Mediterranean hegemon

"Listen to my instructions. When the market falls below 390 points, close one-eighth of your positions. Try to diversify them as much as possible. Don't focus on individual stocks. Orders should be small and high-frequency. Don't place large orders." After thinking for a moment, Livermore issued new instructions to the 12 traders.

"Yes, boss!" A trader couldn't help but respond.

Livermore said quickly: "How many times have I told you not to call me boss? The boss is sitting in the back. What if he hears us?"

"That's the big boss! Uh... the president!"

A bunch of people laughed, and the air was filled with a happy atmosphere...

Just as Livermore issued the order, Mitchell, president of Citibank, also paid close attention to the market trend. After thinking for a moment, he made a phone call, muttered a few words and nodded: "Okay, I understand."

As soon as he put down the phone, he issued an order to his subordinates: "Sell the fixed long-term bonds of the United Group, and then buy back some of the United Group shares in the market, first of all, the shares of the United Bank..."

"What is the reduction price?"

"Higher than the original cost."

"How much to reduce?"

"Don't worry about the quantity, just sell as much as you can, sell it first, and it's a victory if you can sell it! If the volume can't be sold, it's okay to sell it at a lower price. We need to recover funds." Mitchell was anxious and angry, "I just called the president, and he said he was confident in dealing with the run, so he did this."

Someone below muttered: Why is this? Selling United Group bonds to buy shares does not avoid risks, but rather amplifies them.

"Pig brain!" Mitchell cursed angrily, "Who wants to avoid risks? If we buy more United Bank shares now, we will have the opportunity to control it. Even if we cannot control it, it is good to increase our influence... The board of directors has other considerations."

Bond liquidity is much worse than stocks. Under the selling pressure of Citibank, 40 million United Group long-term bonds were quickly sold. The regular trading price was originally $107-109. After the incident fermented, Citibank directly lowered the price to around $100, which triggered a bunch of follow-up orders. The price broke through 98, and then stopped for a while and reached 95.

However, Mitchell's men never dreamed that the other party did not tell the truth at all. He was not on the phone with Contini just now, but with Standard Statistics. It is the oldest rating agency on Wall Street. It was established by Varnum Poole in 1891. It published "The History of Railways" and "The American Canal" and took the lead in establishing the financial information industry with the purpose of "investors have the right to know". During World War I, Standard Company rated corporate bonds and then began to rate national sovereign debts. Later, it developed into the famous Standard \u0026 Poor's.

There are two other rating agencies that are as famous as Standard \u0026 Poor's in the future. One is Moody's, but Moody's is still a subsidiary of Dun \u0026 Bradstreet (a well-known international consulting agency). The other is Fitch International, which currently focuses more on European affairs. Since these two companies have not been established for a long time, Standard Company is still the leader in the industry.

Standard \u0026 Poor's gave the United Group's long-term bonds a credit rating of a-, which is the third tier in the rating. There are two main grades above it, aaa and aa, and two auxiliary symbols +- for proper distinction. In fact, the United Group can reach aa in the minds of Wall Street investors, but because Italy's sovereign rating is only a, and the United Group has an inseparable relationship with the Italian state as a whole, most of the United Group's bonds are rated a-. The a series and the bbb series are standard investment grades, and the other b grades are speculative grades, which will be junk grades in the future, and the possibility of default is very high.

[Author's note: The three major rating agencies have a series of data to assist in the rating process. Although they cannot be said to be completely reliable, they are much fairer than the practice of a certain country's rating agencies represented by Dagong International to give AAA ratings to bonds at any time. Therefore, other ratings other than AAA in a certain country cannot be seen at all. They are all junk grades and there is no need to distinguish them. More than half of the AAA grades are only speculative. Everyone should be careful to step on the thunder...]

Mitchell asked Standard Bank the question: Will the credit rating of United Group bonds be downgraded? If so, how much will it be downgraded?

According to confidentiality regulations, Standard Bank can completely refuse to answer, but Mitchell is a Wall Street boss and a member of the New York Federal Reserve, so he has to give some face and cannot refuse directly. The answer he gave was very vague: "We are currently in a meeting to discuss. Judging from the situation this morning, although United Bank has suffered a shock, there are no major problems with its ability to perform its obligations, so, you know..."

This sentence means that a downgrade is inevitable, but the magnitude will not be too large. Mitchell knew it as soon as he heard it.

"Someone is selling long-term United Group bonds in the interbank market. The current price has fallen to $95, and the trading volume has increased 8 times compared to usual, exceeding $80 million..."

