3
### Chapter 3. Making $10 Million Through a 90% Radio Margin Call
So, the New York Stock Exchange was actually a relatively young stock exchange.
“It’s an emerging exchange, compared to the European exchanges. That’s why we work so hard to follow European traditions. Very, very closely.”
Even so, compared to the stock exchanges of Europe, especially Amsterdam, Paris, and London, it was still a young exchange.
Perhaps that was precisely why the building itself looked even more old-fashioned.
You could tell just by looking at the exchange building, which had strangely imitated Greek and Roman architecture.
And apparently, following that tradition applied to the way trading was conducted as well.
It wasn’t as though anyone could simply trade however they wanted. Trading was only possible through designated [traders].
“So that’s why brokers are restricted too.”
“In the old days, back in the nineteenth century, they supposedly traded while sitting in chairs. Literally. Not anymore, though.”
“Even so, only those who own those seats can trade directly?”
Inside the New York Stock Exchange building on Wall Street, Selby shrugged.
“That’s right. Assuming you can actually trade properly in this chaos.”
The moment I entered the exchange, I felt it.
No, I could hear it.
The scene of traders shouting as they conducted their transactions.
“GM! Twenty dollars!”
“Coca-Cola! Cheap! Now’s the time! Forty dollars!”
“US Steel is the best? What? Five dollars? I’m not selling it for that!”
Countless traders were negotiating prices by writing them down on paper themselves.
They took phone calls, checked information coming in through telegraphs, and shouted out their bids.
It was a sight that was impossible to imagine in the twenty-first century, where electronic signals dominated everything.
I muttered with a hoarse voice,
“They’re trading by writing things down on paper and negotiating.”
“That’s why this place isn’t a joke. Ugh, it’s even worse than a marketplace.”
“It’s slow. Extremely slow.”
Instead of changing electronically in an instant, there was time.
Suddenly, I clenched my fists and trembled all over.
Time to determine whether something was rising or falling.
I had my time.
I could intuitively judge whether the value of things would rise or fall.
Then why had I failed in my previous life?
Timing.
Even if I could determine whether something would rise or fall, by the time I acted, the opportunity had already passed, or I would miss the right moment to sell.
But now, there was enough time.
More importantly, since prices themselves were determined through negotiation, there was even time to bargain.
This was the place where I belonged.
Just then, one of the traders looked at me and asked,
“What? You here to trade?”
“Of course. Trade!”
“Qualification?”
I took a deep breath and held out my certificate.
I presented it with a flourish.
An old but clearly recognizable license was visible.
“NYSE Stock Exchange [Seat] qualification.”
But the trader who saw the certificate suddenly flinched.
“Mr. Howard Gould?”
“Yes.”
“You finally showed up after obtaining a seat here and never coming even once, huh?”
No, what the hell had my father actually been doing all this time?
During this excellent bull market, with such a good position and such favorable conditions.
It was almost ridiculous.
I lightly shook my head and was about to write down the stock I wanted to trade.
Then it happened.
“Gould? The Howard Gould I know is a middle-aged gentleman. Not some young brat like this.”
What?
I turned my gaze and saw a middle-aged man wearing a fedora.
He was smiling in a very friendly manner, but somehow he looked like an actor.
Right.
Dustin Hoffman.
Looking at the middle-aged gentleman who resembled Hoffman, I asked,
“Who are you?”
The trader immediately greeted him as though he knew him.
“Mr. Baruch, it’s been a while. The [Wolf] has finally come out into the market?”
“Hah, horse racing hasn’t been very interesting lately. But then I heard an interesting name.”
“Well, it’s quite common for the owner of a trading position to send a representative instead of coming personally.”
The middle-aged man, Mr. Baruch, took off his fedora and asked,
“Who are you, pretending to be Gould?”
“His son. And you?”
“Huh? Really? Howard had a son? I didn’t know.”
Baruch tilted his head before casually introducing himself.
“I’m Baruch. Bernard Baruch. I do a little stock brokerage.”
My mouth fell open.
“The Baruch who advised people not to invest in stocks, after the panic, when he supposedly heard it from a shoe-shiner?”
This was one of those stories that had been repeated as though countless people were the protagonist, but the real person involved was standing right here.
On the eve of the Great Depression, during the frenzy of the stock market’s explosive rise, everyone was rushing into stocks.
