Golden Spoon Investor

Chapter 563: CH564

The next morning.

President-elect George W. Bush Meets with Federal Reserve Chair David Stanway

President-elect George W. Bush, visiting Washington for the first time since securing his election victory, held a breakfast meeting of roughly an hour with Chair Stanway at a hotel near the White House.

George stated, "I had a meaningful conversation with an outstanding leader here. We had an in-depth discussion rooted in confidence about the economy."

The meeting is believed to have covered several pressing issues, including the recent economic slowdown, the stock market crash, and his campaign pledge for a one-point-three-trillion-dollar tax cut…]

Sitting at the dining table set by the balcony window overlooking Central Park, Seok-won was having breakfast while reading that day's article from the Wall Street Journal.

He was sipping a cup of coffee rich with the aroma of freshly ground beans when Landon approached with a friendly smile.

"Having breakfast, I see."

Seok-won put down the Wall Street Journal he had been holding in one hand and looked up at him.

"If you haven't eaten yet, join me."

"Thank you, but I already had breakfast. I'll just have a cup of coffee."

With that, Landon naturally took the seat across from him.

Aide Han Jisung, who had been standing to the side, stepped forward and poured fresh coffee into a new cup. Landon gave a small nod of thanks.

After glancing at the Wall Street Journal on the table, Landon spoke first.

"With the FOMC meeting only a day away, the fact that President-elect George met Chair Stanway suggests a strong chance the benchmark rate will be cut, just as the market is hoping."

Seok-won dabbed the corner of his mouth with a napkin and asked calmly,

"Do you think so too, Landon?"

Receiving his gaze, Landon shrugged and answered.

"Two years ago, when Long-Term Capital Management collapsed and the financial markets seized up, Chair Stanway stepped in immediately. He slashed rates three times in bold moves that calmed the situation almost at once."

"That's right."

"With the dot-com bubble bursting, credit tightening, and fears of a recession all piling up, the U.S. economy is in real trouble. Most market participants, not just me, expect Chair Stanway and the Fed to step in as firefighters again."

"The situation now is worse than it was during the LTCM crisis."

"There's even talk that ahead of the FOMC meeting, firms like Charles Schwab and Goldman Sachs have been hinting to their VIP clients that a rate cut is likely."

In fact, expectations of a cut had pushed the three major indexes higher for several days, and many investors were betting on continued gains.

But when Landon noticed how unimpressed Seok-won looked, he cautiously asked,

"It seems you don't agree, Boss."

Seok-won glanced once more at the photo in the Wall Street Journal showing President-elect George and Chair Stanway shaking hands with bright smiles, then looked away.

"I thought the Fed, worried about inflation, would tread carefully. But seeing those two meet made me certain there won't be a rate cut."

"What do you mean?"

Landon looked puzzled, as if he couldn't grasp the perspective that ran completely opposite to what everyone else believed.

"You said everyone expects the Fed, which has been tightening, to shift its policy stance after this meeting."

"That's right."

"Given the current situation, it's true that this would be the time to cut rates or at least step back to a neutral position and signal a more dovish approach."

"…"

"But if they actually did that now, people would say the Fed lowered rates because President-elect George asked for it."

"…!"

Landon's eyes widened at the point he hadn't even considered.

"Of course, that wouldn't really be the case. Even so, the risk is that the Fed's independence could be called into question. So even if Chair Stanway and the Board believe it's the right moment to shift policy, they'll likely let this one pass."

Leaning back in his chair, Seok-won continued calmly.

"If anything, the political uncertainty has just been resolved. The market that had been crashing has finally hit bottom and begun to rebound. That makes it even easier for them to avoid making a risky decision."

"Now that you say it, that does make sense."

"If those two hadn't met, there's a good chance the Fed would have cut rates."

Landon swallowed hard and leaned forward.

"If today's FOMC meeting doesn't cut rates as expected, investors will be disappointed and start dumping shares."

Seok-won nodded calmly.

"Once investors realize the Fed isn't responding immediately to the recession threat, and with all the terrible earnings reports lined up ahead, today could be the turning point. The short rebound ends, and the market drops again."

Landon looked at him with growing admiration, as if he finally understood.

"You told us to sell the stocks we bought over the past week and switch to shorts because you anticipated this, didn't you?"

"That's right."

Then Seok-won continued in a low voice.

"After getting hit twice already by trying to buy the dip without realizing it was another dead-cat bounce, investors won't cling to tech stocks anymore. If the trend turns down again, they'll dump them without hesitation."

"Since they saw you hit a jackpot shorting the market, they won't stop at selling. They'll go all the way and short it themselves to try to profit."

Seok-won replied with a relaxed smile.

"And once that happens, the pressure will push the indexes even lower. A deeper drop only benefits us."

It was hard enough to get the market direction right once, but watching Seok-won repeatedly read the trend with precision and ride the swings perfectly left Landon genuinely impressed.

With a curious expression, he leaned in and asked,

"Do you think the market will crash and then rebound again?"

