The Son of Finance of the Great Age

  Chapter 230 Expensive price

  Tiger Fund's current position in Thai baht is about 2 billion U.S. dollars. In fact, hedge funds with close ties to Wall Street and Druckenmiller are all attacking the baht, but the scale is far less than when hitting the pound and the franc. You must know that when the pound was hit, the Quantum Fund alone established a short position of more than 10 billion U.S. dollars.

   It’s okay to explain Soros’s hedge funds with compassion and worry that the Thai baht will get out of control and cause a severe economic crisis, but it’s not the case at all for hedge funds like Tiger Fund. Julian Robertson does not regard himself as a philosopher or social activist at all, and he does not worry about the moral motives of tens of thousands of people losing their jobs due to the depreciation of the Thai baht.

  The only thing that can prevent him from expanding his position without limit is the cost.

  The markets of the UK, France and other countries are highly liberalized. In the interest rate market, the overnight interest rate is also formed by the quotation of the bank consortium, which cannot be determined by the central bank or the government's official document. Therefore, when they were attacked, the British and French governments could only raise interest rates to attract the inflow of foreign capital, thereby alleviating the pressure of selling sterling in the spot exchange market.

Then when the currency crisis spread to the whole of Europe, some countries used mandatory administrative orders in some fields to deal with the selling shock of hedge funds because the marketization was not highly developed. Among them, the Swedish government once used To deal with the attack of hedge funds, the overnight lending rate is extremely high.

   Obviously, this trick will naturally be copied by other central banks around the world. BOT decisively used this trick when the Thai baht was severely impacted, raising the offshore lending rate to 1000% to 1500%.

  Offshore lending rate is a concept derived from lending rate. Because a country's financial market is open, foreign banks will inevitably enter. The market that does not use the national currency within the country is called the offshore market, and this market is naturally dominated by foreign investors. The offshore lending rate, in short, is the interest rate for foreign investors.

  Thailand, in conjunction with this trick, cut off the possibility of foreign investors borrowing Thai baht from local banks through mandatory administrative orders. In this way, even if speculators previously borrowed Thai baht from local banks, it is impossible to borrow short-term loans through local banks. They can only borrow Thai baht from foreign banks that have Thai baht business at high lending rates.

  Using these two tricks together is really a two-pronged approach. First of all, most of the Thai baht lending business is carried out between local banks, which fundamentally cuts off the possibility of speculators continuing to expand their short positions. Secondly, for those foreign banks, if they want to lend short-term interest rates, they must borrow Thai baht from local banks at a very high lending rate, and then release funds to speculators at a higher interest rate. It increases the interest rate burden on speculators.

  Tiger Fund is a typical "victim" role.

  Julian Robertson had previously predicted that the Thai government and the Bank of Thailand would raise interest rates to cope with the impact of the foreign exchange market, and made corresponding preparations. But he did not expect that the Thai government dared to prohibit local banks in Thailand from lending funds to foreign speculators, which completely shattered his preparations.

  Originally, Tiger Fund’s wishful thinking was to lend a short-term huge loan through a local bank in Thailand, and then sell it in the market. This kind of short-term loan is ultra-short-term such as 7 days, 14 days, etc. After the loan expires, you can borrow the corresponding amount of Thai baht from other banks and repay the previous Thai baht loan. This is maintained through repeated cycles. own positions.

  Generally speaking, interest rates such as overnight lending, 7-day lending, and 14-day lending show a gradual upward trend. Although the overnight lending rate is the lowest, it is impossible to short the baht by borrowing overnight because the loan period is too short. However, loans in the form of 7 days and 14 days have great operability, and Tiger Fund can use this time to destroy the Thai baht.

   But now everything is impossible. Because they can no longer borrow loans from local banks that can be extended, if they want to maintain their positions, they must borrow Thai baht from multinational banks that have Thai baht business at an interest rate of 1000% or even higher.

   "How much did we lose in the futures market?" Although Julian was very angry, he could only hold back this tone at this time. After all, the opponent was the central bank of a country.

  In addition to borrowing Thai baht, Tiger Fund, like most hedge funds that shorted the Thai baht, also took a large amount of short positions on the Thai baht exchange rate contract. And when Thailand announced two measures to deal with hedge funds, the futures contracts responded immediately, causing them to suffer heavy losses.

