New York, Manhattan.
Salomon Brothers Headquarters Trading Floor.
In a space as vast as ten tennis courts combined, more than a hundred traders were moving rapidly at their desks. Each click of a mouse or phone call could an losing or making hundreds of thousands of dollars, so everyone remained on high alert. If they made a profit, the year-end bonus could exceed their annual salary, but a single mistake could cost them their job the next day.
The traders couldn't afford to let their guard down for even a mont, their eyes fixed on the dancing graphs on their monitors as they continually placed orders or typed on their keyboards. To the traders, who were fighting tooth and nail over 0.01% returns, this place was akin to the Colosseum, where gladiators once fought for their lives.
"There's an offer to sell at 430!"
"How much?"
"Buy 100 lots at the lowest price! Now!"
"What's going on with gold futures today?"
"Damn it! The lira is tanking too."
(TL/n - The lira is the official currency of Turkey)
Amidst the constant shouting of traders barking orders into their phones, Cox sat at his desk, staring intently at the Bloomberg terminal displaying the pound's exchange rate fluctuations. The pound, which had shown a brief uptick, resud its downward trend, now falling to $1.4300.
"This is going to blow up for real."
At first, Cox had his doubts, but as ti passed, the situation was increasingly worrying. After tapping his fingers on the desk in deep thought, Cox finally printed out a graph showing the pound's movents over the past week and stood up. He headed towards Paulson's private office, which was separated by a glass partition, and knocked lightly before opening the door.
Inside, Paulson was sitting at his wide desk, on a call with soone. He glanced up at Cox while holding the receiver to his ear.
"Are you sure? Hmm, I see."
Gesturing toward the sofa, Paulson indicated for Cox to sit. Cox quietly waited for the call to end. Shortly after, Paulson finished his call and walked over to the sofa.
"Sorry to keep you waiting."
"Not at all."
Paulson settled into the plush sofa and asked, "So, what's the matter?"
Cox handed the printed graph to Paulson.
"Would you take a look at this?"
Paulson imdiately recognized the graph as he picked it up.
"This is a chart of the pound's exchange rate fluctuations."
"That's correct."
Leaning forward, Cox continued, "As you can see, the pound has been in a downward trend since the beginning of the month."
"Hmm," Paulson murmured as he examined the graph carefully before placing it down.
"The exchange rate was $1.4800 per pound at the start of September, correct?"
"Yes, that's right."
"It's really dropped a lot since then."
"The problem is that this trend doesn't seem to be reversing."
Paulson fixed his gaze on Cox and asked in a low voice, "Are you suggesting that Britain won't be able to defend the exchange rate and will exit the ERM?"
Cox answered cautiously, "I can't say for certain, but if things continue like this, it's a strong possibility."
"Even though the British Pri Minister assured everyone that the Bank of England has ample reserves?"
Cox shrugged.
"No matter how much foreign currency they have in reserve, if the selling pressure is greater, they won't be able to hold out."
"That's true," Paulson nodded in agreent.
"I was already monitoring other investors' moves because the pound's movents were unusual."
Cox didn't need to be told; he knew Paulson's experience and the information he had access to far exceeded his own.
"Sure enough, not just hedge funds, but even JP Morgan and Goldman have started shorting the pound."
"Just as I thought."
Cox's eyes glead with excitent as his suspicions were confird.
"Initially, everyone was unsure, but once Soros raised the flag and the Bank of England showed signs of faltering, everyone jumped in to grab as much as they could before it was too late."
"Then…"
"We can't be certain yet, but it's clear that the situation is turning against the Bank of England."
Cox, now looking anxious, said, "In that case, we can't just sit around, can we?"
Paulson smiled, pleased with Cox's eagerness. After all, any trader on Wall Street who didn't seize an opportunity to make a fortune was unfit for the job.
"I had a eting with Dan this morning," Paulson said. Dan was the Chief Investnt Officer (CIO) of Salomon Brothers.
"Then…" Cox's face lit up with anticipation as Paulson continued.
"A grand feast has been laid out—we can't be the only ones to miss out."
That was exactly what Cox wanted to hear. With a clenched fist and a bright expression, Cox nodded eagerly.
"Exactly right."
"The managent has approved a $10 billion allocation. Let's see how much profit we can generate with it."
"Leave it to ."
Cox responded confidently to Paulson's single raised finger. With the Bank of England showing signs of weakness, Cox was more focused on achieving high returns and earning a hefty year-end bonus than worrying about potential failure. Paulson, too, was looking forward to a sizable bonus. Then, a thought crossed Paulson's mind.
"By the way, wasn't there a client who shorted the pound recently?"
"Are you referring to Mr. Park?"
"Yes, that's right."
Paulson had only t him once, but the young man had left a strong impression. Beyond his good looks, Park had an intense gaze that seed to pierce through people, along with a confident deanor—qualities that were not often seen.
"Did he short the pound?"
"Yes. He's already sold $600 million worth of spot and futures."
"At what average price?"
Seeing Paulson's interest, Cox imdiately answered.
"$1.4650."
Paulson looked impressed.
