Golden Spoon Investment Portfolio - Chapter 449

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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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449. By now, it must feel like a nuclear bomb has dropped.

August 16, 1998.
About 400 kilometers northwest of Moscow, in the small city of Valdai with a population of just under ten thousand, stood the Russian President’s dacha.
Nestled deep within a dense forest, the estate was cool during summer and surrounded by numerous lakes both large and small—a favorite retreat for President Ivanov, who enjoyed fishing.
The night lay thick with darkness.
President Ivanov, enjoying his summer vacation, sat on the reception room sofa with Prime Minister Yevgeny Popov and Russian Central Bank Governor Andrey Sinitsyn, who had rushed down from Moscow.
President Ivanov, his face flushed from having already consumed a glass of vodka and reeking of alcohol, stared at Governor Sinitsyn sitting on the left sofa with an expression of disbelief and asked.

“What did you just say?”

Governor Sinitsyn, receiving the gaze, wore an expression of distress and reluctantly forced his lips open.

“We have only one billion dollars in foreign reserves remaining. If immediate measures are not taken, we will face national default within two or three days.”
“What do you mean… Just days ago, didn’t we still have nearly five billion dollars in foreign reserves?”

At the pressing question, Governor Sinitsyn, visibly gaunt over recent months, answered in a weakened voice.

“We issued additional government bonds at high interest rates through Wall Street, and seven hundred million dollars in IMF loans came in… but the measures proved ineffective, and foreign currency outflows have only accelerated.”
“Even so, are you saying tens of billions of dollars have evaporated in just days!”
“The Asian currency crisis has resurfaced, and as the yen has plummeted, investors are rapidly withdrawing from emerging markets, and the shockwaves are reaching us.”

Unstable political conditions, deepening economic recession, and declining international oil prices—Russia’s internal factors were amplifying the exodus of foreign investors.
However, Governor Sinitsyn could not speak the truth and merely glossed over it.
Before his words had even finished, President Ivanov slammed his palm against the sofa’s armrest and bellowed.

“You’re treating Russia the same as some developing nations!”

Seeing him still unable to grasp the situation when foreign reserves were about to run dry, still mistaking Russia for what it was during the Soviet era, I could not help but sigh inwardly.
At that moment, Prime Minister Popov, sitting on the right sofa, interjected.

“The yen’s decline and such are merely excuses. This is surely a sinister plot by Western speculators to shake us during this opportunity.”

Upon hearing those words, Governor Sinitsyn immediately furrowed his brow.
The man was the very cause of the crisis, yet he continued spouting nonsense without grasping the situation—it was infuriating.
I wanted to point out that had he properly managed his subordinates from the start, things would never have deteriorated to this extent.
But time was too precious to waste on quarreling—every second mattered—so I suppressed my surging frustration and spoke in a clipped, rigid tone.

“When dawn breaks tomorrow and the foreign exchange market opens, massive capital outflows will resume, and we’ll face a truly irreversible situation.”

President Ivanov raised his glass and downed a shot of potent vodka in one gulp.

“What’s the solution?”

Sinitsyn leaned forward, as if he’d been waiting for this very question, and answered immediately.

“There is only one option remaining.”
“So what is it?”
“We must declare a moratorium.”
“…!”

President Ivanov’s eyebrows shot up in surprise as he stared at Sinitsyn, who continued with an unwavering expression.

“We suspend all debt repayments for ninety days to prevent further capital flight, and we must devalue the ruble.”
“….”

Prime Minister Popov, apparently already briefed on this matter, maintained a rigid expression without showing particular shock.
Faced with such a drastic measure, President Ivanov fell silent for a moment before finally speaking.

“Is there no other way?”

Sinitsyn shook his head heavily.

“This is the only method to avoid the worst-case scenario.”
“Ugh.”

President Ivanov grimaced and let out a groan of anguish.
After holding his head in his hands for a while, unable to let go of his reluctance, he turned to look at Prime Minister Popov.

“What about requesting aid from the United States and the International Monetary Fund?”

Prime Minister Popov averted his gaze slightly as he replied.

“I’ve already requested assistance, but both sides indicated they cannot provide further support.”
“Damn it!”

In truth, both the United States and the International Monetary Fund had much to say about the situation.
When Russia, facing the crisis, swallowed its pride and hastily dispatched a delegation to Washington, they accepted the apology and resumed their support.
Moreover, they agreed to disburse a staggering 22.6 billion dollars over eighteen months until the following year—far exceeding the initially promised 5.6 billion dollars.
This included not only the International Monetary Fund but also loans from the World Bank and the Japanese Government.
The measure was born from the urgency that if Russia faltered, the economic crisis could spread to Europe and potentially spiral into another Great Depression.
Nevertheless, compared to other Asian nations like Korea, which had experienced the foreign exchange crisis first, this was remarkably swift and unprecedented support.
Yet despite this, Russia was forced to extend its hand again within mere months—making it feel as though the nation were a bottomless pit.
President Ivanov, his expression clouded with distress, turned once more toward Governor Sinitsyn with a question.

“If we declare a moratorium and devalue the ruble, can we resolve this problem?”

Governor Sinitsyn, uncertain what decision the President would make, sat in tension before hastily opening his mouth.

“At least we can prevent falling into complete bankruptcy and buy ourselves time to unravel the situation.”

