Golden Spoon Investment Portfolio - Chapter 242

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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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242. Consider it as recovering the money we lost to those Eldorado bastards.

“Typically, we use bonds as the underlying asset for CDS options, but stock indices? I must admit, that’s rather unexpected.”

John, the branch director, responded to Usami’s remark with composure.

“Whether it’s bonds or stock indices, the principle remains the same—we’re essentially purchasing insurance to protect against potential losses, aren’t we?”
“That’s true enough, but since this situation has never arisen before, I’m uncertain how to structure the option contract.”

At that, John, the branch director, answered casually.

“It’s quite simple. As noted in the proposal, we calculate the CDS value based on the default probability of nations or corporations—similarly, we use the stock indices of three countries as the underlying assets, and the option triggers when the indices fall below the agreed threshold.”

Usami turned his head to look at Nakamura Shoichi, the department head seated to his left, and asked.

“What were the benchmark levels that Eldorado Fund proposed?”
“Korea’s KOSPI at 500, and Thailand’s SET Index and Indonesia’s IDX at 600 and 450 respectively.”

John, the branch director, leaned back in his chair and added with a smile.

“Considering that Thailand’s SET Index stands at 1,279 today, the option would only trigger if it drops by half. The same applies to the other two indices.”
“Hmm.”

Watching Usami stroke his chin with one hand, John, the branch director, shrugged his shoulders.

“Honestly, for the market to crash that severely, we’d need a shock comparable to the Kobe earthquake we experienced last time. In other words, the probability is extremely low.”

Though the mention stirred unpleasant memories, his words were not without merit.

“As you say, such a severe market collapse is indeed rare. That’s precisely what makes me puzzled.”

Usami’s expression grew devoid of humor as he fixed John, the branch director, with a narrow, penetrating gaze.

“Does Eldorado Fund believe that Asian markets—or at least Thailand’s market—will experience a significant crash?”

John, the branch director, met his gaze unflinchingly and replied with a slight smile.

“That’s hardly the case. Nomura Securities is well aware of how favorable the Asian markets have been recently, aren’t you?”
“Then why are you willing to pay such a steep premium just to enter into an options contract with us?”

Usami, still brimming with suspicion, posed a sharp question.
It was only natural to be wary—they’d suddenly sent a proposal seeking to establish a CDS options contract that hadn’t existed before, which suggested ulterior motives.
Moreover, the memory of Eldorado Fund selling knock-in-knock-out options to Japanese export companies and extracting an astronomical sum remained painfully fresh, making caution all the more necessary.
John, aware of what lay beneath the surface, inwardly clicked his tongue at the sight of his counterpart’s guarded demeanor.

‘This won’t be easy. Though to be fair, unless Nomura Securities is staffed entirely by fools, suspicion is warranted.’

Yet outwardly, he betrayed nothing, maintaining an easy smile at the corners of his mouth.

“Simply put, we’re looking to hedge our bets.”

John spoke, observing Usami with his arms crossed.

“You may not be aware, but Eldorado Fund invests actively across the stock markets of not just Japan, but all of Asia. We sometimes make bold wagers, so we’re simply establishing safeguards in case of losses.”
“The amount seems rather excessive for that explanation.”

Usami continued to regard him with suspicious eyes as he flipped through the documents before him.

“According to the proposal, each contract you’re seeking amounts to a billion dollars.”
“Isn’t it true that the larger the insurance coverage, the better?”

John spoke as though it were a trivial matter, but Usami addressed him in a clipped tone.

“Considering that CDS transactions typically involve fees around 5 percent, you’d be paying 150 million dollars annually in premiums alone. For simple insurance, the scale is far too large.”
“Well, well.”

John’s smile vanished from his face. After a brief silence, he spoke again.

“It seems an executive of Japan’s premier securities firm doesn’t become one by accident. Very well. Since you’ve already sensed it, I’ll be candid with you.”

Usami looked at him with an expression that said he’d suspected as much all along.

“As you’ve surmised, we’re betting on a decline in Asian markets.”

The moment John admitted it, the Nomura Securities representatives seated across from him stirred noticeably.

“That’s strange.”
“Even so, this is….”

As everyone murmured in astonishment, Usami furrowed his brow and asked.

“For the index to plummet this severely, a crisis equivalent to a national disaster would need to occur, just as you mentioned earlier. Do you truly believe such a catastrophe will come to pass?”
“There’s a saying: High Risk High Return. To make serious money, one must bet boldly.”

At this glib response, Usami’s expression turned incredulous.

“The Porter I know wouldn’t make such an absurd bet. Is the New York Headquarters attempting reckless gambling?”
“On that matter, I’ll have to refrain from commenting.”

Watching him conduct himself like a smooth operator while clamping down on the crucial details, Usami shook his head slowly.
Though he’d managed to uncover the other’s true intentions, somehow the headache only grew worse.
Then John straightened his posture and posed a question with newfound gravity.

“Would you be willing to enter into a CDS option contract with us?”

Usami tapped his fingertips against the conference table thoughtfully before lifting his gaze once more.

“Very well. Let us discuss the specific terms.”

After some negotiation, both parties concluded a 3 billion dollar CDS option contract using the stock indices of Korea, Thailand, and Indonesia as underlying assets.
Once the Eldorado Fund representatives departed, Usami remained seated in his conference room chair and withdrew a cigarette.
Nakamura Shoichi, standing nearby, glanced sideways at him and broached the subject cautiously.

