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

Monday, August 7, 2008. 9:30 AM.

The opening bell rang.

Yuanxing's open letter had been circulating in Wall Street's information network for a full hour.

It was long enough that at least a third of the people in each of the main trading rooms read the entire text.

It was short enough that most people didn't have time to make a well-thought-out judgment.

They acted on instinct. And instinct told them: Bear Stearns was dead the last time this man spoke.

In the first minute after the market opened, crude oil prices plummeted. The WTI main contract opened lower, dropping by more than one percentage point. It wasn't a large drop, but the direction was clear.

Next up is the financial sector.

Lehman Brothers shares fell nearly four percent at the opening bell. The letter didn't mention Lehman's name, but the phrases "commercial real estate valuations were overvalued" and "tertiary assets exceeded shareholder equity" were, in Wall Street's decoding system, equivalent to Lehman's ID number.

Everyone knows who we're talking about.

Merrill Lynch fell 3%. Citigroup fell 2.5%. Even Goldman Sachs was dragged down by nearly 2%. The financial sector ETF fell more than 3% within the first five minutes of trading. The S&P 500 sank, while the VIX surged.

A conditioned reflex. Upon hearing gunfire, immediately lie down, regardless of where the bullets are flying.

270 Park Avenue. Farstar Capital Trading Room.

Lin Tao stared at the screen, his fingers hovering over the keyboard, receiving no commands. Lu Ze had arrived at the office at 7:30 this morning, but hadn't left even once since the open letter went online.

The screen shows predominantly red.

Oil prices, financial stocks, and the overall market are all falling.

However, compared to the market conditions experienced in the past few months, this magnitude is still not significant.

Lin Tao knew this was only because it was still early. Most people had just read the letter, and it would take time for them to react and adjust their positions accordingly.

He glanced at Matt. Matt was checking risk control parameters, his expression no different from any other ordinary Monday morning.

Isabella was sitting by the window, with a CNBC live stream playing in front of her. The volume was turned down so low that only the person next to her could hear it.

CNBC has already made a big splash. The red banner at the bottom of the screen takes up almost a quarter of the screen:

[Breaking News] Farstar Capital releases open letter: warning of systemic risks in the US financial system.

"...Lance Walker, founder of Farstar Capital, known on Wall Street as 'The Grim Reaper,' released an extremely strongly worded open letter this morning. This is Walker's first public expression of systemic concern about the U.S. financial system since the Bear Stearns collapse in March..."

"...Walker explicitly stated that Farstar Capital is systematically reducing its long positions in energy. Farstar's huge profits in the crude oil market over the past two months were a significant factor driving a large influx of speculative capital into the commodities market..."

"...What has drawn even more attention is the warning to financial institutions in the latter part of the letter. Walker did not name any specific companies, but analysts generally believe that many of the risk indicators mentioned in the letter are highly consistent with Lehman Brothers' publicly available financial data..."

10 o'clock. The decline is widening.

Crude oil prices fell another half percentage point. The financial sector continued to suffer losses, with Lehman Brothers already down more than 5%, and Merrill Lynch and Citigroup also grinding downwards. The S&P 500's decline widened to nearly 1%.

But what unsettles people in the trading room most is not the numbers themselves, but the way they change.

It wasn't a panic-driven crash.

There wasn't the catastrophic scene of massive sell orders wiping out all the buying pressure, as seen in the final days of Bear Stearns. Today's drop was more like a slow, continuous leak.

This kind of selling is even more painful than a crash. A crash at least has a bottom; it hits a certain price level, triggers a panic selling frenzy, and then it ends. But this kind of slow, steady decline has no climax, and therefore no sign of it ending. You don't know when it will stop.

It's 10:30. Lehman Brothers has fallen to 7%.

More and more discussions about Lehman Brothers began to appear in IB's instant messaging system. Most of them were anonymous—traders exchanged views in various groups, and the wording became more and more direct, moving from the tentative tone of the morning.

"Regarding the Level 3 issue mentioned in Walker's letter, have you investigated Lehman Brothers' 10-Q policy?"

"I checked. The numbers he gave are correct."

What about commercial real estate?

"That's true. Lehman Brothers' commercial real estate exposure is larger than any other company's. That's no secret."

"So Walker just said what everyone knew but nobody wanted to say?"

"Pretty much. The problem is, once he says it, can you still pretend you don't know?"

These conversations will not appear in any public media.

But they spread at an extremely rapid pace within Wall Street's internal network, permeating every trading room, every hedge fund's research office, and every institutional investor's morning meeting discussion like blood in capillaries.

Their impact isn't immediate—it doesn't directly cause someone to press the sell button at a particular moment. But they are changing something: consensus.

Before this morning, the consensus on Wall Street was: Lehman Brothers had problems, but it could still hold on.

By noon, this consensus began to falter. Not collapse, just loosen. It was like a crack appearing in a wall—the wall was still standing, but you had noticed the crack, and you knew it wouldn't heal on its own.

Noon.

Lehman Brothers fell 8%. Crude oil fell nearly 2%. The S&P 500 fell nearly 1%.

CNBC switched its reporting from the morning's "breaking news" mode to a "continuous follow-up" mode.

