Reborn Financial Overlord

In recent years, with the wide-scale application of computers and the introduction of information from the Internet, the new generation of capital has been able to conduct foreign exchange transactions through the Internet.Carlo Azerio Ciampi gave these capitals who use the Internet to conduct cross-border transactions a name: electronic nomads.

For a long time, Ciampi has noticed the growth of electronic nomads. Wherever these guys go, the transaction volume of any target will double abnormally. The president of the bank, Ciampi, would feel terrified.

On several occasions, Ciampi has submitted his views on electronic nomads to the Ministry of Finance and the cabinet. He believes that with the changes brought about by modern information transmission, the central bank’s foreign exchange reserves in the past should be changed. The collapse of the Finnish mark is the best proof.

You know, before this, no one dared to imagine that international capital would dare to attack a country's central bank.

However, no one cared about Ciampi's suggestion.

Even when the Finnish mark collapses and Ciampi resubmits his views on e-nomads, no one cares.

Because more foreign exchange reserves need to be added, this will put more pressure on Italy's already declining economy, and the addition of a new trading system also requires new funds to be invested.

bell bell -

The rapid ringing of the phone was extremely harsh in the trading room. The head of the trading department paused for a moment when he answered the phone, and quickly handed the silent phone to Qian Pi.

"Carol. It's me. You must hold on at all costs. I think you know what this means to us."

"Gorya. I have no confidence, not any confidence. You don't know the horrors of the electronic nomads. Now, all the eyes of capital in the world are focused on the lira by Schlesinger's talk. Our 70 billion reserves are simply Not enough to see."

"Listen, Carlo. I know you're under a lot of pressure, but we can win. We can raise interest rates to 15.00% now, so we can keep capital that wants to flee."

"But Finland..."

"Finland is different from us. They are not a member of the Community. If we fail, the Bundesbank will definitely help. I will talk to Schlesinger and ask them to lend us a large sum of money."

"......"

Chapter 21 Convergence Transactions

Goliath's tone was full of confidence. He knew in his heart that Germany just wanted to teach Italy a lesson, but he didn't want the lira to collapse. This would not do Germany any good. On the contrary, with the delicate relationship between Italy and Germany , it would only be bad for Germany if the lira collapsed like the mark.

At this time, I went to Schlesinger to borrow money, and I would definitely be able to borrow it.

However, Ciampi does not have much confidence in this, not because he has no confidence in going to Germany to borrow money at this time, but because he really has no confidence in Lira.

As for the reason... Ciampi doesn't know, he just feels uneasy in the dark, a bit like the sense of trading developed by traders, but not entirely, if you have to say a closer reason, probably It is Qianpi's instinct developed with his rich experience in the financial field for many years.

Of course, just because Ciampi didn't know, it didn't mean that other people didn't know.

As an asshole, if Shen Jiannan could sense Qianpi's uneasiness now, he would definitely give a thumbs up for the richest and most chaotic central bank governor.

The operation of the European Exchange Rate Mechanism is based on the intervention of the central banks of various countries in the exchange rate to maintain a limited range.

Each exchange rate mechanism participating currency is assigned a target exchange rate against the ECU, known as the central ECU exchange rate for that country's currency.The ratio of any two ECU central exchange rates is defined as the bilateral central exchange rate between two participating countries.Aggregating all bilateral central exchange rates forms the ERM parity fence.

Each participating country is responsible for maintaining its currency within the grid, allowing fluctuations of a predetermined magnitude.The fluctuation range of participating countries' currencies is ±2.25%, but some currencies are allowed to float within a larger range of ±6%.For this mechanism to work effectively, members should coordinate each other's monetary and fiscal policies and implement an orderly economic structural reform.

Member states should also agree to direct intervention in foreign exchange markets in order to maintain their currency's position in the ERM.

In the past ten years since the birth of this exchange rate mechanism, it has operated well, and the central bank no longer has to worry about the harm caused by violent fluctuations in exchange rates. It is just like automatic cruise, saving worry and effort.

But that's a thing of the past.

In the beginning, the European Economic and Monetary System established a new currency unit, the Ecu.This monetary unit originates from a currency-weighted average, weighted by 1979 GDP, based on the 1979 EEMS member currencies.The composition of the ECU is periodically adjusted to reflect changes in the relative GDP of member countries.

The composition of the ECU changes when new currencies are incorporated into the European Economic and Monetary System.

It seems that everything is perfect.

It's just that there is a small problem in it.

The problem is that under the European Exchange Rate Mechanism system, countries have different economic levels, so the interest rates of countries are also completely different.

Therefore, this small problem means that you can make a profit without losing money.

That's right, it's a steady profit.

