America's No. 1 financial conglomerate

Chapter 545 The Bargaining Chips in the Counterattack Against Wall Street

After Ralph finished reporting on the private equity department, Ernst did not inquire about other departments, but instead turned to look out the window.

At this moment, the sky outside the French windows was already tinged with a heavy gloom.

As a high-latitude city in the Northern Hemisphere, New York City has always had short days and long nights in winter. Just after five o'clock, night has already eagerly enveloped this steel jungle.

But Ernst was not focused on the darkening sky, but rather on the light reflected outside.

Although Ernst Asset Management is located near the East River, less than three kilometers from Manhattan, the river separates them into two completely different worlds.

At this moment, the skyscrapers on Manhattan Island are brightly lit, and neon signs shimmer and flicker in the night, outlining the bustling silhouette of the Wall Street financial center.

Queens, however, exudes a sense of desolation and tranquility, with only the dappled light and shadow cast by streetlights on the exterior walls of the buildings along the street, lacking the hustle and bustle and extravagance of the area.

"Let's talk about the progress of the market location selection for the new headquarters."

Jane Fraser was slightly taken aback, clearly not expecting Ernst to suddenly steer the conversation toward the construction of the new headquarters.

However, as the company's COO, she quickly composed herself after a brief moment of surprise and responded, "After multiple rounds of discussions and on-site inspections by management, we ultimately prefer the riverside plot in the Astoria area. That plot is adjacent to the East River and faces Manhattan Island across the river, giving it a significant geographical advantage."

"What about the available space?" Ernst turned his gaze from the window to Jane Fraser, his tone clearly worried. Ernst Asset Management was in a period of rapid expansion, and while the current headquarters office space was not yet overburdened, its overall utilization rate was nearing saturation.

Based on the current pace of business expansion and anticipated staff growth, office space utilization will be at full capacity next year. As the number of employees continues to increase, the overcrowding in office areas will directly impact operational efficiency.

Therefore, the planning and construction of the new headquarters is no longer an option, but a necessity that must be addressed in advance.

Jane Fraser had discussed this with him three months earlier, and at that time there were two possible solutions.

The first option is to acquire an old office building across the street with a similar area to the existing headquarters, expand the office space by building an aerial walkway between the two buildings and adding two floors to the top of the original building.

The advantage of this solution is that it has relatively low cost and short construction period.

The second option is to find another plot of land and build a brand new headquarters building.

Ernst thought for a moment and decided that since it was a financial company, it should act like one.

How can a financial company project a powerful image?

It has to be magnificent, so that customers can immediately tell you that you are rich.

An old building is an old building after all. When we bought this building, it was because we liked the land and thought we would demolish and rebuild it one day.

However, Ernst Asset Management now owns several real estate projects in Queens as investments, so there's no need to rebuild on the original site. Even so, building a new headquarters inevitably led to disputes.

Some people felt that Woodside was a better choice because it has the largest old building complex acquired by Ernst Asset Management.

This complex was originally owned by four separate parties, but it was all bought by Ernst Asset Management and integrated into the current plot of land.

If this complex were demolished and rebuilt, the land area would reach eight acres. Not to mention building a headquarters, building the world's tallest building wouldn't be a problem.

However, some people think that the land in Astoria is better, as it faces Manhattan across the river and in a sense can even be considered part of Manhattan.

It has a great geographical location, but it also has its drawbacks, namely its small size.

With only 1.8 acres of land, a building of about 20 stories can be built.

For comparison, Goldman Sachs' headquarters on Wall Street occupies approximately three acres, while the Jin Mao Tower in Shanghai covers nearly six acres.

Even with a building over twenty stories high, this space wouldn't be enough if Ernst Asset Management were to truly grow into a giant like Goldman Sachs.

Are we going to have to build a new headquarters and move again?

Ernst's suggestion was that if you're going to build it, you should do it right the first time, and rent out any office space that isn't needed for the time being.

"Actually, we've considered this as well. We can follow the approach taken during the renovation of the old headquarters and adopt a twin-tower design." Seeing Ernst looking over, Jane Fraser explained, "Next to our plot of land are the yacht club's ancillary assets. When it was built sixty years ago, it was used as the dock office, and now it's for rent. It's an asset of the Astor family."

No wonder he's a big landowner in New York; he owns land everywhere.

Ernst thought of Louis Astor and couldn't help but sigh, "Being born into the right family is truly a skill."

"You mean, you want to push for cooperation with the Astor family, through a joint development agreement where land is contributed as equity?"

Buying is out of the question; the Astor family will never sell.

For such long-established families, land is the foundation of their family legacy, far more important than short-term cash gains.

This is especially true for landlord families that have been around for over a hundred years.

But if you asked them to contribute their land as equity to build a modern landmark building together, they would definitely be willing.

Jane Fraser nodded slightly. "That annex building has no practical use for the yacht club. Once we create a new landmark in that area and increase the asset value of the area, it will perfectly meet their needs."

That's true, because the Astor family owns more than just this one piece of land there; they also have a yacht club, which occupies a considerable area.

The two parties will jointly construct a twin-tower building and distribute ownership and profits according to their shareholding ratio.

It belonged to Ernst Asset Management, who used it as office space. It belonged to the Astor family, who continued to rent it out.

As for the land, both parties can jointly own it according to their shareholdings.

After listening, Ernst slowly nodded, a look of approval on his face.

This is not only a mutually beneficial collaboration, but also an expansion of family networks.

Ernst represents the younger generation and new money, and the Astor family is very willing to further communicate with him and promote more cooperation.

In New York's business circles, establishing partnerships with established forces like the Astor family is itself an intangible asset.

