Chapter 256 People are sitting at home, and trouble comes from the sky
The person who sold the most credit default swap contracts during the subprime mortgage crisis in history was JPMorgan Chase, one of the prototype characters in "The Big Short". It was a credit default swap bought from JPMorgan Chase.
Ordinarily, JPMorgan Chase will definitely suffer huge losses after selling so many credit default swap contracts. However, after the subprime mortgage crisis, when economists conducted a review, they found that JPMorgan Chase turned out to be the ultimate loser. The beneficiary!
First of all, it is because JPMorgan Chase’s direct economic losses in the subprime crisis were actually not large. Its capital losses were mainly used to close positions on various financial products. As long as the positions were closed, the losses were stopped in time. , this part probably cost JPMorgan Chase $10 billion.
After all, JPMorgan Chase is the largest investment bank in the world. It can still get 10 billion US dollars of funds without interrupting the flow of funds.
In the banking industry, as long as the flow of funds continues, even with huge losses and huge liabilities, you can still live a prosperous life.
What's more, JPMorgan Chase's daily business involves a large amount of financial risk investments, and they have to prepare a lot of funds to close positions at any time. Therefore, sufficient capital flow is the first factor for JP Morgan to survive the subprime mortgage crisis.
As for the losses caused by the credit default swap contract, considering the size of JPMorgan Chase, it is not a big sum of money.
Take the prototype character of "The Big Short" as an example. The fund run by the protagonist obtained a high return of 260% through the credit default swap contract. For fund managers, such a high return , the share he received was enough to make him wealthy and free.
But the fund run by the protagonist is only over 200 million US dollars, which means that for JPMorgan Chase, it will lose 520 million US dollars, not to mention that the principal of 200 million US dollars was taken by the protagonist. To diversify the investment, it was distributed among many investment banks such as JPMorgan Chase, Citigroup, Goldman Sachs, UBS, and Deutsche Bundesbank. If the investment was shared evenly, JPMorgan Chase would have lost 100 million.
And 260% is already the top rate of return. Other credit default swaps with higher ratings cannot achieve this rate of return. In other words, JPMorgan Chase's actual losses on credit default swaps did not reach a very exaggerated figure and were completely within the scope of reasonable profits and losses.
JPMorgan Chase also held subprime loan bond products. These all faced default risks after the subprime mortgage crisis broke out. However, JPMorgan Chase was very shrewd in finding buyers for these products, that is, selling them all. dropped.
JPMorgan Chase has been promoting that these subprime loan financial products have high returns and are very safe. Especially in the second half of 2007, there have been large-scale defaults on subprime loans, but JPMorgan Chase has Deliberately concealing the news, and at the same time cooperating with credit rating agencies to maintain high product ratings, they sold a large number of bonds that had defaulted on their debts to investors.
As long as all these bonds are sold, others will lose money, not me, JPMorgan Chase.
After talking about losses, let’s talk about profits. During the subprime mortgage crisis, Bellston, one of the five major investment banks in the United States, went bankrupt. JPMorgan Chase acquired Bellston at a bargain price of US$2 per share and obtained Bellston. All of Ston's assets.
As for Bearston's tens of billions of dollars in debt, JPMorgan Chase only assumed one billion dollars, and the rest was borne by the U.S. government. Just from this acquisition, JPMorgan Chase made a lot of money.
The U.S. government’s money was printed through quantitative easing, and was eventually passed on to the whole world. It was equivalent to the whole world paying to help JPMorgan Chase bear Bear Stearns’ debt.
Other investment banks are not as lucky as JPMorgan Chase. Citigroup survived by receiving a capital injection from the Federal Reserve; Goldman Sachs and Morgan Stanley turned from banks into companies and needed to be supervised by the Federal Reserve; Bear Stearns and Merrill Lynch were acquired; Lehman Brothers collapsed directly.
At this time, not only JPMorgan Chase, but other major investment banks also noticed the hot sales of credit default swap contracts, and then learned that a novel "The Big Short" was popular on Wall Street recently. .
Some people sneered at this, thinking that the content in the novel was complete nonsense. Only an idiot would believe what it said and then perform the same operations as in the novel.
Some people think that "The Big Short" is simply a guide to getting rich on Wall Street. The method of getting rich has been told to you. If you don't follow it, wouldn't you be an idiot?
In short, both sides feel that the other party is an idiot and I am the smart one.
