Volume 1: Japanese Storm Chapter 19: The Prelude to Abduction (4)

  Paulson cleared the papers off his desk and unfolded a map of Japan: "This is Japan, Jerry. You should be more familiar with it than I am. It includes one metropolis, one circuit, two prefectures, and 43 counties. Paulson's investment team focused on investigating Japan's three major metropolitan areas this time: the Tokyo metropolitan area, the Osaka metropolitan area, and the Nagoya metropolitan area. In recent years, Japan's urbanization rate has reached 77%, and its urbanization process has entered a stable development stage, with a self-occupied housing rate of 60%. The land price in Tokyo started to rise from 2007, then transmitted to Osaka, and then to Nagoya. The land price in Osaka began to rise from 2010, while the land price in Nagoya started to rise from 2012.

  In the process of rising land prices, we found that the rise in land prices first started from commercial land, then residential land, and the increase in commercial land was generally higher than that of residential land! Specifically, taking Tokyo as an example, from 1985 to 1990, the total value of residential land assets in Tokyo increased from ￥60 trillion to ￥1.2 quadrillion, an increase of nearly 20 times, with an annual growth rate of 15.6% during the same period, which is more than twice the nominal GDP growth rate of Japan. The overall land price in six major cities including Tokyo rose by 24 times, and the compound annual growth rate was as high as 21.2%. After 1990, this situation became even more pronounced!

  Jerry looked up and glanced at John Paulson, "So"

  John Paulson chuckled, "So, judging from these signs, the Japanese real estate is indeed like what the boss said, like a huge bubble that keeps expanding! Do you know what's the most ironic thing? According to our research and estimates at Paulson Investment Group, the total land price of Tokyo alone is equivalent to the total land price of the entire United States! And we also found a very interesting phenomenon?"

  Jerry's eyebrows jumped, "Oh? Tell me!" John Paulson: "After entering the distillation year, the land prices of the three major business districts began to flatten. We even drew a price curve, which is this. After the Plaza Accord, the yen started to appreciate and drove up land prices." The annualized return on investment in real estate was around 10% in the old year, but by the time it reached 20% in the leisure year, and by the time it reached 30%, the return on investment had fallen to around 40%! Based on Paulson's research on international hot money, we believe that in the next period of time, Japan's real estate bubble will be pierced! The Japanese government absolutely will not allow the yen to continue appreciating, and the macro-financial indicators of the Japanese people and the consumer price index: are statistical indicators of price changes for goods and services related to residents' lives. Usually used as an important indicator to observe inflation levels. A huge reversal has formed. This is really a very interesting thing!

  Jerry: "So what does Paulson's investment group suggest?"

  John Paulson: "You, Fredo and Miss Asia mean shorting Japanese real estate?"

  "Shorting real estate?" Jerry looked at Yoshida Paulson in surprise, wanting to know how one could short Japan's real estate when there were no mortgage-backed securities and credit default swaps, no subprime mortgage bond indices, or subprime derivative bond indices.

  John Paulson: "We have two ways to short real estate, first, in the futures market we can short all materials related to housing. Including cement and steel, second, we can use credit default swaps!"

  Jerry: "A wager?"

  John Paulson: "Yes, boss, if you're interested in the Japanese Big Five steel companies. We can totally use this swap agreement to gobble up shares of those steel companies and gain control, no problem."

  Jerry: "The Big Five steel? That's quite a temptation! But John, is this betting agreement of yours really feasible?"

  John Paulson: "There is a certain risk, after all, we don't know what the true trend of Japanese real estate will be in the future!"

  Jerry: "Alright, stop deceiving me! Judging from your appearance, I knew you had a plan. Speak up! I'm all ears!"

  John Paulson smiled, then pulled out a file from the drawer. "This is the data of Japan's five major steel companies! Nippon Steel & Sumitomo Metal Corporation includes affiliates Nisshin Steel Co., Ltd., Nippon Steel Pipe Co., Ltd., Kawasaki Steel Corporation, Sumitomo Metal Industries, Ltd. and Kobe Steel, Ltd."

  Nippon Steel has Mitsui Group behind it, Kawasaki Steel has Dai-Ichi Kangyo Bank Group in the back, Sumitomo Metal is a core enterprise of Sumitomo Group, NKK has Fuji Group behind it, and Kobe Steel has Sanwa Group standing behind. Among Japan's six major financial groups, except for Mitsubishi Group, all others have stepped into the steel industry, none of which are easy to mess with!

  "Which one is your goal?"

  John Paulson has a stake in Kawasaki Steel.

  "Is Douzaki okay?"

  "Yes, boss, we've done a thorough investigation on the background of Japan's top five steel companies! The most loosely organized one is Mitsui Bussan, which was established in 1876 as the first zaibatsu. And, as Japan's largest private bank, Mitsui Bank has a very fast capital turnover rate! If you want to make money, go find him!"

  "Han, did you say I'm this hungry?"

  "No, boss, you're even more ferocious than I said! Just take a look at the expression on your face, it's as if you can't wait to swallow all five steel companies whole!"

  Jerry coughed awkwardly and indeed, he had already discovered that his saliva was about to slide down from the corner of his mouth.

  "Let's set the deadline for the bet from January to December next year. Paulson, do you have any good suggestions?"

  "For a mature company like Kawasaki Steel, there are three options: first, we can bet on the steel price; second, we can block Kawasaki Steel's compound annual growth rate; third, we can block Kawasaki Steel's annual profit growth rate! There are only these three! Personally, I tend to prefer the first and third options!"

  "Alright, this matter is now left to you! There's one more thing I need to entrust to you: starting from October this year, gradually sell off all the stocks held by our investment company and short the market!"

  "Shorting the market? Boss, do you think Japan's stock bubble will burst this year?"

  "No, no, it's not what I think, but we have to join the ranks of those who are bursting bubbles! Do you understand, John? It's about joining this rank! You think the Japanese, whom we've outsmarted, will easily lend us their stocks again? No, they won't, especially after the Japanese stock market has reached such heights, a certain panic has already appeared in their hearts, and we are just adding fuel to this panic! The result of large-scale short-selling is the emergence of stock market fluctuations, or even a stock market crash! This is also another reason why I came to find you!" Jerry opened the office door and stuck his head out, "Mr. Eikan, Mr. Eikan, please come over for a moment!"