Chapter 18 - 18 The Bidding War
The commodity futures exchange in Sowell Land was enveloped in an extraordinary heat. It was an open secret that Viscount Karsh had halted the distribution of copper. While the craftsmen who handled copper were badmouthing the Viscount because they couldn't work, a portion of that dissatisfaction was also directed at Margrave Sowell, who was being toyed with by the Viscount.
In a certain workshop.
"Master, if we can't get any copper, let's just use iron for the casting."
Since copper was unavailable, an apprentice suggested to the master that they use iron for casting instead. Even when using copper, it was usually mixed with tin to make bronze for casting. This workshop primarily produced bronze doors and bells.
"You idiot! Do you have any idea how hard it is to raise the temperature enough to melt iron?!"
The master's roar flew.
While the melting point of bronze is around 730°C, iron—even cast iron—is around 1200°C; the temperatures are 500°C apart. Raising the temperature that high by hand is a massive undertaking, and since they lacked thermometers, casting with a different material than usual was difficult. The master knew this, but the apprentice was scolded because he thought of it so lightly.
"Good grief, if they don't lower the price of copper, we can't do our jobs. I wonder what the nobles are even doing."
"Master, it'll be bad if someone hears you and reports us."
"We won't be able to work anyway at this rate, we'll just starve to death."
Such complaints could be heard everywhere. It wasn't just the workshops; their customers also grew frustrated as the items they ordered failed to arrive. While Steve had initially thought of taking down Viscount Karsh over about six months, Aurora's decision to set a two-month deadline was precisely because she had anticipated this situation.
Then, as if mocking the dissatisfaction of the commoners, the spot price of copper continued to rise. Even after surpassing last month's high to reach 250 gold coins per ton, the momentum did not stop. If anything was put up for sale, a buyer appeared immediately. And as if chasing the rise in spot prices, the futures prices also rose.
Of course, this was partly because Margrave Sowell, who was originally the seller, had turned to buying and was engaged in wash trading. However, by using multiple brokers and the merchants who placed orders through them, it wasn't discovered that the main seller was the one buying. They bought up large sell limit orders with multiple small buy orders, and once the sell orders were consumed, crude buying followed. To an onlooker, it looked like nothing other than the sellers being forced to cover their positions.
However, most of those orders were just the exchange of positions among allies.
Unaware of this, Viscount Karsh was in high spirits. He summoned Valier to his townhouse to check the market situation, a smile spilling from his face the entire time.
"Valier, what is the market situation?"
"Yes, Your Excellency. Currently, the spot price has risen to 280 gold coins per ton. Futures are at 278, but by tomorrow, both will likely exceed 300. Furthermore, the Salieri Trading Company's short futures are being eaten up immediately, and they are repeatedly buying back at higher prices."
The copper price had finally risen to about four times its original price. At this point, it was a frenzy. Moreover, having surged up in just one month, it was an unprecedented event.
Viscount Karsh was extremely satisfied that his market manipulation was succeeding.
"Umu, that is a good report."
"Yes, however——"
Valier hesitated. Viscount Karsh immediately asked for the reason.
"Is there some problem?"
"Yes. Actually, there are too many followers (T/N: 'chochin' - retail investors following a lead), so it's difficult to accumulate futures positions. They keep buying above our limit prices."
"What, is that all? Then from now on, you should just place orders to hit the sell side of the board."
"Do you intend to buy at high prices yourself?"
"Naturally. Seeing that vixen being forced to repeatedly buy back, those people don't have the power to break the market with selling."
Viscount Karsh maintained a bullish stance. It is fundamental for the main buyer to buy the upper price range during the accumulation phase and during the final short squeeze phase. If the main player is always buying at high prices, profits decrease and they are more susceptible to a sell-off. The theory is to let the followers buy up the higher prices.
Valier felt uneasy about breaking such a theory, but if the main backer, Viscount Karsh, said to buy, he had no choice but to buy. From the next day, the Valier Trading Company took the lead in placing buy orders.
Of course, there was no way Steve and Aurora would miss that movement. The two were having another secret meeting.
"The Valier Trading Company has started buying at the higher prices."
"Yes. They seem quite confident. What shall we do?"
"Let's place infinite sell limit orders at the futures price of 350 gold coins. We'll bring it to a margin battle and make them increase their positions to their limit. They likely think we don't have the physical goods, so they should be determined to keep buying."
Steve sent a look to Aurora, and she received it with a nod.
"It seems they contacted my people to check the copper inventory. I've told them the inventory is low, just as planned."
"That is excellent. Since we are short-selling, we just need to make sure they don't buy back the futures until the delivery date; they'll surely buy at any high price."
"The Viscount's assets in cash and liquid items are roughly 500,000 gold coins. The value of his mines and territory is about 1,000,000, but I wonder if he'll go that far?"
Steve had already heard the information Aurora gathered about Viscount Karsh's assets. This amount of assets was quite high for a Viscount. One could even say it rivaled an Earl. That was exactly why Viscount Karsh harbored the ambition to replace Aurora.
"That is where the role of futures margin trading becomes important. Even if the Viscount's cash is 500,000 gold coins, that only covers about 1,400 positions, so it's a pittance as margin. He'll likely increase his positions, thinking he can just settle them with offsetting trades before the delivery date. In fact, the Valier Trading Company is aggressively buying the highs, and their current position is around 1,000."
Brokers are obligated to report who placed the orders they received. This is a measure for when settlement accidents occur. However, since real-time reporting is difficult, they are supposed to report to the exchange within three days after the transaction.
Therefore, on the day of the trade, only the orders placed by the brokers are known. From there, one estimates the number of personal orders and the main player's orders.
