The Son of Finance of the Great Age

  Chapter 558 The Bear Stearns Conspiracy (2)

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  Bear Stearns, the fifth largest investment bank on Wall Street.

   Founded in 1923, Bear Stearns, headquartered in New York, has existed in this world for 85 years. This world-leading financial services company has provided relevant services to governments, enterprises, institutions and individuals around the world. Like several other giants on Wall Street, Bear Stearns' business covers stocks, bonds, fixed income, investment banking, liquidation, and private wealth management.

  However, unlike several other major investment banks on Wall Street, Bear Stearns has its own unique corporate culture. There are two types of people on Wall Street. One is represented by Stanley. These people have brought the unique noble and egalitarian character of Anglo-Saxon white Protestants to the extreme. It can be seen; while another kind of people is represented by companies established by Jews like Bear Stearns. The pursuit is a kind of wolf nature, so Bear Stearns is called "the lone wolf of Wall Street".

  This unique style has been brought into full play by the current CEO James Kane in the past few years. He once declared that Bear Stearns would only hire PHDs. Of course, the PHD here does not refer to a Ph. D., but those who are born poor, hungry, and desire for money. These people are often smart, willing to endure hardships, and able to let go of their dignity. Therefore, among the five major investment banks on Wall Street, Bear Stearns' brokerage business is the largest and most successful. Many large financial institutions including hedge funds are their customers. There are countless investors.

  Although in July, two hedge funds betting on subprime mortgage bonds within Bear Stearns collapsed due to huge losses, which has since opened the prelude to the panic in the subprime mortgage bond market. But even in December, Bear Stearns still managed at least US$200 billion in assets, and its market value is still close to US$10 billion today.

  How easy is it to defeat such a giant in the short term?

"A loss of US$854 million in the fourth quarter, deducting US$1.9 billion in mortgage business losses." Paulson's assistant quickly found the latest information on Bear Stearns, "At its peak, the stock price once rose to US$170 per share. Stocks, now hovering around $70, it’s amazing that all of this happened in a year.”

After deliberately pausing for a while, the stock analyst named Bizos adjusted his glasses on the bridge of his nose, and continued with a blank expression: "In addition, their management has serious internal conflicts. There is only one person in charge of the joint committee now. , that is, James Cain. Also, they are now entangled in a lawsuit, and the appealing party is Barclays Capital. They believe that Bear Stearns concealed the truth and caused their funds to be severely lost in the collapse of Bear Stearns' hedge fund. .”

"Don't worry about those lawsuits, I want to know what plans their management has!" John Paulson was also expressionless. The moment he made up his mind to empty Bear Stearns, he began to pay close attention to it. The details of the Wall Street giant. While there are several other big hedge funds or individuals also looking to short Wall Street, Paulson prefers the feeling of having everything in his hands, rather than simply following others.

  Paulson Fund also borrowed part of the funds from Bear Stearns, because Bear Stearns' style determines their strategy, and high-leverage operations are their norm. Specifically, as an exchange member with clearing qualifications, Bear Stearns lends funds to their clients, and some of these funds come from their asset management, and some come from the lending market and the company's own funds. As for their income, it is naturally the interest rate difference between different borrowing and lending and brokerage commissions.

   Even if it provides high leverage to customers, Bear Stearns' self-operated business is even more so. In fact, their internal high leverage has reached an unbelievable level. Some large transactions can use leverage of more than ten times. For example, the leverage ratio of the two collapsed hedge funds reached an astonishing 20 times. to $20 billion. This is true for big transactions, not to mention those small transactions, which can easily reach the point of a hundred times or even higher multiples.

   It is precisely because of this aggressive operating style that Bear Stearns was able to surpass Stanley, whose assets and market value far exceeded its own, and became the largest asset securitization company on Wall Street. According to its disclosure, in the fourth quarter, they held a total of $48.7 billion in bond positions, which naturally included subprime mortgage bonds. And it was the losses on these bonds that made Bear Stearns write down a staggering $1.9 billion in losses in the fourth quarter.

   Now is the time for their management to appease investors. Paulson is eager to know what their management will say to investors and what they will do to restore investor confidence.

"Layoffs!" The corners of Bizos's mouth twitched slightly, because this is a time-tested trick to reduce the number of employees to cut operating costs. "We have already cut 900 employees worldwide, but last month, They announced a layoff plan, another 650 layoffs, and fixed income was the hardest hit."

"The other thing is to sell the shares!" After flipping through the information on hand, the expression on Bizos's face finally changed a little. He still couldn't hide his surprise at the striking similarities between the two investment banks, "Like Stanley, they plan to sell part of their equity to a new investor, who is also from China, and it is said that it is a company called Huaxin. state-owned enterprises."

