Golden Spoon Investment Portfolio - Chapter 430

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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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430. There’s no way I would push through such a massive transaction recklessly.

The sudden cold snap had frozen all of New York solid, yet the Hotel Penthouse remained warm and inviting.
Dressed casually, I stood before the expansive floor-to-ceiling windows of the Living Room, slowly raising a mug that exhaled the rich aroma of freshly ground coffee.
My gaze drifted across Central Park, blanketed entirely in white from the snow that had fallen throughout the night.
Perhaps it was the bitter cold that kept the streets empty, but the beautiful winter landscape seemed to soothe my mind simply by observing it in silence.
Then I heard footsteps and a familiar voice from behind.

“Good morning, boss.”

I turned to see Landon Shore approaching with a subtle smile, impeccably dressed in a gray cashmere coat.

“Welcome.”

As I settled naturally into the prime seat on the sofa, Landon Shore took his place to the left.
He set down his mug on the table and spoke first.

“The snow must have made the city roads a mess—did you hit much traffic?”
“I came by helicopter.”

He shrugged casually, and I responded with equal nonchalance.

“That’s certainly better than wasting precious time stuck on the road.”

In New York, a city of the super-wealthy, commuting across Manhattan by helicopter was an entirely ordinary sight.
The city’s notoriously brutal traffic congestion—a word that hardly did it justice—made it even more common.
For the super-rich and Wall Street securities traders, where time was money itself, paying several times more for a helicopter was far preferable to wasting hours crawling through gridlock.
Landon Shore had recently purchased a new estate in Long Island East Hampton, an area renowned for its affluent residents, and had installed a landing pad on the grounds, commuting by helicopter daily.
Thanks to this, he could traverse a distance that would take over two hours by car in just ten to fifteen minutes.
Han Ji-sung, my Attendant Secretary, arrived with a steaming cup of coffee and set it before us. Landon Shore gave a slight nod of thanks.
He lifted the cup to his lips, then leaned back with one leg crossed, speaking to me as I reclined against the sofa.

“Charles Kirk has apparently submitted his resignation from Intel.”

I recalled Charles Kirk, whom I had met in San Diego just days ago.

“So when can he start coming to work?”
“His family will relocate later, and he plans to stay in San Diego starting next week and commute to Qualcomm Headquarters.”
“I thought he’d need at least two weeks to settle everything, but it seems he’s eager to get started.”
“Since this is his first time serving as CEO, and given his considerable ambition to transform the rapidly growing Qualcomm into the world’s leading semiconductor company, his enthusiasm appears quite substantial.”

I nodded slightly, pleased by the news.

“There’s nothing wrong with the new captain steering Qualcomm forward having such strong drive.”
“Quite so.”

I took a sip of coffee and set the cup down before asking.

“By the way, how is the recruitment of Alice Su progressing?”
“We’ve made a recruitment proposal through a professional headhunting firm, and the response has been quite positive.”
“Give her everything she wants and do whatever it takes to bring her on board.”
“I’ll see to it as you say.”

Landon Shore, who had responded, added while holding the warm coffee cup in his hand.

“Oh, and I believe I mentioned before that LTCM notified its investors they would return all the money invested in the fund.”
“Yes, you did.”
“Apparently, the investors are in quite an uproar over it.”

I tilted my head to the side, asking with a puzzled expression.

“What’s the problem? They’re not losing money—they’re getting their returns back as well.”
“The investors are saying they’d rather stay in the fund, even if the fee ratio increases from the original agreement.”
“So LTCM wants to return the money, but the investors are refusing to withdraw it?”
“Exactly. Honestly, if they were consistently delivering 30 to 40 percent annual returns like that, I wouldn’t want to pull my money out either.”

Then Landon glanced at me and broke into a grin, flashing his white teeth.

“Of course, LTCM’s returns, which Wall Street praises as remarkable, are nothing compared to ours.”

Landon Shore shrugged his shoulders with the relaxed expression of a victor.

“If we were to accept investments, people would come running from all directions with bundles of cash.”
“Well, that won’t be happening.”

Seok-won chuckled softly as he spoke.
With operational funds already reaching hundreds of billions of dollars, there was no reason to bother seeking new investments, so Landon Shore readily agreed.

“They begged for money when they needed it, but now they’re wiping their hands clean—the investors protested vehemently, but LTCM ignored them all and returned the capital anyway.”

As he spoke, Landon Shore leaned forward slightly.

“According to what I’ve heard, there was considerable internal debate at LTCM over returning the capital. But CEO Wiseman and Engeron, the investment director, pushed their position forcefully and got their way.”
“Greedy people, really. Once they had enough operational capital, they didn’t want to share profits with outside investors anymore.”
“Officially they claim it’s to increase operational autonomy, but that’s how it looks to me as well.”
“Failure always arrives when arrogance peaks.”

I spoke in a cold voice.
LTCM was brimming with confidence that they would continue their winning streak, but this was their zenith—a terrible cliff awaited them beyond.

‘In a few months, they’ll realize that returning the capital was a stroke of divine fortune.’

Conversely, had they been less greedy and kept the capital instead of returning it, LTCM might never have descended into such catastrophic circumstances.

“And LTCM is selling massive quantities of S&P 500 and major European index options.”
“Options?”