This is a very ridiculous little question. Anyone who has paid enough IQ taxes knows that in the field of investment, there has never been a steady profit.When a person tells others that he can guarantee a steady profit without loss, either he is God or he is a liar.

But as the saying goes: God is trustworthy, sows will climb trees.

If someone could make a steady profit without losing money, the financial market would have ceased to exist long ago.

However, the difference in interest rates among countries does provide smart speculators with an opportunity to make a profit without losing money. This opportunity is later known as the "convergence transaction".

What is a Convergence Transaction?

This is a very complicated thing.

Probably you can cut stones, look for securities that are price mismatched relative to other securities, go long low-priced ones, and short high-priced ones.Generally speaking, there are four types of transactions: the convergence of sovereign bonds; the convergence between new and old government bonds; and the convergence of securities markets.

In short, it can be understood that the common currency unit is the Ecu, but there are different interest rate differences in various countries. This difference means that traders and investment managers are free to invest in currencies with the highest returns. The national currency of the European exchange rate mechanism, without worrying about the exchange rate risk, because the exchange rate of the currency within the European Community is fixed.

Why do you say that?

It is still the exchange rate mechanism of the European Community. When the currency of a member state rises or falls to the floating margin, the central bank of that country has the responsibility to stabilize the exchange rate in accordance with the operation of the exchange rate mechanism.

One of the important factors promoting capital inflows is that international investors increasingly believe that ERM member countries are in the process of moving closer to the European currency, the ECU, which in this case is conducive to the high-yield ERM Currency interest rate differentials will increasingly overestimate the real risk of exchange rate depreciation.

It is conceivable that there is no need to worry about speculation on exchange rate changes, which almost means that there is no loss. Anyway, the central banks of various countries will pay for it.

The favor for convergent deals can be seen almost everywhere.One securities portfolio manager claimed that it was viewed as the equivalent of "government-sponsored hedging".The ERM has fueled the astonishing popularity of a new class of money market mutual funds that trade high-interest short-term securities of foreign governments.

As a securities portfolio manager said in trading: "Since you can get higher returns from Spanish or Italian government bonds without taking compensatory risks, why bother to pay attention to the returns on West Deutsche Mark government bonds?" Woolen cloth?

So the ERM fueled the astonishing popularity of a new class of money market mutual funds that traded in high-interest short-term securities of foreign governments.

Morningstar estimates that between 1989 and 1992, these funds attracted more than $200 billion in investor capital.The main securities investment behavior of these funds is convergence trading.As for the overall size of the market position, the International Monetary Fund has calculated that the total size of the convergent trade may reach 3000 billion US dollars.

This is why Ciampi has always been worried about the electronic nomads, although he does not know the actual amount of convergent transactions conducted by global capital through the computer Internet.

bell bell -

On the London International Financial Exchange, the shrill opening bell rang on time, and the spirits of the traders wearing red vests who had already been ready to take their positions were immediately refreshed.

Schlesinger's talk in front of the media was just yesterday, and everyone knows that today's market will usher in a tense and exciting day.

Chapter 22 One-click shooting that should not have appeared in this world

(Calvin, the front has been slightly repaired)

--------

After a night of hard work, Shen Jiannan fell into a deep sleep with both mental and physical release. Therefore, although he only rested for five hours, he was in good spirits and did not feel dazed because of William's words.

Raising the discount rate to 12.00%, Shen Jiannan took the phone and thought about it.

It seems that the Bank of Italy reacted quickly enough, obviously wanting to use this actual benefit to hedge against the negative impact of Schlesinger’s public speech on the lira, and then use the foreign exchange reserves in their hands to take the opportunity to buy lira to repel the war. Digest the market's bearish awareness of the lira.

But does it work?

Useless.

Having been engaged in the speculative industry for two lifetimes, Shen Jiannan has never seen a time when lira is in a unilaterally negative factor and cannot find any reason to go long.

Yes, never, in two lifetimes.

Many stock traders who have traded before know that a listed company's good news does not mean that the price of securities will rise; and that a listed company's negative factors do not mean that the price will fall.Or, the fundamentals of a stock are very good, and its finances, profitability, dividends, development direction, and stability are outstanding in the entire market or in the same industry. It can be said that it is almost a machine that can make profits without losing money. , logically, it should rise.

But in fact, the price of this kind of security always behaves completely different from its fundamentals, and the final price difference may not even be as good as picking up a piece of garbage on the ground.The junk securities named as the five black categories have terrible fundamentals, but sometimes, its spread income can make people dumbfounded.

It seems unbelievable and unreasonable.

Forex traders often face the same problem.

