Technology invades the modern world

Chapter 393 Top-notch trading skills
Jenny Hearst?
What an old-fashioned name.

So ancient that even John Morgan had to search his memory for a long time to recall who this person was.

“You mean the eldest daughter of the fourth generation of the Hearst family?” John Morgan asked.

In Lin Ran's office, the special advisor for East Asian affairs squinted as he recalled.

He seemed a bit confused. Weren't we here to discuss a shocking conspiracy?
Lin Ran was deeply moved. He still vaguely remembered the scene when he and John Morgan Sr. attended the special fundraising dinner held by the Elephant Party for Nixon.

So many years have passed in the blink of an eye.
Sixty years have passed in the real world, and the other person has gone from being in their early twenties to being over eighty years old today.

"Yes."

"I don't know. I haven't seen her for so long. Many years ago I vaguely heard that she seemed to have had some kind of accident, but Professor, I'm sorry, it's been so long that I've forgotten the specific reason."

"If you're really curious, I'll ask her when I get back." Although old John Morgan was very eager to know why Lin Ran had asked Jenny Hearst, he suppressed his curiosity.

John Morgan Jr. had to be called Professor, and so did his father.

Lin Ran nodded: "Okay."

John Morgan's curiosity only intensified. He thought that after he said that, the other party would say that would be the end of it, but the other party insisted on knowing the answer.

"Alright, Morgan, I know why you've come, and I also know that such a collaboration can't leave any written agreement."

I'd like to ask the White House if they are willing to cooperate with us?

John Morgan Sr. said, “Professor, I think the President is willing, but the whole thing must be done quietly and not announced in public.”

Your proposal is a very bold idea, full of Machiavellian political maneuvering, but in practice, once it becomes known to the outside world, it will trigger a massive reaction from America to the international stage.

The president's open actions of blaming China for the economic collapse, while America hides behind purely financial maneuvering, are a favorite form of maximum pressure and media manipulation.

America gained access to the entire high-end semiconductor industry chain, Wall Street gained huge financial gains, Silicon Valley gained access to the semiconductor industry, and the President gained immense prestige.

However, the operations beneath the surface cannot be hidden. Hollowing out a top 20 economy in the world requires astronomical amounts of capital flows and market operations. This cannot be accomplished by a few hedge funds; it requires the comprehensive and systematic participation of top financial institutions such as Goldman Sachs, Morgan Stanley, Morgan Stanley, and Merrill Lynch.

Such a large-scale coordinated short selling operation cannot be hidden under the watchful eyes of global regulatory agencies; the chain of evidence would be very clear.

Meanwhile, the transfer of the supply chain is an open matter. Orders from companies such as Apple, Nvidia, and Qualcomm have been transferred from TSMC to Samsung and Rapidus. This is a public business decision, which is the most conclusive evidence.

Rapidus, in particular, is a product of US-Japan cooperation, and outsiders will inevitably think that America's shadow is behind it.

When the 4V economy collapsed and TSMC was forced to relocate to Arizona, the world asked the simplest question: Who benefited?

The answer is self-evident.

At that time, no matter how powerful our media machine is, it will be unable to completely shift the blame to you in the face of irrefutable evidence.

Under such circumstances, they could not possibly become porcupines, because they knew very well that America had destroyed their economy and future for her own benefit, so why should they risk their lives for us?

They were betrayed by us, and yet they still risk their lives for us? Is that reasonable?

After listening, Lin Ran thought to himself, "Old John Morgan isn't entirely useless. It's one thing for Machiavelli to know, but he can also explain China's underlying considerations so clearly."

John Morgan Sr. never mentioned neon semiconductor technology from beginning to end, because it was an add-on, not the core of the deal.

"So the White House refused?" Lin Ran asked, thinking to himself, "You're not going to tell me you need more money, are you?"

“So we have to take it one step at a time. In Chinese terms, we need to boil the frog slowly,” John Morgan said. “If you pour a whole pot of boiling water on a frog, it will jump away immediately and make a mess of the kitchen. But if we heat the pot slowly, it will die without even realizing it. What we need to do is heat it up, and what you need to do is make sure it doesn’t jump out prematurely out of panic.”

However, in the following six months...

Lin Ran truly witnessed what it meant to be like a frog slowly boiled in water, and saw how America, as a veteran player, strategized and planned at this poker table.

Throughout the entire process, John Morgan Sr. traveled back and forth between Tokyo and Shanghai.

In late January, an internal research report titled "A Reassessment of the Economic Efficiency and Risks of the Economic Cooperation Framework Agreement in the Current Political Environment," written by the Chinese Academy of Social Sciences, was inadvertently leaked to several well-known international financial media outlets.

