The Son of Finance of the Great Age

  Chapter 99 The aftermath is not over

  When the British government announced its withdrawal from the European exchange rate system, the Bank of England was not obliged to maintain the currency value of the pound against the mark, and the attack on the pound by international hot money came to an end.

  Some people may ask, why don't international hot money continue to attack the pound, causing the pound to depreciate further? This is because the currencies between countries are like two different lakes. The water between the two lakes flows with each other, and the two maintain a relative equilibrium. The price at this equilibrium is the normal exchange rate level. The British pound remained in the European exchange rate system. The British government artificially set up a dam between the two lakes, which made the water in the British pound lake higher than the normal level. Adding water to the lake puts more and more pressure on the Bank of England dam until the dam can no longer withstand the pressure.

  Now that the dam has collapsed, the water in the two different lakes can flow freely again. Although there will be a short-term drop in the water level when the gate is initially opened, it will soon return to a balanced level.

  In other words, after the Bank of England announces that the British pound will no longer be pegged to the mark, the British pound will depreciate sharply in a short period of time, and then reach a market recognized as an equilibrium price. At this time, both foreign exchange buyers and sellers in the market will be at a relatively balanced level.

   At this time, the buyer in the market will no longer be the Bank of England alone, but buyers and sellers composed of countless foreign exchange dealers, and the transaction amount will not be comparable to that of a hedge fund. In other words, even if a certain hedge fund wants to short the currency, there will not be random followers in the market, but there may be larger foreign exchange traders doing arbitrage in the opposite direction.

   Although hedge funds are at the top of the financial biological chain, with their amount of funds, it is absolutely impossible to compete with those large commercial banks that dominate the foreign exchange market.

In the next few trading days, the exchange rate of the British pound against the U.S. dollar once fell to 1:1.6900, which made the 4 billion U.S. dollars exchanged by Zhongshi at a price of 1:2.000 increase the income of more than 600 million U.S. dollars out of thin air. The British pound is traded in the foreign exchange market at an average price of 1.9000, and the final profit is 400 million U.S. dollars.

After deducting the interest of about 10 million pounds for half a month, Zhongshi's final income stayed at about 382 million U.S. dollars. Self-owned funds, through double the leverage to enlarge the funds, obtained a rate of return of 19.1%, which is definitely a shocking figure.

  You must know that in the capital market, the more funds you have, the fewer ways you can invest, and the less you can get greater benefits. Because of this amount of funds, no matter which market they enter, it will cause drastic changes in market prices, except for the foreign exchange market.

A week after the UK announced that it was leaving the peg, speculative funds for the pound began to buy the pound to close their positions in the market one after another, which to some extent pushed up the exchange rate of the pound in the short term, but after they closed their positions one after another , the pound fell again, and finally fell to the 1.5000 price before rebalancing.

The reason why hedge funds and other short-selling funds on the British pound started to close their positions so early is also because they know that over time, the level of foreign exchange fluctuations is out of their control, and they have huge positions. One day's interest will be paid for each additional day of holding. If the position is not closed in time, these profits in foreign exchange will soon be wiped out.

The difference from later generations is that due to the quick selling of Zhongshi in the foreign exchange market, Soros's position is not as terrible as in the previous life, but there is also a short position of 6 billion US dollars. In the final liquidation, they obtained A profit of more than 700 million U.S. dollars was made, which was much less than they had in their previous lives.

  However, history still shows striking similarities. The funds that attacked the lira still did not spare Italy, even after the Italian government announced a 3% depreciation of the lira on the 13th. The short-selling funds in the foreign exchange market are still relentless, and they continue to sell the lira in the foreign exchange market, threatening the lira's position in the European exchange rate system at all times.

   Also on the 16th, the Italian government couldn't resist anymore. After buying 40 trillion lire in the foreign exchange market, they also announced on this day that they would withdraw the lira from the European exchange rate system and let it float freely in the market.

Quantum Fund is the leader in shorting the British pound, and no one knows who is the leader in the shorting of the lira, but judging from the market, the profits of these funds in the Italian market will definitely not be less than the shorting of the British pound, because after exiting the European exchange rate Before the system, the Italian lira depreciated by at least 10.5%, which fell by at least more than 10% after breaking away from the European exchange rate system, so that the income is likely to exceed the income of some funds on the pound.

  In addition to the British pound and the lira, the currencies of several other countries with relatively weak economic strength have also been attacked, such as the Swedish lilang, the Spanish match tower, and the French franc. However, with the lessons learned from Britain and Italy, the central banks of various European countries have stepped up their attention to the foreign exchange market, and at the same time borrowed a huge amount of strong currency from the European Central Bank, and are always ready to face the attack from the foreign exchange market.