But Seok-won shook his head immediately.

"They already tried buying the dip twice and got burned both times because they didn't realize it was a dead-cat bounce. They won't do it again. Like I said, they'll short it this time."

"So it's literally going to be an 'everything crash.'"

Landon's eyes sparkled as he spoke, and Seok-won let out a small smile.

"'Everything crash,' huh? It does fit the situation perfectly."

With his face full of excitement, Landon added in an upbeat tone,

"One thing's for sure: the Fed's announcement today is going to send the market swinging wildly in both directions."

Seok-won lifted one corner of his mouth in a relaxed grin.

Even though more than ten billion dollars were riding on the short bet, seeing Seok-won so composed made Landon feel as if everything would go exactly the way they hoped.

Relieved, Landon suddenly remembered something and spoke up right away.

"By the way, have you heard about Fuller, the chairman of Bear Stearns?"

"Did something happen?"

"He resigned."

"So suddenly?"

Landon replied with a knowing look.

"Officially it's being presented as a voluntary resignation, but in reality he was pushed out by the board."

That was enough for Seok-won to grasp what had happened.

"He must have been forced out because of the losses from this crash."

"It's not just Bear Stearns. Everyone on Wall Street lost money when the bubble burst, so that part might have been tolerable. But the moment he paid a premium to unwind the options contract, the market rebounded and whipsawed. After that, he really had no defense against a demand to step down."

"I feel a little bad. It almost seems like he lost his job because of me."

Landon shook his head as if that made no sense.

"He may have lost the title, but he's still getting his full salary for the rest of his term, and I hear he walked away with a two-million-dollar severance. He's not exactly suffering."

Executives at Wall Street investment banks were often awarded generous stock options, bonuses, and severance packages even when they were dismissed for poor investment decisions.

"Oh, and the transition team sent over an invitation to the presidential inauguration."

With that, Landon pulled a crisp white envelope from his inner pocket and set it in front of Seok-won.

The White House seal was stamped clearly on the front—an eagle with an olive branch in its right talon and thirteen arrows in its left.

Seok-won picked up the envelope casually and asked,

"When is the inauguration again?"

"It's scheduled for Saturday, January twentieth next month, on the west front of the Capitol in DC."

He opened the seal and found a luxurious gold-embossed invitation inside.

While Seok-won examined it, Landon continued his explanation.

"I checked the seating assignment. It's the very first row on the platform. Same section as the Supreme Court justices, former and current presidents and their spouses, and the senior members of the administration."

The placement alone made it clear what President-elect George thought of him.

Seok-won slipped the invitation back into the envelope and said,

"It's the presidential inauguration of the United States. Of course I'll attend."

He rolled up his sleeve slightly and checked his watch.

"The FOMC results will be announced soon."

***

The trading floor of Lehman Brothers, one of Wall Street's major investment banks, was filled with a suffocating tension, like the calm before a storm, as everyone waited for the Fed's rate announcement.

Not a single trader took their eyes off the large screens or the Bloomberg terminals.

The near absence of market volume made it clear that all of Wall Street was holding its breath for the FOMC results.

Rachman loosened the knot of his tie as he monitored the movements of the three major indexes and Treasury yields across the monitors on his desk. Beside him, Charlie chewed his gum nervously and asked,

"They're going to cut rates this time, right?"

"They should. All the indicators point to a recession, and the stock market is a mess. The Fed has to step in."

Charlie let out a frustrated groan and ran both hands through his hair.

"Everyone's gone long expecting a rate cut. If the Fed blindsides us here, I don't even want to imagine what happens."

It wasn't just the two of them. Most of the traders had bet on a rate cut, loading up on large-cap tech stocks that had taken big hits.

Because of that, the Nasdaq had already surged 2.8 percent in the morning alone.

Rachman had bought Cisco, Dell, and Oracle while they were deeply discounted. Now, his mouth felt completely dry as he stared at the Bloomberg terminal like it might explode.

Time crawled by under the crushing tension.

Then, at last, a red banner of breaking news flashed across the bottom of the screen.

[Breaking News: Federal Reserve Board holds rates at current level of 6–6.5%.]

"Holy shit!"

"What the hell!"

"Rate hold? Are they out of their minds?!"

The trading floor, silent just moments earlier, erupted into screams as traders clutched their heads.

"Aaargh!"

Charlie, seated beside Rachman, let out a howl mixed with a string of curses. Hearing him, Rachman's arms dropped helplessly to his sides.

As the announcement hit and all three major indexes reversed sharply into a free fall, a low groan slipped out from his own lips.

"Damn it…"

The moment hope turned to despair, traders across the floor—including the two of them—began hammering their keyboards and snatching up their phones, rushing to unload their positions.

"Sell it! Sell everything!"

"If you don't get out now, you're finished!"

Shouts, curses, and frantic commands collided in the air as heartbeats pounded like they were trying to break out of rib cages.

Clinging to even the faintest chance of survival, traders screamed to sell, struggling desperately not to be swept away by the tsunami of a market collapse.