But one day, a trader came across a shoe-shiner while going to trade in the stock market.
The shoe-shiner had actually lectured the trader.
He bragged about how much money he had made by buying stocks.
It was an era when even a shoe-shiner was buying and selling stocks.
The trader supposedly shorted his entire position that very day.
And then Black Thursday came.
I was witnessing the legendary story’s actual protagonist with my own eyes.
Bernard Baruch, the hidden powerhouse trader of Wall Street.
Baruch simply blinked and smiled strangely.
“I sometimes tell shoe-shiners to buy stocks, but I never tell them not to. Heh heh.”
Of course.
The market was bullish right now!
---
Of course, Baruch himself was also a genuine giant of an earlier era.
“Gould. That’s a name I haven’t heard in a long time. The nineteenth century was a romantic era. Heh heh.”
Born in 1870, he was fifty-seven years old, an age when, considering the average life expectancy of the era, one might start thinking about retirement.
But surprisingly, this man would actually live until 1965.
He belonged to a generation that experienced the nineteenth century, two world wars, even the atomic bomb and the Cold War.
So Gould was already the name of a bygone century to him.
Instead of the noisy exchange, Baruch asked me while drinking coffee in a quiet café.
“So, the grandson of Jay Gould came here to invest in stocks?”
“Yes. It seems this is the only thing I can do.”
“There are plenty of interesting things in the world. Horse racing, your father’s beloved yachts, and even public service. In a peaceful era like this, after the world war has ended, becoming a soldier is an option too.”
A soldier?
Come to think of it, World War I had ended thirteen years ago, while World War II would not begin for another ten years.
If I became a soldier now, I could practically spend my time enjoying myself as though peace would continue forever.
But another world war was coming soon.
Conversely, the people of this era did not know that yet.
They did not know another world war would begin, that people would die in droves, or that the Great Depression was coming.
Baruch then asked,
“So where does the grandson of the [Robber Baron] want to invest? In a bull market like this, you’ll make money almost anywhere.”
I blinked.
Come to think of it, I had not thought about anything specific.
Where should I invest in this era?
Coca-Cola, perhaps?
“If it were an era like this, well…”
Just then, a noise came from the corner of the café.
Sizzle!
I turned my head and was startled.
It was big.
First, there was a large cylindrical tube, the thing I had seen in history books called a [vacuum tube].
Suddenly, a voice began coming from the vacuum-tube radio.
Amid the background noise filled with static, a human voice could be heard.
“A tomb belonging to Tutankhamun has been discovered in Egypt. Tutankhamun was a pharaoh of Egypt, and this discovery is being called the discovery of the century. It contains a golden mask and—”
I was startled.
“Tutankhamun? He was discovered just now?”
“Huh? Ah, the discovery itself happened a little while ago. It’s being opened to the public now. Huh, I wonder how valuable those golden masks are.”
“That’s being broadcast over the radio?”
Baruch, a man from the nineteenth century, glanced at the large vacuum-tube machine and shrugged.
“Yeah. Radios are extremely popular these days. Though I think the craze is getting a little excessive. Wouldn’t it be better to invest in the company that makes the vacuum tubes used in radios?”
Radio.
So radio was the latest technology right now.
A machine that was nowhere near as sophisticated as a twenty-first-century smartphone, yet just as astonishing in its own way.
Why?
The people of this era were experiencing, for the first time, the realization that sound itself could travel through empty space and be transmitted.
Strictly speaking, smartphones were simply computers and televisions made small enough to fit into your hand.
But the radio was something that introduced an entirely new concept and delivered the shock directly through people’s ears.
Could this be worth investing in?
At that moment, I saw the brand name written on the vacuum-tube machine, the radio.
RCA.
[Expected to rise, RCA]
I stared at it for a moment, trying to figure out what it was, and muttered,
“RCA? Radio Corporation of America?”
“Huh? You mean the GE subsidiary? You’re thinking of investing in it? If it were me, I’d stop. It’s gone up too much lately.”
“How much is it?”
GE meant General Electric, didn’t it?
But General Electric was also in the radio business?
Baruch explained rather indifferently.
“When it first went public last year, it was twelve dollars per share. These days, it has risen all the way to forty dollars. Tsk. Even for a bull market, that’s too much. It’ll probably come crashing down sooner or later.”
