Chapter 520 The signs are emerging
It is not uncommon for an entire company to suffer massive losses due to a trader's mistake.
Some of this is caused by operational errors, and some are because they conceal losses from the headquarters. In order to make up for the losses, they use various means to secretly misappropriate funds for increasingly large-scale speculation.
For example, one of the largest fraud cases so far, Societe Generale, will be discovered in January next year, causing a huge loss of 4.9 billion euros (equivalent to 7.1 billion U.S. dollars) to the bank. , just because of a trader’s illegal operation.
Well, that's probably happening.
Beginning in 2007, 31-year-old futures trader Jérôme Kevière anticipated a rise in European stock markets and invested more than his personal authorization allowed in trading.
Of course, everyone knows what will happen to him next...so it is natural that his actions caused huge losses.
After the losses occurred, he covered it up by modifying the bank's computer system data.
In the end, Societe Generale discovered this fraud in January 2008.
In the end, his operations brought huge losses to Industrial Bank.
This incident clearly showed that there were huge loopholes in Industrial Bank's internal management, and Barron certainly did not want this kind of thing to happen in his own company.
In fact, compared to most investment banks, DS Group's funds account for a very small proportion of the "investment on behalf of clients" business, and most of the funds are directed by Barron. investment direction as the guideline.
Of course, some traders also have a certain amount of capital and can invest based on their own analysis results, but their proportion in the overall capital scale is not high.
Even so, as the size of the DS Group's funds increases, there will be hidden dangers. Moreover, the DS Group has not been established for a long time, and the corresponding risk management also needs to be improved.
……
On February 13, 2007, New Century Financial Corporation issued a fourth-quarter profit warning.
New Century Financial Company is the second largest subprime loan company in the United States. It turned out that from the end of 2006, a large number of New Century Financial Company's customers began to have their loans cut off...
And their The source of mortgage loan funds - Wall Street capital, after discovering this, forced New Century Financial Company to withdraw the subprime loans corresponding to the relevant subprime mortgage bonds.
New Century Financial Company is different from commercial banks such as Citigroup and Goldman Sachs in that it does not have the ability to absorb deposits. The money it provides for mortgage loans to customers is obtained from Wall Street financing.
As I said before, they used to issue subprime mortgage loans, and then sold the subprime mortgages to Wall Street investment banks, which were "made" into subprime mortgage bonds by those investment banks. After recovering the funds, they continued to lend... This goes on and on.
Now at New Century Financial Company, the subprime mortgages cannot be sold and the loans have been cut off. They have no income and have to repay debts. So they suffered a huge loss in the fourth quarter of 2006, almost eating up the profits for the whole year of 2006.
The next day, New Century Financial's stock fell 36%. At the same time, the subprime loan index ABX fell 5 points in response.
For the first time, the market felt the chill of subprime mortgages.
You must know that the CDS currently held by Black Swan Fund and the short-selling assets on CDO and ABX index exceed 150 billion US dollars!
The subprime loan index ABX fell 5%, which means that the Black Swan Fund made more than 7.5 billion US dollars in one morning!
So scary!
As mentioned earlier, subprime mortgage bond CDOs are often packaged as A-level high-quality "investment products" by Wall Street investment banks.
In the beginning, during the mortgage bond sales process, there were always some high-risk bonds with the lowest ratings that could not be sold. Investment banks did not want to hold these high-risk bonds, so they combined these high-risk bonds with A small portion of safe bonds were repackaged to form a new investment product, the CDO, which packaged a large number of Class B junk bonds into Class 3A gold.
After the first package, the CDO will also be graded from 3A to B, so the investment banks carried out a second package, packaging the 3A and B-rated bonds of the CDO into the quadratic power of the CDO for sale. , after such a cycle, not only CDOs are circulating in the market, but also CDOs raised to the Nth power.
A large number of Class B bonds have been packaged again and again, packaged as gold and sold externally, but their essence is actually garbage. In 2006, Merrill Lynch sold CDOs all over the world. They charged a handling fee of 1% to 1.5% for each CDO, and collected a total of US$700 million in commissions. Other investment banks have also followed suit.
At the end of 2006, there were US$1.2 trillion of subprime loans on the market, and on top of this, US$5 trillion of CDOs were born!
Soon, subprime mortgages were no longer enough for CDOs, so investment banks created synthetic CDOs. They used the cash flow generated from CDS sold to short sellers such as Black Swan Fund and Paulson Hedge Fund. It became a CDO and became the mainstream of CDO at the end of 2006.
So in fact, the strong participation of black swan funds has actually increased the continued "prosperity" of CDOs.
The falsification of bond ratings by rating agencies, the falsification of real estate data by research institutions, and the investment frenzy of CDOs all combined to cover up the decline of the real estate market and caused little attention to the rising default rate.
This is good news for short sellers such as Black Swan Fund - the market has forced the remaining heat of real estate to make CDS very cheap.
This will also help Black Swan Funds increase their short-selling operations on all financial products that can be shorted, such as subprime mortgage bonds, ABX indexes, CDOs, and synthetic CDOs.
Let them successfully ambush all the short-selling chips when real estate reaches the top.
……
“Thank you very much, Barron, I owe you a favor.”
"Your Highness, we are friends, this is what I should do."
After spending Valentine's Day with his wife Bonnie, Barron met the Duke of Westminston.
As soon as they met, he expressed his gratitude to Barron.
The whole story is that a reporter dug up some shocking information about the Duke of Westminster - he discovered that he had solicited prostitutes four times in six months starting from December 28 last year.
And the specific time when he performed these acts, as well as the photos of the girls entering and leaving the Duke of Westminster's house, were all known to the other party...
They even interviewed two of the girls - to whom they said the Duke of Westminster revealed his name and position.
After Barron discovered the incident, he "reconciled" with the reporter privately, spent money to obtain the photos and materials from the other party, and obtained the other party's promise not to make the matter public again.
It is conceivable that after knowing these things, the Duke of Westminster was full of fear. Once such things were announced, as his deputy chief of staff, at a time when the Iraq War is highly controversial, It will definitely cause big trouble for him.
This is indeed the case. In Barron’s previous life, this matter was a big deal. Under reports and public opinion, the then Duke of Westminster even suffered from mental illness because of it. To a certain extent, it led to his subsequent death.
In addition, it is worth mentioning that the reporter following this scandal this time is from the News of the World.
It was also an "unexpected gain" when Barron sent people to "pay attention" to the other party's movements.
Of course, because Barron detonated News Corporation's "eavesdropping scandal" in advance, it is not ruled out that the other party will use this to try to use the Duke of Westminster for public relations, but now all this is also Already smothered by Barron.
(End of this chapter)