The Desert Storm Windfall
August 28th, Desert Storm. ID Investment liquidated every position it held on the NYMEX. With expiration dates looming and the initial shock of war fading, crude prices that had soared into the stratosphere finally began to ease. At the moment of liquidation, WTI stood at $40.14—two dollars higher than it had reached in the original timeline. It seemed ID Investment’s hundred-million-dollar bet had drawn even more liquidity into the exchange, amplifying the upward momentum.
“Good heavens.” Chief of Staff Choi Kang-wook stared at a single sheet of A4 paper with bloodshot eyes, reading it over and over. It was Vincent Greenhill’s concise summary of the NYMEX trades. “A 235 percent rise in oil prices during the investment period. Fifteen-times leverage. Total return: 3,525 percent. Is this for real?”
“Of course it is. Would you like to see the account?”
In response to Choi’s question, Yoo Jae-won opened ID Investment’s corporate account. The account at Citibank could be viewed through an online service—not yet WWW-based, since the World Wide Web had only been announced a month earlier and only universities and a handful of companies had built homepages. Citibank’s service required a dedicated terminal program.
$3,743,550,000.
The moment the account opened, an astronomical figure appeared on the screen: three billion, seven hundred forty-three million, five hundred fifty thousand dollars. At the current exchange rate of 714 won to the dollar, that amounted to roughly 2.67 trillion won.
“Good heavens.” Choi blinked repeatedly at the Egg PC monitor. Faced with such an unreal sum, the only words that came out were the same exclamation. Vincent Greenhill, too, had been left speechless by the sheer weight of the numbers. Following Yoo Jae-won’s instructions, he had handled every operational detail; when the margin call arrived in July, he had felt as though everything was over. Yet within a month they had reaped an enormous profit. Even on the NYMEX, with its century-plus history, a windfall of this magnitude would never happen again. Having been directly involved, his sense of awe was all the more acute.
Choi Kang-wook did not recover his usual composure until the following day.
“Are you really all right, sir? You look pale,” Yoo Jae-won observed.
Choi gave a weak smile. “Money doesn’t frighten you? I dreamed last night that I was crushed to death under a mountain of dollar bills.”
Being crushed to death by money in a dream was considered auspicious—especially if the money was in dollars.
“Wow, that’s a great dream. Want to sell it to me? I’ll give you an Egg PC for it.”
Choi had meant to convey the crushing weight of the responsibility he felt. The dream itself had been real enough; the sum they had earned was so vast that the fear of being buried beneath it was genuine. Yet the conversation had taken an unexpected turn.
“Ah—my dream? If you’re buying, I’ll sell, but an Egg PC is far too expensive. How about lunch instead?”
“Haha, thank you. Still, a good dream deserves its full price. You played a major role in this investment’s success, so please accept it without feeling burdened. Besides, I hear you’ve been working a lot from home lately. You could use a proper computer, couldn’t you?”
“When you put it that way, I have no choice. I’ll gratefully accept.”
Egg PCs were still impossible to obtain through normal channels, but procuring one additional unit posed no difficulty for Yoo Jae-won.
“But are you truly all right?” Choi persisted.
“You’re asking whether I feel burdened? Not at all. I don’t see the actual cash piled up, so it doesn’t feel real. Maybe that’s why there’s no pressure.”
Yoo Jae-won spoke calmly and honestly. The margin call in July had indeed made his stomach churn, but once that hurdle was cleared and oil prices kept climbing, his emotions had settled.
“Besides, the investment isn’t finished yet.”
“Pardon? It isn’t over? Are you planning to buy more oil futures?”
“No. I’m saying the current price is abnormally high. The entire Middle East hasn’t turned into a sea of fire, and the Iraq-Kuwait war will likely end quickly once the United States intervenes. America’s cutting-edge military can’t be stopped by sheer numbers. Once Iraq is driven out of Kuwait and stability returns to the region, these absurdly inflated prices will correct themselves.”
Choi nodded. The logic was sound, yet it did not fully resonate. This war would mark the first time America’s overwhelming military power was broadcast live on television. Since actual combat had not yet begun, doubt remained. Choi was not alone in his skepticism; many shared his uncertainty about U.S. combat effectiveness, while Iraq’s army—which had seized Kuwait in a mere six hours—was being wildly overestimated. Therefore, anyone who shorted oil now stood to reap another massive profit around January of the following year.
“You’ve already made up your mind, haven’t you?”
Choi had spent two years at Yoo Jae-won’s side; he could read his employer’s intentions at a glance.
“You’re not going all-in again this time, are you?”
“Of course I am.”
Yoo Jae-won answered without hesitation. He was certain a decline was coming, yet his own participation in the market could create variables similar to those in July.
