Shadow of Chinese Entertainment

Chapter 310 [Shadow Level 4]

When Lehman Brothers' stock price rebounded to above $60, Hu Xiaobei mortgaged it to a US financial institution and borrowed $109 billion with a leverage of 5, of which $108 billion was actually received.

In fact, Hu Xiaobei originally wanted to use 2x leverage, but Lehman Brothers' stock price fell from $86 per share in February to $55.

The US financial institutions were only willing to offer leverage of 3-5 times, and even then, it was only with the assistance of Lehman Brothers that the tripartite agreement could be reached.

In other words, Hu Xiaobei pledged nearly $22 billion worth of Lehman Brothers stock to American financial institutions.

During the mortgage period, the right to dispose of the shares is restricted, and they cannot be redeemed within a specified period.

Based on the pledged shares, US financial institutions provided Hu Xiaobei with a 5x leverage loan, which enabled him to obtain $108 billion for short selling.

Because of the short selling transaction, Hu Xiaobei is required to return the Lehman Brothers shares that he actually borrowed and sold within the stipulated time, as agreed in the agreement.

This move was also a gamble for Lehman Brothers.

However, the advantages far outweigh the disadvantages.

If Lehman Brothers had not gone bankrupt, Hu Xiaobei would have needed to buy 18%-30% of Lehman Brothers' stock to repay the American financial institutions.

If Lehman Brothers had gone bankrupt, its stock price would most likely have become worthless.

Hu Xiaobei would have made a huge profit, and as for Lehman Brothers, when it was on the verge of collapse, Hu Xiaobei would most likely have bought 18%-30% of its shares at a low price.

In this situation, as long as Lehman Brothers didn't go bankrupt, it might be possible to revive it.

Of course, this is all predicated on Lehman Brothers being able to survive until then.

Lehman Brothers simply didn't consider that they would actually go bankrupt, or perhaps they did, but if they did go bankrupt, none of that mattered anymore.

Hu Xiaobei has pledged 3636 million shares of Lehman Brothers stock and borrowed 1.818 million shares with a leverage of five times to short sell.

When the loan matures, he only needs to return the 1.818 million Lehman Brothers shares he actually borrowed.

During this period, the ownership of the mortgaged shares still belongs to Hu Xiaobei. If he can repay the loan principal and interest on time, he can redeem the shares upon maturity.

Of course, under normal circumstances, short sellers do not redeem their shares; otherwise, why would they short sell?

Therefore, when the deadline arrives, all that is needed is to return 1.45 million Lehman Brothers shares.

If Hu Xiaobei defaults, the US financial institutions have no right to dispose of the pledged shares to settle the debt, and can also hold Hu Xiaobei and Lehman Brothers accountable.

In this transaction alone, all three parties maximized their interests.

The American financial institutions not only made $100 million out of thin air, but they were also able to cash out at a high price by taking advantage of the rising stock price.

Lehman Brothers used this to alleviate its financial pressure and buy itself more breathing room.

However, Lehman Brothers was simply too large, with deep-seated problems that were difficult to resolve, and it was far from being able to survive a single stock transaction.

Hu Xiaobei's Qianbeifeng Investment is highly likely to make a steady profit of $88 billion.

As expected, Lehman Brothers was scheduled to officially declare bankruptcy on September 15, 2008, triggering severe turmoil in global financial markets.

From September 12, 2008, until its bankruptcy, Lehman Brothers' stock price plummeted by 93%.

By November 21, 2008, its stock had closed at a low of $0.12.

By the end of 2008, Lehman Brothers' stock price had plummeted to just $0.03.

In other words, Hu Xiaobei would only need to spend $440 million to $1750 million to buy back Lehman Brothers stock at a low price and return it to the American financial institution.

Large-scale, long-term capital outflows will inevitably have negative consequences.

Therefore, of the $108 billion, $20 billion will be reinvested domestically.

The remaining $88 billion will be given to the Northwind Investment team to continue shorting other stocks in the US.

This back-and-forth maneuver appeared extremely risky on the surface. But only Hu Xiaobei knew that the financial crisis was inevitable, and Lehman Brothers could only hold on for another year at most.

I have three years, so this bet is basically a sure thing.

In fact, many insightful people had already seen the signs of the financial crisis.

But who can know exactly when the financial crisis will occur?
What events can trigger a financial crisis?
Just like now, many people know that the two superpowers may be about to go to war.

But who knows when war will actually break out?
What kind of event would trigger a real war?

So, speculation is speculation, but life will continue as usual until a real fight breaks out.

........................

On October 15, 2007, Hu Xiaobei's shadow ability was upgraded to level four.

[Shadow Level 4]: 0.005%
Thanks to the extra fourfold boost from Shadow Eater, the evolution efficiency has now reached 0.005%/hour.

Furthermore, this efficiency will increase rapidly over time, until it reaches the current level limit of 0.01% per hour.

In other words, including the rapid growth period of the first two months, it will only take a little over 14 months for the shadow ability to be upgraded to level five again.

If nothing unexpected happens, this advancement will likely take place before the end of 2008.

At this point, Hu Xiaobei's radius perception distance had reached 96-112 meters.

In less than two months, it will be able to reach the current level limit of 112-128 meters.

The shadow's realism and enhancement capabilities have reached 80%, and will reach 100% in less than two months.

As for whether things will be different after that, we'll have to wait until we reach level five to find out.

Hu Xiaobei's lifting strength has already reached over 1500 kilograms. With the additional four times effect of Shadow Devour, resulting in a total of five times the efficiency of devouring and evolving, he can increase his strength by hundreds of kilograms every month.

As the level increases, the precision of shadow control and its rigidity also improve.

With Hu Xiaobei's all-out defense, ordinary firearms were no longer able to break through Shadow's defenses.

It can effectively defend against even heavy sniper rifles.

Of course, things are different when faced with laser weapons or missiles.

However, Hu Xiaobei wouldn't be foolish enough to take the missile head-on. As long as he could see it from a distance, he could dodge it in advance with his current flight speed.

After advancing to level four, he also gained a new shadow ability—Shadow Transformation.

【Shadow Transformation Lv4】: Can differentiate into shadows equal to the level, freely granting or reclaiming the abilities possessed by the shadows. Currently, it can reach 1%-80% of its own strength, and the current level limit can reach up to 100% of its own strength.

Even from the literal meaning, this ability is not difficult to understand.

First, it can differentiate into shadows of the same number as its own level.

For example, if Hu Xiaobei's current shadow ability level is level four, then he can create four shadows.

When you reach level five or six, you can differentiate into five or six shadows, and so on.

Secondly, these shadows are not simple projections.

Hu Xiaobei can freely bestow some of his abilities upon the differentiated shadows, and can also retract the abilities bestowed upon the shadows at any time.

For example, he can imbue the shadows he creates with one or more shadow abilities, such as shadow control, spiritual awareness, illusion and reality, blessing, and shadow devouring, so that they can gain the corresponding abilities.

However, one thing is certain: the shadow created through the transformation cannot enhance the "transformation" ability.

That makes sense. If we could add this ability, wouldn't we be able to exploit bugs and create endless nested loops?
(End of this chapter)