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Chapter 455 Can you earn it, but can't you get it?
After dinner at the hotel, Qin Xianglin proposed to go to the cafe and have a chat with Gao Yang and Wu Ruohan alone.

After 7 o'clock in the evening, Gao Yang, Wu Ruohan and Qin Xianglin sat around a small round table in an Italian cafe on the second floor of the Hilton Garden Inn.

Gao Yang and Qin Xianglin both ordered a latte, and Wu Ruohan ordered a cappuccino.

Wu Ruohan scooped up a spoonful of fragrant milk foam, smiled and handed it to Gao Yang's mouth, asking him to taste it.

Looking at this scene, Qin Xianglin suddenly laughed and said:
"Gao Yang, I have to say that you are really an investment genius. Your hunch about the US subprime mortgage market is completely correct."

Gao Yang asked with a smile: "Professor Qin, you have worked hard these few days, what have you discovered?"

Qin Xianglin said: "My discovery is that during the brewing process of this round of subprime mortgage bubble, Wall Street was far more crazy than I imagined. They designed CDO so complicated that it was difficult for ordinary professionals to see clearly.

Let me use an analogy so that you can understand. For example, when CDO A initially had a combined guaranteed asset package, when CDO B was designed, it also included some assets of CDO A.

It has developed to the present, and it is like this, A has B, B also has A, and then, A and B are packaged into CDO C, this form is called CDO of CDO, that is, the guarantee of debt guarantee.

On this basis, a comprehensive debt guarantee is derived, called Synthetic CDO, which can be used to bet on the winning or losing between CDO holders and swap traders.

The follow-up investigation between you, the conclusion is correct, around the real estate bond market, the derivative real estate bond multi-level guarantee market, various CDOs and CDS, the scale is about 20 times that of the bond market, I guess, I’m afraid not will be less than $50 trillion.

In other words, the entire mortgage market has been magnified 20 times by Wall Street using asset-backed securities.

This is one of the largest and craziest casinos in the history of Wall Street—all kinds of betting modes have been created in this way. "

Wu Ruohan asked: "Professor Qin, according to your research results, how do we consider the best trading target and trading strategy?"

Qin Xianglin said: "The best trading target is what Gao Yang once mentioned, AA-level CDO, buy short its swaps, and the leverage return rate is expected to be as high as 200 times.

In the past few days, I have analyzed the asset portfolios of nearly 100 AA-rated CDOs. I found that among the AA-rated CDOs, the ratio of AAA-rated debt-backed assets is not more than 90% as advertised by major investment banks and insurance companies. AAA-rated assets accounted for only about 25%.

AA-level CDOs contain a large number of BB-level, BBB-level, and even B-level secured assets. This should be a common phenomenon.

In addition, the credit default rate of subprime loans has been rising, and the trend is very obvious.

The bursting of the subprime bubble was almost inevitable. "

Gao Yang said with a smile: "Thank you, Professor Qin, then Titan Fund can boldly short the swap of AA-level CDOs."

Qin Xianglin shook his head: "Gao Yang, this is exactly what I want to talk to you and Ruohan about. It is not advisable and very risky for Titan Fund to use all of its 2.2 million US dollars or buy short AA grade swaps.

Theoretically speaking, once the credit default rate of AA-rated CDOs exceeds 12%, AA-rated covered bonds will be like a piece of waste paper, and even AAA-rated CDOs may be greatly affected.

At that time, the entire CDO market will collapse, and the entire European and American financial markets will have a big storm, involving tens of trillions of dollars in financial assets.

Buying short AA-level swaps with a return rate of 200 times is a bet with a very small winning rate even in a casino, and it is an unpopular bet among the unpopular.

You have 2.2 million US dollars, if you buy all AA-level CDO swaps short, in theory, if the price of AA-level CDO falls by 10%, you can get 20 times the income, which is more than 40 billion US dollars.

Under the background that the CDO bubble is almost bound to burst, it is easy for you to win money. The question is, if you can really make a profit of billions or even tens of billions of dollars, can you take it away? Can you get it?

Although Wall Street is crazy, it is not all lunatics and idiots. On the contrary, there are many smart people.

I believe that the people who saw the huge CDO bubble are not just us, there must be some people betting like you, but there should be very few people who directly bet on the AA level.

Wall Street has seen the CDO bubble, and the most common strategy for trade managers may be to buy long A and AA grades to hedge risks while shorting BB and BBB rated assets.

Of course, there must be someone like you who is completely empty.

Once the CDO bubble bursts, the global financial markets dominated by Europe and the United States will inevitably experience huge turmoil. There may be large investment banks going bankrupt, and the global wealth loss may exceed ten trillion U.S. dollars, or even more.

If Titan Fund uses all its funds, or takes a heavy position, and only bets on shorting AA-rated swaps, it is impossible to not be noticed during this financial turmoil, and there is even a 100% probability that it will be investigated.

