Translator: Dreamscribe
“Departnt Head. Here is the list of Hong Kong ADRs and hedge funds you requested.”
“These are all related to the German stock market, right?”
“Yes. I picked only the most aggressive bear funds.”
Bear fund.
It refers to a fund that specializes in shorts.
When the overall market is in a bear market, money flows into bear funds, and among them, there are those with an aggressive tendency.
That list was what the employees brought to after selecting.
“.......”
I carefully examined the list.
How each fund conducts aggressive investnts.
How much capital they operate.
Also, which sectors they inject the most capital into, and so on.
I needed to first input the data into my head.
When I keep shoving in information like that,
“!”
There are things that give a feeling.
After checking the corresponding list, I set the amount.
Deciding the amount was always the sa.
I would first write down a random number, then adjust it up and down to find the right amount. Once the work was done, I would hand it back to the employee who brought the data.
“Please invest in the ones I checked, and use the amounts circled next to them.”
“Yes!”
As one person leaves, the next person cos in imdiately.
“Departnt Head. I brought the U.S. list you instructed last ti. It can be linked with pri brokers to divide the capital, and if we match the fair value, leverage up to 2x is possible.”
“Just a mont.”
Currently, the places where we are dividing and spreading investnt funds were not only pri brokers.
Dostic ones were also included.
“KS Asset Managent currently has a fund that pursues high risk and high return, so I included that product as well.”
“This one is more aggressive than I expected?”
“Yes. Just in ti, the area they are dealing with is the European stock market, and it includes the Stummwagen we want to buy.”
Kwangwoon Securities is a company I truly like.
Naturally, because it is my workplace.
So, I’m not jealous of other financial companies, but there is just one thing I envy.
It’s that they have an asset managent company.
Asset managent companies that are the core of financial groups.
Also known as a fund company.
While a securities firm at most handles 10 to 20 trillion won, once it moves into funds, that scale increases to hundreds of trillions.
“There are surprisingly quite a few aggressive funds among those KS manages. Of course, because of their overly aggressive tendency, the investnt money only surged in the beginning and is now dwindling.”
“If we put money in, it might beco more active?”
“Yes. Just as stated here, they pursue high risk and high return. There’s a high chance they’ll invest aggressively.”
I see.
Should I get a little help from the number one financial group in our country?
“Then please invest the amounts I checked here.”
“Yes. Understood.”
In that way, I was distributing 700 billion won across dozens of targets.
In truth, there was no need to make it this complicated. It would have been best to go directly into the Frankfurt Stock Exchange and invest.
The problem was, no matter how much Stummwagen had a market cap over 100 billion euros, it wasn’t possible to short 700 billion won all at once.
There were liquidity issues, and if I tried to short a large amount suddenly, Bafin might suspend the trade for disrupting the market.
And most importantly, it was my intuition.
I didn’t get a good feeling about directly investing in the Frankfurt Stock Exchange.
Instead, when I divided the amounts and reviewed various fund lists like this, I kept receiving steady feedback.
So, I kept giving instructions to employees to continue bringing related stocks.
‘But no matter how I look at it, Stummwagen only has good news.’
What on earth is about to happen?
***
Leverage.
What a great system.
To be able to make big trades with a small amount!
But there is one thing to rember.
To use leverage ans to borrow money from soone.
Since it's about taking on debt, it’s good if you make a profit, but if you suffer a loss, the damage amount is doubled.
That’s why the governnt limits leverage for the general public to a maximum of 2x.
Until the subpri mortgage crisis broke out, leverage limits weren’t all that strict.
However, once the financial nuclear bomb exploded, regulations on leverage also beca tighter, and limits were imposed not only on ordinary individuals but also on securities firms.
This was to minimize damage in case another major financial crisis like the subpri occurred.
Of course, in exchanges dealing with futures or FX, leverage up to 100x is possible.
“But that leverage becos practically aningless once your capital exceeds several hundred billion won, doesn’t it?”
Without soone providing the loan, leverage cannot be executed.
In other words, soone needs to act as a guarantor to establish leverage.
That’s why margin is necessary.
However, once the capital crosses hundreds of billions or trillions, the story changes.
From a few hundred million to tens of billions, leverage can be pulled to so extent, but once it exceeds the risk limit, even banks cannot easily accept it.
That’s when a pri broker becos necessary.
“Honestly, even if you have a pri broker, who’s going to give you leverage on several hundred billion won? Unless your credit rating is exceptionally good.”
If soone brings in several hundred billion won and tries to pull 10x leverage, no securities firm or bank would accept it.
Even if it’s just 2x, an enormous credit evaluation is required.
