As of January 1990, the Gulf's proven oil reserves accounted for 65% of the world's total oil reserves and provided 43% of the world's daily oil needs. Among them are only two countries, Iraq and Kuwait. Even after decades of exploitation, their oil reserves are still among the top ten in the world.
It is conceivable that the turmoil in the Gulf region will have a strong impact on the world's crude oil supply.
When news of Iraq's invasion of Kuwait came on August 2, international crude oil prices began to surge rapidly. As of the close of trading on Friday, August 3, international crude oil prices had soared to US$27.63 per barrel. Compared with before the outbreak of the war, the international crude oil price had increased by 29 US dollars. %.
And, this is just the beginning.
In Simon's memory, the war in Kuwait caused the international crude oil price to reach a maximum of 41.07 US dollars.
Because of the influence of Simon's big butterfly, many things are no longer so certain. However, Simon believes that the impact of international crude oil prices on highs of US$40 will not be a big problem this time.
New York.
Cersei Capital headquarters in midtown Manhattan.
Although it is Sunday, the Cersei Capital headquarters is still crowded today.
Except for the loss of some profits due to the delay in clearing short positions in the last week before the war broke out, Cersei Fund Management's layout of various types of crude oil futures contracts has basically met expectations.
As of the outbreak of the war on August 2, Cersei Fund Management Company established various crude oil futures on mainstream Brent crude oil futures and WTI crude oil futures, as well as surrounding light diesel futures, unleaded gasoline futures, high-sulfur fuel oil futures and other types of crude oil futures. Huge long contracts totaling $25 billion.
Cersei Capital began to open positions at the end of June, and the price of opening positions based on international crude oil prices ranged from a minimum of US$13 to US$20 the day before the war broke out.
Starting next week, Cersei Capital will gradually clear out its long contracts.
In fact, this matter had already begun on the day the war broke out.
In fact, it was also because I had to take the initiative to do so.
Simon would like to start clearing positions when crude oil prices are close to or reaching $40, but this is simply unrealistic.
As we all know, futures trading is a zero-sum game. If someone makes money, someone must lose money, and profits and losses are equal.
For example, if Cersei Capital itself goes in the wrong direction this time and establishes a short position in crude oil futures of up to US$25 billion, then once the war breaks out, the international crude oil price will skyrocket from US$20 before the war to a maximum of US$40, an increase of 100%. According to For futures contracts, Cersei Capital theoretically has to pay the other party a huge sum of US$25 billion.
However, Cersei’s capital account holds less than $6 billion.
If the bulls insist on refusing to close their positions within the range that Cersei Capital can lose, Cersei Capital will have no choice but to default.
Defaults in futures trading are very rare, but they are not uncommon, such as the violent crude oil price fluctuations caused by this sudden war.
Perhaps before the war broke out, some futures speculators held on to the hope that they could continue to replenish their margins and try to maintain it. After the war broke out, their hopes were shattered, and many futures speculators simply chose to give up. Some speculators who adopted high leverage of nearly 20 times when the war broke out It was a direct breach of contract that day.
However, a speculator's default does not mean a futures contract default.
Because there are two safeguards from futures brokers and futures exchanges.
When futures traders' account funds are insufficient to cover losses, futures brokers, as the party guaranteeing the transaction, will contribute funds to make up the difference to ensure that the transaction proceeds.
When the funds of the futures broker cannot ensure the completion of the transaction, the futures exchange will use its own reserve funds to supplement.
In the most serious case, in order to prevent the futures trading system from collapsing, the national level will also participate in the rescue.
During the 1987 stock market crash, the S&P 500 index futures experienced huge fluctuations on Black Monday, and the United States launched national-level rescue measures. On the night of October 19, after direct intervention by the federal Treasury Department, major U.S. banks were able to provide huge amounts of funds to the Chicago Mercantile Exchange to avoid futures trading defaults.
Because of the sudden outbreak of the Kuwait War, this time, crude oil futures trading also touched the exchange level.
This also means that if it is a bet of 5 billion US dollars against 5 billion US dollars, the winning party will not only get the 5 billion US dollars at the speculator level, but also at the two levels of futures brokers and futures exchanges to ensure the delivery of the contract. And a large amount of funds are subsidized.
A conference room at Cersei Capital headquarters.
After the day's meeting, it was already evening, and the summer sunset broke into this office building with an excellent view through the gaps in the high-rise buildings in Manhattan.
After sending everyone else away, Janet stood up and came over to sit in Simon's arms, humming to express her tiredness.
