Just as Zhong Shi was gearing up for a big job, on an office floor at 888 Seventh Avenue in Manhattan, a group of white men in suits and leather shoes were meeting to discuss placing more bets on the yen.

"We made a lot of money on the yen last year." Druckenmiller started with last year's results: "So I decided to cut my already profitable Eurobond position and continue to bet heavily on the yen." ”

There were more than a dozen fund managers sitting in the audience, all of them tilting their heads to listen carefully to the analysis of the most important fund manager, although the quantum fund is nominally run by more than a dozen fund managers, but Druckenmiller's position is almost only below one person, and above the others.

Since two years ago, after making huge profits from currencies such as the pound sterling and the Swedish krona, investors who were waiting for the acceptance of the Quantum Fund with checks in hand have been visiting the place in an endless stream, and at the same time, the size of the Quantum Fund has also swelled rapidly, and it is now the largest hedge fund on Wall Street.

Although it did not appear in the classic battle against the French franc in '93, it is widely believed that the Quantum Fund was also involved, after all, they are famous. But on Wall Street, most people know that the campaign against the French franc that lasted for more than half a year was carried out by Robertson's Tiger Fund, after all, the performance and net worth are there, and as long as one of their investors shows his mouth, the whole Wall Street will know.

It's also ridiculous to say that one way Wall Street news is delivered is by the shoe-shiners on the streets, and the well-dressed Wall Street elite, whether they are traders or bankers, are very concerned about appearances. The leather shoes under your feet do not tolerate a little dirt, so the shoe-shiners who make a living here have a relatively regular clientele. While shining shoes, these elites working in large financial institutions often chat with these people, and a few words or tips can reveal a lot of information, so that during the financial crisis of '08, traders in the City of London quietly asked the shoeshine for news of other colleagues who came here.

Since it didn't do anything about the franc that ultimately failed to protect the exchange rate, what did the Quantum Fund do this year? In fact, their returns are no less than those of the Tiger Fund, which has had great success with the franc, and in addition to their investments in the European bond market, more of their investment targets are aimed at the yen exchange rate.

The yen is free-floating against the dollar, so it is impossible to use the same strategy as the pound. And this market is unusually large. Although the Japanese market has been sluggish in recent years, the country's economic strength must not be underestimated, and any large commercial bank can put the quantum fund in a situation from which it will never recover. Therefore, the quantum fund basically makes a fuss about yen futures and options, specifically most of it, on options.

But options are not insurance either. Druckenmiller soon discovered. Exchange rates are very sensitive to trade negotiations. It even played a decisive role, and although the United States has continued to grow economically in the past three years, its deficit with Japan has increased. Therefore, the U.S. government and the Japanese government have conducted many negotiations on trade between the two sides, and most of these negotiations are sanctions, tariff increases, etc., and then the other side either counter-sanctions, or opening another market, etc., because of political disadvantages, it is usually the Japanese side that finally compromises.

In '93, the yen rose from a minimum of 126 yen to 1 dollar to a maximum of 100 yen to 1 dollar, appreciating by more than 20%, but when the 100 mark was about to cross, the yen exchange rate turned lower, and in '94 it returned to 112 yen to 1 dollar.

However, now due to the overall downturn of the Japanese economy, the yen has begun to enter a weak channel, and the downturn in the domestic economy and the lack of exports have made the possibility of yen appreciation become low, so hedge funds have been bearish on the yen, betting on the depreciation of the yen, and the trend in the fourth quarter of '93 is in line with this depreciation expectation.

In addition to taking advantage of the opportunity of each trade negotiation to make profits, the Quantum Fund also made corresponding positions in the depreciation of the yen, in addition to the dollar to the yen, they also made heavy bets on the exchange of other currencies for the yen, so naturally made a lot of money, so that by January 94, the Quantum Fund's position in the yen bearish side reached a staggering $25 billion.

Naturally, these are the amount of the underlying amount on the contract, and the quantum fund does not need to contribute too much capital if the leverage is calculated, otherwise even if their capital scale has grown rapidly in the past year, they will not be able to bear the consequences of doing the wrong direction.

"I have an opinion that there are too many bets on the yen at the moment, and there is no indication that we are about to start trade negotiations with the Japanese, so are we considering reducing the size of investment?" While Druckenmiller was talking, some of the fund managers below had a different opinion.