I narrowed my brow slightly, and Landon Shore nodded.

“Yes. They’re short-selling five-year index options with annual market volatility of 19% in both directions—the volume is substantial.”
“How large is the position for you to mention it?”
“I can’t say for certain, but it’s definitely at least hundreds of millions of dollars.”

I frowned as I spoke.

“Selling options in both directions rather than one direction means they’re not reading market trends—they’re simply trying to pocket the premium. The scale is far too large.”
“Volatility trading is something LTCM has been doing since their bond days, but even I see considerable risk in this approach.”

I hummed thoughtfully and crossed my arms.

“They seem to be placing far too much faith in the option pricing formula created by Sean Paine and Johnny Kalas, who won the Nobel Prize in Economics last year.”

The essence of this formula was that one could completely hedge the risk of a specific option by trading the underlying asset at precise ratios.
And Sean Paine and Johnny Kalas were founding members of LTCM.

“LTCM has achieved remarkable returns using formulas created by mathematicians over the years, so people have no choice but to believe in them blindly. Seeing that, many Wall Street investment banks and hedge funds are now hiring PhD-level mathematicians and copying LTCM’s approach.”

However, Seok-won responded with an indifferent expression.

“Markets don’t move based on complicated equations written on a blackboard, but rather by countless invisible variables. Mathematical formulas might serve as a reference, but they can’t be the answer.”
“You’re right. If stock markets worked like math problems with exact answers, there would be no one who couldn’t make money in the stock market.”

Landon Shore agreed with his assessment.

“They’ve been fortunate so far, but the moment an unexpected variable emerges, they’ll face a catastrophic collapse.”

The black swan that would soon arrive was Russia’s default.
Everyone knew Russia’s economy was struggling.
But until now, no one had imagined that Russia—a superpower with nuclear weapons—would suddenly declare national bankruptcy.

‘That’s why the shock was so much greater.’

It was hard to imagine LTCM’s collapse despite their meteoric rise, but since these were Seok-won’s words and not someone else’s, Landon Shore took them seriously.

“An unexpected variable… You’re right. You never know when something might happen.”

Since it would happen soon anyway, I set aside those thoughts and changed the subject.

“Regardless, there are stocks we need to start buying now.”

Landon Shore straightened in his seat.

“Which stocks are you referring to?”
“Citicorp and Travelers Group.”

Landon Shore tilted his head with a puzzled expression.

“As far as I know, there’s no particular positive catalyst for their stock prices to rise. Why do you want to buy those two stocks?”
“There will be a merger announcement soon.”
“…!”

Landon Shore’s eyes widened in shock at the unexpected revelation.

“A-a merger, you say?”
“That’s right.”

Unlike my composed demeanor, Landon Shore couldn’t hide his bewilderment.

“Once the merger announcement breaks, the stock price will surge dramatically. So we need to accumulate shares before that happens.”

Landon Shore, having struggled to suppress his initial shock, spoke with a skeptical tone as he studied my expression.

“But wouldn’t the Glass-Steagall Act make such a merger extremely difficult?”

The Glass-Steagall Act was legislation that strictly separated commercial banks from investment banks and limited the types of products each could handle.
Enacted in 1933 in response to the observation that reckless management by unregulated banks had been one of the causes of the 1929 stock market crash and the subsequent Great Depression.
As a result, commercial banks were prohibited not only from investing customer deposits in stocks but also from establishing any affiliated relationships with securities companies.
Citicorp was the holding company of Citibank, a major commercial bank, while Travelers Group owned Salomon Smith Barney, an investment bank renowned as one of Wall Street’s top five institutions.
In other words, an actual merger would directly violate the Glass-Steagall Act.

“Everyone thinks the same way, so they can’t even imagine a merger between these two banks. But you know as well as I do that there’s been considerable debate about the Glass-Steagall Act’s effectiveness for several years now.”
“That may be true, but it’s still an existing law, isn’t it?”
“Exactly. However, it’s also the single greatest obstacle to the White House’s policy of fostering the financial industry centered on Wall Street.”

Landon Shore swallowed hard and listened intently.

“If these two banks merge, it will be the largest M&A in history, reaching 140 billion dollars. Such a massive transaction wouldn’t be pushed through recklessly without careful consideration, would it?”

A thought flashed through Landon Shore’s mind, and he leaned forward in his seat.

“Are you suggesting the White House gave its approval?”

Seok-won smiled meaningfully at the corners of his mouth.

“Once the merger announcement is made, it will serve as a catalyst for arguments about the Glass-Steagall Act being obsolete and outdated. Then naturally, Congress will formally discuss its repeal.”

The certainty in my tone confirmed Landon Shore’s suspicion.
He then envisioned the consequences of the merger and his expression brightened.

“If the two banks merge as you say, it will indeed be a momentous event.”
“Exactly why you need to accumulate shares beforehand.”
“I understand what you’re saying.”

Landon nodded with eager enthusiasm.
Seok-won picked up the mug sitting on the table and sipped the remaining coffee, his thoughts turning inward.

‘The repeal of the Glass-Steagall Act will trigger a global financial crisis in a few years, but that’s a concern for later.’

The saying that history repeats itself through human greed and folly proved itself true.

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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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