Chapter 68: Review

"Mr. Di, Miss Xia, how about we go to the Red House for Western food tonight?"

"Many thanks for your kind invitation, Manager Tang, but we'd better just grab a bite here. As a director of the Securities Exchange, you'll be very busy tonight and won't have time for Western food."

Di Ye stood up from the sofa in the lobby, made a gesture of invitation, and led Tang Renrong into the Paramount Hotel's affiliated restaurant. While ordering, he said, "Guan Jinsheng has just gone to the Pujiang Securities Exchange. Once he and Wei Wenyuan finish their argument, I expect Manager Tang will receive a notice for a meeting."

Tang Renrong was shocked by his well-informed news and asked, "How did you know Guan Jinsheng went to the Securities Exchange?"

"Just now, Wang Mishu and I saw Guan Jinsheng rushing out of the lobby. At this time of day, he could only be going to the Securities Exchange."

Tang Renrong looked at Wang Mishu, and seeing him nod in confirmation, he continued to ask, "Why would Guan Jinsheng be arguing with Wei Wenyuan?"

"Because they already had one argument at noon."

Xia Fangfei took a micro-recorder out of her handbag and showed it off, saying, "Manager Guan said it himself. He went to find Manager Wei at noon to apply for the cancellation of the 2 million lots of irregular trades made right at the market opening this morning, and then to suspend trading in the afternoon to let the market cool down. Manager Wei didn't agree, so he was full of pent-up anger."

When the market opened this morning, Xicheng Guotai Securities Securities Securities Securities Securities Securities Securities Securities Securities Futures Company dumped 2 million lots of short orders at the price of 148.5 in one go, but it did not stop the bulls' offensive; the 2 million lots of short orders were digested in less than 1 minute.

After witnessing this raid in the proprietary trading room, Tang Renrong had told his subordinates that it was definitely a violation, because Xicheng Guotai Securities Securities Securities Securities Securities Securities Securities Securities Securities was a small futures company that could hold at most 150,000 lots of positions; 2 million lots far exceeded the scale it should have.

At the time, Tang Renrong guessed that Wanguo Securities was the one pulling the strings behind the scenes. Now, hearing Xia Fangfei say this, he realized he had guessed wrong, so he asked, "Miss Xia, when did Guan Jinsheng say these things?"

"A little after 3 p. m. this afternoon, in Wanguo Securities' proprietary trading room."

"You secretly recorded the conversation between Guan Jinsheng and his employees in Wanguo Securities' trading room?"

Di Ye took the recorder from Xia Fangfei's hand, removed the cassette from inside, and said, "When Fangfei was visiting Wanguo Securities, she forgot to turn off the recorder and accidentally recorded it. If Manager Tang feels there is an issue, you can hand this cassette over to Guan Jinsheng; we guarantee it hasn't been leaked."

Tang Renrong stared at the cassette, his expression shifting. After hesitating for a moment, he said, "Keep it yourselves, just don't leak it. Xiao Wang, we have never seen this cassette, got it?"

Wang Mishu hurriedly assured him, "I understand, don't worry, Manager Tang."

Di Ye laughed and put the cassette back into Xia Fangfei's handbag, saying, "Manager Tang and Wang Mishu don't need to be nervous. There is no sensitive content on the tape, just some angry words spoken by Wanguo Securities employees in a panic."

Tang Renrong shook his head with a bitter smile and said, "Wanguo's act of crazily smashing the market just now caused the bulls heavy losses. Let alone angry words, even kind words would be seized upon by others."

Di Ye handed the menu to Tang Renrong and Wang Mishu. Seeing that neither of them was in the mood to order, he instructed the waiter to serve the food as quickly as possible. As it turned out, only two dishes had been served when Tang Renrong received a call from Wei Wenyuan, asking him to go to the Securities Exchange for a meeting to discuss how to resolve the mess caused by Guan Jinsheng's market-smashing stunt.

"Mr. Di, you left the market and stopped playing shortly after it opened this afternoon. Did you already anticipate that Guan Jinsheng would use this method to smash the market?"

"There is a first time for everything. Since the irregular operation in the morning wasn't dealt with, the same thing could happen in the afternoon. I'm just a small shrimp who can't withstand such big waves, so I chose the best strategy: running away."

Tang Renrong admired his keenness. He put his Big Brother into his briefcase, stood up to leave, and asked, "Mr. Di, do you have any thoughts on how this matter should be handled?"

Di Ye stood up to see him off and said, "I don't have any thoughts, only one reflection."

"What reflection?"

"Weakness and ignorance are not barriers to survival, but arrogance is."

Di Ye plagiarizing this famous quote from *The Three-Body Problem* wasn't to show off, but because he truly felt it.

At the beginning of 1995, the state announced that curbing inflation would be a key government task. Based on this, Guan Jinsheng judged that by the time the 327 Treasury Bond matured in June, the monthly value-preservation subsidy rate should not exceed 8%. Calculated based on a two-year subsidy, the redemption price should be around 144 yuan, while the futures price in early January was over 148 yuan, so he decided to open a short position.

