Rebirth of the Capital Legend

Chapter 260 Conspiracy and cooperation among short-selling institutions!

"Mr. Su seems to know a lot about me!" Frederick shook Su Yi's hand and responded with a smile.

Su Yi smiled and said, "The 'Evolution No. 1' hedge fund managed by Mr. Frederick is already a star fund product in the field of foreign exchange investment and trading. Moreover, in the 'Swiss Franc Black Swan' incident, Mr. Frederick judged that the Swiss National Bank would give up supporting the market and shorted the Swiss franc exchange rate, reaping more than $2 million in profits overnight. With all these factors combined, any investor or institution that wants to make a difference in foreign exchange trading will find it difficult not to pay attention to and understand Mr. Frederick's movements and preferences."

After hearing what Su Yi said, Frederick smiled and said, "Mr. Su's words, can I understand that your organization has conducted a detailed investigation of all my information?"

"We don't call this an investigation." Su Yi said with a smile, "Knowing your friend's information and preferences will make you feel more comfortable when you meet each other, and create more favorable conditions for subsequent cooperation. Isn't that what Mr. Frederick thinks?"

Frederick looked at Su Yi's relaxed expression and did not comment.

Before seeing Su Yi.

He originally thought that Su Yi was a young and arrogant man, but after meeting him, he found that Su Yi's temperament and image were completely different from what he had imagined.

In his eyes, Su Yi's image at this time was young.

But in his gestures and conversations, he was quite calm and experienced.

Su Yi's mature performance obviously surprised him.

"Mr. Su just mentioned friends..." Frederick said with a smile, "In Su Yi's eyes, are we friends?"

Su Yi replied: "Since I invited Mr. Frederick, I naturally regard Mr. Frederick as a friend in my heart, and I hope Mr. Frederick thinks so too."

"I have heard a lot about Mr. Su's past deeds recently." Frederick said, "I heard that Mr. Su made nearly 100 times the profit in the Chinese stock market in just half a year last year, from a few million funds to tens of billions of funds. As far as I know, the market conditions of the Chinese stock market were not good last year. Mr. Su can achieve such an investment record, which should be said to be quite impressive.

According to common sense, Mr. Su should play to his strengths.

I should continue to focus my investment and main capital flow on the Chinese stock market. Why did I suddenly step into an investment field that I am completely unfamiliar with recently?"

"There are no obvious investment opportunities in the recent stock market." Su Yi said, "On the contrary, there are good opportunities in the foreign exchange market. I am not a law-abiding person, and I will not stay in my comfort zone for too long. Besides... on the road of investment, I always go wherever there is an opportunity to obtain excess returns.

Just like the 'Evolution No. 1' hedge fund product that Frederick is currently in charge of.

As far as I know, you don't only invest in the foreign exchange market, which Mr. Frederick is good at, right? When there are relatively certain opportunities in the stock market, bond market, and futures market, won't your fund also invest a considerable amount of funds for speculation or investment operations?"

"Mr. Su, do you think the current foreign exchange market has opportunities with relatively high certainty?" Frederick asked.

Su Yi smiled and nodded, and asked, "Don't you think so, Mr. Frederick?"

"I think there has never been any so-called high-certainty opportunity in the foreign exchange market," said Frederick. "After all, with sufficient liquidity and extremely fierce long-short game, any so-called certain news will cause uncertainty in price guidance."

"My views may be slightly different from Mr. Frederick's," Su Yi said. "Whether it is the stock market, futures market, foreign exchange market, or bond market, I believe that price changes are caused by changes in fundamental expectations. The long-short game on the market is just a manifestation of emotions, but emotions cannot dominate the price trend in the long run. If we extend the time line and look at it from a long-term perspective... price fluctuations must be changing around fundamental expectations. As long as there are problems with the fundamentals and the underlying logic, no matter how the short-term emotions are disturbed, the final price changes will still develop in the direction of the established trend and trajectory.

Of course, it’s also because of the existence of emotions.

This is also because every trader and investor cannot escape the interference of emotions.

This is why there is a temporary deviation between market prices and fundamental expectations, and this is why there is an opportunity to gain excess market returns.”

"It seems that Mr. Su has done a deep study on the core investment system of 'value investing'." Frederick said, "Indeed, in the financial market, the price of the underlying asset is essentially a change in fundamental expectations."

