Golden Spoon Investment Portfolio - Chapter 458

—————
This chapter was translated by Lunox Novels. To support us and help keep this series going, visit our website: LunoxScans.com
—————

458. Make sure to emphasize that the payment will be made in dollars.

Thursday, September 24th, 1998.
Seok-won sat cross-legged on the leather sofa in the President’s Office, gazing out through the panoramic windows at the broad East River flowing serenely beneath the bright sunlight.
Landon Shore and Andrew flanked him on either side of the sofa, their expressions relaxed, while steaming coffee cups releasing a rich aroma rested on the heavy wooden table between them.
Andrew, wearing his trademark suspenders as always, spoke to Seok-won.

“As you instructed, we’ve acquired all of LTCM’s Russian government bonds and corporate bonds at discounted prices of –70% and –90% respectively.”

Landon Shore, seated across from him, shrugged his shoulders and let out a light whistle.

“No matter how much the Russian government declared a moratorium, the bond prices really are at a terrible level.”
“The shock from LTCM compounded the problem, but fundamentally it’s evidence that investors view Russian bonds with deep suspicion.”

As Andrew adjusted his gold-rimmed glasses with one hand, Seok-won responded at a leisurely pace.

“Right now, multiple adverse factors have emerged and default risk has risen, but as time passes and the Russian economy gradually stabilizes, prices will recover.”

Seok-won interlaced his fingers and continued speaking.

“Gavin Phillips knows that too, which is why he was trying to snatch up LTCM at a bargain price.”
“Since you brought it up, he went through all the trouble of manipulating prices downward, but our intervention at the last moment disrupted his plans. Chairman Phillips must be quite upset.”

When Landon Shore said that, Seok-won picked up his teacup and brought it to his lips, responding in an offhand manner.

“Everything requires moderation, but he was too greedy, so that’s what happened.”

Seok-won took a sip, savoring the coffee’s aroma, then spoke again.

“I heard that after Jacob Wiseman sold all the Russian bonds to us, he decided to sell LTCM’s shares to a banking consortium led by the Federal Reserve chairman in New York.”

Landon Shore, receiving the attention, answered immediately.

“That’s correct. Wiseman and the existing fund partners, having secured additional cash from selling the Russian bonds, modified the terms slightly to retain a larger stake than originally proposed and agreed to accept the bailout.”

Seok-won nodded slightly.

“It’s far better to maintain our stake, even if it shrinks considerably, than to be stripped of the fund we’ve painstakingly built at a pittance and cast out empty-handed.”
“You’re absolutely right.”

Andrew, who had been listening to their exchange, interjected naturally into the conversation.

“From what I can see, Chairman Phillips gave no room to breathe at all—he pressed far too aggressively. It seems to have backfired.”
“By squeezing the other side as hard as possible to acquire cheaply, it ended up having the opposite effect.”

Seok-won set down his teacup and leaned back in his chair as he asked.

“You mentioned that a substantial portion of the Russian corporate bonds we acquired this time were issued by Gazprom and Yukos Oil Company, correct?”
“That’s correct. Combined, they exceed 3.5 billion dollars.”

I accepted the folder Andrew handed me and opened it to find a neatly organized list of the Russian corporate bonds we’d acquired.
Seeing Gazprom and Yukos Oil Company listed in order at the top of the list, I broke into a broad smile.
Gazprom was Russia’s largest gas company, born from the Gas Industry Ministry when massive gas fields were discovered across Siberia during the Soviet era.
Yukos Oil Company, like Gazprom, had originally been a Russian state-owned enterprise before privatization, and it was a major oil company so vast it accounted for roughly 20% of Russia’s crude oil production.
As their business sectors made clear, these were the companies that would reap the greatest benefits in the era of high oil prices that was coming soon, sweeping in enormous petrodollars.

‘We acquired the Russian corporate bonds together precisely because of these two companies.’

As I contemplated how much I could earn from the Gazprom and Yukos Oil Company bonds acquired at prices far below book value—practically for free—a smile naturally spread across my face.
I then scanned down the list and discovered a familiar name, my eyes widening.

[Alrosa 250 million dollars]

It was Russia’s largest diamond exploration and mining enterprise, accounting for 95% of Russia’s production and 27% of global diamond mining output.
Lifting my head, I looked at Andrew and asked.

“Is this Alrosa listed here the diamond mining company I know of?”
“Yes, it is.”
“Ah, I see.”

Having discovered an unexpected treasure, I stroked my cleanly shaven chin with one hand, my eyes gleaming.
While I was mentally considering how best to utilize the Alrosa bonds we’d just acquired, Landon Shore glanced around cautiously and spoke carefully.

“There’s talk that the Federal Reserve will soon cut the benchmark interest rate to stabilize the chaotic stock and bond markets. Wouldn’t it be wise to begin unwinding our positions now?”

As if they’d rehearsed it beforehand, Andrew chimed in from beside him.

“We’ve already made substantial profits, and more importantly, if the Federal Reserve steps in as a firefighter, the panic spreading through the market will quickly subside. It would be wise to exit our positions before that happens.”

But Seok-won leaned back against the sofa with a composed expression and spoke.

“Even if the Federal Reserve changes course and implements a rate cut at the upcoming Federal Reserve Board meeting, how much of a reduction do you think we’ll see?”
“We won’t know for certain until the announcement, but I’d expect at least a 0.5 percentage point cut.”

Andrew nodded, apparently sharing Landon Shore’s view.