By the end of January 1995, Wanguo Securities already held 400,000 lots of 327 Treasury Bond Futures short orders. However, on February 10, the People's Bank of China announced a value-preservation subsidy rate of 11.87%. The subsidy rate fluctuates based on inflation; such a high rate indicated that inflation had not come down at all, so the risk of shorting 327 Treasury Bond Futures was very high.

At this point, if Guan Jinsheng could have recognized reality and quickly closed his positions, he would have lost at most a few million. However, driven by arrogance, he insisted on the philosophy that "Wanguo Securities never admits defeat," believing that strength overrides everything and that he could win as long as he blew up all the bulls' positions. Thus, he went down the wrong path, increasing his holdings instead of reducing them. By February 23, he held a total of 1.44 million lots of short orders.

Wanguo Securities' cost of building positions was around 148.1. For every 1 yuan the 327 Treasury Bond Futures rose, they would lose about 200 million. On the morning of the 23rd, if Guan Jinsheng could have set aside his arrogance and closed his positions in time, the loss would have been no more than 400 million. Although it would have been a heavy blow, it wouldn't have led to bankruptcy.

But Guan Jinsheng still held onto the mindset that Wanguo Securities was invincible and continued to add over 400,000 lots of short orders, wanting to suppress the bulls. As a result, just after the market opened in the afternoon, his ally Liaosheng Guofa defected, closing all 500,000 lots of short orders and switching to long, pushing the price of 327 Treasury Bond Futures to a high of 151.98.

By 4:20 p. m., the price of the 327 Treasury Bond had fallen slightly to 151.3. Calculated at this price, Wanguo Securities would lose about 700 million and face the risk of bankruptcy. If Guan Jinsheng had abandoned his pieces and admitted defeat at this time, the Pujiang Municipal Government, in order to maintain the stability of the financial market, would certainly have stepped in to provide a floor, and there might have been a chance to make a comeback later.

However, it was a pity that, under the influence of arrogance, Guan Jinsheng was unwilling to accept failure. In an extremely crazy manner, he dumped 20.7 million lots of short orders in less than 8 minutes, blowing up all the bulls, directly destroying the entire Treasury Bond Futures market, and ruining his own career, eventually ending up in prison.

Besides Guan Jinsheng, a long list of figures related to 327 Treasury Bond Futures, such as Dai Xuemin, Wei Dong, Liu Han, Dai Zhikang, Zhou Zhengyi, Yuan Baojing, and Chen Shulong, all had endings that were more or less related to arrogance.

Before Di Ye disappeared, he had reminded Di Ye to always remember that he was just an ordinary person. Since then, Di Ye had used this famous quote from *The Three-Body Problem* as his motto. Therefore, when he went to Pujiang to go long on 327 Treasury Bond Futures, he brought Xia Fangfei along to collect various materials on the parties involved, partly to witness history and partly to ensure the success rate of his own operations.

With Huang Ya's help, Di Ye had obtained a total of 23 million in funds. Calculated at a 2.5% margin, he could leverage 920 million in funds. Although this was unremarkable in a Treasury Bond Futures market with a daily trading volume of tens of billions, it could not be underestimated; if it triggered an unwanted fluctuation, it would cause him heavy losses.

So, on February 20 and February 21, Di Ye's operations were few, and he always kept a large amount of funds in reserve. It wasn't until Xia Fangfei interviewed Guan Jinsheng and confirmed that his mindset and trading strategy had not changed that he invested all his funds on the afternoon of February 22.

After dinner, Xia Fangfei returned to the hotel suite. While organizing the hundreds of photos that had been developed, she asked Di Ye, "You said these photos could be sold for money. Who exactly are you going to sell them to?"

"Today's event has far-reaching influence, and the aftermath will last for a long time. It's easy to cause trouble if I sell them now. Let's wait a bit; someone will come to buy them voluntarily in the future."

"How long is 'the future'?"

Di Ye lay half-reclined on the bed, looking at Xia Fangfei's alluring figure, and said with a smile, "If you don't want to wait, sell these photos to me. I'll offer a high price."

"How high?"

"How about a car of the same model as the one in Wenjing's family?"

Xia Fangfei had a driver's license and had long wanted to buy a car. Hearing this, she was overjoyed, tossed the photos into her suitcase, flew onto the bed, lay down beside Di Ye, and giggled, "You must take me to play like this again in the future—it's exciting, fun, and profitable."

"Sure, next time I'll take you to play something even more exciting."

"What kind of exciting?"

Di Ye leaned into Xia Fangfei's ear and whispered a few words. After hearing them, Xia Fangfei's expression changed drastically. She flipped over, pinned Di Ye underneath her, and gritted her teeth, "I'll check first to see if you have that ability!"