Su Yi said with a smile: "An excellent market speculator's cognition is not limited to the market sentiment and capital movement. If you don't understand the underlying logic of the price changes of the investment target, it will be difficult to find opportunities to obtain excess market returns and achieve stable profits by simply playing with emotions.

Of course, what’s more serious is…

If you fail to grasp the underlying logical judgment, you will naturally be swept away by the market sentiment.

This is just like "not knowing the true face of Mount Lu because you are in the mountain". It is impossible to grasp the overall situation and cannot really see the development trend of the market. "

After listening to Su Yi's views on investment and trading, Frederick nodded slightly. He was impressed by Su Yi in his heart and said with a smile: "Mr. Su's understanding of investment and speculation is much deeper than I thought. Before coming here... I didn't believe Mr. Su's past investment performance, especially the rumors that you made billions from the Chinese stock market in the past six months.

I originally thought that you Chinese people are hypocritical and like to exaggerate things.

I feel that this is nothing more than you creating a god in your own closed circle and deliberately exaggerating certain facts for propaganda purposes.

But now, after initial communication with Mr. Su, I began to believe these rumors.

From my perspective, I believe that Mr. Su has such knowledge, and he must be an excellent investor, and of course... he must also be a great market speculator. "

"Thank you for the compliment, Mr. Frederick." Su Yi said with a smile, "In fact, in my opinion, whether it is investment or speculation, the source of profit and loss in the market we participate in mainly comes from our cognition, and the financial market is also a place where we can realize the results of our cognition immediately. This is the charm of the financial market, and it is also an important reason why I like investment and speculation."

"Mr. Su's insights are very insightful." Frederick nodded slightly, paused, and suddenly changed the subject, continuing, "But Mr. Su asked me to come here tonight, it shouldn't be to discuss investment, speculation techniques, concepts, thinking, logic and other things with me, right?"

Su Yi smiled and said, "Of course not, but Mr. Frederick, don't worry, we can talk while we eat."

As he spoke, Su Yi asked a beautiful blonde waitress standing next to him to pour a glass of wine for Frederick and made a gesture of invitation to him.

Frederick tasted the wine in his glass and the delicacies on the table.

I couldn't help but give Su Yi a thumbs up and said, "Mr. Su, this dinner is very much to my liking. If this is the basis for making friends, then we should be considered friends now."

"Haha..." Su Yi laughed and said, "It's my honor that Mr. Frederick can regard me as a friend."

"So Mr. Su asked me to come here and what was the main thing he wanted to discuss? Can you tell me?" Frederick asked.

Su Yi replied: "Since we are already friends, of course I can tell you. I met with Mr. Frederick tonight mainly because I want to discuss a cooperation with him."

"Cooperation?" Frederick asked in confusion, "What cooperation?" Su Yi said, "I heard that Mr. Frederick's main hedge fund product, 'Evolution No. 1', has also established a lot of short positions in the pound exchange rate market. Does this mean that Mr. Frederick is bearish on the subsequent trend of the pound exchange rate and the economic development potential of the entire UK?"

"Mr. Su is wrong." Frederick said, "I am not overly bearish on the pound exchange rate, nor do I think that the UK's economic development will continue to weaken. The reason why I have established a lot of short positions in the pound exchange rate market is that I think the bullish sentiment in the short-term pound exchange rate market is a bit excessive from the current trading perspective."

"Really?" Su Yi didn't quite believe the operational logic that Frederick said.

"Mr. Su's main hedge fund, Huayi Chengyuan No. 1, has been shorting the pound exchange rate and continuously increasing its short position in pound exchange rate contracts. Does he think that the UK's economic development potential has fallen into the abyss and cannot support the current pound exchange rate?" Frederick asked, "Or do he think that the result of the UK's referendum on Brexit on June 6 will be unexpected?"

Su Yi replied: "It's a combination of various factors."

"But it seems that Mr. Su's understanding has not received good feedback from the market." Frederick said, "The fund products of your institution, the short positions in the pound exchange rate market, should have suffered huge losses, right?"

Su Yi said: "It is true that we have suffered some losses temporarily, but it is not very objective to say that the losses are huge. At least with the funds we have in reserve, we can withstand the pound exchange rate even if it surges another 1000 points. Therefore, the rumors in the market that our institution is about to go bankrupt are all lies."

"Really?" Frederick didn't quite believe what Su Yi said.

"Mr. Frederick, you don't believe it?" Su Yi said with a smile, "Then please think about it, Mr. Frederick. If the short position of the pound exchange rate held by our institution's fund is on the verge of liquidation, how is it possible that we are still increasing our short positions in the pound exchange rate? How is it possible that our short positions are not only not decreasing, but are increasing instead?"

