America's Road to Fame

Chapter 87 The roller coaster that is about to reach the top
When William Chen woke up, it was still six o'clock in the morning.

He gently broke away from Ivanta's arm holding him, picked up the phone, and saw that there was an account information on it, and the funds of [-] million US dollars had arrived in his personal account.

So he entered the [Account] interface of Future Bank and chose to repay.

A few minutes later, I found that my borrowable line was still 3 million US dollars.Thinking of the 3 million US dollars I lent before, I invested it in Fund No. 1, but because the subprime mortgage crisis has not yet broken out, Fund No. 1 did not make a profit, but lost a lot.

From this point of view, if the loan from Future Bank does not make a profit in the investment, even if it is a loss, at most the amount will remain unchanged after the repayment, and will not be reduced.

For example, this time, after the repayment, the amount has not changed, and it is still 3 million US dollars.

In this way, it prevents the situation of meaninglessly borrowing money from the future bank, and then repaying it, and brushing the limit.

Next, Chen William replaced the bound partner with Nozomi Sasaki, and then it was displayed that the quota was under evaluation.

Five minutes later, the quota showed that it was 5 million US dollars.

In this way, Nozomi Sasaki's system rating is slightly higher than that of Erica, and lower than that of Paris.

In terms of personal ability, Erica should be higher than Nozomi Sasaki, and Nozomi Sasaki is much more famous than Erica. After all, she is now a popular star of RB, so in the evaluation of the two of them, Sasaki Xi's popularity should be a plus.

And if it is Nozomi Sasaki and Paris, the evaluation is lower, then I am afraid that she may be suppressed by her in terms of personal ability and popularity. Only in terms of appearance, William Chen seems to be higher than Paris.

After roughly drawing these judgments, William Chen changed the bound partner to Ivanka.

After the 5-minute credit rating, William Chen was surprised by the displayed credit limit, which was as high as 5 million US dollars!
If you compare Ivanta with Paris, there should be little difference in family background, and it is impossible to say who is more famous, and there will not be a big difference. In terms of personal ability, Ivanta has done well in the family business, but personal career On the one hand, Paris seems to be more handy in the field of fashion, but in terms of appearance and figure, Ivanta is slightly better.

But it shouldn't be so different, one can borrow 3 million, and the other is 5 million...

William Chen was puzzled. Could there be other factors that he didn't know?

At this time, there was a vibrating sound. It was William Chen's mobile phone. He would set it to vibrate before going to bed at night.

Picking up the phone and seeing John Paulson's name displayed on the screen, William Chen's expression changed, because John Moores rarely took the initiative to call himself, and most of the communication was through email. Seeing a call from him suddenly, William Chen couldn't help thinking, could it be that the market of the securities he invested in has changed?
Thinking of New York at this time, it should be after six o'clock in the afternoon, so William Chen immediately connected the phone and heard John Paulson's voice.

"There is one thing that I feel I should tell you, boss."

"Can you wait for me for 5 minutes? I'll get up and go to another room to talk." William Chen glanced at Ivanta beside him, found his home T-shirt and shorts, put them on, picked up his phone, and walked out of the room bedroom.

"Okay, what's the matter? Mr. John, tell me."

William Chen went downstairs, sat on the sofa in the living room, and said to John Paulson.

"According to my carefully adjusted model, I found that the current bank loan interest rate has reached the warning value..."

It turns out that from the very beginning, John Paulson built a model for subprime mortgage bonds to observe the impact of variables on the entire real estate and related bond market prices.

John Paulson has tweaked the model again to make it more accurate after his previous failure at the helm of a fund.This model mainly includes the impact of bank loan interest rates and house price growth on buyers' willingness to buy real estate.

To put it simply, when housing prices continue to increase, home buyers’ willingness to buy will definitely increase, because they will have the fear of missing out. If they don’t buy a house early, they may need to pay more money later, or even have already bought a house. I can't afford a room.

Moreover, housing prices have risen, and the bought house can be sold after a period of time, and the price difference can still be earned. This is also the reason why more and more investors are pouring into the real estate market.

