Investor That Can See The Future

Chapter 62

There are only two months left until voting.

When the company’s policy was decided, Hyun-joo’s sister moved quickly. OTK Company raised money from financial companies using its stake as collateral.

If the loan is not repaid by the specified period, the collateral is automatically transferred.

A number of financial institutions, including private equity funds, sovereign wealth funds, and IBs, have been paying attention to the stakes owned by OTK Company. In the meantime, we have received numerous offers for sale.

It’s good to be able to get interest if you pay it back, and it’s good to have a stake in a company you’ve always coveted if you can’t pay it back.

As it is a business that does not have to lose money, people lined up here and there to lend money.

We borrowed money by entrusting each company’s stake to the one offering the most through an auction process.

Nowhere is the word faster than the financial markets. The fact that OTK Company was borrowing money quickly spread throughout the financial world.

We raised a total of $10.8 billion in cash.

If the borrowed money is not paid back on time, all of the stake secured as collateral will be lost and the OTK Company will go bankrupt.

Even if Brexit becomes a reality, there is no way the UK financial market will collapse. The pound will only fall by 10-20% at best.

Therefore, it is difficult to earn more than that by just investing in spot. So the method I thought of was FX margin trading.

It is a bet that raises leverage and increases the amount of money 10 times.

You will have to pay high fees and interest until you liquidate the transaction, and if your prediction is out of line, you will incur huge losses…

“Once you get it, all your problems will be solved.”

For some reason, it sounds like a common saying people borrow money for gambling, but it is not wrong.

When everything was ready, I gave the order.

“Let’s get started.”

OTK Company’s target was the foreign exchange market of the UK and Japan.

* * *

To understand our strategy, we must first understand the mechanism of the foreign exchange market.

“Where exactly is the Forex market?”

I simply answered Taek-gyu’s question.

“It’s literally a place to buy and sell money.”

Money is a means to purchase goods, but money itself is not a commodity. You can buy a toy with 10,000 won, but you can’t buy 10,000 won with 10,000 won, right?

However, in the foreign exchange market, money is traded as a commodity. With 10,000 won, you can buy 9 dollars, and with 9 dollars you can buy 10,000 won.

So, how can you make money in the foreign exchange market?

The answer is to buy cheap and sell high. Or, sell it high and then buy it cheap and pay it back.

When ‘1 dollar = 2,000 won’, sell 1 dollar to buy 2,000 won, and later, when ‘1 dollar = 1,000 won’, sell 2,000 won to buy 2 dollars. This way you can earn twice as much.

The opposite case is also possible.

When ‘1 dollar = 1,000 won’, first borrow 1,000 won and sell it to buy one dollar. Later, when ‘1 dollar = 2,000 won’, you sell the previously purchased dollar to buy 2,000 won and repay the previously borrowed 1,000 won. Then, even if you pay off all your debts, 1,000 won remains in your pocket.

“In this way, in 1992, an investor robbed the UK foreign exchange market.”

That investor is George Soros, the owner of the Quantum Fund.

At that time, Britain adopted the peg system, which allowed the German mark and its currency, the pound, to move only within a certain band.

However, as the mark strengthened, the pound strengthened as well, and the UK economy deteriorated due to high interest rates and low exchange rates.

Exchange rates are closely related to the economy.

When the economy is in trouble, the value of money should naturally fall. However, since it was linked to the mark, a strange situation occurred where the value of the pound was high no matter how bad the economy was.

Investors (or speculators) could not miss the opportunity.

Judging that the pound was artificially overvalued, George Soros launched an attack on the British foreign exchange market.

He borrowed huge amounts of pounds and then sold them on the foreign exchange market to buy dollars.

As the pound increased and the dollar decreased in the foreign exchange market, the value of the pound naturally decreased and the value of the dollar increased.

However, the pound must not fall below the band as it is tied to the mark.

To defend the value of the pound, the British government released its foreign exchange reserves to sell the dollar and buy the pound.

A war broke out between hedge funds that sold the pound and the British government that bought the pound.

“What was the result?”

“England has been completely destroyed.”

It was the British government that ran out of money first.

When foreign exchange reserves ran out, they had no choice but to raise a white flag. The British government abolished the indexed exchange rate system and abandoned the exchange rate defense.

As a result, the Bank of England went bankrupt, and the pound plummeted by nearly 30 per cent.

George Soros bought the pounding pound and repaid the pound it had borrowed from Britain. And he leisurely left the British market with an astronomical profit.

“There is a famous saying by Karl Marx. History repeats itself twice. Once as a tragedy, once as a comedy.”

“What do you mean?”

“Five years later, something similar happened in Asia.”

In 1997, George Soros targeted Indonesia and Thailand. The rupee and the baht plummeted due to the ruthless sell-off of the quantum fund, which signaled the Asian financial crisis.

At this time, Korea also ran out of foreign exchange reserves and had to urgently borrow dollars from the International Monetary Fund (IMF) to avoid default.

These two events made George Soros a hedge fund legend, with a reputation as a widowmaker and a global speculator.

“Our strategy is similar in a broad sense.”

However, there is one crucial difference. That is, the international event of the Brexit vote is ahead.

