“I know what titanium is: something they mine and ship to Earth. The last time I looked through our assessment records there were thirty or forty asteroids registered with City Hall that we’d leased titanium mining rights to.”
“Right. Some of the processed ore is refined and used here in the Belt to build our own spaceships and for other high-temp applications, but most of it is shipped to Earth. And that’s where futures come in. Titanium is like any other crop or ore or commodity—potatoes, pork bellies, gold, silver, wheat, anything at all that goes up and down in price depending on the supply and the demand. When there’s lots of titanium the price goes down, when there’s lots of demand the price goes up.”
“Yes, I think even the mayor of our fair city could follow that.”
“Good. Now, anyone at all can go out and buy a ton of titanium. If you wanted it for delivery today, you’d pay today’s price. But suppose you wanted it delivered to you nine months from today, about the time it takes a pod of processed ore to get from here to Earth—how would you know what it would be worth then?”
Isabel stared down at the bubbles in her Campari-soda. “I don’t know. How would I know?”
“You wouldn’t—you’d guess. You’d say to yourself, just like that hyena Bo Wivvel kept saying by vu-mail to old lady Maynerd, there are seven new fusion plants under construction in China, on Earth. They’re going to need lots and lots of titanium for the titanium-ceramic fusion chambers.
“You’d also say to yourself that there’s lots of titanium on Earth’s Moon, but recently there’s been a big legal squabble about which country or group actually owns the largest production area. There’s been sabotage, there’s been litigation, and production on the Moon has almost come to a halt.
“And you’d also say to yourself that the three main Belter companies that mine titanium have recently been working marginal asteroids that haven’t panned out as well as they hoped. So production is down, both here and on the Moon.
“So finally you’d say to yourself, and I quote, ‘Nine months from now I’ll bet that the price of titanium as delivered on Earth is going to be at least twice what I can buy it for today. Therefore, in order to make a nice little profit for myself, I’ll go long on titanium futures.’ ”
“Long meaning…?”
“Meaning that you—or Granddame Maynerd—has agreed to buy X number of tons of titanium ore for delivery precisely nine months from today at an agreed upon price that will not change no matter what the actual price is nine months from now. We say that the person who sells the ore at that price nine months in the future has gone short.”
“But how does old lady Maynerd—”
“Make a fortune by going long? Because she’ll never actually take delivery of that ore nine months from now—when, remember, she thinks the price is going to be more than what she paid for it today. Instead, she’ll sell it to someone on Earth for a big fat profit without ever having seen it. And she’ll be making an even bigger profit because she’s been able to buy her futures on 90 percent margin. Which means that by putting up nothing but a million buckles, which is precisely what old lady Maynerd did, she was able to buy futures for ten million buckles worth of ore. So that in nine months, when she sold the ten million for thirteen or fourteen million, she would have made three or four million in profit with an investment of only one million.”
Isabel stared at me as if I were a genie who had just escaped from a bottle. “But if it’s as simple as that, why doesn’t everyone do it and get rich?”
I uttered a harsh, guttural sound. “Because there can be certain minor pitfalls in futures trading, as Granddame Maynerd has just found out. Just after she bought her own futures on March 26th, for instance, a little company over on Vesta called Bio-Eats developed a brand new variety of virophage for dissolving the molecular bonds in the carbonaceous rock in which you find titanium ore. It was such a great new virophage for isolating titanium that the yield of titanium per kilo of rock almost doubled. That means that all the asteroids with marginal traces of titanium can now be mined at a substantial profit. Which means there’s already a lot more titanium being shipped to Earth than anyone would have thought possible before BioEats’s announcement. Which means that the price of titanium began to drop as soon as the news came out.”
“Oh my,” said Isabel, looking thoughtful.
“Yes. Then all the squabbling parties on the Moon unexpectedly got together and patched up their differences and resumed full-scale production. The price of titanium went down some more. Then China announced that they were only going to build two power plants instead of seven. The price collapsed.”
“Which means…?”
“That the shipments of ore that will be in orbit around Earth nine months from the day Granddame Maynerd bought her futures are almost halfway there. On the day her contract expires, December 26th, she is going to have to fulfill its terms and turn over the rest of the ten million buckles she agreed to pay.”
“But that does mean she’ll be the actual owner of X tons of titanium, doesn’t it? So what has she actually lost?”
“She’ll be the owner of X tons of titanium all right, but the titanium is in Earth orbit and she’s here on Ceres. You tell me: is she going to ship it back to Ceres and store it in her living room until the price goes up again?”
Isabel rubbed the side of her nose. “I suppose not. That means she’ll have to sell it on Earth at whatever price she can get?”
“Right. And right now, if she sold it today, she would receive exactly 3.72 million buckles. Which means that on an initial investment of one million buckles she has cleverly managed to lose a total of 6,280,000 buckles. Not bad for four months’ work, even if she did have Bo Wivvel advising her every step of the way.”
“Well, if she thinks Bo Wivvel is so smart, why didn’t she lose all her money using his firm instead of yours?” demanded Isabel indignantly.
“Good old-fashioned loyalty. She said she wanted to stick with the firm she’d been doing business with for forty-four years.”
“So that you’ll go to jail instead of this awful Wivvel person!”
“We always knew that life was unfair.” I swallowed the last of my Pernod. “Your turn to buy the next round. But I wouldn’t go to jail if I could only get that damn computer to—”
“Sorry,” interrupted Isabel, “you’ll have to buy for both of us—I’m broke.”
I stared at her. “Broke? How can you be broke? Payday was only two days ago, wasn’t it?”
“Yes, but I wasn’t paid, none of us upper echelon types were. City Hall is broke too, in fact all of Clarkeville is broke, or so close to it as makes no difference. We’re trying to keep it out of the news, but I doubt if we’ll be able to much longer.”
“Broke?” I repeated. “How can City Hall be broke? Don’t I pay enough—”
“Taxes? No, you don’t. You pay some, but not nearly enough. The population’s growing faster than we can find new revenues. For one thing, the city’s royalties from mining licenses have fallen off, not just on titanium but on all of the other ores, even nickel-iron. And that damn ceresquake is proving to be about six times more destructive than we thought at the time: we’re still discovering new problems with indirect damage caused by the quake—today’s floods in your office and that missing waiver of old lady Maynerd’s are perfect examples. And none of the insurance companies on Earth are paying off the way they’re supposed to. We’re owed billions of buckles, but just when we’ll get them nobody knows. Our credit rating is so low that we can’t sell any paper anywhere in the Solar System except at 27 percent interest.” Isabel gestured at the mountains of garbage that befouled Westlake Park. “You know that the recyclers are on strike; next week the transportation workers walk out if they aren’t given a raise. After that it’ll be the engineers at the power station.” She leaned forward and lowered her voice. “According to my own calculations, the city is going to run out of money in precisely twenty-three days. And in twenty-four days the emergency loan we got from Pallas—arranged through your pals the Three Blind Mice, by the way—has to be paid off.”