Chapter 242 These days, God also writes a book
On the working day, White returned to his office, and the first thing he did was to inquire about various secured debt certificates related to mortgage loans.
As written in "The Big Short", the ratings are quite high, many of them are rated A or above.
White randomly found an AA-rated product and clicked on it. There were dozens of mortgage-backed bonds and dozens of other types of secured debt obligations in the product. Let alone a layman, he was a professional like White. The fund managers looked confused.
White took out a pen, jotted down several mortgage-backed bonds at random, and then began to inquire about these bonds.
After a moment, White's brows furrowed.
“The yield on this mortgage-backed bond was so high last year? This is unscientific. This is just a bond. How can a bond achieve such a high yield? What was the bank’s loan interest rate for the same period last year? A mortgage-backed bond can actually achieve such a high yield!”
After thinking about it for a while, White realized that the reason why the yield on this mortgage-backed bond is high is because it contains a large amount of money. Subprime loans.
The interest rate of subprime loans is inherently higher than that of normal mortgage loans, and the income generated is of course higher.
And in order to stimulate people to take out loans to buy houses, there are also subprime loans in the U.S. market that deliberately give you a preferential interest rate in the first few tranches, but then have a very high interest rate later. They deceive people into getting loans to buy houses.
As long as housing prices continue to rise, people will not want to get off the pirate ship, and even want to board more pirate ships. After all, the high interest rate is nothing compared to the rising housing prices.
The extra few hundred dollars a month in interest is equivalent to thousands of dollars a year, and a house can go up to tens of thousands of dollars a year, and the input-output ratio is more than ten times or even dozens of times. ! Apart from what is written in the criminal law, where can I find such a profitable business?
“This mortgage-backed bond should contain a large number of subprime loans, so it can have such a high return. However, if the proportion of subprime loans is large, it means that the risk is also high. How can it be so high? A high rating? This rating is unreasonable!”
White continued to check other mortgage-backed bonds, and the situation was the same as before. The yield was higher than normal, which meant that it contained a large number of assets. It's a risky subprime loan, but it still has an unusually high credit rating.
Finally, White found a problematic mortgage-backed bond. The returns on this bond were very good in the previous two years, but this year's returns have plummeted.
"This is a mortgage-backed bond for home loans. If the income plummets, it means that many people can't repay their mortgages. The time of the collapse in incomes is this year, which means that this situation of not being able to repay their mortgages will start this year. ”
An unpleasant thought came to White’s mind, and he immediately picked up the phone and dialed a phone number.
The other party is his friend who works in a bank and is responsible for the evaluation of collateral.
"Hey, White, why do you have time to call me? The Nasdaq has already opened. You should be keeping an eye on the stock market now!" said the bank friend.
"Is it convenient for you to talk over there? I want to ask your help for some personal matters." White whispered.
"Wait a minute." The sound of a friend walking around came from the receiver. After a while, the friend said: "Okay, there is no one around me, just tell me!"
"I plan to buy another house recently. , there must be houses in your bank that have been taken away by people who can't pay the mortgage. Is there any cheap one? Please introduce it to me!" White said.
“We have recently acquired a lot of mortgaged houses that cannot repay the loan, but they are not suitable for you. The houses we have recently acquired are either small apartments or relatively ordinary communities.
As for luxury homes, there really are none! You are a fund manager, and there should be many wealthy people among your clients. You must know that it is impossible for the owners of luxury homes to repay their loans. "Friend. explained.
"Small apartment? How is the location?" White asked quickly.
"Of course it can't be in Manhattan! There are them in Queens, Brooklyn, and the Bronx. Although some are newly built, places other than Manhattan are definitely not suitable for you!"
"Since it is The new apartment, being in New York, should have great potential for appreciation, so why was the loan terminated?" White asked again.
“They are all young people who bought a house for the first time. They came to New York with dreams to work hard and wanted to take root in New York. They bought a house as soon as they got excited! Anyway, the loan threshold has been lower in recent years. It's also relatively low."
"What about the more ordinary communities you mentioned?" White then asked.
“The situation in the community is different. House prices have been rising in recent years, so many people have bought houses for investment. They will rent out the houses and use the rent to repay the mortgage.
