Reboot 2003

Chapter 201 109: 'Until Default' (Three in One)

Where did the $[-] million come from?The answer is that it is also mortgaged.

Although this old partner is still quite capable, he also made a small fortune in the past two years - it seems that the money is entirely his own, but he has subsequently invested in many things.

For example, Weibo, such as "Three Kingdoms Online", most of them are built with his money. These two products have not reached the profit cycle yet.

Moreover, he also made mobile phones. Recently, he and ZTE built a large-screen mobile phone. It is said that a corporate corruption scandal broke out in the middle of the development. It seems that the situation is not good, but it did cost a lot of money.

So far, that money has probably been spent almost the same.

Of course, it is very simple to raise funds. This year, Facebook’s valuation is 5 million. If he wants to raise funds, investors will probably be able to squeeze through his family’s threshold.

However, except for angel investors who are too small in scale and cannot be managed comprehensively due to cost considerations, it is impossible for serious investment institutions to invest money in technology companies and let them play finance. Of course, if they want to cash out part of their equity, they can, but this old man My friend obviously takes his equity very seriously, and he has no intention of selling it.

And this time the money...can only be used for mortgage financing.

Perhaps it was because Gu Wenjie pledged 1 million yuan—of course, the 1 million yuan is strictly speaking not a pledge loan. After Yahoo invested [-] million yuan, it was directly withdrawn because of the need for complicated cross-border acquisitions, and Gu Wenjie himself The equity has become a mortgaged share.

But Galaxy Software Pledge is a real loan.

In fact, the current Galaxy software is much bigger than Kuaikan Media.

Even the ecology of those free software has become very valuable now.Through the obvious benefits of excellent software quality and first-mover advantage, coupled with the hidden means of pre-installed software and bundled installation, a series of Galaxy Software products now have actual commercial value, plus Galaxy Music, Shuixiegetai and Weibo, which are directly held by Galaxy Software...

In fact, it is already worth much more than 5 million.

However, for equity mortgages, usually the mortgager is a listed company, and the stocks of listed companies are easy to circulate. For banks, they are often high-quality mortgages second only to real estate.

Maybe it's because the galaxy software hasn't been listed yet, or maybe it's to reduce the risk, so he only mortgaged [-] million in the end...

But is it really necessary to do this to buy a financial product?

Gu Wenjie felt that he couldn't understand it, but the answer was not difficult to understand, and he should know it soon.His old partner told him that next time he would introduce Gu Wenjie to two people...

Early the next morning, Gu Wenjie met the first person.

In the Goldman Sachs Building in Los Angeles, Gu Wenjie met a silver-haired old gentleman in the top office.

"Hello, Mr. Gu Wenjie... We have known your company for a long time. I heard that you have brought an Internet company to the market. It is really amazing."

"Please don't be cautious, just treat this place as your own home. By the way, coffee or tea?"

"I asked a friend to specially buy a cup of Longjing tea. This is the most well-known famous tea in China. Although it is only an introductory category for tea lovers, it is just right for foreigners like us who are just getting started... Do you like drinking tea? Gu?"

"Well, please forgive me for being such an old man who likes to talk to himself, they say your name is Jim, but I'm not sure if you should follow your cultural customs and call you by your first name... To be honest, I I have always felt that Chinese syllables are very powerful. Two years ago, an old friend of mine specially invited a Chinese linguist to give him a Chinese name. Recently, I was also thinking..."

The old man was so kind, although he had a high status, he was very kind, sitting behind his desk and talking to Gu Wenjie like a kind elder.

A young man came over to make tea for Gu Wenjie. Gu Wenjie smiled and said, "Hello, sir, this is actually not the first time I have come to Goldman Sachs. The underwriter of my company's listing is Goldman Sachs."

The old man nodded and flipped through the documents in front of him: "I am not responsible for the listing business, but you seem to be planning to conduct some CDS transactions on behalf of the Santiago Group, right?"

"Yes, I am not a member of the San Diego Group, but I have a deep partnership with him...they are a deep partnership, so I want to know how much Goldman Sachs can cooperate with us..."

