The Son of Finance of the Great Age

  Chapter 216 Capital Wandering

   "Not bad!" Zhong Shi nodded with satisfaction, looking very happy.

  Zhong Yi was very puzzled. A company that buys books online can make Zhong Shi so interested. This has never happened before. Most importantly, this website called Amazon has not yet achieved profitability. According to Zhong Yi's point of view, this is a purely money-burning company.

  Due to time constraints, Zhong Yi replaced Zhong Shi in Amazon’s several rounds of financing. Jeff Bezos has been fully engaged in building Amazon since his resignation from the Shaw hedge fund. When he started seeking the first round of financing, he invited twenty investors, and the first round of financing was only a mere $1 million.

The idea of ​​selling books electronically is very good, but the reality is cruel. The United States has a very large and well-developed chain bookstore system, and this novel business method also takes time for consumers to adapt. As a result, it was not a company called Amazon at that time. It will soon be unsupportable.

   After learning from the pain, Bezos first modified the company's name, established the real Amazon of later generations, and then sought financing again to support it. But the investors in the first round of financing obviously lost confidence in Bezos. In this case, Bezos remembered his connections at the Shaw hedge fund.

It was in this situation that Zhong Shi received a call from Bezos, but he was busy at the time making changes in the copper futures market, so he handed over all matters to Zhong Yi to handle. There are only two bottom lines: the first is to occupy Yue The more shares the better, the second is to retain the right to prioritize capital injection.

   When Amazon went online again, Zhong Shi’s Skyline Investment Company took up 20% of the shares and retained the priority financing rights as it wished, which made Zhong Shi very satisfied.

  Shortly afterwards, under the recommendation of Yahoo, the Internet leader at the time, the clicks and purchases of Amazon's website increased rapidly. Although it has not yet made a profit, venture capitalists are generally optimistic about the prospects of this fast-growing company. When the second round of financing began in 1996, the valuation of the entire Amazon had reached an astonishing $50 million.

  Despite the opposition of many people, Zhongshi still invested 8 million US dollars, and together with the amount invested in the first round, he maintained a 20% holding ratio. This puzzled many people, including Zhongyi, because Amazon was not yet profitable at the time, and it was far from seeing the possibility of profitability.

Jeff Bezos is a master of capital operations, so he is naturally reluctant to see shareholders with the same share. Although Zhongshi’s Skyline Company only occupies one seat on the board of directors, and has never had any objections to his operating policies, but Bezos still resolutely decided to go public after several rounds of financing, so on May 6, 1997, Amazon went public on Nasdaq.

  Although the stake was diluted to 13%, Zhongshi didn't blame Bezos at all. First of all, the other party is a master of capital operation, and will never let Amazon, which was founded by one hand, fall into the hands of other capital or individuals. In other words, the rudder must be controlled by himself. Secondly, even if Zhong Shi seized the leader of Amazon, the future e-commerce ship, with strong capital, he is not good at management, and whether he can continue to survive is still a question.

   This news made Zhong Yi very dissatisfied. He participated in the entire process of investing in Amazon and knew how much effort Bezos had made in diluting other people's equity, including issuing convertible bonds and preferred shares. Zhong Yi always thought that Bezos was a white-eyed wolf, and never thought of standing on the other side's side to consider issues.

   "If you build a company, you don't want your power to fall apart. Under such circumstances, it is inevitable that you will join forces to suppress the most threatening shareholders." Zhong Shi said lightly. He was very pleased with getting on Amazon's board so cheaply. If nothing else, by the time Amazon becomes the No. 1 retailer, these shares will be worth at least $13 billion or more.

  Zhong Yi shook her head helplessly, looked at the sparkling sea in the distance, and asked casually, "What have you been up to lately? It feels like you've been flying around, as if you have a lot to do."

  Because Zhong Shi is now in the fourth year of university, he is very close to graduation, and his thesis has passed the review. It is a thesis about the formula of the Gaussian connection default function. This so-called Gaussian link default function is also called a normal distribution curve, which belongs to the professional knowledge within the scope of probability theory, but it can be related to the default of derivatives, so it also belongs to the category of economics. It was with this thesis that Zhong Shi obtained two bachelor's degrees in statistics and economics in one fell swoop.

I am ashamed to say that the person who invented this formula in later generations was still studying in Canada. Zhong Shi plagiarized his results without any scruples. This was planned when he was just studying at the University of Chicago. Will the author's fate trajectory be changed in the future?

  Although it was only an undergraduate thesis, it still caused considerable controversy within the University of Chicago. Naturally, such controversies are positive and mostly focus on the rating and pricing of the derivatives market. Since the derivatives market at this time is not as developed as it was after 2000, and the Chicago School is not at the forefront of the market, the influence of this paper is still concentrated in a small range.

