Return to 1958 and build a century-old giant

Chapter 821 Profitable Junk Bonds
Yang Wendong said: "You can take a look at Best Buy's investment data from the early years. In 150 cities, we invested more than $4 million. More than half of that was from nearly ten years ago. According to inflation, this amount would only be higher."
"As for the risks, I'm the only one who invested a huge amount of money in the electronics industry before it even took off. If the market doesn't perform as I predicted, I'll suffer heavy losses. I'm bearing this risk alone. Everyone here today basically faces no risk, reaping the rewards without effort. So naturally, you'll have to invest more financially. That's reasonable, isn't it?"

For him, there was naturally no risk, but for outsiders, investing in Best Buy since the late 60s and continuously incurring losses while constantly pouring in funds was naturally a high-risk operation.

Now that we've succeeded, we need to factor in those risks.

Barney said, "We agree with that. The risk on your side was indeed very high at the time, but $15 billion was still too high. We think a valuation of $10 billion should be more appropriate."

"Apple's valuation is also close to one billion. Do you think my Best Buy is inferior to Apple?" Yang Wendong asked rhetorically.

Less than a year ago, Apple's valuation was only $3 million, but with the boom in the electronics industry, Apple's valuation has been raised to nearly $8 million.
Of course, this is not official data. It comes from a wealthy individual who wanted to invest in Apple at this price, but was rejected by Steve Jobs. Therefore, this algorithm exists in the market.

Barney frowned and said, "That's still incomparable. Apple is, after all, an electronics company. Its computers sell globally. As long as it gradually solves its distribution and production issues, its future performance will grow exponentially."

“Yes, a capital-intensive company like Best Buy certainly can’t compete with Apple in terms of growth rate,” Yang Wendong laughed. “But as you said, Apple needs to solve its distribution channel problem, while Best Buy has one of the most complete distribution channels.”

Even if Apple were to falter one day, and IBM or another company were to take its place, Best Buy wouldn't. With so much infrastructure already built, it wouldn't be worthwhile for others to catch up, even with sufficient funds.

Wall Street was also frowning. Yang Wendong was right. Best Buy might not be as fast as those industries that specialize in electronic computers, but its stability was almost guaranteed.
Even if they invested heavily to create a Best Buy exactly like it is today, it would take at least five years, and that's assuming Best Buy doesn't develop now, which is practically impossible.

Furthermore, Best Buy has already deeply penetrated the hearts of people in many cities, and it is almost impossible for newcomers to catch up, unless Best Buy makes a big mistake. But it is a retail company, and unless it is poorly managed and offends customers for a long time, it will not have any quality problems.

Of course, this is not absolute. Perhaps a newcomer will be able to surpass Best Buy in the future, but the possibility is extremely low.

Yang Wendong continued, "Best Buy is not short of funds right now. The reason I raised funds is that I hope to share this achievement with my financial friends in the United States."
At the same time, with sufficient funds and the resources behind you, Best Buy can expand more rapidly, thereby monopolizing part of the US electronics industry's sales and after-sales service, and even entering Europe and Asia in the future.

Celtic Supermarkets is now valued at over $10 billion, and Best Buy's future market capitalization will likely be no less, and possibly even higher. If you think today's valuation is too high, perhaps you can wait until next time to invest. Then we can see what happens. How about that?

Today, Best Buy dominates this market, and the second place is unknown. This is a huge advantage. Perhaps there will be competitors in the future, but that's a matter for the future. In the retail industry, even Walmart has its peers.

But as long as the subsequent development goes smoothly, it will definitely be the No.1 in the United States. In this traditional industry, unless a company like Amazon rises in the future, it will be difficult to fall behind under such an advantage.
Of course, it is still necessary to bring in Wall Street or other giants. Only in this way can we develop with peace of mind. Otherwise, if the US government targets us and blows up any small problem, no company can withstand it.