“We’ve concluded the contract as you instructed, but an uneasiness lingers.”

Usami lit his cigarette with a lighter and spoke bluntly.

“Are you worried the Asian markets might actually crash?”

Considering it himself, the probability seemed far too low, so Nakamura Shoichi shook his head.

“That’s not it. Even if a shock occurs and the index plummets, it would be difficult for it to fall to the agreed-upon level.”
“Then what’s bothering you?”

Nakamura Shoichi gazed at the seat across from them where the Eldorado Fund representatives had been sitting and answered.

“Aren’t they the cunning types who orchestrated the knock-in knock-out option crisis and plunged major domestic export companies like Nissan Motor and Sony into serious trouble? The fact that Eldorado Fund brought us this proposal despite knowing the probability is low makes me deeply uneasy.”

Usami, a managing director with a cigarette wedged between his fingers, spoke as if he understood.

“That’s why over the past few days, I’ve had you all meticulously search for any potential threats that could cause stock market crashes in Korea, Thailand, and Indonesia, but we found absolutely nothing.”
“Yes, well.”

Nakamura Shoichi, the department head, nodded slightly with a complicated expression.

“The only thing we managed to uncover is that all three countries have shifted into current account deficits, but that alone wouldn’t cause the stock markets to crash by half—at most a minor decline.”
“Exactly. There’s definitely something they’re plotting, but we couldn’t figure out what it is. On the other hand, it was too tempting to abandon based on mere suspicion when the premium from the options contract was so attractive.”

Through the options contract with Eldorado Fund, Nomura Securities would pocket 150 million dollars in CDS premiums annually for three years.
There was no reason to refuse—earning 450 million dollars while hedging a risk with such low probability of occurrence.

“You should remember when the Kobe earthquake struck and we took substantial losses by mishandling our Nikkei futures positions.”
“…Of course.”

When the Tokyo stock market plummeted due to the massive earthquake, Nomura Securities, which held considerable stock positions, suffered enormous losses.
In an attempt to recover even a fraction of those losses, they aggressively sold Nikkei futures, but contrary to expectations, the Japanese stock market rebounded within days, and they ended up losing even more money.
Because of that incident, Yoshimura—an entry-class peer and top candidate for executive promotion who had been on a winning streak—took responsibility and was even demoted to a subsidiary. Nakamura Shoichi remembered those events clearly.

“The ones who bought those futures and emptied our pockets back then were none other than Eldorado Fund.”

Usami stubbed out his half-smoked cigarette in the crystal ashtray on the table.

“I don’t know what schemes they’re harboring, but one thing is certain—they’re betting on something with very low probability. Perhaps they’ve fallen into arrogance from their continued successes.”

No matter how much one spoke of high risk, high return, in Usami’s eyes, the other side was simply engaging in a hopeless gamble.

“Regardless, it’s a game where we have better than seventy percent odds, so let’s consider this an opportunity to recoup the money we lost to those Eldorado bastards.”
“…Yes.”

Even as Nakamura Shoichi nodded, an inexplicable unease lingered in a corner of his mind, and he couldn’t manage to relax his stern expression.

* * *

A few days later.
Seok-won, leaning back against the plush rear seat, pulled out his phone and answered the call at the sound of the vibration alert.

“Hello.”
[It’s Landon Shore. Do you have a moment to talk?]

I turned my gaze slightly out the car window as the Mercedes sedan carrying me crossed over the Hannam Bridge.

“Go ahead.”
[John has completed all the CDS contracts with Japan’s four major securities firms as instructed.]

I smiled, holding the phone to my ear as I received the news I’d been waiting for.

“Excellent. Tell John I appreciate his hard work.”

I had entered into CDS option contracts to accumulate as many dollars as possible in anticipation of the Asian financial crisis that would soon descend upon us.
However, the Wall Street Investment Banks and Hedge Funds that would be attacking the Asian foreign exchange markets were likely already assessing the vulnerable financial conditions of various Asian nations, so I had instead targeted Japan’s major securities firms.
They possessed considerable capital due to the bubble economy’s influence, but relative to their size, their international financial acumen and information networks remained underdeveloped—making them perfect targets to exploit.

‘I’m not doing this intentionally, but they’ll have to serve as my dollar ATM.’

I muttered to myself inwardly, then cleared my thoughts and listened to what Landon Shore had to say.

[Combined, all four securities firms total 12 billion dollars in option contract value.]
“What’s the premium?”
[For the three-year contract, we must pay 600 million dollars annually in fees.]
“Five percent isn’t a bad rate at all.”

Landon Shore then asked with a slightly worried tone.

[But if the Asian stock market collapse doesn’t happen as expected, we’d be throwing away 1.8 billion dollars. Are you comfortable with that?]
“Before long, those Japanese securities firms will be beating their chests in regret over signing these option contracts, so you can rest assured.”
[Well, your predictions have never been wrong before, boss. I’m confident this time will be no different.]
“Ha. But what if things don’t go as expected this time?”
[Then there’s nothing we can do about it. Even if we lose all the agreed-upon fees, it won’t significantly shake the Eldorado Fund’s asset base.]

Though 1.8 billion dollars was an enormous sum, the Eldorado Fund’s assets had already grown to a scale where losing that amount wouldn’t cause any real tremor.
I chuckled softly and answered with ease.

“That won’t happen, so don’t worry.”
[I certainly hope so.]

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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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