At that moment, I clenched my fist tightly.
This was it.
In other words, this was like investing in a smartphone company before smartphones became mainstream in the twenty-first century.
Of course, RCA would also crash during the Great Depression.
Even vacuum tubes would eventually be replaced by transistors.
Even so, right now?
It was different.
“Mr. Baruch. You run a brokerage firm?”
“Huh? Well, yes. Why?”
“I want to make a large trade. I suppose I could do it through my personal account.”
Baruch looked at me with interest before asking,
“You want to buy RCA? How much?”
Intuition.
Or instinct.
Call it whatever you want.
No, even without that, radio was going to take off.
I shouted with absolute conviction,
“Six hundred thousand dollars in total. Fifty thousand dollars through my personal account. I want to trade the remaining 550,000 dollars through you!”
Baruch’s mouth fell open.
He had been such a relaxed old man.
According to the records of my previous life stored in my memory palace, this was a man who supposedly had to see an atomic bomb explode before being genuinely surprised.
So did that mean what I had just said was as astonishing to him as an atomic bomb?
Baruch suddenly stared at me and asked,
“Why do you want to trade through me? Your trading [seat] should be enough.”
“Can you handle large trades? I went to the exchange earlier, and it seemed impossible there.”
“You’re a very shy young man. Heh heh.”
After smiling for a moment, Baruch spoke seriously.
“If you trade through me, you’ll have to pay a commission. At least two percent, reckless young man.”
That was really expensive.
But in fact, the New York Stock Exchange had maintained [fixed commission rates] since its establishment.
That would not change until 1975.
So Baruch was not actually overcharging me.
I nodded and asked,
“That’s high. But in exchange, I can make large trades, right?”
“If necessary, margin calls are also possible.”
“Margin call? How many percent?”
A margin call.
In other words, credit trading.
As long as you had credit, it was a method of trading with more money than your principal.
In the Korean stock market, it was usually three times the amount.
“My credit is the highest, so ninety percent. For you, it would probably be less than ten percent, right?”
In other words, this effectively meant I could leverage ten times my capital.
With ten thousand dollars, I could borrow ninety thousand dollars and purchase a total of one hundred thousand dollars’ worth of stock.
What about six hundred thousand dollars?
That became a six-million-dollar deal.
Right there, I filled out the trading application I had originally intended to write.
Scratch, scratch, scratch.
I stared directly at Baruch and handed him the application.
“I’ll trade with six hundred thousand dollars as collateral, using ninety percent credit. RCA.”
“What? You mean a single stock? RCA alone?”
“A single stock. RCA only. Today.”
Baruch stared straight at me before asking,
“You’re crazy. You know that if it crashes, you’ll have to cover ten times the amount?”
Of course I knew.
Six million dollars.
By the standards of this era, that alone would make me one of the wealthiest people in the upper class.
There was a reason people used the term millionaire.
It was because, in the early twentieth century, someone with a million dollars was genuinely rich.
After all, the luxurious fortress of a mansion I had lived in was worth a million dollars.
By twenty-first-century standards, that would probably be roughly 200 million dollars.
Even so, I smiled.
“I’m going to win. Baruch. This time, at least, I’m taking the gamble.”
Baruch glanced at me before asking,
“Do you have the money?”
Instead of answering, I handed him the cash box I was carrying.
Six thousand 100-dollar bills.
Six hundred thousand dollars.
Actually, one million dollars in 100-dollar bills could generally fit into a single bag, so it was easy enough to carry around.
Of course, Baruch was shocked for another reason.
“Ha, carrying six hundred thousand dollars around with you? You really are crazy.”
On the way out, I heard the same thing again.
“Are you insane, Mr. Gould?”
“I’m not insane.”
“Then why!”
I asked my lawyer, Selby,
“Baruch is a trustworthy businessman, right? Isn’t he?”
“Ah, of course. He’s a reputable broker. His credit is excellent! He’s been trading for a long time and never cheats his clients. But that doesn’t change the fact that you’re using ninety percent credit to buy RCA? A company I’ve never even heard of!”
“People are going to listen to the radio, aren’t they? You too, Selby?”
Selby shouted,
“How are we supposed to know when this radio thing will collapse! It’s not even something you can see like a newspaper. It’s just a machine that talks!”
Exactly.
People said the same thing when smartphones first appeared.
