Bonus Chapter Today!
We hit our first 500 unique power stone donners today! Yay, thanks, everyone! 🤯
Awesome news! Thanks, everyone! 🤯🎉 🎊 🥳 🎇 🎆 🔥❤️❤️
We require 99 additional Power Stone donors, 9 more reviews, and 600 more collections to unlock the next bonus chapters.
Get those stones going boys and tomboys, we need to get those numbers up!
Join my Patreon
GodofPleasure
(dot)com/GodofPleasure
******
"That is the language a bank uses when it cannot roll its liabilities," Marvin said.
"Yes. Korea First Bank is insolvent on a mark-to-market basis if you apply conservative loan loss provisions to its real estate and manufacturing sector loan book. This is not a secret among people who have read the quarterly reports carefully."
"What's the timeline for the banking sector story to become public?"
"In terms of official acknowledgment? October is when it starts to become impossible to deny. Korea First Bank may require a government intervention before the end of the month. If the government intervenes in Korea First, the market is going to immediately look at Hanil Bank and Commercial Bank and ask the same questions."
"And the answer to those questions—"
"Is the same. Which is why the government has been trying not to have the conversation."
"Add five million to the won NDF book today," Marvin said. "Bring the total to thirty-five million notional. And move up the KOSPI put execution — I want the full twenty million in index puts and financial sector puts established by October 15th."
"Executing," David said.
---
On October 10th, the International Monetary Fund published a revised World Economic Outlook that downgraded its 1997 and 1998 growth forecasts for the five most affected Asian economies — Thailand, Indonesia, Malaysia, Philippines, and South Korea — by a combined total that represented, in the dry language of international economic forecast revision, the formal acknowledgment that the crisis was larger, more sustained, and more structurally rooted than the initial assessments had suggested.
The five-page Asia section of the WEO was the most carefully read piece of IMF writing in years among the professional financial community. Within it, buried in a footnote on page four, was a sentence that Marvin underlined and transcribed into the notebook: *The extent of private sector foreign currency liability in the Korean corporate sector may represent a material risk to financial stability that is not fully reflected in current sovereign risk assessments.*
The IMF was saying, in the language of footnoted qualifications that international institutions use when they are not yet prepared to say something directly, that Korea's private sector foreign currency debt was a problem that the sovereign risk framework — which evaluated Korea as an investment-grade economy with sound fundamentals — had not captured. The IMF was, in other words, getting within one step of the conclusion that David Kim and Rachel Torres and Marvin Meyers had reached in August.
Three steps behind. But moving in the right direction and moving faster.
---
On October 16th, 1997, the South Korean government confirmed what the market had been pricing for weeks: Kia Motors, the country's third-largest automobile manufacturer and one of the major chaebol affiliates, had officially entered a court-supervised restructuring process. The Kia situation had been visible since July, when the company had missed interest payments on its bank borrowings and had requested that its creditor banks voluntarily extend and restructure the facilities. The voluntary restructuring had been attempted and had failed — the creditor banks, themselves under pressure, had been unable to agree on the terms of a voluntary workout — and the result was the formal restructuring filing.
Kia's total debt was approximately nine trillion won, or approximately ten billion dollars at the then-current exchange rate. Of that total, approximately three billion was foreign currency debt. The restructuring filing meant, among other things, that the Korean banks holding Kia's debt — which included Korea First Bank, Hanil Bank, and Commercial Bank of Korea, among others — were now holding impaired assets of a magnitude that made their own capital positions difficult to defend.
The won fell to 968 per dollar on October 16th.
The KOSPI fell five point three percent on the same day.
Rachel Torres filed a supplementary analysis that afternoon that walked through the loan loss exposure of each major Korean commercial bank on a bank-by-bank basis. The numbers were stark. Korea First Bank, whose non-performing loan ratio was already the highest of the major commercial banks at approximately twelve percent before the Kia restructuring was factored in, faced a post-Kia NPL ratio that Rachel estimated at above eighteen percent — a level that, under standard regulatory capital requirements, would render the bank technically undercapitalised.
