Reboot 2003

Chapter 199 107: Gambling (two in one)

"Aotian, do we really want to buy that hedge fund?"

Before the conversation, Gu Wenjie made a special confirmation with Chen Qin.

As the earliest entrepreneurial partner and the current partner, Gu Wenjie is quite willing to believe Chen Qin's words.

Before Chen Qin said that there was going to be an economic crisis... he basically believed it without questioning it.

This time he said he wanted to buy hedging, and he also felt that the idea was not unfeasible.

But he was also really guilty.

After all, although he has little knowledge of the financial industry, he has also heard the term hedging. In today's Wall Street, hedging is a concept that is neither new nor old, and just caught up with the fashion.

Today, there are 2200 hedge funds in the world, controlling more than 15000 trillion US dollars. Last year, they surpassed Internet companies and became synonymous with wealth accumulation.

However, the meaning of "hedging" is not only about financial management, its function has gone beyond the boundary of financial management——

"Hedging risk" is of course the core of it. Under a careful calculation system, hedging can offset important risks while retaining part of the profits. The most classic example is McDonald's hedging chicken in order to maintain the price of McNuggets. Related to the operation of futures, when the chicken market is not good, McNuggets can also use futures as a hedge to maintain product price stability.

But thanks to this powerful function, "hedging" in the market today is no longer just a financial management idea. After the ability to resist risks reaches a certain critical value, it will even become a tool for manipulating the market——

In the past, financial tools can only exert influence on the market in one direction, but hedge funds can enter the market from both sides at the same time, and through ingenious risk operations, they can do things that ordinary capital cannot do. Relying on it to compete with the power of the country——Before the millennium, Soros’ Quantum Fund used hedging methods to destroy a number of small countries in Southeast Asia. Back, relying on this risk hedging game.

And because of this...

"Yes, in theory, as long as we hedge appropriately, we should be able to avoid market risks."

His old partner explained to him, but Gu Wenjie asked: "But how to operate it specifically? I know you have always had a good vision, but I also know some knowledge about short selling, financial leverage, etc. I always feel that the money we have is It doesn't seem to be enough..."

Because the risk comes from the stock market, it seems that you can only go short, but short is not a normal way of playing in the capital market, and there is no possibility of long-term, and it has very high leverage in a natural state, so if it suffers a loss, its Losses are likely to be unlimited.

With the little money in my hand now... even if I want to enter the market, it is a bit unqualified. If I want to hedge the company, not only will the risk increase, but there seems to be a lot of legal problems...

However, his old partner told him: "Don't worry, short selling is certainly not suitable for long-term hedging, but Wall Street itself is not that complicated, so you can just think of it as buying wealth management products. As long as there is demand, banks will naturally provide products suitable for us. , we will find out after listening to it later.”

Then, as if just to solve his doubts, the experts from Deutsche Bank came.

In a cafe on the side of Xiangjiang Road, Shen Nanpeng had already met the three fund managers. After shaking hands, they sat down. Shen Nanpeng opened the online conference channel and introduced each other to his business partners——

Among the people who met him, the leader was Lippmann, a bond manager, with two subordinates, one named Xu Youyu, who was a financial analyst, and the other named Edward, who was... like a recorder.

The manager, Lippman, doesn't seem to like this way of communication. After the conversation started and the introductions were not over, he said straight to the point:

"Gentlemen of Internet listed companies from China, you predict that the economy will go down, and you want to hedge your listing plan..."

"You have found the right person! If you go to others, they will tell you that this is whimsical, there is no such hedging project at all, are you going to sell short building materials or short copper core?"

"But I have a table game in my hands. You seem to think that housing prices will fall, which will affect the economic trend... So come and participate in this table game! Its profit expectations are high. If the financial crisis makes your company go bankrupt, we have a lot of money. The projects in it can also grow a complete company out of thin air for you! By the way, what is the market value of your company?"

Gu Wenjie on the phone was helpless: "We haven't listed yet..."

Xu Youyu, who was the attendant, quickly said, "I'm sorry, sir, my boss always says some inexplicable things...let me explain to you."

He said it again in Chinese, which was quite kind, and then the conversation finally became normal. Xu Youyu explained: "Gentlemen, Mr. Lippmann and I have carefully studied your product requirements, and you seem to think that The housing market is going to go down and then transmit the risk to the rest of the financial sector, right?"

