Golden Spoon Investment Portfolio - Chapter 196

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This chapter was translated by Lunox Novels. To support us and help keep this series going, visit our website: LunoxScans.com
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196. There won’t be any investments, not now or in the future.

November 17th, 1:00 PM.
A new two-digit trading code was generated on the New York Stock Exchange (NYSE).
The trading code was EL—the stock market listing of Estée Lauder, the luxury cosmetics brand born in New York, USA.

“Trading should begin shortly.”

At Landon Shore’s words, I reclined against the sofa in the comfortable penthouse living room and fixed my gaze on the CNBC broadcast displayed on the large television screen across from me, showing real-time stock market updates.

“The offering price was twenty-six dollars per share, wasn’t it?”
“That’s correct.”

Landon Shore turned his head to look at me and continued.

“The subscription competition was so fierce that we could only secure five hundred thousand shares.”
“It’s unfortunate we couldn’t acquire more, but considering how intense the competition was—everyone and their brother submitted bids for such a highly anticipated stock—we’re fortunate to have secured even that much.”
“Most experts are predicting a rise of at least fifteen percent on the first day.”
“I think it’ll go much higher than that.”

As I smiled, revealing my teeth slightly, Landon Shore suddenly asked with curiosity.

“How much do you expect Estée Lauder’s stock price to rise on the first day?”
“Not quite as much as Netscape, but given the market’s concentrated attention on this listing, it should definitely exceed thirty percent.”

Landon Shore’s expression showed slight surprise.

“A cosmetics company, not an IT firm, rising that dramatically?”
“It’s not just any cosmetics company—it’s a luxury brand known for its serum in that brown bottle. That signature product alone deserves enough premium to justify that kind of surge.”

Landon Shore tilted his head uncertainly before nodding in agreement.

“You’re right. That Advanced Night Repair or whatever it’s called is quite popular with women. The official product name is so long that everyone just calls it the brown bottle.”
“That sounds like wisdom born from experience.”

Landon Shore wrinkled the bridge of his nose and responded with an exasperated expression.

“Don’t even mention it. My wife uses that serum every night because it supposedly restores skin, so I’ve ended up buying her several bottles. You can imagine I know the product name by heart at this point.”

Seok-won let out a quiet chuckle and asked in return.

“Since you’ve purchased it yourself, I can tell that serum commands quite a premium price.”
“Yes. It’s just a small bottle—barely 1.7 ounces—yet it costs forty dollars per unit.”
“And yet it sells out almost as soon as it hits the shelves. You don’t even need to look at the accounting ledgers to understand how impressive the profit margins must be.”

I lifted the teacup before me, took a sip, and set it back down before continuing.

“As interest rate cuts and a booming stock market converge, American consumers’ wallets will grow considerably fatter, and consumption will surge dramatically.”
“That’s certainly true. Consumer spending is the greatest engine driving the American economy.”
“When people have more money, demand for luxury goods naturally intensifies, and that will inevitably drive higher sales growth for Estée Lauder, a premium cosmetics brand.”

At that, Landon Shore let out a low exclamation.

“So you foresaw all of that and instructed us to purchase additional Estée Lauder shares beyond the IPO allocation.”

As I received his admiring gaze, I murmured silently to myself.

‘This stock will experience explosive sales growth alongside China’s economic expansion. I can’t afford to miss the opportunity to buy it cheap.’

Of course, later on, the company’s concentrated business strategy in China would boomerang spectacularly, destroying the stock price—but that was a story for the distant future.
And since I had no intention of holding it until then, there was no need to worry about it now.

“Trading has commenced.”

Lost in thought for a moment, I lifted my gaze at Landon Shore’s words and turned my attention to the television directly ahead.
The moment trading began, buy orders flooded in, and Estée Lauder’s stock price instantly pierced through thirty dollars per share.
Landon Shore, who had expected a positive response but never imagined it would be this strong, wore a look of surprise.

“It’s already exceeded the experts’ predictions right from the start.”

But I smiled faintly and spoke in an unhurried tone.

“It will climb even higher. Let’s wait and see.”

As the surging stock price triggered a flood of profit-taking sales, the upward momentum paused momentarily.
But the dip was quickly recovered, and the stock closed its first day of trading at $40.12 per share.
When Seok-won’s prediction proved accurate once again, Landon Shore shook his head in amazement and regarded him with evident admiration.

“Remarkable. Everything unfolded exactly as you said it would.”

Seok-won smiled silently, his thoughts turning inward.

‘The stock price rose even higher than I anticipated.’

The result was created by the existing buying pressure combined with the massive stock purchases orchestrated by the Eldorado Fund under my leadership.
When the phone chimed, Seok-won picked up the mobile device he’d left on the table.

[I’ve purchased an additional 500,000 shares as you instructed.]

At Andrew’s voice, Seok-won nodded and asked.

“What’s our average cost basis when combined with the existing holdings?”
[The buying pressure has been so strong that it’s risen to $30.26 per share.]

Seok-won spoke calmly, as if he’d anticipated this.

“Given that we’re essentially chasing momentum in a rising market, that’s an acceptable cost. Since the stock surged dramatically on the first day, after the weekend break, Monday will likely see a flood of profit-taking sales that could break the upward trend.”
[Those who received IPO shares will have nearly 60% gains already, so the temptation to sell will be considerable.]
“Continue accumulating in tranches below $35 per share until we secure a final stake of 5%.”
[Understood.]

After issuing a few more instructions and ending the call, Seok-won set down his phone, and Landon Shore, who had been sitting quietly, finally spoke.

