It was also December 1. Across the ocean in Japan, after yet another rate hike by the Bank of Japan in November, the Nikkei 225 continued its upward trend through choppy trading, and that afternoon it finally smashed through the 40,000 mark.
By the local close, the Nikkei 225 settled at 40,039.
As Japan erupted in celebration over the record-breaking moment, a rumor out of Wall Street began spreading at a terrifying speed.
According to supposedly extremely reliable sources, Cersei Capital, the firm that had drawn intense attention from the financial world over the past few months had actually been quietly pulling out of the Japanese market.
It was said that the entire portfolio of Japan-related financial securities held by Cersei Capital's Sub-Funds One through Five had been bundled up and sold by Simon Westeros to a Japanese consortium. Which meant that, during this period, the many hedge funds "following" Cersei Capital's plays in Japan hadn't actually been following Simon Westeros at all, they'd been following the Japanese government!
Over the past few months, at least tens of billions of dollars across the broader financial markets had chased Japan's rally in Cersei Capital's wake. Everyone understood what it would mean if the rumor was true.
The news broke after Japan's stock market closed on Friday. Because of the time difference, it was still Friday morning in North America.
Lehman Brothers' team had originally planned to let the rumor ferment over the weekend, so it would build enough panic before Monday's open.
But the speed of its spread far exceeded Lehman Brothers' expectations. In just one day, it wasn't just Wall Street more accurately, everyone who should know and everyone who absolutely shouldn't know all knew.
The moment North American media heard, their first instinct was to contact people connected to Cersei Capital and verify whether the story was real.
Then many outlets discovered that Simon Westeros wasn't in North America. Even Westeros Company's president, James Rebould, was far away in Europe. Another key figure at Cersei Capital, Janet Johnston, couldn't be reached either. Attempts to approach senior executives at Daenerys Entertainment on the West Coast yielded no useful response.
Compared to the media, some investment-bank executives and even senior government officials tried to reach Simon Westeros directly, and likewise couldn't get through. The only one they could reach was James Rabould, and he offered nothing but vague, rehearsed lines, which was as good as an obvious admission.
So while the rumor's viral spread had outpaced Lehman Brothers' projections, there was one thing they hadn't misjudged.
Panic began to seep everywhere.
Cersei Capital's target had been far too obvious. Too many insiders knew too much. And the connections between all parties were simply too hard to hide. From the beginning, Simon never believed the truth could stay buried forever and clearly the Japanese didn't expect that either. The most important clause in their agreement was this: once Japan's market turned, Simon would not take part in shorting the Japanese stock market.
Greece, Athens.
London was brutally cold this time of year. Simon and Janet had stayed there only three days before the woman couldn't stand it anymore. The two of them flew together to Athens, the Greek capital on the Mediterranean.
When word arrived from North America that the internal details of Cersei Capital's Sub-Funds One through Five had leaked, Simon and Janet had just returned from the Johnston family's private island in the Aegean Sea. They were resting in a mansion in the wealthy hillside district north of Athens, with plans to head to Finland on Monday.
Westeros Company's acquisition team had already finalized the last contract details with Nokia. The signing was scheduled for Monday.
Since he'd expected this day would come, Simon wasn't surprised.
He had intended to keep silent as planned. But around noon Athens time on Sunday, an unexpected visit from Haruo Maekawa the former governor of the Bank of Japan whom Simon had met in Melbourne at the end of June, finally broke the calm of Simon's leisurely detachment.
Maekawa came with three others. Besides himself, Yoko Kosugi, the "gift" Simon had steadfastly refused was still at his side, introduced as the group's interpreter. The other two were Maekawa's assistants.
After a few quick pleasantries, Simon led them out to the terrace in the mansion's rear garden.
The property covered six acres and had also been built into the mountainside. From the specially constructed viewing terrace, you could look down over all of Athens. It was too far from the sea to see the horizon, but given that the area was prime real estate, the view was naturally excellent.
