Golden Spoon Investment Portfolio - Chapter 83

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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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83. You’re planning to use leverage again this time, aren’t you?

Both men couldn’t hide their bewilderment at Seok-won’s bombshell statement.
The peso had already plummeted more than 10% under attacks from speculative forces.
But hearing that it would be cut in half again here was unavoidable.
Leaning forward in his seat, Landon Shore asked with a face of disbelief.

“Did you say the peso will be cut in half?”
“Yes.”

Seok-won picked up the teacup before him, took a sip of coffee, set it down, and spoke calmly.

“What do you think caused the peso’s collapse?”
“Isn’t it because they used a pegged exchange rate system linked to the U.S. dollar, and then took a direct hit from the sudden implementation of U.S. interest rate hikes that began earlier this year?”
“Exactly.”

Seok-won nodded slightly and continued his explanation.

“The Federal Reserve justified it by saying they were preemptively eliminating signs of inflation appearing within the United States. But considering the influence the dollar wields as the world’s reserve currency, the ripple effects cannot be confined to America alone—they must spread throughout the entire world.”

One could see just how powerful the United States and the dollar were as the reserve currency by looking at the global bond markets, where literal massacres occurred following the rate hike.

‘No wonder there’s a saying that when America sneezes, Korea and the rest of the world catch a cold.’

In reality, the U.S. interest rate hike would have a major influence on the cascading emerging market economic crises that would unfold over the coming years.

“Raising interest rates means tightening, so all the abundant liquidity that had been flowing throughout the world at low rates will inevitably be sucked back into the United States.”
“U.S. Treasury bonds only yield 5 to 6 percent interest, whereas Mexican government bonds guarantee returns of 12 to 14 percent. Just as you said, boss, Wall Street’s hot money has been flowing into Mexico in large quantities.”

You could double your profits simply by borrowing money from America and investing it in Mexican bonds—anyone who didn’t do this would be a fool.
Andrew continued speaking, glancing sideways at Seok-won seated at the head of the table.

“But once the Federal Reserve raised interest rates, this easy way of making money no longer worked. Moreover, as the hot money that had flowed in began withdrawing again, it clearly triggered the peso’s decline.”

Seok-won’s lips curved into a faint smile as he spoke.

“And when a leading presidential candidate was assassinated, revealing political instability and causing tremors, speculative forces seized the opportunity and drove the peso down even further. That’s the situation we’ve seen unfold so far.”

Landon Shore shook his head slowly.

“They say misfortunes never come alone, and this is exactly that situation.”
“What’s worst for Mexico is that the Federal Reserve shows no intention of stopping rate hikes.”
“Ugh.”

Landon Shore groaned in agreement with Seok-won’s assessment.

“Indeed, the FOMC raised rates again this time, pushing them past 4% now.”
“As U.S. interest rates climb higher, capital outflows from Mexico will accelerate and intensify.”

Even the two of them would have withdrawn their money and moved it to the United States rather than leaving it in Mexico under such circumstances.

“Even if the Bank of Mexico holds 28.6 billion dollars in foreign reserves, if the volume of hot money flowing in is several times larger, it would be utterly useless.”

Andrew interjected in rebuttal.

“But saying the peso will collapse by half seems excessive. The Mexican government isn’t foolish—surely they won’t just sit idle and watch until such a situation unfolds.”

Landon Shore, sharing the same sentiment, nodded while seated on the sofa.

“As Wall Street anticipates, the Mexican government, unable to endure further, will soon abolish the pegged exchange rate system and devalue the peso.”
“Precisely.”
“Isn’t that the normal course of action?”

Seok-won, leaning back with his hands clasped together, opened his mouth as both men’s gazes fell upon him.

“Under normal circumstances, yes—but the problem is that Mexico is currently in the midst of a presidential election.”
“…!”
“To stabilize the crisis, they’d need to do far more than simply abolish the exchange rate system—they’d have to suppress wage increases, raise taxes, and simultaneously cut public spending. Can they really do that in the lead-up to a presidential election?”

After hearing this, Landon Shore let out a low groan and shook his head.

“Right. The moment either ruling or opposition party brings it up, votes will hemorrhage away. No one will volunteer to take the fall first.”

Contrary to his initial expectations, Andrew’s eyes gleamed as he listened intently to Seok-won’s words, sensing that Mexico’s situation could deteriorate further.

“Moreover, with Luis Donaldo Colosio assassinated and a leading presidential candidate gone, the ruling party is consumed by internal strife and power struggles, leaving them no capacity to manage the crisis. The chaos will only deepen.”

