Chapter 119: Chapter 119: Roller Coaster
James Robinson, upon hearing Noah Scott's question, displayed a hesitant expression.
Simon Westeros' previous successes in stock index futures might be considered luck once or twice, but achieving success three times in a row certainly proved the young man had a reliable strategy. This could mean unprecedented profits for Lehman Brothers if they chose to follow his lead. As the CEO of American Express, which owned Lehman Brothers, James Robinson wasn't short of a daring spirit.
However, such actions would clearly involve insider trading.
American Express had acquired Lehman Brothers three years prior, aiming to venture into the long-planned investment banking sector. If they were to follow Simon's trading patterns and it became public, Lehman Brothers would undoubtedly face an SEC investigation, and clients would likely flee in droves.
More importantly, other investment banks on Wall Street wouldn't miss the opportunity to force a formidable competitor like American Express out of the investment banking arena.
Yet, the lure of making a profit from $75 million to over $200 million in just three and a half months was incredibly tempting.
Consider that American Express, a global financial and travel services company with a market cap of over $13 billion and more than 50,000 employees, had a net profit of only $180 million in the second quarter of 1987.
Evidently, the earnings a young man under 20 had generated in just over three months in the futures market had already surpassed the quarterly profit of a corporate giant like American Express.
After deliberating for a few minutes, James Robinson ultimately couldn't resist the temptation. Tapping the transaction records of Westeros Company in his hands, he told the Scotts, "I'll discuss this with Paul and the board over the weekend and try to arrange some funds by Monday. Neil, you'll handle this, Noah will execute the trades, and both of you report directly to me. Remember, be extremely cautious, as you both are well aware of the consequences should this get out."
...
Los Angeles.
Inside the luxurious house in Palisades, Simon hung up the phone with Noah Scott, leaning thoughtfully in his leather chair.
Janet had been casually sprawled across Simon's desk, flipping through the reports from Noah Scott, her bare feet swinging playfully.
Seeing Simon end the call, Janet tapped his leg with her toes and said, "You little rascal, I believe now that you really won't need many years to fulfill those three wishes of yours."
Her interruption brought Simon out of his reverie, and he smiled, holding her mischievous feet and tickling her soles, "Did you not believe me before?"
Janet giggled and pulled her feet back, replying, "Of course, I believed. It's just, I didn't realize you would make money so quickly. My family, starting from my great-grandfather, accumulated wealth of about $2 billion over more than a hundred years."
Simon remarked, "But I definitely don't have the ability to persuade the government to abolish inheritance taxes, so, in that regard, your family is more impressive."
When Simon and Janet's relationship became public earlier in the year, there were media reports about the Johnston family's influence in getting Australia to repeal its inheritance taxes. The ability to affect a country's fundamental tax policy truly indicated deep-rooted power.
Now, although he was a billionaire, Simon's wealth might make him a target in many people's eyes once exposed.
Simon was well aware of this.
As someone reborn, amassing wealth wasn't particularly difficult.
The simplest way would be to invest $200,000 in Microsoft, currently valued at about $1 billion, and hold the shares until 2000 when Microsoft's market cap peaked at $600 billion. He would then instantly become a billionaire.
$200,000, at the peak of the North American real estate bubble, could be raised by many middle-class families just by selling their homes. However, they wouldn't know that this money could make them billionaires in over a decade.
Simon did know.
Yet, if he merely focused on accumulating wealth, even if Simon amassed $100 billion, lacking social influence commensurate with this wealth, he would still just be a 'fat lamb' waiting to be slaughtered.
Thus, Simon wasn't overly complacent about the fortune he made from the futures market. To escape being a 'fat lamb', he had a long way to go.
Seeing Simon fall silent, Janet patiently waited before playfully scratching his leg with her foot, asking, "What are you thinking about?"
Simon candidly replied, "Fat lamb."
"Ha-ha," Janet laughed, "Do you feel it?"
"What?" Simon looked puzzled.
"Noah," Janet blinked, "His eagerness today was obviously off. It's a clear sign something's up."
Upon Janet's reminder, Simon recalled the thoughts that had flickered through his mind after hanging up. He laughed, "Three times in a row, from $75 million to $278.56 million
, if Lehman Brothers could resist following that, Wall Street wouldn't be Wall Street."
"What are you planning to do?" Janet inquired.
"As long as Lehman Brothers' actions don't impact our interests, letting them make some money isn't a problem," Simon explained, then shook his head, "But that seems unlikely."
With the backing of American Express, Lehman Brothers' financial input would undoubtedly exceed the nearly $300 million in Westeros Company's accounts.
If the market operations were just simple long-term holdings, being followed might not be an issue. But the upcoming stock market crash in October would be a different story.
Simon recalled the 1987 crash, when U.S. government interventions stabilized the market within a week. The S&P 500 index's dip to around 200 points was even briefer.
Westeros Company's final short position was planned to be closed out at this 200-point nadir for maximum profit. However, the futures market had a limited daily contract throughput.
If, after the crash, Lehman Brothers also established large short positions, they would likely arrange to close their contracts first, and Westeros Company's holdings might only be traded after the index rebounded. Simon's profits would then significantly decrease.
Seeing Simon lost in thought again, Janet remained quiet.
