The strongest peasant city

Chapter 1666 Subprime Mortgage Crisis
Under Hong Tao's mental preparation, Fester ate a hearty meal of Huaxia Sichuan cuisine, and he didn't stop eating until his tongue was completely numb, his body was sweating so hot, and his stomach could no longer hold anything.Higgins, who didn't know much about Huaxia cuisine, became very interested in Huaxia cuisine this time. During the banquet, he complained more than once that Hong Tao didn't introduce such delicious Huaxia cuisine to him before, which made him feel sick. He missed a lot of good food.

After eating Chinese food, several people came to Higgins' securities investment company on Wall Street.Although Feisted was a man of the hour more than ten years ago, he couldn't bear the passing of time. Except for Higgins, other people in the securities company were very unfamiliar with Feisted, but this was also in line with Feiss. Virtue, being enshrined every day like a god, is not conducive to carrying out work after all.The four of them got into Higgins' office, and Higgins carefully pulled down the shutters of the office, and said to Feisted, "Fested, listen to Mr. Li, you found that the stock market in country M will have a crash in the near future. Huge fluctuations, but I think the stock market in country M is very stable, it doesn't look like there will be fluctuations, but I know you must have your reasons, let's listen to them.

This was not what Hong Tao and Li Xiaogang wanted to hear, and they couldn't help but cast their eyes on Fester.Fester nodded, and said slowly, "Higgins, you should know what the subprime mortgage crisis is, right?"

"Subprime mortgage crisis!? Fester, what do you mean? Are you going to tell me that the subprime mortgage crisis will explode in Congress?" Fester's words startled Higgins, his eyes widened. asked in a murmur. "Wait, what is the subprime mortgage crisis?" Hong Tao asked in confusion.This is exactly the question in Li Xiaogang's mind. ~ Hearing Hong Tao's question, Fester remembered that in this office, there were two rookies who knew nothing about finance and the stock market.So he explained that "the so-called subprime mortgage crisis is also called the subprime mortgage crisis. Subprime mortgage loans mean subprime mortgage loans. "Secondary" corresponds to "high" and "excellent". The term "mortgage crisis" refers to low credit and low debt repayment ability. As the name suggests, subprime mortgage refers to bringing money to those who have poor repayment ability and low credit. The financial turmoil caused by the violent stock market volatility is called the subprime mortgage crisis.

Fester originally thought that Li Xiaogang and Hong Tao would understand after this explanation, but they became even more confused. Li Xiaogang asked in puzzlement, "Since the other party's ability to repay the loan is poor and the credit score is low, what should the bank do?" Why do you still want to lend money to them?" Higgins chuckled and said, "Isn't it for profiteering? The reason why banks in country M lend money to those who have little income and low personal credit records is because Lending institutions can charge higher mortgage interest than mortgages with good credit ratings. When housing prices are soaring, the risk of loans is actually very small due to the sufficient value of collateral, and they can also obtain huge profits. This is a kind of It is a relatively common mortgage method. Fester, you said, this kind of subprime loan will cause problems?"

Fester nodded, and said in a deep voice, "Of course! Although this kind of loan is a very good way for banks to make profits when housing prices are rising all the way, when housing prices fall, the collateral value is no longer sufficient. , and the income of the mortgagor is not high, at that time, the subprime loan will turn into a nightmare. What's more dangerous is that many investment banks in country M are now powerful enough to earn huge profits, and generally use 2 to 3 times leverage operations , this is even more dangerous." Having said this, Fester turned his head to look at Li Xiaogang and Hong Tao, and seeing question marks on their faces, he couldn't help but smiled wryly, and explained, "Let me give you an example, Assuming that a bank’s own assets are 3 billion, 3 times leverage is 9 billion. That is to say, the bank borrows 3 billion funds for investment with 9 billion assets as collateral. If the investment profit is 5%, then it will get 9 billion Compared with its own assets, this is a huge profit of 5%. Conversely, if the investment loses 15%, then the bank loses all its assets and still owes 5 billion. When I say this, you should be able to understand Bar?"

Li Xiaogang nodded, and said with a wry smile, "Every row is like a mountain, this sentence is absolutely true." Hong Tao nodded in agreement. "Fest, the risk factor of leverage operation is indeed very high, but this is already a very mature operation mode in country M, so there shouldn't be any problem?" Higgins asked, looking at another porridge.

Fester shook his head and said, "If it's just like this, maybe there's nothing wrong with it, but the greed of human nature is endless, and it brings the devil into this world, that's bsp; risk, so follow the normal rules , Banks do not carry out such risky operations. So someone came up with a way to use leveraged investment as "insurance". This kind of protection is called CDS. For example, in order to avoid leverage risks, the bank found Institution B. Institution B may be another bank, or an insurance company, etc. Say to B, how about you insuring my loan against default, I will pay you 5 million insurance premiums every year for 1 consecutive years, a total of 5 million, if If there is no default on my investment, then you will get the insurance premium for nothing. If there is a breach, you will have to compensate me. Think, if I do not breach the contract, I can earn 9 billion, of which 5 million will be used for insurance. I can still make a net profit of 5 billion. If there is a breach of contract, there is insurance to pay anyway. So this is a business that only makes money but not losses. I did a statistical analysis and found that the default rate is less than 9%. If you do business with 1 companies, you can get a total of 1 billion in insurance money. If one of them defaults, the compensation amount is no more than 5 billion. Earn 5 billion. Both B and B believe that this is beneficial to themselves, so they immediately make a deal, and everyone is happy.

