Chapter 857: It's not enough to say that the pig is fat

If the price of LME copper futures is converted into the price of US premium copper futures, it is equivalent to 0.6740 US dollars per pound. If the price of LME aluminium futures is converted into the price of US aluminium futures, it is equivalent to 1.3612 US dollars per pound.

But if we look at the opening prices of this morning's NYMEX copper and aluminium futures, they are 0.6320 USD/lb and 1.2965 USD/lb respectively.

The London Metal Exchange futures prices are more than 5% higher for both types of futures.

This is not a small difference!

And given the overlap in customers between the LME and the New York Mercantile Exchange, it is not long before the prices of LME copper futures and LME aluminium futures on the LME affect the prices of high-grade copper futures and Alcoa futures on the New York Mercantile Exchange. This off-market factor will push the prices of high-grade copper futures and Alcoa futures higher.

This bullish factor is absolutely terrible news for short sellers like Salomon Brothers.

'It seems I've been dragged into this by Phillip Brothers. Albert Raphael definitely underestimated the power of the bulls.'

John Gufran thought with a depressed heart.

'I'd better find out if Albert Raphael has any follow-up plans. If not, I'll have to make plans early...'

Thinking this, John Gufran took out an address book from the drawer, found one of the numbers on the page for Phillip Brothers, and dialed it by pressing the button.

The call was quickly connected, and Albert Raphael's slightly enthusiastic voice came through the receiver.

'John, good morning...'

'Albert, good morning. I've got some news. I don't know if you know it, but the prices of LME copper futures and LME aluminium futures in London are seriously higher than those of American copper futures and American aluminium futures... You know?'

'Okay, what are you going to do? You guys are the main short sellers this time... Okay, I'll wait for your reply, please be quick...'

After a brief pause, John Gufran narrowed his eyes and pondered over Albert Raphael's attitude and words.

After a long while, he opened his eyes, encouraged his subordinate and then dismissed him. He then went to the operations room and ordered a temporary reduction in short selling. At the same time, he instructed the risk assessment department to re-evaluate the investment risks of high-grade copper futures and aluminium futures in light of the current situation.

John Gufran already felt as if he had been taken in by Albert Raphael. If the Philipp Brothers did not show enough strength, he would have to seriously consider whether or not to continue to go along with the Philipp Brothers.

...

No matter how hard the Philipp Brothers and the short sellers such as Solomon Brothers struggled, Xia Yu was not nervous.

In his opinion, the control of the situation had already fallen into his hands when he invested a large sum of money to purchase spot contracts.

After all, he had enough capital to manipulate both markets, and no matter how hard the shorts struggled, they were already doomed to fail.

It just depended on whether the shorts were willing to continue to increase their investment.

From Xia Yu's perspective, he definitely hoped that the shorts would continue to invest capital, because the more the shorts invested, the more profits he could reap.

Due to a sudden matter, Xia Yu did not arrive at the New York branch of Galaxy Fund until 9:30 a.m.

After arriving, he saw that the company was once again dominating the price movements of high-grade copper futures and aluminum futures, and Xia Yu was in a very good mood.

However, upon closer inspection, he noticed that the trading volume and frequency of high-grade copper futures and aluminium futures were not as high as before. Xia Yu realised that the short sellers were hesitating.

If you disregard the commission, the futures market is, in principle, a zero-sum game. The short and long positions are equivalent, and neither side can act alone.

This characteristic of the futures market is different from the stock market, because the stock market is not a zero-sum game.

If the short sellers don't follow suit, Galaxy Fund won't be able to spend any money.

The trading volume and frequency that Xia Yu is seeing in the operations room now are estimated to be equivalent to about two-fifths of the volume at the beginning of the struggle.

Of course, Xia Yu is ready to place a buy order at any time, and there is no sign of a lack of follow-through. The key lies in the short sellers' side, where the volume of sell orders is decreasing, which is preventing Xia Yu's side from exerting itself.

Seeing this situation, Xia Yu suddenly felt a sense of disappointment.

The Philip Brothers Company, which is now the number one futures market in the United States, and the Solomon Brothers Company have this kind of strength?

"Song Yang, what about the statistics on open interest?'

After taking Song Yang back to the office, Xia Yu sat on the sofa with his arms folded, looking at Song Yang and asking.

Song Yang said, "Just a moment," and went out for about a minute. When he returned, he already had a document in his hand and respectfully handed it to Xia Yu: 'Boss, the data is all here.'

Xia Yu took it and read it carefully, frowning and thinking from time to time.

He now held 98,200 lots of advanced copper futures, which had cost him 1.459 billion US dollars. Based on this morning's opening price, the value had reached 1.552 billion US dollars, so the floating profit on the advanced copper futures was 93 million US dollars.

The aluminium futures position is 61,450 contracts, costing $1.881 billion, and based on this morning's opening price, the value has reached $1.992 billion, which is about to reach $2 billion. The floating profit of aluminium futures has reached $111 million.

