America's Road to Wealth

Chapter 195 The capital butcher knife swung down
The policy announced by the Central Bank of Nihong certainly does not mean that interest rates will be cut.

Papa's request, how dare the neon cabinet ignore it.

The policy announced by the Central Bank of Neon.

It is that they will purchase neon medium and long-term national bonds of more than 30 trillion yen in the next three months.

Generally speaking.

A country's national debt is issued by the country's Ministry of Finance.

The banking platform is only responsible for underwriting, which is the process of selling government bonds to investors.

Before the Neon Central Bank began to purchase the national debt of its own country on a large scale.

There are very few central banks in the world that underwrite the purchase of national bonds issued by their own Ministry of Finance.

The main reason is to do so, which is equivalent to borrowing money from the left hand to the right hand.

This right hand is still the kind that can print money.
It is no different from printing money directly, but it looks better in name.

As a result of doing so, it will greatly reduce the yield of its own national debt.

The side effect is to make other buyers of national debt doubtful about their own national debt.

The more direct effect is to release a large amount of the country's local currency in the market.

In economics jargon, this behavior is known as "quantitative easing."

Later generations of the United States have repeatedly used quantitative easing on themselves.

But the inventor of the policy of quantitative easing is actually Neon.

Quantitative easing can pump large amounts of money into the market.

That is, under quantitative easing, the central bank's monetary policy on its own country's economy is not fine-tuning, but directly prescribing a powerful medicine.

Once the decision of Nihong Central Bank is announced.

The currency pair USD/JPY idling long in an instant.

Almost within 5 minutes of the announcement.

USD/JPY rose to 1 from 6 at its lowest point during the day on January 104.300.

There is a time difference of about thirteen hours between Tokyo and New York.

Neon Central Bank announced this news at 07:30 pm Tokyo time.

When this news was announced, New York East Coast time was around 1:6 in the morning on January 06th.

As soon as the news that the Neon central bank is about to start quantitative easing comes out.

Most of the heads of investment banks on Wall Street have their phone numbers and contact information blown up.

Manhattan, New York.

Located in a luxury apartment next to Central Park.

Paulson was woken up by his wife, who pointed to the ringing phone on the opposite side of the bed.

"Telephone! Hurry up and answer the phone, I'm almost utterly disturbed!"

As the wife of the president of Goldman Sachs.Paulson's wife is often woken up in the middle of the night or so early, or at other times.

Although she was used to it, when she got up and got angry, she would still complain a few words.

Paulson has long been used to it, and he patted his face lightly a few times to wake himself up completely.

The CEO picked up the phone, and the voice of the person in charge of the market monitoring department of Goldman Sachs came from the opposite side.

"Mr. Paulson! Just now, the Neon Central Bank announced that it will buy a large amount of Neon government bonds today!!"

This huge black swan incident immediately woke Paulson up.

Holding the cordless phone, Paulson walked quickly to the bathroom and said loudly, "Are you sure?"

"It's confirmed! Just now, in a few minutes. The yen quickly depreciated by more than one hundred points!"

"Oh! Madfak! Didn't they just come here two years ago?"

Paulson cursed and walked to the bathroom door.

Paulson suddenly remembered...

Goldman Sachs does not seem to have invested in yen assets recently.

He was a little uncertain and asked the person in charge of the supervision department.

The person in charge replied: "Well, because of your request, Goldman Sachs has indeed not invested in Japanese yen assets on a large scale recently."

Paulson breathed a sigh of relief.

His movements of washing in the bathroom also slowed down a lot.

Since Goldman Sachs does not have a large-scale investment in yen assets.

The Quantitative Easing of the Neon Central Bank will not have such a big impact on Goldman Sachs.

Naturally, Paulson was not in a hurry.

"Hey~" Paulson, who was holding a cordless phone, became more relaxed.

"I will rush to the company soon. Ha~ But at this time, Richard and the others must be more anxious than me~ Ha~ I hope they don't get too anxious."

The person in charge also smiled across the phone and said:
"That's right. They have really invested a lot of money in Japanese yen assets these days! Especially... most of them are still shorting the dollar!"

In the tone of the person in charge, Paulson heard a touch of schadenfreude.

In fact, at this moment, Paulson is also in the same mood.

The president hung up the phone with a smile, and then began to dress up in a leisurely manner.

Just like what Paulson said in the chat with the person in charge.