Gu Wenjie said it was right, and Shen Nanpeng also said: "That's right, and we...Peter and I are also very interested in such hedging products, but we don't have much money to do hedging."

Xu Youyu explained: "Then you can try this product. Have you ever heard of CDS insurance? It is a 'credit default swap'. In layman's terms, it is a kind of loan default insurance. It is currently the most widely traded market in the world. Foreign credit derivatives, our CDS is specially designed for real estate bonds. It can be used as a credit protection buyer in the real estate field and a financial product that can earn default losses based on default phenomena. Gains, but if you guys want to hedge your business going public, you should be able to look at this product.”

Gu Wenjie didn't understand the truth: "So we want to buy it? Does that mean that as long as the house price falls, it will start to appreciate?"

"No, CDS insurance is a financial product with a negative spread. If you want to appreciate at any time, you can short-sell mortgage securities or the ABX index, but our CDS insurance requires less principal. If you want to match other products, we also It can be customized accordingly, but these solutions require much more upfront investment than CDS.”

"Okay, let's talk about CDS insurance. To be honest, I don't know much about it. Is it reliable? Who pays the insurance?..."

At this moment, 'Santiago' suddenly explained: "CDS, you can see what their banks are doing. According to the Basel Accord, banks need 8% margin to refinance their loans, and they don't want to pay that money , so the insurance company packaged the risk into CDS and passed it on to the third party. Now their CDS should be like this. Real estate developers need to refinance with loans. We are the ones who help take the risk. If there is a problem with the credit of the debt , then we can get the compensation from the financier.”

This time Gu Wenjie also understood: "So now we are buying insurance for the financing of the mortgage? As long as there is a problem with the credit of the loan, we can get the money..."

Xu Youyu explained: "Theoretically yes, but what I need to explain in advance is that if you buy CDS directly, the insured party may not be able to pay the money. If the company goes bankrupt, your insurance money will eventually be paid. It may not be possible to get it in your hands, but our CDS is different. The CDS improved by my boss, Mr. Lippmann, can be circulated. If the overall credit risk in the market increases, you can sell the CDS to other investors, and its redemption will change. Much easier."

"So it's a gamble." Lippmann, who has been silent for a long time, concluded, "The principle is not important. We arrange everything on the table, and all of this is open and transparent. You only need to focus on Judgment at the gaming table—if your judgment is correct, then as long as the gambling game starts, we can all make money, do you understand now?"

Gu Wenjie thought it made sense, but he still asked a few more questions: "But what if the economic crisis didn't happen?"

"If it doesn't happen, CDS only needs to pay some insurance annuity, and its proportion is very small, only about 1% of the protected capital, which is almost equivalent to nothing." Lippmann said.

"Oh……"

It sounded very good, that Edward handed a document to Shen Nanpeng, and Shen Nanpeng passed the document to other people.

It will take time to do background checks for this deal, but when it comes to this, several participants are quite satisfied-Peter Thiel sounds tempted, "It seems good, Jim, Neil, and Chen from San Diego, What do you think?"

Gu Wenjie couldn't fault it either, and Shen Nanpeng finally asked: "Then how can I buy this CDS?"

Lippmann said: "You can buy the hedge funds affiliated with our bank. We have specially designed a financial management project for this CDS contract. If you are not satisfied, we can provide you with a customized financial management plan."

Gu Wenjie remembered the theory of "financial management products" mentioned by Chen Qin just now, and he was about to agree, but "Santiago" in the channel asked, "Can we just buy CDS by ourselves?"

Lippman smiled: "According to ISDA's rules, the credit protection buyer of CDS must be a qualified financial institution, and individuals are not qualified to participate in the insurance. In addition, CDS itself is a general term for loan default insurance, but each loan The risks are different, and only professional managers can distinguish their qualifications from good and bad, and sell them at the right time, and you should trust the abilities of professionals."

'San Diego' didn't pick any more criticisms, and the conversation is almost over here-after Lippman explained, he said that he still has other clients to see, and then there is actually nothing to say, everyone looked at the pass. However, after several people left, Gu Wenjie still asked impatiently: "Aotian, is this the financial product you mentioned just now?"

This is indeed it—but Chen Qin replied: "Almost, basically found the right one. If the real estate bubble is going to spread to the entire market, then loan defaults should be the only way for it to go. For us, it is almost That's the correct answer."

"So what's the difference?"