However, there are obviously not as many people renting houses as there are houses. If the house cannot be rented out, many people will not be able to pay the interest and have to bear the property tax, so they will simply cut off the loan and sell the house to our bank. ”
“How many cases like this happen? I mean this year. "White asked again.
"It's a lot more than in the past two years, but this is normal. After all, the real estate market has been booming in recent years and many houses have been built. The more houses there are, the more people will buy them, and the number of people who can’t repay their loans will also increase! ”
This bank friend is obviously very optimistic about the real estate market.
White did not refute. If someone said that the U.S. real estate market would collapse now, they would definitely be regarded as crazy.< br>
However, his friend's optimism also made White extremely frightened. This friend was a person in charge of collateral valuation at the bank. Not only was he professional, but he was also a front-line worker in the housing loan field. Even he was not aware of the hidden worries in the real estate market. It seemed that the problem was really big.
After ending the call with his friend, White immediately made a decision.
Sell all Bearstone stocks! Sell all Freddie Mac stocks! Sell all Fannie Mae stocks! Throw away all the bonds related to subprime loans!
Of course, if you just avoid losses, you are not a qualified fund manager. Such a kind person cannot survive on Wall Street.
Everyone who can survive on Wall Street is a vulture!
So not only do you want to avoid losses, but you also want to take advantage of the opportunity to make a fortune.
White immediately called Morgan Stanley: "Hi, I'm White. I heard that you recently launched a credit default swap product, which is specifically for real estate loan guaranteed debt obligations. I'm very interested! Is the starting price of 30 million US dollars? If the price is right, I can buy it for 100 million US dollars!"
......
A few days later, White was called to the office. .
"White, I heard that you sold the stocks of Bearstone and Fannie and Freddie?" the boss asked.
"Yeah, I'm not bullish on the housing market," White replied.
"You also went to Morgan Stanley and purchased a credit default swap contract of US$100 million? Is it also for mortgage collateralized debt obligations?" The boss paused and then said: "What are you doing? Are you not optimistic about the real estate market? You think the real estate market is going to collapse!"
White nodded: "You can see it! I do think that the real estate market will collapse. If people cannot pay their mortgages, there will also be a large number of defaults on the mortgage-related collateralized debt obligations, so I made a bet with Morgan Stanley and bought a $100 million credit default swap contract.”
"Why did you make such a judgment?" The boss frowned and continued: "The current real estate market's prosperity index is still very high. House prices have been rising, and developers have been building new houses. There is no need to worry about selling. There is even a feeling that demand exceeds supply."
"Don't you think this is the last hurray before disaster strikes?" White asked.
"What I need is not your subjective judgment, but considerable analysis. For example, you can give me a piece of data and tell me why the real estate crashed!" "Sir, please wait a moment, I will get it now!" White With that said, he turned and left.
On the contrary, the boss was stunned. He did not expect White to really produce relevant data.
Since there is relevant data, why didn’t I see it? This is Wall Street. There are no secrets on Wall Street. All policy information, economic data, and even the analysis of various think tanks can be seen.
Just when the boss was confused, White had returned, holding the copy of "The Big Short" in his hand.
"Boss, this is the book that tells me the real estate market is about to collapse!" White handed the book to the boss.
"The Big Short? Is this the latest book by an economist?" the boss asked subconsciously.
"No, this is actually a fantasy novel."
"Fantasy novel?" The boss looked confused. He obviously didn't understand fantasy novels.
White had no choice but to explain: "It is a novel created by the author based on his own imagination."
"Then what does this novel have to do with your judgment that the real estate market is about to collapse?"
"The content of this novel describes that the real estate market is about to collapse! I think what is said in it is about to happen, so I follow the novel It was written in, "Buying a credit default swap contract for a mortgage."
The boss blinked, as if he didn't hear White's words clearly. He hesitated for a few seconds, and after confirming that he heard correctly, he suddenly revealed his words. An incredulous expression on his face.
"You mean, you followed the description of a novel and conducted hundreds of millions of dollars of operations in the financial market? The key point is that this is a fantasy novel, and the content is completely imagined by the author? You Are you crazy?”
