As the situation in Korea began to take an ominous turn, my parents started paying close attention to Korean news as well.
“To secure urgently needed foreign currency, we will utilize the International Monetary Fund’s financial assistance framework.”
We will also do our utmost to proactively endure the burdens of wide-ranging economic restructuring that will follow.
Now is not the time to assign blame or demand accountability.
“This is the time for all of us to tighten our belts once more, share the pain, and work together to overcome this crisis.”
In the end, on November 22, 1997, President Kim Young-sam delivered a national address, and South Korea’s economy officially came under the management of the International Monetary Fund (IMF).
Starting with the bankruptcy of Hanbo Steel in January that year, the Hanbo Group—ranked fourteenth among Korea’s conglomerates—collapsed entirely, and one major corporation after another entered court receivership or declared bankruptcy.
Then, in July, Thailand abandoned its fixed exchange rate system, triggering a massive crash of the baht.
The shockwave spread across Southeast Asia, passed through Taiwan, and ultimately brought economic instability to Korea.
Already weakened by the government’s large-scale release of foreign reserves for publicity, debt-driven management by major conglomerates, and the growing insolvency of financial institutions, Korea’s economy suffered an unprecedented blow.
The government tried to reassure the public by claiming it held thirty billion dollars in foreign reserves, but when the lid was opened, all that remained was one hundred fifty billion dollars in debt obligations.
With fire at its heels, Korea urgently reached out to Japan for help, despite having distanced itself by demolishing the former Japanese Government-General building.
However, Japan itself was reeling from the Asian financial crisis, with one of its three major securities firms, Yamaichi Securities, going bankrupt, along with Hokkaido Takushoku Bank, the largest regional bank, leaving it in no position to offer meaningful assistance.
The United States, on which Korea had relied most heavily, was locked in disputes over U.S. beef imports and Korean automobile exports, and relations between the two presidents were at rock bottom.
So strained were relations that the post of U.S. ambassador to Korea had been left vacant, making it hard to expect much help.
Ironically, it was this very crisis that led the U.S. government—advocating a restoration of Korea–U.S. relations—to decide on extending Korea’s debt maturities.
“Jaesung. Korea ended up borrowing fifty-five point five billion dollars from the IMF.
The national credit rating has also been downgraded to Baa2, just barely investment grade.”
“The news just keeps getting worse.
It looks like the credit rating will be downgraded even further.”
“Korea is struggling this much.
Shouldn’t we help?”
“Can an individual really help a country in any significant way?”
“You can hardly be called just one individual when you possess that much wealth.
At times like this, I want my son to make the right decision.”
Although he was now living in the United States as a medical school professor, my father had spent his entire life in Korea and possessed a deep sense of patriotism.
I had already been thinking of releasing some dollars into Korea, so I agreed.
Amid the national turmoil, the fifteenth presidential election was held, and opposition candidate Kim Dae-jung was elected.
The dollar exchange rate, which had been around 700 won at the start of the year, finally broke past 2,000 won on December 23.
“Smith. How much cash can we use right now?”
“Immediately available, about ten million dollars. We’re receiving substantial dividends, but per your instructions, we’ve been continuing aggressive share buybacks.”
Income from the films I had invested in was flowing steadily, but with the dot-com bubble beginning, I had been continuously accumulating IT stocks.
The amount of cash readily available was tighter than expected.
At the same time, I couldn’t bring myself to liquidate stocks that were likely to rise at least tenfold in the future.
“If we use our assets as collateral, how much could we borrow?”
“By year’s end, with the continued rise in stock prices, your total assets have exceeded five hundred million dollars.”
“If we push it, we could secure up to five hundred million dollars, but arranging that much immediately would be difficult.”
“About one hundred million dollars could be arranged within two weeks.”
When I fell silent in thought, Smith asked what I intended to do.
“There’s no urgent need right now.Don’t take on additional loans. Just convert ten million dollars into Korean won.”
With the United States expected to lower interest rates next year due to concerns over the spread of the Asian financial crisis, there was no need to lock in loans at high rates in advance.
The dollar–won exchange rate was at its peak, but Korea had only just entered the IMF management system, and the damage was still largely confined to the financial sector.
From 1998 onward, the impact would spread to the real economy, and people’s lives would begin to deteriorate in earnest.
The real collapse in real estate and corporate valuations wouldn’t begin until the following year, so there was no need for large-scale investment just yet.
I’ll start liquidating stocks around 2000, when the dot-com bubble peaks.
Even if I invest that cash into Korea then, it won’t be too late.
I’m not acquiring companies outright—mostly real estate and corporate shares.
The year 2000, when the composite index bottoms out around 500, will be perfect.
When winter break arrived, we boarded a Korean airline’s first-class cabin and headed for Gimpo International Airport in Seoul.
“Wow! It’s been forever since I’ve been to Korea. I’m going to the bathhouse, and I’m drinking banana milk!”
“America was nice, but Korea really does feel more comfortable.”
Even though the country was in chaos, my parents and sister were genuinely happy to be back, and I felt a strangely retro vibe from Gimpo Airport at the end of 1997.
It was rustic, yet oddly emotional and hip.
As we walked toward the exit, enjoying the mood, my grandfather and uncle were waiting for us.
“Grandpa!”
“Oh my. Jaeeun has grown so much I barely recognized her. Jaesung, you’ve practically become an adult yourself.”