When Frederick heard Su Yi's words, he pondered for a moment and indeed found it strange.

"It seems... Mr. Su is firmly bearish on the pound exchange rate and feels that he can win the final victory in this battle between bulls and bears." After pondering for a while, Frederick continued, "Mr. Su's courage is very admirable, but is his approach... still too radical?"

"As long as the operation is done correctly, it doesn't matter whether it is radical or not." Su Yi said, "Today, something happened in Scotland, UK. Does Mr. Frederick know about it?"

"What is it?" asked Frederick.

Su Yi replied: "The people of Scotland took to the streets to call on everyone to support the Brexit referendum on June 6 and support Britain's withdrawal from the European Union. Various signs show that the result of the Brexit referendum on June 23 may not be as calm as most institutions predict in the current market.

Before any 'black swan' event occurs, everyone thinks it is impossible.

But it still happened.

Just like last year's 'Black Swan of the Swiss Franc', before the night when the Swiss franc exchange rate collapsed, would the vast majority of investors who were long have thought that the Swiss National Bank would suddenly abandon the exchange rate, give up supporting the market, and buy back the Swiss franc? "

"So...what does Mr. Su want to cooperate with me on?" Frederick stared at Su Yi and went straight to the core issue.

Su Yi said: "I think at the current stage, when the trend of the pound exchange rate is affected by the market's bullish sentiment and is clearly deviating from the fundamentals, our 'Hua Yi Capital' and Mr. Frederick's 'Evolution No. 1' main hedge fund can be regarded as common interests.

After all, the current pound exchange rate is in the short-side force.

In terms of short positions, apart from our 'Hua Yi Cheng Yuan No. 1' hedge fund, the 'Evolution No. 1' main hedge fund headed by Mr. Frederick should be the largest. And according to the market information I have received, Mr. Frederick is still continuing to increase his short positions on the pound exchange rate.

That is to say, in terms of cognitive logic.

I think both sides are relatively consistent.

If the bulls continue to squeeze out the shorts, or our institution's positions are passively stopped and closed.

Then, if the pound exchange rate continues to soar, the main hedge fund "Evolution No. 1" headed by Mr. Frederick will also suffer huge losses.

Furthermore, analyze from various aspects.

It is impossible for the pound exchange rate to remain stable at this level.

Not to mention the referendum on June 6, no matter what unexpected circumstances may arise, just the fact that the voices supporting Brexit are slightly louder would probably bring about a huge change in market expectations.

and also……

In the current pound exchange rate market, the net long position has soared to nearly 50 lots.

With this level of net long position, once the market trend changes and the long-short pattern reverses, what kind of price fluctuations will occur? I think Mr. Frederick should have an idea, right?

That is to say, in my opinion, the current pound exchange rate market.

A huge storm is brewing, and this storm, this fairly clear excess return speculative opportunity, is clearly biased towards the short side.

So, I hope both of us can maintain our current positions consistently.

And they can consistently invest more funds to resist the continued upward squeeze of the bulls on the market, and then wait for further changes in the news and capital, and finally usher in a change in the long-short pattern. "

"Okay, no problem." After Su Yi finished speaking, Frederick thought for less than ten seconds and replied, "As long as your institution can hold on, Mr. Su, I promise that our 'Evolution No. 1' main fund will not reduce any short positions, and will invest about 10 billion US dollars to continue shorting the pound exchange rate, just as you said... No matter from what angle you analyze it, at this stage, the chances of the pound exchange rate going down are far greater than the chances of a continued upward breakthrough, not to mention that the net long position has reached such a scale that it is meaningless to go long, and it is better to continue to short.

Furthermore, no matter what the result of the referendum on June 6 is.

The cracks in the EU economic system have already formed, and the trend of decline of the entire European currency is inevitable.

Of course, I am very much looking forward to the emergence of the 'black swan'.

After all, only the emergence of a ‘black swan’ event can create a huge profit opportunity and allow us to really make a fortune.”

Su Yi didn't expect that Frederick would agree to cooperate so easily.

He had prepared a lot of speeches in his mind, but at this moment, none of them were needed.

Moreover, the other party stated that it would invest another 10 billion US dollars to short the British pound exchange rate. This was far beyond Su Yi's expectations, and made his tense nerves relax a little.

(End of this chapter)