The Short-Selling Prophet of Wall Street
"Can you drive?"
August 2007.
One month later, at LaGuardia Airport in New York. As soon as Seon-woo and Han Jae-yi cleared immigration, they headed toward a rental car parked in the lot.
"Yes, I got my license in the army. I picked up an international permit too."
Seon-woo answered Han Jae-yi's question as he loaded their luggage into the trunk.
"Surprising. Honestly, I was worried when you said Director Jeong wouldn't be coming."
"He may be my secretary, but he's also a director of the company. SJ Holdings can't run without him—I can't keep him at my side at all times. Hop in."
He closed the trunk and slid into the driver's seat. Once the car pulled away, Han Jae-yi, settled into the passenger seat, spoke up.
"You're a good driver. If you only got your license in the army, you can't have had many chances to actually drive."
Naturally not.
In his previous life, whenever it wasn't an official engagement, he had always driven his own car.
"That's true, but it's not exactly difficult. When we get back to Korea, I'll chauffeur you too, senior."
"Will you? Oh right, that reminds me—no, actually, this is a different topic."
Han Jae-yi turned in her seat to look at him.
"I think it's about time you told me. What exactly is the reason we're in America?"
"I already told you. We came to find people wrestling with the same worries we are—and to invest."
"People out there are thinking the same thing we are? Honestly, I'd have to say we need to find them.
Truthfully, he had even considered seeking out the real-life protagonist of a film that would become a massive hit a few years from now.
But would a college student who'd flown in from Seoul really get a meeting with him? Not a chance. The man would just laugh it off.
Which was exactly why he'd changed his approach.
"We do need to find them."
"Where?"
"Open the front pocket of my bag and see for yourself."
At his words, Han Jae-yi unzipped the front pocket and pulled out an envelope.
"What's this?"
"Read what it says on the front."
"An invitation to the KWFA annual gathering…?" She tilted her head. "What's this?"
"KWFA—a gathering of Korean financial professionals working on Wall Street. That's the invitation."
KWFA. Korean Wall Street Finance Association.
A network of Koreans employed at the world's top investment banks or running their own hedge funds. After deciding to come to the US and realizing he had no connections here, he had gone looking—and this was what he found. He learned an annual social event was coming up, so he instructed Jeong Tae-sung to secure an invitation. The answer came back that attendance was possible in the form of a sponsorship.
"How did you get your hands on this?"
"Sponsored under my own name."
"That's a pretty expensive ticket, you know."
"How much?"
"Five hundred thousand dollars."
"What? That's over half a billion won!" Han Jae-yi's eyes went round. "Did they demand that much from you?"
"No, they hold an auction at the social event, actually. The proceeds go toward scholarships for Korean students in need, or to support the underprivileged."
Seon-woo turned the wheel and went on.
"Can individuals sponsor it too?"
"Of course not. I sold something. In the name of Sunjin Group."
Naturally, Kang Seon-woo the individual couldn't have afforded that ticket—but Kang Seon-woo, heir of the Sunjin Group, was another matter.
"Consider it money well spent. If you want to make a name for yourself, you have to spend at least that much."
Han Jae-yi peered down at the invitation and spoke up.
"You spent that much money—if things turn out different from what we think, then what?"
"What else? I'd actually be happier."
"About what?"
"It would mean we're the only ones seeing the market for what it really is."
"You are seriously…" Han Jae-yi let out a sigh and looked at him. "Something that's fascinated me from the start—you solve problems as if you're reading the answer key."
That remark always stung somewhere deep in his chest. Because, when you got down to it, that was exactly what he was doing.
Instead of answering, he gave a casual shrug.
"Then what happens if we do find someone who thinks like us?"
"We make them ours."
"Make them ours? How?"
"We'll figure that out as we go."
Han Jae-yi stared at him, incredulous. He kept his hands on the wheel, weathering her sharp glare. Outside the window, the New York skyline was drawing steadily closer.
