Putting aside the unusual fluctuations in the treasury bond market for the time being, let's just say that the yen futures market, although there are fewer trading months, Zhongshi still invested 50 million US dollars to buy the US dollar yen exchange rate futures in March at the IMM (international money market) under the CME exchange, and the trading rate was 110.85 yen to 1 US dollar, with a total of 5,000 lots.

IMM's JPY futures leverage is 30 times, plus the broker in order to maintain risk, the final price of the contract in Zhongshi's hands is 4000 US dollars, 5000 contracts are exactly 20 million US dollars, and the entire underlying amount has reached 60 billion yen, if it is not too urgent time and IMM has strict restrictions on positions, otherwise Zhongshi will definitely go long.

The remaining $1 billion in the account was jointly assessed by several banks, including HSBC, Standard Chartered and JPMorgan Bank, and another billion dollars were lent out, and Zhong Shi then bought the same value of yen in the market at the market price, and the exchange rate price was based on the exchange rate of 110.01 on the day, totaling 220.02 billion yen. After the transaction is completed, the yen capital is deposited into the account of the counterpart, the Bank of Tokyo, as a short-term deposit at an interest rate of 1.5% for a total of 18 days.

The deal was concluded very quickly, because because Zhongshi's credit rating in HSBC and Standard Chartered was very high, which indirectly affected the credit review of Morgan Bank and Bank of Tokyo, and Zhongshi did not plan to withdraw this yen capital, and deposited all of it in the account of Skyline Financial Co., Ltd. in the Bank of Tokyo.

At this time, the short-term interest rate in the United States is 3.00%, and the interest rate on the yen is 1.5% (before the Fed chairman raises interest rates on February 4). The spread between the two sides reached 150 basis points, but Zhongshi knew that if history did not go wrong, a major event would happen in the near future, and that event would push the U.S.-Japan relationship and the entire Shijie bond market into a dangerous situation.

More than a dozen days passed quickly, and this day was February 9, six days after the Fed raised interest rates, and the market's reaction to the rate hike had completely passed, but the volatility of the bond market was still different from Greenspan's expectations.

Through this period of operation, Luis and his team have successfully opened a short position of 40,000 lots in the Treasury futures market, which has cost more than $200 million. However, based on this market, the average daily position is more than 300,000 lots. The average daily volume is around 250,000 lots, so this position is not too conspicuous.

After consulting Zhongshi, Louis and others left $300 million as a backup, while the rest of the funds were allocated to Zhongshi to other markets. As for what the market is. They don't know.

February. Japanese Prime Minister Hosokawa Gohei visited the United States and had a "friendly" meeting with US President Clinton, and the two sides held talks again on the trade dispute that had lasted for eight months.

Although almost a decade ago, the United States dragged several other countries to get Japan, West Germany and other countries to sign the Plaza Accord that led to the appreciation of their currencies. However, the situation of the US trade deficit has not changed, and it is even trending worse. Although Japan's economy has been hit hard in recent years, the trade surplus has been growing, and by '94, Japan's annual trade surplus reached $120 billion, half of which $60 billion came from trade with the United States, of which 60% was caused by exporting automobiles.

In order to reverse this situation, the two US administrations have been exerting pressure on Japan, and Clinton's predecessor, President Bush, even brought a large number of people from the US automobile industry to Japan during the emperor's funeral and forced them to buy American vehicles and parts.

In the Clinton era, as soon as he took office, he began to negotiate trade with Japan, especially the automobile industry, and also made some achievements, in July 93, the United States and Japan reached a "framework agreement" to reduce Japan's trade surplus with the United States and facilitate the entry of American products into the Japanese market, but this was only an "agreement of intent". For example, in the Japanese side, words such as "reducing book surpluses, increasing foreign market entry, and substantially increasing imports" are interpreted in the United States as "reducing the fiscal deficit, increasing domestic savings, and enhancing international competitiveness."

From the first day of discussion to implementation, the framework was filled with mistrust on both sides, and even in various areas of dealing, both sides have blatantly dropped harsh words and threatened to seek revenge.

What Clinton and his administration seek is for Japanese auto giants to "voluntarily" buy a certain amount of American-made auto parts each year. In this way, the profits of Japan's automobile exports will be reduced to a certain point, and 40% of the U.S. trade deficit comes from Japan, and 60% of it comes from the automobile industry, that is to say, the U.S. imports of automobiles from Japan alone stand at 2/4 of their trade deficit, close to a quarter, so if this part of the deficit can be reduced, the effect on the reduction of the entire U.S. trade deficit is obvious.

But for Japan, this seems unlikely, because 30% of Japan's trade surplus with the United States comes from automobile exports, if calculated according to the same proportion, the trade surplus that can be created by automobile exports accounts for 60% of the entire Japanese trade surplus, which is far heavier than the deficit created by the automobile industry to the United States, so even if the Japanese government changes frequently, no prime minister dares to easily agree to this condition.

