America's No. 1 financial conglomerate

Chapter 374 When things get ruthless, they don't even spare themselves.

Jane Fraser realized that her words were somewhat inappropriate, but even so, she ignored the teasing in Ernst's words and kept her eyes fixed on Ernst like a hawk, just to get an answer from him.

"Boring." Ernst shook his head. "I don't know how Kane puts up with you."

He suddenly realized that Kane had been working in Europe for a long time, with plenty of freedom, and must have been surrounded by countless women. There was no need for him to put up with it.

He even wondered if he had asked to work in Europe on his own initiative.

To get away from Jane Fraser and escape from this woman who has absolutely no sense of fun?

However, when his gaze returned to Jane Fraser's face and he saw that her expression was becoming increasingly gloomy at a visible speed, like the calm before a storm, so oppressive that it was hard to breathe, he coughed lightly and said, "In fact, I have also made appointments with representatives from several commercial banks, including JPMorgan Chase, Bank of America, and Citibank. I will be negotiating with them over the next two days."

"How much money did you borrow?" Jane Fraser's voice was filled with disbelief. At this moment, she no longer thought Ernst was crazy, but rather that this was an utterly absurd farce.

What exactly is he trying to do? Is he going all in on his entire fortune?

She had seen countless people who were crazy about finance, those investors who chased high risks and high returns, often willing to gamble everything for so-called opportunities.

But she had never seen or even heard of a super-rich man like Ernst, who clearly had enormous wealth and a stable asset allocation, so casually using his funds for such crazy operations.

"7 billion US dollars." Ernst's tone was as calm as if he were talking about the weather, without the slightest ripple, as if 7 billion US dollars was as insignificant to him as an ordinary person borrowing 700 yuan.

Jane Fraser opened her mouth, but her throat seemed to be blocked by something, and she couldn't utter a sound for a long time.

Because her mind was completely blank at that moment, she no longer knew what words to use to respond to this shock.

Persuasion?

At this point, any words of persuasion would seem pale and powerless, and would be utterly incapable of changing Ernst's decision.

Based on Jane Fraser's understanding of Ernst, he was a person with an almost obsessive sense of self-determination; to put it bluntly, he was an extreme megalomaniac.

Wealthy people are arrogant, especially those who started from scratch. They are used to controlling everything and believe that everything can be under their control and develop according to their predetermined path.

Even so, most of these arrogant tycoons will listen to the advice of professionals at crucial moments. After all, professional analysis and advice can often help them avoid risks and seize opportunities. They are arrogant within a framework set by professionals.

Ernst, however, was completely different. He was like a beast that never looked back once it had set its sights on a goal. Once he had made up his mind about something, no matter how reasonable the suggestions or how strong the evidence, he would not waver in the slightest.

This defies common sense, but the other party always emerged victorious, rapidly accumulating enormous wealth.

"You can't put all your money into shorting Wall Street." Despite her shock and doubt, Jane Fraser remained clear-headed in her professional judgment and said with great certainty.

"Of course," Ernst replied without hesitation, his tone carrying a hint of disdain for such an extreme approach. "I wouldn't do something with such high risks and relatively limited potential benefits."

Shorting Wall Street was, from the very beginning, just a smokescreen to mislead the opponents.

Within two days, various forces on Wall Street will learn through various channels that he has borrowed a large sum of money. At that time, the specific flow of these funds will definitely become the focus of close attention across Wall Street.

"I will only use $15 billion to short the stocks of major Wall Street banks, while buying put options on the S&P Financials Index."

"So what about the remaining funds?" Jane Fraser pressed on, her eyes filled with intense curiosity.

The other party has already admitted that they won't put all the funds into this area, so what will the majority of the funds be used for? She was eager to find out.

In her view, since Ernst dared to borrow 70 billion, he must have a complete and meticulous financial operation plan, and the remaining 55 billion was the core of the whole plan.

Ernst paused deliberately, a mysterious smile on his face, clearly intending to fully arouse Jane Fraser's curiosity and whet her appetite.

He watched Jane Fraser silently as her eyes widened with impatience, her gaze growing increasingly fierce as she received no answer, like a cheetah about to pounce.

When he saw the other person about to get up again, he slowly opened his mouth and said with a smile, "Russian government bonds, shorting Russian government bonds is the real purpose of my large-scale borrowing this time."

"You think bond spreads will widen?" Jane Fraser's eyes flashed with surprise upon hearing this answer; she had never expected Ernst to set his sights on hedging.

"That's right, the spread between emerging market bonds and developed country bonds will definitely widen significantly." Ernst's tone was full of unquestionable certainty, as if he had already seen the future market trend with his own eyes.

"My real purpose in borrowing such a large sum of money is to short Russian government bonds, the ruble, and various assets related to the Russian financial market, while going long on government bonds of economically stable countries such as the United States and Germany."

Jane Fraser was completely overwhelmed with shock and could not describe her complex feelings in words.

She didn't know what Ernst was thinking. All his decisions went against the prevailing market opinion, as if he were going against the tide of the market.

While everyone is optimistic about the prospects of the US financial industry and is increasing their investment in US financial assets, Ernst chooses to go against the trend and choose to be bearish on the financial index.

