Thursday, September 24, 1998.
In the CEO's office, where the wide East River could be seen flowing gently beyond the panoramic windows lit by bright sunlight, Seok-won sat on a leather sofa with his legs crossed.
On either side of him, Landon and Andrew sat with relaxed expressions, while on the heavy wooden table before them, cups of coffee filled the air with the rich aroma of roasted beans.
As usual, Andrew—wearing his trademark suspenders—spoke first to Seok-won.
"As you instructed, we've acquired all of LTCM's Russian government and corporate bonds at discounts of 70% and 90%, respectively."
Sitting across from them, Landon gave a casual shrug and whistled softly.
"Even with the Russian government declaring a moratorium, those bond prices are downright horrific."
"The LTCM shock certainly compounded things," Andrew replied, adjusting his gold-rimmed glasses with one hand, "but fundamentally, it's evidence that investors view Russian bonds as deeply unstable."
Seok-won responded at an unhurried pace.
"True, at the moment, with all these negative factors piling up, the risk of default has grown. But once time passes and the Russian economy gradually stabilizes, prices will recover."
Leaning back with his fingers interlaced, he continued speaking.
"Chairman Warren Buffett knew that too. That's why he tried to snatch up LTCM at a bargain."
"Speaking of which," Landon said, "Buffett must be furious. He spent all that effort driving down the price, only for us to spoil his plans at the last minute."
As Landon spoke, Seok-won lifted his cup and replied nonchalantly before taking a sip.
"Well, that's what happens when you get greedy and overdo it."
After savoring the coffee's aroma and taking another sip, Seok-won resumed.
"After Jacob Wiseman sold us all his Russian bonds, he decided to sell LTCM's stake to the banking consortium led by Chris, the president of the New York Fed, didn't he?"
At this, Landon answered immediately.
"Yes. Having secured extra cash from selling the Russian bonds, Wiseman and the existing fund partners revised the terms so they'd keep a slightly larger share than originally proposed. With that adjustment, they agreed to accept the bailout."
Seok-won gave a small nod.
"Even if their share shrinks significantly, it's far better to retain equity than to be forced out empty-handed and watch the fund they built up snatched away at a bargain."
"Quite right."
Listening to their exchange, Andrew naturally joined in.
"Looking at it that way, it seems Chairman Buffett pressed them far too hard, without giving them any breathing room."
"His attempt to squeeze them to the limit in order to acquire cheaply backfired instead."
Setting down his teacup, Seok-won leaned back in his chair and asked,
"Most of the Russian corporate bonds we purchased this time—weren't they issued by Gazprom and Yukos?"
"That's correct. Between the two companies, the total exceeds 3.5 billion dollars."
Taking the file Andrew handed him, he flipped it open to find a neatly organized list of the Russian corporate bonds they had just acquired.
At the very top, listed one after the other, were Gazprom and Yukos. Seeing their names, a deep smile spread across his face.
Gazprom, born from the Soviet-era Ministry of Gas Industry after the discovery of vast gas fields in Siberia, was Russia's largest gas company.
Yukos Oil Company, like Gazprom, had originally been a state-owned enterprise but was privatized. As one of the largest oil companies in Russia, it accounted for nearly 20% of the nation's crude oil production.
As their lines of business made clear, these were precisely the kinds of companies poised to reap the greatest rewards—and to amass staggering oil wealth—when the era of soaring oil prices arrived.
These two companies are exactly why we bought into Russian corporate bonds, Seok-won thought.
He couldn't help but smile as he considered how much profit they could make from Gazprom and Yukos bonds, acquired at prices far below book value—practically for free.
Then, as his eyes ran down the list, he suddenly widened them at a familiar name.
[Alrosa – 250 million dollars]
This was none other than Russia's largest diamond exploration and mining company, responsible for 95% of Russia's diamond output and 27% of the world's total.
Lifting his head, Seok-won looked at Andrew.
"This Alrosa listed here—is it the same diamond mining company I'm thinking of?"
"That's right."
"Oh? I see…"
Discovering an unexpected treasure, Seok-won stroked his smoothly shaven chin with one hand, his eyes gleaming with anticipation.
As he mulled over how best to take advantage of the Alrosa bonds he had just acquired, Landon cautiously spoke up, watching him carefully.
"There are rumors that the Federal Reserve will soon cut its benchmark interest rate to stabilize the chaotic stock and bond markets. Don't you think it might be time to start closing our positions?"
As if they had rehearsed it beforehand, Andrew chimed in as well.
"We've already made substantial profits. More importantly, if the Fed steps in as the firefighter, the fear gripping the market will quickly subside. Pulling out beforehand would work in our favor."
But Seok-won leaned back against the sofa with a calm expression.
"Even if the Fed changes course and decides to cut rates at the upcoming FOMC meeting, how much do you think they'll reduce it by?"
"We can't know for sure until the announcement, but I'd guess at least half a percentage point," Landon replied.
Andrew nodded in agreement.
"Yes, I also think it would take at least that much to calm the markets."
"I agree in principle," Seok-won said, his tone firm. "Given the scale of panic and fear, only a strong move could restore confidence. But judging by the Fed's cautious stance toward mounting inflationary pressures, such a bold action is unlikely."
He cut off his words sharply, as if drawing a clear conclusion.
