The Son of Finance of the Great Age

  Chapter 526 Event Driven

   Can attract Greenspan's attention and make a public speech, indicating that the subprime mortgage crisis has generally broken out, and even attracted the attention of the US authorities. Although so far there have been no major disruptions, with only a few mortgage lenders declaring they're dead, Greenspan and his colleagues are confident that none of this will be a problem as long as risks are actively reined in.

   But obviously, they guessed wrong.

   "The AAA grade index in ABX07-1 rose 3 percentage points and is now 87, the AA grade index rose 2 percentage points and is now 73, and the lowest BBB-grade index rose 1 percentage point and is now 58."

  On the second trading day after Greenspan announced that the subprime mortgage bonds had been brought under control, the market responded positively, and the prices of various grades of mortgage bonds rose in varying degrees. As Zhong Shi's right-hand man, Jiang Shan is reporting today's market conditions to him in detail.

  AAA, AA, etc. represent the ratings given to these bonds by rating agencies, and 07-1 represents the mortgage-backed bonds issued in the first half of 2007. According to the ratings given by the rating agencies, these bonds were originally measured at $100, but the current number represents the instant market price.

  Due to the different risks involved, there are also differences in prices at different levels. For example, AAA-rated bonds are priced the highest because they have the lowest risk of default. And BBB—as the lowest level of bonds, if there is a slight risk of default on these bonds, it will basically be a situation of losing everything, so the price of this part of bonds is set at the lowest, but if they can be paid in full, this Some bonds also have the largest returns, so in the ABX index, it is the bonds of this level that have the largest market volume and transaction scale.

  BBB and lower level bonds are called subprime housing mortgage bonds, referred to as subordinated debt.

Since New Century Financial Corporation and HSBC announced that they had problems with their subprime debt, the entire BBB and below-level bonds have experienced varying degrees of decline, especially the BBB-the most serious decline, while the prices of CDS linked to them have fallen. There has been a surge.

  In the past six months, under the instruction of Zhong Shi, Jiang Shan began to turn to the bond market, especially the correlation research on derivatives such as CDO and CDS. The basic principles of these things are not difficult to understand, and in fact there is no need to understand too much, because these are things that only bankers need to understand and involve. What Jiangshan needs to understand is the internal connections, influencing factors and major players in the market of these derivatives.

   "What do you think of Greenspan's speech?" Zhong Shi just nodded in response to the market's reaction. If Greenspan can take the initiative to speak out, the market should show some face.

"Not so good!" Jiang Shan denied it bluntly, "Unless the Federal Reserve or the U.S. Treasury Department makes some practical policies, this kind of empty propaganda will not help the market at all. The problem now is that due to the The high-grade loan market has plummeted, and financial institutions with a large number of them will inevitably suffer certain losses. Now that the second quarter report is about to be disclosed, their accounting department may start to perform write-down calculations and write off part of the bad debts. It may not be as expected, or even suffer losses. In this case, fluctuations or even sharp declines in the stock prices of these institutions have become a high probability event.”

   "So we should plan in a timely manner and short their stocks?" Zhong Shi couldn't help but nodded secretly when he heard Jiang Shan's meticulous analysis, and when he heard the final conclusion, he suddenly asked a question.

In fact, if it really develops as Jiangshan analyzed, it will become inevitable to short the stocks of these financial institutions at this time. Just imagine selling at a high level and buying back at a low level. A more objective profit.

"this…"

Jiang Shan’s face was full of embarrassment, he looked at Zhong Shi with some embarrassment, pondered for a long time, and then said hesitatingly: “I’m afraid this is inappropriate, first of all, we don’t know who these institutions are; second, even if we know who they are , nor can it be concluded that the quarterly profits of these institutions will decline due to the decline in subprime mortgage bonds, perhaps their FICC business will increase, or some of their direct investments will have substantial profits, etc. These are all unknown Count. The most important point is that Greenspan spoke at this time!"

   "So, your conclusion is that..."

  Although Jiang Shan's style tends to be cautious, Zhong Shi is very satisfied with it, which at least shows that he has considered issues carefully. He needs bold and aggressive traders, but also steady and steady analysts.

"Greenspan's public speaking at this time is definitely not aimless. Although he claimed that the collapse of the subprime mortgage market was under control, in fact, without the injection of liquidity funds, some companies that were deeply involved in the CDO market It may be difficult for financial institutions to continue to maintain, just like the previous New Century Financial Corporation. Once the Federal Reserve injects liquidity into financial institutions, the basis for my above analysis may not exist, so the variables are still quite large. Now Just wait and see."

   After Jiang Shan finished speaking, he sighed helplessly. Indeed, according to his previous analysis, the stocks of some financial institutions will indeed fall, the market value will evaporate, and liquidity will be short. But Greenspan stepped up to speak at this time. Although the motive behind it is not clear, he has already expressed his concern for the subprime housing mortgage loan market. As a derivative product of this loan, CDO is bound to enter the sight of the other party , the question now is how and with what strength the Fed will support the market.