  After Huatou took over the shares of Blaylock and Stanley, Wall Street's enthusiasm for similar transactions reached its peak. Although I don't know if it's true or not, the news of "having an affair" with Huaxia Enterprise at this time is undoubtedly a great comfort to investors.

   "Huaxia Company..." As soon as Huaxia was mentioned, Zhong Shi's face came to Paulson's mind. No way, the owner of this face left him too deep an impression. Suddenly, his heart moved, thinking that if he were him, how would he deal with a giant like Bear Stearns?

Although Paulson has been on Wall Street for many years and has now become a famous figure, he is not a "barbarian at the gate" in essence, nor is he a powerful fund that enters the board of directors and changes the management structure with small shareholders. So there really isn't much to do other than shorting its stocks.

   Think and do it! Paulson is always a man of action. After waving his hand to make Bizos retreat, he called Zhongshi.

   "Mr. Zhong, if you were to choose to short a company, the kind that completely knocks it down, what would you do?"

   Without any pleasantries, Paulson went straight to the point. This is how he understood it. He and Zhong Shi seemed to be in a union of interests, at least in his opinion. So there wasn't much nonsense at all, so he asked directly.

   "..." Zhong Shi on the other end of the phone was silent for a moment, as if he was digesting the meaning of Paulson's words, and seemed to be thinking carefully. After two minutes, he let out a long sigh and asked in a low tone, "John, which company are you planning to attack? Or, which industry company are you targeting?"

Companies in different industries naturally have different strategies. Paulson immediately came to his senses, "It is a financial institution. I want to completely destroy it. It is not as simple as shorting its stocks in the short term, but to let it go bankrupt, close its doors, and completely destroy it." disappear from this world."

"Wow, this is not an easy task!" Zhong Shi smiled, and he replied without thinking, "John, it's beyond my expectation that you are so aggressive, but I like it. I don't know about Northern Rock Bank you Have you ever heard of a bank headquartered in the UK, the bank in the UK suffered a run on depositors because of lack of liquidity? Although it did not go bankrupt in the end, it was sold at a very low price Acquired, you can refer to this model!"

"Northern Rock Bank?" Paulson naturally had an impression, and after quickly recalling the recent events in his brain, he had some understanding, but another question immediately came to his mind, "Mr. Let me ask you, did you do that?"

   "Of course it's not me!" Zhong Shi laughed, and then categorically denied it. For such an act of pinning the blame on himself, he would not admit it even if he was beaten to death. After denying it, he said, "For financial institutions, liquidity is their fatal shortcoming. I believe you are also very clear about this. As long as you spread the news about this, it will cause serious damage to financial institutions in all likelihood. Of course, the premise is that this There are internal problems in financial institutions, so that the maximum effect can be achieved. In fact, you don’t even need to release news, just stand up and say something, I believe it is a threat to everyone.”

  Paulson, of course, knows that liquidity is the fatal flaw of financial institutions, but he is a novice when it comes to spreading the word. Little did he realize how much influence he had in the market today. In fact, countless people are studying him and imitating him, so as long as he makes a public speech, the impact or lethality will be absolutely huge.

   This is one of the reasons why Soros approached Paulson.

  Paulson hung up the phone thoughtfully, bowed his head and pondered for a while, and finally the strategy on how to short Bear Stearns gradually took shape in his mind.

   "Mr. Paulson, an important personnel change concerning Bear Stearns just happened within them!"

Just when Paulson picked up the phone and was about to call the asset management department, Bizos suddenly broke in from the door and said to Paulson out of breath, "Alan Schwartz will succeed James Cain. Cain is still the chairman, the appointment has just been approved by the board of directors and will be announced shortly.”

   "Schwartz? Who?" Paulson stopped reaching for the phone, frowned and thought for a while, but still had no impression of the new CEO, "How could there be a change in high-level personnel at this time?"

"Yes, the market will think the same way. Why is there a personnel change at this time?" Bizos echoed excitedly, "According to conventional logic, the last time Bear Stearns' internal fund collapsed, there was already a CEO who Resignation is responsible. In December, a co-chairman was also responsible for the resignation. But there are not many rumors in the market now, but they changed their coach at this time. Why? Why? Why? "

  Paulsen stared blankly at Bithos, but his heart was full of fire. He suddenly realized that this matter was too valuable.

  …

  Almost at the same time, Soros also received news about Bear Stearns' personnel changes. He immediately held a conference call, a secret conference call with only three people participating. (The novel "The Son of Finance of the Great Era" will have more fresh content on the official WeChat platform, and there will also be a 100% lucky draw gift for everyone! Open WeChat now, click the "+" sign on the upper right to "add friends", Search the official account "qdread" and pay attention, hurry up!)

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  (end of this chapter)