In fact, after Italy and the United Kingdom, national speculative funds targeted France again, but Quantum Fund did not participate in this attack. After analyzing French economic policies, they found that even if French interest rates increase in the short term , It also has no impact on the French real estate market, because the French government has various benefits and subsidies in terms of home ownership, basically fluctuations in interest rates will not cause changes in the stock market. Moreover, more importantly, the general election in France is approaching at this time. In order to ensure the stability of the domestic economy at this stage, the government even issued a stern warning to commercial banks, asking them to strictly control large borrowings in the short term.

At the same time, French citizens voted and passed the "Maastricht Treaty". The essence of this contract is to establish the European Union for future generations. If a certain fund launches an impact on a country's foreign exchange market, then other countries are more obliged to help and maintain the value of other currencies before the birth of the euro.

  Germany can no longer tolerate the French currency being attacked at this time, because Britain has already withdrawn. If France withdraws because of this, then the European Economic Community will be useless, and only Germany, a major economic body, will be left to play a one-man show.

  The currency crisis in Europe has come to an end for the time being!

  However, the pegged exchange rate system, which has inherent defects to some extent, will continue to be attacked. Quantum Fund is planning the next attack, which will take place at the end of the year.

It should be noted that not all linked exchange rate systems will be attacked. Huaxia is also linked to the exchange rate system, but hedge funds cannot attack the mainland at all. This is because Huaxia’s capital account is not open at all. In other words, foreign funds cannot Free flow in the country, let alone attack.

In some countries with normal economic development, reasonable foreign currency value, and free capital flow, the linked exchange rate system is also difficult to attack. This is because foreign exchange dealers have a reasonable psychological range for the currency value, and the market price deviates from this After the interval, they will enter the market to take profits from these abnormal currency value changes.

  In other words, if the currency of a certain country is under attack, then there must be a problem with the economic development of this country, which can cause the market to follow suit.

  Back to the British market, the British London Financial Times Index began to skyrocket after the UK announced its departure from the European exchange rate system. This is because the depreciation of the pound has become a fact, which is a huge benefit to the British economy.

  On September 17, the London Financial Times surged 105 points to close at 2483 points, up 4.44% throughout the day. On September 18, the Financial Times Index rose again by 83 points, closing at 2567 points, up 3.35%.

In terms of stock index futures, on the 17th, the index closed at 2580. This figure has risen by 273 points from the 2303 points where Zhong Shi opened a position. It means that Zhongshi's account profit reached 51.87 million pounds.

This is the result of Zhongshi’s funds not being fully operated. In fact, it is impossible to operate a futures account with a full position. A certain amount of funds must be left as a margin, so that the number of positions held can be guaranteed in real time without being forced by the brokerage company. warehouse.

   Even so, the rate of return nearly doubled in just three days, which stunned the traders who helped Zhongshi trade.

On September 21st, large-scale long liquidation began to appear in the market, which restrained the rise of the stock market to a certain extent, and the short sellers also took the opportunity to suppress the futures price aggressively, causing the futures index price to fluctuate many times on this day. , Finally, the stock market closed at 2560 points on this day.

  Between short selling and long buying, Zhong Shi quietly flattened his lot and left the market at an average price of 2571, which made his profit 50.16 million pounds.

   This is no longer a floating profit, but real real money.

  However, in the subsequent investment route, Zhong Shi felt the huge difference between the different financial markets in London and the United States after hearing the explanations from the traders. In the London financial market, the part exceeding 6,250 pounds is subject to 15% investment tax, which means that Zhongshi’s profit will be reduced by nearly 20% after repaying the principal and interest of HSBC. As for the Nikkei stock index futures he conducted in Singapore before, because he is not a local resident, the Singapore government does not levy taxes on dividends, bonuses and capital gains paid by non-residents, so that his profits can be fully retained.

  The United States is different. Individuals do not need to pay taxes on profits in the futures market. Only legal person accounts need to pay corresponding value-added tax after making profits in physical delivery. (Thanks to the book friend Dilong Throne 00 for the reward! At the same time, I would also like to thank the friends who voted for Sanjiang for this book this week, thank you for your support!)

(PS: I found two versions. One version is that non-UK residents have to pay 18% capital income tax if they have not paid personal income tax in the previous year; the other version is that individual investors pay 15% income tax in the futures market. Here, according to 15% to proceed.)

  (end of this chapter)