  And these factors are the key factors affecting the stock price performance of financial institutions. If a similar situation really happens, shorting the stocks of these financial institutions at that time may mean "losing your wife and losing your army."

  Although the logical relationship has been analyzed, Jiangshan can only sigh because there are too many factors that can affect it, and they are all key factors that can subvert the stock price performance. Many uncertain factors make him feel very helpless.

   "You are right, but you forgot one thing!"

Zhong Shi was very satisfied with Jiangshan's performance, but he also realized that Jiangshan was still a little immature after all, and some things could be realized through research and analysis, "If we know their financial statements and accounting materials for this quarter , then we are completely insider trading. If you really want to know their internal situation, you can communicate with their traders, loan officers or even account managers, and inquire about their situation sideways through a few words. Although these things It's not real data, but to some extent, it can still reflect the development of certain aspects of the business in this quarter."

   "It turns out that the job of an analyst is like this..."

   For a moment, Jiang Shan fell into deep contemplation. Originally in Hu Ping's team, he only played the role of a trader. Although he also had to assume the role of logical analysis at certain times, Hu Ping was always guiding the general direction. But now Zhong Shi's words freed him from the role of a trader and truly entered the position of an analyst. Although he has not yet reached the level of a professional analyst, in time, according to his intelligence, becoming an excellent analyst is almost within reach.

"In fact, there are still many things analysts can do. Even in this market, a lot of insider trading happens from time to time. I believe you should have heard of it." Zhong Shi took out a cigarette, did not light it, but put it on the tip of his nose After sniffing, he put it back into the cigarette case, "Whether a certain new drug can pass the FDA (Food and Drug Administration) certification has a huge impact on the stock price of a pharmaceutical company. If you can capture the relevant authentication information and go long or short as soon as possible, the benefits will be immediate. Of course, this is definitely insider trading, and illegal things cannot be done.”

After a pause, Zhong Shi went on to say: "Actually, the capital market is not completely rational, even in this highly mature market where you can go short or long. As an excellent analyst, apart from being able to communicate with industry experts In addition to capturing useful information from a few words, we must also pay attention to some hot and important things happening around us, because these things can also drive the market.”

"For example, when an influential anchor calls on the public to pay attention to certain things, such as oil spills, such as air pollution, then the relevant industries will receive attention, and their stocks will also rise in the future. Get corresponding attention. This is event-driven, and every hot news can be transformed into real profits.”

   "..."

Jiang Shan was completely stunned by Zhong Shi's words. After thinking about it for a while, he understood what Zhong Shi meant. It turned out that the so-called event-driven was the case, but the next moment he was a little confused again, "If you say I can understand oil spills, but air pollution is something that happened in the last century. The air now..."

"I didn't simply say the United States, other countries are also possible. In short, an event that can attract widespread social attention can always be linked to the capital market behind it, and these are what event-driven funds should pay attention to. The problem."

   Having said that, Zhong Shi waved his hand slightly towards Jiang Shan, signaling him not to speak, then took out the phone from his arms, and after talking for a long time, he hung up the phone.

"what's going on?"

Seeing that Zhong Shi finished answering the phone, there was an inexplicable smell in his whole body, and he didn't know whether it was Jiang Shan's illusion or real existence. In short, Jiang Shan always felt that Zhong Shi seemed to have relieved some burden and became more relaxed. . It was precisely because of this feeling that he dared to ask Zhong Shi boldly.

"Just now we talked about event-driven, and now it's here." Zhong Shi said with a smile, "Stanley Company contacted me just now, saying that there is a bond with a very attractive price to sell, because the amount is relatively large, so they thought And this batch of bonds has accurate ratings from rating agencies, and the corresponding mortgage and other procedures are all available, and they want to sell them to me at a price lower than the market price."

   "Is this impossible?" Jiang Shan scratched his head, a little confused. If all this is true, then it is simply a pie falling from the sky. However, he is very clear that in the capital market where intrigues exist, such good things will never happen, so his first reaction is "this is impossible".

   "In addition to these, they also sent another news, a news that can shake the market, and it is good!" Zhong Shi did not answer Jiang Shan's question, but said another news with great interest.

   "..."

  Jiang Shan was completely confused, he didn't understand what was going on, so after pondering for a while, he asked decisively, "Then what is the exchange condition?"

"I don't know yet, but what is certain is that the other party must have no good intentions!" Zhong Shi took out a cigarette from his arms and lit it with a "snap". cruel.

   Thanks to book friend Shu Awesome for rewarding this book! Thank you gambler for not voting for my monthly ticket again!

  (end of this chapter)