Chapter 19 - Selling the Physical
The copper market was in a state of deadlock. This was because physical copper was not circulating in the market, making it impossible to set a price, while futures had an infinite sell limit order at 350 from the Salieri Trading Company. With only one week left until the final trading day for the near-term futures, and seeing that copper was not arriving by land or sea, the merchants did not slacken their buying of futures.
Naturally, Viscount Karsh and Valier were also buying futures in large quantities. Right now, the two were holding a final meeting regarding trading up until the final settlement day. The location was Viscount Karsh's townhouse. Nobles of the Viscount Karsh faction from the Western region had also gathered there.
They believed that through the trading of the current delivery month, the House of Margrave Sowell would suffer immense losses, resulting in a decline in their financial power and influence. In their stead, if Viscount Karsh came to lead the Western region, they, who currently belonged to the Viscount's faction, would stand in a superior position to those who joined later.
Viscount Karsh was, naturally, in high spirits. He opened a prized wine and served it to everyone, proclaiming it a pre-celebration of their victory.
"So, what is the size of the open interest?"
Viscount Karsh, wine glass in hand, asked Valier about the current open interest.
"Your Lordship's position is 6,500 lots, and combined, all of us hold 8,900 lots."
"That is quite impressive."
"Yes. There is buying coming from others besides us as well; I expect the total open interest to be nearly 15,000 lots."
Hearing this, Viscount Karsh burst into laughter.
"Hahaha. 15,000 lots, you say? Then delivery is impossible no matter what they do."
There was a reason for Viscount Karsh's laughter. The annual copper production in the Kingdom of Cascade was 15,000 tons. Besides what was produced, items that entered the market might be put up for sale again, but even so, the total annual transaction volume was 20,000 tons at most.
Even without blockading the land routes, it was impossible to gather such an amount.
"I have decided, Valier. Set the buy-back order at 500 gold coins."
"That is quite high, isn't it?"
"If there is no physical stock, they have no choice but to perform an offsetting transaction by the final trading day. If that is the case, they will buy no matter how expensive it is."
What Viscount Karsh said was correct. The Margrave Sowell's valuation loss was 150 gold coins per lot. Since the futures open interest was around 15,000 lots, the loss amount would actually reach 2,250,000 gold coins. A margin deposit is merely a deposit; futures trading is a venture where one can lose far more than that.
A certain Baron present offered flattery to Viscount Karsh.
"By now, the Margrave must be frantically scraping together copper while weeping. I imagine she has realized the foolishness of piling up a massive short position without knowing it was Your Lordship's stratagem. After all, the quality of one's intellect is simply different."
"That woman only acts important because her ancestors happened to do well. It is not a status she earned through her own power."
Viscount Karsh joined the conversation in high spirits. The nobles, wanting to leave a better impression on Viscount Karsh than the Baron, began one after another to speak disparagingly of Aurora, but as Valier listened, he felt an unease somewhere in his heart.
Aurora was not the incompetent person the nobles claimed she was. Valier knew this because of his past experiences trying to curry favor with her several times. She was quick-witted and strong with numbers.
Such a woman had built up an open interest equivalent to the domestic transaction volume in the near-term month alone. He couldn't help but think there was some hidden catch.
In the verifiable situation, no copper had arrived in Sowell Land. With only about a week left, transport would be impossible even if there were no land blockades. He had checked the exchange rules until he could see holes in them. There was no way to forcibly nullify the transactions. Furthermore, the opponent was not a merchant but a noble. There was no way she could just force the trades to be cancelled.
Even so, though he tried to brush off his anxiety as overthinking, his experience as a merchant warned him to be careful.
And then, the following day, an anomaly finally occurred.
Physical copper was put up for sale by the Salieri Trading Company. Moreover, it was ten tons of copper all at once. When that news spread, the exchange fell into an uproar.
"If there's physical copper, I'll buy as much as I can!"
"I'm first!"
"I'll pay 370 gold coins for one ton!"
Merchants seeking copper swarmed in front of the Salieri Trading Company. After all, an amount like ten tons would have no impact on the futures price at all. Furthermore, with the financial power of Viscount Karsh and his associates, they could buy it all up without any problem. Knowing this, they rushed to buy, each trying to be the first.