"However, Your Excellency, you will need to visit the exchange occasionally to provoke Viscount Karsh."
"I don't mind. He'll probably get heated up thinking I'm leading the command personally. I'll behave as conspicuously as possible."
Steve swallowed the words, Your Excellency stands out even if you do nothing. In addition to her original beauty, Aurora, who could spend a fortune to adorn herself, could be called the most beautiful woman in the West. And she was also the most powerful person. There was no way such a woman wouldn't stand out.
"Also, once the futures price reaches 350, let's start releasing the physical goods."
"They'll be counting, won't they?"
"Yes, so once we've sold off our current holdings exactly, we'll stop the spot sales there."
The "counting" referred to here was the act of Viscount Karsh's side counting the physical copper Aurora put on the market and cross-referencing it with the information they had grasped. If she sold only the amount of information given to them, the opponent would judge that her holdings had run out.
As a result, the futures would become a complete naked short. Since it's a short sale in a state where physical goods cannot be obtained, it's obvious that they must be bought back eventually. Or rather, that was the performance intended to make them think so.
The next day, a surge of buying came in, and the copper price rose to 350 gold coins. Here, the Salieri Trading Company went on the defensive, placing infinite limit sell orders. At the same time, they put out spot sales, and Aurora came to the exchange to monitor the situation.
Also, Viscount Karsh was at the exchange that day, accompanied by Valier.
Aurora immediately spurred Salieri on.
"Sell more physical copper. The price is still high."
Told this, Salieri looked apologetic.
"We currently have no copper on hand..."
"Then gather it even if you have to use ships! Give instructions to pack it into any empty cabins and bring it back!"
"Understood."
Watching that exchange, Viscount Karsh whispered to Valier.
"The amount of copper put up for sale?"
"It seems to be almost all of the opponent's holdings that we investigated."
"So she's shouting to gather it by ship in a panic? She seems to understand that since the land routes are blocked by my house, there's only the sea route, but even if they hurry by ship, they won't make it by the delivery date."
"Yes."
Currently, there were less than two weeks until the delivery date. There wasn't enough time to go to the Royal Capital or foreign ports to buy copper and return to Sowell Land. To Viscount Karsh, it looked like Aurora was shouting without even being able to calculate that.
And while the futures were capped, the spot market didn't work that way, and currently, a price of 360 gold coins per ton was attached. Yet, even so, only the Salieri Trading Company appeared as a seller of physical goods. This was because everyone thought that in the end, the Salieri Trading Company would be forced to buy the physical goods at a high price.
That day, no one at the exchange feared Aurora; everyone placed buy orders even in her presence.
Furthermore, merchants who couldn't buy physical goods, expecting a buy-back of futures, followed the Valier Trading Company's lead and bought up the 350 gold coin price where infinite sell orders were appearing.
The futures themselves were leveraged, and if one had margin, they could reserve trades for 100 times that amount; people began borrowing money to increase their margin and buy futures with it. Incidentally, the financier providing the margin for such financial transactions was actually the House of Margrave Sowell.
Aurora was lending her own house's funds to the buyers who were taking positions against her. This was her will, stating she would never forgive those who opposed her. Of course, the concept of securities finance was Steve's idea.
In Japan, there are representative securities finance companies like JSF, Japan Securities Finance Co., Ltd., and in places like Kabuto-cho, there are financiers who lend money against stock certificates or cash as collateral. Using such knowledge, he had proposed it to Aurora.
And among those watching such market frenzy were Steve and Emmanuel.
Emmanuel confirmed the order with Steve.
"Steve-sama, it is fine to sell at 350 as well, correct?"
"Of course. Since Her Excellency is placing sell limits here, it means it won't sell any higher than this."
"Then, I will place Steve-sama's and my own orders. Even so, it's a sea of buyers (T/N: 'kai isshoku' - all buyers). There are no sellers other than the Salieri Trading Company and our company."
As a broker, Emmanuel was looking at the orders placed by his peers. All of them were buy orders. He thought that if Steve weren't here, he would probably be placing buy orders too.
"It's the best development. If we can break the market here, the other companies will have to acknowledge Emmanuel."
"I'm not sure if I'll be acknowledged or seen as a weirdo. The ones who can sell here are not merchants, but politicians. For a merchant who can calculate, it's natural to turn to buying based on situational judgment; selling is a gamble of either a huge profit or a huge loss, not business. I am selling from a position where I can predict the result, so it's cheating, so to speak."
"There is a mountain of flowers on the path behind where others go (T/N: A Japanese proverb meaning the greatest profits are found where others aren't looking). You can't achieve greatness by just following the crowd. We have to teach that to the people buying right now."
Emmanuel gave a wry smile at Steve, who was laughing like a mischievous child.
"Looking at Steve-sama, I truly cannot believe you are a child."
"I am exactly as I look."
"No, no, if this is what a child is, then the definition of 'child' in the dictionary needs to be rewritten. A typical ten-year-old child cannot play veteran merchants like puppets in the market."
Being told that by Emmanuel, Steve chuckled.
"Hey, Emmanuel. If I said I have memories of a previous life and I'm using them, would you believe me?"
"That would be the most convincing explanation. I've never heard of being reborn with memories, but otherwise, Steve-sama's achievements cannot be explained. Is it the truth?"
"As if. The Fries Holy Church's doctrine doesn't say anything about the reincarnation of souls. If it really existed, there would be some mention of it in the doctrine, right?"
Steve played dumb. Emmanuel didn't seriously think he was reincarnated either, so they didn't speak of it further.
And the market accelerated toward its end.