stjorthotic Chapter 330 Setting Traps in the Futures Market
Chapter 330 Setting Traps in the Futures Market
Chapter 330 Setting Traps in the Futures Market
Larry knew that the "mastermind" who had framed him had now severed all ties with him. Although he could slowly find out about the other party through that guy named Bush, it would still take time.
Larry's reason for not canceling Reading's account was simple: rather than waiting passively, it was better to take the initiative.
Continue trading with this account, and sooner or later you'll lure this person out. That's "fishing."
The other party is definitely still watching my account. Although I may not fall for it immediately, as long as I continue to trade, especially since I've ventured into futures trading, they will eventually be unable to resist targeting me.
Then I should set a trap for him and teach this "expert" a lesson.
Over the past two days, Larry had thought it over and over again, and finally decided that only by trading futures could he most easily entice his opponents to attack him.
Because futures trading is an unfamiliar field, and far more dangerous. If an opponent truly wants to destroy you, seeing you standing on the edge of a cliff, they will inevitably jump out.
Larry asked Lehman to open a futures account for him, which was then linked to Reading, so that he could place orders there as well.
At this time, securities companies were more like consignment outlets, and naturally they could also accept consignment orders from futures companies.
However, most futures contracts are traded in Chicago, except for cotton, which is traded on the New York Stock Exchange.
Therefore, if one wants to trade futures in New York, the trading method changes back to placing orders by telegram.
Wait until the market returns those lengthy transactions.
Lehman was pleased to process the account opening for this big client who had come to their door. In fact, the account should have been opened a long time ago, but Larry had been there when the stock market crashed last time he came, so he forgot to open a futures account.
Speaking of the Great Crash, Larry suddenly thought of Jay Gould, who was suspected of being the mastermind behind the assassination of King Astor IV. He had been quiet for a while, and Larry wondered when he would launch another attack.
It's really tough! Once someone becomes powerful, they inexplicably attract a lot of enemies—especially their rivals, and Jay Gould of Astor IV, who's like a complete lunatic!
Why would someone want to turn another person into a mortal enemy?
Before long, Lehman had set up Larry's futures account. He placed the contract in front of Larry with a smile on his face, "Sign, sign, sign it! Mr. Livingston."
Larry took the pen and signed his name on the contract.
Lehman was pleased. He handed one of the documents to Larry and said, "Don't worry, we'll set up a dedicated line at Reading this afternoon. You can place your futures orders there."
Larry nodded and said, "Now take me to the futures exchange hall. I'd like to learn about the basic information on futures contracts."
Lehman nodded and led the way, the two of them arriving at the trading hall one after the other.
Lehman Brothers was located in the textile trading building at 119 Liberty Street, and the ground and second floors of that building were the futures trading floors rented by Lehman Brothers.
Today is Monday, and the lobby is noisier than usual.
The ringing of telephones, the shouts of price clerks, and the clattering of telegraph machines blended into a familiar symphony that sent Larry's adrenaline soaring.
"A real man should be battling it out in the trading market! I'm getting so bored with all this equity investing!" Larry sighed, looking at the familiar trading floor.
Lehman waved over one of his shrewd assistants, who then introduced the futures trading instruments to Larry. Clearly, Lehman was well aware of his own limitations in public speaking.
"Sir! Currently, the Chicago Mercantile Exchange trades grain futures such as wheat, corn, and oats, while the New York Cotton Exchange only trades cotton. Additionally, if you wish to trade metals, then copper..."
Tin, lead, zinc, and other commodities all need to be traded on the New York Metal Exchange.
The assistant quickly told Larry about the trading instruments.
"How do you define a transaction?" Larry asked.
The assistant picked up a piece of paper, which was filled with dense contract information, and explained it to Larry, "For example, the current price of corn is $0.95 per bushel, and the trading size of one contract is 5000 bushels, so if you want to buy one futures contract, you will need $4750."