In this big USD/JPY market.

Wall Street investment banks that are heavily shorting the USD/JPY currency pair.

The person in charge of them really can't sleep in anymore at this time.

The bulldog of Wall Street, Mr. Richard Fuld, CEO of Lehman Brothers.

He was dragged into the company by his subordinates' fatal serial calls directly under the bed of his beautiful secretary.

Due to the tight schedule, Richard Fuld didn't even have time to get dressed.

He only changed into a suit and didn't even wash up.

I rushed to the headquarters of Lehman Brothers, located on Seventh Avenue near Times Square in Manhattan.

Halfway through, Richard Fuld had figured out why.

This made Wall Street's bulldogs couldn't help cursing at Neon Central Bank all the way.

"Madefake Neon Cabinet Madefake!"

Richard Fuld, who was yelling at this moment, was no longer as relaxed as the previous two days.And before falling asleep last night, I saw the exaggerated floating profit in the foreign exchange account of Lehman Brothers, the happy look.

When he came to Lehman Brothers Bank, in the trading department.

Lehman Brothers foreign exchange account.

Floating profit has dropped from 9.5 million US dollars yesterday to 0.79 million US dollars.

"Madfak! Close the position! Close the position! Close the position!" Richard Fuld yelled.

A few minutes ago, when he obtained this floating profit figure for the last time.

They also have around $1.5 million left.

It's been less than 5 minutes and they've already fallen in half.

And it only took 10 minutes from the time he was called up from the phone and rushed to the company.

In 10 minutes, the floating profit of 9.5 million US dollars was about to turn into a floating loss.

The chief financial officer Bryn Bulley, who was in charge of duty last night and stared at this transaction all night, said helplessly:
"Sir, a bear stampede has formed. Fifteen minutes ago, I ordered the liquidation of the position. But until now, we have not even successfully closed a thousand lots."

In the trading of international foreign exchange, futures, etc., whether it is long or short.

If you want to close a position, there will be a prerequisite.

That is, the short/long opposite the long/short bet is willing to take your order.

Because to put it bluntly, whether it is foreign exchange or futures, what you are playing is gambling.

Since it is a gamble, it is naturally zero-sum.

That is to say, in the gambling, there must be one person who loses money, and the other person can make money.

I am about to lose money, and the short/long want to close the position.

The faction that must be facing you just happens to be at this number, so it can take your order.

If no one accepts the order all the time, then you have to keep losing money, until the margin is insufficient, you will immediately liquidate your position
It's a bit like a phenomenon in the stock market.

It is when a stock is sought after by everyone.

It started to rise wildly, and those who held it refused to sell.

There will be no price in the market, and the stock price will keep rising sharply, because the buying order is much greater than the selling order, or there is basically no selling order.

In turn, a stock plummets.When everyone is selling stocks and no one is buying.

Then the stock will plummet.

The stock will not stop falling until the number of buyers is equal to that of sellers.

The difference is that you can buy stocks as long as you don't use leverage and as long as the money is not borrowed.

No matter how much the stock goes down, it's still there in the end.

Even if the stock ends up rotten in the hands, it is still a stock.

If the company does not go bankrupt, does not go bankrupt and does not delist, there will be some hope for the stock after all.

But betting on foreign exchange and futures. If you lose in the end, you will really be liquidated directly.All the principal was lost, and even the money owed to the middleman after the liquidation!

If leverage is used
This is the case with Lehman Brothers' current empty orders.

A wave of short sellers fleeing has already formed.The short sellers who had an absolute advantage before all wanted to flee in the first place to ensure profits.

In an instant, hundreds of thousands of empty orders wanted to close their positions.

There is no corresponding response from the bull side.

With these empty orders, there is no way to close the position immediately and end the gambling contract.

Now this kind of market, coupled with the quantitative easing policy of the Neon central bank.

A bear carnage has taken hold.

No bulls will choose to close their positions and leave at this time.

This means that the vast majority of short orders.

There is no way to close the position in the first place.

Compared with other Wall Street investment bank managers, Richard Fuld is more decisive.

After getting the news from the CFO.

Richard Fuld made up his mind at once:

"Cutting the meat, you have to leave the field! Try to minimize the loss!"

Meaning of Richard Fuld.

It is directly on the current USD/JPY exchange rate, directly thanks to some points.

I would rather let the bulls on the opposite side make a little more money directly at this time.