Simon smiled and helped her relax, and said, "After this time, many futures brokers will probably close down, right?"
Now that this big market situation has affected the exchange level, intermediary brokers are naturally not immune and often need to add large amounts of funds to ensure contract delivery. Relatively speaking, the profits of the bulls will not feed back too much to the brokers. They can only get their fair share of commissions.
"There are probably hundreds of them," Janet said lazily, squinting her eyes: "Except for the large brokers supported by parent companies such as Goldman Sachs, Morgan, and Citigroup, many small and medium-sized independent brokers have basically closed down. "
Few speculators can directly cooperate with futures exchanges, and usually require futures brokers to provide guarantees.
There are many types of futures brokers, and the larger ones are generally affiliated to the futures brokerage departments of large investment banks. However, there are countless small and medium-sized futures brokers in various countries and cities in North America and around the world.
In Simon's memory, due to this big market crash, countless futures brokers around the world declared bankruptcy, and the entire industry would be in ruins for many years to come.
Moreover, this incident also triggered another consequence, a sharp decline in crude oil futures trading.
For a long time to come, there will not be many short positions in the market. Therefore, Cersei Capital will not be able to build large-scale positions and can only turn its attention to other areas.
With the outbreak of the war, stock markets around the world fell sharply.
On August 2 and August 3, the S&P 500 Index fell from a high of 371 points to 356 points at the close of Friday. Then, until the outbreak of the Gulf War, the S&P 500 Index was likely to fall to around 300 points. In order to focus on the crude oil futures market, Cersei Capital did not distract from establishing short positions in S&P 500 futures.
Entering the market now, it is also impossible to achieve much.
It is planned that Cersei Fund Management Company will completely clear its positions next week. However, because the futures trading market has fallen into a downturn, although the capital reserves have increased significantly, it will be difficult to conduct large-scale transactions later.
The weekend passed in a blink of an eye, and as the trading day entered, crude oil prices continued to surge sharply.
The situation in the Gulf also continues to be turbulent.
On August 7, the Bush administration officially approved Operation Desert Shield, and federal troops were officially stationed in Saudi Arabia to defend against a possible invasion by Iraq.
However, when the Desert Shield plan began to be implemented, an anti-war wave immediately broke out in the United States. Both the media and the public are very worried that the Bush administration may drag the country into another protracted Vietnam War.
The direct confrontation between federal troops and Iraqi troops in Saudi Arabia also means that the United States' original promise not to intervene in the disputes between Iraq and Kuwait has become empty talk.
At the same time, during the five trading days from August 6 to August 10, Cersei Capital also quickly completed the liquidation of long positions.
The reason why long contracts of more than 20 billion US dollars can be completed so quickly is mainly because short futures traders, futures brokers or futures exchanges are more urgent than Cersei Capital. As international crude oil prices continue to rise, , every day of delay, the loss will increase by one point.
On August 11, when Cersei Fund Management completed all financial settlements, the hedge fund's net asset value had increased from the initial $3.5 billion to $12.63721 billion. In less than 8 months, Cersei Fund Management Company has achieved an investment return of more than 260%.
Although Simon only accounts for US$1 billion of the US$3.5 billion principal this time, the fund's commission rate is also fixed at 20%, and 30% of the 20% commission rate will be allocated to Cersei Fund Management Company. Other partners. However, based on the net asset value of US$12.637 billion at this time, the profits and commissions that Simon could obtain in addition to the principal of US$1 billion reached US$3.367 billion.
In the remaining months of the second half of the year, even if Cersei Capital's income is 0, after the settlement and return at the end of the year, the total amount of cash Simon has hoarded overseas will be close to US$8 billion.
With such a huge sum of cash, even if the capital gains tax factor transferred to the country is taken into account, Simon can basically complete the acquisition of MCA with its own funds.
In addition, although Simon can only receive one-third of the profits of Cersei Fund Management Company this time, he has also eliminated some potential risks caused by his rapid rise in recent years through profit sharing to a large extent.
Moreover, it seems that a large part of the profits of more than 9 billion US dollars has been divided, but except for the Johnston family, which has a principal of 500 million US dollars, and has taken away another larger piece of the cake, other Australian and American investors have scattered At the end of the day, the income received is basically less than one-tenth of Simon's.
Simon himself is still the one who makes far more profits than other investors.
After staying in New York for another week, Simon and Janet returned to Los Angeles together.
The next phase of instruction for the team at Cersei Fund Management is to hunt freely, without the couple having to keep an eye on them.