In those big investment banks, it is not without savvy people who have discovered the crisis in the real estate market, but this is of no use.
This is Wall Street, and there is no shortage of gamblers. When ordinary people see a crisis, their first reaction is to stay away. But when Wall Street gamblers see a crisis, their first reaction is how much benefit they can get from it.
Just like the subprime loan collapse, there are many people on Wall Street who can see through this matter. Those investment institutions have spent money to support so many analysts, and none of them are fools. They all graduated from prestigious schools. Every one of them is extremely smart.
Smart people are all arrogant. These smart people all believe that in this game of drumming and passing flowers, the final taker will definitely not be themselves. Sooner or later the subprime market would collapse, but by then I would have already escaped.
Everyone thinks so, and feels that he is the one who benefits from it, rather than the unlucky guy who takes over in the end.
As a result, the entire Wall Street is pretending to be stupid, pretending not to see that the accumulated bomb yield is getting bigger and bigger, and it is big enough to destroy the entire world economy.
......
At Bear Stearns, which was at the tipping point of the subprime mortgage crisis, there was a copy of "The Big Short" in the middle of the desk of the head of the marketing department.
The supervisor had just read the entire book, but the expression on his face was very embarrassing.
"This novel is actually insinuating that Bear Stearns will go bankrupt? It's a joke. We are the fifth largest investment bank in the United States!" The supervisor looked at the subordinates in front of him with a cold face and tried his best to suppress it. The anger in my heart.
In the novel, Zhang Wei used the word "BearStearmsCos." to refer to Bear Stearns, but in fact the English word for Bear StearnsCos is Bear StearnsCos, and the letter in it is N, not M.
Historically, when "The Big Short" came out, the subprime mortgage crisis had already broken out, and JPMorgan Chase began to acquire Bear Stearns. Using real names at this time is based on real events that have already happened. There is no problem with that. , you can’t say that real events are fake, right?
When Zhang Wei came out with "The Big Short", the subprime mortgage crisis had not yet happened. If Bear Stearns' real name was used, some legal disputes might arise. You deliberately said that someone else's investment bank was going to go bankrupt. It's no wonder they didn't bother you!
But Zhang Wei just changed the letters, but anyone who is not a fool can tell that the novel is talking about Bear Stearns.
You dare to say that Bear Stearns is going to be cool, which is intolerable!
Seeing that the leader was angry, his flatterers quickly tried to persuade him: "This is just a novel, and the contents of the novel are all fictitious. You don't have to take it seriously."
"But this book has been in the public eye recently. It is very popular on Wall Street, and the description in the book will also have a negative impact on us! If investors become suspicious of our products after reading this book, and then do not buy our products, then we will suffer major consequences! Loss!" the supervisor continued.
“Sir, you are right. I have also read part of the book “The Big Short”, which denigrates the real estate and subprime loan markets. And several of the products we have recently launched have also They are all financial derivatives related to real estate subprime loans," the flatterer said.
"Not only that, I heard that the hedge fund sector has also recently purchased a large amount of collateralized debt obligations, and real estate subprime loans also account for a large part. This is consistent with what is said in the novel!" Another person said.
"That's why I said that this novel will affect the sales of our products and cause us losses!" The supervisor said, his face darkened: "I want to sue the author and publisher for this book It can no longer be sold, it must be removed from the shelves."
Several subordinates looked at each other, and finally the flatterer said: "We are not called by our real names in this novel. The author is very cunning. , he changed a word. In this case, the lawsuit may take a long time."
"We have a legal department, and we are not afraid of a long lawsuit! At the very least, we have to apply for an injunction from the court to let this happen. This novel is temporarily removed from the shelves! It will definitely not affect the several products we are currently promoting!" the supervisor said categorically.
At this time, Bear Stearns was conducting a saucy operation. Several of Bear Stearns' hedge funds invested in a large amount of subprime mortgage bonds and collateralized debt obligations composed of mortgage bonds.
Bear Stearns then used these bonds as collateral to issue new bonds, which were combined into new CDOs and sold on the market again.
This is equivalent to using bonds as collateral for bonds to issue bonds, which belongs to the rhythm of infinite matryoshka dolls.
This kind of operation is a bit like a real estate company hoarding land. After taking a piece of land, it uses the land as a mortgage to get a loan from the bank, and then takes the loan to buy new land, then mortgages the loan, and then buys another piece of land. Land, over and over again, unknowingly acquired land worth trillions, and at the same time also incurred trillions of debts.
