There was a strict hierarchy even in the Financial Hub Tower.
The very top — the 70th floor — was used as a grand conference hall.
In reality, the 69th floor was the highest one available for regular office use.
One might assume that Taewoo Securities should naturally occupy the 69th floor.
But in fact, Taewoo Securities used the lowest twenty floors, aside from the retail space.
There was no need for the owner to claim the highest office, after all.
So currently, the company using the 69th floor was Quantum Fund from Wall Street.
"How does it feel to look out over all of downtown Seoul from up here?"
"What's the point in the view? The people from Wall Street don't care — if we could get the same returns, we'd work out of a garage at home. I'm no different."
The 69th floor of Financial Hub Tower.
I was visiting Quantum Fund, having tea with George.
George was a major success even by Wall Street standards, yet here he was, brewing coffee from a capsule machine — the resulting brew as watery and bland as they come.
"Wouldn't it be even better if you could enjoy a nice view and get high returns at the same time?"
"Oh! So it's finally time for that secret project of yours?"
"It's nothing grand enough to call a secret project. Think of it as a practice round — but there is a way to guarantee some real profit."
George put his coffee down.
He pulled down every blind in the office, then took his seat again.
"Tell me — what's this profit-guaranteed business you're talking about?"
"The U.S. Federal Reserve continues to push quantitative easing."
"Just last month they started QE3, the third round of quantitative easing. But no matter how many bonds they buy, it doesn't seem like the sluggish economy will miraculously spring back to life."
After the Lehman crisis, the U.S. economy struggled.
That's why the Federal Reserve implemented quantitative easing in various forms.
There was QE1, which targeted the hardest-hit real estate market; then QE2, aiming to tighten the government's fiscal belt.
And the latest was QE3, focused on purchasing U.S. Treasury bonds.
Everyone was watching to see whether QE3 would be America's last round of quantitative easing, or whether QE4 or even QE5 would follow.
"It'll be difficult to continue quantitative easing indefinitely. Even for the U.S., which holds a firm grip on the dollar's hegemony, it would become a heavy burden."
"Then you think the government will raise interest rates?"
"Not immediately. In August, the Fed chair announced that the zero interest rate policy would be maintained through the end of 2013. It would be hard to walk that back so soon."
There's a reason the head of the U.S. Federal Reserve is called the President of the World Economy.
A single word from him could shake not only the American but also the global economy—so every statement he made carried tremendous weight.
If he were to go back on something he said just two months ago, his credibility would take a hit, so the zero interest rate policy, at least, would have to last until the end of the year.
"So when do you expect things to move?"
"By the middle of next year, the Fed will likely start to show signs of scaling back quantitative easing."
"Is that your own assessment, or did you glean it through contacts with the White House?"
George knew about my connections to the White House.
That was why he asked, and my answer could influence his next steps.
"It's what I've concluded after compiling and analyzing information from all sources—Taewoo Group's own systems, Wall Street, and the White House alike. You can trust it."
"Can you walk me through the scenario? How do you plan to execute this operation?"
"With the third round of quantitative easing, money is flooding into both stocks and real estate. But what happens if quantitative easing is rolled back?"
"Stock prices will plunge, and bond yields will skyrocket."
It was practically a law of nature.
When interest rates are low, money flows freely.
But as rates go up, the money quickly drains away.
"If we short sell stocks that are sensitive to interest rates and buy bonds in advance, wouldn't that be profitable?"
"Not a bad idea, but isn't it a bit weak? Seems like the operation you're proposing has the lowest expected return of any plan you've suggested so far."
"That's why I called it a practice game. But this operation isn't the end of the story."
"Of course! No matter how much you call it a practice game, you're not the type to handle something so small-scale."
I had carried out many operations with Quantum Fund before.
Each of them was large enough to shake entire nations, so George was never quite satisfied.
"I said the Fed would show signs of tapering by mid-next year, but I didn't said it would actually reduce quantitative easing."
"...Are you saying the Fed won't reduce quantitative easing?"
"Wall Street and the financial world broadly expect tapering, but Taewoo Group foresees the Fed maintaining quantitative easing through the end of next year."
The Fed was an institution that prized stability.
If merely signaling tapering would cause stock markets to plunge and bonds to spike,
it was only natural the Fed would delay beginning the taper.
"So it's a bluff — acting like they'll taper, but actually won't."
"What if they do start tapering at the end of next year?"
"The markets would bubble and churn at least three times within a year."
"That means three or more prime opportunities for us to turn a profit."
"That's more like you. At this scale, we're looking at some solid gains."
"Even if it's a practice game, we need to warm up properly before we can play the real one."
There was a reason I called tapering a practice game.
