the most powerful bank in the world is after you.
Your company is facing bankruptcy,
and there's no way out.
Or is there?
In this video, I'm going to put you in
the shoes of Xiang Guangda, a man who bet against
the world and crashed an entire market doing so.
Imagine this, you're a powerful Chinese industrialist.
Over your 60 year lifespan, you build yourself up
up from a car door manufacturer in eastern China
into the world's most dominant nickel producer.
You're holding stretch all over Asia, and your
reputation for putting it all on the line
has earned you a nickname: Big Shot.
Now, it's early 2022, and you're about to
make one of your biggest bets yet.
Over the last few months, you built
up a massive short position on nickel.
But why would you bet against
the very asset you produce?
It turns out you have a good reason.
You're kind of playing 4D chess here.
First, it's a pretty safe hedge.
But more importantly, you believe your company's new
production in Indonesia will start tanking nickel prices.
And when that happens, your short is
going to make a killing.
To you, it feels pretty safe.
Your short bet is about 150,000 tons.
This is done through a bunch of your corporate entities
and facilitated by banks like J.P. Morgan, BNP Paribas,
Standard Chartered Bank, and many smaller Asian banks.
You know it's a big deal when you need more
than one bank on board to get the deal done.
And things are looking pretty good.
But you've forgotten one important detail.
It's 2022.
And anyone who has lived through the 2020s
knows that if something bad can happen, it's
100% going to happen, which it does.
On Thursday, February 24, a little known guy called
Vladimir Putin orders the Russian invasion of Ukraine, setting
the entire world into a state of shock, outraging
Twitter and taking off a refugee crisis.
And there's always secondary consequences.
Global markets go haywire and send the price of
nickel up and up and even further up.
You're watching this, thinking, okay, it's increasing
gradually, but we're alright for now.
And then you see it, on March 7th,
people start panicking.
Short positions start closing.
And a squeeze on the market pumps
the price of nickel by 250%.
And just like that, you Mr. Big Shot.
You're in huge trouble.
Futures on nickel have jacked up to $100,000 per ton.
Your trade is $10 billion in the red.
Your company is at risk of bankruptcy.
Banks are pounding at your door.
They're here to collect by any means necessary.
March 8th.
A squad of bankers takes up
residence in your company's HQ.
Others dial in from all corners of the world, and they
all have the same question: Where the hell is our money?
Sure, you've been a good client in the past, but
you're only as good as your most recent payment.
And you're not up against just any banks.
You're up against a squad of them
led by none other than JP Morgan, the world's largest bank
$3.9 trillion in assets.
You know the Iron Bank from Game of Thrones and
how nobody messed with them, not even the Lannisters.
Yeah, that's basically JP Morgan.
And now they're after you.
Your meeting with the bankers goes on so long that
the sun is rising by the time they leave.
And a little voice is reminding you just how many
hundreds of millions of dollars in debt you are, how
uncertain your company's future is, and how badly your bet
on the fall of nickel has gone. This is horrible.
So what do you say to the bankers?
I'm sorry?, or here's my payment plan?
No.
You say,
We've got this.
You've got a hunch.
But a hunch is worthless.
And that's where another player enters your story
and changes the game completely.
Not another industrialist, not another bank.
But the London Metal Exchange, otherwise known as LME,
the largest market in the world for
options and futures on base metals.
They made an insane move.
They completely shut down trading a few moments
after the price of nickel hits $100,000.
And to wash that bizarre decision down,
they decide to cancel billions of dollars
of transactions, sending the market into what's
professionally known as a shit storm.
The price falls to $48,000. You can take a breath.
You were right.
You have some time to think, but it's
not good enough to save you completely.
You're still billions in the reds.
And now you have something else looming over your head.
You owe LME big time.
They give you a major solid
and want something in return.
It feels very mafioso.
LME needs the market back online.
To do so, they require you to
make some deals with holders of long positions.
Except there's a minor detail that bothers you.
The price is almost $50,000, which means you're still
going to suffer billions of dollars in losses.
So you sit, you listen to LME, knowing that
they just saved your metallic ass, and you say,
No, I'm not going to do it.
Meanwhile, the market is getting worse, much worse.
And the consequences are looking to be far greater than
you, the banks or LME could have ever expected.
The trading freeze means that companies that
use nickel are in huge trouble.
All these companies are pretty wide ranging.
Nickel is used in cars,
construction, aerospace, electronics, batteries,
Hell, even Elon depends on it and
begs people to mine this stuff.
Companies are halting orders.
Dealers are chasing down clients who owe money.
Chaos is echoing through the metals industry.
It's looking very similar to the housing market in '08,
which Imploded, even had a movie made about it.
The only upside is maybe we'll get Margot Robbie
to help explain it all to us.
And while all this mayhem is going on,
what are you Mr. Metals Billionaire doing? .
Well, you're still in China battling the bankers.
They haven't forgotten about their money.
Most of them have zero experience in handling a
situation of this magnitude.
With so much money at stake, all of their careers are on the line,
so they're hammering you hard to pay up, and
the global powerhouse JP Morgan is leading the charge.
But as bad as things look for LME,
as big and powerful and scary as JP Morgan is, you start to
realize that there's some major leverage on your side here.