As he thought this, Seok-won recalled a conversation he’d once had with Manager Oh in his previous life.

“Well, well. Has the newlywed been polishing a lot of shoes today?”

Seok-won, sitting alone in the cramped Shoe Repair Shop as always, polishing the shoes he’d brought in, lifted his head at the familiar voice.
Then he saw Manager Oh approaching, an unlit cigarette dangling from his lips and a paper bag in one hand.

“It’s been over a year since I got married. Why am I still a newlywed?”

Manager Oh retrieved a faded plastic chair with practiced ease, sat down, and replied with playful mockery.

“Then should I call you an old husband instead?”
“That’s enough. Did you come to have your shoes polished?”

Seok-won shook his head as if conceding defeat and asked.

“Yeah. Finish what you’re doing and take your time with mine.”

Without needing to be told, Manager Oh removed the shoes he was wearing and changed into a pair of three-striped slippers.
His movements suggested he knew exactly where everything was, as if this were his own home.
When Seok-won glanced at the shoes Manager Oh had removed, they were still clean except for a light coating of dust.
After all, he’d had them polished just four days ago, so it would have been strange if they’d gotten dirty already.
A simple dusting would have sufficed, but Seok-won understood that Manager Oh came here not really to have his shoes cleaned, but to unwind from the stress of stock trading through casual conversation, so he said nothing more.

“Would you like a cup of coffee?”
“That sounds good.”

Manager Oh responded as if he’d been waiting for the offer.
Setting down the shoes he’d been holding and removing his gloves, Seok-won turned in his chair and poured water from a bottle into a coffee pot.
Then he pulled out two packets of instant coffee from a cardboard box, tore them open, and dumped both into a paper cup.
He did this because he knew Manager Oh’s habit of always making his coffee with two packets, saying one alone was too weak.
As soon as the water came to a boil, Seok-won poured an appropriate amount into the cup and handed it to Manager Oh.

“Stir it a few times so it dissolves well.”
“Got it.”

Manager Oh took the cup and blew on the hot coffee before taking a sip, letting out a satisfied “Ahh.”

“Mmm. Your coffee really is the best. I don’t know why that intern of ours can’t get it to taste like this.”

Gloves back on, Seok-won picked up the shoes from the floor and tossed them down as he spoke.

“You know it’s a big deal these days if you ask someone to fetch coffee, right?”
“You think I’m the type to abuse my position? I didn’t ask you to make it—you offered to brew it yourself.”
“Well, anyway.”

Seok-won wrapped the cloth around his hand, applied black polish to it, and resumed cleaning the shoes.
After repeating the same motions for years, his shoe-polishing movements contained not a single unnecessary gesture.
As Manager Oh watched the oddly mesmerizing sight, he sipped his hot coffee and spotted a newspaper folded in half on the side table, which he picked up.
The moment he habitually opened to the business section, his eyes narrowed at the headline that caught his attention.

[Mexico’s Q1 Economic Growth Worst Since ‘Tequila Crisis’]

“Here we go again.”

Seok-won glanced up at the newspaper article Manager Oh was reading, continuing to move his hands as he spoke.

“The economy’s already struggling, and now with the new flu spreading, it seems like complete chaos over there.”
“That’s how it always works—when hardship strikes, the weakest links break first.”

With that, Manager Oh folded the newspaper and set it down.

“Do you know what this Tequila Crisis mentioned here is?”
“Of course. It’s the foreign exchange crisis Mexico went through in the nineties. They named it the Tequila Crisis after Mexico’s signature liquor.”
“That’s my apprentice for you.”
“That much is basic knowledge.”

Seok-won shrugged his shoulders.

“Look at you getting cocky the moment I praise you.”

Manager Oh chuckled as he watched Seok-won.
When Seok-won rolled his eyes as if to say he was being teased, Manager Oh exhaled white cigarette smoke from his mouth.

“About two years after the Tequila Crisis passed, I took a business trip to Mexico.”
“Ah, I remember now. You gave me that oddly-shaped wooden doll, saying it was a souvenir.”
“That’s right. Are you still keeping the one I gave you back then?”

Rather than answer, Seok-won raised his hand and pointed to the television sitting on the left shelf.
Atop the television sat a single wooden Indian carving, painted in bright, varied colors.

“That bastard. Still keeping it after all this time.”
“I had nowhere else to put it, so I set it up there and just forgot about it.”
“Well, it doesn’t matter. What’s done is done.”

Manager Oh chuckled, then drained the nearly empty coffee cup in one gulp before launching into his story.

“You know the Tequila Crisis was a harbinger of the International Monetary Fund financial crisis that followed, right?”
“Yes.”