Maekawa, however, had no interest in scenery. Simon, Janet, Maekawa, and Yoko sat around a round table. Once the servants brought coffee, Maekawa his exhaustion plain to see forced himself to brighten and smiled.
"First, I have to congratulate you, Simon. That Teenage Mutant Ninja Turtles game of yours… it seems to be selling quite well lately."
Simon lifted his coffee and took a sip, then nodded with a smile. "Thank you."
"Before I came, I looked into things," Maekawa continued. "Yamauchi's royalty system at Nintendo has been rather excessive these past years. Since Daenerys Entertainment intends to enter the console game market, and has already achieved such outstanding results, I think Nintendo ought to grant Blizzard Studio a preferential overseas slot as well, besides Capcom, Konami, and the others."
Nintendo's royalty system, in simple terms, meant it reviewed game content and then took a sizable royalty from each game cartridge as a kind of licensing fee.
On top of that, Nintendo personally monopolized cartridge manufacturing, which squeezed developers' profit margins even further.
Because six companies, Capcom and Konami among them had become Nintendo's earliest content suppliers, once Nintendo rose to dominance it granted those six a preferential policy: even if those companies arranged to manufacture cartridges themselves, the royalties they paid were far lower than what ordinary developers who didn't qualify for the preference had to pay.
Daenerys Entertainment's Teenage Mutant Ninja Turtles game, released last month, sold for sixty dollars a cartridge. Between manufacturing costs and royalties, Nintendo took twenty dollars. After deducting the distributors' cut and other costs, Daenerys Entertainment could only get a gross margin of around thirty percent per cartridge.
By contrast, Capcom, Konami, and the others, thanks to the preferential policy, could reach a gross margin of fifty percent per cartridge.
Nancy had previously estimated that the first Ninja Turtles game could earn the company one hundred million dollars in profit over the coming year. If they obtained Nintendo's preferential policy, that number could increase by at least fifty percent.
Maekawa had offered such a generous chip with almost no preamble. Simon couldn't help feeling surprised. He didn't doubt Maekawa was making empty promises. Though Nintendo's president, Hiroshi Yamauchi, was notoriously strong-willed, Japanese companies were fundamentally controlled by the major conglomerates and Nintendo wouldn't be an exception.
If the leadership of a Japanese consortium applied pressure, no matter how forceful Yamauchi was, he'd still have to comply.
Nintendo could maintain its golden age for at least another five years. A single preferential slot like that could mean hundreds of millions of dollars in profit for Daenerys Entertainment.
Even so, Simon didn't show much on his face. He didn't accept Maekawa's offer immediately either. Instead, he said, "Actually, I think Nintendo's royalty system makes a lot of sense."
Hearing that, Maekawa realized he'd come on too eager. He adjusted his tone to follow the young man's cadence. "That surprises me, Simon. In recent years people have been criticizing Yamauchi's decisions nonstop. Last year two preferential partners even broke with Nintendo over it."
Simon said, "Without constraints, many industries will boom quickly and then collapse just as quickly like the Atari crash. Nintendo's system is a form of constraint. It can guide the console game business toward sustainable, healthy growth. So the system isn't wrong. As for the companies that cut ties with Nintendo, if they ever had the chance to be the rule-makers, they'd do the same."
Maekawa nodded and asked with a smile, "And you, Simon?"
"Of course I'm the same," Simon said. "In fact, everyone has the ambition to be the one who writes the rules. Most people just don't have the strength."
Maekawa suddenly asked, "Simon, do you want to defeat Nintendo?"
Simon shook his head. "Daenerys Entertainment doesn't plan to enter the console-hardware business. We'll focus on game development. But both Atari and Nintendo have proven how obscene the profits are in hardware. This industry is destined to attract many new players. And Nintendo's sluggishness with the next generation of consoles is common knowledge. Sega's 32-bit console has been out for nearly a year, and Nintendo's SFC is still dragging its feet. So decline is inevitable. That decline will come from its own complacency, not from the royalty system."
