The Conglomerate Family Became A Villain [EN]: Chapter 283

283. End of the Line (1)

As the Bank of Japan raised interest rates, Kinzo Korekawa, a legendary investor known as Japan’s last individual investor, warned of market overheating.

He was a myth in the Japanese investment world, having ranked first in Japanese tax payments despite three bankruptcies. This feat cemented his reputation as a financial wizard.

“Do you think the Nikkei index in 1989 is normal? This is not normal. Everyone should know that.”

He was a man who had lived his entire life by value investing principles, similar to Peter Lynch and Warren Buffett.

To him, the bubble in the Japanese stock market was bound to seem irrational.

But his warning could not save the investors deeply immersed in the bubble.

Investors who had invested heavily during the bubble years scoffed at his warning and said:

“Korekawa is old.”

“Who listens to Korekawa anymore?”

“He was ranked first in tax payments *before* the great boom started.”

In fact, Kinzo Korekawa’s tax ranking had been declining every year since the Plaza Accord [a 1985 agreement aimed at devaluing the U.S. dollar relative to the Japanese yen and German mark].

“In a word, he’s washed up?”

“Korekawa is not acknowledging his shortcomings or the changing times.”

“Korekawa needs to adapt, too.”

The reaction of these investors made the Japanese cabinet nervous.

July 1989, Japanese Cabinet meeting.

The atmosphere among the ministers was tense.

“We have failed to reverse the rise in real estate prices.”

Even though interest rates were raised by 0.75%, the surge in Japanese real estate prices showed no signs of stopping.

“Investors don’t seem to care whether it’s 2.5% or 3.25%.”

“They’re not investors; they’re speculators.”

The person clicking his tongue was Ito from the Cabinet Secretariat.

“Speculators, you say?”

“They are only interested in investing 100 million yen and earning 200 million yen. What does a 0.75% interest rate mean to such people?”

“Well, then…….”

Ito said, emphasizing his point.

“In this situation, even if we raise interest rates to 10%, the rise won’t stop.”

Japanese real estate was, literally, a runaway train.

“So, you’re saying real estate is a very difficult problem.”

At the Prime Minister’s words, the ministers bowed their heads.

“We apologize.”

“We will come up with the next measures.”

The Prime Minister asked Ito.

“Ito, if you have any measures in mind, tell me.”

Ito cleared his throat and said.

“We need to regulate loans.”

“Regulate loans?”

“Yes.”

“Are you saying we should raise interest rates further?”

“I think we should regulate the loans themselves, as well as raising interest rates.”

The Prime Minister tilted his head.

“How do you regulate loans?”

In 1989, Japan was at a point where loans of over 90%, close to 100% of the collateral value, were being made.

‘Are you saying we should only lend 50% of the collateral?’

‘Perhaps we should limit the loan amount according to income.’

‘We could also use a method of differentiating interest rates according to the total assets of the household.’

The people listening to Ito and the Prime Minister each considered the implications in their heads.

However, the regulatory measures that came out of Ito’s mouth were shocking.

“I think we need to regulate the total amount of loans.”

The ministers raised their eyebrows at Ito’s advice.

“Ito! That’s dangerous!”

“Such extreme methods are only possible in wartime.”

The Prime Minister closed his eyes after listening to Ito’s proposal.

“Hmm…….”

Ito did not back down, even though the surrounding reaction was cold.

“Don’t you understand? Korekawa is raising his voice, and the Bank of Japan has raised interest rates, but real estate has risen again by more than 10%! Is that all? The Nikkei index is now at 38,000. It will soon be 40,000!”

Nikkei index 40,000.

The cabinet ministers bowed their heads at his impassioned statement.

“The situation is difficult, but that method is too radical.”

“Doesn’t it seem like something the Red Army Faction [a Japanese far-left militant group] would do?”

“Think of another way.”

Finally, the Prime Minister, who had been silent, opened his mouth.

“I think it would be good to raise interest rates again by 1%.”

The card that the Japanese government played was a second interest rate hike.

* * *

John Peer, who returned to the United States after a long time.

The place he headed to was Jung Hyun-woo’s mansion located on the outskirts of Boston.

“Nice house.”

At his compliment, Jung Hyun-woo scratched his head.

“It’s too big for two people to live in.”

In fact, nearly half of the mansion’s rooms were empty.

John Peer said in a cheerful voice.

“Charlie, families always grow.”

He, like other acquaintances, saw Jung Hyun-woo and Sarah’s marriage as a foregone conclusion.

‘In three or four years, this place will be as noisy as any other family home.’

Jung Hyun-woo took his hand off his head and asked.

“Will it be?”

John Peer sighed inwardly at Jung Hyun-woo’s reaction, which was different from what he expected.

‘Ha… Is Charlie’s judgment clouded because of his relationship?’

The reason he came to see Jung Hyun-woo today was to revise the investment direction.

“Charlie, can we talk about work?”

Jung Hyun-woo lowered his hand and answered in a calm voice.

“Of course.”

The two men’s conversation took place in a study filled with warm light.

“The real estate fever in Japan is amazing.”

