Bab 120: Chapter 120: The Crash
The roller-coaster-like fluctuations of the index persisted for most of the month. On September 23rd, as the S&P 500 index broke below 310 points, Noah Scott finally received Simon's order to close positions. From September 23rd to 25th, over three days, Westeros Company's 6,000 short contracts were closed at an average of 307 points, netting Simon a profit of $76.26 million.
Additionally, a month after "Run Lola Run" was pulled from theaters, due to the ongoing close cooperation between the parties, Orion Pictures promptly paid Westeros Company the agreed share of the total box office revenue amounting to $32.51 million.
Thus, excluding a loan that Simon no longer planned to utilize, his total available funds before the final setup reached $387.33 million.
While Noah Scott and others were still puzzling over Simon's conservative operations in September, after the liquidation was complete and following several days of silence, Simon suddenly transferred all of Westeros Company's funds out of the Lehman Brothers account on September 30th.
Noah Scott finally realized that regardless of whether Simon was aware of Lehman Brothers' following intentions, he had become cautious of them.
Wall Street is not very large, especially since the stock index futures market at the time still employed traditional open outcry trading, making the trading pits at the Chicago Mercantile Exchange quite conspicuous. After some observation, Noah Scott was almost certain that Simon had redistributed his funds among several other brokers and had again begun establishing significant short positions.
However, Simon's 'missteps' in September caused Lehman Brothers to hesitate about following him further. Additionally, another major client of Lehman Brothers, Quantum Fund, almost simultaneously began establishing large long positions in early October, opposite to those of Westeros Company, further complicating Noah's and others' doubts.
Though not yet as renowned as later years, George Soros's Quantum Fund had been established for over a decade and had averaged annual returns of over 30%, already making him a rising star on Wall Street.
On one side was a hedge fund giant with proven performance, and on the other was a suddenly risen Hollywood genius, with their trading strategies in complete opposition.
After much hesitation, American Express CEO James Robinson still could not make up his mind and instructed Noah Scott to just observe from the sidelines.
$500 million in cash was significant for any company in that era, and if Noah Scott's managed funds incurred losses, the covert operation would be more likely to be exposed. If that happened, James Robinson could no longer continue as CEO of American Express.
Lehman Brothers remained in observation, but time does not stop for anyone.
For his final gamble, Simon fully unleashed his efforts.
Starting October 1st, the few futures brokers that Simon had secretly reaffirmed began aggressively establishing positions at a rate of 2,000 contracts per day. Simultaneously, the North American stock market began to decline faster upon entering October, with the S&P 500 index sliding to around 280 points within just two weeks.
In Los Angeles.
While "Pulp Fiction" wrapped up, "When Harry Met Sally" officially started shooting in New York on September 14th.
Simon had completed shooting "Pulp Fiction" and did not immediately dive into post-production nor hurry to New York, as the final cut of "Final Destination" was also completed in late September, with the film set to release on October 23rd.
With Amy Pascal overseeing, Simon was not worried about Fox not exerting enough effort in promoting "Final Destination." However, to gain experience in film distribution for Daenerys Studios personally, Simon also involved himself in these tasks.
Juggling a multitude of tasks, time inevitably flew by.
During this period, a thriller drama starring Michael Douglas, "Fatal Attraction," produced by Paramount Pictures, unexpectedly became a box office hit.
Despite being placed in a less favorable September end slot, within just four weeks, "Fatal Attraction" had nearly reached $50 million at the box office, easily becoming one of the few films of 1987 with the potential to break $100 million in North America following "Run Lola Run," "The Butterfly Effect," and "Beverly Hills Cop II."
The box office success of "Fatal Attraction" reminded Simon of another famous film starring Michael Douglas, "Basic Instinct."
After several successful internal screenings of "Final Destination," Fox began urging Simon to quickly complete the final script outlined in his initial contract. Inspired by "Fatal Attraction," Simon spent the last few days outlining the script for "Basic Instinct."
Days passed, and suddenly it was October 19th, a Monday.
In the Palisades mansion.
Just past 4 a.m., Simon was already awake, completely alert.
In the study next to the master bedroom, Simon sat down at the desk. He didn't rush to pick up the phone but quietly reviewed the recent transaction reports from several futures brokers and the stock market reports from
recent days.
From October 1st to 16th, over twelve trading days, Westeros Company had established a total of 26,700 short contracts between 300 and 280 points on the S&P 500 index, with all accounts fully funded.
Having committed all of $387.33 million, even with absolute confidence, Simon felt understandably anxious as the moment of truth approached.
Fortunately, some events still occurred on schedule.
Just yesterday, the U.S. Treasury Secretary Baker claimed on a TV program that if Germany did not lower its interest rates, the U.S. would continue to consider devaluing the dollar. It's a simple truth that if a commodity is about to drop in price, holders will choose to sell.
If the dollar continued to depreciate, capital would inevitably flee North America.
Already on the previous Friday, the North American stock market had shown signs of collapse. On October 16th, the Dow Jones had already fallen from a high of 2700 points in August to 2200 points, and the worsening trade deficit and fiscal deficit for the U.S.'s third quarter had already made the North American stock market precarious.
Baker's untimely remarks on the TV program acted like the last straw on the camel's back.
Simon believed many things did not happen without reason. Thus, Baker's statements and the subsequent media hype naturally made him think of conspiracy theories.
Of course, these things had nothing to do with Simon.
Even if the U.S. economy returned to the Great Depression era, it would not affect him much.