"So, then…"
"Even if they do lower rates, it will almost certainly be by just a quarter of a point—slow, deliberate steps, like testing every stone before crossing a river."
"Only 0.25%…"
"Now that you mention it, that does sound more realistic," Landon admitted.
They both knew that a steep rate cut could risk fueling inflation, and their expressions showed they understood the reasoning.
"But as you both pointed out just now, the market and investors are expecting at least a half-point cut. If the Fed delivers only a quarter-point, or even less, in that atmosphere, how do you think people will react?"
Andrew's eyes gleamed from behind his gold-rimmed glasses.
"More disappointment than relief."
"Exactly."
Seok-won's expression turned meaningful.
"In that case, the stock and bond markets, which have been rebounding on anticipation, will tumble sharply again, dragged down by waves of disappointed sell-offs."
As the two men listened with rapt attention, leaning forward unconsciously, Seok-won curled one corner of his mouth into a smile.
"When the markets collapse once more, breaking through their previous lows—that will be the true moment to cash out."
At this, Landon leaned forward slightly, his expression puzzled.
"If things play out the way you predict, the downtrend will continue. Wouldn't it make sense to just hold our positions?"
Seok-won shook his head and explained his reasoning.
"If the first rate cut proves ineffective, the Fed will be forced to rush into additional cuts. That's why it's better to exit beforehand. And considering the sheer scale of our positions, we need to move two or three steps ahead of everyone else."
Andrew nodded in agreement.
"With positions totaling hundreds of billions of dollars across both cash and options, dumping them all at once could trigger serious turmoil. You mean to wind them down gradually, step by step."
"Exactly."
Pleased with how quickly they grasped his point, Seok-won looked at the two with a satisfied expression.
"Once the first rate cut is announced, start with bonds, then move on to the Deutsche mark and the dollar, and save the financial stocks—those hit hardest by the LTCM crisis—for last."
"Understood."
"Looks like we'll be busy again for a while."
After that, Seok-won continued to hold an in-depth discussion with the two men about the market's likely movements and their strategy for responding.
When Landon and Andrew finally left, Daisy, his secretary, came in, cleared away the teacups on the table, and quietly stepped out.
The moment she did, his phone buzzed in his pocket as if on cue.
Still seated on the sofa, Seok-won pulled it out and answered.
[Sir, this is Jung Kyu-cheol.]
"It must be the middle of the night in Korea. What's going on?"
Jung Kyu-cheol, formerly an executive director at Hyunwoo Construction, had recently been brought in as president of Bluehole Construction, a company Seok-won established to more efficiently manage real estate assets.
[I have some urgent information to report.]
"Go ahead."
[The Asia-Pacific Group, currently under a workout program, has decided to sell off assets to repay its debts.]
"...!"
[I've confirmed that both the Gimpo reclaimed land and Korea Express are listed among the assets for sale.]
Having long been waiting for this announcement, Seok-won tightened his grip on the phone and asked,
"How much is the Asia-Pacific Group asking?"
[They've officially declared that they're abandoning their ongoing request to change the zoning of the Gimpo reclaimed land. They've asked the government to purchase the 3.73 million pyeong site at this year's officially assessed land value of 959.4 billion won, plus 250 billion won in taxes they've paid over the years—bringing the total to 1.2094 trillion won.]
The Asia-Pacific Group had long sought to develop the Gimpo reclaimed land, which remained locked under agricultural zoning. When the government refused to grant approval, the group essentially turned the tables, telling the government to buy it instead.
"How is the government reacting?"
[There hasn't been an official response yet, but given that it's land with high potential value, I think it's very likely they'll agree to the purchase.]
Seok-won, who shared the same view, gave a slight nod as he pressed the phone to his ear.
"They will. Especially since the entire sale price would go directly toward paying off Asia-Pacific's debts, it would place no additional burden on the government."
[Exactly. They're already under a workout program, which means substantial bailout funds are inevitable. By selling the Gimpo reclaimed land, they'd significantly ease that burden.]
The figure was large, but for someone with Seok-won's resources, it wasn't beyond reach.
Especially with his latest bet set to yield astronomical profits, even acquiring the Gimpo land at that price posed no issue.
And considering how much land values will skyrocket in the future, 1.2094 trillion won is practically a steal.
This was an opportunity that would never come again outside the hardships of the IMF crisis—and Seok-won knew he couldn't let it slip away.
Resolving himself, he spoke quickly and decisively.
"Inform both the Asia-Pacific Group and the government that I am willing to purchase the Gimpo reclaimed land at their asking price, and make sure to stress that payment will be made entirely in U.S. dollars."
Startled by how easily Seok-won committed to such an enormous purchase, President Jung Kyu-cheol faltered slightly as he replied.
[Ah… understood.]
"Keep me updated on the progress, and don't forget to emphasize—repeatedly—that the payment will be made in dollars."
Pressed again on the point, Jung hastily answered.
[Yes, I'll make sure of it.]
The call ended, and Seok-won set the phone down, sinking back into the sofa.
"With the LTCM crisis threatening to spark another financial meltdown, the government won't possibly reject such a massive inflow of dollars."
As he pictured the Gimpo reclaimed land soon falling entirely into his hands, a broad smile spread across Seok-won's face.