The limousine sped down the long, straight road, eventually arriving at the San Francisco International Airport, located south of the city. As one of the top-ranked hub airports in the United States, it was bustling with aircraft from all over the world, crowding the vast tarmac. Among the large, bulky commercial airliners, a sleek white Gulfstream IV business jet stood out, its body gleaming under the sunlight.
The black limousine carrying Seok-won and Landon glided to a stop next to the elegant jet. A white driver in a suit opened the door, and the two men stepped out. As the driver retrieved their luggage, they climbed the steps into the jet, where a tall, slender flight attendant greeted them with a bright smile.
"Welcome aboard."
Seok-won nodded slightly in response to her greeting and took a quick look around the cabin. The spacious and comfortable interior, adorned with the finest materials, was luxurious, like a penthouse in the sky. Seok-won moved further into the cabin and sat down in a wide leather seat, facing Landon.
"This is really impressive," Seok-won remarked as he looked around, noting the thick carpet on the floor and the bright wall panels.
"Thanks to you, Boss, this is my first time on a private jet, and it's absolutely fantastic," Landon responded.
"First class is nice, but compared to this, it's like the difference between a suite and a deluxe room," Seok-won said with a chuckle.
"Indeed, it is," Landon agreed, laughing along.
As Seok-won sank back into the comfortable seat, he remarked, "Flying is always such a hassle, but I could get used to this. It's a shame I'm only borrowing it for this trip."
"With your wealth, you could easily afford one of these. Why not buy one?" Landon suggested.
Seok-won looked at him with interest. "How much does one of these cost?"
"The price varies depending on how it's outfitted, but this model goes for around $25 million," Landon informed him.
"Well, it's not exactly cheap, but it's not out of reach either," Seok-won mused.
With the fortune he had amassed from the British pound's collapse and his investments in the UK stock index, Seok-won's wealth had grown to several hundred million dollars. Plus, his European bond investments were still generating substantial returns, so it wasn't an exaggeration—he really could afford to buy a private jet if he wanted to.
Just then, the flight attendant approached with their luggage. "We'll be taking off shortly, so please fasten your seatbelts."
As Seok-won and Landon buckled up, she smiled kindly and asked, "Is there anything you'd like?"
"I'd like a glass of whiskey. What do you have?" Seok-won inquired.
"We have Macallan 25-year and Balblair 17-year," she replied.
"I'll have the Macallan, please," Seok-won decided.
"I'll have the same," Landon added.
"Certainly," she said with a nod before leaving.
As the flight attendant walked away, Seok-won turned his head to look out the round window. He saw the limousine that had brought them slowly making a wide U-turn and driving away. Soon, the sound of the turbofan engines starting up reached his ears, and the jet began to move, slowly taxiing along the runway.
The jet left the tarmac, rolling along the long taxiway until it reached the end of the open runway and came to a stop.
[Good afternoon, this is your captain speaking. I'd like to extend a warm welcome to our VIP guests on board. We will be departing from San Francisco shortly, en route to New York's John F. Kennedy International Airport. The estimated flight time is 5 hours and 10 minutes. We wish you a safe and pleasant journey.]
After the captain's announcement, the jet received clearance from the control tower. The engines roared to full power, and the aircraft accelerated down the long runway, taking off and soaring into the sky.
The jet left the sprawling San Francisco skyline behind, disappearing into the white clouds.
***
Two days later, in Manhattan, New York.
In the executive office overlooking the blue waters of the East River, Seok-won sat on a sofa with Landon and Andrew on either side of him.
After setting down the report in his hand, Seok-won spoke. "A 36% return—it's not a bad result."
Andrew, seated to his left, responded with a hint of regret. "We could have achieved a higher return, but a number of hedge funds, including Mondale Partners, aggressively bought up European bonds, preventing us from reaching our initial target."
Landon, sounding irritated, chimed in. "The moment they saw money to be made, they pounced like a school of piranhas."
For a while, they had been making a killing in the European bond market, but with hedge funds flooding in, the competition had intensified, much to Landon's frustration. Seok-won replied calmly, "As I've said before, it's the nature of hedge funds to chase after money. We're no different."
"Well, that's true," Landon conceded.
"Besides, from the moment we started investing in European bonds, we anticipated this outcome. There's no need to overreact," Seok-won continued, shrugging his shoulders.
"To put it bluntly, it's not as if we claimed ownership of the European bond market," he added.
"We've been making good money, but it's frustrating to have others swoop in and try to take a share," Landon grumbled, licking his lips.
Leaning back in his chair, Seok-won dismissed the concern with a casual wave. "I was already planning to wind down our bond investments. If other hedge funds are willing to take the positions off our hands, that's even better."
"…!"
Both Landon and Andrew were taken aback, their eyes widening in surprise.
They had been making money hand over fist with relatively little effort, so it was shocking to hear that they would be pulling out.
"Are you saying we should stop investing in bonds?" Andrew asked, frowning.
"Yes, that's right," Seok-won confirmed.
Landon, unable to hide his confusion, leaned forward in his seat. "But the bond market is still a golden goose, even with the increased competition. Why would we stop now?"
Andrew also looked skeptical.
"The European bond market may be getting crowded, but if we expand our investments to Canada and Asia, including Japan, there's still plenty of profit to be made."
In reality, hedge funds like Mondale Partners, driven by the pursuit of profit, had recklessly expanded into government bonds not just in Europe but across Asia, ignoring the risks involved.
