America’s Road To Wealth

  Chapter 192 Smith Capital with a loss of two billion

  January 4th.

  Goldman Sachs headquarters.

  In the trading department.

   Many people are looking at the USD/JPY currency pair that has gone short to around 105.900.

  They couldn't help feeling a little more admiration for the company's CEO, His Excellency Paulson.

   To know before this.

  Because of Smith Capital, it began to short USD/JPY.

  Many people at Goldman Sachs want to be like last month.

   Enter the market like Merrill Lynch, Lehman Brothers, etc.

  They wanted to see if they could take a bite or two off of Smith Capital like last time.

   But CEO Paulson who made this decision last time.

  This time, they rejected the opinions of these people in Goldman Sachs.

   Paulson did not give a reason. He just used the authority of the CEO to make them obey orders.

  The elites of Goldman Sachs did not understand this at first.

   But now seeing this kind of long-to-short turn, it is still a very fast multi-to-short market.

   Everyone couldn't help admiring Paulson.

  If Goldman Sachs entered the market like other Wall Street investment banks at that time.

  Then the rush of other investment banks will be what Goldman Sachs is now.

  Look at those investment banks who were long before.

   At this time, one or two are busy making multiple transfers.

  They are all trying to ensure that floating profits turn into profits.

   It's not that easy.

  Goldman Sachs avoided this and was able to sit on the sidelines.

  Paulson's investment ability this time made everyone more convinced of him.

   But in reality, Paulson was also secretly glad.

   You must know that Paulson did not let Goldman Sachs end this time.

   Not because of his investment ability.

   It was because of Paulson, who was getting closer and closer to Texas.

   After learning of Abel's close connection with the shrub family through some channels.

  This guy wants to let himself have a retreat, for his own future development.

   Paulson decided to try not to be an enemy of Abel.

   Avoid Abel's influence and affect his future career.

   This made Paulson decide that Goldman Sachs will not end this time.

   To put it bluntly, Paulson's decision this time is a bit selfish.

   Against the interests of Goldman Sachs.

   Unexpectedly, it might have been a bad thing for Goldman Sachs, but now it has turned into a good thing.

   Goldman Sachs, who has not ended, does not need to be in a hurry like other Wall Street investment banks at this time.

  Facing the awe-inspiring eyes of his subordinates, Paulson felt refreshed.

  He kept an unfathomable expression on his face, and Paulson asked the person in charge of the Market Supervision Department:

   "Now the major investment banks, as well as Smith Capital, what is their account situation?"

  Goldman Sachs' market surveillance department is in similar departments throughout Wall Street.

   is definitely in the forefront. This department specializes in collecting capital market intelligence, as well as various business intelligence around the world.

  It brought a lot of accurate business intelligence to Goldman Sachs, which indirectly brought a lot of profits to Goldman Sachs.

   This also makes this department very important in Goldman Sachs.

  Goldman Sachs has invested a lot in it and has formed very good positive feedback.

  The more resources invested, the better and more accurate the business intelligence collection capability of this department will be.

  Faced with inquiries from the CEO, the person in charge of Goldman Sachs’ market surveillance department replied:

   "Mr. Paulson. From what we know and observe."

  "A dozen major investment banks, including Morgan Stanley, Lehman Brothers, Merrill Lynch, Bear Stearns, etc., have basically completed the transition from long to short."

   Paulson nodded.

   This situation is very common.

  When the market is in a bull market, everyone likes to be long.

  When the market is in a bear market, everyone likes to be short.

  In normal times, it is too common for Wall Street investment banks to switch between long and short.

  But what the person in charge said next surprised Paulson.

  The person in charge of the Market Supervision Department of Goldman Sachs said:

   "But according to other information we have learned, in the second half of the market yesterday, Smith Capital closed all their short positions."

   "And after that, Smith Capital established a large number of long orders."

   "According to the information we can understand, Smith Capital has at least established a long position of more than 20 billion U.S. dollars."

   "Smith Capital idling too much?" Paulson asked in surprise.

