1988 - 2nd Quarter (6)
1988 - 2nd Quarter (6)
"Hmm......"
I was pondering while looking at the <Memory Palace>.
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<Memory Palace>
[Coppers M&A]
[McMillen M&A]
[Lucky Shop M&A]
[Copper]
[Fieldsbury LBO]
[Craft M&A]
[RJR Nabisco LBO]
[1988~1990 Mark/Dollar Chart] : 100K
[1988~1990 Yen/Dollar Chart]
[1988~1990 US Base Interest Rate Chart] : 500K
[1988~1990 US 30-Year Chart]
Coins Held : 7.3K
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The coin usage I had only been saving up and pondering until now was all used to open events and the Yen/Dollar chart.
Since I paid the airplane lease cost, it was just enough.
It's fortunate, if you call it fortunate.
The M&A events were things I roughly remembered.
If the investment funds are sufficient, it's a situation where I can enter anytime.
Clearly, as I hypothesized, those seem to be correct in chronological order.
The near future is cheap, and the farther future from now is expensive.
'I understand everything else, but Copper?'
When it comes to Copper, only one thing comes to mind.
Mr. Copper.
Hanamaru Yasuo.
The protagonist of the Sumiminato Copper Incident.
'Was that guy active from this period?'
I remember Mr. Copper exploding around 1994.
'Copper.......'
In the future, it's used as an indicator that precedes the turning point between recession and boom, Doctor Copper.
But now is a period when futures are just beginning to emerge.
Most transactions occur at the LME (London Metal Exchange), and COMEX hasn't even launched copper futures yet.
'Should I just watch for now?'
It's not like grains where you can know the timing, nor is it like stocks where you can hold long-term.
If you keep rolling over copper futures, your account will melt.
Let's add just one more item to observe in the morning routine.
"Ara."
"Yes."
"Track copper in the morning and prepare the report."
"Got it."
If I keep watching steadily, some signs will appear, right.
June 16, 1988.
"Starting tomorrow, we'll begin settlement."
- Finally!
Matthias shouted so loudly my eardrums rang.
"You've worked hard."
- Don't even say it! I thought I was going to die listening to complaints every day.
The boutiques operating our omnibus account apparently pleaded to settle, please.
At CBOT, they called Switzerland every day with urge and threats, right?
But what do I care.
If they took those expensive fees and ate them, they should deliver value for the money.
And the banks probably secretly hoped they'd hold out too.
Since the amount they can receive rises if they sell at a higher price.
The reason they complain to Matthias over the phone is probably some kind of show-off.
- But the banks say if they dump this, the market will be completely shattered.
"That would be the case."
- Is it still okay?
"No. We need to settle properly step by step. I'll explain, so listen well and relay it."
- Ugh!
Anyway, just explaining the outline is enough.
The boutique traders will understand even if they just hear a simple outline.
"First, we'll exercise the options."
- Exercise? The expiration date is still a bit away.
"Grains are American options. You can exercise anytime."
Unlike European options that can only be exercised on the expiration date, grains can be exercised anytime.
If it were oil or metal derivatives, you could receive the spot after the expiration date, but grains aren't like that.
Grains are sensitive to timing.
- I see. So?
"If you exercise, you receive a futures long position contract."
- Yes.
"And then short the futures."
- ......Yes?
"Then the long contract and short contract offset, leaving only the profit."
It's the typical futures settlement method of opposite trading.
"If you tell the banks that, they'll understand."
- Got it.
"There will be sufficient selling pressure, so we can dump all the futures contracts too."
There will be some impact in the futures market, but since everyone is crazy about long positions now, they'll gladly accept them eagerly.
"Target prices are Soybeans 1000, Corn 320."
- I was checking prices daily, but it's astonishing anew. Then how much is our profit?
"Approximately 250 million dollars?"
- Wow.
About a 500% profit rate, huh.
That huge scale of funds growing over 6 times.
It's somewhat scary.
In my head, I thought countless times so I easily said billions, tens of billions of dollars.
But as it actually gets achieved one by one like this, it gives me goosebumps.
Should I say even I myself can't gauge how far it's possible.
A feeling of stepping footstep by footstep into an unprecedented place.
"Then I'll hang up."
- Yep! Good work......, Ah! But what about that money?
"Send it here."
- May I ask where you'll invest it?
"I'll buy US bonds."
- How much?
"All."
- ......? All of it?
"With 30x leverage."
- Th, uh, um. I have many things to say but I won't say them.
"You thought well."
I chuckled and hung up the phone.
