Reborn in America, I am a legendary short seller on Wall Street.

Chapter 108 Miscalculation (Part 1) (3k views, please vote)
"We need to look at whether the trend exists, not whether the stock price is high or low."

When Larry saw the second stock offer for Colt Firearms, he kept reminding himself of this.

When Larry was still working as a stock ticker at Paine Weber Securities, he made a discovery: whenever stock prices exceeded a round number, there would be a rapid increase.

With Colt firearms now exceeding the 100 mark and coupled with favorable news, theoretically, no one would actively short-sell this stock. Therefore, there are almost no active short sellers in this stock.

All potential short sellers are those who bought the stock earlier and are now taking profits. Whether they sell will determine whether the stock will continue to rise after breaking through a hundred.

Larry has already filled out the transaction form, ready to close his position as soon as the upward momentum in the stock price weakens.

Unfortunately, off-exchange traders have no way to observe trading volume, so Larry can only judge when prices will stagnate based on the magnitude of stock price fluctuations.

Colt opened higher and continued to rise today, with the first bid at $102 and the second bid climbing to $105. At least in the initial stages, the stock has remained strong.

The next three bids were 105 1/4, 105.5, 105 1/4...

The three offers started to stagnate.

Larry started filling in his name and the time of sale on the transaction order. However, on a whim, Larry changed the closing quantity to 500 shares. After all, Colt's stock trend was still strong today, and Larry decided to sell it in three separate transactions.

The trader received the order and checked it with Larry, asking, "Are you closing out 500 shares of Colt firearms?"

“Yes, 500 shares were closed at market price,” Larry confirmed.

"Okay!" The trader grabbed the order form and dashed to the telegraph room to place it.

While waiting for the first 500 shares to be liquidated, Colt's stock price kept coming in: $105, $104.5, $102.5...

The stock price is falling rapidly, and the first batch of profit-takers have already taken advantage of the high opening price and public enthusiasm to run away.

When he saw the stock price return to the opening price of $102.25, Larry filled out a second sell order for 500 shares at market price and handed it to the trader again.

Larry used a batch closing method this time. As long as the average cost of the three batches of sell orders is above $100, Larry will make a huge profit.

Larry submitted the second transaction order and remained at the trading counter, calmly awaiting Colt's latest offer.

Just then, a voice suddenly spoke from behind, "Mr. Livingston... why don't you just invest in my car project? There's no need to wait for the big bosses on Wall Street!"

Larry turned around and saw Henry Ford standing behind him, his eyes fixed on the transaction slip being handed into the telegraph room, clearly having noticed Larry's large-scale transaction.

Nobody's a fool; Henry Ford heard everything when the trader confirmed the sell order with Larry.

By making a slight connection to Colt's current stock price, Ford can calculate that in just Larry's first two transactions alone, he sold 1000 shares of Colt firearms, a transaction volume exceeding $10!

Larry thought for a moment, then gestured for Henry Ford to sit with him in one of the less crowded seats in the trading floor, deliberately drawing out his words.
"Sir, no one is willing to pay for an immature product. My money doesn't grow on trees. You have to understand that your product is indeed not mature enough."

Larry had actually planned to invest in Ford for a long time, after all, Ford was the future king of the American automobile era.

But how to invest? How much equity to acquire? These are the biggest questions.

He just suggested that Ford go back and continue to improve, partly because he was eager to cash in Colt's profits at Reading, and partly to keep Henry Ford hanging, to see what his trump card was, and how he could get the best investment terms.

Now, Larry has sold 1000 Colt shares, pocketing most of the profits, and can calmly discuss this issue with Mr. Ford.

After listening to Larry's words, Mr. Ford pondered for a moment, then looked up at Larry and said, "$5, giving up 15% of the equity, that's my bottom line. I know my cars only lack mature improvements. Even without this money, I can go back and slowly work to raise the money to improve them, and I will still improve my cars."

Larry raised an eyebrow, knowing Ford wasn't exaggerating, since the Ford Motor Company was ultimately built single-handedly by Henry Ford. After thinking for five seconds, Larry changed the subject, asking, "Sir, may I ask where you plan to build your car factory?"

“Detroit! It has extremely convenient steel and transportation facilities, and supporting companies of all sizes!” Ford replied without hesitation.