   "That's right." The person in charge of the Market Supervision Department replied.

   Paulson couldn't help frowning.

   Paulson at the moment is just like David Mellon yesterday.

   Can't figure out why Abel did this.

  The Federal Reserve has cut interest rates, so why do they do more?

  Although every time the Fed cuts interest rates, the currencies of other countries will also choose to cut interest rates along with it.

   In this way, the depreciation cycle of the dollar is often only a few days.

  So this short market won't last long.

  But soon, it will generally have a short market that lasts for four or five days.

  Four or five days is enough for several transactions in the foreign exchange market.

   In other words, at least within a few days visible to the naked eye.

  USD/JPY will go short.

  Abel has at least four or five days to make a profit on the short order he established before.

  As a result, Abel did not make these profits, but instead went long against the general trend of the market.

   This is the same as he went short against the general trend of the market before, which puzzled Wall Street.

   Fortunately, Paulson also made up his mind not to interfere.

  So whether Abel is long or short, it has nothing to do with Goldman Sachs.

  He just asked the people from the Market Supervision Department to keep watching the market.

  Goldman Sachs' indifference is mainly due to Paulson's personal reasons.

   But other Wall Street investment banks will not sit back and watch this "good thing" indifferent.

  Lehman Brothers Bank.

  In the trading department.

  CEO Mr. Richard Fuld.

  He was staring at a subordinate who was on the phone.

  The subordinate was talking on the phone in fluent neon dialect.

  Richard Fuld couldn't understand the neon words, so he could only wait by the side.

A few minutes later.

  The subordinate who can speak neon ended the call.

  Richard Fuld couldn't wait to ask immediately: "How is it? Is there any definite news?"

  Subordinates who speak neon words, respectfully answer:

   "According to our news channel over there."

   "Our informant in the Neon Central Bank said that within a short period of time."

   "Limited by the pressure of the Federal Reserve and the White House, they will not cut interest rates immediately like other currencies."

  Hearing the news, Richard Fuld suddenly showed an ecstatic expression on his face.

   It has been said before.

  After the Federal Reserve made a decision to cut interest rates.

  Most countries in the world will follow suit and cut interest rates.

   In this way, when the U.S. dollar depreciates, others depreciate more, and when it is reflected in the U.S. dollar, the U.S. dollar will appreciate instead, and the U.S. dollar index will rise even further.

  But in essence, the US dollar still depreciates when the Fed cuts interest rates.

   What's more, there are still a few days of reaction time in the middle, and the dollar will definitely depreciate in these few days.

  Richard Fuld, an informant from Lehman Brothers over at Neon.

  After learning the news that the Neon Central Bank was forced to be unable to follow the Federal Reserve's interest rate cut.

  The bulldog on Wall Street immediately beamed with joy.

  Because as long as Neon does not cut interest rates with the Fed.

  That also means that the yen will continue to maintain the current exchange rate strength unchanged.

  The U.S. dollar depreciates, while the yen maintains.

   This is completely opposite to the previous three-year bull market, which is conducive to the continued shorting of USD/JPY.

  Richard Fuld still can't fully believe this news channel.

  This kind of transaction involves tens of billions of dollars, of course, the more accurate the information required, the better.

  The Bulldogs of Wall Street, another few hours.

  After confirming this news through many channels and in many ways.

   Determine why Neon is threatened by the White House.

  Neon will really not cut interest rates along with the dollar this time.

   After really confirming that the news is true.

  In the trading department, Richard Fuld decisively issued the decision to short USD/JPY.

  He immediately empty the original more than 30,000 USD/JPY orders.

   Increased to more than 80,000 hands.

   Not only Lehman Brothers, got the news that Neon will not cut interest rates this time.

  Other well-informed Wall Street investment banks also got the news.

   These people make the same judgment as Richard Fuld.

  The U.S. dollar cut interest rates, but the yen did not follow suit.

   That is bullish for the yen/dollar, and the yen will appreciate.

   In turn, it is bad for the dollar/yen, and the dollar will depreciate.