This report uses academic language and is rich in data.

The conclusion was that the political foundation of the trade framework was crumbling, and industries that depended on it faced unpredictable policy risks.

The network from America began operating.

Goldman Sachs and Morgan Stanley's analyst teams released their outlook reports on the 4V market almost simultaneously, citing the leaked report in a consistent manner. For the first time, they added geopolitical risk as a new assessment weight to their reports. The reports pointed out, without naming names, that more than 90% of the world's advanced chip manufacturing is concentrated in a geopolitical hotspot, which poses an unacceptable risk to global technological stability.

This laid the groundwork for later manipulating public opinion to attack TSMC's monopolistic position.

At the same time, it downgraded its stock rating from "overweight" to "neutral".

This appears to be a completely independent and rational market analysis.

A group of early hedge funds began to establish small, tentative short positions in the New Taiwan Dollar.

In February, customs officials suddenly announced a suspension of imports of pineapples produced in some southern agricultural counties, citing the detection of harmful organisms.

This is a common, seemingly conventional trade tactic used by China, typically employed to precisely target agricultural counties and cities in the south without triggering a widespread economic panic.

Just 48 hours before China announced the suspension of imports, several large hedge funds coordinated by Morgan Stanley used leverage to short the New Taiwan Dollar against the US Dollar briefly and aggressively.

Following the announcement, market panic ensued, and the New Taiwan Dollar plummeted.

The fund immediately closed its positions and made a profit; the entire process lasted only a few days.

Subsequently, Wall Street commentators remarked, "Look, even a small agricultural issue can trigger such large market fluctuations, proving how fragile their economy is."

This further reinforces public expectations regarding this.

What followed was a massive, overwhelming wave of influence from Guan Shuo Dijun, a wave that swept the globe, and 4V was inevitably affected as well.

Mainstream tech media outlets in Silicon Valley almost simultaneously broke insider information:

Samsung: Apple is in deep talks with Samsung, planning to allocate 15%-20% of its next-generation iPhone processor (A19 Bionic) orders to Samsung's 3-nanometer production line for the first time.

Regarding Rapidus: Nvidia and Amazon AWS have signed a “long-term strategic cooperation memorandum” with Japan’s Rapidus to jointly develop a next-generation 2-nanometer chip architecture for AI data centers.

TSMC has been required to allocate more than 30% of its 2nm advanced production capacity to its newest factory in Phoenix, Arizona, within the next three years.

These news items were like bombshells, prompting a coalition of Wall Street funds to launch a fierce attack on TSMC's stock price.

“TSMC’s industry monopoly and technological moat are being eroded, and its valuation needs to be reassessed.”

The Taiwan Stock Exchange Weighted Index plummeted in response.

Wu Jianzhong pushed open the door of the private room, took off his dark trench coat which was soaked by the rain at the beginning of the typhoon season, and looked five years older than he had at the class reunion six months ago.

“Xiaoxian, I’ve read hundreds of financial statements and reports,” he said, sitting down as the waiter poured him a warm glass of sashimi. “I’d like to hear your trading log.”

Wu Chien-chung is the deputy director of the Securities and Futures Bureau of the Financial Supervisory Commission. He is a typical technocrat who is under tremendous pressure from the legislature due to the huge fluctuations in the Taiwan stock market and is frequently criticized by lawmakers.

The person he was referring to, Xiaoxian, was sitting opposite him and was named Chen Xiaoxian.

Chen Hsiao-hsien is the fund manager of the "Greater China Strategic Value Fund" at Fubon Securities Investment Trust in Taipei's Xinyi District. He graduated from the Department of Finance at National Taiwan University and worked at Deutsche Bank on Wall Street for eight years. He is proficient in quantitative analysis and derivatives trading.

Five years ago, he was recruited back to Taipei by Fubon Securities Investment Trust with a high salary and is regarded as a rising star in the local investment trust industry. The fund he manages has a scale of NT$800 billion.

Chen Xiaoxian sighed deeply and began to review the painful four months:

"At the beginning of January, the market was healthy, with the TAIEX index hovering around 21150 points."

After the report from the Chinese Academy of Social Sciences was released, the market treated it as noise, and the market only fell by 48 points that day.

However, our internal AI monitoring system issued orange alerts for low-intensity coordinated attacks for three consecutive days from January 22nd to 24th.

Data shows a high correlation between buy orders for the leveraged ETF 'Yuanta TW50 Inverse 1' across several trading seats in Singapore and Hong Kong.