* * *
Two days later.
At a five-star hotel in New York, the ballroom was hosting the KWFA social gathering.
There really are a lot of people.
A sweep of the ballroom showed well over two hundred guests. He hadn't known there were this many Koreans working on Wall Street. Clusters of three and four shook hands, exchanged business cards, and burst into laughter. It looked no different from any American party.
"Wow, this is impressive," Han Jae-yi said in admiration.
He nodded and took a sip of the drink in his hand.
"Still, I feel a little underdressed."
"Why?"
"Everyone came properly dressed to the nines, and you and I…" Han Jae-yi glanced down at her own outfit.
They were both in suits, technically. But everyone in the ballroom was armed with tailored suits, luxury watches, and designer shoes. By comparison, the two of them couldn't help looking like fresh graduates on their first day of work.
"We did dress up properly, though."
"Please. How does that compare to what they're wearing?"
Han Jae-yi snorted and sipped her drink.
"You know, it's fascinating that they all gather like this. Is it a Korean thing?"
"That's part of it, but America runs even harder on school ties, regional ties, and blood ties than Korea does."
"Excuse me?" Han Jae-yi looked at him, startled.
"Most people assume that since America is the land of capitalism, people get hired and promoted purely on merit."
"Isn't that how it works?"
"It isn't. America has the alumni culture—people push their fellow graduates from the same school. They don't call it the land of networking for nothing."
In fact, the alumni networks of America's elite universities were staggering. The Ivy League schools—Harvard, Yale, Princeton—naturally, and in finance, MBAs from Wharton, Chicago, and Columbia looked out for one another. Sharing an alma mater earned you extra points in an interview, and a senior alumnus gave you a leg up when promotion time came. People liked to say Korea's obsession with academic pedigree was severe, but America had merely wrapped the same thing in a more sophisticated package.
"The people in this organization understood that need too. So they gather, hold their social events, and grow their networks."
"And you know all this about…" Han Jae-yi stopped mid-sentence and looked at him. "Oh, right. You're chaebol. I forget, sometimes, when I'm around you."
A stifled laugh escaped him.
"Mr. Kang Seon-woo?"
While he was talking with Han Jae-yi, a man approached, calling his name.
"Hello. I'm Jo Hyeon-jung, secretary of KWFA."
The man said this and handed over a business card. On it was printed the name of GS, a world-class investment bank.
"Nice to meet you. I'm Kang Seon-woo. Business cards, I, um… don't have any yet."
"Haha, no problem at all. We heard you were a university student. Thank you for sponsoring the event and for attending today."
"Not at all. Seeing the atmosphere here, I'm glad I came."
At his greeting, the man nodded, clearly pleased.
"It's an honor for us that a young member of the Sunjin family would attend our gathering and speak so favorably of it. Shall we go together? I'll introduce you to the members."
He had been wondering how to approach people, and the organization's secretary had come right up to him first. Well, that's convenient, he thought, and followed along.
For a while after that, Seon-woo and Han Jae-yi trailed the secretary, greeting one person after another. They collected a respectable stack of business cards, too. Seon-woo was still nothing more than a college student, but the title of Sunjin family member carried weight with them as well.
"Tiring, isn't it?"
After greeting several dozen people and circulating around the hall, Han Jae-yi was looking progressively worse for wear.
"A little worn out."
"Want to go rest over there?"
He steered her toward the wall of the ballroom, fetched a chair, and let her sit.
"Thanks. These shoes are new—my feet are killing me."
Han Jae-yi sat down, kneading her ankle, and went on.
"Anyway, every single one of them is talking about how great the market is. That's all I hear."
He nodded with a serious face. The outlook of the people working on the market's front lines was uniformly optimistic. They did view Bear Stearns's problems seriously, of course, but they considered the upcoming Fed meeting—where rates would supposedly be cut—the more powerful positive.
"We might be going home empty-handed from today's gathering, then."
"That's what makes it so exhausting."