"Wow! He's already made over 2% profit."
"The downward trend continues, so his profits will only increase with ti."
"Indeed."
With hedge funds led by Soros, JP Morgan, Goldman Sachs, and now even Salomon Brothers joining the attack on the Bank of England, the pound was bound to plumt further.
"To think I initially dismissed him as just a reckless kid who won a big lottery—he's going to make a killing."
But Cox saw things a bit differently.
Judging by how Park had tid and spread out his sell orders, it didn't seem like a re fluke.
"It's not just luck. He may not have predicted the situation would unfold this way, but he likely anticipated the pound's weakness and invested accordingly."
Paulson recalled how Park had insisted on securing tenfold leverage.
"Maybe so. Regardless, he's no ordinary person."
Cox nodded slightly, sharing the sentint.
***
Four Days Later, Cambridge, Massachusetts.
After his Monday morning lecture, Seok-won visited the bookstore out of habit, selecting a copy of the Wall Street Journal and heading to the counter. After paying and receiving his change, he sat at an outdoor table and opened the newspaper. His eyes were imdiately drawn to a headline on the front page.
[
Bank of England Buys Pounds in Bulk! The Beginning of the Counterattack?
As the market opened on Monday morning, the Bank of England, as promised by Chancellor Henry in front of reporters last Friday, injected $700 million to buy pounds in bulk. In addition, with Germany hinting at a possible rate cut, the pound, which had been in a downward spiral, showed signs of halting its decline and even slightly rebounded.
In a statent to reporters on his way to work, Chancellor Henry expressed strong confidence in defending the pound, stating, "There's still plenty of money left in the Bank of England's coffers. If Soros and the hedge funds want to go bankrupt, they can keep trying." anwhile…]
For soone who had bet on the pound's decline, the news of its stabilization was not welco. However, as Seok-won set the newspaper down, his expression showed little concern. He pulled out his cell phone from his backpack and dialed a speed dial number.
After a few rings, his broker, Cox, answered the call.
[Hello?]
"It's . What's the exchange rate right now?"
Perhaps because he had been monitoring the situation, Cox answered imdiately.
[It's $1.4000 per pound.]
"So it's up 5 cents from yesterday."
[That's right.]
Amid the noise of the trading floor, the sounds of people shouting orders could be heard through the phone.
[I assu you've heard about the Bank of England's intervention?]
"Of course."
[Even if you were to close your position now, you'd still be sitting on a significant profit. What would you like to do?]
Without a mont's hesitation, Seok-won replied.
"This isn't nearly enough. Keep holding."
[Hahaha, I figured you'd say that.]
Cox chuckled, seemingly unsurprised by Seok-won's decision to maintain his position.
[There's still so room in your account. Would you like to place additional orders?]"
"Let's wait and see how things unfold."
[Very well.]
"Contact
imdiately if there's any change in the market."
[Will do.]
Ending the call, Seok-won looked down at the Wall Street Journal spread out on the table, crossing his arms.
"The British governnt and the Bank of England intervened directly in the market, but the pound only rebounded by 5 cents. That's not bad news—it's good news."
The fact that the pound's rise had been so limited, despite the Bank of England pouring in a huge sum, indicated that the selling pressure wasn't completely quelled.
"This will only boost the confidence of the sellers, making them even more eager to dump pounds."
Seok-won sensed that the ti was approaching to pull the final trigger that would suffocate the Bank of England. After briefly contemplating when to go all-in with the remaining balance, Seok-won packed up and headed back to his dorm.
He climbed the stairs, reaching for his keys, but stopped when he heard movent inside and simply opened the door.
"Hey!"
Roy, who had been sitting on the floor playing Street Fighter, jumped up and greeted him as if he had been waiting.
"What took you so long? Class ended ages ago!"
"What are you talking about? Since when have you been waiting for ?"
Seok-won looked at Roy with a half-exasperated expression.
Roy had a headband tied around his head, and dark circles under his eyes from playing all night. Holding a controller in one hand, he looked like a gaming addict. Roy had always been into gas, but this was a bit much.
"You don't have any classes today?"
"Of course, I do."
"Then why are you doing this? Aren't you going?"
"I just skipped!"
Seok-won was montarily speechless at Roy's unabashed response. What was his roommate doing, skipping classes at Harvard?
People would pay good money to attend those lectures, and here was Roy bragging about skipping them.
"Hey, that's not the point—let's get a quick ga in."
"Again?"
Feeling a headache coming on, Seok-won showed a clearly annoyed expression. Ever since Roy had lost $10 to him a few days ago, he had been pestering Seok-won non-stop for a rematch.
"You said I wasn't even a challenge. I told you to practice more before coming back."
"This ti is different!"
"Didn't you say that this morning and still got your butt kicked? I was almost late because you kept holding
up."
"No, I've got a new special move ready—just give it another go."
Seok-won looked at Roy rolling around on the floor, throwing a tantrum, then turned around without a word.
"Hey! Where are you going?"
Roy shouted after him, but Seok-won didn't even bother to respond as he closed the door behind him.
"Maybe I should switch roommates after all…"
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