Larry frowned and said, "There's a condition for me to invest: you have to put the car factory in Boston."

"Why?!" Ford's face showed a puzzled expression.

Larry smiled faintly, thinking to himself, "Why, you ask? Of course, it's to increase my influence in Boston."

I finally invested in Ford. If I let it stay in Detroit as it has in history, how can I better share in the benefits of the car company's growth?

Of course, you can't say that to Ford.

“In my opinion, Boston’s lower limit is similar to Detroit’s. It has a more developed steel industry and more convenient transportation conditions, or even better conditions, because it is close to the sea and has better shipping conditions than Detroit. The cars you produce here can be easily transported to the southern United States, cities along the Mississippi River, and even Europe via the Eastern Central Railroad and Boston’s deep-water port!” Larry said calmly.

Henry Ford followed Larry's train of thought, pondering the matter, and slowly nodded.

Larry, seeing that Ford had already digested this conclusion, continued,

"But Boston's potential is something Detroit can't reach. I have two reasons you can't refuse. First, Boston has the best universities on the East Coast. Second, it has the best manufacturing cluster in New England. If you can set up a car company here, you can quickly get the parts you need, such as brakes, from the surrounding factories... Even if they don't have the equipment on hand, they can quickly produce products that meet your requirements based on your description."

Henry Ford thought for a moment, then reluctantly nodded in agreement.
“I admit that Boston is better than Detroit in terms of basic conditions, but you can’t ignore another issue, which is the availability of a skilled industrial workforce. Detroit was already the largest carriage manufacturing center in the United States 50 years ago, and it had a large number of skilled industrial workers in metal processing and machinery manufacturing. But Boston does not have this advantage because it is more inclined towards light industries such as watchmaking and textiles, and has far fewer manufacturing talents.”

Larry smiled; this was a question he had anticipated, and only when Henry Ford asked it did he continue with a smile.
"Do you still want to start a factory where a dozen or so workers assemble a complete car from scratch? Forgive my bluntness, but that's just a workshop. Failing to break down the processes to a level that an average person could handle after a week of training is a dereliction of duty for a factory owner!"

Upon hearing Larry's words, Henry Ford's pupils dilated instantly, and he stared at Larry as if seeing him for the first time, muttering to himself.

"You mean... break down the process into smaller steps, so that even an ordinary person can quickly master it?"

Larry smiled faintly and continued, “Standardized production creates industrial standards, and the subdivision of processes leads to the continuity of production rhythm. If you can make the assembly line flow like a river, then the upstream of this river is raw materials, the middle is assembly workers doing subdivided processes, and the downstream is the finished product. Think about it, that is the production model of modern industry.”

Henry Ford's eyes widened again. He stared blankly at the ceiling of the sales hall and murmured, "You mean, production... is like... flowing water!"

Larry smiled and summarized for him, "Yes, my friend, like water. I'd call it—assembly line production!"

Historically, the assembly line model was invented by Henry Ford. This innovative industrial production method directly increased production efficiency eightfold and is considered one of the greatest inventions of the 20th century. Larry thought to himself, "Using Ford's invention to shock Ford is a great deal. It ensures he understands and also makes him realize the potential value of this process."

Henry Ford turned to Larry, his face filled with undisguised shock. He gripped Larry tightly with both hands and repeated, “Assembly line production! You mean assembly line production! My God, this is a genius invention. With this model, factory owners will no longer be at the mercy of highly skilled technicians.”

Larry was slightly surprised, thinking to himself that Henry Ford's first reaction was different from what he had expected.

"The key is that it improves production efficiency while greatly reducing production costs! This can guarantee that you stand out from similar products instantly," Larry quickly corrected.

Henry Ford nodded heavily, then looked up at Larry, his eyes shining, "Then... the assembly line factory you mentioned can't be built with just $5."

Larry said calmly, "Money is not a problem. I can invest and help you raise funds on Wall Street. But I also have to say something fair: you first need to have a solid product, and at the same time, you need to allow investors to increase their investment. A 15% limit is really too low!"

Henry Ford frowned slightly, pondered for a moment, and then said, "At the very least, I must ensure my absolute controlling stake; my shareholding must not be less than 55%."

Larry nodded. "Okay!"

Having said all that, there was no need for them to say anything more for the time being.

(End of this chapter)