While investors around the world were frantically buying Russian bonds, viewing them as high-quality investment targets, he once again went against the grain and chose to short them.

Jane Fraser considered these behaviors to be utterly insane.

Just then, a name suddenly popped into Jane Fraser's mind: O'Shea Ricardo, head of the hedging department at Ernst Asset Management.

She suddenly remembered that just half a month ago, O'Shea Ricardo had expressed the same view on market trends as Ernst, believing that Russian government bonds posed a huge risk and that the US financial market was also facing adjustment pressure.

However, O'Shea Ricardo was not as certain and aggressive as Ernst. After careful analysis, he took out $100 million to tentatively establish a short position in Russian government bonds as a small-scale risk hedge.

Compared to Ernst's massive $70 billion borrowing and large-scale short-selling plan, O'Shea Ricardo's actions seem like child's play.

"Is it because Standard & Poor's raised the risk level of Russian debt default?" Jane Fraser asked.

Ernst nodded and replied in a flat tone, "That's one reason, I suppose."

His tone suggested that while Standard & Poor's rating adjustment had some influence on his decision, it was not the most crucial factor, but rather one of many factors he considered.

"Is that because of Goldman Sachs?" Jane Fraser then asked her second question.

Ernst's expression was noticeably different this time. Just a few days earlier, Goldman Sachs had issued $12.5 billion in treasury bonds for the Russian government in the form of five-year Eurobonds, with an interest rate of only 12%, far lower than the previous average interest rate of around 20% for Russian treasury bonds.

Goldman Sachs' move caused quite a stir in the financial markets.

This action is almost equivalent to Goldman Sachs publicly stating that it is optimistic about Russia's economic development prospects and believes that the Russian government has sufficient debt repayment capacity to support low government bond interest rates.

This signal also gave countless investors the illusion that the Russian market was gradually improving.

As a result, investment banks from various countries followed suit and joined the rush to buy Russian government bonds, driving up the price of Russian government bonds and keeping market enthusiasm high.

But few people noticed that behind this was the fact that Goldman Sachs itself held $23 billion in Russian government bonds.

Goldman Sachs is not optimistic about Russia's economic prospects. Its real purpose is to create the illusion of a booming Russian bond market by issuing new low-interest government bonds, attract more investors, and find buyers for its large holdings of Russian bonds so that it can cash out and leave at a high price.

When Jane Fraser mentioned Goldman Sachs, a hint of approval flashed in Ernst's eyes.

"I didn't expect you to have seen that too," Ernst said, offering Jane Fraser a compliment without reservation.

Jane Fraser couldn't help but roll her eyes inwardly, silently thinking: "What nonsense I'm seeing. This is all O'Shea Ricardo's analysis, and that's why he chose to go against the market and short Russian bonds."

Her job is to manage a business; where would she get such a high level of expertise?

"Just because of these two points, you're going to short Russian government bonds?" Jane Fraser continued to press.

In her view, the rating adjustment by Standard & Poor's and speculation about Goldman Sachs' intentions alone do not seem sufficient to support such a large-scale short-selling operation; there must be other more critical factors behind it.

"Actually, there's one more thing." Ernst said as he stood up from his seat and slowly walked to the office window.

I don't know when it started, but the sky outside the window suddenly became gloomy, and fine raindrops fell from the sky, pattering against the glass window and making a soft tapping sound.

Ernst stood by the window, looking down at the scene through the glass.

From his vantage point, he could see the filming location of the Spider-Man movie.

Despite the light rain, the crew and actors continued filming in an orderly manner, clearly not enough to stop their schedule.

"It's raining. I wonder if Kane will get wet."

Jane Fraser was instantly speechless. The atmosphere had been built up to this point, and you're telling me this? She practically gritted her teeth as she said, "Then let him drown outside."

Ernst silently mourned for Kane for a minute, and couldn't help but sigh: I really don't know what Kane was thinking, to marry such a wife.

He slowly turned around and faced Jane Fraser again, his expression becoming more serious. "I also discovered that Goldman Sachs has recently quietly raised the lending rate for Russian government bonds. At the same time, major banks on Wall Street have raised the bar for short selling in the financial industry to varying degrees."

What does this mean?

"This shows that they have discovered the problems in the market and have begun to take measures in advance to avoid risks, while at the same time striving to gain more profit margins for themselves." Jane Fraser had also fully realized this at this moment.

"These financial giants may have already analyzed the financial data from the first two months of the second quarter to predict certain future market trends. By raising the borrowing rate for Russian government bonds, they aim to increase the cost for other investors to short Russian government bonds, thereby reducing short-selling pressure in the market."

"Raising the threshold for short selling in the financial industry is to limit competitors' short selling operations against them."

Thinking of this, Jane Fraser's eyes suddenly lit up, and a bold guess formed in her mind: "Perhaps the major giants on Wall Street have already begun to secretly build up positions. They are likely to be establishing short positions in other major banks besides their own, preparing to profit from market corrections."

"No." Jane Fraser quickly shook her head again, denying her previous statement. "They'll short themselves too."

To make a living on Wall Street, if you can't be ruthless enough to cut your own flesh, you don't deserve to be here.

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