Bonds are generally issued at a face value of $100 with coupons, so if the interest rate is attractive and the rating is high, it is generally traded at a price higher than the face value. Now that it has fallen below the face value, it means that the market is beginning to be pessimistic about the bonds.

"Who is selling?"

"I can't tell, but the scale is not small, at least it's a big bank."

Contini frowned and said, "Which rating company lowered our rating?"

"Not yet, but Moody's and Standard \u0026 Poor's have both said they will make a statement on whether to lower the bond rating based on the actual situation."

"It seems someone has leaked the news. At least judging from the rapidly increasing sell-off, the rating will definitely be lowered." Francisco explained, "I just don't know how much it will be lowered. How about I call them?"

Contini shook his head: "How big of an impact?"

"If the current rating is lowered from A- to BBB, the bond may fall below $90. If it reaches BB, it may fall below $80."

"How can we get them to lower it to BB?"

"Galais, BB will enter the speculative grade..."

"Speculative grade is good... Let them fall, and it would be better if they fall below 80." Contini smiled, "Then I will take it back and not only will it be a waste of money, but I can also get a discount."

Francisco instantly understood his idea: If the bond price falls below 80, then if the United Group, which originally issued it at $100, repurchases and cancels it, it will be equivalent to paying off with $80, and even the interest will not have to be paid. Of course, the premise is to cancel and pay it off, which requires real money.

"But this will disrupt our established strategy. Now these funds have been arranged for their intended use."

"Then it depends on whether Livermore can reap an extra wave. What is the difference between the United Trust purchase and the group repurchase?" Contini smiled, "The left hand buys things in the right hand pocket, and you may have to pay an extra tax, but are we afraid of paying taxes? The money I spend on equipment for the army and navy every year has long exceeded several times the tax! You have to remember that we are indeed rushing to make money, but we should not make money like ordinary Wall Street adventurers by default, debt replacement, asset restructuring and other notorious methods. I never consider defaulting, and the United Group brand is not earned by default and fraud. I rely on strength, and rely on planes in the sky, battleships in the sea, and tanks on the ground to guarantee my reputation! If I default now, how can I sit in that position in the future?"

"That's true." Francesco also laughed: United Group is the company with the least motivation to evade taxes in Italy, and the tax authorities never check it. Whatever the United Group says is what it is. No one is a fool. Can't the president understand the donation for arms purchases?

Livermore came to report: "President, it has fallen below 390 points... It is said that someone has jumped off the building."

"How many?"

"Only one for now... This guy may not be able to bear it well."

"It's not that he can't bear it well, it's that the leverage is too high and he is too greedy." Contini shook his head, "Even if he doesn't jump this time, he will jump next time. No one can save him. You guys continue. It seems that fewer people are jumping off the building..."

Livermore's face froze, and then he continued to work as if nothing had happened: The president is right. Those who jump off the building are too greedy. If they don't choose this time, they will jump next time. My job is to purify the society and educate investors about risks.

At 2:47 pm, the Dow Jones Index touched 380 points, and then it was a bit difficult to fall. From the data, this has broken through the lowest point in August, opening up the trouble of further decline, but from the market, the selling volume has decreased a lot. This is a signal of the initial bottoming out that day, but whether it is a rebound, a reversal or a downward relay, it is completely subject to further observation. The floating profit on the books of United Trust has exceeded 700 million. Livermore and 12 traders are slowly closing the positions of stocks with the largest declines with small orders.

Although they are called small orders, in fact, hundreds of thousands of dollars are coming in every minute. Although these orders are not enough to completely withstand the selling pressure from above, at least they have prevented the stock price from continuing to fall into the abyss.

At 3 o'clock, the Dow Jones Index recovered 390 points, and a wave of buy orders appeared on the market. Such buy orders appeared many times in the morning, and each time they were swallowed up by more turbulent sell orders, so that when Livermore first placed a buy order, there was no decent follow-up order, so the traders' orders were quickly executed.

At 3:19, the stock index stabilized at 395 points, and the positions of United Trust had been closed by more than one-eighth. With an overall floating profit of nearly 700 million on the books, it means that nearly 90 million in profits have been in place.

"The president said that the plan has changed temporarily. He has allocated 50 million US dollars to the bond account to prepare to take over the long-term bonds of the United Group tomorrow and the day after tomorrow."

Looking at the bond prices and related trading volumes, Livermore took a deep breath and instantly understood Contini's idea. He said: "I think we can wait a little longer. There must be news for such a large sell-off."

Francisco smiled: "You guessed it right. Moody's and Standard \u0026 Poor's called and said that our credit rating will be downgraded by one level tonight, but they promised that there will be no further adjustment before the situation continues to deteriorate."