Chapter 254: Western Freedom is Just a Disguise

On Friday, Li Changhe had just finished class and walked outside the classroom when he met an unexpected person.

"Secretary Liang?"

Standing outside the classroom was Director Liao’s secretary, Comrade Liang Qun.

"Changhe, come on, follow me!"

As soon as Secretary Liang saw Li Changhe coming out, he immediately pulled Li Changhe out.

"Secretary Liang, where are we going?"

Li Changhe followed his steps, but still asked curiously.

"Get in the car first, I'll tell you slowly."

"I know you don't have classes next, and the school has already coordinated it."

After getting into Director Liao's car, the car started and Liang Qun spoke to him at the same time.

"Changhe, let's go to an office. Some comrades from the financial sector are already waiting there for you to attend a symposium."

"forum?"

"Yes, this is a very high-level symposium. Several of our financial leaders want to know about your matter regarding US silver futures."

"They were shocked that you made hundreds of millions with just $100 million, and they were also very curious about what kind of model you used."

"Several leaders will be listening in. Don't be nervous. Just explain the process to everyone."

Liang Qun explained to Li Changhe.

Li Changhe was thoughtful when he heard this.

This symposium is probably a science popularization meeting.

Soon, the car drove into an ancient courtyard house, and then Director Liao and his colleagues were seen in a room.

Of course, the most important ones are still some middle-aged men.

"Student Changhe, I called you here this time because I want you to explain to us how the US futures market is profitable."

"Everyone is very curious about your profit multiple?"

"Well, you can tell them about your own case."

"Don't worry, everyone here has signed a confidentiality agreement, and the content of today's speech will not be leaked at all."

Director Liao smiled and said to Li Changhe at this time.

At the same time, it was also hinting to him that this was an internal seminar of a very high level, so there was no need to worry about his affairs becoming known to the whole city.

Li Changhe nodded and then came to the table.

"My dear leaders, where should I start?"

Li Changhe asked seriously at this time.

"No need to address me as leader, Changhe. Today we are all your students. Just speak according to your own ideas. You are responsible for speaking and we are responsible for listening. If we don't understand something, we will raise our hands and ask."

Someone said to Li Changhe with a smile at this time.

Li Changhe nodded and said, "Okay, then I'll start with futures. I'll try to use straightforward language and not use those professional terms."

"Futures actually mean expected goods, generally referring to commodities at a certain time in the future, such as gold."

"If the teacup in my hand is gold, then it is spot gold in my hand now. If I want gold in May next year, I can buy it in advance and buy one gram of gold in May next year in advance. This is buying futures. The contract purchased is a futures contract."

Li Changhe decided to start with some general knowledge about futures to the people present.

Although many of the people present were practitioners in the financial industry, there were also many auditors, and Li Changhe could not guarantee that they were all familiar with Western financial instruments.

Because in the past few years, a lot of Western knowledge has been banned, and everyone knows the reason.

Peking University is currently the first university in China to popularize knowledge of Western economics, and it does so secretly and does not dare to make it public.

"Because it is an expected commodity, a future product, people have no way of knowing the price next year, so they estimate a price in advance, make a judgment, and then the buyer and seller sign a contract on their exchange, which is a futures contract."

As soon as Li Changhe finished speaking, he saw a man next to him raised his hand.

"Mr. Changhe, in other words, this judgment of futures prices is completely a gamble, right?"

Li Changhe nodded: "Yes, the essence of futures trading is actually a bet."

"In the West, those who buy when prices rise are called bulls, and those who buy when prices fall are called bears!"

"A futures contract is actually a bet between two parties: those who want to buy high and those who want to sell low!"

"Then classmate Changhe, are there any restrictions on the sellers? Does it have to be a trader or a gold supplier?"

"No, there are no restrictions! As long as you are a customer of the exchange, you can participate in buying and selling. For example, our office is the exchange, and everyone who comes in is a member of the exchange. The comrade on the left is bullish, and the comrade on the right is bearish. Then you can sign a contract based on the standard contract stipulated by the exchange."

"I see. In other words, I use the current price to bet on the future price. If the future price is low, I will make money if I am bearish. If the future price is high, I will make money if I am bullish."

