Dong Qiangqiang's Story of Leaving Germany

Chapter 1095. Danger and Opportunity

Without waiting for Dong Qiangqiang to ask, Duanmu took the initiative to answer: "I listened to the morning news while brushing my teeth this morning. I happened to hear that the unaudited profits of other European automakers in the first half of the year were far lower than market expectations due to exchange rate fluctuations. I suddenly understood what was going on. Did you also think of this after hearing the news?"

"I remembered this when the teacher talked about the exchange rate in class. Although the Chinese market has broad prospects, the United States still occupies the top position in the overseas market for European car companies, whether it is Volkswagen or other German car companies. Statistics show that nearly half of German cars are sold to North America every year. In the past, we only focused on sales volume and sales revenue, but did not consider that if the money flows back to the company, it will be exchanged for euros. Since the beginning of this year, the exchange rate of the US dollar against the euro has continued to fall. This directly leads to all German car companies making a lot of money in the United States. However, once they are converted into euros, they will face losses of up to hundreds of millions of euros due to exchange rate fluctuations. The sharp drop in profits is the real reason why Americans are bearish on Volkswagen. Of course, Volkswagen is not the only one affected by the exchange rate. All German car companies that sell cars in the United States cannot escape this disaster. Unless the Germans never sell cars there, the exchange rate fluctuation of the US dollar against the euro is a hurdle that German car companies cannot get around."

"You said such an obvious truth, why didn't we pay any attention to it when we bought it?" Duanmu seemed to be asking Dong Qiangqiang, but also muttered to himself, "If I had known earlier, I would not have beaten around the bush and just gave him the money."

"Lack of skills, blindness, or taking shortcuts, which one do you prefer?" Dong Qiangqiang didn't hear Duanmu's murmurs clearly, and laughed bitterly at himself, "We deserve to lose money this time because of this. There is a line in Infernal Affairs that goes, you have to pay for what you have done sooner or later. For us, it is the tuition fee that we have to pay sooner or later, just under a different name. What we get by luck will eventually be paid back by strength. Well, let's not talk about this. The first batch of (options) will expire soon. How is the (Volkswagen) stock price these two days? What about the option (price)?"

"If there is really a problem with the exchange rate, then the stock price and option price should fall. The strange thing is that these two have been rising recently. At present, the option that is about to expire will not only not lose money, but also make a lot of money. In addition, Volkswagen has been receiving good news recently, with good news almost every month. The strategic plan we talked about last time to gradually invest a total of 30 billion euros in Asia has been successfully approved, and the ideas of building new factories in China and producing more popular cars have also been put into practice. The chairman personally laid the foundation for the second Volkswagen car factory in Changchun and filled the soil with a shovel, which was also reported in the newspaper. The Germans are so rigorous and keep their promises. It should be no problem for the Golf to be launched in September. In addition, the sales data of the (Volkswagen) domestic market in the first half of the year far exceeded expectations, and rose instead of falling. SARS not only did not affect (Volkswagen's) sales data, but also prompted more Chinese people to consider buying private cars. In the reports I have read, analysts are more optimistic about the growth of the Chinese auto market than before, and Volkswagen Santana is the first choice of many Chinese people. I believe Volkswagen will definitely benefit from it."

"What you said is indeed good news, but since we already know about this (exchange rate) thing, we can't just consider sales data, we also have to pay attention to the changes in the RMB exchange rate against the euro." Dong Qiangqiang's voice became a little low, "I checked the data from the beginning of the year to now, and the RMB exchange rate against the euro has also continued to fall."

"Fuck." Duanmu couldn't hold back for a long time and cursed loudly, "Is it true that the stock price will not rise just because of such a crappy exchange rate? If the exchange rate is so destructive, why is it still rising now? It doesn't make sense."

"You said a long time ago that stock prices reflect investors' expectations of a company's future disposable profits. The current rise may be the result of the combined effect of the many favorable factors you just mentioned, but it is hard to say when the market will reverse. Unless the US dollar and the RMB rise against the euro at the same time, no matter how high the sales data is, it will be useless if it cannot offset the profit loss caused by the exchange rate."

"You are studying economics, right? Then tell me, under what circumstances will these two exchange rates change in opposite directions?" Duanmu sounded a little angry.

Dong Qiangqiang said seriously: "From a country's international balance of payments, foreign exchange reserves, fiscal situation to its monetary policy, interest rate level, inflation rate, etc., all can affect the exchange rate changes between it and foreign currencies. This cannot be determined by a single factor."

"Then tell me the truth, do you think the downward trend of these two stocks will change in the short term?"

“Unless there is a war or a major financial crisis, it is difficult to see sudden changes in the short term.”

"So you think the right thing to do is to sell it as soon as possible while the price is still rising?" Duanmu said dejectedly.

