Golden Spoon Investment Portfolio - Chapter 358

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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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358. Black Monday

July 14, 1997.
Dressed in a loose-fitting shirt and thin cotton pants, Seok-won opened the refrigerator, retrieved a perfectly spherical ice cube, and dropped it into an old-fashioned glass with a soft clink.
He then selected his favorite Johnnie Walker Pure Malt 15-year from the display case, poured it over the ice, and glanced at the Rolex on his wrist—it had just past 9 p.m.
Holding the old-fashioned glass in one hand, Seok-won left the kitchen, crossed the expansive living room, and headed toward the dedicated trading room on the opposite side.

“Mm.”

Settling into the plush chair and taking a sip, the rich, aged flavor of the whiskey bloomed across my palate.
I set down the glass and turned my attention to one of the multiple monitors arranged on the desk.

[HSI: 11,781.88 (
–2,379.03 –16.8%)]

As the Quantum Fund and other hedge funds unleashed a relentless assault, dumping over 30 billion Hong Kong dollars daily for two consecutive trading days, the already fragile Hong Kong stock market finally collapsed under the Hong Kong Government’s drastic emergency measures announced following Friday’s turmoil.
Short-term interest rates were raised from 10% to 12%, and banks were prohibited from lending Hong Kong dollars to currency speculators.
Adding to this, as nervous retail investors and citizens rushed to sell Hong Kong dollars and buy U.S. dollars, the government implemented an emergency measure temporarily suspending U.S. dollar withdrawals from commercial banks.

“With overnight interbank rates skyrocketing from 6% to 300% and one-month rates surging to 47.5%, it would be stranger if the stock market didn’t collapse.”

A 300% overnight rate—something unimaginable under normal circumstances.
These extreme measures plunged the market into complete panic and shock, resulting in a –16.8% plunge—the largest single-day decline in Hong Kong stock market history since the Great Depression.
I shifted my gaze to the New York Stock Exchange futures chart displayed on the adjacent monitor and murmured to myself.

“The problem is that the shock doesn’t end in Hong Kong—the aftershocks are spreading like dominoes in all directions.”

Unlike Thailand, Malaysia, and the Philippines, which had already collapsed, Hong Kong was Asia’s financial center and a magnet for global capital, so the shockwave reaching the entire world was inevitable.
The London Stock Exchange, which had opened before New York, was already plummeting by over 3%.
Then my phone rang. I pulled it from my pants pocket and answered.

[Have you seen the Dow futures?]

I heard Landon Shore’s slightly excited voice as I held the phone to my ear and leaned back in my chair.

“It’s showing weakness as expected, but the important thing is the main market, isn’t it?”
[That’s true. But seeing London collapse like that, it seems New York will have a hard time avoiding the fallout from the Hong Kong market crash.]
“It will.”

After a brief pause, Landon Shore asked with curiosity.

[How much do you expect the Dow Jones to fall from this shock?]

Seok-won gazed at the monitor displaying the Dow Jones futures chart, contemplated for a moment, then answered calmly.

“Today’s decline could exceed five hundred points.”
[…!]

Landon Shore, startled by what he heard, asked back in disbelief.

[Five… five hundred points, you said?]
“That’s right.”

Landon Shore, his alarm evident even through the phone line, spoke in a flustered tone.

[A five-hundred-point drop in a single day—that didn’t even happen during the Great Depression. Do you really think it will happen?]
“As I mentioned before, because stock prices have risen enormously due to the dot-com craze, investor anxiety is equally massive. Even a small shock will trigger an extremely sensitive reaction.”
[But even so, five hundred points seems excessive, doesn’t it?]

Landon Shore’s response suggested the figure exceeded what he could reasonably imagine.

“If the only bad news were the Hong Kong stock market crash, you’d be right. But just days ago, the Federal Reserve Chairman publicly warned investors that the U.S. stock market has been showing signs of overheating.”

Seok-won continued speaking while holding the phone to his ear and sipping whiskey.

“Moreover, the June housing starts index released last week came in higher than experts expected, which has sparked concerns about inflation and interest rate hikes due to economic overheating, amplifying market anxiety. In short, it’s like the branches and leaves are bone-dry—a single spark could ignite a massive fire in an instant.”
[Hmm. Now that you mention it, the timing really does seem unfortunate.]

Seok-won shrugged and added.

“From our position with shorts on the futures, the more the Dow Jones falls, the better for us, isn’t it?”
[Ha ha ha. That’s certainly true.]

After taking several sips, Seok-won set down the rocks glass, now half-empty.

“Even if there’s a significant crash this time, the U.S. economy’s growth momentum remains solid, and above all, the dot-com fever is still alive. We won’t stay down for long—the market will quickly find its footing and bounce back.”
[Then we’ll need to liquidate all our positions before that happens.]
“Exactly. Starting from the second day of the crash when market panic is still running high, we’ll move aggressively into liquidation.”
[Understood.]
“Oh, and don’t forget to use this crash to accumulate Qualcomm shares at bargain prices.”
[Yes, I’ll see to it.]

After issuing a few more instructions, Seok-won hung up and set his mobile phone on the desk.
Then he stared intently at the charts for the Dow, S&P 500, and NASDAQ futures, all still showing weakness.

“With the flow disrupted and the hedge funds’ assault on Hong Kong accelerating, it’s possible the decline could be even steeper than originally expected. I’m curious to see how this plays out.”