   A professor who was already a Nobel Prize winner invited Zhong Shi to be his doctoral student, but Zhong Shi politely declined. His ambition is not in academics, otherwise he would not have gone directly to Wall Street from Caltech.

   "I'm playing a capital transfer game, which is very interesting." Hearing Zhong Yi's question, Zhong Shi showed a strange smile on his face, changed his unpredictable attitude just now, and said with great interest.

Zhong Yi was stunned for a moment, frowned and thought for a while, and then asked tentatively: "Copper futures? Gold? Or foreign exchange?" Because he heard from Andrew that some time ago, Tianyu Fund traded in the futures markets of Europe and the United States. With a heavy bet, I believe it is the game of capital transfer that Zhong Shi said.

   "No, it's bonds!" Zhong Shi raised a finger, shook it lightly, and continued, "Guess again, which bond type is it?"

   What Zhong Yi heard about placing heavy bets in Europe and the United States was the London copper incident that led to Hamanaka Tainan’s resignation. This incident shocked the entire financial world around the world, and finally ended with Sumitomo Corporation’s disastrous defeat in the copper futures market.

Although this incident happened in 1996, it still has something to do with Zhong Shi. It is precisely because he joined forces with Binzhong Tainan in the copper futures market at the end of 1994 to make the already arrogant Binzhong Tainan Confidence intensified like never before.

   Hamanaka Yasuo, who thought he controlled the price of the copper futures market, began to build up large-scale positions in 1995. Although the growth rate of the world economy was not as strong as in 1994, he still increased his positions on a large scale, and even once monopolized the long copper futures market. When the price of the near-month contract is much higher than the price of the far-month contract, hedge funds entered the copper futures market aggressively, and launched a massive bet against the bulls led by Hamanaka Tainan.

  Although the hedge funds are aggressive, Hamanaka Tainan is not a good character. The two sides are fighting to the death in the copper futures market. Although hedge funds once suppressed the price of copper futures to the level of 2,750 US dollars per ton, Hamanaka Tainan still stubbornly pushed up the price of copper futures many times.

   Just when the hedge funds were about to run out of patience, news came from the United States that Hamanaka may be under investigation for manipulating the U.S. copper futures market, and the LME also announced that it would investigate Hamanaka’s position. Under the double pressure, Sumitomo Trading Co., Ltd. was forced to dismiss Hamanaka Tainan from his post, and the price of copper futures also plummeted, falling back to 2,200 US dollars or even lower.

Sumitomo Corporation, which has more than 100,000 long positions, suffered a huge loss. It lost more than 1 billion US dollars when Hamanaka Tainan was dismissed from his position, and continued to lose more than 4 billion US dollars in the subsequent liquidation. The total loss reached as much as $5 billion.

  This incident was listed by the financial world as the largest loss event in history, and Hamanaka Yasuo was also known as the most devilish trader.

  Zhongshi’s funds entered the copper futures market in the autumn of 1995, and withdrew completely by May 1996, almost participating in the entire battle. Although he knew that the result would be a disastrous defeat for the bulls, the process was extremely dangerous. Zhongshi almost used more than 2 billion US dollars of funds. Naturally, in the end, he reaped a full profit of 2.5 billion U.S. dollars, which exceeded the profits he could obtain in any previous financial battle.

  For this sensational financial battle around the world, the face of the winner is always shrouded in clouds and mist, and no one knows who made the money. This is inseparable from Zhong Shi's secrecy work. He knows that if he offends the Japanese consortium, he may be retaliated against. This kind of revenge does not only happen in the financial market. Drink a jug.

   And several other short sellers naturally have concerns in this regard, and have not disclosed any news from the beginning to the end. However, according to the usual practice, the market placed the biggest suspicion of this matter on Quantum Fund.

   It is not wrong to say that Druckenmiller and Quantum Fund also participated in this battle. Of course, due to the addition of Zhongshi, they did not absorb enough positions, and the benefits were not the greatest.

   Having said that, when Zhong Shi mentioned that the current investment focus is on bonds, Zhong Yi's eyes lit up, and he said with surprise: "Could it be Russia's national debt?"

   "Not bad!" Zhong Shi nodded approvingly, and then immediately asked, "Then guess again, why is it called capital transfer?"

   "Capital transfer, capital transfer..." Zhong Yi repeated subconsciously several times, the confusion in his eyes gradually dissipated, and suddenly he yelled, "I see, that's what happened."

   I am very grateful to the book friend Rich Man for his reward for this book!

  (end of this chapter)