The same message was broadcast repeatedly, market data was updated every half hour, and different guests were invited to comment.

But by noon, the tone of the comments began to diverge.

The morning commentary was almost unanimously pessimistic – “Walker has struck again,” “How much lower can financial stocks go?” “Is this a repeat of Bear Stearns?” This sentiment fueled selling and accelerated the decline in the morning.

But by noon, another voice began to emerge.

A strategist from a major brokerage firm made a statement on a midday program, speaking calmly: "Yuanxing's letter raises some noteworthy issues, but I think the market reaction may be excessive."

The risks mentioned in the letter—commercial real estate, Level 3 financing, short-term financing—are not new information. The market has already priced these issues in significantly over the past few months. A hedge fund's open letter should not change the fundamental assessment.

He paused, then added, "Furthermore, I would like to draw everyone's attention to the fact that Farstar Capital itself holds a large number of short positions in the financial sector. Their motives for issuing this letter are questionable."

This statement spread rapidly on IB.

Its effect wasn't immediate—S&P didn't react to this statement right away. But it did something more important: it gave those who didn't want to sell a reason to do so.

In a panicked market, most people don't actually want to sell.

Selling means admitting that your previous judgment was wrong, locking in losses, and handing over your shares at the lowest point.

Nobody likes doing these things. All they need is a reason—a voice that sounds professional and authoritative enough to tell them "don't panic."

That strategist provided this reason.

One o'clock in the afternoon.

The decline has begun to slow.

Crude oil stabilized after falling nearly 2%, and even saw some small-scale buying. The financial sector continued to decline, but the pace slowed significantly. The S&P 500 stabilized around a 1% drop and stopped falling.

Lin Tao noticed this change. Selling pressure was waning. Those who wanted to sell had already done so by morning, and the rest were just observing.

The VIX has also stopped rising. The first wave of panic is being absorbed by the market.

Two o'clock in the afternoon. Three o'clock.

The S&P 500 traded sideways within a narrow range. The decline remained around one percent, neither widening nor narrowing.

The same applies to the financial sector. Lehman Brothers' decline stabilized between 9% and 10%, no longer worsening, but showing no signs of a rebound.

The market has entered a stalemate. Neither the bulls nor the bears are taking the initiative; they are simply holding their ground.

CNBC's reporting frequency has also decreased. The same footage, the same data, and the same analysis have been broadcast repeatedly all day long, and viewers are starting to get tired of it.

The afternoon programs featured more and more guests offering "calm analysis," and their wording increasingly leaned towards "overreacting" and "no need to panic."

One detail worth noting: around 3 p.m., the S&P 500 even tentatively moved up a little bit.

It fell by less than half a percentage point and lasted for less than ten minutes before dropping back, but that direction—even if it only lasted for ten minutes—indicated that someone had started to buy at the bottom.

4 PM. Market closes.

The S&P 500 closed down less than 1%. Crude oil fell less than 2%. Lehman Brothers fell 10%, making it the worst-performing large-cap financial stock of the day. The VIX rose 10%, but the absolute level remained within a manageable range.

If we were to draw today's market trend as a curve, its shape would be: a sharp drop at the open, a continuous decline in the morning, stabilization at noon, sideways movement in the afternoon, and a slight upward movement at the close.

It wasn't a crash. It wasn't panic. It wasn't even a true "crash day."

It's more like the market's reaction after being slapped in the face—first it's stunned, then it hurts for a while, then it starts touching its face to make sure there's no fracture, and finally it slowly stands up straight and tells itself: maybe it's not that serious.

After the market closed, the trading room fell silent.

Matt was doing post-market risk control checks, Lin Tao was still looking at after-hours data, and Isabella closed the CNBC window.

Lin Tao stood up and stretched his neck, hesitated for a moment, and walked to the door of the main office. The door was ajar. He knocked twice.

"Come in."

Lu Ze sat behind the table, the screen in front of him was on, but his gaze wasn't on it. He seemed to be thinking about something when the knock on the door brought him back to reality.

The market has closed.

Lin Tao gathered his thoughts and then spoke.

"The S&P 500 fell less than one point, while Lehman Brothers dropped 10%. The losses narrowed in the afternoon, and some people started buying the dip towards the close. CNBC's tone this afternoon was already shifting towards 'overreaction.'"

He paused for a moment.

"There might be a rebound tomorrow."

Lu Ze looked at him, still with that calm and unperturbed expression.

He said, "It doesn't matter."

Lin Tao waited for him to continue.

But Lu Ze didn't continue. He turned his gaze back to the screen.

Lin Tao stood at the door for a second, nodded, and turned to leave. As he closed the door, he heard no sound from inside the office.

He returned to his workstation and sat down.

What does "It doesn't matter" mean?

Does this mean today's decline is unimportant? Or that tomorrow's rebound is unimportant? Or that the market's reaction to the open letter itself—whether it falls or rises—is unimportant?

Lin Tao thought for a while, but couldn't figure it out.

However, he was already used to his boss's style. He always felt that his boss was playing a long game, but he had no proof.

Let's go home now and look at it tomorrow.