“I believe that’s the minimum needed to calm the market.”
“I agree. With panic and fear running this high, you need a powerful blow to suppress it. But looking at the Federal Reserve’s cautious stance regarding accumulated inflationary pressures, such bold measures are unlikely to materialize.”

Seok-won spoke with decisive certainty.

“Then….”
“Even if they cut rates, they’ll move in 0.25 percentage point increments—cautiously, like testing a stone bridge before crossing it.”
“0.25 percent….”
“Now that you mention it, that does seem likely.”

Both men nodded in understanding, knowing that sharp rate cuts could risk stimulating inflation.

“But as both of you just mentioned, the market and investors are expecting at least a 0.5 percent cut or more. If the actual cut falls short of expectations at 0.25 percent or less, what kind of reaction do you think we’ll see?”

Andrew’s eyes gleamed behind his gold-rimmed glasses.

“Disappointment would far outweigh any relief.”
“Exactly right.”

Seok-won spoke with a meaningful expression.

“Then the stock market and bond prices that had rebounded on optimism would collapse again under a wave of disappointed selling.”

Watching the two men, now fully absorbed in concentration, I smiled slightly.

“The real moment to exit is when another crash occurs and prices break through previous lows.”

Landon Shore leaned forward slightly with a puzzled expression.

“If the situation unfolds as you predict, the downtrend will continue, so shouldn’t we maintain our positions?”

Seokwon shook his head and explained the reason.

“If the first rate cut doesn’t take hold as expected, the Federal Reserve will rush to implement additional cuts. We should exit before that happens. And considering the scale of positions we’ve laid down, we need to move two or three steps ahead.”

Andrew nodded in agreement.

“With positions spanning hundreds of billions of dollars across spot and options combined, liquidating everything at once could trigger significant market chaos. We need to unwind this systematically, step by step.”
“Exactly.”

Seokwon looked at the two men, who grasped his meaning immediately, and nodded with satisfaction.

“After the first rate cut announcement, we’ll start with bonds, then move to marks and dollars, and save the financial stocks hardest hit by the LTCM crisis for last.”
“Understood.”
“Things are about to get busy again.”

Seokwon continued the conversation with both men, discussing anticipated market movements and response strategies in depth.
After Landon Shore and Andrew left, Daisy, his secretary, entered to clear the teacups from the table and stepped out. The moment she was gone, his phone vibrated in his pocket as if on cue.
Seokwon remained seated on the sofa and answered the call.

[Chairman, this is Jung Gyu-chul.]
“It must be the middle of the night in Korea. What’s the matter?”

Jung Gyu-chul, formerly an executive director at Hyunwoo Construction, had recently been brought in as president of Blue Hole Construction, a newly established company to efficiently manage real estate assets.

[I’m calling because there’s urgent information I need to share with you.]
“What is it?”
[The Aptae Group, currently undergoing a workout, has begun selling off assets to repay debt.]
“…!”
[I’ve confirmed that both the Gimpo Landfill and Korean Tongun you mentioned are on the asset sale list.]

Seokwon, who had been eagerly waiting for the sale announcement, tightened his grip on the phone and asked.

“What price is the Aptae Group hoping to get for the sale?”
[They’ve officially announced they’re abandoning their long-standing request for zoning changes on the Gimpo Landfill. They’re requesting the government purchase the 3.73 million pyeong landfill at 959.4 billion won—the current assessed land value—plus 250 billion won in accumulated taxes, totaling 1.2094 trillion won.]

The Aptae Group had continuously tried to develop the Gimpo Landfill, which was zoned as agricultural land, but when the government refused to grant permission, they were essentially telling the government to buy it instead.

“What’s the government’s response?”
[No official answer has come yet, but given the land’s high utility value in multiple ways, I believe there’s a strong possibility the government will decide to purchase it.]

He held the phone to his ear and nodded slightly, sharing the same thoughts.

“That’s right. Especially if the proceeds from the sale are used entirely to repay Aptae Group’s debts, there’s no burden at all.”
[Exactly. Since we’re already in a workout situation, we’ll inevitably need a substantial rescue package. If we sell the Gimpo Landfill, we can reduce that burden accordingly.]

The amount was substantial, but considering Seokwon’s assets, it wasn’t an unbearable expense.
Especially with the enormous profits expected from this successful bet, purchasing the Gimpo Landfill posed no real problem.

‘Besides, thinking about the land values that will skyrocket in the future, 1.294 trillion won is practically a steal.’

This opportunity would never come again except during these difficult IMF times, so I couldn’t afford to let it slip away.
With my resolve solidified, I spoke without hesitation, my words coming quickly.

“Make sure to convey to Aptae Group and the government that I’m willing to purchase the Gimpo Landfill at their desired price, and don’t forget to emphasize that I’ll settle the entire amount in dollars.”

Jung Gyu-chul seemed slightly flustered as I decided on such an enormous land purchase so casually, his words faltering slightly.

[Ah, understood.]
“Report on the progress regularly, and make absolutely sure to emphasize that the purchase payment will be made in dollars.”

At my repeated emphasis, Jung Gyu-chul responded hurriedly.

[Yes, I’ll do exactly that.]

After ending the call, I set the phone down and sank into the sofa.

“With the LTCM crisis showing signs of reigniting the financial turmoil, the government won’t possibly refuse if I offer such a substantial amount in dollars.”

Imagining the Gimpo Landfill falling entirely into my hands soon, I broke into a broad smile.

—————
This chapter was translated by Lunox Novels. To support us and help keep this series going, visit our website: LunoxScans.com
—————