» The Youngest Son of Sunyang
Reborn Rich - Chapter 284
[284]Den of Vipers, Wall Street 5
The declaration of a moratorium in Dubai, Middle East, and the tightening of the Korean financial market—Vice Chairman Jin Donggi would not be able to withstand this dual pressure.
The Korean financial sector would be zealous in debt collection, and there would be no extensions for existing loans.
If by any chance there was an escape route, I would block it.
"Howard. What are you thinking about?"
"Ah, nothing much. I was just thinking about how much this situation would affect Korea."
"Right, you're also a manager at Sunyang Group. I keep forgetting."
"For now, yes."
"What's there to worry about? Even if the entire Sunyang Group bleeds from this crisis, you have enough to transfuse them, don't you? No, you could even save the entire Korean financial sector, couldn't you?"
"I'll pass on that hero act. Oh, by the way... please prepare so that funds can be sent to Miracle Korea anytime they're needed."
"All 56 billion dollars?"
"No. I don't think that much will be necessary."
"But the money from the swap agreement won't come in immediately. You know that, right?"
"Of course. It will vary depending on each financial institution we contracted with. My estimate is that all the money will have come in by the end of the first half of next year. The American financial sector is so vast that it will take quite a long time for it to sink, even as it goes down."
At 11:40 PM on April 14, 1912, the 52,000-ton Titanic, after colliding with an iceberg, took only three hours to completely sink once water began rushing through the breach.
While some companies might hold out until the very end, most of the 56 billion dollars would be collected before next spring.
"Then what about the money remaining after sending funds to Korea? Where would be good to invest it?"
"Do as you always do. Don't even look at derivatives; it would be best to buy blue-chip stocks. Especially, keep a close eye on Apple Inc."
"'Keep a close eye on' sounds like 'you absolutely must buy it,' doesn't it?"
Rachel immediately checked the current market price.
"It's maintaining around 15 dollars per share."
"It wouldn't be bad as a long-term investment."
"By any chance, did you see Macworld, held in San Francisco earlier this year?"
"No. Was something new released at Macworld?"
"It was an electrostatic touch-screen cellphone called the iPhone. It's about to officially go on sale."
It's already out? Wasn't it next year?
"Really? Then maybe I should buy one and take it back..."
It was a fact he would learn later, but the first-generation iPhone OS, the original iPhone, never arrived in Korea. They began using it from the second model onward.
Sunyang Electronics was powerful in the mobile phone market, but in the smartphone era, it would merely be a fast follower. Could it maintain its market dominance this time as well?
As I was lost in all sorts of complex thoughts, Rachel subtly glanced at me, then spoke cautiously.
"What about China, by any chance?"
"China?"
"Yeah. Actually, I want to open offices in Hong Kong and Shanghai, and I'm curious about your opinion."
The opinion of a CEO who judges correctly should be followed.
"Do as you wish. If you invest with a long-term perspective, you'll never incur a loss."
Should I let it mature for about 10 years, then after earning more than ten times the profit, completely buy up all the stocks held by the Korean National Pension Service?
* * *
After confirming that a fund run (mass redemption of funds) had begun on Wall Street, I boarded a flight to Korea.
Now, no one could stop this situation. No one would even look at the flood of funds, and prices would plummet.
If mortgage defaults exceeded 15%, the media would loudly declare that the American housing market had collapsed. Of course, financial institutions would stubbornly deny it.
They would continue to shamelessly lie until the very end, just to redeem a little more of the funds they held.
Upon arriving in Korea, I paid close attention to newspapers and news.
Not a single article about subprime mortgages could be found yet; instead, articles about the opposition party's presidential primary overflowed.
As long as they made it to the main election, winning the presidency was a foregone conclusion.
The two candidates were fiercely tearing into each other, as if the primary itself was the general election.
Their most fatal weaknesses had been exposed to the world, but they vehemently denied them, busy trying to erase their flaws. Yet, they too knew.
Even if all their dirt was revealed, as long as they won the party primary, it would be a direct path to the presidential inauguration in February of next year.
Therefore, they had no hesitation whatsoever in exposing each other's vulnerabilities.
Meanwhile, the ruling party had multiple candidates vying for power, bickering back and forth like measuring acorns, but no one paid them any mind.
I, too, paid no attention.
"What's the status of redemptions?"
"We've processed small amounts to avoid affecting the market. There's still a bit left."
Vice President Jang Dohyung presented a list of financial products that Sunyang Financial Group held.
A perfect outcome breeds suspicion. Even if there are some losses, if the overall profit is still positive, there are times when one must pretend not to notice and leave it be.
"The stock market will crash soon. Liquidate everything except for Sunyang Group's shares. When stock prices fall, we can buy them back."
"What should we do with the remaining funds?"
"Just hold onto them."
"Are you saying we should accept the losses?"
Jang Dohyung confirmed again, as if surprised.
"When others are bleeding, shouldn't we at least be sweating? We should be the lucky ones, not the strange ones who defy explanation."
"Ah, I understand what you mean."
"The domestic market will fluctuate wildly from now on. Tell the employees to never waver and to be thoroughly careful not to get caught up in premature short-term investments. We will not evaluate performance for the second half of this year. Impress upon them that no matter how good their results are, it won't be advantageous for their personnel evaluations."
It's a misconception to think that institutional investors have an advantage over individual investors.
Individuals have a distinct advantage. When market conditions are unfavorable, they don't need to invest; they can just put their money in the bank. They'll at least earn some interest.