But with the rise of housing prices, the boom in home loan business - and a large part of them are subprime borrowers who do not have sufficient assets and proof of repayment, also promotes the slow rise of loan interest rates.

Risk is directly proportional to profit. Banks lending money to users with low scores will definitely charge higher interest.And as the potential of high-scoring users to buy houses is exhausted, the proportion of stimulus loans is also increasing. Those original high-scoring users who continue to buy real estate will also become users of subprime loans.

But when the loan interest rate rises to a certain level, everyone will find that compared with the rise in housing prices, the interest that has to be repaid due to the rise in interest rates has made them unprofitable, so at this time, the willingness to buy a house will decline or even completely lost.

The resulting chain reaction is an imbalance between the supply and demand of real estate, supply exceeds demand, house prices stop rising, and even start to fall because real estate companies are eager to recover funds.

As housing prices fall, home buyers' assets shrink, making them unable to continue to obtain loans and unable to continue to repay monthly payments, resulting in defaults.After the default, the house is taken back by the bank. What is the use of the bank holding the house?Shouldn't we continue to put it in the real estate market and sell it to recover the losses?
As a result, under the vicious circle, the house price fell at an accelerated rate, which continued to cause a chain reaction...

This is the fuse of the subprime mortgage crisis, and among them, the bank's loan interest rate is a very important indicator, so when John Paulson found that the loan interest rate had been raised to a warning point, he immediately notified Chen William .

It's like you are riding a roller coaster, you go up slowly at the beginning, and when you reach the top, there is a "ding" sound, then you should know that the process of accelerated decline is coming.

Now, of course, the ding is the right time only if the parameters of John Paulson's model are set correctly.If the transmission of market sentiment, people's delayed feelings, and other factors are taken into account, according to John Paulson's prediction, the full-scale outbreak of the subprime mortgage crisis can be seen within three days at the earliest, and not at the latest more than half a month.

His judgment was basically consistent with the information William Chen had obtained from the Eye of the Future, because he knew that the correct time was the end of September.Today is already September 9st.

After hanging up the phone, Chen William looked at the 5 million USD loanable limit in the Future Bank [Account] interface, and fell into thought.

The choice before him now is whether to continue to lend funds from Future Bank and increase the short position.

From the start, he has tried to avoid the use of financial leverage.

The leverage here includes not only the low margin ratio in futures investment, margin financing and securities lending in stock investment, but also all the behaviors of using own assets to obtain funds far beyond this for investment, such as mortgage assets for borrowing.

Yes, when you have relatively high certainty, you can obtain excess profits by using financial leverage.

But at the same time, it also means that your risk is also magnified.

Any market has cycles, such as stocks. If you only use your own funds to invest, then even if you encounter a sharp drop, you just need to grit your teeth and hold on. After a year, two years, or even five or ten years, you will There comes a day when there is a solution.

But once you use leverage, it’s different. If you double the leverage, if the price falls by less than 50%, your assets will be wiped out, and you will never have a chance to turn around again.

In Chen William's experience and learning, he saw that there are countless investment geniuses who once shined for a while, but how many of them can still be gods after more than ten years like Buffett?
The vast majority of people can't stand the temptation, because of greed, using financial leverage, you can win once, twice or even ten times, but only one loss is enough.

Some people may say that with the prediction of the future eye, there should be no risk.

Is it really like this?William Chen is not sure that the prediction of the Eye of the Future is really 100% accurate.The amount of funds he used before was not considered large in those financial fields.

Therefore, it is still impossible to judge whether the points seen in the eyes of the future will be reproduced in reality without any changes, but he believes that when the amount of funds is sufficient, it will definitely have an impact on the market.

Then when his capital is large enough, coupled with financial leverage, he may wait for more than just the impact on market prices.

When the hidden wolves see a piece of fat, can you stop them from biting it?
Chen Weilian didn't know what would happen when he was forced to transfer money by the future bank and his assets were insufficient, but thinking about it, he would definitely not be so optimistic.

Therefore, now that William Chen saw the 5 million loanable line on the [Account] interface, he was a little uncertain for a while.

(End of this chapter)