1988 - In the Bahamas (4)
1988 - In the Bahamas (4)
"Gold?"
"Yes. If it's the Keller-Roth Family, I assume you have connections with the Swiss central bank."
"Well, that's true, but......."
That's the reason I specifically picked Matthias out of countless lawyers.
He has his own capabilities and carries weight, but more importantly, there was no one else suitable for borrowing gold.
"Let me explain it simply first."
"I have plenty of time. I'd appreciate it if you could explain in detail."
"That will be after the contract."
"......Understood."
He's not the type to wipe his mouth clean after hearing the strategy.
In fact, once you hear it, the so-called strategy isn't that special.
"We will borrow gold from the Swiss central bank and sell it on the market."
"A gold short sale."
"Currently, the collateral ratio for gold is at most 20%. If we put up $8 million as collateral, we can borrow $40 million worth of gold. That secures five times the investment capital."
"Yes."
"In that case, what interest would we have to pay?"
"Since it's central bank gold......, probably a fixed rate of around 1%? With good negotiation, it might even go down to 0.5%."
"Then, if we buy U.S. Treasuries with that $40 million, how much interest would we receive?"
"Ah!"
Currently, the U.S. overnight rate is roughly between 6~7%.
Receiving 6% interest from U.S. Treasuries and paying 1% gold interest leaves the remaining 5% as profit.
That is the gold carry trade.
"But what if the gold price rises? Wouldn't the loss be much greater?"
"To prevent that, we must buy gold futures simultaneously with the short sale to lock it in."
"Lock in?"
"It means fixing the price. You don't need to do complex calculations; just think of it as a method that exists."
"......Anyway, regardless of price fluctuations, we keep the 5%?"
"It's not 5%. It's 5% of $40 million, so based on the original capital of $8 million?"
"25%?!"
"And that's risk-free."
"A risk-free annual return of 25%?"
"Not a bad return, right?"
"Not bad? It's fantastic!"
It's a strategy currently only known to a few, like Baring Bank and some hedge funds.
It's not perfectly risk-free, but it's practically an arbitrage close to risk-free.
Considering there are few competitors now and the fact that we can borrow gold directly from the central bank, it's a method we can use for the next 10 years.
Of course, I plan to invest in the drought, not U.S. Treasuries.
"That's the basic principle. I'll explain the details after the contract. I'm not hiring you just for a mere 25% return."
"Mere......! Hah-. Please give me some time to think."
"Take your time."
Matthias sat on the edge of the bed, staring blankly at the floor as he began to ponder.
"Ara."
I sat in the chair and spread my arms.
Ara quietly approached and sat on my lap.
I gave her a back hug and began my mental detox.
This was surprisingly effective.
The sensation of reduced sensitivity and a calmer mind.
Would it be as effective during intense trading times?
If so, Ara's role might be more important in that aspect than as a secretary.
If I can just maintain composure during those thin-ice stressful times, I'll be able to make much more accurate judgments.
I held her like that and fidgeted for a while.
Eventually, Matthias turned his head and looked at me.
"Alright. Let's do it. I look forward to working with you. Boss."
"Likewise. I look forward to working with you too, Matthias."
We shook hands.
Honestly, I wasn't too worried.
There's no way the direct descendant of a Swiss secretive lawyer family would pass up that level of return.
"Then let's start by setting up the fund."
"No."
"Huh?"
"Now that we're on the same team, I should also generate some profit of my own."
Matthias said that with a sly smile.
Profit?
"The demand for clean money always exceeds supply."
"Oh......."
Is he thinking of selling the company along with the shares, adding a commission?
I didn't expect that.
Good idea.
It's a method only a law firm at the Keller-Roth level, with constant large clients, could execute.
Since it's a bearer share with $8.3 million in cash, if the logistics are handled well, there shouldn't be a problem selling it piecemeal.
"I'll try to secure up to $10 million. And let the LP be under my name."
"Good."
Not a secret account, but coming in under his own name.
It means that if a dispute arises with the IRS later, he'll mobilize the family's power for defense.
Seems he's firmly decided to be on the same boat.
"Shall we draft the contract then?"
"Of course. Boss."
And so, in that Bahamas hotel, we began planning our future endeavors one by one.
Ara also diligently took notes in her notebook and kept up well.
Matthias returned to Switzerland immediately after finalizing the contract.
He seemed so full of motivation that he couldn't contain himself.
Well, the tasks ahead are no small matter.
First, we need to sell the bearer shares to secure investment capital, prepare to borrow gold, and recruit employees for the Execution Office to be dispatched to New York.
And that's not all.
We also need to approach various boutique banks, establish the fund's committee in the Bahamas, and bring in a trust company to ensure the safety of the dummy directors.
If even that's insufficient, we might need insurance companies too.
Preparing all that alone won't be easy, but with a $300 million reward at stake, what choice is there?
We just have to do it.
Of course, if he's really short-handed, I could help, but...
Since I'm the one devising the most important investment strategy, I'll leave it to the expert for now.
"Wow-."
While Matthias was boarding a flight back home in such a busy manner,
Ara and I were taking a walk on a private island we rented in the Bahamas.