  Some people may think that USD/JPY is not the same as JPY/USD?

  Aren't they the exchange of two currencies?

   Between normal foreign exchange, they are indeed the same.

   But in the international foreign exchange futures market.

  USD/JPY is USD/JPY.

  JPY/USD is JPY/USD.

  The two are different currency pairs.

  Even if they are in the foreign exchange market, they usually appear in pairs.

  USD/JPY is based on USD.

   Conversely, the yen/dollar is based on the yen.

  Let’s put it this way, USD/JPY 107.500 means that one dollar can be exchanged for 107.5 dollars.

   Going short becomes 107.300, and one dollar can only be exchanged for 107.3 yen.

   One dollar can be exchanged for fewer yen, so the dollar depreciates, and the dollar/yen goes short.

  Conversely, if 107.500 becomes 107.600.

  It means that one dollar can be exchanged for more yen.

  For the U.S. dollar, it means that the U.S. dollar appreciates and the yen depreciates.

  U.S. dollar/yen, which is based on the U.S. dollar, naturally goes long.

   At this time, the Neon Central Bank was pressured by the United States and could not cut interest rates, but the United States itself lowered interest rates.

   That means the depreciation of the US dollar, and fewer yen can be exchanged for.

   It is reflected in the dollar/yen currency pair where the bulls and the bears are now fighting fiercely.

   That is, the dollar/yen will continue to go short normally.

  It will remain empty until the end of the period when the United States is not allowed to cut interest rates for Neon. After Neon starts to cut interest rates, it may go long again.

   This is undoubtedly a very favorable condition for Wall Street investment banks who are shorting the yen.

  This is why Stanley O'Neill and them before.

   would seriously suspect the reason for Abel's collusion with the White House.

   This situation occurs, except that it is indeed good for strengthening the US economy.

   For Abel, who was shorting USD/JPY at that time, it will undoubtedly have huge benefits!

  Because Abel benefited the most at that time, Wall Street investment banks suspected his collusion with the White House.

   But now

   It’s not just Goldman Sachs who found out that Smith Capital changed from idling to long, and started to do long USD/JPY with a bad mind.

  Goldman Sachs detected it, but Paulson chose not to end because of personal reasons.

  But other Wall Street investment banks, after confirming these two news.

  They are not polite.

  Richard Fuld of Lehman Brothers placed 50,000 new empty orders at once.

  Merrill Lynch's Stanley O'Neill is not polite, after confirming these two news.

  The most powerful black man on Wall Street even put Merrill Lynch on 100,000 empty hands.

   By the afternoon of January 4th, the international foreign exchange market.

  USD/JPY has hundreds of thousands of empty orders.

  The long-term long positions that had been accumulated for more than two years were instantly flattened.

  USD/JPY maintained a one-day exchange rate around 106.100, then went down again and fell below 106.

  In the Smith Building.

  Traders of Smith Capital.

   They were a little desperate, looking at the account of Smith Capital.

   410,000 lots of USD/JPY long orders, the cumulative floating loss exceeded 1 billion US dollars.

  If it weren't for the Pacific Commercial Bank, Abel's own bank, as the main funding provider of Smith Capital this time.

  Losses like this, bank middlemen.

  I will definitely recommend Smith Capital to close the position, or ask Smith Capital to increase the margin.

   But this kind of loss is already scary.

  The total deposit is only three billion US dollars, and this has lost one-third of it.

   It is not far from the forced liquidation line, that is, liquidation.

   In this regard, David Mellon had to find Abel himself.

   "Boss, the situation looks bad."

  David Mellon said worriedly:

   "Continue, even if the Pacific Commercial Bank does not need to call for a margin. But Citigroup and Wells Fargo will definitely ask us to call for a margin."

   Margin call is very common in financial investment.

   But the problem is that there are only hundreds of millions of dollars left in Smith Capital's account.

   These hundreds of millions of dollars are used for emergencies, and they cannot all be filled here.

   And even if it is filled in, it may not be enough later.