Even in Southeast Asia, many of his locally profitable businesses are joint ventures with local capital, and this is even more true in the United States. In the early years, when he was losing money, no one cared, but now that he has a trend of unifying a market with huge potential, Wall Street has followed suit.
Like banks, they only offer icing on the cake, but Yang Wendong doesn't care, as long as he can ensure the normal operation of his company and control the channels.

“Then we need to go back and negotiate. I wonder how many shares Best Buy will give up this time?” Barney finally said.

Such a large deal would require consulting with the board of directors, even on Wall Street.

Yang Wendong said, "15-20%, depending on what kind of help you can provide besides funds. I am naturally willing to give up more shares in anything that is beneficial to Best Buy's development."

In this round of financing, the funds are actually secondary; the main thing needed is the resources of Wall Street banks.

The most direct example is commercial loans. Even if Best Buy, a company with heavy assets, receives returns on gold in the future, it will not invest in it but will continue to use bank loans. This is normal business behavior.

What Wall Street excels at, of course, is financing. Directly providing money is actually the simplest approach. If they really want to raise funds, they can come up with all sorts of securities-related methods. The Greek economic crisis of 2013 was orchestrated by them; they used financial means to almost bankrupt Europe.
“Okay, we need some time. We’ll get back to you in a week,” Barney and the others said after discussing it.

Yang Wendong nodded and said, "No problem, I look forward to your good news."

He could wait a few days, and besides Best Buy's financing, he also had other purposes for coming to Wall Street.
Although Best Buy will eventually need to seek investment from Wall Street, Wall Street is not monolithic and contains many financial giants, which gives Yang Wendong the right to choose.

It's obvious to anyone with eyes to see that with the development of the electronics industry, the rise of Best Buy, a retail giant that started its layout early on, was inevitable. Investing now is a sure thing. It's like how in the early days, countless people went looking for gold mines, but some smart capitalists chose to build roads. No matter who found a gold mine, I can make a profit by collecting tolls.

Perhaps Apple and IBM today will not be able to monopolize the personal computer industry in the future, but Best Buy may monopolize a part of the sales market. It is almost impossible for any other capital to create a giant like Best Buy.
This is the first-mover advantage, not only in the internet industry but also in the traditional retail industry. Unless the industry undergoes a transformation, Best Buy will inevitably become the dominant player in the future.

For Yang Wendong, he is not worried about the emergence of similar competitors. On the contrary, supermarket companies like Walmart may take a share of the market, but this is inevitable. After all, it is impossible to really monopolize the retail industry, and Walmart cannot do that either.

The next step is to see which Wall Street giant is willing to pay the money to partner with Best Buy. Whoever partners with Best Buy and can help it grow in the future will likely reap substantial benefits.
With a week to go, Yang Wendong wasn't in a hurry and instead spent two or three days sightseeing in New York City. On May 20th, Yang Wendong arrived at 60 Broad Street in New York City, the location of a company called Drexel Burnham Lambert, where he made an appointment with the company's owner.

Michael Milken, CEO of Drexel Burnham Lamb, also valued Yang Wendong's arrival and personally came downstairs to greet him.

"Mr. Yang, hello, I've long admired your name," Michael Milken said with a smile, shaking hands.
Yang Wendong shook hands politely in return: "Mr. Milken, hello, I've heard of you on Wall Street too."

"Haha, you flatter me. It's raining a bit outside, let's go upstairs and talk," Michael Milken said.

Yang Wendong nodded and said, "Okay."

Led by Milken, Yang Wendong and his group entered the headquarters of Dechong Securities. The company was located on the 12th floor of the building. The company was not very large, with only one floor.
Of course, this is relative to Changxing Group or other large group companies. In reality, being able to rent an office floor in downtown New York City is already considered to be a fairly large enterprise.

Milken led Yang Wendong on a tour of the company premises before entering his office. Milken asked, "Mr. Yang, I heard that Best Buy is preparing for financing. This news has already spread on Wall Street."