If the stock price moves contrary to the investor’s expectations, falling or rising, and a margin call occurs and they default, the damage falls entirely on the side that provided the leverage.
There are exceptions.
If the investor is a well-known tycoon or has strong enough capital to minimize losses, then a securities firm or bank might consider it.
However, 99% will reject it.
For them, risk managent is more important than life itself.
They had already learned enough about the dangers through 9/11 and the subpri crisis.
“But… why exactly is Jin-ho trying to make contact with pri brokers?”
Pri brokers refer to large securities firms and major banks.
Like those we commonly know, GoldReagan, JP Mason, and so on.
They play a role in facilitating large overseas investnts or linking investnts like hedge funds.
If leverage is needed, they also provide loans based on their internal credit assessnts.
“He’s currently working through pri brokers to link with hedge funds, and he’s also using stock lending services.”
“What? Even stock lending services?”
One of the most core roles of a pri broker.
That is the stock lending service.
Through institutions or pension funds holding large amounts of stock, they borrow the shares of a specific company those entities own and use them to short.
Hedge funds frequently use this kind of stock lending service.
“So you’re saying Jin-ho is splitting the funds left and right right now?”
“Yes. Quite unlike Departnt Head Jung Jin-ho.”
At this mont, Jung Jin-ho was breaking up 700 billion won and inserting it into various products.
“Is he finally doing split investing?”
From a general perspective, it would look like Jung Jin-ho is diligently dividing the money for diversified investnts.
“It’s actually the opposite.”
However, as always, Jung Jin-ho was not soone who followed standard investnt strategies.
“You just said he’s splitting the money?”
“Yes. But in the end, all the money is going to the sa place. Directly into Stummwagen.”
What the hell does that an?
After all the effort to break up the capital, the only target ends up being Stummwagen?
CEO Hwang’s mind began turning quickly.
“Co to think of it, if we suddenly shove in 700 billion won, the German financial watchdog would step in. Stummwagen’s stock price recently hit an all-ti high, right? Is he trying to ride that montum by mixing the waters here and there?”
“No.”
“No? Wait a minute. Then all of this is a short?”
“Yes. Just as you said, he’s mixing up the labels and putting all the money into shorts.”
CEO Hwang tilted his head.
Why would soone suddenly short Stummwagen, which is supposedly doing so well?
“Is there so kind of issue with Stummwagen?”
“Nothing has co out so far. On the contrary, only good news keeps piling up, and the current stock price of 250 euros is expected to reach 300 euros next week. Actually, analysts are confident it will definitely go up.”
But Jung Jin-ho placed his bet not on a long, but on a short.
“And he even wiped out Kwangwoon Securities' na from the whole thing.”
“Yes. If Departnt Head Jung Jin-ho’s investnt succeeds, the opponent won’t even know who took their money. It’s all scattered around.”
If it fails, on the other hand.
Just imagining it was chilling.
“To make such an aggressive short on the current hottest auto stock.”
“And in a way that even if it becos an issue later, Kwangwoon Securities’ na won’t co up.”
If soone tried to pour 700 billion won into a short position on the top-performing stock in the auto sector, they would have been summoned to the CEO’s office and stripped of their title on the spot.
But that soone is Jung Jin-ho.
He bet money on the Swiss franc, the world’s largest safe asset, at a timing no one expected and predicted the removal of the Swiss price cap. He also made a fortune during the China Shock and the Greece default crisis.
He has an uncanny ability to sll money during crises.
“CEO-nim, to be honest… I’m starting to get a little scared every ti Departnt Head Jung Jin-ho makes an investnt. I keep wondering what kind of incident is about to explode this ti.”
“Haha. Our Jin-ho does have a terrifying insight. I still don’t know what basis he uses to make such decisions, though.”
Judging only by data and figures, Stummwagen is a company that can only go up, not down.
“But if Jin-ho made that decision…”
A heavy silence settled between CEO Hwang and Senior Managing Director Tak.
Their heads told them Jung Jin-ho’s decision must be wrong, but for so reason, their hearts felt convinced.
It was probably because of past experience.
“Ah. Tak. Isn’t your car a Stummwagen?”
“Yes.”
“I don’t know what’s about to happen, but sell it before it turns into junk.”
“I just got it not long ago…”
“Then just hold on to it if you want.”
“Ugh.”
It looked like he’d have to start looking for a new car tomorrow.
***
It’s the sa in other industries, but the auto market is particularly competitive.
Siyota held firmly onto the number one spot with overwhelming sales, but they were increasingly bothered by Stummwagen, which was rising fast.
Where does technological advancent begin?
It starts with reverse engineering.
They dismantle competing cars and examine what kind of technology was used.