The New York Stock Exchange opened at 9:30 AM Eastern Time, synchronizing with the Chicago Mercantile Exchange at 8:30 AM Central Time.
In Los Angeles, Simon only needed to wait until 6:30 AM.
However, just after 6 AM, the three phones Simon had recently installed in the study began to ring one after another.
Although the official trading time was half-past, in reality, floor trading in both the New York and Chicago exchanges often started before the market opened.
Before pulling funds from Lehman Brothers, Simon had secretly opened stock index futures accounts with Goldman Sachs, Morgan Stanley, and First Boston, all of which had futures brokerage services.
While still unaware of Lehman Brothers' covert following, Simon believed they must have discovered his recent two-week setup by now. However, at this point, Simon couldn't afford to worry too much.
Switching brokers, if Lehman Brothers continued to follow, would only add some resistance to Westeros Company's closing operations in the coming days. Simon didn't believe Lehman Brothers would expose Westeros Company's previous trading records to other banks, prompting firms like Goldman Sachs to also follow his lead.
Competition on Wall Street was fierce, and if Lehman Brothers did so, competitors like Goldman Sachs would not mind taking the bait while dragging the fisherman into the water.
Goldman Sachs, Morgan Stanley, and First Boston's traders informed Simon by phone that with over twenty minutes to market opening, a massive number of long contracts were already being sold off at the Chicago Mercantile Exchange, with the lowest bid dropping to 253 points—a nearly 10% drop from last Friday's close at 281 points.
Simon's initial trade had waited a month and a half for the S&P 500 index to rise from 270 to 290 points.
Now, just over a weekend, and even before the market opened, the S&P 500 index had already fallen 28 points. Even from miles away, Simon could imagine the gloomy atmosphere in the trading halls of the New York Stock Exchange and the Chicago Mercantile Exchange.
Janet walked in at some point, still in her strap nightgown, barefoot. However, unlike her usual lazy cat demeanor, her eyes were bright and alert. She didn't snuggle up to Simon but quietly pulled up a chair to sit across the desk, listening as Simon continuously spoke with Chicago.
Although the bid had already dropped 28 points, surpassing any of the previous rounds of operations, Simon still firmly declined the traders' suggestions to close positions.
After finishing three calls, Simon put down the phone, and Janet, with a somewhat uncertain expression and gleaming eyes, asked softly, "How much now?"
"The lowest was 253 points."
Simon responded, picking up the remote and turning on the TV that had also been recently installed in the study. The screen immediately showed the chaotic scenes inside the New York Stock Exchange, as well as the commentators' trembling voices.
From the commentator's words, starting at 9 AM Eastern Time, the NYSE had accumulated a large number of stock sell orders within just a few minutes.
After quietly listening to the TV report for a while, Janet turned to Simon, her expression showing a mischievous thrill, and whispered, "Hey, dear, how low do you think it will go?"
Simon looked at Janet's demeanor and wanted to pinch her nose but simply shook his head, "With this chaos, how could
I possibly know?"
Janet's eyes flickered a few times, and she pouted but did not pursue further.
Although Janet might have sensed something, Simon could never directly admit it. It wasn't that he didn't trust Janet, but his experiences were simply too fantastical, and Simon could not handle the consequences if they were revealed.
On the TV screen, the chaotic scenes switching between various exchanges quickly passed the last few minutes.
At 6:30 AM Los Angeles time, both the New York Stock Exchange and the Chicago Mercantile Exchange opened.
In New York, the Dow Jones Industrial Average dropped 67 points at the opening and then began a steep decline.
In Chicago, the situation at the Mercantile Exchange was even more startling.
The S&P 500 index opened significantly lower, plunging from the previous Friday's close of 281 points down to 198 points, a terrifying 29% drop.
Westeros Company's short contracts had an average entry point around 290 points.
At the S&P 500 index's low of 198 points, each of Simon's short contracts was already showing a paper profit of $45,000, over 300% in relation to the average margin of $14,500.
Of course, Simon did not expect to close positions at this absolute low point.
Because the futures market at the time did not employ a daily no-debt settlement system, as long as enough margin could be added before the next day's trade, most of the wrong-positioned long contracts would not be forcibly closed.
Thus, only those completely out of reserves would choose to cut losses and leave the market, meaning the number of short contracts closed today would definitely be much lower than usual.
Nevertheless, as trading began, Simon firmly set the closing range for the shorts between 200 and 210 points. While closing his short positions, Simon did not hesitate to establish long positions in the same 200 to 210 range.
October 19, 1987, was undoubtedly a long day for many.
While continuously on calls, Simon felt the day end swiftly.
At 3:15 PM Chicago time, 1:15 PM in Los Angeles, the Chicago Mercantile Exchange officially closed.
After tallying up, of the 26,700 short contracts in Westeros Company's account, only 8,300 were closed during the trading day, leaving 18,500 contracts still in the account waiting to be handled.
Additionally, the number of long contracts that Westeros Company had re-established between 200 and 210 points also reached 3,500.
In the final phone conversation of the day, the trader from Morgan Stanley's tone carried a hint of regret, suggesting Simon had been too greedy. If he had set a higher upper limit for closing, Westeros Company could have closed over half of its positions today.
Once the federal government intervened in the market, possibly as soon as tomorrow, the S&P 500 index could rebound significantly, and Simon would miss the opportunity for further profits.
However, Simon wasn't overly concerned with the trader's regrets.
As long as nothing significant changed, he still had at least two more days to close positions at low levels.
PERTIMBANGAN PENCIPTA 
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