"Haha, yes, Mr. Milken, are you interested?" Yang Wendong asked in return.

"Haha, my assets are nothing compared to Goldman Sachs and Morgan Stanley," Milken laughed. "But I'd like to ask, besides Best Buy, are your major businesses in the US—KFC and Red Bull—currently accepting financing?"

"You're interested in these two companies?" Yang Wendong smiled and said, "KFC might accept funding in the future, but Red Bull isn't for now."

KFC's home turf is also in the United States. To make money in the US, it needs to find suitable partners, just like Best Buy. However, in terms of future prospects, KFC is a traditional industry with limited growth potential. Even if Wall Street doesn't reject it, they won't be very interested.

Milken said, "Actually, I'm optimistic about Red Bull."

"Do you think I can beat giants like Coca-Cola and Pepsi?" Yang Wendong asked curiously.

Red Bull is currently still experiencing significant losses, and with giants like Coca-Cola also getting involved, it's not necessarily true that many people are optimistic about Red Bull's future.

Therefore, we will not accept financing for the time being, because financing would involve other shareholders, and if we keep burning money, the process will become very complicated. In addition, no one on Wall Street has taken the initiative to discuss this matter yet; Milken is the first to do so.

Milken laughed and said, "Yes, although Coca-Cola has a big brand, its management's execution ability is far inferior to Mr. Yang's. I have learned about Mr. Yang's various companies. Although I am not familiar with some industries, I can see that once you decide on a direction, you will never give up. Best Buy's success today is also due to this."

“You’re absolutely right. Then, when Red Bull accepts funding, I’ll consider you.” Yang Wendong thought for a moment and said, “That’s fine too. I’m going to invest in you today, and if your investment is successful, you can also participate in Red Bull’s investment.”

Michael Milken was arguably the most successful Wall Street fund CEO in the 80s, and his fame even surpassed that of George Soros of the Quantum Fund.

Michael Milken chuckled, "Well, Mr. Yang, so you're also bullish on American junk bonds?"

Yang Wendong nodded and said, "Yes, I believe that all the current bond crisis problems were caused by the oil crisis, but the oil crisis will eventually end. Once the crisis ends and the US economy improves, these bonds will inevitably recover to some extent."

Michael Milken laughed and said, "That's right. Mr. Yang shares the same view as me. It seems that you are planning to invest in Chrysler for the same reason?"

"We have considered that," Yang Wendong nodded and said.
Junk bonds are essentially Wall Street using various financial means to package and list the debts of heavily indebted companies.

Even Yang Wendong didn't understand the specific operations; he only knew that it involved very complex mathematical knowledge. This is why Wall Street in the United States has started competing with large manufacturing companies, NASA, Boeing, and other companies for mathematical geniuses in recent years.

By using mathematical methods to complicate various securities and profit from them, this is one of the reasons why financial capital will dominate manufacturing in the future. Top talent is already scarce, and now they're all flocking to the finance, legal, and accounting industries.
After the oil crisis, the US economy weakened, and junk bonds became worthless. A debt of 100 dollars might only be worth 10 dollars, and nobody wanted it because many people were worried that if they defaulted on their debts, their bonds would become worthless.
However, if someone is bold enough to hold these debts, they will make a fortune if these companies do not default. In reality, whether it is a company, an individual, or a country, it is best not to default if possible, as the consequences are too severe.
Michael Milken amassed a massive amount of junk bonds in the late 70s and early 80s. When the US economy recovered a few years later, the value of many of his bonds skyrocketed, making him one of America's most famous financial investors. It's rumored that his bonuses alone reached $5 million in 1985, not even considering his investment returns.
Michael Milken chuckled, "How much can Mr. Yang invest?"

Yang Wendong countered, "How much funding do you need?"

Milken thought for a moment and said, "One hundred million US dollars. According to the rules of our internal fund, if it makes money, 30% of the profit after deducting the principal will be my share. What do you think?"

PS: Please give me a monthly ticket
(End of this chapter)