The Conglomerate Family Became A Villain [EN]: Chapter 280

280. The Big Short (6)

According to a crime investigation scholar, a common trait among fraud victims is above-average greed.

The desire for quick riches or elevated status can cloud judgment, making them susceptible to scammers’ promises.

Wall Street investors were no different. Since 1985, they’d been wary of a potential bubble or overvaluation in the Japanese economy.

However, by 1988, their perspective had shifted dramatically. They saw the Japanese economy as solid, backed by the world’s highest foreign exchange reserves, and closely linked to the U.S. economy.

Jung Hyun-woo was instrumental in this change of heart on Wall Street.

“After Charlie’s investment, Wall Street investors flocked to Japan.”

Sitting across from Jung Hyun-woo was Henri Arnault, CEO of JP Morgan Investment Bank.

“And they made a lot of money.”

Henri Arnault nodded slightly.

“Since then, Japan has become a dream investment destination for them.”

Jung Hyun-woo’s voice rose slightly at the end of his statement.

“What do you think, Mr. Arnault?”

“Neutral, perhaps?”

“Neutral?”

The Japanese economy may or may not be inflated.

‘A good position to get out of.’

Henri Arnault was consistently risk-averse, always minimizing exposure and avoiding responsibility.

“I believe investors must be flexible in responding to events as they unfold.”

He preferred reacting to market changes over predicting macroeconomic trends.

This approach had pros and cons. It prevented significant losses but also limited the potential for substantial profits.

In essence, Henri Arnault was a low-risk, low-return investor.

Nevertheless, his technical ability to maximize those low returns was why he became CEO of JP Morgan Investment Bank.

“So, you’re saying you have no opinion regarding Victoria Fund’s withdrawal?”

Henri Arnault steepled his fingers and replied.

“We will follow Charlie’s lead on this.”

Jung Hyun-woo frowned at his answer.

“Until recently, you were asking us to delay the withdrawal from Japan, weren’t you?”

“That’s…”

Henri Arnault trailed off. JP Morgan had, in fact, sent documents warning that Victoria Fund’s exit from Japan was premature and that converting yen to dollars could result in exchange losses.

“Was that a mistake?”

Henri Arnault replied in his characteristically soft voice.

“It wasn’t a mistake. We were simply trying to convey the overall sentiment on Wall Street to Charlie.”

Jung Hyun-woo spoke firmly.

“So, you have no objections to Victoria Fund’s withdrawal.”

Henri Arnault had initially opposed Victoria Fund’s withdrawal from Japan, but seeing Jung Hyun-woo’s resolute stance, he backed down.

‘Even if there are losses, Charlie Jung will be the one to bear them.’

Of course, losses for Victoria Fund would depress Victoria Corporation’s stock price, which, in turn, would negatively impact JP Morgan’s stock price.

Nevertheless, he didn’t challenge Jung Hyun-woo.

‘This is different from Edmund Norman’s situation.’

Edmund Norman was the CEO of JP Morgan Financial Group and had high hopes for Victoria Fund.

He was the one who approved the billion-dollar investment in Victoria Fund.

‘Even if Victoria Fund performs poorly, Mr. Norman, not me, will be held responsible.’

Henri Arnault made it a point to avoid involvement in matters outside his direct responsibility.

“That’s right. JP Morgan trusts Charlie.”

The corners of Jung Hyun-woo’s lips quirked upward for a moment.

“Then you would also agree to shorting Japan.”

Shorting Japan.

This was a completely different matter.

Henri Arnault’s eyebrows shot up.

“Ch, Charlie!”

Jung Hyun-woo remained calm.

“Is there a need to raise your voice so much?”

Henri Arnault narrowed his brows and asked.

“Do you know how much the Japanese stock market has risen this year?”

There was no way Jung Hyun-woo wouldn’t know this.

“At the very least, it must be 50%.”

“If you had shorted Japan at the beginning of this year, the return on investment would have been minus 50%.”

Short selling often involves leveraging with margin [borrowed funds], so shorting Japan could have wiped out the principal and led to bankruptcy, not just a 50% loss.

“That’s why we’re planning to short next year, not this year, isn’t it?”

“Charlie! The Japanese stock market will continue to rise next year.”

“That may be the case.”

Henri Arnault’s voice grew louder.

“Do you want to go bankrupt next year?”

Even as his voice grew louder, Jung Hyun-woo remained composed.

“We will be shorting gradually, so we will have a two-year window.”

He clarified that he wouldn’t be shorting the entire investment fund at once.

‘Shorting gradually? Still, isn’t it only two years?’

Henri Arnault didn’t believe the Japanese economy would collapse within two years.

“I am against it.”

Jung Hyun-woo said in a low voice.

“That’s different from what you said earlier.”

Henri Arnault’s face hardened as he raised his voice.

“Isn’t this a different matter?”

Withdrawing investment funds meant forgoing potential profits, but shorting Japan was a high-risk gamble that could lead to ruin.