The total inflow of funds was approximately $2.8 million, which is not a large amount, but the timing and pace were perfectly synchronized.

In my recent review, I believe this was a test of the market's short-selling costs and reaction speed.

Starting in February, it transformed into a precise strike, much like a surgical operation.

The pineapple ban in some areas is a smokescreen.

The real attack occurred on the afternoon of February 20. Starting at 2:37 p.m., a total of US$12.6 billion in concentrated sell orders flooded the spot exchange rate market for the US dollar against the New Taiwan dollar within four and a half minutes.

The exchange rate plummeted from 30.48 to 30.65 in an instant.

Our internal systems immediately identified it as a high-intensity, coordinated attack, triggering a red alert. This attack caused a chain reaction, leading to a panic sell-off of over $30 billion.

During our review, we discovered that the attackers had established positions using complex swap contracts well before the attack, and had profited at least $8000 million.

They perfectly exploited the rules to achieve a precise strike, sweeping away profits and leaving the market.

Chen Xiaoxian looked equally tired, his whole body showing signs of exhaustion: "It was from this point on that I adjusted all my positions to defensive positions."

Wu Jianzhong sighed: "We also realized something was wrong starting in March. At that time, many people in the financial industry reported to us through various channels that there were abnormalities in the market."

Chen Xiaoxian asked in confusion, "So why aren't the authorities involved?"

Wu Jianzhong didn't say anything, and drank the otter food in his cup in one gulp.

Seeing that he was unwilling to speak, Chen Xiaoxian continued, "But by March, a systematic and perfect storm had formed, causing a massacre of local financial capital."

On March 11, after rumors surfaced that Apple was evaluating Samsung's 3nm orders, attacks against TSMC began.

Chen Xiaoxian took out a tablet computer from his briefcase, switched to the corresponding screen, and pushed it in front of Wu Jianzhong.

"Look here, from March 11th to 14th, four trading days."

On the NYSE-listed TSMC ADR, open interest in put options surged by 12 contracts, with a notional value exceeding $20 billion.

Meanwhile, in the Taiwan stock market, TSMC saw a net outflow of NT$880 billion through the QFII channel.

The most fatal thing is that instead of dumping shares, they used algorithms to continuously and aggressively sell off, keeping the stock price firmly below the moving average.

The TAIEX index fell from 20500 points to below 19000 points.

Our funds and other local institutional investors made net purchases of over 1000 billion during this period, but it was completely ineffective.

Our money is limited, while their ammunition seems endless.

Retail investors and other market participants had clearly accepted the short-selling narrative during the prior preparation process.

Seeing that Wu Jianzhong remained silent, Chen Xiaoxian's anger was palpable.
"March! Lao Wu, March is the perfect storm! TSMC's stock price has been hammered down by algorithms for four consecutive days, and the abnormal data of options trading is filling our servers like snowflakes!"

Our system has been issuing red alerts every single day! There's no way the Financial Supervisory Commission couldn't have missed that!

Why didn't the official funds intervene at the time? Why didn't they take even temporary measures to restrict short selling? What were you waiting for?

He slammed his fist on the table, causing ripples to spread across the surface of the newly refilled cup of Dassai.

Wu Jianzhong closed his eyes, as if unwilling to recall, and then drank the sake in his cup in one gulp.

“Of course we saw it,” he said, his voice hoarse. “Hsiao-hsien, do you think we’re all blind? On the afternoon of March 12, the day TSMC’s stock price plummeted the most, the Financial Supervisory Commission held an emergency closed-door meeting. We had already drafted a temporary stabilization measure to restrict malicious short selling and increase margin requirements for securities lending, which was originally planned to be announced before the market opened the next day.”

"Then why wasn't it carried out?!" Chen Xiaoxian pressed.

“Because that morning,” Wu Jianzhong looked at me, his eyes filled with helplessness and humiliation, “the White House Special Assistant for East Asian Affairs came to Taipei from Narita International Airport in Tokyo, along with advisors from the Treasury Department and the Securities and Futures Commission. We had an informal breakfast meeting with him and his team at the Hyatt Hotel.”

He paused for a moment, as if savoring every detail of the moment.

He didn't mention the Taiwan stock market at all.

Throughout the entire meeting, he praised us as a model of the global free market.

He said that the reason we are able to attract global capital, especially America Capital, is because we have a transparent, open financial environment that is free from non-market interference.

Wu Jianzhong gave a self-deprecating laugh.

Then, he casually mentioned it.

He said that recently, some emerging markets have adopted, well, relatively strict capital control measures due to short-term volatility. Of course, we understand their difficulties, but international capital is the most timid. Once doubts arise about the freedom of the market, it will take a very, very long time to restore investor confidence.