As he said it, Apple flashed through Simon's mind.
In his previous life, Apple's cut of app sales had essentially been a copy of Nintendo's royalty model. But unlike Nintendo's stagnation, Apple always managed to stay a step ahead of Android and that was exactly why the Android camp found it so hard to contend with Apple.
"I'll pass your words on to Yamauchi," Maekawa said, lifting his coffee for a sip. Then he finally turned to the real point. "Simon, I came here this time because we hope you'll make a public statement."
Simon nodded once, waiting for him to continue.
"We've already confirmed it," Maekawa said. "The rumor was released by Lehman Brothers, which belongs to American Express. The situation in North America and Asia has been terrible these past two days. We hope you can publicly express confidence in Japan's economy through certain media outlets."
Simon asked, "And what about Sub-Funds One through Five?"
"That's also a key point," Maekawa said. "We hope you'll tell the media that you transferred the investment portfolio of Sub-Funds One through Five back in June. Yet Japan's stock market showed no weakness over the following half year. That alone proves Japan's economy has more vitality than many people predicted."
Simon didn't nitpick how, without realizing it, Maekawa had moved the timeline up to June. Strictly speaking, it wasn't wrong, they had indeed finalized the transaction at the end of June.
"Actually," Simon said, "Maekawa, you should understand that my statement won't matter much now. Since Lehman Brothers leaked the story, they've certainly already built massive short positions. Perhaps many institutions have done the same in advance."
"But there are even more long funds still in the market," Maekawa replied immediately. "Simon, if you speak up, the funds that remain long will surely push back. And we'll do everything we can to maintain stability."
Simon said, "Maekawa, you know Japan's economy has a severe bubble. A market turn is unavoidable."
"I know," Maekawa said. "We only hope the turn can be gentler, so we have more time to cushion the impact."
Simon rubbed the coffee cup in his hand, weighing it.
The Nikkei breaking 40,000 was a clear sign the top was in. It couldn't keep climbing. A decline was inevitable.
In his memory, Japan's market had taken four full months to fall from above 38,000 down to 28,000. That was extremely mild, and it also showed how effective the government's interventions had been.
Now, if he did nothing, with the panic that had accumulated over the last two days, even though Japan's market had price limits and wouldn't see a Black Monday like North America in 1987, the opening next week would likely trigger a crash-like sequence of plunges.
If that happened, the hedge funds that had been misled earlier by Cersei Capital's signals would probably take massive losses and they would inevitably blame Simon.
On the other hand, if Simon showed some public confidence in Japan now, slowing the downward momentum and giving those hedge funds time to flee, he'd also be reducing the chance of becoming their target. Since a downturn was already certain, all he'd be doing was delaying short sellers' profits a little, hardly a sin.
Having made up his mind, Simon raised his head again and looked at Maekawa.
"Then what do you want me to do?"
Maekawa motioned to the two assistants waiting nearby. They took out a folder from the briefcase they'd brought and handed it over.
"We've prepared some materials. You can read them first. We've also already coordinated with media on both the Japanese and North American sides. Once the copy is finalized, it can be on the front pages of many papers first thing tomorrow morning. And if you're willing to do a television interview, that would be even better."
Simon flipped through the materials and shook his head. "No interviews. I don't like appearing on television."
"Then a statement in the papers will be enough," Maekawa said, not forcing the issue. He even added proactively, "Also, every press draft we complete will be provided to you in advance, to ensure there won't be any unexpected differences between us."
Simon nodded.
He was very satisfied with that arrangement.
He didn't want to open a newspaper and find opinions attributed to him that he knew nothing about.
At the same time, he understood: the Japanese weren't being cautious out of respect. They were far more likely afraid that he might suddenly change his mind and refuse to honor the deal.