Jung Hyun-woo raised his voice slightly.

“Are you saying that the last interest rate hike didn’t work?”

“It’s not just that it didn’t work. Japanese people don’t seem to care about the interest rate itself.”

Jung Hyun-woo steepled his fingers and asked.

“Even with a 3% interest rate, if you get a 100% loan, you have to pay 3% of the real estate price as annual interest. But you’re saying they don’t care?”

John Peer answered firmly.

“Because they can make more profit than that.”

Last year, the rise in Japanese real estate was more than 20% nationwide, and major cities such as Tokyo and Osaka saw increases of more than 30%, with commercial districts such as Shinjuku and Ginza approaching 50%.

This meant that even if they paid 5% interest per year instead of 3%, they could make several times that profit.

“Then the Japanese government will have no choice but to raise interest rates further.”

John Peer frowned and asked.

“Can interest rate hikes really stop the real estate boom?”

The surge in Japanese real estate was a phenomenon unlike anything seen before.

“So, what does John think?”

John Peer relaxed his brow and said.

“I think it will last for two or three years.”

Not only the public’s opinion but also the opinions of experts aligned with John Peer’s.

“The Japanese government will continue to pour out measures, and the market will continue to defy them. And you’re saying that the real estate market, having run out of steam after a few years, will start to decline?”

John Peer clicked his tongue inwardly at Jung Hyun-woo’s analysis.

‘Tsk, Charlie’s intuition isn’t dead; he understands everything.’

He nodded and answered.

“I think the scenario you described is the most likely.”

Jung Hyun-woo listened to his answer and raised his teacup.

“John has fallen into temptation.”

“Temptation, you say?”

“The temptation that real estate always makes money.”

John Peer sighed and said.

“Charlie, it doesn’t make sense to talk about a decline in the current situation.”

He thought that he should stop short selling even now.

‘As long as real estate doesn’t collapse, the Nikkei index won’t collapse either.’

The huge liquidity being supplied to the Japanese stock market came from the real estate bubble.

Jung Hyun-woo said as if he had read his mind.

“John, you came to me to stop short selling.”

John Peer emphasized his point.

“I said you can’t catch a falling knife [an attempt to buy a stock or other asset that is declining in price, based on the assumption that it will eventually rebound].”

“A falling knife, huh…….”

“Charlie, this quarter’s loss is 15%.”

Victoria Fund’s assets under management were over $200 billion. A 15% loss meant a loss of approximately $30 billion.

“Isn’t it an unrealized loss?”

John Peer clenched his fist slightly.

“If the Nikkei index exceeds 40,000, the loss could increase to 50%.”

Jung Hyun-woo put down his teacup and asked.

“So?”

John Peer opened his eyes wide at his question.

“So, you say?”

“Didn’t you say that you would invest additional private funds if the loss became unbearably large?”

John Peer received his question with disbelief.

“You don’t mean you’re prepared for a loss of more than 50%, are you?”

Jung Hyun-woo nodded.

“Of course.”

He was saying that he hadn’t started short selling without that much resolve.

John Peer was able to understand Jung Hyun-woo’s intentions more clearly than when they were talking on the phone.

‘Charlie is serious.’

He unfolded his clenched right hand.

“If the Nikkei index breaks through 45,000, Victoria Fund could go bankrupt.”

“Sarah has also decided to join.”

John Peer almost jumped up from his seat.

“Miss Hilton, too?”

Jung Hyun-woo nodded calmly.

“We have decided to work together.”

John Peer thought that Sarah was making too big a bet for her beloved lover.

‘Even if she is the daughter of a *chaebol* [a large South Korean business conglomerate] family, if she doesn’t know that money is a scary thing…….’

He let out a long sigh.

“Haa…….”

“The ground will sink.”

John Peer spoke with sincerity.

“I don’t know. When I stand on the streets of Tokyo, everything looks good. The collapse of the bubble that Charlie is talking about, or the economic recession that the Japanese government is worried about, isn’t even a shadow.”

Jung Hyun-woo picked up on his words.

“You mean everyone has a happy face, and there are no beggars or homeless people on the streets.”

“That’s right.”

“John, there is no utopia.”

John Peer opened his eyes wide at his words.

‘There is no utopia.’

It was a stark statement that was hard to believe came from the mouth of a young man who was not even thirty years old.

“Does Charlie think that Japan’s happiness is false?”

“Rather than false, it’s an illusion.”

“An illusion?”

“They have pulled happiness from the future to enjoy now. In the end, the price will be paid by future generations.”

John Peer turned his gaze out the window.

‘Even the warm sunlight feels cold.’

It wasn’t that he felt a chill in his body, but his heart felt heavy.

“If the Japanese economy collapses, many people will suffer.”

Jung Hyun-woo answered calmly, like someone who had seen the future.

“John, there is no happiness without a price. As I said before, the current happiness is borrowed from the future.”

There is no happiness in the future.

A future where happiness exists.

In the end, is he saying that only pain will remain?

“The conversation is becoming too metaphysical.”

John Peer was a pragmatic investor.

Of course, Jung Hyun-woo knew that too.