After hearing Li Changhe's explanation, everyone present immediately understood.

"Then how did you, Changhe, earn hundreds of times more?"

Someone continued to ask curiously.

Li Changhe said: "This involves the futures trading model established by the United States."

"I'll take silver as an example!"

"Futures trading in the United States is a margin model. Its contracts are fixed. One futures contract is 5000 ounces of silver. When I first bought it, silver was $6 an ounce, and the value of one contract was $3."

"But in reality, you only need to pay a deposit of $1000 to buy a contract."

“That is to say, I only used $1000 to buy $3 worth of silver futures.”

"In foreign economic terms, this is called the leverage effect. Using $1000, you can leverage $ worth of goods. This is another major feature of futures, the leverage multiple."

"This multiple is not fixed. For example, in the Chicago trading market, silver has a 30-fold leverage, but in the New York gold futures market, it has a 100-fold leverage. This multiple is generally set by the exchange."

"And my $100 million, in theory, can buy 1000 silver contracts, with a total value of $3000 million of silver."

"Of course, I actually only hold 800 contracts."

"Later, the price of silver in the market rose from $6 to $11, and I made about $5 per ounce of silver."

"The profit of futures contracts is actually very simple, which is the price difference of your goods x the number of contracts x the contract multiplier."

"The contract multiplier is the quantity of goods per contract. One silver contract is 5000 ounces, so the contract multiplier is 5000!"

“So, when the price of silver rose to $11, I sold the contracts I had, 800 contracts, for a total of $2000 million!”

“Then, I used the $2000 million to continue signing new contracts in the market as a long position!”

"Mr. Changhe, that means that theoretically, your $2000 million can control 2 silver contracts, right?"

At this moment, someone else raised his hand and asked.

Li Changhe smiled and said, "Yes, but in reality I can't buy that much. Futures contracts are theoretically unlimited, provided that someone buys and sells with you!"

"If you want to buy, there must be someone selling, and then a contract can be reached."

"For example, our office can only accommodate 100 people at most, so there is actually a limit to the number of transactions we can complete within a certain period of time."

“The same is true for exchanges. Although the number of customers can increase, the trading time and trading mode limit the number of transactions.”

“So in the end, I actually only held 3750 contracts, and at that time, silver had risen to around $38.”

"Mr. Changhe, that is to say, in your second transaction, your unit price spread has reached about 27 US dollars, and then according to your profit formula." "Your profit has reached 5 million US dollars?"

After Li Changhe's simple explanation, everyone present quickly grasped the calculation model.

"Yes, but this is only a theoretical profit, because there are also transaction fees from the exchange and taxes that the US government will levy at that time, so in reality, it is not that much."

Li Changhe explained solemnly.

Everyone present nodded.

"Mr. Changhe, according to your description, the US Futures Exchange is actually a casino, right?"

“Whether they are so-called longs or shorts, they are actually gamblers, gambling on future prices.”

"Then how do you determine that the price of silver will rise?"

After listening to this, Li Changhe shook his head.

"First of all, leaders, let me correct you on one point. We cannot simply view the futures market as a casino. It also stems from the production needs of enterprises."

"Enterprises need to control costs in production, and raw material costs are a very important factor, so early futures customers were mainly corporate customers."

"They will judge the future market for raw materials based on market feedback, changes in the international situation, the impact of climate and other factors, and stock up or sell in advance."

"This is also the reason why futures were first born. In essence, it was a pre-trading model for Western companies to avoid risks. Later, it gradually evolved into a high-profit model."

"Knowing this principle, we can predict these products from many aspects."

"Take silver as an example. I first saw the case in a Western economics magazine in the Peking University Library."

"That case is actually a case of fluctuations in silver futures, and the manipulator behind the scenes is the Hunt family, who is also the manipulator behind the current US silver market."

Li Changhe told everyone present about his process of judging the silver market.

After listening to this, everyone present nodded thoughtfully.

“This is the most vicious form of Western capital, maliciously manipulating the market for profit.”

Some people couldn't help but criticize.

Li Changhe listened without saying anything.

"Student Changhe, we recently inquired about the price of silver. It is still rising and is approaching 40 US dollars."

