"Today is the day!" Zhong Shi, far in Hong Kong, rubbed his hands together, ready for a big move.
"Are you serious? You still want to short the Japanese market?" Andrew, coming to his senses, looked shocked, even a bit angry. Earlier, Zhong Shi had sold all his short positions, and Andrew thought Zhong Shi had given up on the idea. Now it seemed that he hadn't abandoned the plan but was looking for a better opportunity.
"Look, the Japanese stock market has been rising for four consecutive days. With today's high opening, it's bound to rise again. How are you going to short it?" Andrew held a chart of the recent market trends and pointed at it.
Zhong Shi didn't take Andrew's intense reaction to heart. In fact, no one could stop him now. Knowing this, Liao Chengde and Zhong Yi wisely kept quiet, pretending not to notice.
"You're right, the Japanese stock market is rising, but Andrew, have you noticed that the momentum has slowed down recently? It's starting to look like a spent force." Zhong Shi wasn't annoyed; instead, he patiently explained to Andrew.
"Uh... I admit you have a point. But that doesn't mean the Japanese market will decline in the future. Shorting still carries a lot of risk." Andrew studied the chart carefully and had to admit that Zhong Shi had a point.
"You're not wrong, but you have to understand that the United States is a country that won't let anyone take its dominant position. It will definitely take action against Japan. It won't tolerate Japan surpassing it over the next decade. Moreover, the overvaluation of the Japanese economy is largely due to U.S. actions, and it will likely be the one to burst the bubble!"
"But you can't be sure it will happen soon, or that it will be around the 40,000-point mark, can you?" Andrew still didn't believe it.
"Alright, let me give you an example!" Zhong Shi slapped his forehead, a bit frustrated. "If I have two Nikkei futures options, one bullish and one bearish, I'll sell the bullish one to Japanese companies and the bearish one to overseas funds investing in the Japanese market. What do you think?"
"Currently, the rise in the Japanese stock market is strongly boosting the confidence of domestic companies. In this situation, they will definitely accept the contract. But why would overseas funds buy the bearish option?" Andrew was confused.
"Good question. This involves macroeconomic research! In fact, international investment banks are the best at macroeconomic analysis. Haven't you noticed that Goldman Sachs and Morgan Stanley have been releasing bearish reports on the Japanese economy recently? They mention that while the real economy appears to be growing rapidly, the actual growth rate is far below that of the stock and real estate markets. Additionally, the profit margins of export trade are declining, and after removing capital gains and real estate price increases, these companies' pre-tax profits are lower than in the 1970s. What does this mean? It means that the current growth is a false prosperity, a bubble!"
"International funds take these reports from major investment banks very seriously. After analyzing the financial statements of companies, they will also discover this fact. In such a situation, to hedge their risks, what do you think they will do?"
"Buy the bearish options issued by international investment banks!" Andrew's voice dropped, finally understanding why Zhong Shi had been frantically gathering various macroeconomic data and research reports from international investment banks.
These internal reports, which are only provided to large fund companies, are generally not accessible to ordinary investors. Instead, they often receive reports with opposite opinions. Out of ten leaked reports, seven or eight might be true, but one or two core reports on major trends are false. In this mix of truth and falsehood, ordinary investors find it very difficult to discern.
"Then what?" Andrew was still reluctant.
"It's simple. Investment banks use this information advantage to sell all the options, earning substantial fees while balancing the two opposing forces. Now, they have the power to decide when to burst the bubble!"
Zhong Shi smiled faintly, looking somewhat enigmatic.
"Is it now?"
"I don't know. But it should be when these options can freely circulate in the market. As far as I know, bankers started selling these options in Japan two years ago, and they have since appeared in Europe. I think they will soon be listed on U.S. exchanges."
Andrew was silent, forced to admit that once these options could freely circulate, it would severely undermine the confidence of Japanese market investors.
The reason is simple: a significant part of Japan's market prosperity comes from international speculative capital. These greedy funds always find the most profitable places early and leave first with substantial gains when a crisis is about to erupt.
When U.S. investment banks became members of the Japanese exchange, the channel for foreign capital was opened, and a steady stream of speculative funds flooded into the Japanese market.