"Do you use the cent system here?" Larry keenly realized a problem: futures prices weren't based on quarters or eighths of a dollar, but rather on every single cent. (Note: The smallest unit at the time might have been five cents or a quarter cent, but that was too complicated, so it was standardized to one cent.)
"Yes, sir! Futures prices are in small units, and fluctuations are measured in cents," the other party replied.
Larry then asked, "Does Lehman Brothers offer leverage? For example, if I want to buy 5000 pessimists' worth of wheat, can I only pay the original price of $4975?"
The assistant hesitated for a moment, then looked at Lehman. After receiving Lehman's approval, the assistant turned to Larry and said definitively, "Sir! You've just opened an account. For your safety, you don't have leverage right now and can only use full-price leverage. Or you can consider adding leverage after you've been trading for six months."
Larry nodded, then turned his gaze to the price board. After looking at it for a while, he already knew the prices and positions of most futures contracts.
The standard contract unit for grains is 5000 bushels, while cotton futures contracts are sold by the bale, with each bale weighing about 500 pounds. A standard cotton contract typically consists of 100 bales.
When quoting prices, the price called out by the trader, or the price displayed on the quote board, is in cents per platinum. For example, wheat is 95 cents.
But to actually calculate each contract, you need to multiply 95 cents by 5000 bushels, resulting in a final price of $4975 per contract. This is the unleveraged figure.
If margin trading is offered later, Larry will be able to save more money for futures trading.
But it's extremely troublesome.
Moreover, the price of grains generally does not fluctuate much.
Therefore, for futures contracts like wheat and corn, one should wait for a big opportunity—in contrast, cotton futures are more volatile.
Currently, among grains, wheat is the most expensive, oats are the cheapest, corn is in the middle, and cotton is about the same price as wheat.
Larry glanced at the quotes on the wall and secretly made notes.
After looking at all the national, formal exchanges, Larry couldn't help but become interested in the other local, smaller futures contracts listed on another large blackboard.
St. Louis on the Mississippi River, along with exchanges for soybeans and pork, and Alabama's orange juice, tobacco, cotton thread, and salt—
Wait! Can we still trade tobacco leaves here?
Larry stared at the tobacco offer, blinked, thought for a few seconds, and then turned to look at Lehman.
"Mr. Lehman, is there tobacco trading here? By the way, I don't understand what tobacco trading is—how do you distinguish tobacco leaves? Where is the best tobacco from in America?"
Lehman nodded and said, "We deal in Bright Leaf tobacco here, which is the most irreplaceable type of tobacco."
Knowing Lehman's stutter, the assistant quickly took over, saying, "—The best tobacco comes from North Carolina. In fact, the best tobacco on the market comes from North Carolina, South Carolina, and parts of Virginia."
Larry heard the words "bright tobacco" twice and quickly asked, "Then what is this bright tobacco?"
Larry's assistant and Lehman took turns answering questions, and soon Larry understood some basic knowledge about tobacco production.
Ordinary tobacco leaves are grown in various states in the eastern United States and are nothing special. But glossy tobacco is unique, and it can even be said that it has played a revolutionary and pivotal role in the world tobacco industry.
Glossy Leaf Tobacco is not only the core of the modern American cigarette industry, but also the foundation upon which James Duke established American tobacco.
Glossy tobacco is a specially blended, light-colored, high-sugar, and highly combustible Virginia tobacco. It gets its name from the pale golden color and metallic sheen it develops after blending.
Legend has it that a small plantation owner in North Carolina, who grew tobacco, had his slave fall asleep while the tobacco was being roasted.
The high temperature inside the furnace caused the tobacco leaves to dehydrate rapidly and the sugars to caramelize. When the plantation owner discovered this, he hurriedly rescued the tobacco. The tobacco leaves, which he thought were ruined, turned out to be an unprecedented golden yellow. After trying it, the plantation owner found that this batch of tobacco had a sweet aroma and a mild smoke, far surpassing traditional dark tobacco leaves.