"The answer is maximum cooperation." The old man smiled kindly and pressed the button on the table. "Of course, it can even exceed the maximum limit. Please call Lin Meijun from the bond department to come over."

“Wait, didn’t I come here to talk about that mortgage financing that just closed? My partner told me that his firm raised $5 million through Goldman Sachs.”

The old man smiled and said: "I know, this is a deal that is very beneficial to both of us. We all enjoy it and are looking for further cooperation space. I heard that you and San Diego both want to seek cooperation in the CDS market. Investment, but you can't find the qualifications to enter the market, Goldman Sachs can be your counterparty."

Gu Wenjie was a little confused: "But we asked Deutsche Bank before, and they said that we don't have ISDA investment qualifications..."

The old man said kindly: "This is not a big problem. After all, 5 million is not a big deal for Goldman Sachs, and the market size of CDS was only 1 million US dollars ten years ago. At that time, I was still in Morgan Sachs. Danley, but now it is a big market of more than 200 billion, it should be more open."

Gu Wenjie opened his mouth, not knowing how to ask the question. He felt like a repeat student who came to the senior mathematics office, but felt that something was wrong.

Of course, Goldman Sachs' olive branch itself should be very helpful, but Gu Wenjie is always a little vigilant. He pointed out: "I didn't say that we will spend all 5 million to buy this kind of financial products."

The old man smiled and said, "Of course it's up to you, but CDS is a very good project. Although it has high risks, the rate of return is also high. Think about it, if a 1 million CDS is paid out, it can get 100 billion profits, no financial product can make more money than it..."

Gu Wenjie said: "As far as I know, the shortest insurance period for CDS is four years, plus handling fees, it is impossible to earn 1 billion from 100 million."

"Oh, okay, but even so it's worth a lot of money, and its risks are worth its rewards."

Gu Wenjie felt more and more strange, so he probed further: "But it seems that you are planning to stop raising interest rates recently?"

"Hahaha, the country can't control this place, our country advocates a free market, those usurers should be out of luck!"

The old man enthusiastically introduced CDS, a promising investment project, to Gu Wenjie. He said that the mortgage default rate had increased recently and that Bullock Tax Statistics Company was experiencing thunderstorms. Gu Wenjie still wanted to make a few more criticisms, but he just At this moment, someone came in - "Hello, Mr. Sen, I am Lin Meijun, your exclusive customer service manager."

"This is Lin Meijun. Although 5 million is just a small deal, it is an important turning point for a novice trader to determine his career... This client is handed over to you, Lin."

The old man bowed his head and started to work by himself, while Lin Meijun sat opposite Gu Wenjie, with his slender legs close together and his hot chest raised, he talked with Gu Wenjie about CDS. The introduction of risks was a lot briefer, but the purchase process was straightforward. A little more detailed.

As for the problem that Gu Wenjie was worried about, it was solved at once - Lin Meijun has customized an authorization document for Gu Wenjie in advance, which can perfectly bypass ISDA's qualification restrictions. If they are willing, they can even sign it now, and Lin Meijun As an intermediary to buy CDS.

Of course, there is no need to rush into this deal. We can slowly get to know each other before discussing it.

When things came to this point, everything went smoothly, but thinking of the mortgage, Gu Wenjie still felt that there was a big problem. After understanding the situation, Gu Wenjie hurriedly bid farewell to Goldman Sachs. He had a lot to say to Chen Aotian—Goldman Sachs was really so kind. ?If this CDS is really so profitable, why didn't Goldman Sachs buy it by itself.

Before leaving, Lin Meijun gave him a business card and told him that they could get to know each other more. However, Gu Wenjie felt that he still needed to have a good talk with his old partner and ran away. After going out, he saw a text message. Chen Aotian said that he was sleeping, but There is one other person I could meet who could be helpful in this transaction, just this afternoon.

When is this, and I don’t know how he can sleep, but Gu Wenjie is really at a loss. The other two partners have already quit. He is walking on the streets of Los Angeles alone, and he doesn’t know what’s next. Not really supposed to work with Goldman Sachs...

Fortunately, when I was looking at my phone, a call came quickly.

