Chapter 284: Dubai’s Payment Suspension and the Korean Financial Sector’s Freeze: Vice-chairman Jin Dong-ki Can’t Withstand This Double Pressure

The payment suspension declaration in Dubai, Middle East, coupled with the freezing of the Korean financial sector – Vice-chairman Jin Dong-gi couldn’t withstand this double pressure.

The Korean financial sector would be scrambling to recover bonds, and existing loans wouldn’t be extended.

If there was even a sliver of a chance for him to escape, I would cut it off.

“Howard, what are you thinking about?”

“Oh, it’s nothing much. I was just briefly considering the extent of the impact this crisis will have on Korea.”

“Right, you’re also a manager at Soonyang Group. I keep forgetting.”

“For the time being, yes.”

“What’s there to worry about? Even if the entire Soonyang Group bleeds from this crisis, you have enough resources to provide a transfusion, don’t you? No, you might even be able to bail out the entire Korean financial system.”

“I’ll pass on playing the hero. Oh, speaking of which… please prepare things so that funds can be sent to Korea Miracle whenever needed.”

“All 56 billion dollars?”

“No. I don’t think it’ll come to that.”

“But the money from the swap agreements won’t come in immediately. You know that, right?”

“Of course. It will vary depending on the financial institution we contracted with. My estimate is that all the money will be in by the end of the first half of next year. Even though the American financial system is collapsing, it’s still massive, so it will take quite some time.”

At 11:40 PM on April 14, 1912, the Titanic, a 52,000-ton vessel that collided with an iceberg, took only three hours to completely sink after water began pouring through the breached hull.

Some companies will hold out until the very end, but most of the 56 billion dollars will be collected before next spring.

“Then what about the money left over after sending it to Korea? Where should we invest it?”

“Do as you always do. Stay away from derivatives and focus on buying blue-chip stocks. Pay particular attention to Apple.”

“Paying close attention sounds like you’re saying we should definitely buy it?”

Rachel immediately checked the stock prices.

“It’s maintaining around $15 per share.”

“It wouldn’t be a bad long-term investment.”

“Did you happen to see Macworld held in San Francisco earlier this year?”

“No. Did something new come out at Macworld?”

“They unveiled an electrostatic touchscreen cell phone called the iPhone. It will officially go on sale soon.”

Has it come out already? Wasn’t it next year?

“Really? Then maybe I should buy one and take it back with me….”

I later learned that the first iPhone, the 1st generation iPhone OS, was not released in Korea. We started using it from the second model.

Soonyang Electronics is a powerhouse in the mobile phone market, but in the smartphone era, it’s just a fast follower. Will they be able to maintain their market dominance this time?

Lost in complex thoughts, I noticed Rachel subtly watching me before cautiously speaking.

“What about China?”

“China?”

“Yes. I’m actually thinking of opening offices in Hong Kong and Shanghai, and I’m curious about your opinion.”

One should follow the opinions of a CEO who makes sound judgments.

“Do as you see fit. If you invest with a long-term perspective, you’ll never lose out.”

Should I hold onto it for about ten years, reap more than ten times the profit, and then buy up the stocks held by the Korea Pension Service?

* * *

After confirming the start of fund runs (mass fund redemptions) on Wall Street, I boarded a plane bound for Korea.

Now, no one can stop this crisis. The쏟아지는 funds will be ignored by everyone, and their prices will plummet.

Once mortgage defaults exceed 15%, the media will start declaring that the US housing market is doomed. Of course, financial companies will vehemently deny it.

They will shamelessly lie until the very end to redeem even a little more of the funds in their hands.

After arriving in Korea, I kept a close eye on the newspapers and news.

I couldn’t find a single article about subprime mortgage loans yet; only articles about the opposition party’s presidential candidate primaries filled the pages.

Just getting to the main race guarantees a win in the presidential election.

The two candidates were preoccupied with tearing each other apart as if the primary itself was the election.

Each other’s most critical weaknesses were exposed to the world, but they vehemently denied them and were busy trying to erase them. But they both knew.

Even if all their dirty laundry was aired, winning the party primary meant a direct path to the presidential inauguration in February of next year.

That’s why they had no hesitation in revealing each other’s flaws.

On the other hand, the ruling party had several candidates vying for the nomination in a close race, but no one paid them any attention.

I didn’t pay any attention either.

“What’s the redemption status?”

“We’ve been liquidating in small amounts to avoid impacting the market. There’s still a little left.”

Vice President Jang Do-hyung handed over a list of financial products held by Soonyang Financial Group.

Perfect results raise suspicion. Even if there are some losses, sometimes you have to pretend not to notice if the overall profit is positive.

“The stock market will crash soon. Liquidate everything except Soonyang Group’s stock. We can buy it back when the stock price drops.”

“What should we do with the remaining funds?”

“Just hold onto them.”

“Are you saying we should accept the losses?”

Jang Do-hyung asked again, seemingly surprised.

“When others are bleeding, shouldn’t we at least sweat a little? We should be the lucky ones, not the suspicious ones.”

“Ah, I understand what you mean.”

“The domestic market will be turbulent soon. Tell the employees to absolutely not waver and to be extremely careful not to get caught up in hasty short-term investments. We won’t evaluate performance for the second half of this year. Emphasize that even if they achieve excellent results, it won’t benefit their performance reviews.”

Thinking that institutional investors have an advantage over individual investors is a misconception.