But institutions cannot do that. Even if the economy is in shambles, they must manage money. Only then can they collect fees and generate corporate profits.
Putting money in the bank, for them, means not working and merely idling.
Furthermore, individual investors can tie up money in a single stock for one year or two. They can hold onto a falling stock until the very end, wait for it to rise, and then sell.
However, institutions cannot simply hold onto falling stocks indefinitely. They must quickly cut their losses and find other blue-chip stocks. Even though they know it's fine to hold on, they can't help it due to year-end performance evaluations.
Individual investors fail precisely because they imitate institutional investing.
"Chief. Observing is good, but shouldn't we still be working?"
"No. You should be resting. When under pressure in a crashing market, people are bound to make all sorts of mistakes. Ah, tell everyone to use their vacation time. It would be good for them to use up all their annual and monthly leave."
"Are you sure that's acceptable?"
It was the first time Vice President Jang Dohyung had heard that employees were allowed to rest. It was unfamiliar, but likely welcome.
"When chaos reigns, if the pressure of performance weighs on your shoulders, sound judgment becomes difficult. It's not too late to work once composure is regained."
Not long after, this decision proved to be a great help to the employees of Sunyang Financial Group.
A few days before the opposition party's presidential primary, the KOSDAQ index plummeted by over 10%. At one point in the morning, a sidecar was triggered due to a sharp drop in the futures market, and in the afternoon, a circuit breaker, temporarily halting stock and futures trading, was activated for the second time in history.
A staggering 293 stocks hit their lower limit, and the KOSPI also saw declines across all sectors. Large-cap securities stocks, in particular, plunged by over 10%, and Sunyang Securities could not escape it either.
Foreign investors offloaded over 1 trillion won in the securities market, while institutional investors bought a massive 1.5 trillion won worth.
A fund run phenomenon also did not occur.
Korea had only witnessed the symptoms of the American stock market crash; it did not yet know the cause.
Or perhaps they knew but were keeping quiet. Shameless lies might be rampant to buy time to offload the bomb onto the general public.
Mirae Asset Management stated that "there are no major issues with our large-cap equity funds," and UBS's Asia representative whispered sweet words about attractive valuations, claiming stability would return in a month or two.
Even as UBS's American headquarters was in disarray from the bomb exploding.
"How much is it?"
Even to my simple question, Vice President Jang Dohyung turned pale and stammered his reply.
"Th-they purchased 3.5 billion dollars just last week. I don't know why they did such a thing..."
"It wasn't us, so it's fine. And what else?"
"Over 11 trillion won in domestic equity funds alone will be dumped. Overseas equity funds will exceed 15 trillion won."
"So, domestic will be halved, and overseas will turn to waste paper, meaning 20 trillion won will evaporate. What about the scale of American derivatives?"
"Pathetically, the Korean financial sector can't even accurately grasp it. Since it's such a complex product, they don't even know its composition. They just blindly bought it because Moody's and S&P rated it AAA."
"That's welcome news to hear. Heh heh."
"Huh? What do you mean...?"
"Ah, never mind."
Ignoring Jang Dohyung's bewildered expression, I suppressed my laughter.
"Vice President Jang. There's something we need to find out precisely, starting now."
"Please tell me, Chief."
"Thoroughly investigate the banks that Vice Chairman Jin Donggi's affiliates do business with. Find out how much debt each bank has, what their collateral is, and the extent of the damage the banks will suffer from this crisis. Down to the branch level!"
"The banks, not the affiliates?"
"Yes. Do you understand why?"
Jang Dohyung didn't avoid my gaze, then smiled slightly.
"You're planning to turn the banks' financial pressure onto Vice Chairman Jin Donggi, aren't you?"
"Bingo."
A bank whose money has dried up is no longer a bank. Having gone through the IMF crisis, they had already endured the terrible experience that banks could collapse and be annihilated.
This foreign exchange crisis would revive those horrific memories of the past for them.
"Then we should deposit our financial group's surplus funds into those banks, even now."
His quick understanding was commendable.
When a bank's vault empties, they even withdraw the money we've entrusted to them. To refill the vault, there's no choice but to squeeze the debtors dry.
A bank that fails to meet its BIS ratio, or capital adequacy ratio, is more savage than a predatory loan shark.
While loan sharks ruin individuals, banks ruin corporations.
Forgetting completely how many families depend on a company, or that it could be revived with just a little breathing room, they enter into ruthless recovery efforts for their own survival.
"I will also deposit Miracle Korea's funds into those banks. If we withdraw all of it at the most optimal timing, they won't know what hit them."
Vice President Jang Dohyung thought for a moment, then quietly opened his mouth.
"Vice Chairman Jin Donggi... he's going to have a hard time this time. But Chief, what is the extent of your objective this time? Before, it was Sunyang Card... which affiliate are you targeting this time?"
"Not an affiliate."
"Huh?"
Vice President Jang Dohyung's eyes sparkled, as if trying to read my thoughts.
"This time, I intend to reel in a big catch properly. Not a company, but a person."
His eyes widened.
"Could it be Vice Chairman Jin Donggi...?"
"Yes. Our second eldest uncle, he's truly worked hard, but now he should rest a bit. He'll have to decide whether to retire completely or continue serving as Vice Chairman under me as a professional manager."
Someone as proud as him would never continue to hold a mere titular vice chairman position.
I still plan to leave a shred of sentiment. His two sons will be given the opportunity to continue working as Sunyang employees.