"Yes! I have also been in contact with this kind of CDS contract." Higgins said with a slight frown. "Yes, you are in the stock market, but you can come into contact with this kind of contract that only appears in the loan field. This is the most frightening thing. CDS can be traded and circulated in the financial market like stocks. , this 5" means that cds can be speculated arbitrarily like stocks!Did you know that after repeated hype, bsp; the total market value has reached tens of trillions of dollars. Once such a huge bubble bursts, the impact on the entire financial market of country M will be immeasurable.

Hearing Fester's words, Higgins shivered involuntarily. Thinking of the terrible consequences, Higgins felt very dizzy.Seeing that Higgins' face was a little pale, Fester smiled, and then said, "Under the background of rising housing prices and lower interest rates, this bubble will not be a problem, but you must know that housing prices cannot go up forever. Once housing prices fall and interest rates rise, those subprime mortgage holders with low incomes will immediately feel extremely pressured to repay their loans. Under such heavy pressure, they will soon collapse and default. Banks The contract took back the house, but because of the falling house price, they will find that even if they sell the house, the money they get is not enough to make up for the loan plus interest, or even the principal of the loan. If there are only one or two cases like this The situation is fine, but if there is a large-scale explosion, the banks and other financial institutions in country M will immediately face the danger of insolvency and bankruptcy!
Higgins, who spoke bluntly, had cold sweat on his forehead, and his body trembled.Seeing that Fester and Higgins were talking so lively, Hong Tao and Li Xiaogang had little knowledge and were full of lawsuits.Hong Tao finally couldn't bear it any longer, coughed, and said, "Fester, please forgive me for interrupting, but can you tell me how we can make money from this subprime mortgage crisis?"

Fester chuckled and said, "Mr. Hong, the financial market is actually an intertwined and interlocking whole. If there is a problem in any link, it will affect the whole body. The impact of the subprime mortgage crisis It will be transmitted to the stock market soon, and by then, we will be able to make a lot of money in the stock market." Higgins said to Hong Tao and Li Xiaogang through the interface: "The reason is actually very simple. The subprime mortgage crisis will make many banks in country M And financial institutions are facing huge losses, or even bankruptcy, which will inevitably cause the stock market in M ​​country to plummet. We can take advantage of this to short the stock index and buy a lot of stocks. The money we can make at that time must be astronomical Of course, the premise is that we have enough funds to invest.”

Li Xiaogang frowned, and said, "I have about 4000 billion yuan on hand, and the funds should not be a problem. However, I still don't understand how the sharp drop in the stock index will make us make money? Don't the stocks go up and the more we earn? Also, what is a stock index?"

Higgins said: "The stock index is actually an indicator. It is the weighted average of some representative stocks in the stock market, which to a certain extent represents the trend of the entire stock market. However, the stock index is a margin transaction, which means Now, you can fight big with a small amount. Now the margin requirement for stock index operations in country M is 4000%, that is to say, you can buy futures contracts worth 11 trillion yuan with 11 billion yuan. There are two types of futures indexes: long and short. Take the Dow Index of Country M as an example. Now the Dow Index of Country M is 1 points, and the value of each point is about ten dollars. If it rises to 12 points, then your profit is 11 points minus 1 points, and then multiplied by ten, which is $12. But if the Dow drops by [-] points, it means You lost $[-]. If it was a short sale, you sold a lot and got $[-]. After the contract expires, the Dow drops from [-] points to [-] points. You only need to repay your The securities company that opened the account has [-] US dollars. In this way, you will earn [-] US dollars. Conversely, if the contract expires and the futures index rises from [-] points to [-] points, then you will have to Pay the securities company [-] US dollars, so you will lose [-] US dollars. The futures index is actually as simple as that.”

Higgins said it was simple, but it still made Hong Tao and Li Xiaogang dizzy. Li Xiaogang couldn't help but let out a wry smile, and said faintly: "I think we should not get involved in the stock market. Just figure it out!" Higgins hurriedly said, "That's impossible! This time, there are more than 4000 billion funds, and if something happens, the two of us can't afford it."

Li Xiaogang shook his head and said: "In business, there are profits and losses, and the risk of stock trading is especially high. I understand all of this. You two just feel free to operate. If you make money, you will also have a share, but if it is I will definitely not blame you if I lose, you can rest assured." Higgins and Fester looked at each other, and Higgins said: "Since Mr. Li and Mr. Hong trust us so much, we will do our best without saying anything. We will do our best to give the two of you a satisfactory answer." Feisted said, "Mr. Before it explodes, if you two can't wait, then we have to take the initiative and find a way to detonate it in advance."

Li Xiaogang frowned, and said in a deep voice: "I'm running out of money and need money urgently, so I'm afraid I don't have any extra time to wait. If there is a way to detonate it in advance, that would be the best." Sid nodded and said, "If that's the case, then I have to ask Mr. Hong Tao to come forward to help." Hong Tao asked full of doubts: "You want me to come forward? What do you do?"

Fester said: "I said before that the reason why the subprime mortgage crisis has not yet exploded is because the housing prices in country M continue to rise, bank interest rates continue to fall, and the repayment pressure of subprime mortgage holders is not great. Therefore, if we want the crisis to break out early, we can only start from these two aspects. One is to find a way to bring down the housing prices in country M, and the other is to increase the interest rate! To achieve these two points, we must rely on Mr. Hong Influence in the borders of M."

Hong Tao pondered and said: "Although I am the president of the Chinese Federation, I am not from country M after all. No matter how powerful the Chinese Federation is, it will always be a strong dragon that cannot overwhelm a snake. My influence may not be as powerful as you imagined. So powerful, I'm afraid even if I step forward, I won't be able to get the effect we want!"

(End of this chapter)