Individuals have a significant advantage. When market conditions are poor, they don’t need to invest; they can simply deposit their money in a bank. At least they’ll earn some interest.

But institutions can’t do that. Even if the economy is a mess, they have to keep the money circulating. That’s how they collect fees and generate profits for the company.

Keeping money in a bank means not working and being idle.

Also, individual investors can lock their money into a stock for a year or two. They can hold onto falling stocks until they rise and then sell them.

But institutions can’t just hold onto falling stocks indefinitely. They need to quickly cut their losses and find other blue-chip stocks. They know it’s okay to hold, but year-end performance forces their hand.

Individual investors fail because they try to imitate institutional investors.

“Chief of staff, while observing is good, shouldn’t we also be working?”

“No. We should be resting. When you’re under pressure in a crashing market, you’re bound to make all sorts of mistakes. Ah, tell everyone to use their vacation time. It would be good to use up all their remaining annual leave.”

“Is that really alright?”

This was the first time Vice President Jang Do-hyung had heard that employees were allowed to rest. It felt unfamiliar, but also welcome.

“When you’re confused, and the pressure of performance weighs on your shoulders, it’s difficult to make sound judgments. It’s not too late to work when you’ve regained your composure.”

Before long, this decision greatly benefited the employees of Soonyang 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 the sharp drop in the futures market, and in the afternoon, a circuit breaker, which temporarily halts trading in stocks and futures, was activated for the second time in history.

A staggering 293 stocks hit their lower limit, and all sectors of the KOSPI also fell. In particular, large-cap securities stocks plummeted by over 10%, and Soonyang Securities was no exception.

Foreign investors on the stock market sold off over 1 trillion won, while institutional investors bought up a whopping 1.5 trillion won worth.

Fund run phenomena did not occur.

Korea had only seen the effects of the US stock market crash; they didn’t yet know the cause.

Or perhaps they knew but were keeping it quiet. It could be a brazen lie to buy time to pass the buck to the general public.

Mirae Asset Global Investments stated that ‘there are no significant issues with our large-cap equity funds,’ and UBS’s Asia representative whispered sweet nothings about attractive valuations and how things would stabilize in a month or two.

This was despite the fact that UBS’s US headquarters was in chaos from the exploding bomb.

“How much is it?”

Even to my simple question, Vice President Jang Do-hyung turned pale and stammered.

“W-we’ve purchased 3.5 billion dollars just last week. Why did they do such a thing….”

“It’s okay since it wasn’t us. And what else?”

“Over 11 trillion won will be poured into domestic equity funds alone. Overseas equity funds exceed 15 trillion won.”

“Since domestic funds will be halved and overseas funds will become worthless, 20 trillion won will evaporate. What is the scale of US derivatives?”

“Pathetically, the Korean financial sector doesn’t even know exactly. Because the products are so complex, they don’t know their composition. They just blindly bought them because Moody’s and S&P rated them AAA.”

“That’s the best news I’ve heard all day. Heh.”

“Pardon? What do you mean…?”

“Ah, never mind.”

I dismissed Jang Do-hyung’s bewildered expression and stopped smiling.

“Vice President Jang, there’s something we need to investigate thoroughly starting now.”

“Please tell me, Chief of staff.”

“Thoroughly investigate the transaction banks of the subsidiaries under Vice-chairman Jin Dong-gi. How much debt does each bank have, what is the collateral, and what is the extent of the damage the banks will suffer from this crisis? Down to the branch level!”

“Not the subsidiaries, but the banks?”

“Yes. Do you know why?”

Jang Do-hyung didn’t avoid my gaze and gave a slight smile.

“You’re planning to shift the banks’ financial pressure onto Vice-chairman Jin Dong-gi.”

“Bingo.”

A bank without money is not a bank. Having gone through the IMF crisis, they had the terrifying experience of banks failing and disappearing into thin air.

This foreign exchange crisis will revive those terrible memories for them.

“Then we should deposit our financial group’s surplus funds into those banks right now.”

Good, he’s quick-witted.

When the bank vault runs dry, we’ll pull out even the money we’ve deposited. To refill the vault, they’ll have no choice but to squeeze their debtors.

Banks that fail to meet the BIS ratio, their capital adequacy ratio, are more vicious than loan sharks.

Loan sharks ruin individuals, but banks ruin companies.

They completely forget how many people depend on the company and that they could recover with just a little leeway, and instead, they begin ruthless recovery operations to survive.

“I’ll also deposit Korea Miracle’s funds into those banks. If we withdraw all of it at the most opportune moment, they’ll be utterly devastated.”

Vice President Jang Do-hyung pondered for a moment before quietly speaking.

“Vice-chairman Jin Dong-gi… he’s going to have a rough time this time. But Chief of staff, what’s the goal this time? It used to be Soonyang Card… which subsidiary are you targeting this time?”

“It’s not a subsidiary.”

“Yes?”

Vice President Jang Do-hyung’s eyes sparkled as if trying to read my thoughts.

“I’m planning to catch a really big fish this time. Not a company, but a person.”

His eyes widened.

“Could it be Vice-chairman Jin Dong-gi…?”

“Yes. Our second uncle has worked very hard, but it’s time for him to take a rest. He’ll have to decide whether to retire completely or continue as vice-chairman under me as a professional manager.”

The proud man wouldn’t continue in a vice-chairman position in name only.

I intend to leave a bit of goodwill. His two sons will be given the opportunity to continue working as Soonyang employees.