The Conglomerate Family Became A Villain [EN]: Chapter 186

Autumn Storm (4)

The fundamental reason the Plaza Accord shocked Wall Street was that the meeting of finance ministers itself was a secret.

Of course, senior executives from the Big Three banks and political heavyweights knew that the G5 [Group of Five, referring to the finance ministers of the US, UK, France, West Germany, and Japan] finance ministers were coming to New York.

However, even they didn’t know what topics the finance ministers would be discussing in New York. They simply assumed that negotiations favorable to the United States would take place.

Only members of the Reagan administration knew exactly what agenda the finance ministers would agree on. And they kept the secret until the announcement of the agreement.

“This negotiation is for the benefit of the United States?”

The one who raised his eyebrows was Damon Ferman of Terra. He raised his voice in front of five Terra fund managers.

“Stock prices are fluctuating, the bond market is in turmoil, and the financial market is in shock. How can this be a negotiation for the benefit of the United States?”

As he said, Wall Street was shaken by the shock from the Plaza Accord.

In particular, the shock to the banks was significant.

“Isn’t this proof that the White House morons know nothing about the economy!”

One of the five fund managers, sitting at the far right, raised his hand and said.

“Mr. Ferman, shouldn’t we move now?”

Damon Ferman’s gaze was fixed on him.

“Move now?”

The fund manager stated something extremely obvious.

“What’s the point of talking about it here? The agreement is already done. Since it has already happened, isn’t the response important?”

His common-sense answer was unlikely to work for the agitated Damon Ferman.

“Bob! I am talking about my great nation right now!”

The fund manager was speechless at his outburst.

‘Is he out of his mind?’

Terra had bet nearly $2 billion on rising stock prices and bonds.

In a situation where the U.S. economy was faltering, such a bet was very risky.

‘Moreover, we didn’t buy actual stocks or bonds, but invested in derivatives [financial contracts whose value is derived from an underlying asset]. If we don’t pull out now, we will suffer a fatal blow.’

Terra’s investment basically started with risk. They were a fund that made profits by short selling [betting that a stock’s price will decline] when stock prices fell and through derivatives when stock prices rose.

“How did our great nation end up in this state? What are the president and Congress doing? How much more do the White House morons have to ruin this country before they stop?”

Damon Ferman was shouting like a tragic hero.

The fund manager who had previously offered his opinion raised his right hand again.

Damon Ferman raised his voice as soon as he raised his right hand.

“Bob, are you trying to ruin my mood again?”

The fund manager mustered up the courage to answer despite Damon Ferman’s question.

“Mr. Ferman, if we withdraw now, we can salvage half of it.”

Conversely, if they withdrew now, they would have to bear a loss of $1 billion, half of the $2 billion.

“What did you say now?”

Damon Ferman’s eyes flickered with madness.

“If we withdraw now…….”

He couldn’t finish his sentence and closed his mouth.

‘Damn it…….’

Now there were only two options left.

Either lose all $2 billion, or wait for a miraculous turnaround and hit a grand slam.

The remaining four fund managers looked at poor Bob and thought.

‘There’s a 90% chance we’ll lose it all.’

The shock the U.S. financial market received was so great that Damon Ferman lost his mind and went wild.

One week later.

Terra and Damon Ferman received a disastrous report card.

“Minus 173%?”

Not only was the principal gone, but they also had to be responsible for the additional losses incurred.

The amount of the loss made the loss that Carney Paul inflicted on Bank of America seem insignificant.

Moreover, Terra’s losses were not yet 확정 [confirmed].

“Mr. Ferman, if we don’t stop here, the losses will increase further.”

Just one week after the Plaza Accord.

The mark rose by 7% and the yen by 8.1%, putting pressure on the U.S. economy.

It was only natural that the financial market contracted.

“I can’t stop here!”

Stopping here meant the end of his career.

“Mr. Ferman, there’s no chance of winning.”

Damon Ferman knew very well that there was no chance of winning.

‘Why did this happen? Are there only morons in the White House?’

The amount of goods imported from Japan was still large, and American consumers were still buying Japanese products.

In this situation, if the value of the dollar fell, the U.S. trade deficit would only increase.

‘Raise the price of Japanese goods to reduce purchasing power? Who came up with such a stupid idea? To reduce the trade deficit, we need to open the markets of Germany and Japan and sell our goods!’

Damon Ferman was not the only one frustrated. Most Wall Street investment banks were recording unexpected losses.

Even the famous Magellan Fund could not avoid losses this time.

Only JP Morgan was exquisitely balancing profits and losses.

“Henri. You’ve shown your skills this time.”

The person praising Henri Arnault was Arthur Morgan, Chairman of the Board of JP Morgan.

He had handed over the position of CEO of JP Morgan to Edmund Norman, but still retained the position of Chairman of the Board.