"Westerners like to talk about danger, while Chinese prefer to talk about crisis. Our ancestors believed that danger and opportunity can exist at the same time. It mainly depends on the angle from which we consider things. I think maybe (exchange rate fluctuations) are not a bad thing for us," Dong Qiangqiang carefully said what he had been thinking about for a long time. "If we really believe that its revenue growth cannot bring more profits to the company, then we can actually consider put options. I know that your money and mine are already in it, but we have only used a small part of Sergeila and Anderson's money before, and the bulk of it is still lying in our account." "You mean... use their money... to short?" Duanmu was just glad that he didn't touch the money of the two people. At this moment, he suddenly heard Dong Qiangqiang's suggestion. Somehow, he suddenly felt a chill on his spine and thought to himself with fear: Why did he change the opposite direction in the middle of the conversation?

"Don't forget, none of the American companies we've contacted are optimistic about it, so even if we're bearish, we're not the first to try it. As for the long options we've already bought, we can sell them in batches, and then gradually buy put options. In this way, from the perspective of the total amount of funds used by Cicada, a small amount is bullish and a large amount is bearish, which can be considered a hedge. Do you think this is feasible? If we really do this, we can also have an obvious benefit: because of the recent rise in stock prices, the price of put options has fallen, which is actually a good opportunity to build a position."

"Let's not talk about whether the funds of those two people can be used and whether they are right or wrong in this direction. Just this change is too... what? Don't forget, we were still bullish on Volkswagen in the first half of the year. The first month of the second half of the year hasn't even passed, and our attitude has turned 180 degrees. Will this... be ridiculed by our peers for being too unprofessional? And how will the institutions that are already our clients view us?" Duanmu couldn't help but feel a lingering fear when he thought of the report he had sold.

"It doesn't matter. Our bullish logic is that we are optimistic about Volkswagen's earnings in the Chinese market. Didn't you say that? As long as the logic is self-consistent, the exchange rate of the US dollar against the euro will not change much in the short term, but is the exchange rate of the RMB against the euro really a solid block?" Dong Qiangqiang had long expected Duanmu to raise this issue. "Besides, making money is the kingly way. What others think is not important. Don't forget that those who are not our customers are all eyeing our rate of return. To put it another way, even if the last customer does not stay, as long as we can make money from catching cicadas, we will not be considered a failure this year. Isn't that the truth? Not to mention that you have to go to Russia to attend the performance review meeting at the end of the year. Don't you want to have a beautiful report card to show to the Russians?"

Duanmu was speechless for a moment after hearing what Dong Qiangqiang said. Actually, in addition to wanting to communicate with Dong Qiangqiang about the reasons why Americans were bearish on Volkswagen, he also wanted to discuss with him the stocks of several luxury goods companies in Britain, France and Italy. He was both impressed and excited by the mid-term performance of these luxury goods listed companies during the first half of the year when SARS was rampant. He firmly believed that after the end of SARS, with the resurgence of the tourism industry, the domestic luxury goods consumption market and the luxury goods purchases brought about by overseas travel would surely give these old luxury goods companies a second spring, and the company's stock price would naturally benefit from it, and all would prosper together. But after discussing with Dong Qiangqiang, he never expected that after a phone call he would come to a conclusion that was completely opposite to the previous one. He was unable to come to an end and no longer had the mood to continue discussing luxury goods stocks.

Just when Dong Qiangqiang was advising him to make a decisive move, Duanmu muttered "Let me think about it" and hurriedly hung up the phone.

Dong Qiangqiang stood quietly in front of the window. The dark night sky had now completely brightened. The rain had not stopped but it had become much lighter. He digested his thoughts while thinking about what to do next. He did not come out of his thoughts until a familiar classmate greeted him. Recalling his rude attitude towards Wang Shunan, he felt a little guilty. He wanted to call to apologize to the other party, but he felt embarrassed. After thinking about it, although he was also curious about why Anita came to Wang Shunan, he did not make the apology call in the end.

At the end of July, Lao Bai told Dong Qiangqiang that the landlord's trip to China had officially entered the countdown. On the other hand, all the tourism projects related to the One Euro Hotel had ended. For this project alone, Le Bai received a total of 27 tour groups, which was a miracle.

Dong Qiangqiang took his first exam in the advanced stage of his master's degree as scheduled. It was neither a minor nor a major exam, but an elective course, "U.S. Financial Statement Analysis". With the special training of the CFA course, he felt that he had a chance to strive for the highest score when he walked out of the examination room, and he was more confident about the subsequent exams.

The first batch of public bullish options under Buchan expired. Because of the use of leverage, the option yield was higher than the two expected, reaching 33.5%. At the same time, the stock price and the price of bullish options were still rising.

Lu Shan also exceeded Dong Qiangqiang's expectations. He successfully got the admission letter from the Technical University of Munich, which he had longed for. Just like Dong Qiangqiang did back then, he began to prepare to move to a new city.

Li Lei also called Dong Qiangqiang to show off that he had received an admission letter from the University of Trier's major in economics and would soon become Dong Qiangqiang's alumnus again. Dong Qiangqiang was stunned by his progress.

There have been so many damn accidents this summer.