Say you refuse to pay them.
What can they do?
Chase you through Indonesian and Chinese courts?
That's not going to be easy for them.
Remember how you ran that trade through
a bunch of your corporate entities?
Well, that makes it murky water when it
comes to whether they have the legal rights
to seize your company's assets or not.
Plus, you have a strong company
with a proven track record.
You pioneered breakthroughs in steel production.
Long term, you'll probably be OK.
And finally, most importantly, you're backed by none
other than the People's Republic of China.
Suddenly, big bad JP Morgan doesn't
seem all that scary in comparison.
You start smiling.
You're not actually on the back foot.
The bankers are.
So you say, No, I'm not done yet.
You tell the banks and LME,
Instead, you offer them up some manufacturing facilities
in Indonesia as collateral, as well as something
extremely rare for any Chinese businessman to offer.
You offer them a personal guarantee.
If you can't give them the money you owe them, they
can kick you out of your home, take everything.
Culturally this is a big deal and exposes you to shame.
But it's your final offer, and they can
take it or leave it.
If they want they can go ahead and try their
luck against the Chinese government in court.
And before we go any further, let me tell
you about a little app I use called Kucoin.
With Kucoin, you can buy and sell hundreds of cryptos.
You can short stuff, you can do futures, you can
do pretty much anything you want to do in crypto.
But what I really enjoy is the lending.
Theirs is market rate, so you don't have to
worry about, like, liquidity issues on the platform.
In the past year, I've made just over
$25,000 lending on the Kucoin platform.
A lot of that is from stablecoins, but those
rates are down right now with the bear market.
But other rates are still strong, like BNB at 14%.
So if you want to try it for yourself,
there's a discount link in the description.
Works pretty well.
All right, let's get back into it.
The banks decide uhh, maybe we shouldn't
battle the Chinese government.
They're not going to pursue you
or your company for a while.
And in return, you agree to reduce your position
on nickel once prices have fallen below $30,000.
So LME reopens the market, prices go down, and
your company recovers 20% of its short position.
This is great for you, but in
the aftermath of the market freeze, LME
is under extreme pressure from regulators.
They've lost the goodwill and trust of the market,
and the results are far from pretty.
Traders leave in droves, open interest in LME's six main metals
plummet to their lowest levels in ten years.
But that's not really your problem.
You have your own problems to worry about.
Each month, bankers are coming to you
to review your agreement.
And the price of nickel is still floating around $30,000.
Things are still insanely dangerous for you.
You haven't gotten rid of
this monumental short position.
And to put this in perspective, your short is equal
to about 6% of the total global production of nickel.
If prices rise again, the banks and
you will face losses in the billions still.
And I need to remind you that this is 2022
and Russia is still at war with Ukraine.
It only takes one bad news event at
this point to send nickel prices soaring again.
So for now, you hold your breath
and pray that they don't soar again.
But then May comes around, and
boy, do you start feeling good.
China's lockdown deals a blow to the metals market,
and prices start to drop below $30,000, meaning you
can reduce your position to around 60,000 tons. Great.
Now you're only messing around with two and
a half percent of the global total production.
If this was an Indiana Jones movie, this
would be the bit where you grab your
hat before the door comes down on you.
Luck is on your side, and it gets even better.
first started pounding on your door in the first place.
This means that you haven't just decreased your
debt, you no longer have any, and can
close your position in relative comfort.
So what do you do?
Well, you're a reputable Chinese industrialist, so you try
to get out of that shameful personal guarantee.
But JP Morgan being JP Morgan, tell you to beat it.
The guarantee stays. But they say that you can have
some of your nickel plants back.
They're flexing on you for essentially
ruining their entire spring season.
You can't really blame them. Fine.
This is when things get completely ridiculous.
It's June, and fears of recession start
popping up in the global markets, and
prices all over the place start falling.
Now, your original short position, which puts you
in this mess and almost destroyed an entire
market, doesn't seem that stupid after all.
It actually looks pretty smart in hindsight.
So what do you do?
Do you learn your lesson and let this one float on by?
Or do you go all in again?
Well, they don't call you the Big Shot for nothing.
You go all in and ask the banks
to help you run your short position even longer.
JP Morgan, undeterred by your massive balls,
tells you, no fucking way.
You just about ruined our lives.
No one will touch you or your balls.
So by the end of the month, you fully exited
your position with JP Morgan and a few other banks.
And when all said and done, you've lost
just about a billion dollars on this trade.
It sounds pretty awful, but
So you're basically fine. It's great
all things just fall in place for you, the billionaire.
An entire market was put on pause.
Banks had no way to touch you, and
one of the largest governments in the world
was on your side the whole time.
And sure, people on the other
side of the trade lost billions.
LME is slammed with lawsuits seeking $500 million
and the nickel market almost imploded.
But you're doing okay.
In fact, you're doing more than okay.
You beat JP Morgan, survived bankruptcy, and your company
had $56 billion in revenue last year.
You're set to expand all around the world.
Oh yeah, your Indonesian production plant, as you predicted
at the start of all this mayhem,
has driven nickel prices to fall.
So what did you learn, Mr. Big Shot?
My guess is there's no risk in a big bet
when everyone else has more to lose than you do.