Seok-won took a sip of his coffee before speaking calmly.
"The government is selling bonds to hedge funds to borrow money, hedge funds are borrowing money from brokers like JP Morgan and Goldman Sachs, and the brokers, in turn, are raising funds from other investors to keep the cycle going. How long do you think this can last?"
"…!"
"So far, this cycle has been running smoothly, but the moment something goes wrong, the immense leverage in the system will collapse, and the bubble will burst immediately."
A heavy silence filled the room.
The implications of Seok-won's prediction were staggering. If the bubble burst as he suggested, it would mean a catastrophic upheaval in the international bond market.
Andrew, his expression grave, asked, "Are you saying there's going to be trouble in the bond market?"
"What I'm saying is that the current low-interest environment is abnormal, and things are bound to return to normal eventually," Seok-won replied.
As he observed the two men's tense expressions, Seok-won continued calmly.
"Parties are fun, but they can't go on forever."
Andrew adjusted his glasses and voiced his disagreement.
"There are debt issues, but thanks to the low interest rates, the economy is booming. I doubt anyone would try to overturn that suddenly."
Landon nodded in agreement.
"That's right. The party can't last forever, but I don't think it's time to head home just yet."
"Maybe you're right. But everyone seems to be forgetting one important factor," Seok-won said.
"What's that?" Andrew asked.
"Inflation," Seok-won answered, his voice dropping a notch.
"…!"
"If we continue to see excessive liquidity in the market, inflation is inevitable."
Though still a minority, there were growing concerns among academia and some circles on Wall Street about the risks of excessive liquidity leading to inflation.
"You both know that the Federal Reserve's dual mandate is to maintain price stability and maximize employment," Seok-won reminded them.
Despite this, Andrew and Landon remained skeptical.
"Of course, but there's no sign of inflation yet. Why would the Fed act prematurely to cool the economy?" Andrew asked.
"I agree. If the Fed tried to raise interest rates, the White House would immediately oppose it," Landon added.
To curb inflation, the Fed would have to cool the overheated economy, something the U.S. government was unlikely to support.
Hedge funds like Mondale Partners were counting on this and were boldly increasing their leverage to invest in bonds.
"Shock always arrives when everyone feels safe," Seok-won said, his tone measured.
"The Fed doesn't want inflation, but they also don't want to freeze the economy."
"If a recession follows an interest rate hike, the Fed will be blamed for it, so of course they don't want that," Landon agreed.
"So, the Fed is likely to raise interest rates just slightly, enough to signal to the market that they're addressing inflation," Seok-won explained.
Realizing what he meant, Andrew spoke up. "To warn the market and preemptively curb rising inflation expectations."
"Exactly," Seok-won nodded.
Landon, still puzzled, tilted his head.
"Even if that happens, the bond market wouldn't collapse, would it? Yields might drop a bit, but it wouldn't lead to a broader crash."
Andrew seemed to agree, nodding along.
"Things rarely go as planned," Seok-won cautioned, fixing them with a serious gaze.
"The Fed hopes a rate hike will only curb inflation, but they're overlooking one crucial factor."
"What's that?" Andrew asked.
"The immense leverage in the bond market," Seok-won said gravely.
"Oh…" Andrew's eyes widened as the realization hit him.
"If interest rates rise even slightly, it could spell disaster for hedge funds that have leveraged to the hilt."
Landon, now understanding the implications, paled.
"With so much leverage, even a small drop in bond prices could lead to massive losses. If prices start to fall, hedge funds will panic and rush to reduce their positions."
Seok-won, his eyes dark, continued where they left off.
"As the funds, already stretched thin, start selling off their holdings, prices will drop further, triggering more panic sales. The resulting margin calls will ripple across the entire market, creating a deadly spiral."
The horrifying scenario left Landon and Andrew in shock. They stared blankly ahead or groaned in despair.
It was hard to dismiss the idea as overly pessimistic when the bond market bubble was so inflated that even a minor shock could indeed trigger such a catastrophic outcome.
A heavy silence settled over the room as Seok-won sat quietly, giving them time to absorb the situation.
After a while, Andrew was the first to break the silence. "I can't be certain it will happen, but it seems wise to be cautious, given the possibility."
"The party might go on a little longer, but I'd rather leave early and sleep soundly at home than get caught in the rain," he added.
Though his tone was serious, both men quickly regained their composure. Seeing this, Seok-won nodded slightly.
"Then, let's start unwinding our bond positions gradually," he said.
"Understood," they both replied.
Landon, however, couldn't hide his disappointment.
"We've made a lot of money in bonds, and it's a shame to see it end."
Seok-won grinned, revealing his teeth.
"You're right, Landon. It would be a bit of a letdown to end the party like this, so let's make sure we enjoy the final dance."
"What do you mean?" Landon asked, not fully understanding.
"We'll liquidate our positions and then short the bond market," Seok-won explained.
"Oh!" Andrew's eyes lit up as he leaned forward.
"If bonds crash as predicted, we'll make a killing," he said, admiration evident in his voice. "I can't believe I didn't think of that sooner. You're brilliant."
Landon, a beat behind, widened his eyes in astonishment.
"The final dance to close out the party should be a wild one."
"With a spectacular finale, just as you said," Seok-won agreed.
Excitement spread across Andrew and Landon's faces as they envisioned the possibilities.