My Age of Investment

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After the reception, Xia Jingxing found a room in the hotel, and chatted with Gates on the sofa.

As soon as he sat down, Gates couldn't wait to ask: "Daren, tell me, how does this thing make money?"

Xia Jingxing smiled, he thought Gates was not interested in money.

Even Gates is still interested in making money, so Jack Ma must be lying.

"Mr. Gates, have you observed the housing prices in the United States in recent years?"

Xia Jingxing looked at Gates, he didn't answer the other party's question directly, because this thing can't be explained clearly in a few words, and he had to start from the root.

Gates shook his head, "I didn't go out of my way to find out, but I know that the real estate market has been extremely prosperous in recent years, and it only goes up but not down."

Xia Jingxing smiled. Gates became financially free decades ago. He has a special person to take care of his assets. Naturally, he doesn't like real estate speculation as a financial management method, and he basically won't buy a house. Isn't the Xanadu 2.0 built by himself uncomfortable? ?

If the question he asked was not asked to Gates, but to the ordinary working class in the United States, those people would definitely be able to analyze it well.

The scene of China's reappearance more than ten years later, the house buying boom, is now being staged in the United States.

"Then do you know about buying a house with zero down payment?" Xia Jingxing asked.

Gates was taken aback for a moment, "You mean you don't pay a penny, move into the house with your bags, and slowly repay the mortgage for the rest of your life?"

"Yes, early consumerism is prevalent in the United States, and it has now spread to the real estate sector."

Gates spread his hands, "It's very good, I can live in the house I like earlier, but the work may be a little harder, and the loan will take a long time.

I still remember that when I was studying at Harvard, I had a classmate who came from a lower class and had to pay off student loans for many years. "

Xia Jingxing laughed loudly, "Your classmate still went to Harvard University, the income from the job is guaranteed, and the loan repayment is not a problem.

Did you know that even new immigrants without jobs are starting to live in big houses? "

"New immigrant? No job? Still living in a big house?"

Gates was born in a wealthy family since he was a child, and he has been rich for so many years. He has long been separated from the masses and has no idea of ​​the status quo at the bottom.

Xia Jingxing nodded, "Yes, after the promulgation of the "American Dream Down Payment Act" led by President Bush Jr., it is required to reduce the down payment ratio of low- and middle-income families, and it also requires government financial institutions such as Fannie Mae, Freddie Mac, and Ginnie Mae to A certain amount of mortgages for the poor must be included in the bank mortgages purchased.

In this way, the homeowners have their own houses, and many poor people without financial means have a piece of land to cover themselves. "

Gates frowned, "What if the loan is not repaid? This is completely a bet that housing prices will not fall!"

Xia Jingxing nodded lightly, "That's right, this is betting that the housing price will never fall.

However, savvy banks and lending institutions will not fail to see the default risk of lenders, and now they have transferred the risk out. "

Gates asked, "Abt-backed securities?"

"Yes, lending institutions such as banks have securitized mortgage asset packages and sold them all to other financial institutions."

Xia Jingxing said with a smile, "Currently, nearly half of the MBS in the U.S. real estate mortgage-backed securities market are sold to the famous Fannie Mae and Freddie Mac."

MBS, Mortgage Backed Bonds or Mortgage Loan Securitization.

Gates continued to listen quietly, Xia Jingxing continued to speak calmly.

"The housing loan has a long term, banks and other lending institutions do not want to hold this asset for a long time, and the "two rooms" also do not like to hold it for a long time.

So Fanfang became a distributor and sold them all over the world - governments (sovereign wealth funds), banks, hedge funds, insurance companies, pension funds, individual investors, etc.

In this case, a complete chain of capital flow is formed—from homeowners who borrow to buy houses to investors all over the world.

This is equivalent to investors from all over the world, "funding" the American people to buy houses,

So, starting in 2001, house prices in the U.S. have risen at a rate that has never been seen in history..."

Looking at Xia Jingxing with a smile on his face, Gates always felt that it was a malicious smile, and after listening all the way, even if he didn't understand the real estate market, Gates knew that there was a problem, and the problem was not small.

"Of course, in addition to Fanfang and Freddie, the big and small investment banks on Wall Street also took a fancy to this business. They recruited the three major rating agencies, packaged various mortgage-backed securities into CDO bonds, and marked them with A ratings or even AAA ratings. market sale."

Xia Jingxing said with a smile, "These CDO bonds are very easy to sell, because everyone thinks that house prices will not fall in the future, and if the lender defaults, at worst they can be recovered and auctioned to make up for losses.

This concept has penetrated into the bones of most people, so after the establishment of this business model, more and more subprime loans appeared, and the scale of financial derivatives developed on the basis of subprime loans also became larger and larger. "

CDO, secured debt certificate, also known as collateralized debt obligation, mortgage debt contract, English name.

Gates basically understood at this time, and asked: "Daren, you mean that housing prices may fall, and this bubble of false prosperity will be punctured."

"Yes, the price of anything that can be traded in the world is not constant, there will be fluctuations and changes."

Gates was silent for a while before asking again: "You judge that housing prices have fallen, so how do you make money?"

"Thanks to the little geniuses on Wall Street."

Xia Jingxing said with a smile, he really admired these young geniuses, as long as it is profitable, there is no financial product that cannot be designed.

He introduced to Gates: "Credit default swap (English: credit default swap, abbreviated CDS) is also called credit default swap, credit default swap, and loan default insurance.

It is one of the derivative instruments of credit and insurance. The contract is traded by two legal persons, one is called the buyer (the party to be protected in case of credit default), and the other is called the seller (to protect the buyer in case of credit default).

We need to buy CDS now. When housing prices fall and subprime loans and subprime bonds default on a large scale, the seller will be responsible for compensating our losses.

Of course, what is even more ruthless is that not only can you insure your own CDO, but you can also insure someone else's CDO.

In other words, we don't need to hold subordinated bonds, just buy CDS directly.

This is actually a gamble, and the tool is CDS. "

Gates understood it completely, and asked, "Then who sells CDS?"

Xia Jingxing replied, "Investment banks, Goldman Sachs, Morgan Stanley, and insurance companies."

"Then you play against them?" Gates asked again.

Xia Jingxing shook his head, "After receiving our insurance premium, they can also buy CDS issued by other financial institutions, and play with another opponent."

Gates asked again: "When they issue CDS, they are not afraid of large-scale default on debts, and they will pay themselves to death."

"Many elites on Wall Street have calculated that there are many borrowers in one asset package, and the probability of default is extremely small.

Moreover, the institution that issues CDS will issue countless CDS. As long as the probability is controllable, the insurance premium can still cover the compensation cost. "

As he talked, Xia Jingxing laughed to himself. If the calculations were really accurate, then there would be no subprime mortgage crisis.

These institutions that issued CDS thought they would make money like selling insurance, but it was almost meaningless to describe it as a blood loss.

In essence, CDS is similar to insurance, except that it does not insure against diseases or people, but about the possibility of market crashes.

Therefore, there are many ghosts on Wall Street, and everything can be gambled.

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