What areas were better than Siyota’s models?
They closely analyze and try to understand the technology.
“But no matter how you look at it, we seem to have far superior emissions technology, don’t we?”
One of the reasons Stummwagen’s vehicles were receiving rave reviews was because they had drastically reduced exhaust emissions.
That part felt a little off.
Stummwagen was not known for developing eco-friendly technologies.
They were simply pumping out luxury brands and focusing on aggressive marketing to drive up sales.
“But didn’t they pass all the tests?”
“They did. But it seems the actual emissions during real driving are different.”
After persistently studying the vehicle,
The engineers were able to find a difference.
“It’s different. The emissions during actual driving are clearly different from those during test conditions.”
No matter how many tis they tested, the results during actual driving didn’t match.
It all pointed to one thing.
“Don’t tell those Stummwagen bastards used software…”
They had manipulated the software so that the car would perform differently during test mode and during real driving.
“Those sons of bitches?”
***
“This is… hard to get used to.”
Ever since working under Departnt Head Jung Jin-ho, it was the first ti he’d seen money split up and spread out like this.
That’s because, up until now, even when he did diversify his investnts, it was only into three or four areas at most.
But now, 700 billion won in capital was spread across dozens of products.
Our Departnt Head is diversifying his investnts?
“But isn’t it hard to really call this diversification? The target is still just one in the end.”
“That’s true. But the funds he selected are certainly aggressive. Since they don’t have much volu, they’re already borrowing shares and shorting everything.”
“They’re bear funds. And he only picked the really vicious ones.”
Each fund has its own distinct personality.
So aim for stable returns, while others, like now, charge in with extre aggression.
If it works, it’s a jackpot.
If it doesn’t, it’s total ruin.
He only put money into those kinds of funds, ones that yield only two outcos.
It ant there was nothing he could directly control from here.
“Even with all this shorting, the price doesn’t seem to want to go down?”
“By now, that rumor must’ve reached the German retail investors too. That soone’s shorting and licking their lips. That kind of backlash can actually push the price up.”
It’s not publicly disclosed which institution shorted which stock.
Because having that be known is basically the sa as screaming, “Kill .”
However, the volu and ratio of short selling can be seen.
You can’t tell exactly who shorted what, but you can see if the short volu on a particular stock has suddenly surged, and from that, compare it with recent trading activity and infer where the shorts are concentrated.
Retail investors aren’t fools.
Which is why talk had likely already started circulating in their communities.
That so shady force dared to short Stummwagen, which was currently on a steep upward trend.
That would trigger a backlash sentint, leading to even more buying and pushing the price higher.
If things got worse from there, wolves from all around the world would gather, pump up the stock price, and bury the short sellers in their graves.
So do it for profit.
Others well, they gather capital just for the sheer fun of crushing short sellers, even if it doesn’t benefit them.
That’s what the stock market is.
Emotion cos before reason.
That’s why our departnt’s staff were trembling as Stummwagen’s price rose day by day, along with the buy volu.
If things kept going like this, 700 billion won might just vanish into thin air.
And so, they spent a few nerve-wracking days.
“D-Did you all see the news!?”
“Yes. We just saw it too.”
As usual, the employees who ca into work at 6 a.m. were already seated in front of their monitors.
It was because shocking news had just broken from California.
[Stummwagen manipulated its software to produce drastically lower nitrogen oxide emissions in test mode compared to actual driving, with emissions exceeding U.S. environntal limits by 40 tis. This is a clear violation of the law, and the U.S. governnt will cooperate in temporarily banning all sales of Stummwagen vehicles.]
Unbelievable behavior from Germany’s number one automaker.
They had tampered with the software to deceive emissions output.
And by a whopping factor of 40!
“What, did they actually think they wouldn’t get caught?”
“According to the report, they were doing it for quite a while.”
“Unbelievable, both the ones who pulled it off and the countries that got fooled.”
“No one could’ve imagined Stummwagen would do sothing like that.”
Wait a second.
This isn’t the ti to be sitting around.
With such shocking news breaking, there’s no way Stummwagen’s stock price would stay intact.
“Is the German stock market open yet? What about the places we put money into? We need to check quickly and move funds.”
Just as Manager Seo rushed around, he locked eyes with Departnt Head Jung Jin-ho, who had just arrived.
“Oh-Departnt Head.”
“Calm down, Manager Seo. There’s nothing we need to do right now, is there?”
“Pardon?”
Nothing we need to do?
What does he an by that?
Manager Seo replayed Jung Jin-ho’s words in his head while walking back inside, and then clapped his hands.
"Ah. Right."
We’re auto-hunting right now, aren’t we?
*****
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