Golden Spoon Investment Portfolio - Chapter 319

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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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319. Before it’s too late, I need to step into the ring.

February 17, 1997, Tokyo, Japan.
John Porter, the branch manager of Eldorado Fund’s Japan office, sat at his spacious desk in a leisurely manner, conversing with Nakamura Shoichi, the head of the derivatives division at Nomura Securities.

“So you’re asking us to terminate the CDS option contract we signed with you.”
[Yes, that’s correct. I would greatly appreciate your understanding in this matter.]

Unlike his usual arrogant demeanor, bolstered by pride as Japan’s premier securities firm, Nakamura Shoichi was now completely deferential.
Meanwhile, Porter leaned back in his chair, exuding complete composure.
The reason Nakamura Shoichi was so desperate was the Thai stock market, which had been plummeting without bottom ever since the baht came under attack.
The Thai SET Index, which had surpassed 1,279 points last year and enjoyed prosperity, began to rapidly deflate its accumulated bubble from the second half of the year as the current account deficit continued to grow and the economy deteriorated.
However, since the option trigger condition was the SET Index falling below 600 points, Japanese securities firms including Nomura Securities, which had entered into option contracts, had not been greatly concerned until now.
Then, starting last week, hedge funds suddenly launched their attack on the baht, and the Thai stock market, caught in the crossfire, plunged into panic and collapsed, putting them in dire straits.
The SET Index broke through the 1,000-point support level that was considered a floor and continued its free fall, reaching 700 before anyone realized it—they were truly panicking.
As the Thai SET Index dove downward the moment the market opened today as well, Porter, watching the monitor, spoke with a voice full of leisure.

“If you wish to terminate it, then we shall do so.”
[Thank you so much!]

At the sound of Nakamura Shoichi’s delighted response, Porter held the receiver to his ear and broke into a broad smile, baring his teeth.

“You’re aware of how the penalty clause is structured in case of termination, correct?”
[That… well…]

When the subject of the penalty fee came up, the other party trailed off and showed a troubled reaction.

“Just to remind you, the condition stipulates that the party requesting termination pays 80% of the total CDS option contract amount to the counterparty.”

If even one contract were to be cancelled, the remaining two—the options on Korea’s KOSPI and Indonesia’s stock market—would automatically be terminated as well, resulting in a penalty payment of 2.4 billion dollars, which was 80% of the total contract amount.

[Isn’t that condition far too harsh?]

Nakamura Shoichi pleaded as if begging for mercy.

“These are contract terms that have been thoroughly reviewed and notarized by a lawyer.”
[Of course, but you’re only terminating the Thai SET index option. Combining all three options together and demanding a penalty is excessive, isn’t it?]

Hearing the tone of someone trying to reduce the penalty by any means, Porter’s branch manager immediately hardened his expression.

“You’re well aware that these three options were bundled together in a single contract from the start. That’s precisely why you’ve been paying the fees as a combined sum.”
[But the other two options besides Thailand are still far from their trigger conditions… Couldn’t you lower the penalty amount somewhat, taking that into account?]

Nakamura Shoichi continued to press him, gauging his reaction carefully.

“Then what figure did you have in mind?”

Though I had no intention of reducing it at all, I asked as if probing, and Nakamura Shoichi answered quickly.

[How about 600 million dollars?]

Upon hearing the figure, Porter’s branch manager let out an incredulous laugh.

“600 million dollars—not even half? Are you aware that the fees we’ve paid to Nomura Securities for maintaining the options amount to 150 million dollars?”
[Still, you’d be seeing 450 million dollars in profit….]
“No. If the Thai SET index breaks below 600 as things stand now, we could earn 1 billion dollars. Instead, you’re asking us to lose 400 million dollars.”
[It hasn’t broken the 600 line yet, so it’s not confirmed profit, is it?]

Faced with such unreasonable logic, Porter’s branch manager responded with cold derision.

“Let’s be honest here. From your perspective, it looks like 600 will break soon, so you want to terminate the options contract before that happens, don’t you?”
[Well, it’s not so much that as it is a matter of risk management….]

Hit squarely on the mark, Nakamura Shoichi began to ramble, trying desperately to deflect.
Porter’s branch manager cut him off mid-sentence, as if he had nothing more to hear, and spoke with firm finality.

“Either pay the penalty as the contract stipulates, or pray that the options clause doesn’t trigger while you watch the Thai SET index. Choose one.”
[Rather than that, couldn’t we consult with each other and find a compromise?]
“I’m ending this call.”

Porter’s branch manager set down the receiver and hung up the phone.

“Tsk. He calls wanting to negotiate, then tries to peddle nonsense.”

Porter frowned irritably and clicked his tongue, then turned his gaze to the monitor before him.
Watching the Thai SET Index slide relentlessly downward without a single pause, he couldn’t help but whistle low.

“To be honest, when I received the directive and entered into the options contract, I thought it would be difficult to turn a profit. Who could have predicted that Thailand’s booming stock market would collapse so spectacularly in an instant?”

Porter tapped his desk rhythmically, his mind drifting back to Seok-won, with whom he’d spoken this morning.

“That man is truly remarkable.”

A sudden thought struck him, and Porter moved his mouse to pull up the charts for Korea’s KOSPI and the Indonesian stock market.

“Surely the other two markets aren’t experiencing the same kind of stock market collapse as Thailand?”

Porter’s eyes widened as he stared at the monitor, his words spoken almost carelessly, and he quickly shook his head as if dismissing an absurd notion.