The total floating profit of the two futures combined has reached $204 million.

Compared to the total investment of over 3.3 billion US dollars, this profit margin is absolutely small.

This also shows that the short positions led by the Phillip Brothers Company are still very strong, and after fighting for so long, they have not allowed the prices of high-grade copper futures and aluminium futures to skyrocket.

Unlike the London Metal Exchange, where the Bahraini bank has been beaten back and back, with little ability to defend itself, it can only watch helplessly as the prices of the two futures skyrocket.

However, Xia Yu is still not satisfied with these figures.

He was the main force on the long side, but on the short side, the Phillip Brothers were the major short, but other institutions had also entered the market.

Xia Yu estimated that the Phillip Brothers had only invested about 2 billion US dollars, or even less.

If the Phillip Brothers saw the situation was not good and closed their positions and withdrew, the losses would not be too great, estimated to be only a few hundred million US dollars, which could hurt but not cripple them. This was not in line with Xia Yu's plan.

He had planned to knock Philip Brothers out with one blow and take it over at a low price. If Philip Brothers' losses were not big enough, it would make his takeover more difficult.

Thinking about this, Xia Yu instructed Song Yang, "For the next two days, slow down the offensive. You can even pretend to be short of funds and lure more short-selling capital in.'

Song Yang was taken aback, and revealed a sinister smile as he nodded repeatedly, saying, "Boss, I understand.'

The boss doesn't think the pig is fat enough.

...

After leaving Galaxy Fund, Xia Yu quietly went to the New York branch of Jiuding Securities.

As soon as he saw the general manager Toby Moulton, Xia Yu went straight to the point and asked, 'Toby, how is the short selling going?'

Unexpectedly, Toby Moulton said with some regret, 'Boss, the short selling was going well before. Many institutions were willing to bet against us, but in the past few days, we have approached four institutions, and none of them are willing to bet against us.'

There is only one reason for holding shares in Philip Brothers but not being willing to bet against the company: a lack of confidence in the company. If you bet against the company, you will lose even more if the company's share price crashes and you are stuck holding the shares.

If you don't bet against the company, you can sell your shares in time if the situation looks bad, and limit your losses to an acceptable range.

Xia Yu nodded slightly, without immediately expressing any opinions, but continued to ask, 'How much have we shorted now?'

The company had been working around the clock on this, so Toby Moulton knew the figures off by heart and said without hesitation: 'At present, we have shorted a total of seven institutions, borrowed a total of 22.12 million shares, accounting for 14.75% of the total share capital, and sold 616 million US dollars.'

'The share price of Philip Brothers has now fallen slightly, and our floating profit is 8.26 million US dollars.'

From these figures, it can be seen that the impact of Philip Brothers' temporary short-selling loss has been reflected in its stock price, but because the outside world is not aware of the actual loss, the stock price has only fallen slightly.

If news of Philip Brothers' loss of $200 million were to be revealed now, its stock price would absolutely plummet, after all, last year Philip Brothers' annual net profit was only $289 million.

The current slight price drop is simply due to investors' pessimistic outlook on Philip Brothers based on speculation and subjective analysis.

After a moment's thought, Xia Yu's face became stern, and he stared at Toby Moulton and said, 'Toby, I have already asked the Galaxy Fund to slow down their offensive. It is possible that in the next two days, Philip Brothers will regain the advantage. You must seize the opportunity and strive to quickly increase the amount of short selling.'

'If some institutions are still unwilling to bet against the market, you must send someone to keep an eye on them. When the final assault begins, keep a close eye on the flow of their shares, so that it will be convenient to buy at the bottom later. Do you understand?'

Toby Moulton had also talked to his boss Xia Yu and knew that he did not just want to make a profit, but also to take over the Philip Brothers Company.

He knew what was important.

Therefore, he nodded solemnly and said, 'Boss, I understand. I will immediately formulate an action plan.'

'Well, go ahead, work hard,' Xia Yu encouraged with a smile.

...

Sure enough, over the next two days, as the buying momentum of the Milky Way Fund slowed, it made the short sellers very happy.

After successive tests, the short sellers kept increasing their positions, trying to regain lost ground, and the long positions, which had lost the Milky Way Fund, could only barely fend them off.

Fortunately, there was still the price impact of the futures markets in London and the island country, driving up the prices of copper and aluminium futures on the New York Mercantile Exchange and the Chicago Mercantile Exchange.

Toby Moulton also seized the opportunity and, within just two days, lured three institutions and borrowed 8.25 million shares.

After borrowing, he immediately began selling them.

However, in order to avoid being labelled a malicious short seller, Toby Moulton still made some cover-up.

But the large-scale sale of shares greatly increased the trading volume of Philip Brothers' shares, which had a slight impact on the stock price.

The news inevitably reached Philipp Brothers, and Chairman Tendler Wells sensed something was amiss, a sense that he was being surrounded by conspiracies.