Episode 169
The IT boom swept through the nation like a wildfire.
Early investors had multiplied their money several times over in just a month and were now actively promoting IT investments, bragging about their success. They portrayed themselves as savvy pioneers, ahead of the curve, and those who didn’t invest in IT as being out of touch with the times.
With stock prices soaring and people earning more from their investments than their salaries, many were even quitting their jobs.
This IT boom wasn’t just due to my investment; several factors were at play. The perceived future value of the internet, the government’s push for IT development, the US government’s similar policies lending credibility, and, most importantly, the public’s desperation after the IMF crisis, seeing this as a once-in-a-lifetime opportunity for upward mobility. And I had fueled the flames with my relentless investment.
People who couldn’t buy IT stocks because I was buying everything were now buying related stocks, anything remotely connected to the IT sector: medical stocks, even the stocks of companies that sold computers.
Companies, both public and private, were adding “Information Technology” or “Technology” to their names to ride the wave, and it was actually working.
People were buying anything that sounded like IT. Blind investment. And I was the conductor of this orchestra of madness.
“I intended to create a boom, but this is insane.”
I had decided to invest an additional 4.5 trillion won, but the current surge had only cost me 2 trillion won.
Unlike before, when I had gradually invested 1 trillion won over a month, I was now buying everything on the market. There were no more IT stocks available, except for newly listed companies. And the scarcity, combined with the public’s buying frenzy, was driving up the price even further.
“We’ve invested a total of 3 trillion won, and the current value is 9 trillion won. This is like printing money.”
A threefold increase.
Of course, the actual profit would be lower, considering the market’s reaction and other variables when I cashed out, but the current market value was still impressive, and the price was still rising.
My phone rang. It was Kim Min-sik.
“Hello?”
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It’s Kim Min-sik.
“Yes, Mr. President.”
He chuckled. – The market is booming. Congratulations, sir.
“Congratulations? It’s just an illusion. It’s not real money until it’s in my pocket.”
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That’s true. I’m calling with a proposition.
“What is it?”
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Have you considered the futures and options market?
“Futures? Options? What are those?”
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Simply put, it’s betting on the future price of a stock. You’re buying a stock at today’s price for future delivery.
His explanation was tailored for me, but I still didn’t fully understand. “Buying a stock for future delivery?”
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Yes. For example, with futures, if you buy a stock today, expecting it to double in a month, and it actually triples, you’re buying it at twice the price but selling it at three times the price. Options are a bit more complicated, but it’s a similar concept. If you can predict the price increase, futures and options are the most profitable instruments. Of course, you lose money if the price falls, but we control the market. We can manipulate the price and make a huge profit.
“So you’re buying it now, expecting the price to go up later.”
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Yes, are you interested?
“Hmm, I don’t fully understand the concept, but you’re saying we can make a lot of money if we can predict the price increase, and since we’re the ones driving up the price, it’s a guaranteed profit, right?”
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Exactly.
“Then we shouldn’t do it.”
He sounded surprised. – Why not?
“Our total investment is trillions of won. People aren’t stupid, they know we’re the ones manipulating the market. And if we also bet on the future price increase through futures and options, it’ll be too obvious. When this bubble bursts, people will be looking for someone to blame. And if they find out we profited from it through futures and options…?”
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Th-then how about just Joongang Investment Corporation? We’re already the villains, the ones who created this boom. What’s the difference between being criticized twice and being criticized three times?
“It won’t just be criticism. Countless people and companies will be ruined. Do you think the government will just sit back and watch?”
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W-well…
I said in a softer tone, seeing his disappointment, “We can make enough profit without it. We have to be rational. It’s a tempting opportunity, but we need a way out. If we’re investigated for manipulating the market, we need a plausible defense. We have to be able to say, ‘We didn’t know the price would go up this much, we wouldn’t have used futures and options if we had.'”
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I see. He seemed to understand. – I was being too greedy. A way out… you’re right. I apologize, sir.
I smiled. “There’s no need to apologize. You were just trying to help the company. It’s okay.”
I was enjoying a drink with my father at my parents’ house, basking in their hospitality. My mother, who was preparing some fruit, asked, “Your wedding is coming up soon. How’s your fiancée?”
“We’re doing well. We don’t see each other often, but we talk on the phone regularly.”
Well, we kept the call connected without talking, but it still counted.