“I’ll commit only half the profits. The other half will serve as margin.”
Even half amounted to an enormous sum—1.67 billion dollars.
“Vincent is going to have his hands full.”
“Once the trade is complete, I’ll reward him handsomely. Ah, and we’ll need to strengthen ID Investment’s organizational structure, so please prepare for that in advance.”
“Understood. A full-scale entry into finance?”
“No. As I mentioned before, once this oil trade ends we’ll have plenty of ammunition. I intend to gather companies with strong technological capabilities.”
There were countless firms possessing technology that would prove invaluable in the future yet lacked the capital to commercialize it or finish development. Yoo Jae-won’s goal was to support them in completing their products and, through ID Technology, help them pioneer markets—creating mutually beneficial investments.
“Very well. In line with strengthening ID Investment, we should also reorganize the entire company.”
Choi handed Yoo Jae-won another assignment.
“Reorganization?”
“At present, you hold 100 percent of two companies: ID Technology and ID Investment. There is also an organization preparing to spin off as a separate entity, and ID Software, in which you own a 50 percent stake. In addition, you hold significant—though not controlling—stakes in Yoo Kyung Foods and Daekom. Once ID Investment begins investing in multiple firms, the corporate structure will grow even more complex and the scale will expand dramatically.”
With so many ventures underway, the organization had already grown large and somewhat inefficient.
“Furthermore, you will need a dedicated support structure to manage a vastly larger enterprise.”
Choi’s observation was entirely reasonable. At this point, upgrading the organization into a full chaebol-style group structure made sense—establishing a strategic planning office to oversee group-wide strategy, a dedicated audit office, and an information office to systematically collect and report on management and investment matters.
October 1st, dawn.
Yoo Jae-won rose early and launched ID Talk. A connection to Vincent Greenhill in Manhattan was established automatically; Vincent had been the most frequent contact among company personnel since July, so the auto-connect option had been preset.
“After discussing it with the analysis team, we’ve concluded that current WTI prices are abnormally elevated.”
—I had the same impression, but I lacked the confidence to say so. I’m relieved the analysis team reached the same conclusion.
In truth, there was no analysis team—only the brief conversation between Yoo Jae-won and Choi Kang-wook. Still, his conviction stood at 99 percent. He would have preferred to say 100 percent, but the possibility that his own intervention might again skew the outcome, as it had in July, kept him at 99.
“Yes. We cannot afford to miss this opportunity. I’ll bet on the decline. The trigger price is $38 and above.”
—Short trigger at $38. Noted. The question is the size of the position.
“Exactly. Monitor the NYMEX. The moment WTI rises above $38, sell futures or buy put options. You may also sell call options. The investment size will be precisely half of the recently realized profits—1.67 billion dollars.”
—1.67 billion dollars! That’s enormous. I’m not sure the NYMEX can absorb that much.
“If the NYMEX proves insufficient, use the Chicago exchange or London. Execute as many trades as possible. For liquidation, do not wait for my order—clear the positions as quickly as you can once prices fall below $29.”
—Understood. I’ll do my utmost.
Vincent Greenhill replied with reassuring confidence. The position was sixteen times larger than July’s, so he would be under considerable pressure, yet Yoo Jae-won believed even the NYMEX could handle it. As volatility increased, capital flowing into the exchange had grown; daily trading volume had reportedly exceeded four billion dollars. At most, seven days would suffice to build the entire position using only the NYMEX.
Fortunately, events unfolded much as they had in his previous life. Contrary to reports of massive destruction at Kuwait’s refineries, far fewer facilities had actually been damaged, and oil prices fell rapidly. Moreover, despite fears that Iraq might attack Saudi Arabia after invading Kuwait, Baghdad refrained from escalation. As more participants sought to lock in profits, the view that WTI had risen excessively gained widespread acceptance.
Amid this shift, ID Investment deployed numerous accounts to establish short positions worth 1.67 billion dollars, accelerating the decline. Some market participants attempted to support prices by placing buy orders, but against 1.67 billion dollars their efforts proved futile.
WTI, which had peaked at $42 in early October, began a steady descent and reached $26 by October 22nd. On that day, ID Investment’s put positions were fully closed. Including leverage, the final return stood at 305 percent—only one-tenth the return achieved on the July long positions. Because the contract size was so large, the firm had concentrated on futures rather than smaller options, limiting the percentage return. Yet the absolute profit far exceeded the first trade. Although the investment lasted only twenty days, the enormous capital deployed produced a vastly larger realized gain.
The final profit came to 6.79 billion dollars. Adding the residual cash that had been set aside, ID Investment’s total assets comfortably surpassed 8.8 billion dollars.
It was a miracle born of Desert Storm.