The Son of Finance of the Great Age

  Chapter 484 Legend of Never Withered Flowers

After 9.11 and the war in Afghanistan, the United States urgently needs to stimulate its local economy. Under such circumstances, the Federal Reserve has opened the floodgates, and the trade deficit over the years has caused a large amount of US dollar funds to be invested in long-term US treasury bonds with the lowest risk. Therefore The Federal Reserve had to implement quantitative easing policies to release liquidity and stimulate economic growth.

Under such circumstances, the size of the financial market and transaction funds are also growing exponentially, and various derivatives and leverage are emerging in different ways. The prosperity of the real economy has brought greater prosperity to the financial market. Suddenly, certain industries are in an extremely dangerous situation.

  In this era of blooming flowers and raging fire, only a few people have discovered the potential crisis, and John Paulson is undoubtedly one of them.

  In fact, when CDOs were popular, Wall Street did not think of the risks, so they invented CDS to resist such risks.

  CDS (Creait

  DefaultSwap), that is, credit default swap, also known as credit default swap, is essentially a kind of insurance against loan default, and a kind of over-the-counter credit derivatives.

   Simply put, CDS is a kind of insurance for CDO. When CDO defaults, CDS will compensate for the losses caused by CDO default. As a corresponding consideration, the party issuing the CDS will charge a certain fee every year as an insurance premium.

   As for the degree of correlation between the two and how the relevant price is calculated, it all depends on Zhongshi’s epoch-making paper.

  Now the market is booming. As long as housing prices continue to rise, mortgage institutions dare to lend to anyone, including those who cannot afford the richest man or the regular monthly repayment of principal and interest. Because once they fail to repay the loan, the mortgage agency has the right to take back their house, and the house has increased in value, so the mortgage agency still made a lot of money in the end.

   What's more, they can also package and sell these non-performing loans to investment banks, so that they can make CDOs and sell them in the market, which indirectly reduces their risk.

   Now, what John Paulson and his partners have to do is to short sell CDOs as much as possible, and buy CDS at low prices at the same time, betting in two directions at the same time. Because if the CDO credit rating is high and the default risk is low, the corresponding price of CDS is also low, and once the CDO has a major default risk, the corresponding CDS price will immediately rise.

   This is their strategy!

  After Paulson rambled on and recounted his reasons for shorting, research results, and strategies for shorting, an entire hour had passed. He carefully wiped the sweat from his forehead, carefully looked at Zhong Shi's expression, and found that the other party didn't look dissatisfied or impatient, so he secretly breathed a sigh of relief.

  In fact, there are risks and loopholes in Paulson's investment strategy. Because the future is uncertain, no one can tell, and the current US real estate market does not see any downward momentum, which means that for a period of time, his strategy may suffer the risk of losses.

  "Great strategy, now I just want to ask, how much should I invest?"

To Paulson's surprise, just when he was panicking, Zhong Shi on the opposite side suddenly showed a smile, stretched out his hands and patted it twice to show his approval, and then looked at Paulson seriously. , asked with a serious expression.

  The other party agrees, and actually agrees with his own strategy! At this moment, great joy immediately filled Paulson's whole body, and even gave him a feeling of ecstasy, which was much stronger than the pleasure he got from smoking marijuana when he was young.

Paulson didn't doubt the other party's professional level at all, nor would he think that the other party didn't estimate the risks involved. After all, if a famous person like Zhong Shi was just purely hot-headed, or after more than an hour of his own experience Convincing, it is ridiculous to decide to invest in yourself so happily.

  The only possible and reasonable explanation is that Zhong Shi, like himself, also discovered the huge and false "prosperity" bubble in the US real estate market.

While Paulson was still wandering for nine days, Zhong Shi readily took out the check book from his pocket, and after a little thought, he took out a pen and wrote something quickly, and it didn't take long for a complete checkbook that could be read at any time. The cashed bank check appeared in front of Paulson.

   "A billion dollars? Oh my God!"

   When the number above was scanned, Paulson couldn't contain his surprise any longer, and blurted out. The next moment, he realized that he had lost his composure, and his old face blushed so rarely that he pushed back the check and stammered, "Mr. Zhong, this number is really too big, you don't need to think about it?"

Just last year, Paulson just raised a fund for shorting CDOs, with a total of 120 million US dollars. For Paulson, who started his own fund in 1994, it is already astronomical. The numbers are gone. And with the increasingly serious losses, many investors have chosen to redeem their shares, which is the main reason why Paulson is eager to raise a new fund.

But he never thought that Zhong Shi would actually write such a large check after only a few tens of minutes of conversation. increased several times.

   "Bukui is the king of making money in the future, and he can remain calm enough at this time!"

  Zhong Shi also secretly sighed in his heart. However, he did not withdraw the check, but pushed it back to Paulson, said with a smile: "Relax, man. I just trust your judgment. In fact, I have a similar judgment, but I have no resources at the moment." , so I can only turn to you for help! Do it with confidence, my friend, I don’t plan to redeem these funds until they are profitable.”