It is also necessary to close the position in advance, so as to avoid possible greater losses in the future.

"Understood." Bryn Bulley responded immediately.

Then the CFO of Lehman Brothers took a look at the latest quotations.

USD/JPY has risen to 108.560.

Bryn Bulley was a little desperate, because at this time Lehman Brothers had already started to make a lot of floating losses.

"Sir, what value should we choose for closing positions?!" Bryn Bully asked Mr. CEO again.

The value of 108.560 made Richard Fuld equally desperate.

But he was only desperate for a few seconds, and the value on it had changed from 108.560 to 108.590.

The bulls have gone crazy, not even giving the shorts a chance to surrender.

At this time, it can be said that the bull market has become a big trend.

Those short positions in the market that do not have a full position are estimated to turn into long positions at this time.

"111!!" Richard Fuld gritted his teeth and bleed profusely, he yelled: "Immediately close all leveraged positions at 111 yuan!"

If you choose to close your position at the value of USD/JPY 111.000.

For this time, Lehman Brothers' investment in USD/JPY is really cutting flesh.

The loss is almost more than half.

The CEO is willing to take on such a responsibility, so Bryn Bulley naturally took action immediately and prepared to cut the meat to close the position.

Plus Richard Fuld is also right away from idling more.

He ordered Bryn Bulley to open a long position again, and use a high leverage, hoping to hedge the loss of this short position.

Doing long and short at the same time, with different leverage ratios.

This is known in the industry as "hedging".

That's what hedge funds do.

It's just that there are a lot of decisive people like Richard Fuld on Wall Street.

Moreover, the long list does not mean that it can be opened as soon as it is opened.

If the number of hands is small, it is good to say, but if the number of hands is large, there are not many new empty single bets on the market.

At this time, start to turn more, but it is not as easy as the previous stalemate stage.

Lehman Brothers finally closed 109.950 short positions, when USD/JPY rose to [-].

Lehman Brothers' high-leverage long positions were successfully opened with less than a few hundred lots.

The massacre of bears has been formed, how can there be so many iron bears?
At this time, the meat cutting warehouse of 111 is also a little flat.

Bryn Bulley turned around and wanted to ask Mr. President about the countermeasures, but saw the president slumped on the chair, his eyes already a little dazed.

US East Coast time.

January 1th (Asia time zone is earlier than America time zone).

In the New York Stock Exchange, those investors who held short positions in USD/JPY foreign exchange futures shrank by more than half in one day.

The second day, the third day, is Saturday and weekend.

U.S. futures closed for trading.

1 month 9 number.

USD/JPY broke through 118.950 a few hours after the US futures market opened on Monday.

After twelve o'clock, the major exchanges in the United States were briefly closed.

The financial predators on Wall Street are experiencing both sorrow and joy at the moment.

Building Three, World Financial Center, New York.

In the New York branch of PNC Financial Services Group, which is in the same building as Merrill Lynch.

Snapped! !

"Honey, go open a bottle of champagne!" said Sally Winston, CEO of PNC Financial Services Group.

He happily leaned back on the office chair, crossed his legs, held a cigar in one hand, and swam freely behind the female secretary with the other, when he suddenly slapped hard.

"Ice it down! Lincoln will come over later, I have to celebrate with him!!"

"What do you want for lunch? My dear boss, let me help you figure it out!"

The female secretary laughed idiotically, and deliberately pouted her body so that her boss could play more comfortably.

"Besides money, I only have appetite for you. But Lincoln is a Puritan, and he doesn't like playing with you with me."

Sally Winston laughed.

Last week, he discovered Abe Smith and Smith Capital together with Lincoln, the investment fund manager in the company, when they suddenly came from idling.

He and Lincoln, the head of the company's investment department BlackRock Fund, discussed behind closed doors for an afternoon.

In the end, the two giants of PNC Financial Services Group unanimously decided to place a heavy bet on multiple contracts.

In the beginning, USD/JPY turned from long to short because of the interest rate cut in the US dollar.

The fall made the eyelids of the two giants of PNC Financial Services Group jump.

When Abel's loss came to about 20 billion US dollars.

He didn't know that he was in PNC Financial Services Group, because he was optimistic about his investment style.

PNC Financial Services Group also lost almost [-] million US dollars along with him.

Just when Sally Winston and Lincoln were a little suspicious of life.

