America's Road to Fame

Chapter 104 Transferring Risk
These fanatical blind self-confidence now seem to be very ridiculous things.

But this is often the case. Before the change occurs, everyone will be immersed in the inertia of that thinking.

If you sit down, imagine how you thought about the real estate market a few years ago: At that time, there was a consensus that house prices would always go up.

When you have money, the first advice others give you is to buy a house.When you want to start a business, the advice others give you is that it is better to buy a house.Countless people are talking to each other, if you don't buy a house early, you will not be able to buy a house in the future.

So is there a house price that will go up forever?Some people have questioned it, but this kind of voice will not be heard. Everyone thinks that at least they will not be the last batch of unlucky ones to take over the offer.

Look at those who bought a house early, they have already made a lot of money. Everyone has many such examples. They bought a few houses with a loan, and now their assets have doubled; I can't afford it anymore, and I regret it.

Yes, in the past few years, all Americans have devoted themselves to the real estate market in this atmosphere.

However, in John Paulson's previous analysis report, there was a statistic that Chen William found very interesting.

That is, before the No. 1 fund bought CDS bonds aggressively, the main function of this type of bonds was for hedge funds to hedge risks after investing heavily in CDO bonds.

But even so, there are very few funds that really do this.

By the end of 2008, according to the PerTrac hedge fund database research report, more than 14000 hedge funds reported operating results, thousands of institutional investors were licensed to invest in CDS products, and only more than 100 institutions were involved in stimulus loans. The market for CDS products.

Therefore, when John Paulson first built a position in Fund 1, he was cautious about buying CDS at the beginning, but he found that those institutions were very enthusiastic about his purchase of CDS, and he kept receiving CDS For the phone number of the bond contract, each company will list a large list of lists for him to choose.

As a result, the process of buying CDS was extremely smooth, and the position was quickly completed without even having a big impact on the price of this bond.

But it is different now. After many institutions began to discover the danger and began to buy CDS, this kind of bond became scarce for a while.

However, John Paulson still relied on his previous relationship to quickly replace William Chen’s latest 2 million US dollars with his selected CDS products. You must know that various institutions in the market have launched countless CDS products. It is also a headache to choose the best product among the many products—that is, the product with the greatest possibility of subprime loan foreclosure, but these are for John Paul who has been working on related research for several years. As far as Sen is concerned, it is easy to be familiar with it.

"Deutsche Bank gave us a list of CDS products, and there are hundreds of CDS products in which we can choose at will." John Paulson's voice was gloating:
"They are mainly targeting the German market. Those German guys pay too much attention to the rules, so they don't realize the tricks in CDO bonds. They only see AAA-rated bonds and buy them with confidence. They don't know that most of them are Packaged 3B bonds. So the Germans bought most of the CDO bonds going to the European market.”

"Those rating agencies have gone too far this time. Moody's and Standard & Poor's are almost playing the role of stamping." William Chen said speechlessly.

"That's what they do all the time," John Paulson said, shrugging. "That's why I put them in the short list of Fund 2."

The current situation is becoming more and more interesting. People continue to see that after the inflection point of the real estate market arrives, as housing prices begin to fall, those real estate investors find that the loans they need to repay are as high as 1.5 times or even higher than the housing price. Choose cut off.

The streets are full of real estate company salespeople and leaflet advertisements, and some real estate companies have even started to buy a house and send decorations, home appliances...

The emergence of these phenomena has also made more and more people aware of the dangers of the real estate market, re-examining those CDO bonds based on subprime loans, and more and more doubts.

In contrast, the price of CDO bonds has not fallen sharply at all. Goldman Sachs, Morgan Stanley, Deutsche Bank, Merrill Lynch, Morgan Stanley, Lehman Brothers, Citigroup... all of them are at the top of the financial food chain. Institutions are still advocating the value of those CDO bonds. Under the complex design of bonds, other institutions and investors still choose to believe them, believing that this huge bond market cannot collapse.

So Goldman Sachs successfully bought time for themselves, and sold a large number of junk bonds in their hands to investors who knew nothing about the dangers.These investors even include banks and institutions from Asia, Europe, and the Middle East.

John Paulson smiled and told Chen William that at the CDO bond conference held in Las Vegas, the heads of the investment departments of banks from Japan and South Korea around him talked about the CDO bond investment. The prospect of income, without the slightest awareness, has already reached their hands.

There is a saying in Huaguo - adding weight layer by layer. This is the situation now. Those financial product designers who designed these CDO bonds handed over the products to the company's sales staff, and then they halved the risk and recommended them to those big institutions. .

Large institutions continue to halve the risk, sell it to small investment institutions, and finally publicize it to investors. It has become a 3A-level high-quality bond with extremely low risk and huge returns.

After all, do you really think the booming US bond market is going to crash?If you have this kind of thought, you should reflect on whether you have a psychological problem, right?
……

"Mr. Kaplan, have you noticed any of the recent concerns about the American real estate market?"

William Chen came to the newspaper office of the "New York Observer" again. In his office, he talked with Kaplan, the editor-in-chief of the newspaper office, about the real estate market:

"I think that as a responsible media, it is very necessary to remind investors of the risks involved. But it must be objective, so I hope to make a follow-up report in the newspaper, send reporters to every continent in the United States, and conduct on-the-spot interviews When looking at the current situation of the real estate market, it must be true and objective, and the public needs these reports.”

His proposal actually aroused Kaplan's interest. Being in the financial center of New York, he can also see some discussions about the real estate market in the United States recently, so he decided to start focusing on the investigation according to what William Chen said. The current real estate industry and some truths about the subprime market.

What Chen William needs now is to show these truths to the public, instead of allowing those investment institutions to beautify them.

And he doesn't need to be too direct to output the negative view of the real estate market, as long as the public knows what is happening in the United States, the intensified wave of supply cuts has appeared, and housing prices continue to fall. The impact of the market is not as innocuous as some financial people claim.

Because he himself participated in the short-selling of the real estate market, if the media he owns directly supports this point of view, after the crisis breaks out, it will easily attract criticism and even lead to investigation by the SEC.

So he specially reminded Kaplan that it is enough to show the truth of the facts, and there is no need to specially comment and guide.

The current "New York Observer" has set up a separate online new media department, including the electronic version of the website and mobile business, including the "Observer" app, which are all included in this new department.

Chen William is the president of the newspaper, and Kaplan is the editor-in-chief and also serves as the director of the traditional media department.

Allen became the director of the new media department of the Internet, with a certain degree of independence, responsible for the operation of the Internet media, but in terms of content, it needs to be reviewed by Kaplan, but he also has the right to report directly to William Chen.

So after talking with Kaplan, William Chen went to the network new media department and met Alan, the head of the department.

"Mr. Allen, I saw that our audio reading function has been activated, but it is still read by real people. I wonder how the development of the smart audio reading function is going?"

"Observer" APP.Human voice reading newspaper function.After being launched, it has been loved by many users.Now it has become an important source of profit for the online new media sector.

Many users have subscribed to this feature and enjoy the experience of listening to news while doing other things at home or driving.

(End of this chapter)