No matter how he considered it, President Ivanov felt as though he were swallowing poison himself, yet unable to find any better alternative, he reluctantly gave his approval.

“There is no other way… It cannot be helped. Proceed with it.”

Governor Sinitsyn, who had been anxiously awaiting the response, finally released a sigh of relief.

“A difficult decision indeed, Mr. President.”

Governor Sinitsyn, his mouth bitter, bowed his head toward President Ivanov and spoke.

“Then I must return to Moscow immediately to prepare measures to minimize the shock.”

The sun had set and darkness enveloped all directions, yet there was no luxury for such considerations when Russia’s fate hung in the balance.
Once the moratorium was declared, it was as clear as day that it would deliver an enormous shock both domestically and internationally, making it imperative that he return to Moscow for swift action.
Given the gravity of the situation, President Ivanov himself needed to return to his post immediately.
In fact, considering his position as President, he should have returned to the Kremlin even before Governor Sinitsyn.
Yet President Ivanov showed no such inclination, pouring vodka into an empty glass and speaking as though discussing someone else’s affairs.

“Very well.”

Then he brought the brimming glass to his lips and drained it in one long gulp.
Watching the captain of the Russian ship, on the verge of shipwreck in a violent storm, behave in such a manner, one could only lament.

‘The path ahead is shrouded in darkness.’

Yet Andrey Sinitsyn couldn’t afford to sit idle either, so he quickly rose to his feet and made his way out of the room.
At least there was one saving grace: Prime Minister Popov, unlike President Ivanov, wasn’t shirking responsibility—he was boarding the helicopter to Moscow alongside him.

* * *

The next morning.
Seok-won sat in the back seat of his Mercedes sedan as usual during his commute when his phone vibrated, prompting him to retrieve it from his inner jacket pocket.

“Hello.”
[Boss. The situation you predicted has happened!]

Hearing Landon Shore’s voice brimming with excitement, Seok-won instinctively sensed that the moment he’d been waiting for had finally arrived.

“Did Russia declare a moratorium?”
[Yes, sir. Prime Minister Popov just announced that all debt repayments will be suspended for 90 days, and the ruble will be devalued sharply from 6.3 rubles per dollar to 9.5 rubles per dollar.]
“So they’ve devalued the ruble by 34% in one stroke.”
[Correct.]

The fact that they’d taken such a drastic measure despite the considerable shock it would send through the markets was itself proof of how dire the situation had become.

“What’s the market’s reaction?”
[Even though everyone was nervously watching, nobody expected Russia to actually declare a moratorium. It’s pure panic. The moment the news broke, Russian government bond yields skyrocketed from 150% to 200%.]

At 200% interest rates, these bonds were essentially junk bonds on the verge of bankruptcy.

‘With Russia declaring a moratorium, there’s no guarantee they can repay either the interest or the principal on their bonds. Calling them junk bonds wouldn’t be wrong.’

As Landon Shore continued, I brushed aside the fleeting thought that had crossed my mind.

[Apart from the Russian stock market, which will remain closed for now due to the moratorium declaration, the shock will begin as soon as Asian markets open.]
“Panicked investors will flock even more to safe-haven assets, so not only will stock markets fall further, but the yen will depreciate as well.”
[That’s likely what will happen.]

Landon Shore spoke with palpable gravity.

[The yen might even break through 150.]
“The Japanese Government will do everything in their power to prevent that, so it won’t go that far.”

If my memories from before the regression were accurate, 147 yen per dollar had been the peak.

‘So it’s about time to liquidate the position now.’

I adjusted the mobile phone in my hand and issued instructions.

“Tell Porter to liquidate the entire position once the yen hits 147.”
[A major catastrophe has struck, so the yen will likely remain weak for some time. Wouldn’t it be better to hold a bit longer?]
“We’ve already made more than enough profit. It’s better to take our winnings now. There’s a saying—buy on rumor, sell on news.”

It was somewhat disappointing, but since I’d already reaped substantial gains, there was no real regret. Besides, the real bet was on Russian government bonds, so Landon Shore simply nodded without further comment.
Above all, since the real bet was on Russian government bonds, Landon simply nodded without saying another word.

I’ll pass along the message to Porter, the branch manager, to organize the positions.

Landon Shore, who had answered, posed another question.

What should I do about the short bets I placed on the Nikkei?

Seok-won paused for a moment before answering.

[Understood.]
“Keep monitoring the market and developments in Russia. Alert me immediately if anything significant shifts.”
[Yes. I’ll contact you again then.]
Yes. I’ll contact you again then.

A thought suddenly crossed my mind, and I murmured softly to myself.
Then, a sudden thought crossed my mind, and I muttered softly to myself.

“Without knowing it would come to this, they said LTCM was frantically buying up Russian government bonds until last month.”

With the moratorium declaration, Russian bond prices had plummeted, and LTCM had suffered losses in the hundreds of millions of dollars overnight without lifting a finger.
The problem was that these losses were merely the beginning, not the end.
Once panicked investors began dumping Russian bonds and prices crashed further, LTCM’s losses would snowball exponentially.
If panicked investors dumped Russian government bonds and prices plummeted, LTCM’s losses would snowball.

“By now, LTCM must be in a situation like a nuclear bomb has dropped on them.”

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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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