An uninhabited island without even servants.
Only the two of us existed before the night sea.
"It's beautiful."
"Really. I've only seen scenery like this in pictures."
The Milky Way filling the night sky was incredibly beautiful.
A sight rarely seen in the U.S.
Not because of pollution or light pollution, but because being outside so late at night, wandering around so carefree, is very difficult in the U.S.
Maybe only possible at a remote campsite.
Splash-. Splash-.
Beyond the pitch-black darkness, the sound of waves adds as background noise.
"Did you learn a lot today?"
"Yes. Though there are still some things I don't understand."
It's dark, so it's hard to see clearly, but her figure illuminated by the faint moonlight is incredibly alluring.
The thin swimsuit she's wearing is barely visible, blurred.
Who would have thought that small frame could look so beautiful.
Maybe my aesthetic sense is broken.
"What didn't you understand?"
"First, I don't get what a partnership is."
"......Hmm."
A limited partnership isn't a particularly special or complex structure.
Maybe it's just not as well-known as a corporation.
"You know about corporations?"
"Yes. The company itself is treated as a single legal entity. Right?"
"A partnership is that split into two. The GP with unlimited liability, and the LP with limited liability."
"I don't really get it."
She shook her head.
Well, explaining it just like that, it's natural she wouldn't understand.
"So, think of it as divided into GP for management and LP for investment. That might be easier?"
"Ah-ha!"
"The GP can manage but must bear responsibility to the end, while the LP invests money and is only responsible for that investment amount."
"You mean if debts or losses go negative, the LP only loses up to their investment, and the GP is responsible for the negative portion?"
"Exactly."
Her comprehension is good, as expected.
"Also, in a corporation, rights and dividends arise according to shareholding ratio, but in a partnership, the partnership agreement between the partners takes precedence. Depending on the contract, the GP can exercise all authority, and the LP might have no authority at all."
"I see. It sounds like a decent method, so why was Matthias so opposed?"
"Because the GP and LP cannot be treated as the same person."
"......?"
"The fund we'll operate is centered on the U.S. market, right?"
"Yes."
"If the profits generated there are considered mine, the IRS and the New York Department of Finance can demand taxes on the fund's entire assets."
And that too, adding penalties on top of the maximum tax rate every year.
If they let it sit for about 10 years and then demand back taxes all at once, in the worst case, you might have to pay over 100% of the profits as tax.
That's because the penalty interest for intentional deferral is compound, not simple.
That's also why I plan to liquidate in 1997.
Right now, if the paperwork is formally complete, they won't touch it, but from '98 onward, they prioritize judging the substantive relationship, regardless of paperwork.
It's not that the tax law changes, but the IRS's interpretation of the tax law changes, so there was no way to deal with it.
"So, if you go to the IRS and say just one thing, all the profits earned until then could be lost."
In fact, the LP's investment capital belonged to the GP.
If Ara says just that one sentence, I'm bankrupt.
Or even if the IRS secures circumstantial evidence, it's the same.
Since the burden of proof lies with me, not the IRS, if the IRS makes a claim based on a minor statement or circumstance, I have to prove in court that it's not true.
It's a kind of presumption of guilt principle.
That's why it's described as a house of cards and a tightrope.
"......Don't worry."
"Well. What if later, a cure is developed and your sister is completely healed?"
"It's still the same. Without Master, Lily wouldn't have held on."
"She might have held on even without me."
I deliberately deflected.
She might think that now, but...
Will she truly think the same then?
"Really."
"Alright. I believe you."
"So, whatever Master tells me to do, I'll do anything."
"I said I believe you, right?"
"But......, but......."
She seems to know I don't fully believe.
Her perception is extraordinary.
Is she using mind-reading or something.
"This is my issue. Don't worry. It'll get better with time."
"As Master said, I've been masturbating every day."
"......Ahem."
Damn.
Suddenly?!
Such a surprise attack.
If I had been drinking water, I would have spit it out immediately.
I did tell her to do it, but...
I never attached a condition of 'every day,' did I?
"W-well, good."
"Sorry. It felt good, but I don't think it was an orgasm."
"Uh, hmm. You'll feel it better as you get used to it."
"I felt a pleasant sensation, my thighs trembled, and my strength drained, but I couldn't 'go' like when Master did it for me."
Wasn't that just climaxing?
It's just a difference in intensity.
Does she think only that level from the first day was an orgasm, and everything else isn't?
"Sorry I couldn't 'go.' I'll listen to Master's words better from now on. Please don't doubt me."
"......Ahem."
She's quite something.
It's as if she instinctively knows how to bewitch a man.
Yet, it's sad that the last thread of doubt just won't disappear.
"Then, shall we check?"
"Yes."
"Show me. How did you do it?"
"Master."
"Yeah."
"Here."
Ara handed me something.
A camcorder?
When did she bring this?
I had no idea.
As soon as I took the camcorder, Ara immediately crouched down on the sand.
A posture as if taking care of business.
The M-shaped curve illuminated by the moonlight was incredibly appealing.
I unconsciously pressed the record button.