If it is decided to remain, the exchange rate will stabilize without the need for the British government to release and defend its foreign exchange reserves.

Conversely, once the withdrawal is concluded, it will be difficult to stop the pound from falling no matter what you do.

“We just have to hold on until the voting results come out.”

* * *

There aren’t many markets that can handle more than $100 billion in a short period of time.

The foreign exchange market is a huge market that is difficult to compare with the stock market, but again, if this amount of money is concentrated in one side, the market price is bound to fluctuate.

Foreign exchange speculation is like poker where you start from scratch. Whether attacking or defending, he clearly knows the opponent’s means and goals.

They shoot money like live bullets while grasping each other’s strategies. If there is no more money to pour into the foreign exchange market, the hedge fund loses, and if the foreign exchange reserves run out before that, the country loses.

If you win, you can get an astronomical profit, but if you lose, your bankruptcy is confirmed.

From an attacking standpoint, the more allies there are, the more advantageous it is. For this reason, hedge funds publicly point out the economy and exchange rate problems of a country before attacking the foreign exchange market and gather as much power as possible.

Even in 1992, if the Quantum Fund had dealt with the British government alone, it would have been George Soros who raised his hand first.

However, a number of hedge funds joined the same camp as George Soros, and the British government, beaten by the bundles of money they fired, could not stand it and declared capitulation.

My strategy in this area was just the opposite.

It is not us, but the British people who have the right to vote, that are destroying the British government.

Therefore, it should be avoided as much as possible to give the impression that foreign exchange speculators are trying to rob the British foreign exchange market.

So I split the OTK Company funds in two, one side selling the pound and the other side buying the yen.

If it had been another currency with low trading volume, the exchange rate would have fluctuated immediately. However, as the pound and yen are semi-key currencies, the dollar-pound and dollar-yen traded astronomically every day.

We took our time and traded as quietly as possible.

But did I say that if the tail is long, it will be trampled on?

As the supply continued to pour, the exchange rate began to move in one direction. The fact that we are trading FX margin with the money we borrowed has spread throughout the financial world.

If the exchange rate moved excessively, a different strategy had to be developed. Fortunately, this problem was solved automatically by the market.

When the pound was undervalued and the yen was overvalued, hedge funds and other financial companies that had been paying attention to it for a while came forward.

“Look at these guys.”

They sided with the government. In other words, it bought the pound with the British government and sold the yen with the Japanese government.

Under normal circumstances, our defeat at this point was almost certain.

The live ammunition we prepared was only (?) 100 billion dollars. Nevertheless, the funds were dispersed due to the war in both foreign exchange markets.

Considering that George Soros spent a trillion dollars when he robbed the UK, this amount of capital is negligible.

Taegyu said.

“Isn’t this a bad situation?”

I shook my head.

“no. The opposite.”

* * *

London Forex Exchange.

Forex dealers moved their hands frantically to handle the influx of orders.

As the value of the pound fell due to continued selling, the government responded by loosening its foreign exchange reserves, and other financial companies that predicted a rise in the pound also joined in buying.

However, as the pound began to rise again, a massive sell-off came as if waiting.

Josh muttered as he watched the exchange rate change every minute.

“Are you going to keep selling as long as you accept the stock?”

This type of speculative trading is no longer practiced by hedge funds. This is because the probability of success is reduced, but the risk is unacceptable in case of failure.

Didn’t even the great George Soros retreat from the Russian market at an astronomical loss?

‘Do you really think Brexit will happen?’

The UK Treasury has warned that the pound could lose more than 10 per cent if the UK leaves the EU.

However, even now, just before the vote, Remain was more dominant, and the stable flow of the foreign exchange market and the stock market showed that.

If Brexit doesn’t happen…

Josh smirked.

“The otaku will go bankrupt.”(Read more @ wuxiax.com)

* * *

On my way out of class, I got a phone call from Hong Kong.

[Nice to meet you, Mr. Kang. This is Chase Southwell, whom I talked to before.]

Golden Gate Asia branch manager called me?

For a moment, I was so surprised that I thought I heard it wrong.

“Ah, hello.”

[Long time no see.]

“Yes. How have you been?”

We exchanged greetings as if we were close friends.

He never called me suddenly for no reason. After a while, he brought up the subject.

[OTK Company is well aware of what is going on in the foreign exchange market.]

I smiled bitterly.

“Looks like a lot of rumors have spread.”

[I consider Mr. Kang to be a great investor. However, I don’t understand why they would make such a reckless investment. Stop right now. It’s not too late yet.]

OTK Company was experiencing huge losses in both foreign exchange markets. If you liquidate your current position, several trillions will be lost.

[This is your friend, not your partner.]

“·················ogue.”

Asia’s legendary investor Chase Southwell calls me a friend!

You really have grown a lot after Kang Jin.

I thought so and laughed to myself.

“Thank you for thinking about it. Then, as a friend, I will only tell you one thing.”

[What?]

“I intend to go all the way. So never stand against me. The reason will be known when the results come out.”

This will probably sound absurd. You may think that you are acting bravely because you do not want to admit defeat.

But I was sincere. At least he didn’t want Golden Gate to lose.

After a while, Chase’s voice was heard.