The government would have to recapitalise Korea First Bank. The question was when and how.
On October 17th, Marvin expanded the Korean financial sector put position by an additional ten million, bringing the total KOSPI financial sector short to thirty million notional. The puts were structured through the Hong Kong entity, referencing the KSE financial sub-index, with November and December expiries.
Grant called that afternoon.
"The won is moving faster than the September data suggested," Grant said. The quality of his voice had changed over the past three months — not troubled exactly, but carrying the alertness of a man who is in the middle of a large and consequential operation and is tracking every significant data point with the attention that scale requires.
"The Kia filing was the catalyst," Marvin said. "The market has been waiting for a visible corporate failure to confirm the thesis about chaebol debt quality. Kia is the confirmation."
"What do you expect next?"
"The government announces some form of support for Korea First Bank before the end of October. The announcement is delayed as long as politically possible because the Ministry of Finance is still hoping the situation stabilises without requiring official acknowledgment. It doesn't stabilise. The announcement comes. The market responds to the announcement as confirmation of systemic risk rather than as resolution of it. The won falls further."
"And the IMF program?"
"November. The Korean government reaches the IMF before year end. My estimate is late November to mid-December. The program will be the largest in IMF history at that point." He paused. "The winning position should be fully established before the IMF announcement. Once the IMF program is confirmed, the won initially falls further on the adjustment conditions, then stabilises as the liquidity injection takes effect. The exit window on the short position is in the period between the announcement and the stabilisation — probably a two to three week window in which the spot rupiah and the spot won are at or near their worst levels before the recovery begins."
"That's a narrow window," Grant said.
"Narrow windows are where most of the money is," Marvin said. "That's why most people miss them."
---
The rupiah hit 4,000 on October 22nd.
Elena Marchetti called at four-thirty in the morning Pacific time — five-thirty in the afternoon in Singapore, where the settlement was being processed — with the confirmation. Her voice had the particular quality of a professional delivering news that is both expected and, when it arrives, still produces a kind of physical shock, the way a door opening on a room you knew was there is still briefly startling.
"Spot is four thousand and ten," she said. "The three-month NDF book is fully in the money across all tenors. The settlement on the September contracts is coming in at the target level. Do you want me to execute the exit?"
"Execute the exit on the September contracts," Marvin said. "On the October and November contracts, hold for one more week. My revised target for those tenors is four thousand two hundred to four thousand four hundred — the IMF program announcement for Indonesia is going to produce another leg down before the stabilisation. I want to catch that leg."
"Understood." A pause. "The P&L on the September contracts alone is approximately eighteen point three million dollars on the rupiah book."
Marvin noted this. "Eighteen point three."
"Correct. On thirty million notional, with average entry at 2,741 and average exit at approximately 4,010, after carry costs and fees."
"And the mark-to-market on the remaining October and November contracts?"
"An additional twelve point one million unrealised at the current spot. If the additional depreciation you're targeting materialises, the total rupiah program should close out at approximately thirty-two to thirty-five million in net gains."
"Good. Execute the September exit today. Report back when it's confirmed."
He hung up the phone and sat for a moment in the quiet of the early morning office, the terminal's light the only illumination, the canyon dark and still outside the window. Thirty-two to thirty-five million in gains from a single currency program, deployed over ten weeks from thirty million in notional capital.
He felt the confirmation again — Not satisfaction. Confirmation.
He turned to the notebook and began writing the Korea exit plan.
---
Korea First Bank's recapitalisation was announced on October 27th. The South Korean government confirmed that it would inject one trillion won — approximately one billion dollars at the then-current exchange rate — into Korea First Bank to restore its capital ratios to regulatory minimums. The announcement was framed as a contained and specific intervention, not a systemic response, and the Ministry of Finance spokesman who delivered it used the word *precautionary* in a way that suggested considerable effort had gone into selecting it.
The won fell to 987 per dollar on the day of the announcement.
The KOSPI fell another three point seven percent.