It was Paulson, the owner of the 'Paulson Opportunity Fund', who asked him if he wanted to invest.

Gu Wenjie recalled the conversation just now, and asked him: "Do you know that housing prices have started to rise recently?"

Paulson was frank: "To be honest, we have been shaken recently, but we will only continue to be short. If you still want to continue, you can come to us."

Gu Wenjie didn't say anything more. Of course he no longer needs other funds, but it seems that market expectations are obviously different from what Goldman Sachs said. Even short sellers like Paulson are not optimistic about the prospects...

No, there is another person.

Gu Wenjie called Lippmann's office. Lippmann is the creator of tradable CDS. If we want to talk about the prospects of CDS, probably no one knows better than him.

It's a pity that Lippman is not here today, but Xu Youyu, the Chinese from last time, answered the phone: "Hello, Mr. Gu Wenjie, I didn't expect that Edward guy to do such a thing, but you seem to have gained a lot from this accident." Small benefit, congratulations."

Thinking of Edward who jumped off the building, Gu Wenjie felt that it would be impolite to talk about celebrating like this, so let's hurry up and get down to business.

"Xu, will our CDS be triggered? Why is the actual default rate so high now, but market participants have no reaction at all?"

Talking lightly and deeply, Gu Wenjie didn't expect the other party to tell everything he knew. In fact, Xu Youyu didn't answer him at that time.

But in the evening, when his old partner, who was obviously working in the East Eighth District, got up, he said that the second person he was meeting was in Los Angeles recently, and asked him to wait... he was a Democratic senator.

During this period, someone called him, and it turned out to be Xu Youyu, a Chinese from Deutsche Bank. The other party said that he had contacted a friend, and they both wanted to meet Gu Wenjie.Gu Wenjie said that he still had an appointment in the evening, and the other party said that a cup of coffee is enough, mainly to talk about the CDS that Gu Wenjie was asking about before.

After Gu Wenjie left, Xu Youtao brought someone with him and introduced him: "Mr. Gu, this is my friend Ji Xianglin, the actuary of the Imperial Bank of Canada..."

It should be a very common thing to recommend professionals to big donors, and Gu Wenjie didn't care.

Gu Wenjie still wanted to know about CDS, and Xu Youyu answered him seriously: "Our mathematical model judges that the default rate in the mortgage market is very high, but the increase in the default rate in the mortgage market will not directly increase the risk of CDS compensation, even if the housing price has been long-term Stagnant, and the yield associated with CDS is not outstanding."

Gu Wenjie asked, "Why?"

"Because we have a counterparty." Xu Youyu said, "If someone is short, someone is long."

"I know, I was in Los Angeles recently, and a lot of people were trying to sell me real estate investments, but housing prices have clearly stopped rising. I heard that some developers, in order to keep people busy, decorated curtains and cars and pretended that their houses were occupied. live, so that home buyers don’t lose confidence..."

"It's one thing that it can't rise. Even according to internal data, the default rate is now very high, but this is housing prices, and our investment field is in the bond market. Some people have used some methods to support the shaky real estate bond market. Let the market not be subject to too much volatility even if the default rate soars..."

Gu Wenjie nodded, and Xu Youtao asked him: "This tool is called CDO, have you heard of it?"

Gu Wenjie vaguely heard it in other places, and his old partner frequently mentioned this term to him a few days ago: "Is it the kind of product that packs a lot of ABS? I saw that many of the CDS of the Edward Fund are credit mortgages of CDOs. "

But Xu Youyu said to him: "Yes, but the connection between this tool and CDS is very complicated. Why don't I let the teacher Ji next to me introduce it. He is the invention of the 'Gaussian connection function' used by CDO. Man, I think he should understand this financial product better than 99% of the people on Wall Street."

It was only then that Gu Wenjie knew that Xu Youyu had recommended him to someone who was not an ordinary person, so he quickly said that it was an honor. Ji Xianglin looked like a very lethargic bank clerk, and he nodded kindly and said it was all right... As for the question Gu Wenjie asked, he also used a common example Let’s explain——

"Whether it's short or long, today's real estate financing product is called MBS, which is equivalent to selling the mortgage that the bank has received directly to a third party..."

