The core investment strategy of LTCM was simple. It was called convergence trading—entering when the prices of two similar instruments diverged, and exiting when they converged again.

This was often likened to pruning. No matter how many branches a tree has, they all spread out from a thick central trunk. In the same way, you cut profits from price fluctuations around a “core value.”

There was nothing inherently wrong with this strategy. Sure, extreme leverage and the Russian moratorium could be pointed out as issues, but they weren’t enough to be the primary causes.

The biggest problem... was that they became too famous.

LTCM, the fund of geniuses.

That legendary fund had created a “perfect investment strategy.” It was a method everyone envied...

And in reality, LTCM’s strategy was so sophisticated and stable that practically every investment bank and hedge fund on Wall Street started copying it.

That was the problem. The profit margin for such a strategy was limited, but suddenly too many mouths were trying to feed from it.

To earn the same returns, they all increased leverage dramatically, and when the Russian moratorium hit, everything shattered. Too many boats had crowded the same harbor, and when the current shifted, they all capsized.

If it had been only LTCM, it might’ve been manageable—but other financial institutions were using the same strategy and suffered identical losses.

.

.

.

That’s how the $100 billion in liabilities that Vice Chairman Peter Fisher saw had been created.

It was, in fact, a simple equation. “Assets = Equity + Liabilities,” and LTCM’s assets exceeded $140 billion—yet their own capital barely reached $10 billion. So naturally, the rest was debt.

So..., technically, a $100 billion liability wasn’t a problem in itself. It wasn’t.

Originally.

“...Is this even liquidatable?”

The Vice Chairman’s voice trembled with a mix of rage and disbelief as it echoed through the office.

“...”

No response.

“Of course it’s not liquidatable! If it were just bonds, maybe. But what the hell is all this?!”

Total return swaps, repurchase agreements, long-term bond spreads... None were individually problematic contracts, but all of them had one thing in common—extremely low liquidity.

So they couldn’t be liquidated. No buyers.

Russian government bonds, which made up a huge portion of LTCM’s liabilities, were in precisely that state. Regardless of their theoretical value, no one was willing to buy Russian bonds. The entire trading volume had evaporated—there were only sellers, and no buyers.

No, as of yesterday, even the sellers had nearly vanished. No one wanted to sell at those prices.

What use is a $100 billion jewel if it’s buried in a half-collapsed basement and can’t even buy a bottle of water?

And beyond that—this sheer scale... If LTCM’s debt was $100 billion, then their total market exposure was over $1 trillion.

That’s the nature of derivatives. You don’t need much upfront capital thanks to margin.

“...Can’t we arrange a bailout?”

One of LTCM’s partners asked cautiously.

“Haa...”

A long sigh left the Vice Chairman’s lips. He bit down on his lip and finally replied.

“...We’ll consider it. I’ll report to the Chairman first.”

But the answer had already been decided.

They had to be saved.

***

Additional investigation revealed that LTCM didn’t only hold illiquid assets.

They had sold off all their high-liquidity holdings to cover margin calls—what remained were only those toxic assets.

–“...We should block this, don’t you think?”

“Sigh, yeah. I agree. We have no choice but to arrange a bailout...”

–Rustle.

[LTCM Acquisition Plan – Goldman Sachs]

Vice Chairman Fisher recalled the acquisition proposal Goldman Sachs had submitted not long ago.

‘Too late.’

Ideally, Goldman Sachs would take over. But expecting things to go that smoothly was naïve.

Just plugging the margin calls would cost at least $3 billion. Sure, Goldman Sachs had excellent liquidity management, but pulling that kind of money together in just a few days was still incredibly difficult.

“...I’ll have to summon the bankers of Wall Street.”

–Click.

The Vice Chairman put down his pen and began writing a list of names for the invitations—only the most important and wealthiest players on Wall Street.

Starting with Goldman Sachs CEO John Corzine...

Bear Stearns’ James Cayne. Merrill Lynch’s David Komansky. Lehman Brothers’ Richard Fuld.

The heads of Citigroup, Salomon Smith Barney, JP Morgan, UBS, and Morgan Stanley.

‘And...’

Peter Fisher, having written down sixteen names, paused at the tip of his pen. After a moment of thought, he shook his head, sighed, and added one more name.

Alpha Fund.

***

Wall Street — Alpha Fund Headquarters.

I quietly smiled while reading the situational report sent by John Corzine, CEO of Goldman Sachs.

