Chapter 897 – Preach to Deaf Ears
Druckenmiller is one of the fund managers in Quantum Funds, and also one of Soros’s four deputies. He rushed into Soros’s office without knocking. In Quantum Funds, only the four deputies can enter Soros’s office without knocking.
“What is it, Miller?”
“Mr. Soros, Thailand’s XX commercial bank, lent out a large sum of Thai Baht on a forward contract, and it’s not our people.”
Soros laughed. Had they started to act? Soros is very impressed with Feng Yu’s skills in the financial market. He felt Feng Yu might even be better than his four assistants.
But it’s a pity that Feng Yu is a Hong Konger and is wealthy. He will never work for Soros. But to say Feng Yu is on the same level as Soros, the latter will never agree.
Feng Yu is only lucky to buy so many of Microsoft’s shares. If not, how can Feng Yu compete with Soros?
“Observe them close and monitor if they operate the same as us.” Soros wants to see to what extent Feng Yu can do without his orders.
In the afternoon, Soros received information that a large amount of funds had entered the market and bought some of Thailand’s banks’ shares.
Soros knew how Feng Yu operates. What Feng Yu was doing is the same as Soros. The next step should be using various methods to increase Thailand’s debts.
……
Feng Yu used the money he borrowed to buy shares, bonds, futures, etc. He maximized his loans and bought as many shares and bonds as possible. After that, he will use his bonds as a mortgage to get more loans. He will repeat this cycle over and over again.
This way, 10,000 USD can purchase a few hundred thousand USD worths of bonds. Where did the extra money come from? From Thailand’s banks and commercial institutions.
“Feng, what is going on? How come we are in so much debt?” Kirilenko is panicking as they are slow in debt.
“It’s a good thing to be heavily in debt. What do you think will happen if we sell off all the bonds in our hands?” Feng Yu smiled and asked.
“Ah? Sell everything? Won’t we lose money this way?” Kirilenko was stunned. They will lose money if they sell everything! We are here to make money and not lose money!
Kirilenko’s investment team head, Lennon, can’t stand it any longer. He reminded Kirilenko. “Mr. Kirilenko, did you forget we had bought a lot of futures contract earlier? All the contracts are Short contracts.”
“Short? We have a lot of short contracts?” Kirilenko asked excitedly and turn to Feng Yu. “What is a short contract?”
Feng Yu and Lennon raised their heads and looked at the ceiling. You don’t know anything, and why are you so excited when you heard about the short contracts?
“Shorting means we buy some futures contract and we must buy back the instruments to sell to the other party within a period stated in the contracts. We only need to pay 10% of the value, or you can understand it as 10-times leverage. That means we used 1 USD to complete a 10 USD deal.”
Kirilenko had a blank look on his face. “And then?”
“And then it’s like what you mentioned just now. Once we start dumping our shares and bonds, the share prices will plummet, and even the market index will drop.”
“Of course, I know about this!” Kirilenko rolled his eyes at Feng Yu.
“The market index drops and will trigger all the share prices to fall. There will be panic, and all investors will start dumping their shares. Overseas investors will lose confidence in the Thailand stock market and also dump Thailand’s stocks. We must sell these commodities at 10 USD when the time comes. But we do not have the commodities in hand now. We can buy them when the prices fall to 8 USD. This way, we will profit from the difference, which is 2 USD. With the 10-times leverage, we will earn 20 USD. This is how you profit through a Short Futures contract.”
“But we had lost money before. Can the profits cover our losses?” Kirilenko still remembered what Feng Yu said. The initial two months will have no profits.
“We might not cover our losses, but the amount will be negligible. This is because our debt ratio is too high, and this will cause us to incur losses from the bonds and shares. But don’t forget we still have a weapon, which is the Forex contract.”
Kirilenko blinked his eyes and saw Feng Yu’s angry stare. He stopped asking and wait for Feng Yu to explain.
“When share prices fall, the stock index will also fall, which will lead to many investors losing confidence in Thailand’s economy and currency. Do you still remember what we did when Rubles depreciate?” Feng Yu asked.
“I know. We exchanged Rubles for USD!” Kirilenko replied excitedly.
Feng Yu nodded and gave Kirilenko a thumbs up. “That’s right. Investors will exchange their Thai Baht to the safer USD. Although I am not willing to admit, the USD is one of the most circulated and important currencies in the world.”
Kirilenko’s face changed and kept quiet after he heard how powerful USD is. But he could not refute this as Rubles is not as strong.
“The Forex is similar to the stock market. When a certain currency is dumped in large amounts, what do you think will happen to the exchange rates?” Feng Yu asked.
Kirilenko replied cautiously. “That currency’s exchange rate will drop?”
Feng Yu gave Kirilenko an encouragement look. “Yes. The exchange rate will fall. It will drop from 24:1 to over 30:1. Since the value of the USD will not change, and Thai Baht will depreciate.”
“When this happens, our Thai Baht contract will make money, right?”
“Of course. Our Forex contracts will make a sum of money for us, and Baht’s depreciation will cause inflation in Thailand, and Thailand’s economy will go into recession. Thailand’s stock market will crash, and share prices will plummet further. What we can profit is from shorting the stock index and Forex.”
“Wait. From what you mentioned, we should make high profits. But why did you say we will not make money.” Kirilenko was confused. They were using 10-times leverage, and how can they still not make money?
Lennon continued with the explanations. “We will lose money when we sell our Thai Baht.”
Kirilenko felt giddy after all the explanations. They will lose money at the start and then make money? He still doesn’t understand how it works. Never mind. The financial market is too complicated, and not everyone is like Feng Yu, who is good at everything. I only want to make some money. I will just follow what Feng says.
Feng Yu saw the confused look on Kirilenko’s face and can’t be bothered to explain to him. He had tried his best to explain in layman’s terms, but it is too complicated. Of course, Feng Yu is also influenced by his job as a financial broker in his previous life. He did not explain all the details to his clients too.
In Feng Yu’s previous life, he only explained the essential terms of the investments to his clients and left out the details. This way, his clients will agree to let him handle the investment. If Feng Yu made it sounds so easy, who will want to hire brokers?
“Brother Ki, you just need to know that we will lose money these few days, and you must remain calm.”
Kirilenko replied angrily. “When am I not calm? I said I would let you all handle everything. Feng, I trust you and won’t mind even if I lose money!”
Feng Yu rolled his eyes. Calm? If you are calm, you will not be drinking with women now, instead of sitting in the office looking at the financial reports. Never mind. Just let him do whatever he likes.