To those merchants, a clerk of the Salieri Trading Company said:
"Please rest assured. We still have plenty of copper. We shall bring more shortly."
"There's more?!"
The merchants were astonished by those words. And they doubted if it were true. However, just as said, copper was brought in one after another. Numerous carriages were on the verge of filling the road between the Salieri Trading Company and Margrave Sowell's castle. They transported copper from the castle to the company, and once the load was gone, they returned to the castle again. Then, they would head back to the company loaded with new copper.
Furthermore, since the merchants who bought the copper took it back to their own firms, the area around the Salieri Trading Company became heavily congested.
The news reached Valier immediately, and he rushed to report to Viscount Karsh.
"Your Lordship, the Salieri Trading Company is putting a massive amount of copper up for sale."
Seeing Valier arrive in a panic, Viscount Karsh looked at him dubiously, wondering why the man was so flustered.
"There cannot possibly be a massive amount of copper. It is a bluff from the opponent. Would a man of your caliber be deceived by such a trick? They used the same tactic last month, did they not?"
"No, no, the thing is, this sale is approaching a scale of 100 tons. Furthermore, they claim they still have stock. In fact, carriages loaded with copper are coming from the Margrave's castle to the Salieri Trading Company without interruption."
"Is that copper not a fake?"
Unable to readily believe Valier's report, Viscount Karsh suspected the copper was counterfeit.
"I am having that confirmed urgently as well, but for now, I am continuing the buy-up of the physical stock. If it is fake, we will demand a refund, so please be at ease."
"I see. It would be amusing if it were fake. But even so, a mere 100 tons or so does not even reach ten percent of the futures open interest. And to put that up for sale..."
"No, as I mentioned earlier, they say they still have plenty of stock."
"Have they not said exactly how much they have?"
"No. I am unable to obtain information from inside the Margrave's castle, so I do not know what the total volume might be."
As a commoner merchant, Valier naturally could not obtain information from inside Margrave Sowell's castle. Valier was asking Viscount Karsh to get the information. It was just that he was using a roundabout phrasing instead of asking directly.
"Understood. I shall handle that side. Valier, I leave the buying up of the physical stock to you."
"As you command. However, I am somewhat uneasy regarding the cash on hand."
"I understand. I will have gold coins delivered to your company immediately. Once we buy this all up, they will have no means left to break the market. This is their final struggle."
Viscount Karsh immediately gave instructions to investigate the amount of copper in Margrave Sowell's possession and to transport cash to the Valier Trading Company. Valier confirmed those instructions and decided to return to his own company.
At that time, the Salieri Trading Company was in a state of great confusion with the processing of copper purchase orders and deliveries, and they announced that a temporary shop would be opened in front of Margrave Sowell's castle. With this, the sale of copper became possible in two locations, and furthermore, because the transport to the original shop was halved, the customer turnover improved dramatically.
However, since it inevitably took time to release the copper from storage, the sales contracts were concluded first, and then customers waited for the release. The release itself was to be carried out on a 24-hour basis with Margrave Sowell's permission, but they did not go out of their way to make that public. Because of the feeling that it might sell out, customers would buy the copper even at high prices.
And even on the following day, physical copper continued to be put up for sale. By that day, even the merchants who were buying seemed to have become uneasy; there was no pushing and shoving or fighting over the turn in line like there had been yesterday.
On the contrary, some began to hurry back to their own firms to quickly put the portion they bought yesterday up for sale. After all, since copper was being sold infinitely, it was clear that the price would collapse at this rate.
Opposing this was Viscount Karsh's buy-up of the physical stock. To settle the quick-to-flee followers (T/N: refers to 'chochin-suji', small-time speculators who follow the lead of big players), Valier grandly advertised that his company would be buying up copper. Of course, the source of those funds was the investment from Viscount Karsh and the nobles of his faction.
Viscount Karsh's plan—buying up a large amount of copper at high prices in the market, copper which they themselves were withholding—was beginning to crumble, but considering the funds invested up to this point, he could no longer back down. And more than the monetary amount, he feared the fact of having been defeated by Aurora.
Steve was receiving reports on the state of the market from Harry in Aurora's office, alongside her. Additionally, Salieri, the head of the Salieri Trading Company, was also present today.
