

Sitting on the trading desk, and seeing everything as it happened, I had assembled documentation of the many bizarre disconnects in the media narratives around 9/11, The War on Terror, and the economic “recovery.” It was the size of a telephone book. I thinned this down to a smaller package, which I used to try to communicate with friends and neighbors; I might as well have been talking to the wall. I needed to understand how to get through to people. Eventually, I went door-to-door after working all day on the trading desk. People in the wealthy neighborhoods did not want to hear about it. I tried it in a place where the houses were small. I walked past a guy sitting on the front steps of a house. He seemed to be interested in what I might be doing there (I was still in my suit). I gave him the thumbnail summary. He simply said, “Good luck, man”, in the voice of someone who had already given up.

I decided I could not go on after George Bush, instead of being repudiated, was re-elected. I did not think that possible. This is how much I had changed: In desperation I had voted for John Kerry. I went on to work as a “Team Captain” for the Obama campaign. But there was no change coming with “Change you Can Believe in” Obama, whose cabinet oddly came to conform to the candidate list of Citigroup. After that, I stopped voting.

In the aftermath of the Global Financial Crisis it eventually became known that tens of trillions in losses in derivative positions were housed in the biggest banks, which were then bailed out with newly created money. The prime brokers would have failed, but to prevent that they were made banks and also received direct injections of created money from the Fed. No one was prosecuted. On the contrary, the perpetrators were rewarded with enormous bonuses. It was almost as if it had all gone according to plan.

I had expected widespread failures of financial institutions and had watched closely for the first signs. In 2008, I noticed the failure of a small broker dealer in Florida, and I was shocked to learn that client assets owned outright with no borrowing against them were swept to the receiver and encumbered in the bankruptcy estate. I had to understand how this could possibly have happened, and eventually uncovered that ownership right to securities, which had been personal property for four centuries, had somehow been subverted. This would be born out further in the bankruptcies of Lehman Brothers and MF Global.

I had owned Swedish Government bonds since 2003, but I owned them in the U.S., and therefore had exposure to the failure of the U.S. sub-custodian. I needed to find a way to own them directly in Sweden with property rights. I flew to Stockholm in March of 2009. Without a Swedish personal number, I had to buy an apartment in order to be allowed to open bank accounts. Then it was possible to open a special securities account to which I could transfer my Swedish government bonds, and then own them directly; they could not be lost if a custodian became insolvent (this has now been subverted as well).

The Swedes were very interested in why I had made the decision to move to Sweden. In April of 2011, I was asked to speak at an investment conference in Stockholm. The title of my presentation was “Paradigm Collapse.” It was the first time I spoke publicly about the gutting of investor protections, including ownership rights to securities, and of the context for understanding why this was happening,

I first spoke publicly in the U.S. about the subversion of property rights to securities at an investment conference in 2012. There was a tremendous response from the audience of some hundreds. When my time was up, there were shouts of “Let him keep talking.” The organizers said that had never happened before. The conference was politically connected in some way. Their head of research told me that the CIA was certainly there. The next day there was an article in the online Wall Street Journal rebutting what I had said, but without mentioning me.

My Dad’s cousin was married to a fellow named Bob, who had been in the Office of Strategic Services, the forerunner of the CIA, during WWII. They were unusually close members of our family, living next door to my father’s brother in Shaker Heights, and having every Christmas with us. My cousin, who played in their house as a boy, has told me of finding original photographs of German submarine pens and a Japanese military sword. Bob was in Skull and Bones at Yale. His roommate at Yale was William Bundy, who became an intelligence analyst with the CIA, and is said to have had key roles in planning the Vietnam War in the administrations of both John F. Kennedy and of Lyndon B. Johnson. William’s brother, McGeorge Bundy, served as National Security Advisor to both Kennedy and to Johnson; he was on the Council on Foreign Relations at the age of forty.

After Bob’s wife, my father’s cousin, died young of cancer, Bob left a successful career with Cleveland Cliffs and began systematically traveling the world. Dad had said Bob would have soon been made CEO. He kept in touch with our family. He was at our house for a family dinner in 1976. He explained that he had decided to make Rhodesia his base. We asked him why, and he said, “I just like it there.” Dad, for some reason, then said openly at the table, “Bob is in the CIA.” This was followed by complete silence for some time, until Bob began speaking again. Rhodesia became Zimbabwe three years later. Members of my wife’s family were living there at that time.

Less than a month after speaking at that conference in the U.S., a man contacted me who asked to meet in Stockholm. He had been the Chairman of a U.S. political party, and had a long career related to the defense establishment. He stayed at a hotel within a short walking distance from my apartment. We had lunch. He suggested a pint of ale. He asked me to explain the subject of which I had spoken at the conference. I went through the evidence and implications. The odd thing is that he then asked no questions about the subject. Instead, he fixed me in the eye and said, “Does your family know you are doing this?” He said nothing more; that was the end of the meeting. I paid the bill and left. Perhaps it had been a “courtesy call.” We all have to die sometime, and being assassinated must be among the most honorable ways to do it. One must have been doing something right! Made a difference! No classier way to die, really. I always wanted to be like John Lennon!

I have not wanted to write this book, or have anything to do with this, but is has become unavoidable. It is like exorcising a demon, which has plagued me and my family. It must be done. And then, I will be done. I am self-publishing this because I don’t want to involve a lot of people. I just need to get it out. I expect that there will be efforts to criticize me personally and this work.

We have been overwhelmed with unpleasant and contradictory media “information.” This is by design. It is an intentional strategy, highly effective in shutting down critical thinking. I hope not to add to this burden. And so, a goal here is to be focused and concise, so as to not sap the attention of the reader. A further and more important goal is to provide not just information, but a synthesis of key information, allowing the reader to understand what is happening, why it is happening, why it is happening now, and what grand objective stands behind seemingly unrelated developments and events.

It is important to note that what is exposed here is not conjecture. It is found in authentic primary source documents, in which the planners themselves lay out their plans. I wish to acknowledge the important contribution of my extraordinary friend, who found key documentation of the Legal Certainty Group in one of his many sleepless nights. I thank the miraculous people who have helped me and kept me alive. I wish to thank the many, many heroic people working to expose this global takeover, one of whom said, “Wars are not won without courage.”

You are about to be confronted with quite shocking, depressing material. You don’t want to know about this. I don’t even want to know about it.

Charles Dickens had his character Scrooge (an investment banker) say, when faced with his own gravestone:

It is my hope that in making this unpleasantness explicit, and doing so at this time when developments are becoming more apparent, that awareness might spread, and that the worst might be averted. Perhaps this Great Taking might not be allowed to happen if we each hold up our end—even the investment bankers—and say forcefully: we will not allow this. It is a construct. It is not real.

David Rogers Webb
Stockholm, Sweden
May 28, 2023 [2]