noveldepot Chapter 31: Laying out a "Gold" Investment Strategy
Chapter 31: Laying out a "Gold" Investment Strategy
The following Monday.
Today, Lijiagang does not have the former "Hong Kong Electric".
Early in the morning, he arranged to meet Wang Fusheng, an investment banker from "Great Wisdom," at the factory office.
October is almost here.
A small opportunity for a surge in gold prices is coming soon, and he must prepare in advance.
However, investing in international gold is different from stock trading. Stock trading has certain limitations, requiring a lot of advance planning. In contrast, the international gold market has ample supply, so there's no worry about a lack of available gold for trading.
He only needs to make arrangements a few days in advance.
Moreover, the futures market is highly volatile, and making plans in advance can actually lead to losses due to market fluctuations.
International gold prices will only see a sharp jump starting in early October, and now, on September 25th, there are enough days for his account to be fully leveraged.
Moreover, he didn't have much money.
It was just the money invested in Wharf Holdings.
He made HK$1.4 million from investing in Wharf Holdings.
He initially bought shares from Wharf Holdings at HK$19 per share, but later he bought shares at more than HK$20 per share, averaging HK$19.66 per share.
He leveraged his initial capital of HK$10 million with a tenfold leverage, using the initial capital as margin. After the leverage expanded his funds, his account held HK$100 million for investment.
During this period, a total of 510 million Wharf Holdings shares were purchased, representing approximately 6.15% of Wharf Holdings' equity.
He finally reached a deal with Pao Yue-kong for a round number of HK$47.
The transaction price was HK$47. Subtracting the average purchase price of HK$19.66, Li Jiagang could earn HK$27.34 per share.
510 million shares multiplied by HK$27.34.
It is close to HK$1.4 million.
This is his net profit.
Of course, this does not include the fees he needs to pay to the margin company, handling fees, brokerage commissions, taxes, etc., which will be automatically deducted from his principal.
What about giving Wang Fusheng an extra commission of double?
After deducting these funds from Li Jiagang's accounts, there were still over HK$1.4 million left. More than HK$1000 million was then deposited into the company's account as working capital.
He didn't touch any of the other money.
Even when acquiring HK Electric, they were willing to pay high interest rates to take out a loan, but they didn't touch this money.
We're keeping it to wait for this golden opportunity.
"Knock knock knock!!!"
Just then, there was a knock on his office door.
"Come in."
"Hello, Mr. Li."
"Please have a seat, Manager Wang."
"Thank you, Young Master Li."
Wang Fusheng had scheduled business meetings with other clients today, but when he received a call from Li Jiagang this morning to meet, he immediately canceled all his appointments.
After the Wharf Holdings incident.
Wang Fusheng had long regarded Lijiagang as a super big customer, and also his god of wealth.
Helping Li Jiagang invest in Wharf Holdings not only brought Wang Fusheng considerable profits, but also further enhanced his career and reputation within the industry.
After exchanging a few polite words...
Li Jiagang finally got to the point, "I plan to invest in international gold, but..." He paused deliberately, looking at him seriously, and continued, "I don't want anyone to know about this."
Feeling the coldness in Li Jiagang's eyes, agent Wang Fusheng couldn't help but feel a chill.
"Young Master Li, please rest assured," Wang Fusheng raised one hand to the sky, "I swear on my life that I will absolutely not reveal a single word."
"Okay, I'll remember your words."
"If I invest in international gold, how much leverage can you apply for?" Li Jiagang asked again.
"Young Master Li, up to 15 times."
"15 times?"
Li Jiagang knew he had almost reached his limit.
Because there were no electronic devices to operate them in this era, the leverage ratio that could be pried was not very high.
A 15-fold increase now is quite good.
"Okay, you go and select a few people, and then you can personally go to the United States to manage things for me."
"Young Master Li, how much capital do you plan to invest?" Wang Fusheng asked expectantly.
"Let's go for HK$1.3 million."
"By the way, what is the latest exchange rate of Hong Kong dollars to US dollars?" Li Jiagang asked.
He hasn't been paying attention to this matter recently.
During this period, the Hong Kong dollar still had a free exchange rate against the US dollar, so it fluctuated greatly.
"Today's exchange rate is 1/5.03."
Upon hearing this, Li Jiagang nodded.
HK$1.3 million, at an exchange rate of 1-5.03, is equivalent to nearly US$2600 million in principal, which he will be able to round up to the nearest dollar.
