Golden Spoon Investment Portfolio - Chapter 454

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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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454. We won’t make it past this month. We’re going to collapse.

September 4, 1998.
Seok-won sat on a supple leather sofa with one leg crossed, dressed in a custom-tailored suit that fit him like a second skin.
Beyond the expansive panoramic window beside him, the East River glimmered beneath the sunlight, while the skyline of Brooklyn stretched across the opposite bank like a painted canvas.
On one wall of the President’s Office, adorned with the finest finishes, hung “Untitled,” a 1982 work by Jean-Michel Basquiat, the renowned Black painter.
It was a painting Seok-won had personally purchased for five million dollars.
Landon Shore would joke whenever he saw it, saying it looked like a child’s scribbles and that we’d overpaid for it.
But knowing that just twenty years later, this very work would sell at auction for $110.5 million—the sixth-highest price in art auction history—Seok-won could only smile.
Simply hanging it on the wall and waiting would see its value multiply twenty-two times over. It wasn’t a bad investment strategy at all.
Seok-won turned his gaze to the faces of those seated around him.
With him at the center, Landon Shore and Andrew, the CIO, sat on either side, along with Dan Baradan, the Senior Chief Investment Officer, engaged in conversation.
Setting down a coffee cup that carried the rich aroma of premium beans, Seok-won spoke.

“I hear that with Moody’s credit downgrade announcement causing bond spreads to widen significantly, Wall Street investment banks are in quite a panic.”

Landon Shore, wearing a silk necktie, answered with a smile.

“Most Wall Street investment banks investing in bonds—JP Morgan, Salomon, Merrill Lynch, and so on—hold portfolios similar to ours, so they have no choice but to panic.”

Andrew, seated across from him, shrugged and added his thoughts.

“Over the past few years, they’ve watched LTCM achieve remarkable returns and simply copied the investment methods. It’s only natural they’re suffering the same consequences.”

Andrew glanced at Seok-won, who occupied the seat of honor, and spoke with unmistakable pride.

“Whatever returns LTCM has generated, they’re nothing compared to what we’ve accomplished.”

Unlike LTCM, Seok-won’s personal Family Office had no obligation to disclose performance, so no one knew exactly how much the Eldorado Fund was earning.
Dan Baradan, the Senior Chief Investment Officer with angular features and dark hair, flashed a white smile.

“If our fund’s returns became public, all of Wall Street would be turned upside down. Or perhaps they wouldn’t even believe it.”
“Sometimes even I find it hard to believe, so that’s entirely possible.”

Landon Shore nodded and praised Seok-won.
As the three men lavished compliments before him, Seok-won felt slightly embarrassed and let out a small, awkward cough.

“That’s why financial stocks are experiencing the steepest declines even as the broader market collapses.”

Andrew picked up the thread.

“Yes. Not only have most stocks fallen more than 15%, but particularly JP Morgan, Salomon, Lehman Brothers, Chase Manhattan, and Merrill Lynch—all of which are heavily involved in bond trading or have deep ties to LTCM—are being hit especially hard.”
“Since they’re entangled with the problematic bonds, it will be difficult for them to escape the decline until the situation is resolved.”

Andrew, wearing suspenders over his shirt just as he did on the Trading Floor, asked cautiously.

“How far do you think the financial stocks will fall?”

The other two men looked at him with curiosity in their eyes.
Seok-won, leaning back against the plush sofa cushions, answered without hesitation or deliberation.

“In the worst case, the financial sector’s market capitalization could be cut in half.”
“…!”

The three men, who had been anticipating a maximum decline of around 10%, couldn’t hide their shock as they widened their eyes at a projection that far exceeded their expectations.
Andrew, who had been standing slack-jawed, quickly regained his composure and spoke.

“You’re saying it could be cut in half?”
“That’s simply my assessment.”

Seok-won answered with a meaningful smile playing at the corners of his mouth.
But since every prediction Seok-won had made thus far had never been wrong, they all hardened their expressions and swallowed dryly.
Seok-won continued, his demeanor unfazed.

“Now that Bloomberg’s reporting has partially exposed LTCM’s portfolio, which had been shrouded in secrecy, unfavorable movements will soon appear in the market for Wall Street investment banks and Jacob Wiseman.”
“What exactly are you referring to?”

Landon Shore leaned forward and asked.

“The assets that LTCM and Wall Street investment banks have invested in will decline more sharply than others, and their losses will mount.”
“…!”
“Global investors and traders will rush to liquidate LTCM’s assets and flee like rats abandoning a sinking ship. Such a scenario is inevitable.”

After hearing this, Andrew let out a low groan.

“As LTCM scrambles to raise capital from every direction, their positions will inevitably be exposed. Just as you said, other funds and investors will rush to sell their holdings before prices fall further.”
“Exactly. It’s not so much a deliberate attack on LTCM as it is an instinctive act of self-preservation.”

Landon Shore nodded and continued the thought.

“So once the secret gets out, they’re left completely exposed.”
“That’s right.”

The relaxed atmosphere that had accompanied their coffee conversation had vanished entirely.
Watching the three men absorbed in serious thought, each with a different expression on their face, Seok-won spoke in a subdued voice.

“If that happens, LTCM’s losses will snowball out of control.”
“We could end up losing every remaining asset we have.”

At Landon Shore’s words, Seok-won interlaced his fingers and rested his elbows on the armrest of the sofa.