Seeing my uncle, now younger again, and my grandfather, still healthy and vigorous, filled me with a peculiar feeling.
“You’ve grown, and now you feel awkward around us. It’s been three years, and you’ve changed so much. Looks like American water suits you.”
My uncle laughed at his shy nephew as we headed together to my grandfather’s house.
“How is life as a professor?
Is it manageable?”
“There was some territorial behavior at first, so it was uncomfortable, but I’ve settled in now.”
“Outsiders are rarely welcomed easily.
Still, you took on a new challenge and endured.
That’s admirable.”
My grandfather, himself the director of a mid-sized hospital, took pride in my father, who had followed in his footsteps and even made it to the United States.
“Jaeeun seems to have adapted very well. What about you, Jaesung? Have you made many friends?”
“Yes. I’ve made quite a few famous friends.”
“Grandpa. Oppa doesn’t have friends his age. He’s only close with uncles.”
“Jaesung likes computers, so he gets along well with engineers.”
My parents didn’t mention that I had struck it big investing in publicly listed companies, but they did boast that I had created a program myself and sold it to a major American corporation.
“That’s truly impressive. These days, those computers are being used a lot in hospitals too. Keep working hard.”
After returning to Korea, my family enjoyed my grandmother’s home-cooked meals and went from our old favorite Chinese restaurant to various eateries, indulging in real Korean food to our hearts’ content.
“Dad. I need to go to the bank to receive a dollar transfer. Can you come with me?”
“I’m scheduled to visit your grandfather’s hospital today, so that’ll be difficult. Go with your mother.”
Since I was still a minor, I needed a guardian’s consent in Korea, and I couldn’t exactly bring ten million dollars in cash from the United States, so I arranged for Smith to wire the money.
When my mother and I entered the neighborhood bank, a teller with a gloomy expression forced a smile as she greeted us.
“How may I help you?”
“We’d like to receive a dollar transfer and exchange it.”
At the mention of exchanging dollars, the teller’s eyes lit up, and she asked how much we intended to convert.
“We’d like to transfer ten million dollars from the United States and exchange the entire amount.”
“Uh… did you say ten million dollars?
Please wait just a moment.”
The teller went to call the branch manager, and my mother asked if it wasn’t too much money to exchange at once.
“Isn’t that an enormous amount to convert?”
“It’s fine. We still have far more in the U.S., and this is a good opportunity to buy a house in Korea as well.”
After returning, I had checked real estate prices and found it curious that apartments in Bundang and Ilsan weren’t much cheaper than those in Gangnam or Jamsil.
In the future, people would talk about owning one prime property, and the closer to Gangnam, the more astronomical apartment prices would become.
But right now, prices were similar regardless of location.
“Good afternoon. I hear you’re here to exchange dollars.”
As we sat in a private reception room, a man who appeared to be the branch manager entered and bowed politely to my mother.
“Yes. We live in the United States, and we happened to have some surplus funds, so we’d like to convert them to won.”
“You’ve made an excellent decision. Exchanging currency when the exchange rate is this high is a way to make money. We’ll assist you with a preferential rate.”
Normally, an individual exchanging such a large sum would face a complicated process, but with the nation desperate for dollars, we were given maximum convenience and speed.
“The exchange should take about a day. What would you like to do with the cash?”
My mother looked to me for an answer, and I said we’d hold it as cash for now but planned to purchase real estate soon.
“Currently, maximum interest rates of twenty-five to forty percent are permitted, and most restrictions on foreign investment have been lifted.”
“Although you reside in the United States, as Korean nationals, there will be no issues using these funds.”
“For now, we’ll deposit it, and once a good property appears, we’ll acquire real estate.”
“Understood. We’ll set you up with a high-interest deposit account.”
Even though this was the past, Korea’s processing speed was impressively fast, and with the branch manager’s help, everything proceeded smoothly.
“You’re not even going to live in Korea.
What are you planning to do by buying a house here?”
“We can lease it on a jeonse basis.
I think prices will hit rock bottom soon.”
Although I was still a high school student, my mother trusted my judgment without question, knowing I earned money well and had received personal guidance from Warren Buffett.
“Then where are you thinking of buying?”
“For now, a few apartments in Apgujeong, then places in Daechi-dong, Jamsil, and Banpo.”
“There are newly built apartments in Banpo and Ilsan too.
What about those?”
“They’re too far from the city center. Apartments in Yeouido might be acceptable, though.”
At the time, most apartment prices, based on a standard thirty-four-pyeong unit, were in the low two hundred million won range.
By next year, they would fall to the mid-to-high one hundred million won range.
Since there was no limit on the number of properties one could own, I planned to buy as many easily tradable apartments as possible, along with a building in Garosu-gil and a factory in Seongsu.
I should sell Garosu-gil before gentrification really kicks in.
As I spread out a map of Seoul and pondered where to buy, my mother asked the most important question.
“We’re going back to the United States next week. How are you planning to handle the property purchases?”
“Ugh… that’s true. If there aren’t any good listings next week, should we come back during summer vacation?”
Real estate really needed to be inspected in person, so handling everything by phone from the U.S. would be difficult.
“If you go around looking at properties yourself, negotiating prices with homeowners won’t be easy either. How about asking your maternal grandfather to help?”