"For those reasons, it seems the merchants who bought the physical copper we released are taking it to the Valier Trading Company. Thanks to that, the bustle at the Salieri Trading Company has vanished. Also, it has been reported that Viscount Karsh's men attempted to contact the servants here, but they answered that they do not know the amount of copper held."
Receiving the report, Aurora nodded with a satisfied smile, then picked up a teacup from the table and took a sip. After returning the cup to its place, she gave instructions to Salieri.
"Salieri, sell the copper at a price significantly lower than the Valier Trading Company's buying price."
"That is fine, but in that case, shall we go directly to the Valier Trading Company to sell the copper?"
Salieri proposed to Aurora.
"It would be meaningless if the opponent says they won't buy. Everyone knows that you and Valier are at odds in trading. Refusing to buy from you wouldn't hurt his reputation, but it would be different if it were other merchants. Even if Valier wins here, if his image turns sour, it will affect his future business. He will surely consider that as well."
"I had not thought that far ahead."
Salieri bowed his head to Aurora.
Then, Aurora looked toward Steve.
"Even so, it is an amazing magic to be able to create enough copper that it won't even fit in this castle. It will make copper mines worthless."
"No, Your Excellency. If I die, that magic will also vanish, so mine development must continue. Even while I am alive, the succession of technology takes time, and once it is cut off, restoration is difficult, so mine development should be continued."
Steve answered thus.
The copper currently being sold was created by Steve using magic. However, since even Steve lacked the magical power to create a massive amount of copper at once, he had been continuously creating it in a place borrowed from Aurora; this was the result.
"That is true. But while you are alive, you can manipulate the copper market however you wish. If you felt like it, it would even be possible to dominate the copper prices of the continent."
"I have no interest. No matter how much copper I make, it won't fill the bellies of the fief's people."
"You have no greed. If that is your true heart, I am relieved. It means I won't have to deal with a monster."
That was Steve's true heart. Even if he obtained income from the copper he made, he could only do so for fifty years at most. After Steve passed away, only a territory with no industries would remain. If that happened, the people would starve.
If it was to get through the immediate financial difficulties, it couldn't be helped, but he had no intention of doing it for a long period.
"From my perspective, dealing with Your Excellency is more difficult. If mages were more than ordinary people could handle, the Kings would have been mages for generations. What rules people is not magic, but politics. And politicians are more formidable than mages."
"That is certainly true. We are not a pack of animals, so people cannot be ruled by force alone. To realize that at your age, it seems your parents' education was quite thorough."
"I shall tell my father that he received words of praise from Your Excellency."
To Salieri, who was watching the exchange between Aurora and Steve, it seemed that because Steve's thoughts were unbefitting of his age, his inside might be that of a veteran noble. In this market battle, he had strongly opposed when Aurora first instructed him to sell, but he agreed to face the market with a short position after hearing the story up to the final trade.
At that time, he had been impressed, thinking it was just like Aurora, but afterward, he couldn't believe it when he heard that the mastermind was Steve. However, only the Emmanuel Trading Company, which Steve frequently visited, had been perfect, from the timing of the first sell to the timing of the reverse-buy (T/N: 'doten-gai', closing a short and opening a long), and then the timing of the second reverse-sell.
Even with the revolving trades Salieri initiated, they were placing orders with perfect synchronization.
As a result of piling up the verifiable facts, he had reached the conclusion that Steve was the mastermind, but even so, he could not believe that a mere ten-year-old child was manipulating such a large market.
And today, having met him and heard his words and actions, he was convinced.
If Aurora survived the murky noble society with her intellect, Steve had the singularity of magic in addition to intellect. He had a premonition that in the future, Steve might even surpass Aurora.
"Well, fine. Let us decide whether to join hands in the future later. We have already received orders for 1,000 tons of physical sales; if the opponent buys this at 360 gold coins per ton, their cash will surely be exhausted."
Aurora returned the topic to the main point.
No matter how great Viscount Karsh's assets were, the Kingdom of Cascade did not have a system like modern Japan where cash could be transferred through banks and moved instantly across the world. Since he could not bring all his cash to his townhouse in Sowell Land, he could not support the price with his entire fortune.
And according to the information Aurora had investigated, it was impossible for the Viscount Karsh faction and the Valier Trading Company to support the price for 1,000 tons with the cash they could prepare.
Finally, the great copper market was about to reach its end.