Now, they are about to short the market.
The poor Japanese are still in the dark, believing that the Japanese stock market is truly prosperous and that they will dominate the world economy in the next decade.
"Give the order!" Seeing Andrew's silence, Zhong Shi commanded calmly.
Zhong Shi's argument was somewhat forced, but Andrew, who knew the power of investment banks, was successfully convinced. Not only him, but even Liao Chengde and Zhong Yi, who had been pretending to be uninvolved, were also intimidated.
International investment banks are just the vanguard; behind them is a battle between nations. Japan, due to its inherent political weaknesses, cannot compete with the United States. Moreover, they are also concerned about the bubble, so they tacitly accept this approach to some extent.
A combination of factors led to the turning point in the Japanese stock market.
On the last trading day of 1989, there was no significant turmoil. The Nikkei index once reached 38,957 points but ultimately rose by only 38 points, closing at 38,915 points.
No one realized that this peak would be the highest point the Nikkei index would reach in the next twenty years! After this day, the Nikkei index would plummet, even falling below 10,000 points.
Zhong Shi's funds successfully established a short position of 8,000 contracts, with an average price of 40,500 per contract (40,500 * 500 / 150 * 8,000 / 10 = $108 million, with a margin of 10%), costing over $100 million, with the remaining tens of millions set aside as reserve margin.
This was thanks to the performance of the Japanese market. The bulls almost didn't hesitate to take on such a large short position.
In Japan, while everyone felt regret, they also looked forward to the new year, hoping that the Nikkei index would quickly reach the 40,000-point mark in the coming year, unaware that the crisis was already at their doorstep.
Jim and his team could finally breathe a sigh of relief. They wouldn't lose money today. In fact, losing money every day was like being fried in a pot, making them extremely uncomfortable, even though it wasn't their own money.
The next trading day would be on January 4, 1990, a Thursday. They had five days to relax. No one wanted to stay in this place, and like at Christmas, they packed up their things as soon as the market closed, preparing to leave for Tokyo and catch the earliest flight out of the country.
Even Jim and Maxim were no exception.
On this day, several major U.S. investment banks announced that they would begin issuing Nikkei index put options in the over-the-counter (OTC) market in January of the following year.
The OTC market is a general term for markets that differ from traditional exchanges. Here, there are no trading seats, and securities are bought and sold directly between buyers and sellers (electronically or by phone). There is no fixed, centralized trading venue, no broker system, a wide variety of trading products, and much looser regulation, giving it a significant advantage in trading volume.
International investment banks saw this advantage and decided to issue Nikkei index put options in the OTC market. Of course, the counterparty for these options would not be themselves but the bullish investors who were confident in the Japanese market.
This news was buried in the New Year's celebrations, but it didn't escape Zhong Shi's watchful eye.
"See, just as I said, it's starting now!" Zhong Shi said to Andrew, pointing at the fleeting image on the TV screen, not without a hint of pride.
They were watching CNBC, the consumer news and business channel, which continuously broadcasts global financial news, with screens hanging in the exchanges to keep traders informed of new information.
"Indeed..."
Andrew turned his head, looked for a while, and gave Zhong Shi a thumbs up. This time, he was truly convinced. Zhong Shi seemed to have an extraordinary sense for market trends, which Andrew considered a natural talent.
At the same time, Jim and Maxim, waiting for their flight at the Japanese International Airport, also saw this news. In the noisy waiting hall, the two tall Westerners stared at the TV screen, suddenly letting out a strange cry.
"I get it, that's how it is!"
"Yes! Yes! The main battlefield isn't here!"
The two white men embraced in public, shouting wildly, even shedding tears.
"Are they gay?"
A short, middle-aged Japanese man passing by them muttered under his breath and quickly left with his suitcase. This man was Iwamoto Kaoru, returning from Singapore.
The two men who had been fighting to the death in the Singapore exchange passed each other by.
(The protagonist has finally made a direct appearance. The Christmas campaign has taken up a significant portion of the story, with a lot of professional content. The protagonist's absence has made some readers anxious, and the author will pay more attention to balancing professional content and the protagonist's role. The second volume of the book will be fully updated within the next seven days. Thank you for your continued support and attention!)