[Gangnam Perspective] The Black Swan Behind the Frenzy Over the 'Get In' Meme

On the 13th of last month, the media picked up a meme in which a chaebol chairman pulls up in a sports car on a battlefield, reaches out his hand, and says, "No time to explain. Get in." No one knows who created this meme, and it is unclear exactly how much it has affected the stock market. What is clear is that many people have since gone wild over it, and a significant number of them appear to have joined the rush to buy stocks. As so-called debt-fueled investing, where people borrow money to purchase shares, has increased, the balance of overdraft credit lines at the five major commercial banks has surged by 1.3 trillion won in just the past three days.
Most people say they found the "Get in" meme amusing. I, however, see this kind of meme consumption as nothing but dangerous. A meme that effectively says, "There is no time to explain market and industry trends, just buy the stock," is really encouraging the very blind investing we have long warned against. Advice to carefully analyze business reports and future value now sounds old-fashioned and tedious. Above all, it is chilling to imagine that this meme might have been created with impure motives and could be exploited to prop up share prices. Risk rarely comes from where you can see it; it tends to hit you from behind.
Right now, the South Korean stock market is a dizzying market where sell-side and buy-side sidecar trading curbs are triggered one after another. The amount investors have borrowed from securities firms to buy stocks and then failed to repay has exceeded a record 33 trillion won. If the market plunges for several days in a row, securities firms forcibly liquidate these debt-fueled positions. It is a structure in which investors are thrown off the roller coaster and suffer heavy losses.
Politicians care deeply about stock prices, but it is doubtful they are facing up to the risks that retail investors confront. Our main risk today is not that share prices have doubled under the current government, nor that they fell too quickly because of the Iran crisis. In this world there are two kinds of risk: the risks we know and the risks we do not. The former are, in fact, not the real problem. Household debt, supply chain disruptions, and inflation fall into this category. They are serious issues, but everyone is watching them, so the detonators can be managed. Under normal circumstances, those bombs do not go off. What really blindsides us are the unknown risks: the Russo-Ukrainian War, Coronavirus Disease 2019 (COVID-19), and the 2008 financial crisis, for example.
We are surrounded by countless known risks: the Iran crisis and high oil prices, household debt, investment in the United States, and more. The problem is that politics is turning these known risks into unknown ones. When everything is reduced to the achievements or failures of a particular administration, structural dangers sink below the surface. While liquidity is increased to support the index, the weakest links in the debt chain can become even more fragile. The moment a small trigger, such as a change in lending conditions or interest rates, hits weak spots like loans to the self-employed or real estate project financing (PF), we could face a kind of risk we have never seen before: a black swan event, an unmanageable shock.
The current government argues that channeling more money into stocks rather than real estate will direct capital into more productive areas. Yet stock investment itself is not inherently productive. Trading shares is essentially the buying and selling of existing assets, so no money flows directly into companies. Only when stock prices rise as a result of investment do corporate values increase and funding costs fall. It is these indirect effects that are being labeled as productive.
In fact, the same is true of real estate. The act of buying and selling homes is an asset transaction and does not in itself constitute productive activity. However, when transactions become active, new development and presale projects can become more profitable. As a result, construction firms may increase investment and hiring, and related industries may expand production. The real problem is capital being excessively skewed to one side, not that real estate is always unproductive and only stocks are productive.
Last year, an official at the Financial Services Commission (FSC) faced a backlash after remarking that debt-fueled investing was just another form of leverage. He is now clinging to President Lee Jae-myung's instruction to "take a breather while we are down." The stated goal is to strengthen the market's fundamentals by weeding out zombie companies, reforming KOSDAQ (Korean Securities Dealers Automated Quotations), and increasing the share of institutional investors. The aim should not be to pump up stock prices, but to build a robust market that will not be shaken even by a black swan event. In a market that goes wild over the "Get in" meme and swings on short-term trading, it is hard to expect real productivity.
Hong Su-yong (syhong@fnnews.com)