“That’s good. Distance makes the heart grow fonder, they say. You should keep in touch. She’s a foreigner, which is a bit concerning, but she’s beautiful and…”
My father said sternly, “Don’t start again. What’s wrong with foreigners? Are they not human?”
“I’m just saying… I like her, and her family is good, and she’s pretty. Why can’t I finish my sentence?”
“Just don’t say anything about her being a foreigner in front of her.”
“Do you think I’m that insensitive?”
I smiled awkwardly, watching them bicker.
‘I can’t tell them it’s a strategic marriage.’
I would have to pretend to be happily in love, but my mother suddenly asked, “Are you involved in that IT thing, Sol?”
“IT?”
“Some of the mothers in my social club made a fortune from it. Even your older brother made some money, I hear.”
“My brother is investing in IT?”
“That’s what I heard. So…” She looked at me expectantly. “I was thinking of investing too. I have some money sitting in the bank, doing nothing, from the rent you’re paying me. What do you think? You’re a chairman of a large corporation now, you must know about these things.”
Even my mother, a housewife with no knowledge of the stock market, was interested. It showed how widespread the IT craze had become.
The influx of new investors usually started with existing stock investors, then spread to those in related industries, then to the general public, and finally to housewives.
“Do you really want to invest, Mom?”
“I’m just curious, since everyone is making so much money.”
“Do you even know what IT is?”
“Isn’t it that internet thing?”
Investors who didn’t even know what IT stood for were jumping in, hoping to get rich quick. My mother was a prime example of a blind investor. ‘What should I do?’ I thought for a moment. “How much are you planning to invest?”
“I have a little over 1 billion won in my account…” She looked at me cautiously. “I won’t do it if you tell me not to. I don’t know anything about this.”
“What does Dad think?”
My father, emptying his glass, said, “Stocks are a path to ruin. I told her not to, but she insists on asking for your opinion.”
“Really?”
She said, her eyes still filled with expectation, “They say the internet is creating a new world. The Third Industrial Revolution.”
I smiled. “Do it.”
Her face brightened. “Really? Are you sure? See? I told you I should ask Sol.”
My father said with a disapproving expression, “Are you sure it’s okay?”
“Our analysts are optimistic about the short-term outlook. It should be fine for now.”
“Tsk, she’s getting greedy.”
“One of my friends tripled her money! She’s been bragging about it so much!”
“We’re doing fine thanks to Sol. Don’t be greedy.”
“But more money is always good, right? So it’s okay?”
“Yes, but you have to promise me one thing.”
“What is it? Just tell me.”
I said firmly, “You have to pull out when I tell you to.”
“Of course, I’ll do as you say.”
I shook my head. “It’s not as easy as you think. It’s still going up, and you’ll be tempted to hold onto it a little longer. But the stock market can turn on you in an instant. Understand?”
“Don’t worry, I always listen to you.”
Would she really listen to me and pull out at the right time?
I doubted it.
But the amount wasn’t that significant, and she wouldn’t listen to me anyway.
If she made a profit and learned her lesson, it would be a good thing. And if she lost money, she would never touch the stock market again.
“And tell my brother to pull out too when I tell you to.”
I didn’t like him, but I still had to warn him.
“Alright, alright.”
I felt the urge to move to the next stage.
If even housewives were talking about it, the market was nearing its peak.
The IT craze showed no signs of slowing down.
There had been a few articles comparing the current situation to the tulip mania and highlighting the disparity between the stock prices and the companies’ actual performance, but they had no impact.
I had absorbed all the shares sold by the panicked investors, preventing a market correction.
The IT sector’s resilience, defying negative news, had reassured the investors and silenced the skeptics.
“Golden Bank.” It was a pioneering venture company, offering a revolutionary way to earn money: getting paid for clicking on ads.
I looked at their data and scoffed. “This is absurd.”
Park Jong-bum said with a stunned expression, “Their PER has exceeded 6,000.”
The Price-to-Earnings Ratio (PER) was a commonly used metric for evaluating a company’s stock price, comparing it to its earnings per share.
For example, if a company’s stock price was 1,000 won per share, and its annual earnings per share were 100 won, its PER would be 10. And if its earnings per share were 200 won, its PER would be 5. But Golden Bank’s PER was over 6,000.
It meant it would take 6,000 years for Golden Bank to earn its current market capitalization through its current earnings.
And yet, its stock price continued to rise, hitting the upper limit again today.