   Of course Abel knew of this situation.

   But the more this happened, the more relaxed the expression on his face looked.

   "Simply put, you are short of money, right?"

  Abel asked with a smile.

  David Mellon hesitated for a moment, then nodded slightly.

  Because strictly speaking, it is really a lack of money.

   No shortage of money can guarantee the maintenance of the margin, so you are not afraid of floating losses.

   "The Pacific Commercial Bank, can you squeeze again?" Abel's first thought was his own bank.

  David Mellon shook his head and said:

   "I've contacted John over there. I'm afraid it can't be done. It has reached the critical line. If it crosses the line, John said that it may attract the attention of the FDIC and OCC. There is a high probability that there will be a lawsuit."

  This time Smith Capital’s foreign exchange investment.

   Pacific Bank of Commerce both provided $25 billion in funding.

  Its custody assets are only about 100 billion US dollars.

  Most of them are immovable assets.

  In fact, the active funds can be said to have been used to support the boss.

   It would be a bit too much to let the Pacific Commercial Bank contribute.

   In addition, strictly speaking.

  If something goes wrong with the investment of Smith Capital this time.

  The Pacific Commercial Bank will definitely suffer from this.

   It might even lead to bankruptcy.

  There is nothing I can do with my own bank.

   There are only two ways for Abel to raise a large amount of funds.

  One is the Pacific Bank of Commerce mortgage.

   Pacific Commercial Bank is now a medium-sized bank, with more than ten billion US dollars in its own assets.

  Use it as collateral to get loans from those large banks.

   At least billions of dollars in loans can be obtained.

   That's it, a little too much for Pacific Commercial Bank.

  It has already let it take the risk of bankruptcy in violation of regulations to contribute.

  Now it has to take out itself as a mortgage for money.

   It's not the last step, and Abel didn't want to do it.

  He has another source of funding.

   "Then take out our part of the funds in the US stock market first."

   Abel said.

  Smith Capital has invested in 131 stocks in the US stock market.

  The total investment exceeds 14 billion US dollars.

  The purchase time has been more than half a month.

  During the past half month, each of them has increased to a certain extent.

   "Sell the ones that have risen the most and have the best market prices." Abel told David Mellon.

  David also knew about the funds.

  Smith Capital’s $14 billion US stock investment.

   In half a month, Smith Capital has made almost three billion dollars.

   Many of these stocks will continue to rise, and holding them for a period of time can make more profits.

  David was reluctant.

  But Abel insisted on this, and David could only immediately order the traders to start action.

  Because the market was very good, Abel selected 31 stocks out of 131 and sold them.

  Selling fast.

  Smith Capital invested about US$3.1 billion in these 31 stocks.

  After selling them all, there was an extra $4.8 billion in the Smith Capital account.

   In other words, these shares brought Smith Capital a profit of $1.7 billion.

   This made David realize something.

  He asked Abel: "Boss, it seems that you think they won't go up any more, so you choose to sell them?"

  Abel smiled and said nothing.

   But it is exactly as David guessed.

  Stocks that will continue to rise and continue to make money, Abel did not choose to sell.

   Most of the 31 stocks that were sold have already finished their gains.

  In other words, there will be no further large-scale price increases in the future.

  So the liquidation of this part of the stock has little effect on the investment profits of Smith Capital in the US stock market.

  The additional funds of 4.8 billion U.S. dollars also made Smith Capital's funds more abundant and flexible.

   After Abel has so much free money.

  He immediately issued another order that made David tremble with fear.

  Abel requested that Smith Capital continue to increase its short-selling efforts against USD/JPY!

   By continuing to put in margin, put money into Wells Fargo and Citibank margin accounts.

   It’s January 6th.

  Smith Capital's foreign exchange account.

   Already holding more than 550,000 USD/JPY long orders.

  Account floating losses of more than 2 billion US dollars.

  At the same time on the sixth day.

  Neon time is six o'clock in the evening.

  Neon Central Bank announced a new policy of theirs.

  (end of this chapter)