“Sir, this novel is really very reasonable. I believe what is described in it will happen soon!” White explained confidently.
"Shit!" The boss yelled angrily. He jumped up and yelled at White: "Shit is all in your mind! Even if it is a mistake in judgment, can you find a more reasonable reason?
According to a novel, I bought a 100 million credit default swap contract. Do you think I’m an idiot? That’s all investors’ money!
You can pack up and leave after causing such a big loss! No! You can't just leave! You have to bear the loss of 100 million! You should go to jail! "
Seeing that the boss was really angry, White had no choice but to continue to explain: "Boss, don't be angry first. Please read this novel first. I guarantee that after reading it, you will even feel a We bought too little of the 100 million credit default swap contract!”
“White, are you possessed by evil spirits? That’s why you said such outrageous things!” As he said that, he actually took out a cross from the drawer and pointed it at White.
The vultures on Wall Street also have faith, mainly because they have done too many immoral things and need to seek comfort.
White showed a helpless expression: "Sir, I am not possessed by a demon. What I say is true. Please read this book "The Big Short". If you have read this book In the future, if you still think I am wrong, you can report me to the Financial Industry Regulatory Commission, or even call the police to arrest me!”
Seeing White’s persistence, the boss calmed down a little, with a hesitant expression on his face. Towards the copy of "The Big Short" on the table.
White then added: "Sir, I have been in this industry for many years. I have never made any major mistakes in these years, and I have also made a lot of money for the company. What do you think I will do?" Is it unfounded? "
The last sentence finally moved the boss. The boss recalled White's past and knew that he was not a reckless person.
"Okay, let me read this book first. If the content in the book is nonsense, then I won't let you go!" the boss said.
......
The next whole morning, the boss was addicted to this book "The Big Short".
When he saw the last chapter, when the subprime mortgage crisis began to break out, his whole body couldn't help but start to tremble.
“Oh my god, was this book written by God!”
The boss looked at the cover of the book and found the author's signature. The name of this god was Zhang Wei.
"Zhang Wei, this is a Chinese name, the son of God born in China!" The boss thought to himself.
This boss obviously doesn’t know that God really has a second son who is Chinese.
The content in "The Big Short" was too shocking for the boss. He was a little distracted for a while and his mind went blank.
As the boss of a fund company, he has been on Wall Street for so many years and knows more about the inside story of Wall Street. Based on his understanding of Wall Street, the content written in this book is completely In line with Wall Street's urinary nature.
Just from the various shameless operations on Wall Street described in the novel, the boss already believed the novel's content seven to eight percent.
“Is the real estate market really going to collapse?”
In the next two or three minutes, the boss still had to verify it himself. After a long time, he came to his senses and immediately dialed a few A phone call.
The boss’s personal connections are much wider than White’s. He doesn’t need to find friends to trick people like White to get a lot of real data.
Soon, the connections told the boss several figures about the default rate of subprime loans. When he learned that the default rate of subprime loans had reached such a terrifying level, the boss immediately felt that a disaster was coming. feeling.
"It's over, the real estate market is really going to collapse! Aren't the mortgage-backed bonds of home loans going to be turned into waste paper? Those collateralized debt obligations that include mortgage-backed bonds will also be implicated, and their value will shrink significantly!
America How many guaranteed debt securities are there related to real estate? One hundred billion? One trillion? Or even several trillion? Who knows how many layers of guaranteed debt securities they have split and sold? Times!
These shameless liars on Wall Street know that what they sell is junk, and they deliberately package the junk and then sell it! I don’t know how many ordinary people will be deceived by them! Family wealth!
Oops, investment banks can’t survive it. If the investment banks can’t survive it, it will be a financial crisis! "
Disaster is imminent! After the feeling passed, the boss’s first reaction was that this was a God-given opportunity to make money!
In just a few seconds, the boss made a judgment. He immediately picked up the phone and called his secretary.
"Sir, what are your orders?" the secretary asked.
The boss handed "The Big Short" to the secretary: "This book, buy thirty copies immediately, and then notify all the fund managers in the company to go to the conference room for a meeting after the market is closed today! We are going to do a big job. ”
(End of this chapter)