How a Japanese Billionaire Drives the Stock Markets Crazy

How a Japanese Billionaire Drives the Stock Markets Crazy

At the end of last week, more than $ 800 billion in value was destroyed on the American technology exchange Nasdaq. This is due to the high-risk speculations of the Japanese telecommunications and media group SoftBank.

In recent months, the normal rules of stock exchanges appeared to have been suspended. Although the crown crisis plunged the world economy into the worst crisis since the Great Depression of the 1930s, after a mini-crash in March, stock markets soared as they did in May.

At first, this boom was blamed on the so-called day traders, small speculators who try their luck on the stock market from home with their laptop. In fact, responsible online brokerages reported an increase in accounts, also in Switzerland.

In fact, there were inexplicable incidents that are typical when laypeople play games. For example, the shares of the car rental company Hertz reported a price jump, even though the company had deposited the balance.

The stock market professionals viewed this with considerable mistrust. But apparently at least one of them has something to do with it. The “Financial Times” has now revealed that Japanese telecommunications and media group SoftBank has influenced the boom in large-scale technology stocks.

The strong man behind SoftBank is Masayoshi Son, a billionaire with a penchant for eccentricity. Like the American Ray Kurzweil, Son also believes that artificial intelligence will determine the future destiny of humanity.

Son was an early investor in Alibaba and is said to have made around $ 60 billion from that alone. He also made a lot of money with Vodafone in Japan. Along with other strong investors, mainly from the Gulf region, he also founded the Vision Fund, a fund that specializes in investing in the technology sector.

Recently, however, SoftBank has suffered several setbacks. The investment in Uber so far has not paid off. The stake in WeWork, a kind of Uber for offices, turned into a real disaster, as did the stake in Wirecard, the German financial company that has since gone bankrupt.

These setbacks apparently led Son to go on the offensive and on a grand scale. According to the “Financial Times,” Softbank is said to have acquired call options for technology companies in the amount of around $ 30 billion in recent months.

This turned Son into a “whale,” as it is called in trading lingo, an investor influencing the entire market with a huge bet.

How does it work? The options were originally made as insurance. Cereal and wine producers, for example, can use it to protect themselves from poor harvests. However, you can also speculate risky with options. They work as a lever with which you can massively increase the impact of your investments.

According to the “Financial Times,” Son did just that, in a relatively simple variant: SoftBank bought so-called call options at technology companies. That means: the bank has secured the right to buy shares in Apple, Tesla, etc. at a certain price in the future.

This massive gamble from SoftBank has literally skyrocketed tech stocks. The shares of Apple and Tesla, which are already highly rated, have doubled again. The price of the newbie on the Zoom stock market went through the roof.

Son’s calculation seems to have paid off. According to the “Financial Times”, SoftBank has made a profit, albeit unrealized, of around four billion dollars in recent weeks.

But since SoftBank was exposed as a “whale,” the tide has turned. On Thursday there was a mini crash on the Nasdaq tech stock market. A value of around $ 850 billion was destroyed in one day. Apple shares fell 10 percent, Tesla shares even 16 percent. The decline continued on Friday, albeit at a slower pace.

SoftBank is now feeling this too. Today the stock has lost 8 percent on the Tokyo Stock Exchange. Investors have realized that Son has taken a gigantic risk with his bet on tech stocks. If prices on the Nasdaq continue to fall, its four billion gains will soon turn into much larger real losses. Son has experience in this. In the dotcom crash earlier this century, it is said to have lost $ 70 billion.

Normal investors should also expect losses. The mood on the stock exchanges is currently tense. The uncertain outcome of the US elections is causing nervousness. Investors have also realized that an inconclusive outcome of these elections could cause chaos. The Vix index, which is used to measure volatility, this index is also known as the “fear barometer”, therefore it shows large swings.