"Then it's settled. You will lead the formation of a special task force to begin negotiations with the Astor family as soon as possible."

After making his decision, Ernst turned to O'Shea Ricardo, who was sitting on the other side of the conference room, and his tone immediately became serious. "Tell me about the situation in Russia."

This was his main purpose in attending the meeting; the situation regarding Russian debt was his primary concern.

"According to the latest data we obtained from internal sources in Moscow, the total tax revenue collected by the Russian Ministry of Finance in October was only 112 billion rubles, while fiscal expenditures during the same period reached 24 billion rubles, resulting in a fiscal deficit of 128 billion rubles and a deficit ratio exceeding 53%."

Holding a red laser pointer, O'Shea precisely pointed to the deficit data highlighted in bold red on the chart, his tone revealing a hint of excitement and anticipation. His expression was like that of a hunter who had finally locked onto his prey.

"Russia's fiscal situation has now fallen into a vicious cycle of robbing Peter to pay Paul. According to our calculations, more than 70% of the funds raised from its recent new government bond issuance will be used to repay maturing old debts, leaving less than 30% of the funds available to supplement fiscal liquidity."

"This means that Russia's fiscal system has lost its ability to generate its own revenue and is completely dependent on external financing and debt rollover to maintain its operation."

"Is the accuracy of this data guaranteed?" Ernst asked, his brow furrowed and his tone heavy.

This data wasn't released by the Russian Ministry of Finance; it was recently purchased from within Russia by Ernst Asset Management at a high price.

"Absolutely accurate," O'Shea Ricardo assured him firmly, then operated the remote control to bring up another chart. "This is a chart of the Russian Central Bank's foreign exchange reserves, supplementary intelligence we obtain when acquiring fiscal data."

"By cross-validating this trend chart with information we previously collected through other channels, the two showed a 98% agreement, which fully confirms the authenticity of the fiscal data."

The charts on the screen clearly show that the Russian central bank's foreign exchange reserves are experiencing a precipitous decline.

As of now, its foreign exchange reserves stand at only US$121 billion.

"With $121 billion in foreign exchange reserves, repaying $240 billion in maturing foreign debt is theoretically an impossible task," O'Shea Ricardo said with a hint of certainty. "Unless there is a large influx of new foreign exchange before the end of the year, a default on Russia's foreign debt is almost inevitable."

Ernst picked up the coffee cup on the table, about to bring it to his lips, when he suddenly remembered something. "I remember the IMF gave Russia a loan of $226 billion, didn't it? What happened to that money?"

This started last year, and it was divided into four phases. It was supposedly a loan from the IMF, but it was really just the US giving the green light, at the cost of another 15% cut to the defense budget. The Americans' thinking is simple: to squeeze every last drop of military technology out of Russia.

With a reduced defense budget, the already difficult situation for research institutes will only worsen.

At this point, whether it's selling technology at a low price or attracting talent, it's all beneficial to the United States.

"That money was already used to fill the hole." O'Shea opened a list of expenditures. "Let's not talk about the previous ones. The last installment of $48 billion arrived in July of this year."

"After the $48 billion arrived, $10 billion was used to pay off the national debt, and the remaining $38 billion was added to the foreign exchange reserves. However, the previous financial crisis caused the outflow of assets from Japan and South Korea, which took away $33 billion, not to mention the huge debt problem now."

O'Shea Ricardo used an analogy: "It's like patching a leaky boat while forgetting that there's a huge hole in the hull."

"If I'm not mistaken, this black swan event will be resolved next month, or at the latest, January," O'Shea Ricardo said with a strong sense of confidence and anticipation in his eyes.

Ernst's body stiffened slightly, then he leaned forward and pressed, "What's the basis for your judgment?"

"There are two key signals," O'Shea Ricardo quickly responded. "The first signal is the unusual market price movement of Russian government bonds."

"We have observed an unusual upward trend in the prices of Russian sovereign bonds recently. On the surface, this seems to indicate a recovery in market confidence in the Russian economy, but based on our internal data, it is precisely a landmark signal that Wall Street giants have completed a risk transfer."

Ernst's eyes lit up. The rise in Russian bond prices was good for Russia, but it also meant that Goldman Sachs and its partners had finished selling off their holdings and had transferred the risk.

When risks are about to erupt, large institutions always use various means to create a false market impression and complete the final risk transfer. "The second signal is the trend of international oil prices," O'Shea Ricardo continued, while pulling up a chart of Brent crude oil prices.

"Brent crude oil prices continue to fall sharply, currently hovering around $13 per barrel. Energy exports are a core source of Russia's foreign exchange earnings, accounting for more than 70% of its total foreign exchange income."

"The continued plunge in oil prices is tantamount to directly cutting off Russia's main source of foreign exchange. Without sufficient foreign exchange income, it is nothing short of a pipe dream to repay its maturing foreign debt."

After speaking, O'Shea Ricardo pulled up another chart, which showed the results of Ernst Asset Management's quantitative model calculations.

On the chart, a red curve rises sharply, clearly showing the changing trend of the probability of Russian foreign debt default.

"Based on our model calculations, and considering multiple factors such as current fiscal data, foreign exchange reserves, oil price trends, and market sentiment, the probability of Russia defaulting on its foreign debt next month has risen to 67%."

"If Brent crude oil prices continue to fall and break below the $11 per barrel mark, the probability of default will exceed 85%, at which point default will become a highly probable event."

"Very good." Ernst smiled after hearing the report, a smile he hadn't shown in a long time, his tone tinged with approval.

The counterattack against Wall Street is finally about to begin.