“Once Estée Lauder learns that we’ve secured a major shareholder position, they’ll reach out to us immediately.”

Seok-won crossed one leg and responded.

“While 5% doesn’t threaten management control, it’s certainly a stake significant enough to command their attention. They’ll definitely make contact.”
“Will you meet directly with Estée Lauder’s executives then?”
“Hmm. No.”

After a brief moment of consideration, Seok-won shook his head.

“I have no intention of interfering in management anyway. Let Landon Shore meet with them instead and make it clear this is purely an investment. That should put their minds at ease.”
“Still, now that we’re becoming a major shareholder, shouldn’t we secure at least one board seat?”
“I’ll handle that.”

I had no concerns about delegating to Landon Shore—he would handle everything competently on his own.
As I picked up the remote and turned off the television, Landon Shore suddenly spoke as if remembering something.

“By the way, are you aware that LTCM has become quite the hot topic on Wall Street lately?”

At the mention of LTCM, which I had been keeping a close eye on anyway, Seok-won’s interest was immediately piqued.

“What’s happened?”
“Through Italian bond and mortgage-backed securities trading, they’ve apparently achieved returns of up to 60% this year.”
“60% returns from bonds alone—that’s impressive.”

Since it was a topic generating considerable buzz, Landon Shore’s voice grew increasingly animated.

“With such high returns attracting new investors in droves, their capital has already swelled to 3.6 billion dollars. As for the assets they’re managing, the exact figure is unclear, but estimates suggest it exceeds at least 100 billion dollars.”

At this, Seok-won’s eyes narrowed slightly.

“If their assets under management are 100 billion dollars, that means they’re employing leveraged borrowing exceeding 28 times their capital.”

Until now, it was not uncommon for hedge funds to employ leverage exceeding ten times their assets, engaging in leveraged borrowing.
Even I myself had utilized knowledge of the future, but without leverage that allowed me to bet multiples of my available capital, it would have been difficult to multiply my assets so dramatically in such a short time.
Nevertheless, LTCM’s operational approach of employing 28 times leveraged borrowing was an extraordinarily risky move even by today’s standards, where leverage had become commonplace.
Contrary to my concerned reaction, Landon Shore dismissed it casually, as if there was nothing particularly problematic about it.

“Since LTCM’s profit technique involves exploiting price differences between bonds—essentially sweeping up pennies—they naturally need to manage substantial capital to generate sufficient returns, don’t they?”

It was a logical point: the larger the capital under management, the more pennies would accumulate.
Every little bit adds up, but the problem was that funds were beginning to emerge that mimicked LTCM’s successful methods.

‘When operating alone, there’s no major issue, but as competitors gradually enter the game, profit margins naturally compress.’

In a situation where margins were shrinking and competition intensifying, there was only one way to maintain high returns.

‘Increase leverage even further and take positions in risky products that would have been ignored in the past.’

In reality, while LTCM initially dealt only in relatively safe bonds to generate margins, they had begun venturing into riskier investments like merger arbitrage to boost returns.
The strategy was simple: purchase shares of companies announcing mergers at prices below the agreed acquisition price, then pocket the spread once the deal closed.
If mergers proceeded smoothly, profits were guaranteed, but if a deal fell through midway, stock prices would plummet, resulting in catastrophic losses—a dangerous wager indeed.
Engaging in such investments was itself a warning signal, yet investors intoxicated by LTCM’s stellar returns remained completely blind to these red flags.

‘Then again, I know how this ends, so I can see it clearly. If I didn’t have that foresight, I’d probably be just as dazzled by the money flowing into my pockets, blind to the dangers.’

Or perhaps I’d simply close my eyes to what I could see.

“One of the investors who put money in when the fund first launched has generated a 71% return even after fees, according to reports.”

I studied Landon Shore intently as he marveled at the figure, then posed my question.

“Are you regretting not investing when LTCM first opened?”
“Not at all.”

Landon Shore waved both hands in flustered denial.
His panic stemmed from the fact that it was Seok-won himself who had decided against investing initially.
Landon Shore cautiously observed that my expression wasn’t entirely unfavorable, then proceeded carefully with his next words.

“There’s talk that LTCM is raising an additional billion dollars in new investment alongside Merrill Lynch. What if we tested the waters with, say, 100 million dollars?”
“Hmm. They’re raising new capital?”

Seok-won stroked his chin thoughtfully as he asked.
Interpreting this as a sign of interest, Landon Shore leaned forward and responded.

“Yes. Given their remarkably encouraging performance over the past two years, they’ve become selective about investors—apparently there’s a queue of people wanting in.”
“I’m not so sure.”

Seok-won replied with evident indifference.

“Whatever others may think, as LTCM grows larger, they keep increasing their leverage. It feels like a time bomb waiting to detonate. When you pump air into a balloon until it reaches its limit, it has no choice but to burst.”
“Ah, then….”
“I won’t be investing in LTCM now or ever.”

Seok-won drove the point home with unwavering conviction.
Faced with such an airtight stance, Landon Shore felt inwardly disappointed but had no choice but to accept defeat gracefully.

“Understood.”

Watching Landon Shore’s face show lingering regret, Seok-won thought to himself.

‘In a few years when LTCM goes bankrupt, he’ll be grateful that the boss held back and didn’t get involved.’

He could already picture Landon Shore’s relief, his hand pressed to his chest as he acknowledged that the boss’s decision had been the right one.

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This chapter was translated by Lunox Novels. To support us and help keep this series going, visit our website: LunoxScans.com
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