It’s just that in Bear Stearns’ operation, he is the bank himself and can issue bonds to raise funds by himself, bypassing middlemen. This is obviously more terrifying than the land hoarding by real estate companies.
If a real estate company wants a loan, it has to get approval from the bank. But if the bank does this on its own, doesn’t it mean that it is free to do whatever it wants!
In this kind of operation, every time a matryoshka doll is performed, a layer of leverage is added. The more matryoshka dolls, the more assets involved, and the greater the leverage. If one day the leverage cannot hold up, the consequences can be imagined. .
For those who play finance, as long as they add leverage, they will jump off the building if they think about wealth, and life or death can be in an instant.
This is exactly how Bear Stearns died.
Bellston is the fifth largest investment bank in the United States after all. With its size, it has a history of nearly a hundred years, and even if it temporarily loses some money, it will not collapse overnight.
The bad thing is that Belston added leverage. You thought you lost more than one billion, but under the influence of leverage, it was tens of billions.
You may think that just tens of billions of bad debts, when placed in the entire financial system, can leverage hundreds of billions of financial derivatives. Hundreds of billions of financial derivatives went wrong, and the entire market confidence was completely destroyed, and the financial crisis came.
As with matryoshka dolls, even if the smallest one inside burns, it will burn outward layer by layer, and eventually it will burn to the largest doll.
It was precisely because the leverage was too high that Bear Stearns was the first large investment bank to fall during the subprime mortgage crisis.
At this time, Bear Stearns obviously did not expect that it would die on leverage. The greed of capital made them ignore the risks of leverage, and they were having fun playing matryoshka dolls.
The contents of "The Big Short" obviously influenced Bear Stearns' matryoshka dolls.
They say you are going bankrupt, who would dare to buy your products?
As for Wall Street, you can say that I have a dark heart, you can say that I am ugly, you can even say that I am indifferent, but it will never affect my making money! As long as it affects my money, I will fight you!
......
Amazon Publishing Department, Thomas put down the manuscript of "Three Tibet" in his hand, but his heart could not calm down for a long time, and his whole person was in shock.
"What a masterpiece! I have never seen such a shocking science fiction novel! The presentation of the world and the portrayal of human nature, I can't even describe it in words! This is definitely a palace-level work, and it will definitely become a masterpiece in a few years. World famous books, placed together with the works of those great writers! "
Three-Body's first Once Upon a Time on Earth is indeed very suitable for European and American tastes. It's no wonder that Thomas was surprised after reading the novel! The feeling of being a deity.
After marveling for more than ten minutes, Thomas gradually calmed down and began to analyze this work from a business perspective.
“The connotation of this work is obviously more profound than "Game of Thirst", but the sales volume will definitely not reach the level of "Game of Thirst". After all, it involves a lot of physics knowledge. Reading The threshold will be relatively high. But as long as this book is published, it will definitely be a best-selling work and even have the potential to hit the top of the best-seller list!"
Thinking of this, Thomas already had a smile on his face. , with these three entities, the performance in the second half of the year should be stable.
At this moment, the cell phone suddenly rang. Thomas looked down and saw that it was a call from the Legal Department.
"The people from the legal department are going to do something wrong with me!" Thomas sighed helplessly, and then picked up the phone.
......
This summer vacation, Zhang Wei had a very comfortable time. It was the first time since he went to college that he had such a leisurely vacation.
Until I received an email from Thomas saying that the book "The Big Short" had been sued.
At ten o'clock in the evening, Zhang Wei estimated that Thomas on the other side of the world should have gone to work by this time, so he dialed Thomas's phone and asked what happened.
The phone was connected, and the two parties did not exchange greetings. Thomas said straight to the point; "Zhang, your book "The Big Short" was sued to the New York State Court. The person suing us was Bear Stearns Bank. ! "
"Is it because I wrote in my novel that Bear Stearns was going to go bankrupt? I had already changed the letter. I thought I could avoid legal issues, but I didn't expect to be sued!" Zhang Wei said.
"You just changed one letter, and any fool will know that you are talking about Bear Stearns."
"Then what are they suing me for? Infringement? Or spreading rumors and smearing?" Zhang Wei then asked.
"They're suing you for stock price manipulation!" Thomas replied.
"What? Manipulating stock prices? I haven't opened a stock account in the United States, how can I be involved in manipulating stock prices?" Zhang Wei looked confused.