In other words, he had only handed over half of the power he had to Edmund Norman.

“You flatter me.”

Arthur Morgan said coldly.

“Hmm, it wasn’t your idea.”

He read his thoughts by looking at Henri Arnault’s expression for a moment.

Henri Arnault readily admitted his words.

“I followed John’s advice this time.”

“John?”

“He’s a friend named John Pierre.”

“Hmm, is he a friend who is like your right-hand man?”

Henri Arnault nodded and replied.

“Yes.”

Arthur Morgan asked again.

“What did that friend say? He wouldn’t have bet against it without any basis, would he?”

Henri Arnault cleared his throat and replied.

“Actually, he didn’t exactly predict the contents of this negotiation.”

“Then?”

“John said that this negotiation could fall apart and that we should bet on the opposite side as well.”

Arthur Morgan slowly nodded at his answer.

“The negotiation could fall apart. Yes, that could have happened. That friend is better than Damon.”

Henri Arnault paused and asked.

“Damon, are you referring to Damon Ferman?”

The Ferman family was a prestigious family that produced the IMF’s [International Monetary Fund] First Deputy Managing Director, Ein Ferman. Damon Ferman, a powerful figure at Terra, was also a member of that Ferman family.

“Do you know him?”

“I’ve heard rumors. He’s a powerful figure at Terra and has great intuition…….”

Arthur Morgan shook his head and said.

“He made a completely wrong choice this time.”

Henri Arnault could have predicted Terra’s losses to some extent.

‘Because they mainly trade derivatives. They must have suffered more than three times the losses compared to other investment banks.’

More than three times the losses.

Combined with the previous short-selling failure, it could be said to be a major back-to-back defeat.

“Even monkeys fall from trees, don’t they?”

Arthur Morgan raised his right hand and replied.

“That friend is not a monkey. The real monkey is in Boston.”

The monkey living in Boston.

The person he was paying attention to was Jung Hyun-woo.

Arthur Morgan raised his voice slightly and asked.

“How is that friend doing?”

Henri Arnault bowed his head and replied.

“As Mr. Morgan expected, Charlie Jung made a huge profit from this Plaza Accord.”

Arthur Morgan let out a short exclamation.

“Truly! Amazing!”

He let out a long sigh and said.

“Huh……. I should have met that friend in person.”

“Do you regret it?”

“Because he’s the real monkey.”

Arthur Morgan did not use the expression monkey for racial discrimination. He compared Jung Hyun-woo to a monkey because he thought that Jung Hyun-woo’s handling of money was like a monkey climbing a tree.

“So, how much did that friend earn?”

Henri Arnault thought for a moment and then replied.

“Charlie Jung has a lot of money scattered around in places other than our bank, so I think he must have earned at least $3 billion.”

A profit of $3 billion.

Jung Hyun-woo’s profit was equal to the money Damon Ferman of Terra lost.

Arthur Morgan laughed loudly after hearing Jung Hyun-woo’s profit.

“Hahaha, all the money Damon lost must have gone to that friend.”

Then he turned his gaze out the window.

‘Like his grandfather, he seems to have been born with a genius sense.’

A natural talent for handling money.

In Wall Street, only those who have this can rise to the top.

* * *

After the Plaza Accord, Jung Hyun-woo was able to generate astronomical profits.

However, according to Forbes’ estimates, his wealth did not increase but rather decreased.

The reason was that the stock price of Victoria Corporation had fallen.

October 2, 1985.

The stock price of Victoria Corporation was $11.6, which was more than 20% lower than the previous month when it was over $14.

‘A completely unexpected development.’

Jung Hyun-woo’s assets announced by Forbes in the second half of the year were about $20 billion.

Most of it was Victoria Corporation stock.

‘I made a profit of $3 billion from the Plaza Accord, but I lost more than $3 billion because the stock price of Victoria Corporation fell.’

It felt like robbing Peter to pay Paul [taking something from one person to pay another, resulting in no overall gain].

‘Tsk, nothing I can do.’

It was when he clicked his tongue inwardly.

Sarah opened the door and came inside, raising her voice towards him.

“Charlie?”

Jung Hyun-woo did not react to her first word. Then her voice grew louder.

“Charlie!”

Jung Hyun-woo turned his head at Sarah’s thunderous voice.

“Oh, Sarah, you’re here?”

Sarah sighed deeply and said.

“Hah……. What are you so engrossed in?”

Jung Hyun-woo scratched his head and replied.

“I was checking the company’s stock price.”

On the monitor on his desk, the current stock price of Victoria Corporation was changing in real time.

– $11.65

It was up $0.05 from earlier.

Even with this much change, Jung Hyun-woo’s assets differed by more than $100 million.

Sarah tilted her head after hearing his answer.

