Chapter 144: Investment Company
The U.S. Federal Reserve (Fed) meeting concluded, and Chairman Ben Bernanke entered the press conference room.
The eyes and ears of investors and financial professionals worldwide were focused on his every word.
DJ Capital’s headquarters displayed Bernanke’s image on a large screen.
Seong-hwan and I watched the screen with slightly tense expressions.
[Based on our assessment that the economy has recovered as expected, we plan to reduce our asset purchases starting later this year…]
The market reacted instantly before the Fed Chairman could finish his statement.
“The 10-year Treasury bond yield is moving. It’s already risen to 1.7%!”
Lisa exclaimed excitedly.
The interest rate chart on the monitor beside the screen was rising at an alarming pace.
Grant quickly chimed in,
“This is the expected movement. Should we increase our position further?”
“Hold off on additional positions for now. Let’s monitor the situation.”
I tried to appear calm, but my heart was racing just the same.
As Treasury bond yields surged, the stock market was also in turmoil.
The S&P 500 index on another monitor was rapidly declining.
“S&P 500 at 1,640 points. It’s already dropped by 2%.”
“Massive sell-offs are occurring, centered around tech stocks.”
Grant and Lisa took turns reporting on market conditions.
After taking a deep breath, I shouted,
“Everyone, stay calm and maintain your positions! There will be further declines in Treasury bonds and tech stocks, so hold your positions and wait for the next volatility.”
The U.S. market was in chaos.
All news channels were busy covering market conditions following the Fed’s QE tapering announcement.
Financial and tech stocks plummeted by nearly 5%.
Real estate stocks also dropped by more than 4% in a single day.
“The mortgage-backed securities (MBS) market is starting to collapse.”
Lisa’s report left Seong-hwan in disbelief.
“Everything is moving exactly as we planned.”
Grant wholeheartedly agreed with Seong-hwan.
“The boss’s prediction about the Fed tapering QE was spot on.”
A few days later, the on-screen interest rates fluctuated once more.
“10-year Treasury bond yield surpasses 2.0%. This confirms the upward trend.”
I stood up from my seat.
I was now confident that margin calls were no longer a concern.
“From now on, actively utilize the remaining liquidity to increase our short positions in Treasury bond futures. Bond yields will definitely rise above 3%.”
All the employees in the trading room quickly typed on their keyboards.
The order window rapidly accumulated positions worth hundreds of millions of dollars in real-time.
Watching this, a smile naturally formed on my face.
At that moment, Lisa shared some new information,
“There’s a reaction in the Japanese market as well. The yen exchange rate has surpassed 95 yen.”
I raised my hand to give instructions,
“Strengthen the yen position further. When volatility starts in the Japanese Treasury bond market, bond yields will also move.”
In the bustling trading room, I closed my eyes for a moment.
I could feel my heart pounding strongly.
It felt as though the market was moving in the palm of my hand.
“The 10-year Treasury bond yield has already surpassed 2.3%.”
“It’s rising at an incredibly fast pace.”
Lisa and Seong-hwan raised their voices,
And Grant added firmly,
“The S&P 500 has also broken below 1,580. The entire market is in a state of panic.”
In just one week, the index had plummeted by nearly 100 points from its 1,680 level, which was nothing short of a crash.
But…
“It’s not over yet. It will drop further to 1,400 points. Stay steady and maintain your positions!”
The on-site traders moved swiftly following my instructions.
The order window was rapidly filling with additional put options and short futures positions.
At that very moment, Lisa shouted again,
“USD/JPY exchange rate surpasses 100 yen, the yen’s value is plummeting rapidly.”
“What about Japanese Treasury bond yields?”
“Currently, the 10-year yield has risen to 0.95%. It’s poised to break the 1% mark soon.”
The Japanese market was reacting even faster than anticipated.
As the yen exchange rate and Treasury bond market movements unfolded exactly as predicted,
My heart raced even faster and stronger.
“Keep expanding the yen position! Also, add more short positions in Treasury bonds. Use all remaining liquidity if necessary.”
“Understood.”
Lisa quickly relayed the instructions to the trading room.
The employees’ hands moved ceaselessly, and a massive position was being built on the screen.
As the market moved according to our predictions, confidence rapidly grew throughout the company.
Grant reported the real-time profit status with an excited voice,
“The yield on Japanese Treasury bonds has now surpassed 80%, and the yen profit is even higher.”
The chart Grant showed displayed an astonishing 120%.
Seong-hwan’s eyes seemed ready to pop out.
“This is like… printing money?”
“It’s too early to be amazed!”
This was just the beginning.
In reality, as time passed, the market became even more volatile.
Both the U.S. and Japan were in a state of panic.
Conversely, our positions were on a steep upward trajectory.
“The yield on Japan’s 10-year Treasury bond has just surpassed 1.2%.”
Lisa shouted excitedly again.
However, at that moment, an unexpected breaking news alert appeared.