It was the emergence of glean tobacco that led to a completely different flavor in machine-made cigarettes. In fact, it could be said that glean tobacco is the only raw material suitable for large-scale machine-made cigarette production—without it, there would have been no explosive popularization of cigarettes.
Brightleaf tobacco is mainly produced in some areas of central North Carolina. James Duke made his fortune in Durham, which is located in the core production area of brightleaf tobacco.
Duke controlled thousands of tobacco farmers and secured a supply of high-quality Brilliant Leaf tobacco by paying advance deposits and establishing long-term contracts, thus creating a raw material barrier. However, it is clear that tobacco farmers also see the value of Brilliant Leaf tobacco, so futures companies like Lehman Brothers also engage in tobacco trading.
"Sir, have you ever smoked American Bull Durham cigarettes?" the assistant asked.
"Yes, that kind of smoke is a bit harsh on the throat."
Upon receiving Livingston's reply, the assistant continued, "For cigarettes intended for inhalation, glossy tobacco is already quite good. It's relatively mild and easy to burn, and without this roasted tobacco, cigarettes cannot be industrially produced."
Larry was surprised to learn that there were so many intricacies involved in tobacco processing. Lehman added that current tobacco-making machines can only handle dry, moderately brittle, bright tobacco leaves; traditional dark tobacco leaves are prone to clogging and are difficult to ignite.
In short, if cigarettes are like cars, then Brilliant Leaf tobacco is like oil. But what's truly astonishing is that James Duke not only controls the largest car manufacturer but is also the standard oil in the tobacco industry. This is because it controls 70% of Brilliant Leaf tobacco through long-term contracts. This is the foundation upon which it has been able to monopolize and squeeze out other smaller cigarette companies, thus creating the American tobacco industry.
Larry remained silent after hearing this, but Lehman sensed something was different. He dismissed his assistant, leaned close to Larry, and asked in a low voice.
"Are you looking for a business partner, or are you looking to buy some in-demand goods?"
Larry turned to look at the other man, who looked very serious, and said, "Yes, I am very interested in the tobacco business—either get some Brightleaf tobacco or find a partner with whom I can produce together."
Lehman nodded. "Actually, these two are often the same person. Think about it, if you want to produce machine-made cigarettes, then you must have people with resources to cooperate with you. Otherwise, no matter how good the machine is, it cannot produce cigarettes without bright leaf tobacco."
Larry smiled and raised an eyebrow. "Do you have someone like that in mind?"
"Of course! This brings us to our largest supplier from North Carolina, one of the largest producers of bright leaf tobacco in the area, named Richard Joshua Reynolds." Lehman, unusually without stuttering, rattled off the whole thing in one breath.
"What's this guy like? Is he also a tobacco merchant? What's his relationship with James Duke?" Larry asked three questions in a row, but he only really wanted to know the answer to the last one.
"Oh, he's one of the people who were ruined by Duke!" Lehman said, shaking his head.
Reynolds was born into a well-off small farm; his father was a tobacco manufacturer. In 1875, Reynolds established his first tobacco factory, mainly producing chewing tobacco, somewhat similar to betel nut.
Because Reynolds was quick-witted, the tobacco business expanded rapidly, reaching an annual production of 100 million pounds a few years ago.
However, James Duke controlled the local tobacco market through various means and continued to suppress Reynolds' chewing tobacco sales by dumping it at low prices, causing the latter to now be in dire straits and only able to survive by smuggling bright leaf tobacco.
"To stop Duke's acquisition, Reynolds offered local tobacco farmers high prices, but his chewing tobacco was being rapidly replaced by cigarettes, and with no one to help him, he would eventually go bankrupt—or sell the factory to American Tobacco—" Lehman concluded.
Larry nodded silently, thinking that this person was worth getting to know. Offering help in times of need is the easiest way to build goodwill, especially since it involves this bright leaf tobacco that just appeared. This kind of local specialty can only be handled by "local experts".