"Ladies and gentlemen," Druckenmiller explained after glancing at his colleague, "the investments in Europe's large bonds have come to an end, and I am about to sell them gradually." If you don't invest in the yen, then do you have any investment goals? ”

As soon as he finished speaking, a fund manager said: "Copper! I have carefully studied that now due to the economic recovery, especially in Southeast Asia, the general rise of infrastructure construction, the demand for metals is gradually increasing, I think the time is fully ripe to enter the copper market, the current market copper prices are at a relatively low position, but due to the hedging failure of German metals, their short positions in copper have been largely liquidated, pushing up copper prices. With the recovery of the economies of China, the United States and other countries, the demand for refined copper is also bound to grow, especially in the Japanese market, the depreciation of the yen can promote the growth of copper exports, but it is also one of the largest consumers of copper, so it ......"

As he spoke at length, almost everyone present fell into deep thought, this fund manager is responsible for commodity research within the quantum fund, specifically his analysts are responsible for commodity market research in various markets, and he synthesizes these research reports, and then takes them to the manager's meeting for discussion, and finally decides that Druckenmiller, the main person in charge, finally makes up his mind.

"In addition, there are investment opportunities in the U.S. long-term Treasury market, are you considering investing more money in the Treasury market?" When the fund manager in charge of commodity research finished speaking, another burly, red-looking fund manager also said, "And the bond market doesn't need a lot of money, and we can raise the leverage through the broker, so that it doesn't take up too much money." ”

What he is talking about is bond futures, and the quantum fund invests in the bonds themselves in the European and mainly British bond markets, and these bonds themselves are calculated in hundreds of thousands, and even some bonds are often calculated in billions, which to some extent occupies most of the funds of the quantum fund.

After the UK's exit from the European exchange rate system, the management of the Quantum Fund was keenly aware of the need to take a heavy position in the UK bond market, as they realized that the UK would no longer need to maintain such high interest rates. The reason why I didn't bet heavily on bond futures was because there was only one such thing as a 10-year government bond in the gilt futures market, and there was no such big plate at all. Therefore, bonds themselves are the most haode choice, naturally, these denominations are often traded in bonds of 100,000 pounds, which naturally require corresponding funds, and the leverage is much lower than that of futures.

The bond futures market in the United Kingdom is far less developed than in the United States, and it is important to know that in the CME, not only long-term and short-term Treasury bonds in the United States, but also foreign bonds also have a futures market, which is due to the exceptionally developed financial market in the United States.

"I need a full study, please make it as soon as possible, and we will discuss it at the next meeting." Druckenmiller thought about it for a moment and decided, "Based on your report, I will reduce my short position on the yen accordingly so that I can free up funds for other investments." ”

This was the end of the meeting, and it has to be said that the hedge fund was very fast, and after three consecutive days and nights of overtime, two research reports on different markets were put in front of Druckenmiller's desk, along with operational strategies. After thorough communication with Soros, Druckenmiller agreed to the two investment reports, while trimming his position in the yen to $8 billion, and then allocating funds to two other markets.

Don't think that it is a lot to cut from $25 billion to $8 billion, just calculate it with 10 times leverage, this money is only $1.7 billion, and the current management fund of the Quantum Fund accounts for less than 20% of the scale of tens of billions of funds, and it is precisely because of these two moves to different markets that the Quantum Fund has not suffered huge losses in 94 years.

Returning to the bond market, the Fed's interest rate hikes have not dampened inflation expectations, but have been exacerbated by successive increases in long-term interest rates. Greenspan didn't understand why the market didn't work according to his logic.

After all, long-term interest rates and short-term interest rates are two concepts, although the two sides have a certain connection, but more importantly, they are determined by the supply and demand of market funds. But Greenspan ignores that his interest rate hike has led to uncertainty in the long-term interest rate market, which means risk to capital, and this risk is amplified by leverage dozens of times, which is enough to destroy the fragile capital base of leveraged hedge funds, forcing them to sell their bond futures or bonds to reduce risk, and these quasi-banking institutions sell bonds in large quantities, causing bond prices to fall, which in turn makes long-term interest rates rise, which is exactly the opposite of Greenspan's expectations. (To be continued......)

PS: Thank you very much for the monthly pass support of TANKandDAPAO, 090320023841930, wangxueliang, Mo Shangliuyun, and Drag Maniac! At the same time, thank you again for the magic dragon war ghost、Let me think about the reward!