“A PER of 100 is already considered insane, but 6,000?”
Maru sighed. “People have lost their minds.”
“We’re thinking about the inevitable crash, but ordinary investors believe these companies will become as big as Saseong or MG one day. They think it’s now or never. They have to buy now to make a big profit later. But isn’t it funny?” I smirked. “They’re like moths to a flame.”
The stock market was a zero-sum game. My profits were someone else’s losses. And yet, these moths were throwing themselves into the fire, blinded by their greed.
Why couldn’t they see that they would eventually get burned? Because everything was going up, and everyone around them was making money.
“How much do we have left after countering the negative news?”
“A little less than 1 trillion won.”
I smiled. “Then let’s trigger the second wave of selling. Chunha Group is pulling out.”
I had decided that now was the time to withdraw.
Chunha Group, which had contributed 1.5 trillion won to the IT frenzy, would be selling its shares. But the market was still strong, and IT stocks were scarce, so the impact wouldn’t be catastrophic. If we had dumped all our shares at once, it would have triggered a panic sell-off, but Joongang Investment Corporation would be buying some of our shares to cushion the blow.
And most of our holdings were in the top nine IT companies, the so-called “nine leaders,” like Golden Bank and Hangul Computer. There were plenty of buyers waiting in line.
“Announce that Chunha Group is withdrawing its investments. We’ll sell our shares gradually to minimize the market impact. Other investors will probably start selling too, worried about the market. Absorb all those shares. And then, when the initial panic subsides, the other investors will start buying again. And then it’s smooth sailing. They’ll buy our shares even without our intervention.”
“Yes, sir.”
I smirked. “Announce that we’re withdrawing because the current stock prices are too high, too irrational. It’s a warning to the other investors.”
The IT boom raged on, fueled by speculative investment.
Despite occasional articles comparing the situation to the tulip mania, the market continued its relentless upward climb. Whenever there was a negative news report and some panicked investors sold their shares, I bought them all.
The market’s resilience, defying all negative news, only reinforced people’s belief in the IT bubble.
Golden Bank. A pioneering venture company offering a revolutionary way to earn money: getting paid for viewing online advertisements.
I looked at their data and scoffed. “This is absurd.”
Park Jong-bum said, dumbfounded, “Their price-to-earnings ratio has exceeded 6,000.”
The price-to-earnings ratio (P/E) compared a company’s stock price to its earnings per share. It was a common metric used to evaluate a stock’s valuation.
For example, if a stock was trading at 1,000 won per share and the company’s earnings per share were 100 won, the P/E ratio would be 10. If the earnings per share were 200 won, the P/E ratio would be 5. But Golden Bank’s P/E ratio was over 6,000.
It meant it would take Golden Bank 6,000 years to earn its current market capitalization at its current earnings.
And yet, their stock price continued to rise, hitting the upper limit again today.
“A P/E ratio of 100 is already considered crazy, but 6,000?”
Maru sighed. “People have completely lost their minds.”
“We’re thinking rationally, considering the inevitable crash, but the other investors believe these venture companies will eventually become as big as Saseong or MG. They think they have to buy now to make a big profit later. But isn’t it funny?” I smirked. “They’re like moths drawn to a flame.”
The stock market was a zero-sum game. For every winner, there was a loser. And yet, they were blinded by their greed, believing they would be the winners.
“How much do we have left after countering the negative news?”
“A little less than 1 trillion won.”
I smiled. “Then let’s trigger the second wave of selling. Chunha Group is pulling out.”
It was the perfect time to withdraw.
If Chunha Group, which had invested 1.5 trillion won, started selling, it would flood the market with shares. But the market was still strong, and IT stocks were scarce, so the impact wouldn’t be catastrophic. Joongang Investment Corporation would absorb some of the shares to prevent a panic sell-off.
And most of Chunha Group’s holdings were in the top nine IT companies, the so-called “nine leaders.” There were plenty of buyers.
“Announce that Chunha Group is withdrawing its investments. We’ll sell gradually to minimize the market impact. Other nervous investors will probably start selling too. Buy all their shares. And then, when the initial panic subsides, the other investors will start buying again. And then it’ll be smooth sailing. They’ll buy our shares even without our intervention.”
“Yes, sir.”
I smirked. “We’ll say we’re withdrawing because the prices are too high, too irrational. It’s a warning to the other investors.”