  Hearing Zhong Shi's assurance, a big stone hanging in Paulson's heart finally fell to the ground. Before making a profit, he will not redeem it, that is to say, no matter how much he loses, the other party will accept this fact, so that he can boldly make a difference in the market with confidence.

However, Paulson quickly grasped another layer of meaning from Zhong Shi's words just now. "Insufficient separation skills" means that the other party is very busy, and who can spend a billion dollars in his eyes, what is the bigger cause that is busy? ? For a while, Paulson was full of doubts. After thinking and thinking, he finally couldn't suppress his curiosity and asked, "Mr. Zhong, may I ask, what is your focus now?"

   Talking to a smart person is refreshing. Zhong Shi immediately realized Paulson's intentions, but he didn't intend to hide anything. He just uttered a word lightly and let the other party guess.

   "Amaranth!"

Paulson's heart suddenly tightened, because he thought of a giant in the hedge fund industry. Of course, for him at present, the Evergreen hedge fund is indeed like a behemoth in front of the Paulson Fund, and it is out of reach. super existence.

  Established in 2000, the Evergreen hedge fund is headquartered in Greenwich, Connecticut, USA. Its main investment products are energy, especially natural gas. At present, the fund management scale is close to 10 billion U.S. dollars, and it is the 39th largest super fund in the hedge fund industry.

   Being able to attract such a huge investment scale, the Evergreen Hedge Fund naturally has a proud performance. During the first three years, the hedge fund's returns of 22%, 11% and 17% respectively far exceeded the returns of the S&P 500.

And what the market likes to talk about the most is that when Hurricane Katrina hit the Gulf of Mexico in 2005, the hedge funds of Brutal Flowers keenly seized this opportunity and bet heavily on long natural gas. Investors brought in $1.26 billion in gains, making it a myth in the energy hedge fund industry.

Although more and more funds are pouring into the energy sector of natural gas as the jaw-dropping performance is made public, the current undead flowers seem to have become the protagonists of this market. At one time, their positions accounted for some months. 60% to 70% of the market has become the main force controlling the market.

Just in the first four months of this year, according to Wall Street rumors, the Evergreen Fund lost about $1 billion in natural gas futures. It is said that they own 100,000 lots of New York Mercantile Exchange natural gas contracts, accounting for all futures 40% of the contracts were closed, such data simply ruled the market.

Although there are recent rumors that Blackstone Investment will withdraw their shares in the Everlasting Flower Fund, this has not affected the pace of the fund's profitability. It is said that in the summer, they once again made another 2 billion US dollars, successfully recovering investors' losses. confidence.

   With such a performance and such a position, the current Paulson can only envy and worship him.

Paulson, who started out as a business merger, is not familiar with energy, especially natural gas, but what he knows is that natural gas consumption accounts for 20% of all energy consumption in the United States, and is basically used by most American households, restaurants, and hospitals. natural gas. Natural gas futures are traded on the New York Mercantile Exchange and Intercontinental Exchange, but compared with the S&P index and another important energy benchmark oil, the volatility of natural gas futures is much more severe than these two targets. In the financial market, high volatility means high risk, which also means high yield.

   "Do you want to make natural gas?" Paulson asked tentatively again.

  Although he knew it was a taboo to say such a thing, but seeing that the other party valued him so much, Paulson simply let go of his courage and asked. He is also very clear that even if he knows something, he will not easily get involved in this industry, because if he sets foot in a field he is not familiar with, he will often end up dying miserably.

  Buffett, known as the stock god, once had a famous saying, "You must invest within the scope of your own understanding." It is precisely because of this sentence that he escaped the bubble of technology stocks. And this sentence is also regarded as the standard by John Paulson, not only that, but also regarded as the wise saying by most fund managers on Wall Street in many cases.

Just like Paulson himself, he started out as an investment bank in mergers and acquisitions. At the beginning, he focused on the stocks of companies that may undergo restructuring and mergers. Later, as the scale of funds increased, he began to recruit researchers. Gradually expand the field to other industries.

  However, every time he sets foot in an industry, he and his team must do enough homework. In addition to recruiting professional industry analysts, he also personally goes to the stock market and leads the team to do sufficient research. Just like shorting CDOs this time, he and 45 other researchers traveled all over the United States to study the prospects and current status of the entire real estate market, and through systematic analysis, the entire ecological chain of CDOs and CDSs Only after thorough research did he dare to short these securities with confidence.

  To his disappointment, but as expected, Zhong Shi didn’t take this issue at all, just smiled slightly, and said lightly: “You’ll understand after a while!”

Paulson closed his mouth tactfully, pressed the intercom, and asked the fund's legal department to send the entrustment documents that had been prepared long ago. The idea of ​​what would happen to the withered flowers lingered in Paulson's mind.

  What is this legendary character going to do? After several years of silence, how much trouble will he cause when he returns to the arena this time?

   It's just that he was far from expecting that within a few months, this world-renowned hedge fund announced its liquidation due to huge losses, causing a sensation in the entire financial world.

   Thank you book friends, it wasn’t me who voted for the monthly ticket last night!

  (end of this chapter)