Reinventing the Millennium.

Chapter 276 The Great Ambition
"Hey, Xiao Yu, I will arrive in New York at 4 pm the day after tomorrow."

"Don't forget to pick up the plane."

"Oh yes, I said it according to your time, don't convert it any more."

"I will expedite the domestic situation. I have to go to Yu Province tomorrow morning to see the new factory, and then fly to New York."

"Okay, okay, my past mission this time will be very difficult."

Fang Zhuo stood on his balcony and made an international call, communicating with Yu Hong, the global marketing director.

After a while, the phone call ended, he yawned, took out a cigarette, and walked towards the sofa.

Just two steps away, Fang Zhuo put away his cigarette and smiled at his younger sister Zhao Suqi who was sitting upright.

"Brother, have you been smoking a bit aggressively lately? I saw that the ashtray in your study is full of ashes." Zhao Suqi said seriously.

"When I think about something at night, I always feel that my thinking is not smooth." Fang Zhuo shook his head.

Zhao Suqi said seriously: "Smoking is harmful to health."

"Well, that's why I bought cigars." Fang Zhuo got up and pulled the whiteboard in the living room to the middle.

Zhao Suqi was limited by her knowledge, and she was temporarily confused about the judgment of cigars. She didn't know what the structure of cigars was.

"I will teach you some interesting knowledge today, which can be regarded as a professional science popularization for you in advance."

Fang Zhuo took a pen and wrote the word "subprime mortgage" on the whiteboard, and introduced: "The bank mortgage loan market in the United States divides the income and credit status of borrowers into grades. For example, the good ones are preferential grades, and the bad ones are Secondary."

"Loans granted by lending institutions to borrowers with poor credit and low income are called subprime loans."

"Simple, right?"

Zhao Suqi nodded intently, and suddenly asked, "Brother, does a president like you have to charge money for lectures outside?"

"This class is probably worth half an Yike." Fang Zhuo smiled, and wrote the word "finance" on the whiteboard, and then pointed the arrow of "subprime mortgage" to this word.

Zhao Suqi cheered up and listened to the lecture from the president worth half Yike.

"Subprime loans are obviously not good enough and face the risk of default. Is this easy to understand? So what should we do? In order to reduce this risk of default, lending institutions such as banks package and sell a large number of subprime loans to another institution."

Fang Zhuo saw that his younger sister obviously didn't understand, and gave an example: "For example, Bank A has a subprime loan of 100 million yuan, the ten-year interest is 30 yuan, and the probability of default is 0.1%. This loan is sold to another institution B, then A immediately gets 110 million in cash, and B gets a long-term asset income that looks pretty good."

Zhao Suqi nodded, expressing his understanding.

Fang Zhuo first marked on the whiteboard and continued: "B, it is not honestly waiting for the loan to mature in 10 years, that is too slow, it innovates financial tools and securitizes this loan, that is, divides it into 1000 shares are sold to the trading market so that ordinary people can also buy it.”

"B got the cash of 1000 ordinary people, and these 1000 people without sufficient financial resources got a subprime mortgage securities that looked good, waiting for the income, and it was a win-win situation."

Zhao Suqi felt as if she often heard the word "win-win" from her brother. She asked, "Yes, it sounds very good, and the probability of default of 0.1% is also very low. Isn't it a win-win situation?"

"Well, it's okay if it's just like this, but Institution B is not satisfied with this, it bought another subprime loan with a default probability of 0.5%, which is 5 times higher than the previous one." Fang Zhuo smiled , "You said, how should I sell it to others reasonably and smoothly?"

Zhao Suqi was lost in thought, staring at the words and symbols on the whiteboard.

After a while, she asked uncertainly: "Bundle these two together for securitization?"

"Qiqi is still a bit talented." Fang Zhuo nodded, "As long as two loans with a default probability of 0.1% and 0.5% are put together, the probability of their simultaneous default will immediately decrease, which will reduce the second securitization rate." The person or institution that accepts the order can also buy with confidence.”

Zhao Suqi thought about it: "It seems to be not bad."

"Well, the problem is that it won't stop there. Institution B or the next C will combine subprime loans from different regions and different default probabilities into the capital market to reduce the risk as much as possible from the surface."

"Then, this kind of subprime securities will be packaged into asset-backed securities with a series of loans such as credit cards, student loans, and commercial mortgage securities, and the scale will increase several times."

"It's still more than that. The risk of asset-backed securities has become higher. Banks or financial institutions are not stupid. They think this is not feasible, so they seek insurance for the risk of the securities defaulting."

"This risk has flowed into the insurance industry. This kind of operation is called credit default swap, or CDS for short. It is the most common credit derivative product in foreign bond markets."

"Moreover, these operations are not one-way, and leverage is added in the middle. You sell to me, I sell to him, and he sells to her. The gradually enlarged risks permeate the entire financial capital market with the combination of financial products."

"This is called systemic financial risk."

"Once the bottom critical part goes wrong and the subprime market fluctuates, the risk is transmitted very quickly and the whole system blows up."

Fang Zhuo finished the last sentence lightly, and asked, "Do you understand?"

"I seem to understand, but why does this risk expand so slowly?" Zhao Suqi was puzzled.

"The liquidity of the bubble is too strong. As for the bubble, the United States has cut interest rates many times in a row to encourage people to buy houses. The U.S. policy has now introduced a package of economic stimulus plans, and one of the important policies is 'home ownership. '." Fang Zhuo muttered.

He thought for a while and said: "The above are all my judgments, but there should be no problem with this judgment, but the final explosion will not happen in a short while. There are many links that can be involved in it, but there are also some links that must be guaranteed to be Let your own people take the lead, so as not to be accounted for in the end.”

Fang Zhuo glanced at his thinking sister.

Zhao Suqi was awakened by this look, and hesitantly said: "So... Regarding the judgment of these subprime mortgages, its formation, development, and outbreak, brother, you need someone who can carry out your will and you can trust to do it?"

Fang Zhuo didn't speak.

Zhao Suqi associated with the "financial devil" that her brother joked about a long time ago, and said: "Some operations can't let people in the company know each other?"

Fang Zhuo smiled: "It's all judgment, listen to it, these are just simple talk, when you go back to college, see how professional courses are taught."

"So, who is more trustworthy than your sister, and who is more able to implement your will to operate the subprime mortgage market?" Zhao Suqi stared at his brother's expression.

Fang Zhuo smiled and said: "Do you think your brother is a god? If there is a systemic financial risk, there is a systemic financial risk? This is just a class, a deduction class."

Zhao Suqi blinked: "But you are very confident in this deduction, aren't you?"

"I think we still need to observe." Fang Zhuo said seriously, "Otherwise, what do you think I went to the United States for? Is it just playing the player?"

Zhao Suqi nodded understandingly: "I thought I was going to date Miss Xiao Yu."

Fang Zhuo's face almost froze, and he tapped on the whiteboard: "Look hard, study hard, and you still carry out your will? You have strong confidence."

"The main reason is that I trust my brother, and my brother also trusts me." Zhao Suqi gave a reason.

Fang Zhuo pointed to his head: "Trust alone is not enough, you must have knowledge and IQ that can be trusted."

Zhao Suqi nodded: "Study hard and make progress every day."

Well, study hard, make progress every day, carry out my brother's will, and strive to be the devil.

(End of this chapter)