[Warren Buffett has declined to participate in the LTCM acquisition plan. As a result, it is highly likely that AIG will also opt out.]

Technically, this was bad news. The more big players involved, the less burden would fall on Alpha Fund.

But... I’m the kind of weirdo who gets off on derailing the flow of history, so this was all deeply satisfying.

‘I knew that old man wouldn’t bite.’

In the original Goldman Sachs plan to acquire LTCM, Warren Buffett was the biggest piece of the puzzle.

To organize the current state of things around the Goldman Sachs–LTCM axis...

From what I heard in my past life, LTCM’s head, John Meriwether, after losing an estimated $1.5 billion, went around knocking on every door until he turned to his old friend and fellow alumnus, John Corzine at Goldman Sachs.

Corzine nodded and agreed to raise $1.5 billion, then approached Warren Buffett. Buffett concluded that a joint acquisition would require $4 billion.

Losses had deepened by then, and Buffett believed it was never a problem solvable with just $1.5 billion. Incidentally, when the Fed Vice Chairman opened LTCM’s books and calculated the needed bailout, he also came up with exactly $4 billion. So Buffett had it right.

If my sources were accurate, Buffett had agreed to provide $3 billion. AIG, whose CEO was a close friend of his (and the same AIG that got wrecked in the subprime crisis for selling CDS—only surviving thanks to then–Treasury Secretary Henry Paulson), pitched in $700 million. Goldman Sachs offered the remaining $300 million.

But the plan never came to pass. AIG, Buffett, and Goldman Sachs all pressured Meriwether hard to force a cheap sale, until eventually they opted for a public bailout instead.

‘Honestly, Buffett was pretty ruthless.’

First he said, “I’m not investing in your fund,” and then came back later to offer to buy out the whole thing at a dirt-cheap $250 million.

He even gave them only 50 minutes to decide. It was straight-up chicken game.

Oh, and Goldman Sachs? Didn’t they start this as a favor between friends? Come on, there are no friends on Wall Street.

Besides, Goldman Sachs had already paid into the Fed’s bailout fund for LTCM, tying themselves to both sides. There were even rumors that the Lehman Brothers chairman blew up with rage about it—because here they were, fronting money for restructuring, only to watch someone else try to snatch the company on the cheap.

Anyway, all this maneuvering had played out behind the scenes in the original timeline.

–Snap.

“You’ve really got an eye for things, old man.”

But not anymore. Buffett refused Meriwether’s plea—and Goldman’s as well.

He had judged there was something more important, and that LTCM’s rescue would cost more than $4 billion.

[Empire of 0s and 1s — Collapsing!]

[‘No-Profit Visionaries’ — Internet Startups Go Bankrupt]

[Yahoo! stock plummets 20% after earnings warning]

Those were the reasons.

“Ahaha.”

I hummed cheerfully and swung my leg. ✪ Nоvеlіgһt ✪ (Official version) Everything was lining up just as I had predicted.

If the Nasdaq didn’t crash after a major shock like this, it would be criminal. Even the Dow Jones had fallen over 20% in just days—how could the bubble-built Nasdaq stay afloat?

Berkshire Hathaway had recently increased its cash holdings, sold off more assets, and was finally reaping rewards for avoiding the bubble—despite investors threatening to kill Buffett for it.

And would LTCM even catch his eye now? More likely, he’d bleed Lehman dry in exchange for direct loans.

–Tap.

Ha Yeong-il approached and handed me an envelope.

“Young miss, a letter from the New York Fed. It’s addressed to the CEO, but... I thought you should see it first.”

“Yup, that’s right.”

As always, Ha Yeong-il looked at me with eyes full of awe—as if I were a prophet—and I basked in it as I unfolded the letter.

“It says there’s an important matter and they’d like me to attend tomorrow’s breakfast meeting... Haha, what an honor. The Fed is begging for money.”

It was a foregone conclusion. Even in the original timeline, they were desperate for bailout money. And now, with the dotcom crash layered on top, they were going to exclude the largest hedge fund with over $50 billion in cash reserves?

Ridiculous.

“...The Fed wants money? So it really is a bailout?”

“Yup. I’ll need to talk more with Goldman Sachs. Aah, what a shame—I won’t get to see their faces myself. I can’t even bring a camera... I feel like I’ll have to chat with Collins for hours just to get it out of my system.”

I got up with a soft grumble.

There was so much to do.