"Mr. Lehman, could you please contact Mr. Reynolds? I'd like to meet him. The location is up to him; I'm willing to travel to North Carolina," Larry said, bowing to Lehman.
Lehman smiled. "No, no problem, sir. After all, you're one of my most important clients. Yes..."
By the way, how much do you plan to deposit?
This is the pragmatic side of Wall Street: get things done for whatever price you're paid!
Larry smiled and first pulled a thick wad of cash from his wallet, handing it to the other person. "Here's $4600, the prepaid rent I just received. Please deposit it into your company's account. Also—"
Larry then pulled out his New York bank checkbook, wrote a check for $20, and handed it to Lehman. "Mr. Lehman, please transfer $20 to my account. Please do this as soon as possible, okay?"
"No, no problem!! Mr. Livingston!!" Lehman stared intently at the $20 check, his face beaming with excitement. "I'll contact Mr. Reynolds right away. What's with asking him to choose a location? He's a camel that's about to die of thirst, what makes him dare to pick a place?!"
Larry smiled and nodded, then suddenly remembered a question, "Wait a minute! I wanted to ask, what are the commission rates for futures trading?"
"Three per thousand! That's the pragmatic side of futures companies. We...we're not like stock brokers." Lehman said, adopting the air of a champion of justice. Then he added, "—However, I've heard rumors that stock commission rates will also be reduced to three per thousand in the future."
Larry opened his own futures account at Lehman Brothers and then rushed to Reading's New York office. Located near Lexington Avenue and Third Avenue, the area was predominantly inhabited by middle-class and professional residents, and felt somewhat deserted during the day.
Larry pushed open the door to the sales office and was met with the gaze of the front desk manager, Bernard Baruch.
"Good afternoon, Mr. Livingston." Baruch gave Larry a warm smile.
"Hello, Mr. Baruch. How have you been lately?" Larry smiled and took a few steps forward.
"Not bad—" Baruch leaned closer to Larry and said, "—The general manager said that as long as you don't close your account, he will fully cooperate with you."
Larry smiled slightly. "Has he come to terms with it?"
"It's no use being so reckless!" Baruch raised an eyebrow slightly and continued in a low voice, "I told him that you not only want to close the account, but you also want to sue the sales department and expose Reading's deliberate attempt to bankrupt its customers in the newspapers—"
Larry chuckled and patted him on the shoulder. "I know! I'll go see him. Please wait here for a moment; a Lehman Brothers trader will be here to meet with you shortly."
As they talked, Larry found out where the sales manager's office was and then walked inside.
After Larry left, Bernard Baruch stood alone at the front desk, marveling at the blond young man's confidence and competence at such a young age.
Just as my thoughts were in turmoil, I heard the door open and a young man in a suit and vest walked in.
"Sir, I'm from Lehman Brothers. I need to set up a trading line for one of our clients," the other party said politely, bowing.
"Oh, is this Mr. Livingston?" Baruch thought to himself.
"Yes, my boss said he is one of our most important clients—but Mr. Livingston needs to, and can only, conduct futures trading with you. That's why we need to set up a dedicated trading line," the other party replied politely.
Baruch glanced back in the direction of the general manager's office, then smiled and said, "Mr. Livingston is also one of our most important clients. Alright! Set up your trading line."
The other party nodded, then went outside to call over the telecommunications engineer and began setting up the telegraph line.
Logically, setting up a dedicated transaction line for a client requires the general manager's approval. But Baruch felt there was no need to ask; Mr. Livingston's demeanor meant he could easily manipulate the general manager.
Baruch specifically pointed out a VIP client room to the Lehman Brothers telecommunications engineer, where Mr. Livingston would conduct his transactions.
The other party nodded, picked up their tools, and began wiring.
The branch office's clients overheard the conversation and were very curious about who had such influence to set up a dedicated futures trading line.
Baruch ignored the questioning looks from the traders in his branch.
Ten minutes later, a short man with black hair strode in. He looked around as if he was in a great hurry.