Therefore, the trading strategy I suggest is, for the 2.2 million US dollars, use 30% of the funds to short AA-level swaps, use 50% of the funds to short BB-level and BBB-level swaps, and use the remaining 20% ​​of funds to see Multiple AAA grades, as a transaction hedge.

Such a combination of transactions is normal and difficult to be doubted."

Gao Yang thought for a while and said: "Professor Qin, let's use 8000 million US dollars to short AA-level swaps, 1 million US dollars to short BB-level and BBB-level swaps, and then use 4000 million US dollars to go long AAA-level CDOs. What do you think?"

Qin Xianglin said: "This arrangement is also possible. Although the leverage of shorting AA-level swaps is as high as 200 times, it is only theoretical. If you sell 8000 million U.S. dollars short, even if you succeed, you will not be able to get 160 billion U.S. dollars in profits.

I suggest that the 8000 million US dollars short AA grade, don't be greedy, resolutely let go if the profit is about 30 times, and leave the remaining profits to the smart people on Wall Street.

Shorting BB-level and BBB-level swaps, the current leverage is not too high, because the recent price rise is obvious. After success, the expected theoretical return rate is about 20 times. It is recommended that you let go when the return reaches about 10 times.

Be long $4000 million on AAA CDOs and expect to suffer most of the losses when the storm comes.

With your 2.2 million US dollars, the final comprehensive income is controlled at about 20 times, which is about 30 billion US dollars. After deducting about 30% of capital gains tax, you can still make a net profit of almost 10 times.

Such a trading strategy is the safest and most beneficial. "

Gao Yang nodded and said: "Okay, then we will follow Professor Qin's suggestion, thank you for your advice."

Qin Xianglin said with a smile: "Now you can book a flight ticket to Las Vegas. For the securitization forum on the weekend, our goal is to find bond guarantee managers from major investment banks and insurance companies, as well as swap traders. , to complete the transaction plan.”

Gao Yang signaled Wu Ruohan to tell Chen Lan to book a ticket to Las Vegas on Saturday.

After Wu Ruohan left, Qin Xianglin sighed suddenly: "In about half a year, the CDO bubble may start to burst. Once a large financial institution can't hold it, countless wealth will be wiped out, many people will lose their jobs, and there will be a lot of people. People were evicted from their homes and left on the streets."

Gao Yang said: "Professor Qin, isn't this a normal phenomenon in a capitalist society?"

Qin Xianglin said: "I'm not sympathizing with others. Once such a financial crisis occurs, the US government and the Federal Reserve will definitely rescue the market. At that time, although the US is the center of the storm, Europe may suffer the most damage."

Gao Yang said with a smile: "It is almost inevitable. The Federal Reserve has the right to print money. Professor Qin, if the subprime mortgage bubble bursts and there is a serious financial crisis in Europe and the United States, do you think this will be a step for the Americans to deal with the euro?" chess?"

Qin Xianglin was startled when he heard the words, and shook his head with a smile: "I understand what you mean. In recent years, some actions of the United States in Eastern Europe, especially the Middle East and West Asia, are indeed aimed at the euro at the strategic level.

However, it is impossible for Wall Street to plan to promote the subprime mortgage bubble and finally detonate it to deal with the euro.

Of course, if Europe and the United States are finally faced with a major financial earthquake at the same time, objectively speaking, it can indeed strengthen the US dollar while weakening the euro.

Once the Fed rescues the market, the U.S. dollar will inevitably flow back to the United States to help the United States resolve financial risks. This is also the natural advantage of the U.S. dollar, which is equivalent to a conspiracy..."

Later, Wu Ruohan came back and whispered to Gao Yang: "Xuan said, Dorsey wants to accompany us to Las Vegas, and he plans to drive over from California on Saturday."

Gao Yang said with a smile: "Okay, you tell sister-in-law to book a hotel and plan to go to Dorsey's room."

Professor Qin asked suddenly: "Gao Yang, if you really earn 20 billion US dollars in the end, how will you arrange the money?"

Gao Yang said: "Professor Qin, if such a large amount of money can be made, the profit belonging to the Android company will be transferred back through the fund dividend, and then use the Android company as a platform to invest in the equity of US and European technology companies, as well as the Chinese market.

The Titan Foundation will expand its capital and continue to invest in US stocks. In the future, when the time is right, the Titan Foundation will establish a new hedge fund, raise external funds, expand its scale, and strive to grow into a hedge fund in the US market and even a world-renowned hedge fund. "

Professor Qin smiled and said, "Your ideal is very lofty."

Gao Yang said: "For Huaxia, European and American institutions are both professional and have huge capital advantages. I think we can also continue to accumulate capital in the European and American markets and earn money from the European and American markets.

From financial capital, to technology companies, to various talents, we can find allies in the European and American markets..."

(End of this chapter)