Why is the central bank cutting interest rates but the local currency is strengthening, why is the local currency depreciating due to the trade surplus, why is the central bank governor’s tough speech but the local currency is depreciating, and why the economic data is so bad, why is it still appreciating?

Should books on international finance be burned?

The answer, of course, is no.

When determining the price factor, the impact of a single factor on the price is not a direct relationship, but more of an expectation, and what really directly determines the price is money.

Therefore, the impact of a single factor on the market itself is not so reliable, and even if it has an impact, it may not be effective immediately.

But what if many factors in the same direction are superimposed at the same time?

The results speak for themselves!

The Deutsche Mark is the country with the largest weight in the Ecu, and now Deutsche Bank has almost directly stated that the Italian lira needs to depreciate, which means that the lira will never appreciate, and there is even no reason to do more.

At least until the lira is approaching the lower track of the floating mechanism, there is absolutely no reason to be long lira.

There has never been a target like this, and there is no logical reason for the opposite direction to be unilaterally found.

This has never happened before.

However, the Italian central bank must maintain the parity of the lira.

This point is very scary.

In other words, the price floating lower limit mechanism of the Italian lira will act like a magnet to attract the price of the lira to that position.

No matter what the Bank of Italy tries to do.

"William, I'm glad you learned to think with your brain, but don't worry about this little problem. The Bank of Italy's interest rate hike will only make the situation worse. This means that Italy itself admits that the lira is now overvalued. And, no confidence in the lira."

"..."

Holding the phone, William froze for a moment, thoughtful.

For a long time, a hint of understanding flashed in his eyes. The regulation of interest rates is to leave room for monetary policy. When the economy is facing unfavorable factors, loose monetary policy is used to stimulate inflation. When the economy is improving, interest rates are raised. , tightening monetary policy to curb inflation, leaving room for future maneuverability.

Now, the Italian economy is sluggish, and what is needed is a loose monetary policy. If it is not helpless, it will not raise interest rates at all.

This is undoubtedly drinking poison to quench thirst, the more you drink, the faster you die.

"Understand?"

"A great man is eight feet tall, and a little Mao Sai is suddenly enlightened by a few words. Your wisdom is as admirable as a mountain."

"William. You are Chinese anyway. This flattery is worse than an old carrot. You are not ashamed. Read more idioms if you have nothing to do. Don't learn the corruption of capitalism every day.

"..."

After some teasing, Shen Jiannan hung up the phone and got up.

Waking up, Qina was wrapped in her pajamas and saw his panties being handed over, and Yulia, who was bare-chested and backless, put on the shirt for him.

Just talking about the corruption of capitalism is known to others. Obviously, Shen Jiannan also enjoys this kind of corruption of capitalism. With the help of the two, the shameful Adam suddenly became like a dog, wearing a black suit. In a suit and a blue tie, he looks elegant and has an indescribable temperament.

"My dear. You study the itinerary today. I think Italy will soon sponsor us a handsome travel fee."

"Shen. Do you know that if people know what you say, a bastard like you will definitely be beaten to death."

"Is it a jerk?"

"Jesus. You don't know what a jerk you are."

"But don't you just like my bastards, haha..."

Kissing the two of them goodbye like a dragonfly dipped in water, Shen Jiannan laughed out loud and walked out of the bedroom. He had some expectation that the market would be stunned when faced with a gadget made by a guy like Mitnick.

Eight in the morning.

Bank of Italy, Trading Department.

Looking at the giant LCD screen not far away, Qian Pi felt a little short of breath and heavy.

German mark: Italian lira, 1:810; German mark: US dollar, 1:1.482;, US dollar to Italian lira, 1:1200.45, French hair salon: exchange lira...

Lira-weighted index, 521.00.

521.00

A very loving number.

But for Ciampi, he didn't think this number was so loving, not because he was Italian.

One and a half hours after opening in the morning, the lira encountered a large number of selling orders in the foreign exchange futures market. The three major weight ratios of the British pound against the lira, the deutsche mark against the lira, the franc against the lira, and the ECU with the highest weight ratio and the most active transactions were all short lira. positions, under the impact of these short positions, the price of the lira was quickly hit from 480 to 521.00.

This is a very bad thing.

Normally, the early morning transaction volume of the lira futures market, even in the London market, is only a few million pounds at most. In the New York foreign exchange market, the transaction amount is at most 200 million US dollars in the morning stage.

But today was uncharacteristically. In just one and a half hours, the turnover of Lira in the London foreign exchange market has exceeded 2000 million pounds, and the turnover of the New York market has also exceeded 3000 million US dollars.

Obviously, Schlesinger's speech has attracted the attention of global capital to the lira.