***

The Trading Floor at Lehman Brothers Headquarters in Times Square was gripped by heavy tension as the opening bell approached.
The shockwaves from Hong Kong’s market crash had already rattled London, and New York was next in line to be hit.
Lackman, who had finally shed his Junior Trader tag just a few months ago, sat in his chair and licked his parched lips with his tongue.
Then he turned his head toward Dietz in the seat right next to him and whispered in a low voice.

“There’s no way we’re avoiding a decline today, right?”

Dietz, wearing a striped tie, nodded grimly.

“Not after what we saw in London.”

London and the European markets, which had opened hours earlier, had plummeted more than 3% under the shockwave of Hong Kong’s crash, recording a devastating Black Monday.
The New York Stock Exchange futures were also showing weakness across all three major indices, unable to escape the fallout.
Lackman, who had unfortunately increased his positions significantly just the week before, frowned and grumbled.

“Why do they have to spread the damage here? Why can’t they just fight it out among themselves?”
“Because both the mutual funds invested in Hong Kong and the hedge funds attacking it are based on Wall Street. It’s natural that we’re affected.”
“I know, I know… it’s just frustrating.”

Lackman let out a groan of anguish.
Then he glanced at one of the monitors set up on his desk displaying the futures index and asked.

“How much do you think it’ll drop?”
“How would I know? But one thing’s for sure—with the bad June housing starts data from a few days ago and the Federal Reserve chairman’s warning about market overheating, there’ll be strong selling pressure as investors rush to realize gains before taking losses.”
“Yeah, that makes sense.”

Lackman nodded reluctantly, sharing the same sentiment.
Then he pulled up his holdings on the monitor, scrolling through them with a troubled expression as he muttered to himself.

“I’m already underwater right after buying. Should I cut my losses immediately?”

Finding no answer despite his deliberation, he turned to Dietz again.

“What are you going to do?”

Dietz let out a small sigh at Lackman’s persistently annoying behavior and answered.

“I’ve placed all my sell orders at the opening price.”
“What? Already?”
“The sentiment is too poor. It’s obvious as day that prices will fall, so even though it pains me, I should sell while I’m still making a profit.”
“Hmm… It’ll be difficult today, but won’t you regret it if the market bounces back right after you cut your losses?”

Unlike Lackman, who couldn’t shake his lingering doubts and hesitated, Dietz had already let go of his greed.

“Then there’s no choice. Even so, I think it’s better than facing a crash head-on with nothing to cushion the blow.”

When his close colleague Dietz said he would liquidate his entire position, Lackman’s indecision deepened even further.
Seeing this, Dietz was about to advise him not to let unchecked greed amplify his losses, but after a moment’s thought, he held his tongue.
After all, no one knew how the indices would move, and trading results were each person’s own responsibility—not something determined by listening to others.
As he wavered and struggled to make a decision, the clock finally struck exactly 9:30 AM, and with the opening bell, the New York Stock Exchange opened for trading.

[DJI : 7,911.08 (▼ 52.45)]
[NASDAQ : 1,640.33 (▼ 10.59)]

Contrary to his tense anticipation, as the market opened, the indices that had been plummeting quickly reversed course and began climbing back, narrowing their losses. Lackman’s rigid expression softened as he spoke.

“If this goes well, we might manage to hold roughly flat for the day.”

Dietz frowned slightly, seeing that despite a flood of sell orders contrary to expectations, strong buying pressure was absorbing all of it.

“Was I too hasty…?”

A brief regret crossed his mind at the thought that his judgment might have been wrong.

“Wouldn’t it be better to buy back what I sold right now?”

Lackman, who had just let out a sigh of relief beside me, turned to speak as if he were the one worried about my situation.
Dietz stared at the stock index climbing steadily upward again, hesitating over what to do next.
Just as he steeled his resolve and was about to rebuy the positions he’d sold, someone suddenly let out a cry that sounded almost like a scream.

“What?! Massive sell orders are pouring in all at once!”
“Yes!”
“Why is this happening?!”
“No! This can’t be!”

Dietz froze his finger above the buy button and checked his monitor.
What he saw was a colossal tsunami of sell orders completely engulfing the trading window—as if a massive wave were crashing down upon the shore.

“My God….”
“What on earth is happening?”

Both Dietz and Lackman were so stunned by the sudden turn of events that they could only gape in silence, their minds reeling.
In the blink of an eye, the Dow had plummeted over 100 points, and NASDAQ continued its freefall.
Lackman, snapping back to his senses too late, rushed to cut his losses, but the stock prices were falling faster than he could place orders.
No matter how frantically he pressed, his trades wouldn’t execute, and his losses snowballed before his eyes—Lackman’s face drained of all color.
Meanwhile, Dietz, who had narrowly escaped falling into the abyss, felt a chill run down his spine as he exhaled a breath of relief.
Yet only a handful of traders had been blessed by fortune’s favor as Dietz had been.
Most of the traders on the Trading Floor stood transfixed before the massive ticker boards, now blazing crimson like a sea of blood.
Some clutched their hair in despair, while others stood in stunned silence, watching the indices plunge ever deeper, their sighs growing heavier with each passing moment.
Lackman continued hammering in sell orders that refused to execute, cursing under his breath.

“Damn it! How much further is this going to drop?!”

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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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