“No. That can’t be.”

Even as he thought it couldn’t be, Seok-won’s morning directive echoed persistently in his mind.

‘No matter how much they plead, if they don’t comply with the penalty clause as stipulated, you must never cancel the options contract.’

Could it be?
Porter swallowed hard, his throat suddenly dry.
Just then, a beep sounded, and the Female Secretary’s voice came through the keyphone speaker.

[Executive Director Tanino from Yamaichi Securities is calling. What would you like to do?]

Without even needing to hear the purpose of the call, Porter already understood. He cleared his mind and reached out with one arm to press the keyphone button as he spoke.

“Put him through.”
[Understood.]

And so Porter fielded calls from representatives of Japan’s Big Four securities firms—Nomura Securities, Daiwa Securities, Nikko Securities, and Yamaichi Securities—each pleading with him to cancel the options contracts, a subtle form of coercion that stopped just short of outright intimidation.

***

Quantum Fund Office, 7th Avenue, Manhattan, New York.
George Hamilton sat in the center of a spacious sofa in the Executive Office, with Rodney, the CIO, and Ian, the Chief Manager, seated around him in conversation.

“So Eldorado Fund is betting on a long position in the baht, not a short?”

George Hamilton, sitting with one leg crossed, set down his teacup with a puzzled expression.

“That’s correct. After analyzing Eldorado Fund’s trading records over the past five days, we confirmed they’ve taken long positions in both futures and spot markets.”

At Ian’s response, George Hamilton’s brow furrowed slightly.

“They don’t actually think we’re going to lose to the Thai government, do they?”

Rodney, dressed in a deep navy suit with a white pocket square, shook his head in response to George Hamilton’s evident displeasure.

“That’s where it gets a bit ambiguous.”
“What do you mean?”
“The amount they’ve committed seems too small to say they’re fully betting against us.”
“How much did they put in?”
“We may not have grasped everything, but the position size appears to be only around four to five hundred million dollars.”

George Hamilton hummed and leaned back in his chair.

“You’re right—considering Eldorado Fund’s size, that bet is relatively small.”
“But regardless of the amount, the fact that they’ve wagered money on a long position means Eldorado Fund believes the Thai government has better odds of success, doesn’t it?”

George Hamilton nodded slightly at Ian’s words.

“If that’s really the case, then Seok-won’s luck has finally run out.”

A chill crossed George Hamilton’s face.
Rodney harbored doubts about whether Seok-won, who had demonstrated such remarkable judgment until now, had truly made a miscalculation, but he kept such thoughts to himself.

“Anyway, the Bank of Thailand has spent over eight billion dollars defending the baht so far, correct?”
“Yes. By the end of today, it’s expected to approach ten billion.”

Rodney answered immediately.

“They’re depleting their foreign reserves much faster than we initially anticipated.”
“With 27 baht per dollar as their defense line, they’re pouring out their foreign reserves every time the exchange rate falls. There’s no way around it.”

George Hamilton clicked his tongue with a look of contempt.

“If they had retreated their defensive line gradually while maintaining their position, they could have held out much longer. But to fight with their entire strategy laid bare like that—truly foolish.”
“It suggests that Thailand’s capacity to respond to external attacks is inferior compared to Britain and Japan, doesn’t it?”

Rodney shrugged and continued the conversation.

“For ordinary people, perhaps ignorance is forgivable, but for those responsible for a nation’s economy to be incompetent is a sin. Still, thanks to their incompetence, achieving our objective has become far easier. From our perspective, there’s nothing to complain about.”
“Then shall we enter the fight properly at this point?”

Rodney asked with gleaming eyes.
George Hamilton’s lips curved upward in response to the barely contained excitement in his gaze.

“Now that Thailand’s foreign exchange reserves have been significantly depleted, we shouldn’t wait any longer before stepping into the ring.”
“I’ve been waiting to hear exactly those words.”

As Rodney smiled at him, Chief Manager Ian also fixed his gaze on the two men with an expression brimming with anticipation.

“Trickling money in bit by bit has been frustrating, to say the least. Now we can place a proper bet.”

George Hamilton displayed a leisurely confidence, like a hunter toying with already-captured prey.

“When Asian markets open tomorrow, we’ll deploy one billion dollars in a single wave in the first phase, making it absolutely clear that we’re the ones moving.”
“Understood.”

Chief Manager Ian responded promptly and threw in a quip.

“It will be the day of the second Tokyo firebombing—or rather, the Bangkok firebombing.”
“Ha ha ha! A fitting comparison indeed.”

Just as the Quantum Fund led by George Hamilton had torn down the Bank of England and Japan, when it raised its flag and gave the signal, the hedge funds would descend like a pack of starving hyenas, tearing into the Thai government.
The three men had no doubt that once this happened, the Thai government, having already depleted much of its foreign exchange reserves, would be unable to hold out any longer and would ultimately surrender.
Rodney suddenly wondered how the Eldorado Fund, standing on the opposite side with a long position, would respond to the massive baht-selling offensive that would cut off the Thai government’s lifeline.

‘Will they realize their mistake and quickly reverse their position? Or is there truly something we don’t know? Time will tell.’

At this moment, neither George Hamilton nor Rodney anticipated that they would soon receive an unexpected blow from the Thai government they had so thoroughly underestimated.
As countless desires and conspiracies swirled together, the sixth day finally dawned—the day that would determine the victor of the first round in the fierce battle between the Thai government and the hedge funds over the fate of the baht.

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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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