"After all, fund companies have to charge management fees, and they can't deposit and withdraw at any time..."

At this moment, Chen Qin still didn’t tell the truth. Others didn’t pay much attention to what he said as a joke. After all, it is natural for fund companies to charge management fees, which is also a kind of risk hedging—for complex financial products A financial talent with knowledge in all aspects is an indispensable helmsman. CDS itself is not a currency, it is a contract. There is obviously a huge difference between profitable CDS and unprofitable CDS.

As the inventors of liquid CDS, Lippmann and his team obviously have no one more suitable as a manager than him.

However, as a reborn person, Chen Qin has never personally experienced this era. He has read "The Big Short". Although CDS itself is a controversial financial product, its uses and risks are quite obvious——

CDS was not born for shorting. The Tianchao market, which does not allow shorting, also has a mature CDS system. Of course, that is 16 years ago.

For Internet practitioners in China, the closest to the structural debt risk is probably the Ant Financial incident——Ant Financial relied on the credit certificates they created through complicated means to make the margin as low as 0.1%. Of course it is unreasonable, but of course capital will expand, Wall Street is also in this dangerous juncture today, and they will not take an iron fist, so of course they can increase leverage as much as they can.

CDS is the fulcrum of Wall Street leverage in this period. It itself should be a reasonable financial means for risk replacement. However, the risk accumulated by excessive leverage in real estate has obviously exceeded the carrying limit of CDS. Once housing prices fall, the mortgage of subprime loans People will default on a large scale, and CDS can earn a lot of liquidated damages at that time. If you want to buy with the goal of shorting the market, then CDS should be the standard answer.

But... how should I put it.

The sudden hedging this time was in itself Chen Qin’s idea. He had previously agreed to buy hedging for the IPO. The logic itself should be fine, but he is a reborn person after all. Of course it is true to say that he wants to avoid the financial crisis. From this From a perspective, there is actually not much difference between hedging and avoiding, but...

"Sorry to bother you again."

After Lippman left with his two subordinates, Shen Nanpeng was sitting in the cafe, talking to Gu Wenjie and the others, looking at the documents left by Lippman, when suddenly a person came by.

This person was a well-dressed man in a suit, and he looked a little familiar. Shen Nanpeng was taken aback for a moment before he realized that he stood up and shook hands with him: "Oh, you are that... Wilson?"

The man is the clerk just now, but his name is not Wilson: "You can call me Edward. I am the local assistant manager of Deutsche Bank, engaged in providing bond information."

"Hello, please sit down."

Edward smiled and said, "Don't bother me. Actually, I want to talk to Mr. Peter Thiel. When I was working in Silicon Valley, my previous company received investment from Mr. Peter Thiel..."

Peter Thiel on the computer smiled casually: "I remember you, have you ever worked at Flick? I didn't expect to meet you here."

Edward chatted with him in a polite manner, but of course he didn't come back just to get close, and the conversation heated up the scene, and he asked: "A few people want to buy the CDS fund of Deutsche Bank, but do you know the name of this fund?" How much is the management fee?"

"20%?"

"Yeah, there's a 3% management fee, and like that Mr. Santiago said, Deutsche Bank's CDS funds are very expensive, and that means Mr. Lippmann needs to put a lot of money into positive spreads. In the wealth management business, the CDS positions actually used to buy are very limited.”

Shen Nanpeng gradually realized what he meant: "So what's your opinion?"

"I have a friend who has nothing to do with me." Edward said, "He opened a fund company, which is also officially registered, and will buy quite a lot of CDS insurance from Deutsche Bank, and its management fee is only 1% .”

Shen Nanpeng said: "But Mr. Lippmann is the inventor of CDS, his experience should be worth that money, we don't know much about the fund you mentioned."

"We buy the same product, and we buy more CDS." Edward explained, "Although it is unknown, it has been established for more than a year and has been engaged in CDS transactions during this period. I can personally reputation to assure its reliability."

As he spoke, he took out an investment document like a magic trick, showed it to Shen Nanpeng, and then showed it to the laptop camera: "As a fund of my close friend, I invested 900 million US dollars in the fund myself, and I pledged I bought my house and borrowed all the money I could borrow. This is my entire net worth. If you buy this fund, I cannot guarantee that it will make money, but I can guarantee that you will make the same proportion of money as me. We have provided the most stringent third-party audit company for this fund company, and we can guarantee at least fairness."

(End of this chapter)