Memories swirled in his mind, and Chen Xiaoxian remembered that the local media had reported on it extensively at the time because the name of the Special Assistant for East Asian Affairs was very special, extremely special: John Adams Morgan.

Both Adams and Morgan were figures they couldn't afford to offend.

At the time, the media was still hyping it up, saying that a big shot had arrived, and news anchors were going crazy about how our relationship with America was the best in history.

“He was warning us,” Wu Jianzhong said, emphasizing each word. “He told us in the most polite and benevolent way: You can bail out the market, but as long as you dare to break the rules of the ‘free market,’ Wall Street will immediately downgrade our credit rating to junk status and then withdraw all the funds.”

“Just three hours after that breakfast meeting ended,” Wu Jianzhong continued, “China began to condemn it, and their coordination was seamless. One played the good cop, and the other played the bad cop.”

One uses the rules of the free market to bind our hands, while the other uses a spiked club to hit us on the head.

What can we do? What do we dare to do?!

The air in the private room seemed to have been sucked out.

No wonder, no wonder, Chen Xiaoxian thought to himself, this is a blatant conspiracy.

On April 9, Moody's, an international rating agency, released a special report entitled "Geopolitical Risks and Sovereign Credit Correlation Analysis of the East Asian Semiconductor Industry".

The report did not downgrade our rating, but for the first time listed the possibility of a military blockade of the supply chain as a negative watch for future ratings.

This report was like a precise bomb, detonating the international bond market and causing the credit default swap price of domestic companies' dollar bonds to surge by 25% in a single day.

This is just the beginning.

On April 15, America’s Ministry of Commerce and Japan’s Ministry of Economy, Trade and Industry jointly hosted a global technology supply chain security summit in Washington, D.C.

The invited companies included Samsung, Intel, Rapidus, and ASML—almost all industry giants—but not TSMC, nor any of our companies.

This is a political exile, announcing to the world that we will be excluded from the future security supply chain landscape.

The most devastating blow occurred at 10:32 a.m. on April 22. "Chen Xiaoxian looked at Wu Jianzhong and said, "That day, our stock exchange's trading system suffered the most intense DDoS attack in history. Although our engineers held it off for 15 minutes, the system experienced a trading delay of up to 3 minutes."

You surely know what this means for a modern market.

Wu Jianzhong's face turned pale.

"In those three minutes of chaos, short positions in TAIEX stock index futures increased by 60,000 contracts in an instant."

In our later review, we discovered that the attacking IPs originated from botnets around the world and were untraceable.

Chen Xiaoxian turned off the tablet, and the private room fell into a deathly silence.

“So, Jianzhong,” I concluded, “they used Wall Street rating agencies, government industry summits, and a cyberattack of unverifiable origin.”

They accomplished three things: defined our sovereign credit risk, announced our exclusion from future supply chains, and demonstrated their technological capability to paralyze our financial system at any time.

They put the noose around our necks, but didn't tighten it.

According to my calculations, from January to now, this specter, whether it's Morgan or someone else, has made over $150 billion in profits across our various financial markets.

And this is just the beginning.

The most terrifying thing now is not this, but whether $150 billion can satisfy their appetite, and if not, how much more will it take?

What Wall Street wants, what the White House wants, these are all unknowns.

And what role does China play in all of this?

Chen Xiaoxian didn't finish his sentence, but he said everything.

On the television screen in the room, a bald, well-known TVBS commentator was giving a long and eloquent speech:

"Hey, let's not talk about those abstract things today, let's talk about money."

Let's talk about how our stock and foreign exchange markets have been severely damaged over the past four months.

Look at this! How much has our stock market lost since January? Over ten trillion New Taiwan Dollars!
Official funds stepped in to prop up the market, but what happened? They acted as if nothing had happened, and the market continued to fall.

The chairman of the Financial Supervisory Commission spoke out, saying that investors should have confidence, and financial experts analyzed that this is a short-term technical correction.

Let me tell you, this is all nonsense! If you actually believe this, then you're just a sucker.

You need to understand that this is not just a simple market fluctuation; there's a very large strategy behind it.

To those who dislike him, everything the bald guy says is nonsense. And people actually believe the conspiracy theory that America and China are working together to hollow out the country? Isn't that ridiculous? He's been on so many shows that he's completely lost his sense of reality.

But from Chen Xiaoxian and Wu Jianzhong's perspective, this is the most likely reality. The real world has become exceptionally unpredictable, and things that were unthinkable in the past have actually happened.

(End of this chapter)