"Theoretically, you still have room to make a profit, so why did you sell it so early?"

At this time, someone asked Li Changhe again.

Li Changhe thought for a while, then said: "Because I think that the behavior of the Hunter family has actually broken the market rules!"

"His actions have in disguised form monopolized the global silver market, and one of the characteristics of Western capital is anti-monopoly."

“So in this case, the exchange would restrict the Hunter family’s behavior.”

"For example, they could change the rules and increase the margin ratio."

“You have to know that the margin is only specified by the exchange and is not completely immutable.”

"If the exchange increases the margin by even $1000 per contract, the Hunt family, which holds more than contracts, will have to pay hundreds of millions of dollars in margin."

"The margin requirement of the exchange is completely determined by the exchange. They can submit the margin amount to a price that the Hunt brothers cannot afford, so that the other party has to sell the contract in hand."

"At that time, a huge amount of contracts and silver will hit the market, and the price of the entire silver market will collapse. If you want to leave at that time, it will be too late."

Li Changhe said seriously.

"In other words, you think the U.S. will intervene to force the Hunt family to trade contracts? But isn't the Western economy based on freedom and fairness? This behavior should violate the principle of freedom in the Western economy."

Someone else asked Li Changhe curiously.

Li Changhe shook his head and said, "Leaders, from my personal perspective, I think the Western economy has never been absolutely free."

"Western politics and economy are closely related. It is a typical merchant government structure."

"The so-called freedom is a compromise and balance reached by all parties under the premise of having political power, which is the so-called fair freedom!"

"This is also one of the reasons why they oppose monopoly, and the Hunt brothers' model clearly breaks this balance."

"But from the perspective of trading rules, the Hunt brothers did not violate any rules. They found a loophole in the silver market."

"Therefore, it is difficult to sanction him from the perspective of the market. In this case, I think their national power will definitely take action."

"Because in the market, the main force in establishing short contracts is Wall Street brokerage capital and bank capital."

"And their combined strength is extraordinary."

"Coupled with political considerations over there, I think the Hunter brothers will definitely be sanctioned."

"In my opinion, freedom and integrity are just a disguise they put on themselves. When the benefits are big enough, they will tear off this coat without hesitation and tear their opponents to pieces with their sharp fangs."

These people in front of him may be the first pioneers of future economic contact with the West. Li Changhe feels it necessary to give them a reminder.

At this moment, someone in the office started to applaud first, and then the whole office room burst into warm applause.

Then, both sides asked various questions and had discussions until the end of the meeting.

On the way back, Li Changhe sat next to Director Liao.

"You spoke very well at today's meeting. It's a good start for the country."

Director Liao said to Li Changhe with a smile.

"A good start?"

"Yes, next, the National Finance and Economics Committee will hold a 'Foreign Economics Lecture' in Beijing once a week, in order to popularize Western economics knowledge to many cadres."

"The lecturers are mainly economics professors from more than 40 universities in the surrounding area, including Professor Chen Daisun and Professor Hu Daiguang from your Peking University."

"Of course, before this lecture begins, everyone needs to unify their thoughts. It just so happens that your case is here, so I'll let you explain it first today and let some people see it."

"By the way, I'll also educate some leaders on financial knowledge. After all, your earnings have really shocked many people."

"But with this symposium, your case is over."

"And the clothing business plan you submitted, I think it's something you can try."

"It's nothing more than giving you an additional identity as a patriotic Hong Kong businessman. I will prepare a certificate for you at that time. Just keep it confidential."

Director Liao said to Li Changhe with a smile.

After hearing this, Li Changhe was filled with surprise.

"Thank you, director!"

"Okay, no need to thank me. In the end, it's all your own fault."

"As I said before, our current reform is a bold attempt, and you don't have to worry about it."

"If the direction is right, we will vigorously promote it. If the direction is wrong, we will sum up the experience and lessons and start over again."

"Anyway, all of this is for our country and people!"

After listening to this, Li Changhe nodded seriously.

At the same time, I felt emotional again.

If someone else said this twenty years later, he might be skeptical.

But now, he really believed it.

This is the light of the times!
(End of this chapter)