"Mr. Su seems to know quite a bit about me!"
Frederick shook Su Yi's hand, responding with a smile.
Su Yi said with a smile,
"The 'Evolution No. 1' hedge fund managed by Mr. Frederick is already a star investment product in the foreign exchange market. And during the 'Swiss franc Black Swan' event, Mr. Frederick accurately judged that the Swiss National Bank would abandon its market support and heavily shorted the Swiss franc exchange rate, reaping over 200 million US dollars in windfall profits overnight.
With all these factors combined, any investor or institution aiming to make a mark in foreign exchange trading would find it hard not to notice or understand Mr. Frederick's movements and preferences."
Upon hearing Su Yi's words, Frederick chuckled,
"May I interpret Mr. Su's remarks as your institution having conducted a detailed investigation into all sorts of information about me?"
Su Yi said with a smile,
"We don't call this an investigation. Understanding a friend's information and preferences creates a more comfortable feeling when meeting each other and sets more favorable conditions for future cooperation. Doesn't Mr. Frederick think so too?"
Frederick looked at Su Yi's relaxed and joking expression, neither confirming nor denying.
Before meeting Su Yi.
He had originally thought Su Yi was a young and arrogant person, but after meeting, he found Su Yi's demeanor completely different from the image he had imagined.
In his eyes, the image Su Yi presented, though young.
His every gesture and word in conversation exuded a profound sense of calm and experience.
Su Yi's mature demeanor clearly surprised him.
Frederick said with a smile,
"Mr. Su just mentioned friends... In Su Yi's opinion, do we count as friends?"
Su Yi replied,
"Since I invited Mr. Frederick, I naturally regard Mr. Frederick as a friend, and I also hope Mr. Frederick thinks the same way."
Frederick said,
"I've heard quite a lot about Mr. Su's past deeds recently, I heard that Mr. Su made nearly a hundredfold profit in the Chinese stock market last year, in just over half a year, growing a few million in capital to a fund size of several billion.
As far as I know, the Chinese stock market wasn't doing well last year, so Mr. Su achieving such investment results is quite remarkable. By conventional wisdom, Mr. Su should leverage his strengths.
He should continue to focus his investments and primary capital flow into the Chinese stock market. Why would he suddenly enter an investment field completely unfamiliar to him recently?"
Su Yi said,
"The recent stock market doesn't have obvious investment opportunities. On the contrary, the foreign exchange market offers good opportunities. I'm not a person who sticks to the status quo, nor do I stay in my comfort zone for too long.
Furthermore... the path of investment has always been to go wherever there's an opportunity for excess returns. Just like the 'Evolution No. 1' hedge fund product that Frederick currently manages.
As far as I know, it doesn't only invest in the foreign exchange market, which Mr. Frederick specializes in, does it? When there are relatively certain opportunities in the stock, bond, or futures markets, won't your fund also invest a considerable amount of capital for speculation or investment operations?"
"Does Mr. Su think the current foreign exchange market presents highly certain opportunities?"
Frederick then asked.
Su Yi smiled and nodded, then countered,
"Doesn't Mr. Frederick think so?"
Frederick said,
"I believe there are no so-called highly certain opportunities in the foreign exchange market. After all, with ample liquidity and extremely fierce long-short competition, any seemingly certain news will lead to price-driven uncertainty."
Su Yi said,
"My view might be a little different from Mr. Frederick's. Whether it's the stock market, futures market, foreign exchange market, or bond market, I believe price changes are caused by changes in fundamental expectations.
The long-short competition on the trading floor is merely a manifestation of emotion, but emotion cannot dominate price trends in the long run. Over an extended timeline, in the long term... price fluctuations will always revolve around changes in fundamental expectations.
As long as the fundamentals, as long as the underlying logic has issues, then no matter how short-term emotions disrupt it, the ultimate price changes will still develop towards the established trend and trajectory.
Of course, it's also due to the presence of emotions. And because every trader and investor cannot escape the interference of emotions. That's why there's a temporary deviation between market prices and fundamental expectations, creating opportunities to achieve excess market returns."
Frederick said,
"It seems Mr. Su has a deep understanding of the core investment system of 'value investing'. Indeed, in financial markets, the manifestation of target prices is essentially a shift in fundamental expectations."
Su Yi said with a smile,
"An excellent market speculator's understanding isn't limited to mere market sentiment and capital movements. If one doesn't grasp the underlying logic of how investment targets' prices change, then relying solely on emotional plays makes it very difficult to find opportunities for excess market returns, and equally difficult to achieve stable profitability.
