Journey 1995:Non-Stop

Chapter 409 Short Selling
"Starting now, apply for more loans from banks in the names of the chemical plant and the tile factory. Considering the risks, prepare a total of around 6000 million yuan. This money doesn't need to be raised now, because we won't need it. We need to ensure the company has the ability to pay for the next month or two. Then, starting now, immediately go and bid for projects in all areas with good business conditions," Yan Hui said.

"President Yan? What's going on?" Sun Lei had just spoken with Yan Hui for two or three hours yesterday, and he roughly knew some of Yan Hui's thoughts, but he still wanted to ask.

"What's the price of rebar from Laiwu Steel today?" Yan Hui asked.

“4900,” Wang Yongjun said.

“Our purchase price is about 4700. So, starting today, we will set the price at 4680 and extend the delivery period as much as possible. We require that the price be fixed at 4680, and every steel transaction will be settled at 4680 yuan,” Yan Hui said.

"Isn't this a loss?" Wang Yongjun thought he had misheard.

The purchase price was 4700, and with shipping and other costs, the price was over 4750. How could the delivery be settled at 4680? That's a loss of 70 per ton, and a loss of 70 per ton!
"Do as I say." Yan Hui didn't explain to Wang Yongjun. "Get to work quickly in the next few days and execute the plan. Let's secure a bid worth 100 million first."

"Mr. Yan, let me confirm one more time. Is it that you require every subsequent steel transaction to be settled at 4680 yuan?" Sun Lei remained relatively calm.

“Yes, I think steel prices have peaked. Old Wang, do you understand?” Yan Hui asked. “4680 is not a fixed number. According to the price the steel mill gave us, we will reduce it by 20 per ton and participate in the bidding.”

"I understand, I understand." Wang Yongjun wasn't stupid; he knew what President Yan meant.

It seems that President Yan is finally going to start "playing with steel," which makes him very nervous.

This time, approximately 6000 million yuan will be needed. It should be noted that the 6000 million yuan requested by Yan Hui has a repayment period. This 6000 million yuan can be used to gradually transfer more than 3 million yuan worth of goods!
“There’s another issue. Don’t worry about the government’s bids, but we need to set a penalty policy for some private companies. Let’s say 300 yuan per ton. If steel prices plummet and they don’t want the goods, they’ll have to pay us 300 yuan per ton for subsequent orders; if steel prices skyrocket and we can’t deliver, we’ll also pay 300 yuan per ton,” Yan Hui said. “Sun Lei, you’ll be in charge of this.”

"Understood." Sun Lei replied without any hesitation.

“Okay, that’s the situation. I’ll sign the parts that need to be signed the day after tomorrow. You guys hurry up and gather funds and do market research. We should try out any well-managed projects and set prices that they can’t refuse.” Yan Hui thought for a moment, “But we must keep a low profile in the early stages. This round might result in a loss, so we need to avoid being ridiculed by our peers. If we keep a low profile, even if we lose ten million, we can afford it.”

"Understood," the three said in unison.

“Go ahead and do it. I’ll be back the day after tomorrow.” Yan Hui had already made some plans. “If there’s anything you don’t understand, call me anytime. Also, Lao Wang, there are some things I discussed with Lao Sun yesterday. You should talk to him first and make sure to keep it confidential. We can’t spread market panic. Only the four of us should know about this.”

"clear."

As a result, Yan Hui would miss the banquet originally planned. He had intended to go home for more than a week, but time waits for no one. He would go back for two days, take care of what he needed to do, and put on a show, and that would be about it.

Honestly, his absence from the later banquet might not be a bad thing; it would save a lot of money. After discussing the plan, Yan Hui's eyes became brighter. He seemed to be discerning the entire world's格局 (geju, a concept encompassing overall situation, overall structure, and overall dynamics), but he was still too short-sighted to see everything clearly.

Yan Hui had no idea what the financial crisis would look like or how the world order would change.

He already has assets exceeding 100 million, yet he has never been involved in the "finance" industry. This moment marks his first foray into this field, and his approach can be simply described as "short selling."

At this time, Yan Hui knew nothing about futures trading and paid little attention to the financial markets. He had only heard that apple futures had experienced another huge surge this year, with some people making a fortune and others losing everything. However, Yan Hui wasn't envious of any of this, because he knew absolutely nothing about the apple industry. (Here, "apple" refers to the fruit itself.)
However, with assets having reached this point, these issues must eventually be faced. Yan Hui's short-selling action at this moment is based on his analysis of various market conditions. He only chose steel, did not use leverage, and even added insurance for himself, namely the so-called 300 yuan/ton penalty for breach of contract.

The 300 yuan/ton figure wasn't because Yan Hui was afraid he couldn't afford it, but rather because he worried that if steel prices plummeted, real estate companies would forcibly terminate contracts or even refuse to pay penalties. Excessively high penalties are tempting, but might be unattainable. 300 yuan/ton was his comprehensive assessment. Many real estate companies would be willing to pay this penalty; 5000 tons would only cost 150 million yuan.

In 1997, Yan Hui experienced a global financial crisis, during which Soros and others made a fortune, and the crisis also triggered many real estate problems in China.

At the time, due to the real estate problem, the demand for related materials shrank, and Mr. Teng, a major supplier to the construction site, encountered financial problems. Later, he got involved in gambling, and with the processing plant running into trouble, he ultimately chose to defraud Yan Hui.

While the entire incident cannot be attributed to the financial crisis, it must be acknowledged that Yan Hui was affected by the last financial crisis. Over the years, he has harbored resentment about it, and now that a new crisis is brewing, Yan Hui has naturally sensed it. Moreover, he knows that he can seize an opportunity in this financial crisis.

His vision is on a completely different level compared to back then.

How could his family have imagined that Yan Hui would come up with so many questions just by taking a plane ride? After arranging everything, Yan Hui stood there thinking for another seven or eight minutes, taking some notes, before finally calling Qing Lan.

About 10 minutes later, Yan Hui boarded the Coaster bus he had rented.

Yan Hui's father was supposed to pick him up, but he felt it was unnecessary to trouble his father, so he simply rented a car and drove back.

Throughout the journey, the family was in high spirits. My mother and grandmother held hands, concealing their excitement. Because my parents had worked away from home for many years, my mother and grandmother had a good relationship and there were no conflicts between them. After 05, when my parents stopped working, the family was no longer short of money, and the relationship between my mother and grandmother improved even more.

Yan Hui is very good to her grandmother. There is also a housekeeper from the south who cooks and does laundry. This housekeeper is very good at making vegetarian dishes, especially tofu stew, but she didn't bring her back this time.

Everyone was looking forward to their new house and full of confidence for the future, but Yan Hui was preoccupied with the huge sum of money. At this moment, he desperately needed to broaden his perspective and examine whether his choices were right from a higher level. Of course, he couldn't see it; he was simply constantly thinking, preparing to find the most suitable path between risk and opportunity.

(End of this chapter)