The program's KOSPI financial sector moved to approximately seventy percent in-the-money on the November expiry series. The mark-to-market on the combined KOSPI and Korean won positions was, on October 27th, approximately fifty-five million dollars across the program — more than the total capital Irving Meyers had originally expected to transfer.
On the evening of October 27th, Grant called from his Century City office.
"I've been running the program P&L with Rachel," he said. His voice had a quality that Marvin had not heard from him before — not quite disbelief, but something in the register adjacent to it, the quality of a person who has understood intellectually that a particular outcome was possible and is now processing its actual arrival. "Across all closed and open positions, including the Indonesian rupiah closed gains, the Malaysian ringgit closed gains, the Thai and Philippine supplementary positions, and the current mark-to-market on the Korean positions—" a pause "—the program is showing total realised and unrealised gains of approximately eighty-three million dollars on more than one hundred million in deployed capital."
Marvin was quiet for a moment.
"The Korean positions haven't closed yet," he said.
"No. They haven't."
"The won is going to one thousand two hundred to one thousand three hundred before this is over," Marvin said. "The IMF program, when it comes, will require a devaluation of that magnitude to restore Korean export competitiveness to the level required to generate the current account surpluses needed to service the foreign debt load. The Korean government will resist accepting that conclusion. The market will impose it regardless. We have the position. We hold."
"The hold discipline at this level of unrealised gain," Grant said carefully, "is going to require nerve son."
"I know dad." A pause. "That's what the program risk parameters are for. We established them in advance precisely so that the decision to hold doesn't require nerve in the moment — it requires only the discipline to follow the parameters we set when we weren't in the middle of the trade."
A silence on Grant's end.
"You know," he said, and his voice had settled into something more personal, more direct — the sound of a man saying something he has been thinking for a while, "I've been doing this for twenty years. I've worked with some of the best institutional investors in the business. I have never — and I want you to hear this precisely — I have never seen anyone hold a thesis with this quality of discipline through this kind of market volatility. Most people — most professionals — would have taken the gain in October and been grateful."
"Most people didn't know what November was going to look like," Marvin said.
"And you did."
"I knew the structure of it, Dad." A brief pause. "The structure says November is where the real money is. You just have to trust me dad."
—
November rolled in, bringing with it the inescapable, deafening marketing blitz for James Cameron's impending leviathan, *Titanic*. Billboards and relentless television spots dominated the cultural landscape, signaling the arrival of a massive cinematic event. But in the boardrooms of Miramax, the focus was entirely on Marvin's package. The ink had finally dried on a mountain of complex legal contracts for *The Sixth Sense*, officially locking in the director, the marquee actors, and the lead producers.
However, securing a green light was only the opening skirmish. The reality of the Hollywood machine was that the physical filmmaking process was a glacial crawl. Even for a nimble aggressive "mini-major" studio like Miramax—which largely operated without the multi-tiered corporate bureaucracy that choked the "Big 7" legacy studios—pre-production was a monumental logistical nightmare. Before a single camera could roll, an entire temporary corporation had to be built from the ground up.
It wasn't just about picking locations. It was a slog of navigating a labyrinth of strict union regulations with SAG, DGA, IATSE and many more.
It meant exhausting weeks of secondary casting, battling city officials to secure airtight filming permits for the Philadelphia streets, drafting complex insurance policies, and hiring hundreds of specialized below-the-line crew members, from production designers and cinematographers down to the grips, gaffers, and caterers. Sets had to be constructed, props sourced, and storyboards finalized.
Every single moving piece had to be perfectly synchronized before the meter started running on day one of principal photography.
But Marvin couldn't care less about the tedious, granular minutiae of production schedules and union mandates. He had already architected the deal and set the board; let the studio executives handle the lifting. His gaze had completely shifted across the Pacific. His undivided focus was now locked onto South Korea.
*****
I can't reply to your comments but don't let that stop keep commenting. My Discord link is in my profile and also here.
Join my Patreon
GodofPleasure
(dot)com/GodofPleasure