Of course, what's even more serious is... If one cannot grasp the judgment of the underlying logic, they will naturally be swayed by market sentiment. This is like 'one cannot see the true face of Mount Lu, only because one is in the midst of the mountain itself' – unable to grasp the whole picture and truly see the market's development trend."
Frederick listened to Su Yi's insights on investment and trading, nodded slightly, and was truly impressed by Su Yi in his heart.
He said with a smile,
"Mr. Su's understanding of investment and speculation is far more profound than I imagined. Before coming here... I originally didn't believe the rumors about Mr. Su's past investment track record, especially the widespread talk of you making billions from the Chinese stock market in the latter half of last year.
I used to think you Chinese people were hypocritical, fond of exaggerating things. I thought it was just your closed circles creating myths and intentionally exaggerating certain facts for promotion. But now, after an initial conversation with Mr. Su, I've begun to believe these rumors.
From my perception, I believe that with this level of understanding, Mr. Su is certainly an excellent investor, and of course... also a formidable market speculator."
Su Yi said with a smile,
"Thank you for the compliment, Mr. Frederick. Actually, in my opinion, whether it's investing or speculating, the source of our profits and losses in the markets we participate in primarily comes from our understanding. And the financial market is also a place where one can instantly realize the results of their understanding. This is the charm of the financial market, and a major reason why I enjoy investing and speculating."
"Mr. Su's insights are very thorough."
Frederick nodded slightly, paused, then suddenly changed the topic, continuing,
"However, Mr. Su invited me here tonight, presumably not just to discuss investment and speculation techniques, ideas, thinking, and logic, right?"
Su Yi said with a smile,
"Of course not. But Mr. Frederick, there's no need to rush. We can talk while we eat."
With that, Su Yi gestured to a blonde waitress standing nearby to pour Frederick a glass of wine, then made a welcoming gesture towards him.
Frederick tasted the wine in his glass and the delicacies on the table.
He couldn't help but give Su Yi a thumbs-up, saying,
"Mr. Su, this dinner is arranged perfectly to my liking. If this is the foundation for making friends, then we... should already be friends now."
Su Yi chuckled,
"Haha... It's my honor that Mr. Frederick considers me a friend."
"So, Mr. Su, what is it you primarily wished to discuss by inviting me here? May I hear it now?"
Frederick asked.
Su Yi replied,
"Since we are already friends, of course I can tell you. I invited Mr. Frederick tonight mainly to discuss a cooperation with you."
Frederick asked with slight puzzlement,
"Cooperation? What kind of cooperation?"
Su Yi said,
"I've heard that the 'Evolution No. 1' flagship hedge fund managed by Mr. Frederick has also established a significant number of short positions in the GBP exchange rate market. Does this indicate that Mr. Frederick is also bearish on the future trend of the GBP exchange rate and the economic development potential of the entire UK?"
Frederick said,
"Mr. Su is mistaken. I am not overly bearish on the GBP exchange rate, nor do I believe the UK's economic development will continue to weaken. The reason I established a significant number of short positions in the GBP exchange rate market is solely from a current trading perspective; I feel that the short-term bullish sentiment in the GBP exchange rate market is a bit excessive."
"Is that so?"
Su Yi didn't quite believe Frederick's stated operational logic.
"Is the 'Huayi Chengyuan No. 1' flagship hedge fund managed by Mr. Su aggressively shorting the GBP exchange rate and continuously increasing its short positions in GBP exchange rate contracts because you believe the UK's economic development potential has fallen into an abyss and can no longer support the current GBP exchange rate? Or do you believe that on June 23rd, there will be an unexpected outcome in the UK's national referendum on Brexit?"
Frederick inquired.
Su Yi replied,
"It's a combination of factors."
Frederick said,
"However, it seems Mr. Su's perception hasn't received positive market feedback. Your institution's fund products, the short positions in the GBP exchange rate market, should have incurred substantial losses by now, shouldn't they?"
Su Yi said,
"It's true that there are temporary losses, but saying the losses are enormous isn't very objective. At least with the funds we have reserved, even if the GBP exchange rate pushes up another 1000 points, we can fully withstand it. So, all those market rumors about our institution being on the verge of liquidation are lies."
"Is that so?"
Frederick didn't quite believe Su Yi's words.
Su Yi said with a smile,
"Mr. Frederick doesn't believe it? Then please consider, Mr. Frederick, if our institution's fund's short positions in the GBP exchange rate were already nearing liquidation, how could we still be continuously increasing our GBP short contracts? How could our short positions not only not decrease but actually increase?"