“Charlie doesn’t usually care much about our company’s stock price.”

Jung Hyun-woo took his eyes off the monitor and said.

“I was checking if it was a short sale.”

“Hmm, the stock price has fallen a lot recently. But Citibank and JP Morgan have also fallen together, so it’s probably not a short sale.”

Victoria Corporation was closely connected to the Big Three banks, so its stock price fell together when the stock prices of the Big Three banks fell.

“I can feel that everyone is having a hard time because of the Plaza Accord.”

Sarah handed Jung Hyun-woo a document and asked.

“Didn’t you say this was better in the long run?”

Immediately after the Plaza Accord.

Jung Hyun-woo had explained the effects of the Plaza Accord to Sarah.

His explanation to Sarah can be summarized as follows.

– Even though it’s difficult right now, if the value of the yen and mark rises, the competitiveness of American products will recover. Then, in two or three years, the U.S. economy will recover, and the exchange rate will stabilize accordingly.

In short, the Plaza Accord was not an agreement to see immediate effects.

It was an agreement that looked to the future two or three years later, or perhaps even further.

“It’s a good agreement in the long run.”

Jung Hyun-woo checked the document Sarah handed him.

“Sarah, do I just sign here?”

Sarah nodded and replied.

“That’s right.”

“But why did Sarah bring this instead of Luna?”

The document Sarah handed him was not an important approval document that she would bring.

“I met Luna at the door. Instead of waiting outside the door for Luna to hand this to Charlie, I just brought it in.”

She meant that it was originally the job of Luna, Jung Hyun-woo’s secretary.

“I see.”

Sarah sat down in front of him and said.

“It’s time to take it out.”

Jung Hyun-woo tilted his head at Sarah’s words.

“Take what out?”

“The amount you profited from the Plaza Accord.”

Sarah was saying that the party was over, so it was time to clean up.

“Sarah, the party is just beginning.”

Sarah raised her eyebrows at Jung Hyun-woo’s words.

“Starting now?”

Jung Hyun-woo replied calmly to her question.

“I told you. It will take two or three years for the Plaza Accord to take effect.”

“Then does that mean that Japan and Germany will be more advantageous than the United States for the next two or three years?”

Jung Hyun-woo sighed briefly and replied.

“Hoo……. A huge wave that has never been seen before will come from Japan.”

“A huge wave?”

“A wave made of money. It will sweep through LA, and maybe even go to New York.”

Jung Hyun-woo’s analogy was Japan’s encroachment on American capital using bubbles [an economic cycle characterized by rapid escalation of asset prices].

‘Mitsubishi bought the Rockefeller Center, Sony bought Columbia Pictures, and Panasonic bought Universal Pictures.’

The Empire State Building, which can be said to be a symbol of New York, was also sold to a joint venture centered on Japanese people during this period.

‘But Japan’s wave didn’t last long.’

As the 1990s began, Japan’s bubble burst.

Jung Hyun-woo knew.

That that was the real opportunity.

* * *

Michael Carter, CFO [Chief Financial Officer] of Citi Securities, tilted his head after receiving a call from Jung Hyun-woo.

“You’re saying you’ll only pay off part of the loan?”

“That’s right.”

From Citi Securities’ point of view, it was not a losing business since they could receive a large amount of interest every month.

However, Michael Carter couldn’t help but have one question.

‘What is he going to use that money for?’

Jung Hyun-woo had not used all of the borrowed money to buy Victoria Corporation stock.

“May I ask where you plan to use the loan?”

It was not strange to ask about the source of the loan. Depending on the loan product, the loan could be recovered if the source was unclear.

“I plan to invest in Japan and Germany.”

Michael Carter couldn’t believe his ears.

“Invest in Japan and Germany?”

The yen and mark had risen nearly 10% against the dollar.

“Is it strange?”

“Shouldn’t you take some more time to watch? The yen and mark will fall again.”

Michael Carter thought that the strong yen was a temporary phenomenon.

Jung Hyun-woo realized that he did not fully understand the Plaza Accord.

“The yen and mark will continue to rise.”

“Continue to rise?”

“You’ll know if you look closely at the contents of the Plaza Accord.”

Michael Carter narrowed his brows.

“Mr. Jung, I think that this rise in the short term is an abnormal reaction from the market, although it will be like that in the long term.”

He still couldn’t believe Jung Hyun-woo’s words.

“If that abnormal reaction is the will of the market, shouldn’t we accept it?”

The market does not move with rational judgment.

Michael Carter also knew that fact. However, in most cases, it was not easy to accept.

‘Time will tell who made the right judgment.’

He lowered his voice and said.

“I understand. I’ll let you know the repayment account.”

On this day, Jung Hyun-woo repaid $1 billion, half of the $2 billion he had borrowed from Citi Securities.