Long-Term Capital Management (LTCM) was a star company. Its core figures were John Meriwether and the team he brought from Salomon Brothers, including two Nobel laureates, Robert Merton and Myron Scholes, as well as former Federal Reserve Vice Chairman David Mullins. It was a constellation of stars, known as Wall Street's "dream team."
The company was founded in 1994, and its performance in the following years was extremely impressive, attracting the attention of almost all of Wall Street.
LTCM made a profit of 19.9% in 1994, 42.8% in 1995, and 40.8% in 1996. In 1997, it encountered the Asian Financial Crisis, yet still managed a profit of 17%.
This incredible company operated in secrecy for its first few years, but there are no secrets in the market. Big players in the financial market could infer the actual situation through capital flows and various other means.
Currently, there are many speculations in the market, but none have received authoritative recognition.
"Why are you rambling on? Everything you've said so far is nonsense?" A manager from an unknown company interjected.
He Zhengcheng didn't remember his name and couldn't be bothered to turn his head to look. One cannot discuss ice with a summer insect; how can one bother with the common mediocrity of the world?
"I've read many research reports on Long-Term Capital Management. Last time, I think I saw a report on Yahoo that gave me a lot of inspiration, but unfortunately, I didn't pay attention then, and now I can't find it."
"I don't remember the detailed content of that report, but I still clearly remember two key figures."
"Long-Term Capital Management held approximately 50 million US dollars in principal, but it leveraged over 2500 billion US dollars in funds. This means they routinely used leverage exceeding 50 times."
"Since Long-Term Capital Management deals in financial derivatives, it essentially influenced over one trillion US dollars in funds. Am I wrong in saying this?" He Zhengcheng asked.
"What does this indicate?" Someone still didn't understand.
"As long as we make Long-Term Capital Management lose 5 billion US dollars, we can create a giant bomb on Wall Street with a scale exceeding one trillion US dollars." He Zhengcheng grew more excited as he spoke.
Just imagine, if one trillion US dollars of capital were affected, countless financial institutions on Wall Street could go bankrupt!
If this loophole were exploited, and those who suffered losses wanted to stir up trouble, coupled with the power struggles between several major countries, perhaps, perhaps... He Zhengcheng suddenly broke out in a cold sweat. This, this is too dangerous... "Making a company lose 5 billion US dollars is still too difficult!" By this point, someone was already considering the feasibility of the matter.
After all, making a company incur losses is many, many times simpler than artificially creating a financial crisis in America.
"..." He Zhengcheng was still somewhat terrified at this moment. Would he be silenced?
He was reborn, became a big winner in life, and at this moment, discovered a very serious loophole in America. If handled properly, it could trigger a financial crisis no less severe than the 2008 Subprime Mortgage Crisis.
"Do you have any method to make Long-Term Capital Management incur losses?" Someone asked him.
"Ah, um, uh..." He Zhengcheng hesitated. Should he silence them?
Forget it, a great man overlooks the faults of a small man. There are more than ten people here; silencing them on their territory would be too brutal. I'll spare them!
"What, you have no solution either?"
"Of course, I don't have a solution, but Russia does. Based on Long-Term Capital Management's operating model, they are bound to invest in the Russia bond market."
"If Russia defaults on its debt, Long-Term Capital Management will inevitably suffer huge losses."
"Then we spread this news, using public opinion to heighten public panic, which will inevitably overwhelm the America capital market. Regardless of whether Long-Term Capital Management goes bankrupt, to deal with a potential crisis, almost no bank on Wall Street would dare to continue lending large amounts of funds to Soros!" He Zhengcheng casually rattled off a few sentences.
What he said made sense. Once a financial crisis occurs, cash is king. Lending money to others at that time would be suicidal and met with ridicule by everyone.
There were still difficulties, though. One was Russia's debt default, and the other was how to know the scale of Long-Term Capital Management's losses.
However, at this point, he didn't plan to continue speaking. If something went wrong, he wouldn't even know how he died.
"What if Soros can crush the Hong Kong capital market in the shortest possible time?" another relatively low-key person said.
"!!!" One truly cannot underestimate people; there are always those smarter than him, better at grasping key points. Crushing Hong Kong would yield a large amount of capital, but, uh, it would also lead to a quicker demise. Let's not discuss that for now.
"When two armies meet, the brave one wins. There's no such thing as a free lunch in this world, wanting to get through a crisis unscathed. Without courage, without spirit, in such a national war, one will inevitably be completely devoured," He Zhengcheng said righteously.
"Yes, in the final analysis, we still have to rely on ourselves!"
"Either compete with Soros and his group to see who collapses first, or show the courage to fight to the end, not limited by the rules of the game they set," He Zhengcheng kindly reminded.
According to the existing rules of the game, if the Hong Kong Government and the mainland inject large amounts of capital, the strength of international speculative funds could completely defeat Daxia Country and the Hong Kong Government, which would mean hundreds of billions of US dollars in profits, a feast for financial capital worldwide.
Of course, unless Daxia Country and the Hong Kong Government were all under a 'weak intellect halo,' they would certainly not let Wall Street have its way.
America is stealing our family's assets. Initially, for the sake of the bigger picture, we might reason with the robbers, but since they don't care, why would we follow their logic and watch them steal money? Of course, we'd just flip the table. Daxia Country isn't some naive female lead who counts money for the other party after being sold.
So, the matter is very simple. The Hong Kong Government and Daxia Country can use their foreign exchange reserves to directly enter the market and acquire shares of blue-chip companies on the Hong Kong Stock Exchange, pushing up stock prices and boosting the stock index. In fact, the Hong Kong Monetary Authority later did just that.
The entire battle lasted until September. During this period, Long-Term Capital Management's crisis fully erupted after Russia's debt default, causing panic on Wall Street. America's three major stock indices plummeted in August and September, and the Hong Kong financial crisis finally ended in October.
The timing is surprisingly consistent. Can you say there's no connection between them?
At least there can be. If there isn't, then create a causal relationship.
Big capitalists have always been so arrogant and overbearing!
Lu Xun once said, there was no road in the world to begin with, but when many people walked it, a road came into being.
"If necessary, fight a protracted war..."
"I'll go back and look into Long-Term Capital Management..."
"Hmm, this is a breakthrough!"
"50 times leverage, they can even play like this, aren't they afraid of killing themselves?" someone said.
"Who isn't?"
He Zhengcheng's expression remained unchanged; he wasn't going to say more. The highest level of deception is when you believe it yourself, and he truly believed it. As for whether it's real or not, you can judge for yourselves.
"Cheng Zai, come sit. This is my business card. Interested in joining our company?"
"What's so good about your company? It's just..."
"Sorry, I don't have any plans to work for anyone at the moment," He Zhengcheng directly refused.
"We can form a company together instead!" someone suggested.
"Sorry, I haven't decided which industry I want to pursue yet!" He Zhengcheng replied.
"No problem, we can cooperate once you've decided."
"I still want to prove myself through practice, or rather, train myself. Zhao Kuo was also good at theoretical warfare, and I might not even be as good as Zhao Kuo. I need to be battered in the market a few times to summarize true experience!" He Zhengcheng began to be low-key at this point.
Damn it, what was he doing before, shooting his mouth off without knowing his limits?
"Hahahaha..." A burst of laughter. Seeing He Zhengcheng rein himself in, without the arrogance he had just displayed, these people also started chatting and laughing with him. After that, no one discussed serious matters...