Frederick heard Su Yi's words, pondered for a moment, and indeed found it strange.
"It seems... Mr. Su is firmly bearish on the GBP exchange rate and believes he can achieve ultimate victory in this long-short battle,"
Frederick, after some thought, continued.
"Mr. Su's audacity is very admirable, but is the approach... still too aggressive?"
Su Yi said,
"As long as the operations are correct, it doesn't matter if they're aggressive or not. Today, something happened in the Scottish region of the UK. Is Mr. Frederick aware of it?"
"What happened?"
Frederick asked.
Su Yi replied,
"People in Scotland marched in the streets, urging everyone to support the Brexit referendum on June 23rd, and actively backing the UK's departure from the EU. All current signs indicate that the Brexit referendum on June 23rd might not turn out as calmly as most institutions in the current market predict.
Any 'Black Swan' event is considered impossible before it happens. But it still happens.
Just like last year's 'Swiss franc Black Swan,' before the night the Swiss franc exchange rate collapsed, would the vast majority of long-position investors have imagined that the Swiss National Bank would suddenly abandon the exchange rate, abandon market support, and repurchase Swiss francs?"
"So... what exactly does Mr. Su want to cooperate with me on?"
Frederick stared at Su Yi, getting straight to the core issue.
Su Yi said,
"I believe that at the current stage, with the GBP exchange rate influenced by market bullish sentiment and showing a clear divergence from fundamentals, our 'Huayi Capital' and the 'Evolution No. 1' flagship hedge fund managed by Mr. Frederick can be considered joint stakeholders. After all, among the current short forces in the GBP exchange rate.
Regarding short position holdings, apart from our 'Huayi Chengyuan No. 1' hedge fund, Mr. Frederick's 'Evolution No. 1' flagship hedge fund should be the largest, and according to market information I've received, Mr. Frederick is still continuously increasing his GBP short positions.
In other words, in terms of cognitive logic. I believe our two sides are also quite consistent. If the bulls continue to force shorts, or if our institution's positions face passive stop-loss liquidation.
Then, with the GBP exchange rate continuing its upward surge, the 'Evolution No. 1' flagship hedge fund managed by Mr. Frederick would also suffer huge losses.
Furthermore, analyzing from all aspects. The GBP exchange rate cannot stabilize at this level. Let alone any unexpected situations arising from the June 23rd national referendum; even a slightly louder voice supporting Brexit could bring about a significant shift in market expectations.
Also... In the current GBP exchange rate market, net long positions have surged to nearly 500,000 lots.
With net long positions of this magnitude, once the market sentiment shifts and the long-short dynamic reverses, what kind of price volatility will erupt? I believe Mr. Frederick must have an idea, right?
In other words, in my view, in the current GBP exchange rate market. A huge storm is brewing, and this storm, this rather clear speculative opportunity for excess returns, is distinctly biased towards the short side.
Therefore, I hope both sides can consistently maintain their current positions. And can consistently commit more capital to resist the bulls' continued upward pressure on the short positions on the trading floor, then wait for further changes in news and capital, ultimately ushering in a shift in the long-short dynamic."
"Yes, no problem."
After Su Yi finished speaking, Frederick thought for less than ten seconds before replying,
"As long as your institution, Mr. Su, can hold out, I promise that our 'Evolution No. 1' flagship fund will not reduce any short positions and will also invest approximately 1 billion US dollars to continue shorting the GBP exchange rate.
As you said... no matter from what perspective, at the current stage, the opportunities for the GBP exchange rate to fall are far greater than the opportunities for it to continue breaking upwards. Moreover, with net long positions reaching such a scale, going long is meaningless; continuing to short actually offers a better risk-reward ratio.
Furthermore, regardless of the outcome of the June 23rd referendum. The cracks in the EU economic system have already formed, and the trend of decline for the entire European currency system is already unavoidable.
Of course, I am very much looking forward to the emergence of a 'Black Swan'. After all, only the occurrence of a 'Black Swan' event can create massive windfall profit opportunities and allow us to truly make a huge profit."
Su Yi didn't expect Frederick to agree to cooperate so easily.
He had originally prepared many arguments in his mind, but now none of them were needed.
Moreover, the other party stated that they would subsequently invest another 1 billion US dollars to short the GBP exchange rate, which greatly exceeded Su Yi's expectations, causing his tense nerves to relax slightly.
(End of Chapter)