They said there was no way of knowing when the companies making those machines would go bankrupt.
And in fact, most of them did.
But the companies that survived rose to astronomical heights.
Besides, what about now?
This was the extremely bullish market before the Great Depression.
“So right now, it’s only forty dollars, Selby.”
In reality, RCA would eventually rise far beyond five hundred dollars.
At its peak.
Then I stopped.
“Wait, Selby. Where am I supposed to sleep?”
Selby looked at me and shook his head pitifully.
“Go sleep at a motel. Homeless employer.”
Damn.
How had I not thought of that?
I had sold my house, so now I had no home!
---
So, this was nothing.
“My goodness! RCA has risen this much!”
This was the office at 195 Broadway.
In the end, I became homeless in another property my father had purchased, the Broadway office.
Selby brought me food, or rather bread in the form of sandwiches, from his house.
But since I had not been able to wash properly, I was a complete mess.
The moment I arrived at the office, I asked Selby, who was screaming, while yawning,
“What are you making such a fuss about?”
“Read the newspaper! The newspaper!”
“Oh, right. We still have to get information from newspapers, don’t we? Let’s see.”
It felt strange reading the news on paper like this.
[RCA stock price: $40 → $157]
Selby looked at me with a face full of excitement, but I simply shrugged.
“This is only natural, Selby.”
“Why is it natural? Even in a bull market. Huh, it tripled in just three days!”
“It’s stranger that it took three days. Though I suppose that’s because this is an era when trades are conducted by hand.”
I replied as I entered the office bathroom for the first time in a while.
“Suddenly, a 600,000-dollar purchase came in. No, since it was a leveraged trade, it was a six-million-dollar purchase. And who’s leading that deal?”
Selby hurriedly followed me into the bathroom, rolled his eyes, and then suddenly clapped his hands.
He finally realized it.
The important thing about this deal was not the 600,000 dollars, or even the six million dollars.
It was the buyer.
“The lonely wolf of Broadway, Mr. Baruch, who hasn’t even moved to Wall Street yet!”
“Is that old man’s nickname? Anyway, a famous big-time investor suddenly made a massive deal. And it was in a cutting-edge product’s stock!”
“Now even people who didn’t believe in radio, like me, will believe in it. Because Baruch bought it!”
In modern terms, it was like this.
Warren Buffett was the greatest investor of the twenty-first century.
However, he had a reputation for avoiding investments in IT because he did not understand the field very well.
But suppose Buffett suddenly bought Apple.
Apple’s stock would skyrocket that day.
Baruch was currently a major investor who had dominated the nineteenth and early twentieth centuries.
He was undoubtedly famous in the present, but also a figure from the past.
And now he had made a cutting-edge investment?
“This is exactly why I used Baruch.”
Then, while speaking, I suddenly stopped.
195 Broadway, the office.
That was right.
The Baruch who should have been seen on Wall Street was standing right in front of me.
The car stopped, the driver opened the door, and the middle-aged gentleman, Baruch, stepped out and greeted me.
“Hey, grandson of the Robber Baron.”
“Oh, Baruch? What brings you here?”
“What do you mean, what brings me here? My office is right near your father’s office. Whether it’s your father or me, we’re both relics of the past. Everyone is moving to Wall Street instead of Broadway.”
Oh, really?
Come to think of it, Broadway and Wall Street were only about a one-minute walk apart.
Broadway had been the gathering place for financial brokers during the previous century.
But by the middle of the twentieth century, everyone would move to Wall Street, leaving Broadway with little more than musicals.
Were people already starting to move away even now?
The self-proclaimed relic of a bygone era, Baruch, suddenly handed me a document.
“Congratulations. You became a millionaire overnight. No, a ten-millionaire.”
It seemed to be some kind of purchase confirmation.
“I’ll sell everything.”
“That’s probably for the best. Heh heh. RCA is going to crash again, isn’t it?”
“No. It’s going to keep rising now. But…”
In fact, RCA would continue rising until just before the Great Depression.
Radio was not going to collapse suddenly in just two years.
Besides, radios were extremely expensive in this era, making them even more of a luxury product than modern televisions.
But I had plans of my own.
“Now I’m going to start seriously putting my position to work.”
Selling was easier than buying.
[Balance: $17,550,000 USD]
Yes.
I was now a multimillionaire.