Save the Bachelor of Heaven

  Chapter 3832 3834 [Zhangdang goes to jail]

In March 2007, not long after school started, the subprime mortgage crisis broke out in the United States.

 In fact, the subprime mortgage crisis began to emerge last year. In 2006, housing prices in the United States began to decline from rising to falling, and have continued to decline.

The full name of "subprime mortgage" is "subprime mortgage loan", which originally refers to the loans provided by lending institutions to borrowers with poor credit and low income.

At that time, housing prices in the United States were rising steadily. In order to make more money, many lending institutions provided loans to people with poor credit and low income, allowing them to buy houses and then use the houses as collateral.

 Because housing prices continue to rise, lending institutions have houses in hand. Even if the borrowers are not qualified, they can auction the house and successfully recover the loan. The risk is not high, so they lend heavily.

Not only that, they also package it into financial products and promote them to the financial market.

Due to lax regulation, this kind of financial management product, which was originally extremely risky, was packaged by Wall Street as a low-risk, high-yield financial product, so many investors bought it one after another.

  In the end, the scale of this financial product reached US$62 trillion, while the global GDP at that time was only US$58 trillion.

 The low risk of this financial product is entirely based on the rising housing prices. Once house prices fall, the risk of this financial product will suddenly rise.

 …

 House prices in the United States began to fall in 2006, leading to a sharp increase in the risks of financial products.

 Due to the fall in house prices, although the lending institutions have houses in their hands, the value of the house has depreciated significantly. Even if the house is auctioned, the loan will not be recovered. As a result, the risk of lenders losing money naturally increases.

In March 2007, New Century Mortgage Company, which is responsible for issuing mortgages in the United States, filed for bankruptcy protection, firing the first shot of the subprime mortgage crisis.

 Affected by this, U.S. stocks plummeted. Dow Jones, Nasdaq, and S&P fell more than 2 percent.

In April 2007, new home sales data in the United States were released. New home sales fell by 8% year-on-year, nearly 10%, and housing prices fell again.

 In June 2007, U.S. stocks plummeted again, with the three major stock indexes falling by 1%.

Following that in July, Standard & Poor's downgraded the rating of subordinated bonds, a move that triggered panic in global financial markets.

Many people sold their subordinated bonds one after another in order to stop selling in time. As a result, the price of subordinated bonds plummeted, causing trillions of market values ​​to evaporate out of thin air, causing many investors to suffer heavy losses.

For example, Bear Stearns’ hedge fund is on the verge of bankruptcy, and Macquarie Bank stated that investors in two of its high-yield funds are facing a 25% loss...

These negative news further triggered panic selling among investors, causing global stock markets to plummet.

 In August, Home Mortgage Corporation filed for bankruptcy.

Later in the same month, BNP Paribas announced that it was involved in U.S. subprime financial products, triggering panic among savers and causing global stock markets to fall again.

 In order to save the global stock market, countries have taken actions one after another and invested funds to rescue the market. In a short period of time, the amount of funds invested in the stock market by various countries has exceeded 300 billion US dollars. Among them, the Federal Reserve invested nearly 40 billion U.S. dollars.

 But even so, stock indexes in various countries still fell severely.

Moreover, many companies, banks, and investment institutions have stated that they are involved in subordinated bond financial products and have caused serious losses.

 These include well-known American companies such as Wal-Mart, Home Depot, and Lehman Brothers, which caused the U.S. stock market to plummet to the lowest point in recent months.

Seeing this, countries continue to increase their efforts to rescue the market. The Federal Reserve not only cut interest rates by 50 basis points, but also injected nearly 100 billion U.S. dollars into the stock market; Japan provided 2 trillion yen to rescue the market; the European Central Bank also added an additional 40 billion euros...

 …

Although the subprime mortgage crisis triggered the global financial crisis, Xiang Nan made a lot of money from it.

 It’s not that he’s shorting stocks. To be honest, he doesn't like short selling.

As Brad Pitt's character in "The Big Short" says, "[With the stock market crash], people are going to lose their homes, people are going to lose their jobs, people are going to lose their retirement savings... I hate this business [finance] the most. The reason for speculation is that people are not numbers. Every time the unemployment rate increases by one percent, 40,000 people die.”

Xiang Nan’s so-called huge profits are because during the financial crisis, people will panic sell assets with investment value. Such as stocks of high-quality companies.

  Microsoft’s stock price was as low as $19 in 2008, but now its stock price is as high as $430. In sixteen years, it has increased twenty-two times.

 Apple’s stock price was as low as $81 in 2007, and its current share price is $169. Moreover, it also split its stock twice in 2014 and 2000, once by splitting 1-for-7 shares, and once by splitting shares by 1-for-4 shares. Therefore, Apple’s stock price has increased more than fifty-six times in sixteen years.

These high-quality stocks are what Xiang Nan wants, so he took advantage of the stock market's slump to slowly absorb them. Although it is not like short selling, you can make several times or more than ten times the profit in one go. But such long-term investment is more in line with human nature.

 …

 In 2007, Li Er continued her studies and writing books. She successively wrote two novels, "I'm Waiting for You in Memories" and "If Life Is Just Like the First Meeting".

 In this year, Jiang Jiao also released his first album "Love is Xiami". With his innocent and cute appearance, he won the support of a large number of fans.

 This also brought her popularity to a higher level. It is said that on the 60th anniversary of the founding of Tianzhong School, she was invited back to the school to perform for the juniors and girls.

 This year, Xiang Nan saw a shocking news among the students of Class 3, Grade 3, Tianzhong.

 Zhang Yang was arrested by the police for selling illegal audio and video products and selling obscene materials for profit, and was eventually sentenced to two years in prison.

It turns out that when he was in college, in order to earn tuition, he rented and sold a batch of VCDs and DVDs on campus. The rent is fifty cents a time and the sale is ten yuan a piece.

This business was originally booming and he earned more than 20,000 yuan. However, he was jealous because of this and secretly reported him.

As a result, the police found more than 10,000 pirated CDs in his dormitory and the rented warehouse, including a small number of movies starring Li Lizhen, Shu Qi and Ye Yuqing.

So he was not only selling illegal audio and video products, he was also suspected of selling obscene materials. He also caught up with the police's anti-pornography and anti-illegal activities at the time, and was caught in the crossfire. As a result, he was punished for both crimes and was sentenced to two years.

Xiang Nan was very emotional when he heard the news.

 He knows that Zhang Yang is smart and good at business.

In the movie "The Left Ear", in 2006, when the Internet was just emerging and online shopping was in its ascendant, he persuaded black people to open an online store, and he realized early on that "a good online store requires P-pictures."

 When he graduated from college in 2009, he was already the founder of a shopping website. Roughly equivalent to the level of Vipshop and Eslite.

It’s just that unlike Yanjing, Zhangzhou doesn’t have that much business to do, so unfortunately he went astray.

 In fact, renting and selling pirated DVDs was not a big deal at the time. There are a lot of pirated CDs in many video stores, computer malls and even mobile vendors, but he was unlucky enough to catch them.