A $50 million margin call? I'll short Wall Street.

May 5, 2008, 10:03 AM.

270 Park Avenue, Farstar Capital Trading Room.

On the Bloomberg terminal's price display, the WTI crude oil futures contract is climbing at a breathtaking pace.

119.43……119.43……119.67……$119.89……

Lin Tao stared at the string of numbers, feeling his heartbeat perfectly synchronized with the fluctuating price quotes.

"It's broken!"

The trader sitting next to him, Zhang Yang, slammed his hand on the table. "$120! It's broken through $120!"

A suppressed commotion erupted in the trading room. Several people simultaneously turned to their screens, and the sound of keyboards clicking rapidly increased.

Lin Tao didn't look at Zhang Yang. His gaze was fixed on the printer on his right, watching the stack of reports that had just been faxed over the Goldman Sachs research line, page by page, being printed out.

He waited for this report for an entire morning.

Arjun Murthy, Goldman Sachs Commodities Research.

This name has been on everyone's lips in Wall Street's energy circles for almost a month.

This analyst, a graduate of the Indian Institute of Technology and who spent twelve years researching commodities at Goldman Sachs, is known for his extremely aggressive bullish views. At the end of last year, he was the first to proclaim the "era of $100 crude oil," which was ridiculed by the market for two whole months before being proven right.

Today, he released a new research report that insiders call the "super peak".

The printer finally stopped.

Lin Tao grabbed the stack of papers, still warm from the ink, and quickly glanced at the cover:

Crude Oil Supercycle: A Structural Path to $200

He took a deep breath, clutched the stack of reports, and strode quickly toward the innermost office.

……

The door to Lu Ze's office was ajar.

Lin Tao knocked twice and pushed the door open to go inside.

"Boss, Goldman Sachs' research report is out!"

He placed the stack of documents on Lu Ze's desk, his voice barely concealing his excitement, "Arjun Murty's latest report, target price—"

Two hundred dollars.

Without even looking up, Lu Ze finished Lin Tao's sentence in a tone as if he were stating the weather.

What lay before him was not any data on crude oil, but a densely packed CDS spread curve.

The chart includes almost half of the US financial market.

Lin Tao paused for a moment, looked at the report in his hand, then at Lu Ze's lowered head, and said somewhat uncertainly:

"Boss, you... have you already looked at it?"

"No."

"Then how come—"

"Just a guess."

Lu Ze drew a line lightly on the CDS chart with his pen. Blankfein had told him about this half a month ago.

Lin Tao stood there, holding the stack of "priceless" research reports, feeling a little unsure of what to do.

He worked at Bear Stearns for three years and saw countless research reports from Goldman Sachs, Morgan Stanley, and Citigroup, but never before had he felt so certain that this was not an ordinary analysis, but a judgment of historical significance.

In his report, Aju Murti used nearly eighty pages to meticulously construct an incredibly grand bullish narrative, covering everything from Middle Eastern geopolitics, the structural depreciation of the US dollar index, the demand curve of emerging markets, the logic of OPEC's production cuts, to the bottleneck of global refining capacity.

The conclusion is: crude oil is undergoing a once-in-a-century supercycle. Two hundred dollars is not the peak, but a midpoint.

"Boss,"

Lin Tao mustered his courage, flipped out the core page of the report, and pushed it onto Lu Ze's desk.

"I know you don't pay much attention to these research reports, but look at this logic—a weak dollar coupled with supply constraints—this combination has never been disproven historically, and now China's demand..."

"Lin Tao."

A voice came from the doorway.

Lin Tao turned around.

Isabella stood in the doorway, holding a warehouse report in her hand. She was wearing a dark gray business suit with a neat collar and no unnecessary embellishments.

Her gaze swept over the stack of research reports in Lin Tao's hand, then landed on his face, and the corners of her mouth curved slightly, carrying a meaning that he couldn't quite understand.

"I'm here to deliver the position report."

She walked in, placed the documents on Lu Ze's desk, and then turned to Lin Tao.

"Are you talking to the boss about Aju Murti's new report?"

"right!"

Lin Tao immediately handed her the report, "The target price is two hundred dollars, the logic is very sound, I think we should—"

"I am aware of this report."

Isabella took it, flipped through it, and then put it on the table.

"It came out last night, and I've looked at it briefly."

"So what do you think?"

Isabella did not answer immediately.

She walked to the window and glanced at the price display screens outside the trading room that were still flashing.

$120.34.

The upward trend shows no signs of stopping.

"Lin Tao, you worked at Bear Stearns for three years."

She turned to look at him, her tone as calm as if she were discussing a technical issue.

How many sell-side research reports does your department receive each year?

Lin Tao thought for a moment: "About... a few hundred?"

"right."

Isabella nodded.

"Have you ever tallied how many of those hundreds of research reports were ultimately proven accurate by the market?"

Lin Tao was speechless for a moment.

"perhaps……"

He hesitated for a moment, "Maybe 30%? 40%?"

"Do not."

Isabella shook her head, her tone devoid of any sarcasm, merely a calm statement.

"The accuracy rate is roughly between 40% and 50%. About the same as flipping a coin."

Lin Tao was stunned.

But Goldman Sachs—

"Goldman Sachs' research report is the same."

Isabella interrupted him.

"Lin Tao, I have a question for you. What do you think was the purpose of Aju Murti writing this report?"

"In order to... provide research value to clients?"

Isabella looked at him and remained silent for two seconds.

The two seconds of silence made Lin Tao suddenly feel that something was wrong.

"sit."

Isabella pulled over a chair and sat down on the sofa herself.

"Tell me, what's Goldman Sachs' structured products division holding onto right now?"

Lin Tao frowned and thought for a moment: "Crude oil-related derivatives?"

"right."

Isabella's voice became slower and clearer, as if she were explaining a problem to a bright student who was stuck on it.

"Specifically, it involves a large number of short positions in crude oil call options, as well as related structured products. Goldman Sachs has sold these to various clients over the past few months—airlines, refining companies, and some hedge funds that are chasing the upward trend."

"By selling these products, they have taken on a certain level of risk exposure in the market. They need to hedge, they need someone to take over, and they need enough people in the market who believe that oil prices will continue to rise to buy the long positions they need for hedging."

Isabella picked up the research report, turned to the last page, where a list of recommended trading strategies was presented:

Go long on WTI crude oil futures. Go long on energy ETFs. Buy crude oil call options.

"Take a look at this recommendation strategy,"

Isabella handed that page to Lin Tao.

"He's telling everyone who reads this report what to buy."

Lin Tao looked down and then slowly raised his head.

Something began to loosen in his mind.

You mean…

I mean,

Isabella's voice remained calm, but each word was spoken with great steadiness.

"This report isn't for smart people. It's for those who're willing to take over."

"Aju Murthy wasn't predicting oil prices. He was providing Goldman Sachs' sales team with a beautifully worded, logically sound instruction manual, telling clients worldwide: you should buy at this price, and then Goldman Sachs can gracefully transfer the risks they need to hedge at this price."

"Moreover, Goldman Sachs' own crude oil financial products are currently the most popular. If people believe the logic behind these research reports, they will buy them. Goldman Sachs will then profit."