With a 30% shareholding in Cersei Fund Management Company, the team's six partners are expected to receive hundreds of millions of dollars in dividends this year. Even ordinary employees are expected to receive huge bonuses, so the team can be described as smug.
Back in Los Angeles, it’s Monday, August 13th.
The North American summer season has come to an end and has not been greatly affected by the outbreak of the war.
On July 27, "The Hand That Rocks the Cradle", a collaboration between Daenerys Entertainment and Disney, was released in North American theaters with 1,632 opening screens. The box office revenue in the first seven days from July 27 to August 2 was US$21.18 million. , not as good as the previous "Sleeping with the Enemy", but it has also reached the best-selling level with an average of over 10,000 per library.
In the second week from August 3 to August 9, the box office of "The Hand That Rocks the Cradle" dropped 23% the next week, collecting another US$16.33 million.
A total of US$37.51 million has been accumulated in two weeks. Compared with the production cost of US$11 million and the publicity budget of US$6 million, within half a month, the film has begun to generate profits. However, it is somewhat difficult for "The Hand That Rocks the Cradle" to achieve a box office of over 100 million US dollars. It is expected that the North American box office will be around US$80 million.
Although it did not meet expectations, a low-cost thriller film with an investment of US$11 million was able to earn US$80 million at the box office in North America alone. Neither Disney nor Daenerys was dissatisfied.
On August 10, "The Evil Dead 3" produced by New World Pictures, a subsidiary of Daenerys Entertainment, was released.
This series of horror films, which opened at the end of the summer season, opened on 1,329 screens, with a box office of US$6.13 million in its first week. It is neither outstanding nor a failure. The total North American box office is still expected to be between US$15 million and US$20 million. Between now and then, Daenerys Entertainment can expect to be profitable.
However, because two consecutive sequels failed to make much of a breakthrough, New World Pictures planned to release subsequent sequels directly to video tapes and cable television platforms. On the one hand, this can save costs, and on the other hand, it can also free up schedules for other movies produced by New World Pictures.
Daenerys Entertainment's "The Last Day Out", which kicked off the summer season, had a cumulative box office of US$149 million in the 11 weeks of its release as of August 9. The film's single-week box office remains at around US$7 million, relying on strong box office Curve, overall box office numbers continue to move steadily toward the $200 million mark.
"Sleeping with the Enemy", a collaboration with Fox, has a cumulative box office of US$93.81 million in its eighth week of release, which is about to exceed 100 million and is expected to hit higher box office figures.
"Teenage Mutant Ninja Turtles", which has only been released for five weeks, has successfully reached US$103.53 million in North American box office as of August 9, surpassing the 100 million mark ahead of "Sleeping with the Enemy". However, due to continued large declines, the single-week box office of "Teenage Mutant Ninja Turtles" has fallen to less than US$5 million, and it is expected to have less than US$20 million in box office potential.
Regardless of the large amount of funds hoarded overseas, Daenerys Entertainment alone brought Simon more than 500 million US dollars in net profits in the first half of the year. In order to avoid the continued depreciation of the large sum of cash in hand, while taking into account the acquisition of MCA, Simon I also started to consider more investments in other directions.
Speaking of which, the reason why rich people can become richer and richer is roughly because of this.
Of course, the acquisition of MCA is still the top priority in Simon's plan.
The outbreak of the war in Kuwait triggered a decline in global stock markets, and MCA was naturally not spared.
Just in the week from August 6th to August 10th, MCA’s stock price fell by 9%, and the price per share fell back to less than 40 US dollars. By the new week of August 13th, the opening price of MCA’s stock had fallen to 39.25 US dollars, this kind of stock price decline did not even prevent the good news that Panasonic intends to acquire MCA.
Although Panasonic's acquisition of MCA has not been made public since Michael Ovitz's last trip to Tokyo was accidentally revealed, this matter is no longer a secret in the eyes of many people. News that Michael Ovitz secretly met with MCA board members was also recently revealed.
However, due to the bursting of Japan's economic bubble, Japanese corporate giants generally have to first ensure that their operations will not be affected by the economic crisis, so they have generally slowed down the pace of overseas expansion.
Sony's experience of paying "tuition fees" in Hollywood over the past year after acquiring Columbia Pictures also aroused Panasonic's vigilance.
Although Panasonic has hoarded more than 12 billion US dollars in funds overseas through accumulation in previous years, which is enough to easily complete the acquisition of MCA, the industry generally predicts that Panasonic's acquisition of MCA will be conservative and will not be as lavish as Sony.