The Son of Finance of the Great Age

  Chapter 155 Quantum Fund This Year

   Just when Zhongshi was gearing up for a big job, on a certain office floor at 888 Seventh Avenue in Manhattan, some white people in suits and ties were holding a meeting to discuss betting more on the yen.

"We made a lot of money on the yen last year." Druckenmiller started from last year's record: "So I decided to cut down the European bond position that had made a lot of money, and then continue to bet heavily on the yen. .”

There were more than a dozen fund managers sitting in the audience, all of them tilted their heads and listened carefully to the analysis of the most important fund manager. The status is almost only under one person, but above others.

Since making huge profits from British pounds, Swedish krona and other currencies two years ago, investors from all over the world holding checks and waiting for the acceptance of Quantum Fund have been visiting here in an endless stream. At the same time, the scale of Quantum Fund has also expanded rapidly. , is now the largest hedge fund on Wall Street.

  Although it did not appear in the classic battle against the French franc in 1993, it is generally believed that the Quantum Fund was also involved, after all, they have a good reputation. But on Wall Street, most people know that the campaign against the French franc that lasted for more than half a year was carried out by Robertson's Tiger Fund. After all, the performance and net worth are there. As long as one of their investors reveals their words, the whole Wall Street will know up.

It’s ridiculous to say that there is a way for the news of Wall Street to be passed on by the shoe shiners on the street. The well-dressed Wall Street elite, whether they are traders or bankers, pay great attention to appearance, and the leather shoes under their feet cannot tolerate Dirt, so the shoe shiners who make a living here have a relatively regular clientele. While shining shoes, these elites working in large financial institutions often chat with these people, and a few words or the amount of tips can reveal a lot of information, so that during the financial crisis in 2008, London The traders in the City quietly asked the shoe shiners for news of other colleagues who came here.

  Since the franc failed to protect the exchange rate in the end, what did the Quantum Fund do this year? In fact, their income is no less than that of Tiger Fund, which has achieved great success in the franc. In addition to their funds invested in the European bond market, more investment targets are aimed at the yen exchange rate.

The exchange of the Japanese yen to the US dollar is free floating, so it is impossible to use a strategy like that against the British pound, and this market is extremely large. Although the Japanese market has been sluggish in the past few years, the economic strength of this country must not be underestimated. All of them can put Quantum Fund in an irreversible situation. Therefore, Quantum Fund basically makes a fuss about yen futures and options, specifically, most of them make fuss about options.

But options are not safe. Druckenmiller soon discovered that the exchange rate is very sensitive to trade negotiations and even plays a decisive role. Although the U.S. economy has continued to grow in the past three years, the deficit with Japan has still increased. Therefore, the U.S. The government and the Japanese government have conducted many negotiations on bilateral trade. Most of these negotiations are sanctions, raising tariffs, etc., and then the other side either counters the sanctions, or opens another market, etc., due to political disadvantages , usually the Japanese side finally compromises.

In the year of 1993, the yen rose from a minimum of 126 yen to 1 dollar to a maximum of 100 yen to 1 dollar, a full appreciation of more than 20%. However, when the yen was about to cross the 100 mark, the exchange rate of the yen turned It went down, and in 1994 it returned to the position of 112 yen to 1 dollar.

However, due to the overall downturn in the Japanese economy, the yen has begun to enter a weak channel. The downturn in the domestic economy and weak exports have reduced the possibility of the appreciation of the yen, so hedge funds are bearish on the day. Yuan, betting on the depreciation of the yen, the trend in the fourth quarter of 1993 is in line with this depreciation expectation.

In addition to taking advantage of the opportunity of each trade negotiation, Quantum Fund has also made corresponding positions in the depreciation of the yen. In addition to exchanging the U.S. dollar for the yen, they have also placed heavy bets on the exchange of other currencies for the yen. Naturally, They made so much money that in January 1994, Quantum Fund's bearish position in the yen reached an astonishing $25 billion.

  Naturally, these are the amounts on the contract. If the leverage is taken into account, the Quantum Fund does not need to pay too much money. Otherwise, even if their capital scale has grown rapidly over the past year, they cannot afford the consequences of doing the wrong thing.

"I have an opinion. There are too many bets on the yen at present, and there is no sign that we and the Japanese are about to start trade negotiations. Are you considering reducing the scale of investment?" During the talk, some of the fund managers below put forward different opinions.

"Everyone," Druckenmiller glanced at the colleague, and then explained, "The investment in large European bonds has come to an end, and I will gradually sell them. The money must find a good investment So, if you don't invest in the yen, do you have any good investment goals?"