Once the U.S. starts raising interest rates, a domino effect of events would follow.
Then, we'd have to move faster, risking huge gains or severe losses in a blink.
"Is this practice game going to be just the two of us? Or are we moving alongside the fledglings waiting for their turn?"
"I want to proceed with companies that have passed our tests."
The tests referred to the Cream crisis.
We'd distributed information about the Cream crisis to every company in the Financial Hub Tower.
I added a note asking them to be careful not to let information leak.
"When carrying out operations like this, insider threats are the most dangerous. Anyone who can't manage confidential information doesn't deserve to be part of the plan."
"We've used informants planted in Wall Street to identify which financial firms were leaking information."
"So, did you find anyone trustworthy? I'd bet most sold everything for money and leaked all the intel."
"Just as you said, most companies leaked information — whether purposely or by accident. But about ten firms took their security quite seriously."
Ten might seem like a small number.
After all, the Financial Tower housed countless financial firms from Wall Street, Europe, Japan, and beyond.
Ten out of so many was definitely a small fraction, but it was more than I had expected.
"The ones who sold out their information are going to regret it. This operation is going to bring us solid gains."
"Maybe after getting hit once, they'll realize the value of keeping Financial Tower's information secure. Seeing the ten firms that cooperated with us reap high profits through this operation should serve as a wake-up call."
"They'll finally realize the cost of blabbering carelessly and be sure to keep their mouths shut from now on."
Right now, the entire United States was focused on the presidential election.
So even if we made moves, no one was paying attention, allowing us to act aggressively.
"George, keep a steady hand on things."
"Wall Street types are always thinking only of their own gain, so they tend to act unpredictably. I'll signal when to move and when to withdraw. And I'll make it clear — any financial firm that acts up this time will be excluded from the next operation."
"Once they taste the profits, they'll know how to behave. So we need to make a lot of money on this practice run."
Financial firms were, at their core, just money-making organizations.
They would do anything money could buy.
Once they understood that following our lead meant higher returns, we could turn those greedy hyenas into loyal hunting dogs.
Of course, they were still hyenas pretending to be dogs.
No matter how much they changed their appearance, they were always hyenas at heart, requiring constant vigilance.
***
November 6, 2012.
The U.S. presidential election was underway.
Because America is such a vast country with so many people, it wasn't until the following afternoon that a clear winner began to emerge.
That's why, on the evening of November 7, I brought some beer and headed for Captain Kang's office.
Mr. Han and Captain Kang were already there, sipping beer and nibbling on snacks as they closely watched the vote count.
"So, is the result more or less decided?"
"Fortunately, it looks like President Obama's re-election is almost certain."
"I told you this would happen. What were you so worried about?"
"Just a month ago, all the polls had the Republican candidate leading. And then, a typhoon slammed into the eastern U.S."
Obama had led most polls for months,
but starting in October—one month before the election—the Republican candidate's support started to surge.
For more than twenty days, Obama slipped to second place.
"When a natural disaster strikes, it usually drags down a sitting president's approval rating."
"Thanks to President Obama's excellent response, he managed to recover his lost support. Just one misstep, and the results could have been completely different."
You can't prevent natural disasters.
But dealing with them is the government's responsibility, and Obama had delivered a response that satisfied the public.
"The Republican candidate's gaffes didn't help either."
"After he carelessly claimed too much money was being spent on disaster prevention and preparedness, the typhoon hit and he got slammed for it. If he hadn't said that, the gap would have been even narrower."
"That's probably why people say the presidency is determined by heaven's will."
Thanks to the natural disaster, President Obama had gained an advantage, while the Republican candidate lost ground—so it wasn't wrong to say this election was decided by the heavens.
"Now that the U.S. presidential election is over, Mr. Han, you're going to get busy."
"I'm keeping a 24-hour watch on the Federal Reserve, and together with the financial firms in the Financial Tower, we're carefully preparing for bond purchases and short-selling."
The U.S. Fed couldn't make any major moves during an election.
So, only about half a year after the election would they begin showing any signs of tapering quantitative easing.
That meant that with careful preparation starting now, we could time our moves precisely.
"Mr. Han, keep things moving on that front. Captain Kang, what's your situation?"
"We're progressing steadily on the Korean presidential campaign as well. Thanks to the over-glorification strategy, the ruling party and opposition candidates are locked in a fierce battle. But the polling difference is razor-thin. The three leading candidates are separated by less than 1%, constantly leapfrogging one another."
As soon as the U.S. presidential race ended,
the Korean presidential election was scheduled for the following month—there wasn't even time to catch our breath.
At least the U.S. election had gone pretty much as I expected, so that was one worry off my mind.
But the Korean race was a whole different story, with far more complicated dynamics at play.