Seeing the results, some belief has arisen, huh.
"Ara. Call David."
David, as if he was waiting, quickly entered my office.
"Did you call me?"
"When grain settlement ends, funds will come in. Approximately over 250 million dollars."
"250 million?!?"
"Yes."
"Uhhahahaha! With that, we can hold more Nabisco, right? I want to stop seeing employees idle."
"Don't worry. You'll get busy. Not Nabisco though."
"Then?"
"30-year."
"......Ahhh! Really?!?"
"Yes. This time, unlike before, we can't take all from Salomon, so we need to split all banks we can mobilize and buy as much as possible."
David made a grimace.
"When deposited, can we set it to enter immediately?"
"No. Only when I say, you can enter."
"Got it."
It should be fine.
Even with a face that looks like tears will drip drop by drop, he does the tasks assigned properly.
For a trader of this era, truly safety-oriented, I mean.
Salomon Brothers.
"Damn it all!"
If Bradley Erickson was the unseen king of the prop trading department, the absolute ruler of Salomon Brothers was the chief of the bond department, Johnny Meriwether.
But he, making that nickname meaningless, was wildly throwing office furnishings and spewing curses.
"These damn betrayers! Rebel bastards!"
"Us? Why?"
The person calmly watching that scene was the chief of the sales department, Roman Clouseau.
He was deliberately maintaining an expressionless face, but inside he was shouting cheers.
'My stomach feels clear!'
That long time of humiliation and oppression.
The time to return as 'The T-bagging' Roman had come.
'The rookie really pulled off a big job.'
I didn't think Mickey, who just shed the rookie tag, would bring such a large-scale operation.
Indeed, one well-raised slave isn't jealous of ten laborers.
"We just proceeded with department work according to procedure, right?"
"You did it knowing off-the-run was needed!"
"That's the bond department's situation."
Salomon's bond department conducts bond arbitrage trading through prop trading.
When the Treasury issues new bonds and on-the-run emerges, they short sell on-the-run and repay with off-the-run.
Even though it's just a 0.1% interest rate difference, if you use repo to increase leverage, you can earn quite a large scale profit without risk.
It was also the main strategy responsible for incentives in the bond department.
But most of the volume needing repayment is already sold to clients.
Meaning now, the bond department, to repay the shorted US bonds, has to buy from the market or spit out held on-the-run.
That is, in other words, also meaning this quarter's incentives will be cut to half of half.
"If we committed some wrongdoing, refer it to the disciplinary committee."
Roman spread his hands and shrugged his shoulders.
As if asking what's the problem.
"This......!"
Johnny Meriwether also couldn't spit out the words trying to come out past his throat.
Because the bond sales themselves aren't problematic.
Actually, the work also proceeded through the bond department.
The sales department just received and passed on orders.
Viewed from the whole company, it's rather beneficial, so the board would welcome it, not have reason to refuse.
Only the bond department whose incentives decrease will suffer loss.
"More than that, rollover costs will keep coming out, shouldn't you quickly repay the short sales?"
"I know without you saying!"
"Since you called me and were shouting, I thought you didn't know. Then it was calling me amidst your busyness."
Kwang-!
Once again, a file flew through the air.
"We'll see!"
"As you wish. 20 billion dollar credit. I'll enjoy it well."
Incentives for repo rollover continue to be shared while the position is maintained.
Even though the bond department does all the work, the sales that brought the contract sit and keep receiving free incentives.
"Get out! Damn!"
"No, it was Johnny ssi who called me."
"Get out, I said!"
Roman went out with a bitter smile.
Kwang!
Johnny slammed the desk, seethed for a while, then shouted.
"Hey! Anyone come in!"
One of the secretaries entered, saw the messed-up office, and deeply sighed.
"Did you call me, Chief."
"Did you find out who the bastards that screwed us are?"
"It's a place called EXE."
"......What the hell do those guys do?"
In this field, guys with lots of money aren't one or two, but hedge funds with the capacity to buy 21 billion dollars worth of bonds are few.
At least they should have been known secretly by name.
"It's a newborn less than half a year old."
"What?!?"
"And they sold the gold of the Swiss Central Bank."
"Really, what kind of bastards....... No. Important thing isn't that crap. Find a way to crush those bastards!"
"Time is needed. EXE doesn't seem to be the main body."
"That would be. Damn. Anyway, find out as quickly as possible!"
"Got it."
Johnny took out liquor, poured it into a glass.
"No matter who they are, they need to be prepared to get hit as much as they hit this body."
He looked at the messed-up office, gulped down strong whiskey in one go.