Leveraging 15 times would amount to $3.9 million.
Li Jiagang was genuinely concerned about having such a large sum of money put into one account for trading.
Thinking of this, he looked at Wang Fusheng: "Agent Wang, I need you to do something." Li Jiagang suddenly spoke, his voice low but his tone authoritative.
Agent Wang Fusheng immediately sat up straight, even his breathing became soft: "Young Master Li, please speak."
"You should understand the principle of not putting all your eggs in one basket, right?" Li Jiagang said slowly. "You should select three of the most reliable traders in the company who are most knowledgeable about gold futures, but their backgrounds must be clean and their mouths must be tight."
Wang Fusheng immediately understood upon hearing this.
"Young Master Li, are you planning to distribute your assets across multiple locations?"
"More or less."
"I need to open accounts in multiple locations, but all of them must be concentrated on trading on the New York COMEX and the Chicago CME. I will arrange for someone to go there to oversee the accounts."
Manager Wang nodded in understanding.
But at the same time, a hint of disappointment flashed across his face.
Li Jiagang, of course, noticed the change in his expression and understood what he was thinking.
He began, "Mr. Wang, I understand that doing this will reduce your commission significantly." A slight smile played on his lips. "But don't worry, as long as you wholeheartedly manage this investment for me, I can guarantee that you'll earn several times more than your commission."
At first, Manager Wang looked embarrassed, but his eyes lit up when Li Jiagang said the following words.
That's right!
The reason he looked disappointed was because Li Jiagang wanted to open accounts in multiple locations, meaning that not all the funds would be invested with him.
In this way, even if he still invests in his company, he will have to split a portion of his commission with the brokers in other branches, which will result in him receiving much less.
But now that Li Jiagang had said that, he was immediately excited. He had no doubt that Li Jiagang would keep his promise.
He had witnessed firsthand how generous this young master Li was.
"Young Master Li, please rest assured, I will handle it well."
"Controlling them isn't enough; they also need to be properly supervised for me." Li Jiagang's eyes sharpened as he added, "Besides you, I don't trust any other agents. You understand what I mean?"
Wang Fusheng nodded emphatically.
"Young Master Li, how many accounts do you need to open?" Wang Fusheng asked again.
"Do you have connections to obtain offshore accounts?"
"Of course, my company offers this service," Wang said, pausing before adding, "but I suggest that Mr. Li spend some money to have my company open secure accounts in Zurich, Switzerland, the Cayman Islands, and Wall Street, New York, under the name of an offshore company."
"Spending money is no problem, let's do it this way."
"Yes, Mr. Li, I will open four accounts for you in Hong Kong, Zurich, Cayman Islands, and New York as soon as I get back."
"Will all the funds be split equally?"
"Yes, the investment is spread out evenly."
"Understood."
After leverage was used to increase funds, a total of $390 million entered the market. Now, when spread out, each account has about $100 million in funds.
After arranging all this, Li Jiagang finally breathed a sigh of relief.
Although the price increase from investing in gold in October 1978 was not very large, the increase from October to the closing price in December of the year was only about 200 per ounce.
The real surge in gold prices occurred during the multiple delivery period from December 1979 to January 1980.
At that time, the price of gold would fall rapidly starting November 1st due to the US bailout policies (interest rate hikes, intervention in the foreign exchange market, and increased gold sales).
It kept falling to $193 per ounce.
Since the beginning of December, Iran has been experiencing internal revolutions, a second oil crisis, soaring inflation, and frequent Soviet attacks on Afghanistan.
This subsequently drove up gold prices.
After all, in any era, as long as society is in turmoil, gold will always be a hard currency.
At that time, gold will rise from around $200 to $850 per ounce. He will definitely invest a huge amount of money in global investments. How much will he earn?
That's a whopping $657 per ounce!
If all goes well.
He couldn't even imagine how much wealth he would have by then; becoming the richest man in Hong Kong would be absolutely certain.
However, he won't get cocky just because the gold investment will yield huge returns.
Because he knew that even in the 80s, the truly wealthy families in the world were hidden behind the scenes; they were the ones who were truly richer than any country.
No one knows exactly how much wealth these families have hidden, but these families truly control the lifeline of the global economy and can wreak havoc wherever there is a stock market around the world at any time.
This was true at least before the millennium.