As soon as he finished speaking, a fund manager said: "Copper! I have studied it carefully. Now due to the economic recovery, especially the general rise of infrastructure construction in Southeast Asia, the demand for metals is gradually increasing. I think that entering the The time for the copper market is fully ripe, and the copper price in the market is currently at a relatively low position, but due to the hedging failure of German metals, their short positions in copper have been liquidated in large numbers, pushing up the copper price. With the economic recovery of China, the United States and other countries, the demand for refined copper is bound to increase, especially in the Japanese market. The depreciation of the yen can promote the growth of copper exports, but it is also one of the largest consumers of copper, so..."

Following his long narration, almost everyone present fell into deep thinking. This fund manager is in charge of commodity research within Quantum Fund, specifically, his analysts are in charge of various markets. Commodity market research, and he synthesized these research reports, and then brought them to the manager's meeting for discussion, and it was Druckenmiller, the main person in charge, who finally made a decision.

"In addition, there are also investment opportunities in the long-term U.S. treasury bond market. Should you consider investing more money in the treasury bond market?" After the fund manager in charge of commodity research finished speaking, another burly man with a red face appeared. The fund manager also said, "Moreover, the bond market does not need a lot of funds, and we can increase the leverage through brokers, so that the funds occupied will not be too much."

What he is talking about is bond futures, while Quantum Fund invests in bonds in Europe, mainly in the UK bond market. These bonds themselves are calculated in hundreds of thousands, and some bonds are often calculated in units of billions. This has somehow taken up most of the Quantum Fund's capital.

  After the UK withdrew from the European exchange rate system, the management of Quantum Fund was keenly aware of the need to take a heavy position in the British bond market, because they realized that the UK would not need to maintain such a high interest rate. The reason why he didn't bet heavily on bond futures is because the British government bond futures market only has a variety of 10-year government bonds, and there is not such a big market at all. Therefore, the bond itself is the best choice. Naturally, the sale and purchase of these bonds with a denomination of 100,000 pounds naturally requires corresponding funds, and the leverage is much lower than that of futures.

  The British bond futures market is far less developed than that of the United States. You must know that in CME, not only the long-term and short-term U.S. treasury bonds, but also foreign bonds also have a futures market. This is determined by the extremely developed financial market in the United States.

"I need a complete research report, please make it as soon as possible, and we will discuss it at the next meeting." Druckenmiller thought for a while, and then settled down, "According to your report, I will reduce the bearish position accordingly. Yen positions, so that funds can be freed up for other investments.”

  The meeting ended like this. It has to be said that the hedge fund was very fast. After working overtime for three consecutive days and nights, two research reports on different markets together with operating strategies were placed on Druckenmiller’s desk. After full communication with Soros, Druckenmiller agreed to the two investment reports, and at the same time reduced his position in the Japanese yen to 8 billion US dollars, and then allocated funds to the other two markets.

Don’t think that the reduction from 25 billion US dollars to 8 billion US dollars is a lot. Calculated with 10 times the leverage, the money is only 1.7 billion US dollars, which is only a small part of Quantum Fund’s current management funds of tens of billions. It is precisely because of these two moves to invest in different markets that Quantum Fund did not suffer huge losses in 1994.

  Back to the bond market, the Fed's interest rate hike did not dispel the market's expectations of inflation, but the successive rises in long-term interest rates made this expectation even more serious. Greenspan never figured it out, how could the market not operate according to his logic?

   It stands to reason that although interest rates have been raised, the long-term government bond yields should not fluctuate much. After all, long-term interest rates and short-term interest rates are two concepts. Although there is a certain relationship between the two, the more important thing is to be determined by both the supply and demand of market funds. But Greenspan ignored that his interest rate hike has led to uncertainty in the long-term interest rate market. This uncertainty means risk for capital, and this risk is magnified dozens of times through leverage, which is enough to destroy the market. The fragile capital base of leveraged hedge funds forces them to sell their bond futures or bonds to reduce risk, and these quasi-banking institutions sell a large number of bonds, which makes bond prices fall, which in turn makes long-term interest rates rise, just like Greens Pan's expectations were the opposite.

   Thank you very much for the monthly support of book friends TANKandDAPAO, book friends 090320023841930, wangxueliang, Moshang Liuyun, and dragging madman! At the same time, I would like to thank Magic Dragon War Ghost again, for making me think about the reward!

  (end of this chapter)