“It will collapse next year.”

John Peer raised his eyebrows at his words.

“It will collapse next year?”

Until now, Jung Hyun-woo had never accurately stated the timing of the Japanese bubble’s collapse.

‘He had only said that he would withdraw after the Olympics from before.’

He had argued since the past that the bubble would collapse in a few years, but he had never made such a short-term prediction as now.

“Sell all the stocks you have. And short sell all the major Japanese banks…….”

John Peer stood up halfway from his seat and raised his voice.

“It’s too dangerous.”

If the scale of short selling became larger than now, he would risk bankruptcy with even a slight miscalculation.

“You don’t trust us?”

“Th, that is…….”

John Peer couldn’t say no.

While staying in Japan, he had witnessed the strength of the Japanese economy firsthand.

‘The product quality of goods produced in Japan far exceeds that of goods produced in the United States.’

He thought it would be difficult for American cars to surpass Japanese cars.

“Our short selling is not just speculation.”

John Peer frowned.

“If it’s not just speculation, then what’s the purpose behind it?”

Jung Hyun-woo countered with a question.

“Doesn’t short selling also have the positive effect of preventing bubbles from growing?”

The positive aspect of short selling.

This was common knowledge that anyone who trades stocks, not just stock traders, knows.

“Hoo…….”

As John Peer let out a long sigh, Jung Hyun-woo smiled faintly.

“It seems like you have nothing to say because it’s such a basic concept.”

John Peer’s gaze lowered.

“I didn’t come here to talk about this.”

“I know. John wants to say that we should stop short selling and gradually withdraw from Japan.”

“Isn’t that the right approach?”

Jung Hyun-woo shook his head.

“The Japanese government is struggling to achieve a soft landing. I just want to help them a little with short selling.”

John Peer thought.

‘There’s no genuine feeling in Charlie’s words.’

He was saying that he wasn’t being sincere.

“Charlie, tell me your real thoughts.”

John Peer wanted to know Jung Hyun-woo’s true feelings.

“Do you think I’m lying to John?”

“I didn’t sense any emotion in today’s conversation.”

Jung Hyun-woo realized that John Peer’s intuition was sharper than expected.

‘I can’t deceive him anymore.’

He bit his lower lip slightly and said.

“I think it’s over.”

It’s over.

Deep lines appeared on John Peer’s forehead.

“Are you saying that the future has been decided?”

Jung Hyun-woo nodded and answered.

“The Japanese government will take more drastic measures than the market expects.”

“The market is already expecting interest rate hikes.”

He was implying that interest rate hikes were by no means drastic measures.

Jung Hyun-woo did not back down and emphasized his point.

“It will be more than that.”

Measures beyond interest rate hikes.

John Peer relaxed his brow and asked.

“You don’t mean the Japanese government is intervening in the bond market, do you?”

Japan’s bond market was larger than imagined.

‘If you control that market and manipulate it…….’

The repercussions would be unpredictable.

Jung Hyun-woo coldly answered his question.

“John, it would be fortunate if it ended with that.”

A measure that is not even comparable to intervening in the bond market.

Then what measures will the Japanese government take?

“Charlie, from whom…….”

Who did you hear it from?

The moment his question was about to escape his lips, Jung Hyun-woo raised his right hand and gestured to cover his mouth.

John Peer stopped talking for a moment.

‘Don’t say anything. No, he means be careful what you say.’

Perhaps there was a listening device installed here.

‘If there is a bug, by any chance…….’

There was only one place he could think of.

‘The CIA, are they monitoring Charlie?’

But the relationship between the CIA and Jung Hyun-woo was not bad. In particular, Jung Hyun-woo had repeatedly emphasized his good relationship with the CIA.

‘If the CIA is monitoring Charlie, it’s not to catch Charlie’s weaknesses, but because of the information Charlie might leak.’

The information that Jung Hyun-woo could leak.

It was not only about network technology. The information he obtained from the CIA was also one of the things he was prohibited from disclosing.

‘Maybe that’s possible.’

John Peer speculated that it seemed certain that Jung Hyun-woo had started short selling based on information from the CIA.

“John, if the Japanese government takes drastic measures, the Nikkei index will fall below 30,000.”

If the Nikkei index fell below 30,000 as Jung Hyun-woo said, there would be nothing to worry about.

Because Victoria Fund would be reborn as a giant on Wall Street, earning astronomical profits.

“The Nikkei falls below 30,000. Can I believe it?”

Jung Hyun-woo raised his voice confidently.

“Didn’t I say that the future has been decided?”

John Peer didn’t ask any more questions and got up from his seat.

“I understand. Then I will proceed knowing that.”

Jung Hyun-woo sighed briefly inwardly.

‘Hoo… I ended up using the CIA again.’

He knew that it was not good to associate with the CIA too often.

‘I should refrain from it for the time being.’

While he was planning his next move.

John Peer thought as he left the mansion.

‘Perhaps there is the CIA or something more behind Charlie.’

Secret organizations of the world that are often covered in tabloid magazines.

Freemasons.

He thought that perhaps Jung Hyun-woo belonged to such a powerful secret society.