[Breaking News: Bank of Japan (BOJ) announces additional Treasury bond purchases to calm market turmoil!]
A brief silence fell.
With this unexpected development, all eyes turned to me.
“If the BOJ expands Treasury bond purchases, reduced bond supply could lead to lower yields.”
We had bet on Treasury bond prices falling,
But now, bond prices could rise instead.
“Should we close some positions?”
Both Lisa and Grant expressed concern simultaneously.
But I disagreed.
“The market will perceive the BOJ’s announcement as a sign of fear.”
“Does that mean you intend to maintain our positions as they are?”
“Yes.”
After nodding once, I looked at everyone in the trading room and shouted,
“I’ll make all the decisions. Don’t waver.”
“Yes, Sir!”
The trading room resonated as if we were one.
In the tense silence, everyone’s gaze was fixed on the screen.
The BOJ’s Treasury bond purchase announcement momentarily halted the market,
But as expected, it didn’t last long.
Another breaking news alert filled the screen.
[Despite BOJ’s expanded bond purchases, 10-year yield rises further.]
[Japanese Treasury bond yield surpasses 1.5%!]
“Whoaaaaa!”
Everyone in the trading room erupted in cheers.
“It seems the market is interpreting the BOJ’s actions as negative, just as the boss predicted.”
Following Lisa, Grant exclaimed,
“No matter how many bonds the BOJ buys, it’s failing to ease market anxiety.”
It was only natural.
The yen’s depreciation due to Abenomics’ quantitative easing would persist for at least another decade.
“We’re nearing the final stage now. Wait a little longer, and once bond yields hit 1.8%, we’ll close all positions.”
A few more days passed.
Following bond yields, the yen exchange rate also surpassed 105 yen.
Lisa reported to me,
“Yen profits have exceeded 180%. What should we do?”
“Wait a little longer!”
Bond yields hadn’t risen as much as we had targeted.
Then, after fluctuating between 1.6% and 1.7% for several days, the Treasury bond yield finally surpassed the target of 1.8%.
“Now’s the time. Close everything!”
“As of this moment, all positions related to Japan will be closed.”
“Brother, what about the U.S. side?”
In response to Seong-hwan’s question, I turned to the S&P 500 index.
The index, which had been at 1,680 points, had already fallen below 1,500 and was rapidly approaching the target of 1,430.
And within just ten more days, the U.S. indicators also reached their targets.
“Boss, the position… closure results are in.”
Lisa’s voice trembled slightly.
Everyone’s attention turned to the screen she had pulled up.
“Starting with the U.S. side, the 10-year Treasury bond short position yielded 190%, and the S&P 500 yielded 140%.”
There were brief gasps of surprise and cheers.
After nodding, I responded,
“And the results for Japan?”
Lisa opened her mouth, suppressing her excitement,
“The final yield on Japan’s 10-year Treasury bond is 235%. Particularly, the yen weakness position reached an astonishing 312%.”
Whoaaaaa-!
Seong-hwan exclaimed in disbelief,
“312%… Is that for real?”
Not just Seong-hwan, but murmurs could be heard throughout the trading room.
It was hard to believe these results were achieved in less than a month.
“So, what’s the total profit combined for the U.S. and Japan?”
At my question, everyone’s attention once again focused on the screen,
And Lisa flipped through the data to reveal the tallied figures.
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Final position liquidation amount: $69.5 billion
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Yield: 116.5%
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Profit: $37.4 billion
“Whoaaaaa!”
“Unbelievable.”
“We made $37.4 billion in just one month?”
“This can’t be real!”
Even as they saw it with their own eyes, the employees in the trading room couldn’t believe it.
In just one month, our assets had more than doubled, which was no small feat.
Their reactions were understandable.
Looking at everyone, I declared,
“I promise a special 1,500% bonus to everyone here, along with an additional 15 days of vacation.”
“Whoaaaaa!”
An even louder cheer than before filled the meeting room once more.
In just one month, fewer than 20 people had earned nearly $40 billion…
This level of compensation was only fair.
“For Grant and Lisa, instead of 1,500%, I plan to pay according to the performance bonus stipulated in their contracts.”
During their recruitment,
I had promised them 5% and 3% of the profits, respectively, as performance bonuses.
As a result, both would receive astronomical sums once again.
‘Out of the $37.4 billion in profits, $10 billion is client-entrusted assets, so 8% of the remaining $27.4 billion is about $2.2 billion.’
The performance bonus alone was over $2 trillion in our currency.
Despite this, neither seemed to have any intention of leaving the company.
“To keep feeling this dopamine rush, I have to keep working with the boss. Where else would I go?”
“Me too. If I leave here, I don’t think I’ll ever feel this way again.”
Their responses naturally brought a smile to my face,
And I had no reason to oppose their decision to stay.
“I’m counting on you both going forward.”
“Boss, in that case, shouldn’t we elevate our status from a hedge fund to an investment firm?”
We had earned enough money,
And it was time to consider the next step.