“Bear Stearns’ lawyer believes that you insinuated that Bear Stearns will go bankrupt in the novel, which will inevitably affect investors’ confidence in Bear Stearns and also affect Bear Stearns’ stock price. It happened to be recently In the past three trading days, Bearstone's stock price has dropped. They believe this is related to your novel, so you are suspected of manipulating the stock price."
"Can this be linked to cause and effect? What a talent!" Zhang Wei sneered, then asked: "What does the other party's lawyer ask for?"
"No, they ask for "The Big Short" to be removed." br>
"No, I won't agree!" Zhang Wei categorically refused, and then said: "Your Amazon legal staff are not just white-collar workers who don't work for a white-collar salary, right? Fight them to the end, and the legal fees will come from my royalties at the worst. "Buckle!"
"Well, I've discussed this with the legal department and I don't think it's necessary!" Thomas said.
"What do you mean it's not necessary? Do you want me to recognize it?" Zhang Wei asked angrily.
"Zhang, don't be anxious now, listen to me explain slowly." Thomas paused, and then said: "I have exchanged opinions with the legal counsel. The other party's lawyer is obviously very smart. They have not If they directly sue you for infringement or spread rumors, just because you changed a letter in the book, they can't win the lawsuit with this reason.
So they found this reason to manipulate the stock price and used this reason. , it will be more troublesome for us to provide evidence. Because Bear Stearns knows better than us what the daily trading volume of Bear Stearns' stock is, who is buying and selling, what bad and bullish news it will have, and what impact it will have on the stock price.
Moreover, they can also apply to the court for a temporary injunction on the grounds of avoiding stock market fluctuations and protecting investors, prohibiting the continued sale of "The Big Short" before the verdict. In this case, "The Big Short" will have no choice but to be taken off the shelves for a long time to come. "
Zhang Wei frowned slightly. According to Thomas' description, he was obviously at a disadvantage.
After calming down for a few seconds, Zhang Wei asked: "Thomas, your Amazon Legal, do you have any good suggestions? "
"Our suggestion is to temporarily remove it from the shelves and then put it back on the shelves after March 2008! Thomas said.
“Why March 2008?” "Zhang Wei asked.
"Because the timeline in your novel reaches March 2008, which is the time when Bellstone's bankruptcy was predicted in your novel."
"You mean, by March 2008, Bellstone will be bankrupt." If Bear Stearns goes bankrupt, you won't sue me again? Thomas, I didn't expect you to believe me so much. I just wrote that Bear Stearns would go bankrupt in the novel. You really believed it. Your trust touched me so much. "
"Uh, Zhang, you may be overthinking it. I don't believe that Bearstone will go bankrupt! It's the fifth largest investment bank in the United States. How can it go bankrupt?" Thomas immediately poured cold water on it! , and then continued to explain:
“The legal opinion is that since the other party’s reason for suing you is to manipulate the stock price, then wait until the end of the timeline in your novel, which is March 2008, and then do everything after that. What happened has nothing to do with your novel, so there is no such thing as manipulating stock prices. "
"If you can think of this method, it seems that your legal affairs are quite good!"< br>
Thomas continued: "At present, the sales volume of "The Big Short" is not outstanding. Even if it is taken off the shelves for a year, the impact on your income will not be great. After discussing with the legal department, I feel that this It’s the most cost-effective solution.
Of course, we at Amazon will compensate you in other ways. We have reviewed your book "Three Body" and it is simply the best I have ever read! The best science fiction novel. We are willing to invest more resources in the promotion of "Three Body"!"
Zhang Wei understands that according to Thomas, the sales volume of "The Big Short" is average, so it is better to temporarily cancel it. Fight, and save yourself the trouble of going to court.
Then Amazon will increase its efforts to promote "Three Ti", which can be regarded as compensation for Zhang Wei.
This deal is definitely a good deal!
Anyway, the real power of "The Big Short" will not be until after the subprime mortgage crisis breaks out. By then, people will find that the predictions in "The Big Short" are true, and there will be no need for Zhang Wei to ask. Amazon will definitely rush to print more copies. From "The Big Short."
So Zhang Wei is getting a powerful promotion of "Three Ti" for free.
"Okay, Thomas, I agree with your plan. "The Big Short" will be temporarily removed from the shelves!" Zhang Wei agreed without hesitation.
(End of this chapter)