"But any MBS is risky. No matter how well-off, honest and reliable the person is, there is a possibility of repaying the loan, just like everyone may die suddenly. For himself, Death from illness and death from old age are both possible, but the probabilities are different."

"Then if we regard the default of MBS as a person who gets sick and dies, even if he is very healthy, his security cannot be as safe as the U.S. Treasury bonds, so in order to dilute the risk, we let the MBS be combined and packaged with each other, and then sold together... ..."

"Wait," Gu Wenjie heard this, and remembered a word he had heard before, "Is this a hedge?"

"It can be counted, but not completely. Hedging is to offset the risk from the opposite direction. It will offset the risk through probability, just like letting a married couple live in the same house. The probability of one dying is much lower..."

"In addition, we can also allow the elderly couple to take care of each other, although if one of them dies, it will definitely affect the health of the other."

"But if one of them is sick, the other will also take care of his health to a certain extent, increasing the possibility of his recovery. Of course they are not equal, but this kind of relationship like marriage can make them better against risks. Ability……"

"But it's unfair, isn't it?" Gu Wenjie asked back. "The elderly couple you mentioned may have one person who is not sick or disaster at all, but the other person is completely a drag."

Ji Xianglin said without energy: "People will always die, the difference is only sooner or later. For this society, we need to keep them alive as much as possible, or let their families live."

Gu Wenjie shook his head after hearing this: "But even for the entire financial market, is it reasonable for CDOs to combine non-performing assets and sell them to customers?"

"This is indeed unreasonable, but this is not the original intention of my formula. The formula we proposed is only used as a measure to allow Wall Street to judge the comprehensive risk of a combined family 'until default'." Ji Xianglin said without energy.

Xu Youyu also concluded: "Although it is not very ethical, CDOs use this method to tie all MBS together. Unless housing prices really fall, then the floating funds will dilute the risk of some assets to the entire industry. So even if the default rate rises on a small scale, the entire bond market will not be affected too much.”

"Well, no wonder..."

"what happened?"

"The people from Goldman Sachs just wanted to lure us to buy a large amount of CDS. It seems that they are very confident in the current CDO market..."

Gu Wenjie almost understood what was going on, and talked to these two people again. Needless to say, Xu Youyu came here for this. After solving Gu Wenjie's question this time, he chatted with him again Regarding the mortgage, Xu Youtao chatted about the recent financial market, exchanging pleasantries without saying anything.

Xu Youtao introduced Ji Xianglin because Ji Xianglin wanted to use this relationship to inquire about the bankruptcy and liquidation of Edward Fund. The bank he worked for was very interested in part of the assets of Edward Fund.

Gu Wenjie felt that this was a talent, and tentatively asked Li Xianglin if he had any plans to open his own fund.

Ji Xianglin said that he is actually a little interested, but short-selling institutions do not feel safe, and he still wants to develop in a big bank or a serious investment institution.

Gu Wenjie was talking, and just at this moment, a call came, and it turned out it was Chen Aotian.

"Hello, Old Chen?"

"Where are you?"

"I'm waiting for your news, where is the senator?"

"He has to wait a while, but when you meet him later, you have to say this..."

Gu Wenjie hurried to the door, but he had more important matters to discuss with him.

"Are you really not confused?" Gu Wenjie asked him directly, "My business is not doing well, and I mortgaged [-] million to buy the CDS. Do you know that Goldman Sachs expects you to lose all the money and then take away your company? None of your companies are listed, and now companies like Shanda and Google want to buy you, so Goldman Sachs secretly gives you a loan, and wants you to lose all your money so that they can buy your equity.”

Chen Aotian on the other side of the phone asked him curiously: "Why do you think that Goldman Sachs is messing with me? He is willing to sell CDS, of course it is a good thing for us."

Gu Wenjie said: "However we buy CDS, we are trading against them, and if their CDO does not collapse for a day, the CDS in our hands is just waste paper..."