   "Around $20 million." An analyst named Billy King replied dejectedly. He is a Korean with a bachelor's degree in economics from UCLA and an MBA from Carnegie Mellon University. He once worked for Hyundai Securities and Peregrine America, and is now an analyst for Tiger Fund specializing in Asian markets.

  In Singapore, London and Chicago, Tiger Fund sold more than 600 Thai baht short contracts. The strong rebound of the Thai baht not only wiped out their previous profits, but also cost them a very heavy price.

   After Billy King finished speaking, he looked at Julian Robertson, and tentatively asked, "Should we stop the loss and leave?" He already had the idea of ​​admitting defeat.

   "No!" Julian Robertson decisively denied, "Not only will we not close the position, but we will further increase the intensity of short selling until Thailand announces that it has surrendered."

  Although he suffered a heavy loss, Julian Robertson didn't care. In fact, he is a very forbearing person. The forbearance here naturally refers to the forbearance in the capital market.

There used to be such a true story, which came from within the Tiger Fund, that is, when the Japanese stock market crashed in 1990, the Tiger Fund once shorted the Nikkei Index at a position close to the highest point, and these selling orders have not been balanced. Lost, and even held it for 97 years, a full 7 years. At that time, the Nikkei index had fallen by two-thirds from its highest point, which showed Julian Robertson's forbearance in the capital market.

"But according to our current position, the interest we pay every day is a huge amount." Billy King felt that he had to remind Julian that it would be calculated based on the current interest rate of the Thai baht that can be borrowed, as long as the Thai baht does not announce depreciation for one day , then the cost they hold is an astronomical figure.

   "How much is it, have you calculated it?" Julian Robertson's face did not change at all, as if he was talking about something unrelated. But his slightly trembling hands betrayed his true inner thoughts.

  Billy King lowered his head and made quick calculations in his mind. When he raised his head again half a day later, his expression had changed.

   "If we want to maintain our current position, the interest we have to pay every day will reach as much as 10 million U.S. dollars." When he spoke, his voice was trembling slightly.

  The Thai baht borrowed at the punitive lending rate of 1500% is essentially that these 2 billion US dollars positions are burdened with such an interest rate, which has not included changes in the exchange rate. In fact, the baht has risen by one percent against the dollar, and that number will continue to rise.

   "So many?" Although Julian Robertson was mentally prepared, he was still taken aback when he heard this number. Although the price was very expensive, it still did not dissuade Julian Robertson from shorting the Thai baht.

   Seeing that Julian Robertson had no intention of giving up at all, Billy King could only shake his head, and turned to do his own thing.

  …

  A similar situation continued to be staged on this day by hedge funds shorting the Thai baht and the foreign exchange trading departments of commercial banks. Almost everyone who is shorting the baht realizes that it will be difficult for them to maintain their current positions if the baht does not completely collapse in the next day or two.

   This situation of fighting to the death has inspired the determination of most speculators, so that they no longer have any scruples to sell short in all places where the Thai baht can be shorted.

In fact, Thailand is also aware of this situation. At this time, within the BOT, there is no joy in holding the baht. battle time. Punitive rate hikes and a ban on local bank lending are just the beginning.

   "Okay, thank you very much!" In the governor's office, Malaga was on the phone with Gao Shengming, chairman of the Monetary Authority of Singapore, and the conversation had come to an end.

  Since Thailand announced the news of fighting back against international speculative capital, the entire bullish market has been invigorated, and it has the confidence to continue to fight against hedge funds. The experienced Monetary Authority of Singapore immediately reminded BOT of the counterattack of international speculative capital, and brought up to 8 billion US dollars in capital assistance, preparing to intervene in the market with Thailand in the following period of time.

  Singapore is very clear that once Thailand declares its fall, the next target of international speculative capital may be Singapore. And Singapore, which wants to be the world's financial center, is far more open in terms of finance than Thailand. The series of measures currently implemented in Thailand may not be implemented by the Singapore government.

  The best situation now is to let them fall into the sand before the international speculative capital has succeeded, and lose first in the battlefield of Thailand. At that time, even if there are speculators shorting the Singapore currency again, I am afraid it will not be so easy.

   On this day, the Singapore side also actively intervened in the market, but the main sales were taken over by the Bank of Thailand. Singapore estimates that the current BOT funds may be insufficient, so throwing an olive branch at this time does not mean to send charcoal in a timely manner.

   Sure enough, Malaga was overjoyed and thanked repeatedly on the phone, even a little groveling, without the slightest awareness that the two parties were at the same level.

  (end of this chapter)