Under Baruch's questioning, the dwarf finally said, "I... I need to find Mr. Livingston. I have something important to discuss with him—"
Is it someone looking for Mr. Livingston again?
Baruch suppressed his curiosity and asked instead, "Sure! Wait a moment, he'll be here soon."
"Um, sir, may I have the pleasure of knowing your name?"
"I am the general manager of Lehman Brothers," Lehman replied.
Baruch raised his eyebrows, smiled, and shook hands with him. "I know you, Mr. Lehman! It's a great honor to meet you."
"Thank you—Mr. Livingston is here today, isn't he? I was afraid of delaying his business—" Lehman was still a little anxious.
"Wait a moment, I think it will only take about ten minutes—" Baruch turned to look at the office.
Just then, the door to the general manager's office opened, and Larry Livingston walked out with a smile on his face.
Behind him, the general manager of the sales department followed closely by him with a smile.
After the two men emerged, the manager preemptively said to Baruch, "Bernard! Arrange a VIP box for Mr. Livingston. He is our most distinguished guest. We can no longer allow this esteemed gentleman to conduct transactions in the main hall!"
Baruch had anticipated this outcome. He pointed to the room next door. "Mr. Livingston, your VIP box is ready. The Lehman Brothers telegraph line is also being connected."
Larry smiled and said, "Thank you!"
Lehman stepped forward and approached Larry. "Sir, I've found out what you asked me to inquire about."
""
Larry asked, "So fast?"
"The speed is not slow—but it should be somewhat different from what you expected—" Lehman hesitated, as if he wanted to say something but then stopped.
Larry nodded and led him aside, listening quietly as the other man gave him his report.
Bernard Baruch looked at his sales manager, who still had beads of sweat on his forehead.
One can imagine that the general manager of his sales department was quite frightened by this customer.
The general manager took two steps forward mysteriously and asked Baruch, "I have agreed to Mr. Livingston's request! My God, please take good care of him for me. Bernard, I'm only a year away from retirement. As long as this noble gentleman is kept on his side, I'll give you whatever you want!"
Baruch smiled and nodded.
Baruch had made the right bet. Ever since Livingston, the blond teenager, walked into Hartford’s brokerage and made his first amazing deal, Baruch had decided that he was someone he could entrust his future to!
Baruch could imagine that the sales department would not only restore his previous leveraged position, but also turn the $120 million in promissory notes that Mr. Livingston had pinned there into new capital.
Under the current profit-sharing model, Mr. Livingston receives a 1% commission on every transaction. For such a large client, a mere sliver of corn in his hand is enough to make him rich.
Larry finished his conversation with Lehman, walked back to Baruch's body, and beckoned to him, saying, "Mr. Baruch, may I have a word with you in private?"
Baruch raised an eyebrow and walked out of the reception office. "Of course, sir! I've been waiting for your call—"
The two arrived at the VIP client room specially prepared for Larry Livingston. Larry looked around at the environment and facilities and nodded in approval.
"A very good trading room, but unfortunately I can't come here often."
Baruch smiled. "Mr. Livingston, whether you come or not, this room will always belong to you."
Larry smiled, gestured to the seat, and indicated that Baruch should sit there. "You sit there, let me see!"
Baruch was confused, but he still sat down as Larry instructed.
Larry smiled and nodded, then stepped forward and placed his hand on Baruch's shoulder. "Bernard! Would you do me a favor?"
Bernard was somewhat surprised. He didn't know why the other party was asking him to do something so solemnly.
"You mean, Mr. Livingston!" Baruch stood up quickly, his face solemn.
"Be my discretionary trader!" Larry solemnly stated his request.
"Me? To be your trader? Why?" Baruch was shocked again, his eyes fixed on Larry.
"I'm going to set a trap in this room. I need to find the person who's against me."
"And you, Mr. Baruch, are my hunter. If you help me catch that prey, I'll reward you with $1!" Larry said with a smile.