Prime Minister Hosokawa has prepared another alternative plan for his visit to the United States, using a total of up to $140 billion to stimulate economic growth to please the United States. But as soon as Hosokawa and his team began negotiations with the Americans, they were surprised to find that the Americans knew their bottom line well, and even quoted the private conversation of the Japanese representative, which made them confused. (The United States installed bugs on Boeing planes)

The Japanese are planning to re-flow their current holdings of dollar capital back to the United States through a plan to stimulate domestic economic policies, after all, the yen is in circulation in Japan, not the dollar, and the $140 billion will eventually flow to the American market. A large part of it goes to the U.S. Treasury market, which gives the U.S. government more capital available.

However, the United States was unwilling to insist that the Japanese automobile industry use American parts, and at the same time open up the telecommunications, medical equipment, insurance and other markets, Japan also had no way to retreat, with this demand contrary to the "principle of free trade" forcefully refused, and finally the two sides broke up unhappily, and the three-day trade talks were announced to break down on February 12.

This was the first full-scale break in the US-Japan negotiations after World War II, and the first time that the Japanese government said "no" to the United States, so it became a very symbolic event.

And everything that Bell Stone did stemmed from this event. He knows it well. It would take decades for the U.S.-Japan auto trade negotiations to take decades before an agreement was finally reached in '95. Because of this trade friction, the relationship between the United States and Japan has also dropped to a freezing point.

Soon, American retaliation against Japan came. On February 13. The United States announced trade sanctions against Japan. At the same time, it was announced that the "Super 301" trade clause in the trade law will be used in March.

The "Super 301" buy clause refers to an amendment to Section 301 in the U.S. trade law that imposes sole responsibility on the U.S. government for investigating trade barriers to foreign exports to the United States. At its core is the shift of trade retaliation powers from the President to the Office of the Trade Representative. This allows negotiators to retaliate directly without consulting the president. In addition, the Office of the Trade Representative (USTR) proposes the trading partners and areas that the United States considers to be "the most closed" and "most unfair" in the six-month period of the end of March and the end of September, and then the two sides will conduct trade negotiations within the next 18 months, and once the negotiations fail, the United States can impose unilateral trade sanctions on these trade counterparties, the main thing is to impose high tariffs on imported products, up to 100%.

In other words, if the U.S. Trade Representative determines that there are trade barriers in the Japanese market on April 1, and then the U.S. and Japan fail to reach an agreement on this within the next 18 months, the U.S. can unilaterally retaliate against Japan, and cars exported from Japan to the U.S. may be twice as expensive as they are today.

Having said that, of course, Japan can also impose retaliatory tariffs on American products, but the problem is that Japan is a trade surplus and the United States is a trade deficit country, and the two sides are in an unequal position. In other words, if the United States raises tariffs, domestic consumers will have a big deal to buy cars produced in the United States, or European cars, anyway, there is a lot of room to choose, but if Japanese cars lose such a big market as the United States, the automobile industry and the domestic economy will suffer a major blow.

This is also one of the reasons why later generations of Weishenme Europe and the United States have repeatedly imposed high tariffs on Chinese products.

Naturally, all this has nothing to do with Zhongshi, and the rest of the matter depends on how the Japanese continue to negotiate with the United States, and the reason why he remembers it is because the impact of this incident is very large, not only is it the first time that Japan has said no to the United States, but more importantly, it has caused a chain reaction in the international bond market.

The breakdown of trade negotiations, the impact on the foreign exchange market is obvious, the yen appreciation in the short term has become an inevitable trend, sure enough, on February 14, Valentine's Day, the yen against the US dollar as soon as the opening skyrocketed, from the opening of 106.5 all the way to the highest point of 101.10, once approached the range of 100 yen to 1 US dollar, but finally to the close of the slight pullback, and finally closed at 102.25 yen to 1 US dollar.

Zhongshi's bet on the yen was a big win, and the 220.02 billion yen was then converted into the corresponding US dollar at the market price, earning 151.7848 million US dollars, and after counting the short-term interest rate differential between the US dollar and the yen, he paid close to 50,000 US dollars in interest, and finally reached a net income of 151.7 million US dollars.

The 5,000 hands of yen futures made a profit of 47 million US dollars in half a month, a gain of 200%, and it was on this day that Zhongshi sold all of them, which is the bag for safety, and finally turned into real gold and silver.

In addition, there are options, on this day, Zhong Shi notified HSBC Hong Kong to exercise the option, and the option was liquidated to earn $75 million, leaving $70 million after deducting the option premium. Together, Zhongshi has earned $268.7 million in the past half a month.

There are naturally losses when there are gains, in fact, because the quantum fund made the wrong bet on the yen, this time they can lose a lot! (To be continued......)