In fact, he didn’t consider shorting Japan an investment at all.

‘Shorting Japan is gambling.’

He viewed Jung Hyun-woo as a gambler.

“Do you have any evidence that the Japanese economy could collapse?”

Henri Arnault had been skeptical even when Jung Hyun-woo planned a large-scale investment in Japan.

‘I am well aware of the risks of the Japanese economy.’

He cleared his throat and said.

“Charlie, surface-level data often doesn’t reflect the actual economic situation. Moreover, Japan’s economic structure differs from the United States. Trying to understand Japan based on our standards will lead to mistakes.”

He echoed the sentiments of Wall Street investors who emphasized the differences between the Japanese and American economies.

Jung Hyun-woo retrieved documents from his bag and placed them on the table.

“This is data analyzing the risks of Japanese real estate.”

The data had been sent by John Peer from the Tokyo branch.

Henri Arnault didn’t even glance at the documents.

“We saw plenty of this kind of data three years ago as well.”

Jung Hyun-woo held out his right hand.

“Please take a look anyway.”

Henri Arnault remained unmoved.

“Charlie.”

“It’s not too late to talk after you’ve looked at it. It’ll only take about three minutes, won’t it?”

Three minutes would suffice.

Henri Arnault sighed deeply.

“Hoo… I’m falling for Charlie’s words again.”

He reluctantly reached for the data and skimmed through it.

Exactly two minutes later, he let out a low groan.

“Ugh…”

Jung Hyun-woo knew the precise moment he’d react.

‘He’s confirmed that real estate risk management is worse than he imagined.’

Henri Arnault was a risk management expert. To him, loans or investments without risk management were like castles built on sand.

“This is severe.”

Jung Hyun-woo nodded and replied.

“As you can see, Japanese banks have no risk management at all.”

Henri Arnault examined the data and asked.

“But we can’t predict the decline of the Japanese economy based on this alone.”

Jung Hyun-woo responded clearly.

“I wasn’t talking about shorting the entire Japanese economy.”

Henri Arnault paused and asked.

“Then what is Charlie planning to short?”

Jung Hyun-woo replied softly.

“Banks and real estate.”

He would short the stocks of Japanese banks and construction companies.

Henri Arnault stroked his chin.

“It seems like there’s a chance of success, but I can’t guarantee it’s 100%.”

Jung Hyun-woo didn’t disagree.

“A heated iron plate can stay hot longer than you think.”

He meant that even loans without risk management wouldn’t collapse immediately.

“Let’s cut it in half.”

Henri Arnault proposed halving the shorting scale to manage the risk.

Jung Hyun-woo smiled inwardly.

‘He’s still worried about risk management even now.’

He was indeed a master of risk management.

“It’s already been reduced a lot compared to the initial shorting scale.”

Henri Arnault put down the data and said.

“Looking at the data, Japanese real estate loans could collapse at any moment. However, because Japanese real estate prices are continuing to rise, we can’t be certain the loans will burst.”

Jung Hyun-woo acknowledged his point.

“If I could be certain, I would have invested all my assets to short it.”

I am also managing risk.

However, his risk management was practically nonexistent from Henri Arnault’s perspective.

“How about increasing it to three years?”

Jung Hyun-woo’s shorting plan was scheduled for two years. Henri Arnault wanted to extend it to three.

“If we increase the shorting to three years, the interest we have to pay will snowball.”

“We can reduce the shorting scale.”

Henri Arnault agreed that the Japanese real estate bubble would burst, but he felt the shorting scale was too large and advised adjusting it.

Jung Hyun-woo stiffened slightly.

“Henri, I will consider JP Morgan’s advice, but we are the ones who operate Victoria Fund.”

Henri Arnault clenched his fist slightly.

“If the investment fails, how will you take responsibility?”

Jung Hyun-woo answered his question.

“I will use my own money to buy back company stock.”

Henri Arnault raised his eyebrows and asked.

“Are you talking about buying back Victoria Corporation stock?”

Jung Hyun-woo slowly nodded.

“That’s right.”

If the investment failed, he would use his own money to boost the stock price.

Henri Arnault placed both hands on the table.

“If you put that promise in writing, I will thank you on behalf of JP Morgan.”

Jung Hyun-woo clicked his tongue inwardly at his thorough risk management.

‘Tsk, he’s saying I can’t get away with just words.’

To get JP Morgan’s consent, he had no choice but to pick up a pen.

* * *

“You even wrote a memorandum?”

Sarah raised her eyebrows at Jung Hyun-woo.

“I had no choice in order to persuade JP Morgan.”

Sarah put her hand on her waist and raised her voice.

“If you fail, you’ll take twice the damage. Does Charlie know that?”

“I won’t fail.”

Sarah was about to get angry but lowered her eyebrows.

“What happens if the investment goes according to Charlie’s intentions?”

An investment that proceeds according to his intentions meant the ruin of Japanese real estate.