After a while, Simon said, "Let's not worry about this for now, we'll see how things go after 'Pulp Fiction' wraps up."
The shooting for "Pulp Fiction" was scheduled to conclude mid-September, giving Simon another half month to maneuver.
Moreover, for Simon, the film business was what mattered most.
To avoid being seen as a 'fat lamb', accumulating wealth was essential, but so was gaining considerable power.
Hollywood, the world-renowned center of the film industry, was exactly where Simon aimed to establish his base of power.
If he could gradually take control of this influential industry, combined with his vast wealth, Simon would truly escape the 'fat lamb' label and become a major player capable of influencing the country and the world.
Hearing Simon's plans, Janet appeared puzzled, "We could just withdraw all the money from the futures account, right? Then Noah can go cry in a corner."
"That won't work," Simon shook his head, smiling, "Doing that now would just tell them we're planning to switch brokers. Wall Street isn't that big; do you think Lehman Brothers wouldn't figure out where we've opened a new account?"
Janet pondered and reluctantly agreed, "Yeah, that makes sense."
...
Unknowingly, another weekend passed quickly.
It was now September.
Over the weekend, under direct instructions from James Robinson, CEO of American Express, Lehman Brothers secretly arranged $500 million to follow Westeros Company's trading strategies.
However, to Noah Scott's surprise, compared to previous heavy investments, Simon only instructed him to establish 6,000 short contracts between 337 and 330 points during the new week, specifically for December.
The shift from long to short positions was expected by Noah Scott.
However, the position of 6,000 contracts, using only 30% of Westeros Company's funds, was far below the previous 80% investment level. Those who had gathered substantial funds to follow Simon's risky moves were utterly baffled.
A 30% investment was a very conservative long-term strategy.
By then, all of Wall Street understood that after a five-year bull market, the North American stock market was inevitably heading for a downturn. Thus, Westeros Company's current position seemed like an attempt to skim whatever profits were left before the market reversed.
Could it be that the feast was over just as they were about to join?
Without the prospect of massive short-term profits, it wouldn't be feasible for American Express to keep $500 million in a futures account long-term.
Even Noah Scott began to wonder if his covert operations had been detected by Simon, prompting such cautious behavior. But this didn't make sense either. If Simon knew Lehman Brothers was about to follow him, he would have changed brokers.
There was no reason to leave money on the table.
Amidst this uncertainty, the first week of September hadn't even ended when the North American stock markets took a sharp dive, with the S&P 500 index plummeting from above 330 points to around 310.
The usual 20-point drop.
With a contract multiplier of 500, each contract's profit or loss reached $10,000.
Thus, in just a week, Westeros Company's 6,000 short contracts saw a paper profit of over $60 million.
However, Lehman Brothers' paper profits were even more substantial. Noah Scott had followed Westeros Company's movements with twice the scale. After Simon stopped establishing positions, he couldn't resist buying an additional 3,000 contracts, bringing Lehman Brothers' short position to 15,000 contracts.
In just a week, Lehman Brothers' paper profits exceeded $150 million.
Yet, this time,
Simon did not issue a sell order.
Compared to Simon's unshakeable calm, those directly involved in the operations, including Noah and Nelson Scott, couldn't stay composed.
$150 million in profits, almost equivalent to American Express's entire quarterly net income. Moreover, as the project leaders and traders, such earnings meant they would receive a substantial year-end bonus.
If the S&P 500 index continued to decline, it would be one thing. But as the third Thursday of September, the final delivery day, approached, the previously plummeting S&P 500 index began to rise again.
Lehman Brothers' 15,000 contracts meant that each point increase or decrease in the S&P 500 index represented a $7.5 million gain or loss.
Thus, as the S&P 500 index climbed from 310 back up to 320, watching $7.5 million vanish with each point, and with no trading instructions from Simon when it reached a high of 320, everyone at American Express involved in the operation could no longer remain composed. Noah Scott began to close positions.
But the rise in the S&P 500 index didn't stop.
By the time Lehman Brothers hurriedly completed closing their 15,000 contracts, the S&P 500 index had risen back to 326 points. The original profit of over $150 million shrank to just $56 million.
$56 million was still a significant return, but compared to the initial $150 million in paper profits, it had drastically reduced.
Then, events took an unexpected turn once again.
On September 17, 1987, the third futures delivery day of the year, the S&P 500 index spiked to 328 points and then did not continue rising but began to fall again.
Excluding the weekend, in just three trading days, the S&P 500 index plummeted from 328 back to 313, like a roller coaster.
At this point.
Westeros Company's account still held the unmovable 6,000 contracts, with paper profits nearing $60 million again.
Facing such a situation, Noah Scott, Nelson Scott, and James Robinson, among others, were utterly perplexed.
What exactly was happening?
Was the kid doing this deliberately?
What would he do next?
Should they continue to follow?
...
Los Angeles.
Unlike Noah Scott and others who were experiencing a roller-coaster of emotions, Simon, who had anticipated the severe fluctuations of September, spent most of his time apart from checking reports from Chicago, focusing on the final days of filming "Pulp Fiction."
Ultimately, on September 19, a Saturday, with only a few shots left, the crew opted to work overtime. That afternoon, Simon's second directed film since his return to this era officially wrapped up.
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