Neon Central Bank announced their quantitative easing policy.

The situation turned around immediately.

Since then, major countries around the world have successively announced interest rate cuts along with the US dollar.

The window for dollar depreciation is quickly disappearing.

Combined with the quantitative easing policy of the central bank.

The U.S. dollar has strengthened again, and at the same time, there is also the quantitative easing method of the Neon Central Bank to actively depreciate the yen.

This caused PNC Financial Services Group's investment in USD/JPY to continue to expand like a wild horse in the next few days.

At present, the floating profit of PNC Financial Services Group has accumulated to 15 billion US dollars.

Sally Winston's gamble with Lincoln paid off enormously.

"What should I do this afternoon?"

Sally Winston was thinking carefully while tasting the fine wine and beautiful lips of the female secretary.

Stanley O'Neill, a black Merrill Lynch executive who works in the same office building as Sally Winston.

But not as easy as Sally Winston, nor as lucky as Sally Winston.

Stanley O'Neill was sitting in a chair with his head in his hands and his eyes bloodshot.

The most powerful black man on Wall Street is in a state of infinite remorse at the moment.

Because just now, Merrill Lynch had as many as 15 empty orders, when USD/JPY reached 118.900.

Completely blow up all positions.

Merrill Lynch's more than US$35 billion in deposits and funds were all wiped out.

It's okay to liquidate.

The loss is 35 billion US dollars, which is not enough for Merrill Lynch.

But
Since it is a bet against each other, sometimes liquidation may not necessarily solve the problem.

Because the liquidation is only the loss of the margin in the account.

If there is no way to close the position, the position contract in the account will continue to lose money.

Just like now, if USD/JPY continues to rise.

In addition to the liquidation of Merrill Lynch, there is no more than 35 billion U.S. dollars.

The position contracts that have not been closed in the future will continue to lose money.

There is no longer a security deposit with the middleman, and it will become a debt.

What to do if you owe money, you need to make up the money first.

If the compensation is not complete, the middleman has the right to collect the debt.

If the arrears are too long, the middleman can also sue to collect the debt.

That is to say, after losing 35 billion US dollars, Merrill Lynch must continue to make up money later.

The matter was not over until all positions in Merrill Lynch's contracts were successfully closed.

Fortunately, USD/JPY finally stopped its crazy rise after reaching the value of 119.

The butcher knife wielded by the bulls is finally not so sharp under the possible profit retracement and anti-short situation.

At this time, Merrill Lynch can basically close this position contract as long as it makes up a margin of about [-] to [-] million US dollars.

But do
Nothing good for Stanley O'Neill.

Stanley O'Neill is in despair at this time, and is thinking about whether to continue to call for margin.

Continue to add margin calls, if USD/JPY can fall again.

Then Merrill Lynch may reduce losses, or even turn losses into profits.

But it is also possible to increase the margin, continue to liquidate the position and continue to owe money
This is a difficult choice.

One is to cut the flesh and leave directly. Merrill Lynch will lose more than 40 billion US dollars this time.

Stanley O'Neal for the previous three years.

A total of more than two billion US dollars earned by Merrill Lynch on the US dollar/yen was lost, not to mention.

Merrill Lynch has to pay more than one billion US dollars for this.

If you choose this, it will basically declare that Stanley O'Neill is completely over at Merrill Lynch.

Even the second half of his entire life can be declared a real social death.

Let the company lose so much money, can you still expect Merrill Lynch shareholders to let Stanley O'Neill go?

Forget it!
how can that be.

Stanley O'Neill also knew that if he took another step back, he would be dead.

The black president gritted his teeth and planned to go all the way to the dark.

However, just when he finished thinking about it, he was about to ask the company to continue to increase the margin.

Stanley O'Neill had just walked to the trading department, and was preparing to issue an order to continue the attack to the traders who were also panicked and desperate.

At the same time, let other departments of the company adjust more funds to support themselves.

Stanley O'Neill was seen outside the door of the trading desk.

The company's chief executive, David Komansky, was pushing the door and walking in.

Stanley O'Neill saw a smile on David Komansky's face that he had never seen before.

It was the kind of smile that David Komansky would have been happy with if Merrill Lynch lost $40 billion.

See this smile from David Komanski.

Stanley O'Neill suddenly panicked.

The most powerful black man on Wall Street, he knew he was done.

(End of this chapter)