“If it ended there, we’d be lucky. But I call LTCM a time bomb that could shake the entire market because they’re leveraging over a hundred billion dollars in borrowed capital.”

The color drained from the faces of all three men as they grasped the implication.
Dan, sitting beside Andrew, looked at him with wavering eyes.

“If LTCM collapses and loses even the borrowed capital….”

Seok-won finished the thought in a dry voice.

“The investment banks that provided the leverage will be shaken in a chain reaction, and the entire stock and bond markets—not just Wall Street—will collapse.”

In that moment, the room fell into heavy silence, and the three men froze as if turned to stone.
If the situation unfolded as Seok-won described, it wouldn’t be merely a stock market crash but an economic depression that could spiral beyond control.
As they all stared at him with grave expressions, Seok-won shrugged his shoulders.

“Even if the market is driven to the brink and fear reaches its peak, the Federal Reserve and the U.S. government won’t simply stand by and watch like they did before. Don’t worry too much.”
“…Do you really believe that?”

Andrew asked with a stiffened face.

“Yes. The Federal Reserve and Wall Street investment banks know better than anyone that if the levee breaks, it’s unmanageable. They’ll do whatever it takes to prevent it.”

The three men, who had been sitting with tense expressions, finally showed signs of relief at Seok-won’s confident tone.
Seok-won offered a faint smile as he observed their reaction.

“However, until the situation stabilizes, the entire market gripped by terror will descend into panic. And that will be the perfect opportunity for us, given our short positions.”

The three men’s faces hardened at the thought of the chaos and upheaval to come, yet they could not help but marvel at how I had foreseen all of this and orchestrated the pieces in advance.
As they contemplated the staggering profits that would materialize once everything unfolded according to plan, they swallowed hard, their eyes glazed over.
Even as I received their awestruck gazes, I remained composed, lifting my teacup to take a sip of coffee.
Then, breaking the silence, a phone rang from Landon Shore’s inner jacket pocket.

“My apologies.”

As Landon Shore, slightly flustered, began to pull out his mobile phone to silence it, I waved my hand dismissively.

“It might be an urgent call, so go ahead and answer it.”
“Yes, of course.”

Landon Shore lowered his head slightly and carefully answered the phone.

“Hello.”

Upon recognizing the caller, Landon Shore’s eyes widened as he glanced toward me.

“Ah. Yes. Wiseman already gave me all the necessary information—what is this regarding?”

At the mention of Wiseman, Andrew and Dan exchanged surprised looks.
I, too, leaned forward with interest, my eyes gleaming as I fixed my gaze on Landon Shore, who continued his conversation.

“I see. This isn’t a matter we can decide over the phone. Could you send over a proposal? Yes. That sounds good.”

Once Landon Shore ended the call and lowered the phone from his ear, I immediately asked.

“Was that Jacob Wiseman, the CEO of LTCM?”
“Yes, it was.”
“What did he want?”
“He was asking us to invest funds into LTCM.”

Andrew, who had been listening intently with perked ears,’s eyes flashed with sharp acuity.

“Seeing Wiseman, who had returned all previously received investment funds, personally calling to seek capital like this suggests that LTCM’s situation is quite dire.”
“If word of this spreads through Wall Street, the market will be shaken once more.”

Dan added his voice from beside me.

“Judging by Wiseman’s actions, LTCM won’t survive past this month—it will collapse.”

As Seok-won twisted one corner of his mouth upward, the three men nodded in agreement.
Jacob Wiseman, desperate to secure additional capital to weather the crisis, reached out not only to the Eldorado Fund but also to numerous titans and major investment funds, including the founder of Dell Computer, a giant in the PC industry.
But contrary to Wiseman’s expectations, not a single one was willing to invest money in LTCM.
It was only natural—this was no longer the LTCM of old that had been so selective about investors while posting stellar returns and riding a wave of success. Now it was hemorrhaging massive investment losses and teetering on the brink.
Cornered at last, Wiseman swallowed his pride and offered the condition that he would not collect a single penny in fees for three years, but it made no difference.
Battered and ravaged by violent currents, LTCM—now on the verge of sinking—could not attract a single investor willing to pour money into it.
In just one year, the situation had completely reversed, and Wiseman and his partners fell into despair.

* * *

September 19, 1998.
Chris Murphy, President of the New York Federal Reserve Bank, had just stepped away from his wife and was heading toward the door to attend an opera performance when a sudden phone call brought him back to the living room, where he picked up the receiver.

“Fuller. What’s the matter on a weekend?”
[There’s something urgent I need to tell you.]

Thinking of New York’s notoriously brutal traffic and the limited time before the performance, President Murphy glanced at his watch on his wrist as he rolled up his sleeves.

“What is it?”
[If we don’t take action within this week—within four days—LTCM will likely go bankrupt.]
“…!”
[If that happens, the losses could range from a minimum of five billion dollars to a maximum of tens of billions of dollars.]

At Fuller’s words—Fuller, the Chairman of Bear Stearns—President Murphy’s eyes widened as he gripped the receiver tightly.
A sudden default of tens of billions of dollars could occur? It was like a bolt from the blue.

“Explain in detail.”

In an instant, the trivial concerns that had occupied President Murphy’s mind—his wife in her elegant dress waiting for him in the foyer, the opera performance starting soon—vanished completely.

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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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