Sha Zhu's Rebirth in the Courtyard: Starting with Hitting Someone in the Head

Chapter 425 Watching the Show in the Cold Winter, Awaiting the Final Outcome Overseas

In the last two months of 2008, a global financial market winter enveloped the entire Western world.

In mid-to-late November, US stocks experienced another round of brutal plunge. The Dow Jones Industrial Average continued to decline, hitting a new low in more than five years, with intraday drops exceeding 5%. Selling was rampant, and the entire market was filled with a sense of despair that seemed to have no end.

Wall Street investment banks, hedge funds, and private capital that previously jumped on the bandwagon to buy at the bottom have all suffered increasingly dire consequences.

Whether it was the professional trading teams of top institutions or the capital giants who were once regarded as benchmarks by countless people, without exception, anyone who entered the market to buy at the bottom in October was trapped.

Every day on Wall Street, institutions announce huge losses, layoffs, bankruptcies, and liquidations. Financial news is filled with bad news: financial giants are falling, capital tycoons are suffering huge losses, and news of institutions collapsing en masse is constantly dominating the headlines.

In late November, major newspapers and financial media outlets in Europe and the United States were flooded with reports claiming that Warren Buffett, the "Oracle of Omaha," had bought US stocks at rock-bottom prices and was now deeply trapped in losses.

The news reported that Buffett invested $5 billion in Goldman Sachs in September and another $3 billion in General Electric in October. In just two months, the common stock prices of Goldman Sachs and General Electric plummeted by more than half, a truly disastrous drop.

He once published an article in the newspaper titled "Buy America Now," calling on the world to buy US stocks at rock-bottom prices. Looking back now, it seems like a huge joke.

Many people are discussing and joking, saying that even the Oracle of Omaha misjudged this time, and the halo of the stock market god has been shattered.

Hong Kong, Zhonghuan Financial Trading Room.

The three He brothers, He Xiao, stayed by the screen day and night, watching with detached eyes as Wall Street continued to collapse and institutions were wiped out one after another.

He Chen casually clicked on an overseas financial newsletter. After reading the long report about Buffett being trapped in a losing position, he couldn't help but sigh, his tone tinged with both emotion and a hint of irony.

"Everyone outside is laughing at Buffett now. He was so successful back then, publishing articles urging the world to buy American stocks, but he ended up getting stuck with huge losses himself. Even the stock market guru misjudged the situation, so you can imagine how badly those institutions that rushed in to buy the dip lost."

He Xin sat next to her, glanced at the news headline, and gently shook her head.

"Most people outside only see that the stock price has fallen sharply and immediately conclude that Buffett has lost a lot of money. In fact, there are many things that people don't understand, and they can't just laugh along with him."

He Chen was slightly taken aback: "Third brother, what's the explanation? The news is in black and white, and the stock price has indeed dropped significantly."

"The key point is that the varieties are different," He Xin explained calmly.

"The eight billion dollars that Buffett invested in Goldman Sachs and General Electric was used to buy perpetual preferred stock."

Preferred stock and common stock are completely different things. Common stock fluctuates wildly with the stock price; if the stock price is halved, shareholders will suffer significant paper losses.

Preferred shareholders have priority in receiving dividends, with a fixed annual dividend of 10%. As long as the two companies don't go through bankruptcy liquidation, the dividends must be paid on time every year.

"The sharp drop in stock price affects the warrants that Buffett holds. Those are just the right to buy common stock at a fixed price in the future. Now that the stock price is below the exercise price, these warrants are temporarily worthless, just a paper loss. It doesn't mean that most of his eight billion yuan principal has been lost. The risk does exist, but it's far less exaggerated than the news reports."

After hearing this explanation, He Chen was stunned for a long time, pondering the difference. "So that's how it is. To grab attention, newspapers only publish the most captivating half of the facts. The general public just watches the spectacle, and even many small and medium-sized institutions on Wall Street are swayed by preconceived notions from public opinion."

He Xiao also spoke up, slowly adding, "To put it bluntly, Buffett's investment prioritized securing stable dividends, leaving himself a safety net. However, he publicly called on ordinary people around the world to rush in and buy common stocks, and countless people actually listened and followed suit, trying to buy at the bottom. It was this group of people who ended up losing everything."

After this conversation, He Chen felt even more deeply moved. The capital market is full of appearances and traps, and news and public opinion are not necessarily the whole truth.

After months of market fluctuations, the last trace of restlessness in the three of them has been completely worn away.

Throughout the fourth quarter, global capital was in a frenzy of activity, constant speculation, and losses leading to margin calls. Only the Ho family remained steadfast, holding cash and observing the unfolding events.

The situation in Hong Kong is well-planned.

The courtyard houses in Beijing present a peaceful and undisturbed scene, a stark contrast to the dire financial hell outside.

He Yuzhu's daily routine remains calm and regular. He drinks tea, reads books, practices martial arts to maintain his health, and occasionally teaches his grandchildren.

He had already determined the future trend and knew that this year-end decline was just the final grinding and killing before the storm ended. Every drop now, every institutional margin call, is paving the way for the ultimate bottom of the century next March.

Xu Damao saw daily reports about the financial crisis on television and the internet. Prices soared in the first half of 08, with pork and cooking oil prices soaring, and ordinary people complaining daily about the high cost of vegetables.

By the end of December, international commodity prices had plummeted, with oil and steel prices declining. The upward trend in the prices of daily necessities slowed, and some items even saw price reductions.

However, people are uncertain about the future, so they dare not spend money and try not to spend money if they can avoid it, and their willingness to save money has become stronger.

Both Da Mao Supermarket and Ma Jia Restaurant were affected, with their turnover declining every day.

Xu Damao, wearing a down jacket with a high collar, unzipped it a bit and said, "Brother Zhu, I just came from the supermarket. Ma Hua also called me. Since Lehman Brothers collapsed, both of our businesses have been affected."

He offered He Yuzhu a cigarette and lit it for him. "I have a regular customer at my supermarket. He was telling me the other day that his son lost hundreds of thousands of yuan in the stock market and is now sighing all the time, not even eating properly. Brother Zhu, when do you think this will end?"

He Yuzhu exhaled a puff of smoke: "It'll be soon. Don't worry. I estimate that things will return to normal in China by the second half of next year. The foreigners will have to wait a few more years."

Xu Damao nodded and poured hot water to refill He Yuzhu's cup of tea. "Brother Zhu, how accurate was your estimate?"

"Guess," He Yuzhu said, taking a sip of hot tea. "Think about what I told you back in 9/11."

Xu Damao jumped to his feet, his eyes bulging out of their sockets. It took him a while to recover, then he chuckled, "Brother Zhu, you really made a move?"

"That's right. Master Zhu keeps his word. How could I possibly let go of such a once-in-a-lifetime opportunity? Don't go around telling anyone about this, or we won't get the private jet."

"Absolutely not! I know what's important. Brother Zhu, are you really giving me that plane? You're not kidding, are you?" Xu Damao, acting like a lackey, massaged He Yuzhu's shoulders.

"Alright, stop with the nonsense. You're old enough to retire. While you're still in good health, take your wife on a trip around the world."

"Okay! Alright!"

Xu Damao was overjoyed and couldn't stay still for a moment.

"Brother Zhu, I'll be going now. I need to call MCA right away to put his mind at ease and also show off a bit. I'll take them on a world tour next year."

He pushed open the door and walked out, taking out his phone and making a call as he went, raising his voice.

"Hey, MCA! Hurry up and call him Uncle Da Mao! You've got nothing to worry about lately..."