Chapter 103： transfer risk
These fanatical blind self-confidence, it seems to be a very ridiculous thing now.
But that's often the way it is, and until the change happens, everyone is immersed in that mental inertia.
If you sit down and imagine how you felt about the housing market a few years ago: Back then, it was a consensus that house prices would keep going up.
When you have money, the first piece of advice someone gives you is to buy a house. When you want to start a business, the advice others give you is still, 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 are there any house prices 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 people to take over.
Look at those who bought a house early before, they have already made a lot of money, and everyone has many such examples around them. They bought a few houses with a loan, and now their assets have doubled; they did not buy a house in time, and now the house price is rising. I can't afford it anymore, I regret it.
Yes, just in the past few years, all Americans have put themselves into the real estate market in this atmosphere.
However, in the previous analysis report of John Paulson, there was a data that made William Chen feel very interesting.
That is, before Fund No. 1 bought CDS bonds aggressively, the main role of this bond was that those hedge funds used to hedge risks after investing a lot in CDO bonds.
But even so, there are very few funds that actually do so.
As of the end of 2008, according to the PerTrac Hedge Fund Database research report, more than 14,000 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. market for CDS products.
Therefore, when John Paulson initially opened a position in Fund 1, he was cautious in buying CDS at first, but he found that those institutions were very enthusiastic about his purchase of CDS, and he kept receiving CDS selling. For the phone call of the bond contract, each company will list a large list of forms for him to choose.
As a result, the process of buying CDS was extremely smooth, and the position was completed quickly, without even having much impact on the price of this bond.
But now it's different. After many institutions began to see the danger and began to buy CDS, the bond became scarce for a while.
However, John Paulson, still relying on his previous relationship, quickly replaced William Chen's latest $200 million 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 one among these numerous products—that is, the one with the highest possibility of subprime loans being cut off. For Sen, it's easy to get used to it.
"Deutsche Bank gave us a list of CDS products, and there are hundreds of CDS products that we can choose at will." John Paulson's voice contained some schadenfreude:
"They are mainly targeting the German market. Those Germans pay too much attention to the rules, so they don't realize the tricks in CDO bonds. They only see 3A-rated bonds and buy them with confidence. They don't know that most of them are Wrapped 3B bonds. So the Germans bought most of the CDO bonds that went 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.
"They don't always do that." John Paulson shrugged. "So I put them on the short list of Fund 2."
The current situation is getting more and more interesting, and people are constantly seeing that after the inflection point of the real estate market, as house prices begin to fall, those real estate investors find that the loans they need to repay have been as high as 1.5 times or even higher than the house prices. Choose Disconnect.
The streets are full of salespeople and flyers from real estate companies. Some real estate companies even started buying houses and sending decorations and 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 built on subprime loans, and more and more doubts have been raised.
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, Citi... These are all standing at the top of the financial food chain. Institutions are still hyping 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 and the others successfully bought time for themselves and sold a large number of junk bonds to investors who were ignorant of the dangers involved. These investors even include banks and institutions from Asia, Europe and the Middle East.
John Paulson smiled and talked to William Chen. At the CDO bond conference held in Las Vegas, the heads of the investment departments of banks from Japan and South Korea around him were talking about those who invest in CDO bonds. The prospect of income, without realizing it, has already reached their hands.
There is a word in Huayu - layer by layer, and this is the case now, the financial product designers who designed these CDO bonds, handed the product to the company's sales people, and then they halved the risk and recommended it to those big institutions .
Large institutions continue to halve risks, sell them to small investment institutions, and finally publicize them to investors, and they have become a 3A-level high-quality bond with extremely low risk and huge returns.
After all, do you really think the booming American 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 the recent concerns about the American housing market?"
William Chen came to the newspaper office of the New York Observer again. In his office, he talked to Kaplan, the editor-in-chief of the newspaper, about the real estate market:
"I think as a responsible media, it is very necessary to remind investors of the risks involved. However, it must be objective, so I hope to be able to do a follow-up report in the newspaper, send reporters to various continents in the United States, and conduct on-the-spot interviews. Look at the current situation of the real estate market, it must be truthful and objective, and the public needs these reports.”
His proposal also aroused Kaplan's interest. Being in the financial center of New York, he could see some recent discussions about the real estate market in the United States, so he decided to start a key investigation according to what William Chen said. and some truths about the subprime market.
What William Chen needs now is to show these truths to the public, instead of letting those investment institutions beautify them.
And he does not need to be too direct to export the view of the real estate market, as long as the public knows what is happening in the United States, the intensifying tide of supply cuts has appeared, and housing prices are continuing to fall. The impact of the current market is not as innocuous as some financiers claim.
Because he himself has participated in shorting the real estate market, if he directly outputs a view that is biased towards this through the media under his control, after the crisis completely breaks out, it is easy to attract criticism and even lead to investigation by the SEC.
Therefore, he specially reminded Kaplan that as long as the truth of the facts is shown, there is no need to deliberately comment and guide.
Now the New York Observer has set up a separate online new media department, including the website electronic version and mobile business, including the "Observer" APP, which are all assigned to this new department.
William Chen is the president of the newspaper, Kaplan is the editor-in-chief, and he is also the head of the traditional media department.
Allen has become the director of the new online media department. He has a certain degree of independence and is responsible for the operation of online media. Only 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 Kaplan finished talking, William Chen went to the online new media department and met with the head of the department, Allen.
"Mr. Allen, I saw that our voice newspaper reading function has been activated, but it is still read aloud by real people. I wonder how the function of intelligent voice reading and newspaper reading is going?"
The Observer app. Real voice reading function. After its launch, it has been loved by many users. Now it has become an important source of profit for the online new media sector.