At his words, Han Jae-yi was nodding in regret when—
"—I'm telling you, the market could crash any day now!"
A voice struck their ears. Without needing to compare notes, Han Jae-yi and Seon-woo both turned their heads toward where the voice came from.
At a table on one side of the ballroom, a man was holding forth to three or four people seated around him.
"Do you know what the subprime mortgage delinquency rate is right now? Fourteen percent. Fourteen! This time last year it was ten. That's four percentage points."
"Oh great, this guy's off again."
Even in the face of his tirade, the people seated across from him chuckled as if it were the usual routine. But beneath the mockery, the man's voice carried real heat.
"No, listen. Do you know why those two Bear Stearns funds went under? Because CDO prices collapsed. And Bear Stearns isn't the only one holding those CDOs. Merrill does, Lehman does, Morgan Stanley—all of them."
One of his listeners spoke up.
"Hey, our house holds them too. We're tracking the CDO drop, and everyone's scared because they're worried Bear Stearns inventory is about to hit the market."
"Exactly. And the Fed cutting rates next month is practically a done deal. It's just a question of 25 basis points or 50. If we get 50, the market moves on even if Bear Stearns blows up."
The man who'd been delivering the tirade looked at the others with contempt.
"Rates go down and delinquencies magically fall? House prices have already started dropping. By the time rates come down, it's meaningless to the people who already can't pay their debts."
He tapped the table with his finger and continued.
"So here's what I'm saying. Next month, the Fed cuts rates—then I'm taking a short position. Want in on it?"
"You short-addicted bastard, you're always saying 'I'm shorting this, I'm shorting that,' and nobody's ever once seen you actually do it. Be honest—you're too scared to trade your own money, so you're telling us to invest, right?"
"Seriously, Danny. You're great and all, but do something about the bragging. It's the same routine every single time."
The man's conversation partners waved their hands and got up from their seats.
"Fun conversation, but sorry. I don't have money to invest in your delusions."
"Me too, Danny, sorry. If I reported this up the chain, I'd be told to clear my desk by lunch."
Once they'd left, the man—Danny—merely shrugged his shoulders, as if disappointment were beyond him.
"You'll all regret this! When the time comes, you won't even get the scraps!"
Saying that, he sat back down—and as he turned his head, his eyes met Seon-woo's.
Seon-woo approached him with a smile. Han Jae-yi followed.
"Hello? I'm Kang Seon-woo."
"Oh, hey. Haven't seen you around the group before—new member?"
"No, I sponsored the event and was invited."
"Ugh, this place isn't worth paying to get into. Boring, isn't it?"
The man spoke with an air of utter tedium.
"It was boring until just now. Suddenly it's not. May I ask your name?"
"I'm Danny Kim. Just call me Danny. I'm American—Korean-American, as you can see—which is how I'm a member here."
The man never said anything in fewer than three sentences. His pitch was a bit like a street huckster's, but somehow, Seon-woo found himself liking it.
"Could I hear it too?"
"Hear what?"
"What you were telling those people just now."
"Aw, I don't hand that out to just anybody. Kang—"
"Seon-woo."
"Right. Seon-woo. Thing is, you don't strike me as having a lot of money."
A short laugh escaped.
"I actually have plenty. That's why I sponsored this event."
"Oh, do you? See, the money I'm talking about is counted in millions."
"I'll keep up with you in millions, then. May I listen? If you want to make those guys regret it, talk to me. I'm richer than I look."
At those words, Danny Kim studied him in silence. The look of a man sizing up an estimate. Then he burst out laughing.
"Well, you're the first person at one of these things who's ever come up asking to hear my story, so sure."
Danny leaned forward and dropped his voice low.
"Bear Stearns is going under soon. And with that as the starting gun, you could see a chain reaction of financial firms collapsing."
At Danny Kim's opening line, the corner of Seon-woo's mouth curled up in a grin. At last, they had found someone who shared their view of the world.