“Even if real estate prices fall by only 50%, the stock prices of Japanese construction and banks will take a hit of more than 80%.”

Just as bubbles inflate with rising prices, fear fuels the decline when prices fall.

“Then our profit will be 80%?”

Jung Hyun-woo shook his head.

“We have to take twice as much.”

Taking twice the profit meant shorting more than the margin.

“Wouldn’t it be dangerous?”

“It’s money we earned in Japan anyway.”

He meant that since it was money earned from Japanese real estate, it would be okay even if they lost it all.

Sarah grabbed his hand and said.

“It’s okay to lose it all. Charlie is a gambler.”

“Hasn’t he always been?”

“I think I know that more clearly now.”

Sarah finished speaking and kissed him on the cheek. Then she let go of his hand and said.

“Okay, let’s go home.”

Jung Hyun-woo thought she had become softer since they started dating.

‘How much softer will she become when we get married?’

Of course, she could become stricter instead. But somehow, Sarah didn’t seem like she would change that way.

The next day, the two boarded a plane bound for San Francisco.

“We may have to lease a private jet now.”

Sarah nodded.

“It would be okay if it was just us, but there are quite a few attendants.”

When the two traveled, at least seven or eight attendants, including secretaries and bodyguards, accompanied them.

Today, 11 attendants boarded the plane, causing a slight issue at the airport with seat assignments.

“Would a business jet be okay?”

“That should be enough.”

Sarah didn’t think they needed a Boeing 737-like aircraft for a private jet.

‘Even a Boeing 737 can carry nearly 200 people.’

The Boeing 737 was a small aircraft as passenger planes go, but it was too big to be used as a private jet.

“Sarah, you choose the plane.”

At Jung Hyun-woo’s request, Sarah nodded.

“Okay. I’ll take a look.”

She was the daughter of the Hilton family, but she wasn’t yet familiar with private jets.

‘I have no choice but to ask Aria for this.’

The plane that left Boston flew for six hours and reached San Francisco.

“It’s only been three hours because of the time difference.”

It was 3 p.m. in Boston but just noon in San Francisco.

“Let’s go out and have lunch.”

Jung Hyun-woo nodded and got up.

Two hours later, at Bank of America headquarters, four people were sitting at the table.

“Charlie’s story is difficult.”

Lyra Marine and Roberto Giannini represented Bank of America.

Roberto Giannini was Lyra Marine’s cousin and the second son of CEO Paulo Giannini.

“I don’t think it’s that difficult.”

“Is that so?”

The representatives from Victoria Corporation were, of course, Jung Hyun-woo and Sarah.

“The bubble in Japanese real estate has inflated to the point where it wouldn’t be strange if it burst at any moment. We have decided to bet on this bubble bursting.”

Lyra Marine sighed briefly.

“Hoo… But American investors won’t agree with Charlie’s opinion, will they?”

Many American investors were still betting on Japanese real estate and companies.

“Their opinions are not important.”

Lyra Marine’s voice hardened slightly.

“Charlie, there’s such a thing as a trend.”

Rather than confronting him directly, Lyra Marine tried to persuade him gently.

“I know what Lyra is trying to say. You’re saying that even if the bubble is big, it could last longer than we expect.”

Roberto Giannini looked back and forth between Jung Hyun-woo and Sarah.

‘Charlie Jung looks younger and more frivolous than I thought. In comparison, Sarah Hilton is so beautiful that I wonder if she’s an actress.’

His cousin Lyra Marine was also beautiful, but she didn’t seem to match Sarah Hilton’s blonde hair and blue eyes.

The other three were vehemently discussing Japanese real estate.

“Lyra, Charlie predicted the Atari bubble.”

Lyra Marine nodded.

“I know. You made a lot of money by shorting Warnock Group, a subsidiary of Atari, at the time, right? But we have to think of the game market and the real estate market differently.”

Jung Hyun-woo raised his voice slightly.

“Is it because of the uniqueness of Japan?”

“That’s right.”

Jung Hyun-woo lowered his voice.

“Even if we consider the uniqueness of Japan, the current prices have crossed the line. And the loans are also crossing the line.”

“Interest rates are continuing to fall.”

“But we can’t increase the loan amount indefinitely.”

There is a limit to how much money Japanese banks can lend.

“We can reduce the loan scale, but…”

Jung Hyun-woo cut off Lyra Marine and stiffened his neck.

“If we cross the line, the Japanese government may ban loans.”

The line he was talking about referred to the limit of loans.

Lyra Marine paused.

“Ban loans?”

It was an unthinkable measure in the United States.

‘It’s not like Prohibition [the ban on alcohol], but a loan ban.’

If loans were banned, not only households but also companies would be shaken.

‘They can’t make that choice.’

However, Jung Hyun-woo’s thoughts were different.

“Lyra, it’s possible in Japan.”

It’s possible in Japan. The uniqueness of the Japanese economy didn’t only work in a positive way.