On the opposite side of Dayang, Chen Qin, who had just found time to chat with Gu Wenjie during the break, was holding a mobile phone in the grove, and was a little dumbfounded for a while.

CDO is indeed a financial product that is beneficial to the market. It has stabilized bond products for a period of time, but it will eventually die. This tool is still useful when housing prices are flat, but when housing prices fall, no matter how good-looking CDO is, it will not be worth it. Not to mention the fact that most CDOs are not as good-looking as they look...

So Chen Qin changed the topic: "By the way, how is the talk between Goldman Sachs and you?"

Gu Wenjie replied: "They are so enthusiastic, they wish I could return the [-] million to them on the spot."

Chen Qin was curious: "So you are afraid?"

Gu Wenjie said angrily: "Otherwise? It doesn't matter to me."

"So Goldman Sachs made a mistake." Chen Qin explained to him earnestly: "Don't worry so much, the basis of our judgment on the future is the house price, and he wants to ask us to buy CDS, so let's buy CDS, not only ordinary CDS, but also If I want to sell short CDO CDS, I want to see who can win in the end.”

Gu Wenjie was a little depressed: "I mean you should at least keep some of it. No matter how optimistic you are, it would be a bit of a problem to invest all of [-] million..."

After talking about it halfway, I feel that it is a bit meaningless to say this now, and Chen Qin didn't explain it anymore... After all, although short selling of real estate bonds is already a big industry today, and many data are open secrets, but in today's In the current market, it is still not easy to accurately judge the Wall Street turmoil that will start next year. The long-short fight is still fierce. The public feels that the bulls have more energy, but this is an opportunity for the shorts to leverage greater profits.

So in any case, for the reborn, as long as they buy CDS, even if they can't make a lot of money, it is quite simple to make a small profit.

But now that you are here, you will naturally want to make more money. If you want to make more money, of course there is no big problem in operation. You just need to buy CDS desperately. In history, some people really made money like this.

It's just that for negative-sum games, getting chips is never the most difficult thing, just like making a lot of money in a luxurious casino, which itself is not very dangerous, how to get out of the casino is the most difficult thing - of course, Generally, casinos are not so unaffordable to lose. A customer can lose a few million at most in a casino.

But what if it is hundreds of millions, or billions of profits?

"It's fine, anyway, the company is yours, so you can figure out what to do..." Gu Wenjie asked the next question, "When will your senator come? I'm at the cafe in the financial district right now. Xu Youyu introduced me to an acquaintance named Ji Xianglin, he seems to have a lot of research on CDO..."

Gu Wenjie didn't continue to talk about the mortgage, and Chen Qin didn't call to talk about it with him.

Next, the second person that Gu Wenjie wants to meet to solve the problem is almost here, and that is a Democratic senator...

Of course, it wasn't the one surnamed Ao—although Lao Xu added his contacts before, but as a grassroots leader, that person now has many fans and no shortage of donors, so dealing with him is not very cost-effective.

What Gu Wenjie wants to meet today is another Democratic Party named Joseph Bidden. He has already had some contact with Galaxy Software before, mainly for some legal contacts and contacts, but now he has to continue to communicate with him except for the previous purpose. It's close, and you have to consider how to end this short-selling plan. At this time, you have to think about this future Democratic politician. Of course, you don't want to find nothing.

The reason for looking for him is quite complicated to explain, which is why Chen Qin is now in a hurry to call Gu Wenjie and "ventilate" with him in advance.

But before Chen Qin had time to say it, Gu Wenjie heard a familiar name—"You mean Ji Xianglin?"

Gu Wenjie said: "Yes, it is the Chinese who provided the Gaussian connection function to CDO... Ji Xianglin, the inventor of CDO's valuation formula, I want to invite him to be our fund..."

It's a coincidence that such people can continue to be encountered on Wall Street.Chen Qin's heart moved: "He is not willing?"

"Yes, he probably thinks it's too dangerous..."

"That's just right." Chen Qin was very happy, "When you meet with that senator, you can take this Ji Xianglin with you. Anyway, what the bank is doing now is disgusting to people. Find this kind of scholar to talk to the senator. , maybe we can still be good people!"

(End of this chapter)