Many users subscribe to this feature and enjoy the experience of listening to the news while doing other things at home or driving.
But that's often the way it is, and until the change happens, everyone is immersed in that mental inertia.
If you sit down and imagine how you felt about the housing market a few years ago: Back then, it was a consensus that house prices would keep going up.
When you have money, the first piece of advice someone gives you is to buy a house. When you want to start a business, the advice others give you is still, 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 are there any house prices 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 people to take over.
Look at those who bought a house early before, they have already made a lot of money, and everyone has many such examples around them. They bought a few houses with a loan, and now their assets have doubled; they did not buy a house in time, and now the house price is rising. I can't afford it anymore, I regret it.
Yes, just in the past few years, all Americans have put themselves into the real estate market in this atmosphere.
However, in the previous analysis report of John Paulson, there was a data that made William Chen feel very interesting.
That is, before Fund No. 1 bought CDS bonds aggressively, the main role of this bond was that those hedge funds used to hedge risks after investing a lot in CDO bonds.
But even so, there are very few funds that actually do so.
As of the end of 2008, according to the PerTrac Hedge Fund Database research report, more than 14,000 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. market for CDS products.
Therefore, when John Paulson initially opened a position in Fund 1, he was cautious in buying CDS at first, but he found that those institutions were very enthusiastic about his purchase of CDS, and he kept receiving CDS selling. For the phone call of the bond contract, each company will list a large list of forms for him to choose.
As a result, the process of buying CDS was extremely smooth, and the position was completed quickly, without even having much impact on the price of this bond.
But now it's different. After many institutions began to see the danger and began to buy CDS, the bond became scarce for a while.
However, John Paulson, still relying on his previous relationship, quickly replaced William Chen's latest $200 million 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 one among these numerous products—that is, the one with the highest possibility of subprime loans being cut off. For Sen, it's easy to get used to it.
"Deutsche Bank gave us a list of CDS products, and there are hundreds of CDS products that we can choose at will." John Paulson's voice contained some schadenfreude:
"They are mainly targeting the German market. Those Germans pay too much attention to the rules, so they don't realize the tricks in CDO bonds. They only see 3A-rated bonds and buy them with confidence. They don't know that most of them are Wrapped 3B bonds. So the Germans bought most of the CDO bonds that went 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.
"They don't always do that." John Paulson shrugged. "So I put them on the short list of Fund 2."
The current situation is getting more and more interesting, and people are constantly seeing that after the inflection point of the real estate market, as house prices begin to fall, those real estate investors find that the loans they need to repay have been as high as 1.5 times or even higher than the house prices. Choose Disconnect.
The streets are full of salespeople and flyers from real estate companies. Some real estate companies even started buying houses and sending decorations and 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 built on subprime loans, and more and more doubts have been raised.
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, Citi... These are all standing at the top of the financial food chain. Institutions are still hyping 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 and the others successfully bought time for themselves and sold a large number of junk bonds to investors who were ignorant of the dangers involved. These investors even include banks and institutions from Asia, Europe and the Middle East.
John Paulson smiled and talked to William Chen. At the CDO bond conference held in Las Vegas, the heads of the investment departments of banks from Japan and South Korea around him were talking about those who invest in CDO bonds. The prospect of income, without realizing it, has already reached their hands.
There is a word in Huayu - layer by layer, and this is the case now, the financial product designers who designed these CDO bonds, handed the product to the company's sales people, and then they halved the risk and recommended it to those big institutions .
Large institutions continue to halve risks, sell them to small investment institutions, and finally publicize them to investors, and they have become a 3A-level high-quality bond with extremely low risk and huge returns.
After all, do you really think the booming American 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 the recent concerns about the American housing market?"
William Chen came to the newspaper office of the New York Observer again. In his office, he talked to Kaplan, the editor-in-chief of the newspaper, about the real estate market:
"I think as a responsible media, it is very necessary to remind investors of the risks involved. However, it must be objective, so I hope to be able to do a follow-up report in the newspaper, send reporters to various continents in the United States, and conduct on-the-spot interviews. Look at the current situation of the real estate market, it must be truthful and objective, and the public needs these reports.”
His proposal also aroused Kaplan's interest. Being in the financial center of New York, he could see some recent discussions about the real estate market in the United States, so he decided to start a key investigation according to what William Chen said. and some truths about the subprime market.
What William Chen needs now is to show these truths to the public, instead of letting those investment institutions beautify them.
And he does not need to be too direct to export the view of the real estate market, as long as the public knows what is happening in the United States, the intensifying tide of supply cuts has appeared, and housing prices are continuing to fall. The impact of the current market is not as innocuous as some financiers claim.
Because he himself has participated in shorting the real estate market, if he directly outputs a view that is biased towards this through the media under his control, after the crisis completely breaks out, it is easy to attract criticism and even lead to investigation by the SEC.
Therefore, he specially reminded Kaplan that as long as the truth of the facts is shown, there is no need to deliberately comment and guide.
Now the New York Observer has set up a separate online new media department, including the website electronic version and mobile business, including the "Observer" APP, which are all assigned to this new department.
William Chen is the president of the newspaper, Kaplan is the editor-in-chief, and he is also the head of the traditional media department.
Allen has become the director of the new online media department. He has a certain degree of independence and is responsible for the operation of online media. Only 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 Kaplan finished talking, William Chen went to the online new media department and met with the head of the department, Allen.
"Mr. Allen, I saw that our voice newspaper reading function has been activated, but it is still read aloud by real people. I wonder how the function of intelligent voice reading and newspaper reading is going?"
The Observer app. Real voice reading function. After its launch, it has been loved by many users. Now it has become an important source of profit for the online new media sector.
Many users subscribe to this feature and enjoy the experience of listening to the news while doing other things at home or driving.
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