Manager Oh tapped ash into an empty paper cup, his expression turning bitter.

“It had been two years since the crisis hit, but what I saw on my business trip to Mexico was absolutely devastating.”
“Was it really that bad?”

Seok-won looked up and asked, his hands still moving busily as he polished the shoes.
Even as he spoke, his fingers continued their meticulous work.

“Yes. The collapsed economy hadn’t recovered, so cities had turned into crime-ridden wastelands, and everywhere you looked there were homeless people begging.”
“It sounds just like Korea during the International Monetary Fund crisis.”
“We suffered greatly back then too.”

Manager Oh pointed to the carving on top of the television.

“I bought that wooden carving from a native child, not even ten years old, who was selling them to tourists in front of the hotel. I paid ten dollars for it.”

Seok-won, who hadn’t known this, turned his head and looked at the wooden carving he’d carelessly left sitting there with fresh eyes.

“Back then, there was a lot of talk about Korea’s economic difficulties, but I thought surely we wouldn’t end up like Mexico. Yet less than six months later, the International Monetary Fund crisis hit.”

Manager Oh made a deflating sound, as if air were leaking from a tire, and posed a question.

“But you know what’s really funny?”
“What is it?”

Manager Oh stubbed out his nearly finished cigarette in the paper cup he held.

“Looking at how things escalated to a foreign exchange crisis, Korea and Mexico share one remarkably similar trait.”
“Really?”

Hearing this for the first time, I paused mid-polish of my shoes.

“When have you ever seen me lie?”
“Last week, you told your wife you were going to a funeral, but you went rock fishing with your friends instead.”

Manager Oh’s expression turned sheepish.

“This kid remembers everything, I swear.”

After muttering under his breath for a while, Manager Oh cleared his throat and continued.

“Anyway! When the foreign exchange crisis hit Mexico, they were right in the middle of a presidential election. Same as us.”
“You’re absolutely right.”

Indeed, Korea had been holding its presidential election for the 15th president when the IMF crisis struck, and it had a decisive impact on the election results.

“While multiple problems compounded—including the assassination of a leading ruling party candidate—what really drove Mexico to the brink of national bankruptcy was the government and central bank’s failure to respond properly amid the political chaos.”

Manager Oh smacked his lips as he spoke.

“And what’s most painful is that Korea watched Mexico go through all that, yet just two years later, we found ourselves in a similar situation and failed to prepare. We suffered the exact same fate.”
“Ah…”

I mirrored his regretful expression.
If Korean officials had taken the lessons from Mexico’s crisis to heart instead of dismissing it as someone else’s problem, couldn’t the IMF crisis have been avoided?
Just then, a bell chimed, and Manager Oh pulled a smartphone from his inner pocket to answer the call.

“Hello? Yes. What? Got it.”

After the brief call, Manager Oh quickly slipped his shoes back on and spoke.

“The executive director is looking for me urgently. I need to head over right away.”
“Of course.”

The shoes were already clean anyway—there was no real need to polish them further.
As Manager Oh stood up, he suddenly remembered something and handed me a paper bag he’d set beside him.

“Take this.”

Seok-won accepted the paper bag with a puzzled tilt of his head.

“What is it?”

“Your sister-in-law is expecting. So I picked up some baby items.”
“You didn’t have to.”
“Don’t be ridiculous. This isn’t for you—it’s a gift for the baby. Well, I’m heading back.”

Manager Oh raised his hand briefly and hurried back into the office.
Opening the paper bag moments later, Seok-won smiled at the sight of the small, adorable baby shoes inside.
The weight of that precious little pair resting in his palm was something he would never forget for the rest of his life.
Lost in those distant memories, Seok-won was pulled back to reality by Andrew’s voice.

“Considering Mexico’s admittedly turbulent political situation, things may well unfold differently than Wall Street anticipates.”

At that, Landon Shore rubbed his hands together, his expression brightening slightly.

“If things play out as you say, the stakes could be even larger than they were in Britain.”

Leaning back against the sofa, Seok-won smiled deeply and spoke.

“Even if the Mexican government manages to avoid the worst-case scenario contrary to expectations, the peso will have depreciated further by then. We’ll simply see reduced profits rather than actual losses.”

A game with no risk of loss—there was no reason not to place the bet.

“Will you be shorting only the peso?”

Andrew leaned forward slightly, his tone serious.

“When an economic crisis hits, government bonds will plummet alongside it. We’ll short those as well.”
“Will you be using leverage again this time?”

At Landon Shore’s question, Seok-won nodded without the slightest hesitation.

“Of course we will.”

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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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