My Age of Investment

"No problem! Morgan Stanley has accepted this business."

Now that all the risks have been isolated, Mack felt that there was nothing to worry about, so he agreed to cooperate without hesitation.

Blankfein had been thinking by the side just now, without interjecting.

At this moment, he stared at Xia Jingxing, "Dai Lun, synthetic CDO's income is not too high, and it will not be a very popular product. With your capital, it is enough to leverage the tens of billions of dollars in the CDS market.

I can tell you for sure that we can't sell that many.

If you want to short subordinated bonds in a big way, you have to buy ordinary CDS from the market. "

Xia Jingxing naturally understood the logic behind it, and he didn't intend to bet all on the synthetic CDO.

If the market sales situation is ideal, he still intends to buy all the synthetic CDOs heavily because there are collaterals, but the actual conditions do not allow it.

This forces him to buy some ordinary CDS that circulate in a small range among major investment banks and hedge funds if he wants to maximize his profits.

The profit model of ordinary CDS is slightly different from that of synthetic CDO.

The latter has the collateral of high-quality bonds and is not afraid of defaulting on debts.

However, if the ordinary CDS purchased are provided by unlucky ghosts such as Lehman and AIG, claims will be a problem.

In fact, in addition to the way of claiming, there is also a profit model of waiting for the price of CDS to rise and selling.

It's just this profit model, and the profit will not be particularly large.

If the subprime debt defaults on a large scale, it is equivalent to being out of danger, and the value of CDS will rise rapidly.

At this time, you can wait for the CDS provider to be responsible for the compensation, or you can sell the CDS to some financial institutions that need to avoid risks.

Because many financial institutions hold too many subprime mortgage bond assets, once the subprime mortgage crisis occurs, the subprime bond rating will drop, and when losses occur on the books, they need to buy CDS to offset the losses.

As for the CDS sold by his side, whether he can get compensation in the end is none of Xia Jingxing's business.

In fact, many people underestimated the spread of the subprime mortgage crisis. When seeking safe-haven assets and buying CDS in large quantities, they misjudged the situation and believed in the wrong company.

The price is that there is a big problem with the reimbursement rate of CDS!

All in all,

Ordinary CDS can also be played, but the operation is more difficult, which puts forward higher requirements for market control and timing of sales.

It's similar to beating drums to pass flowers, and seeing whose hands it explodes.

Even the CDS provided by Lehman and AIG can also be bought. At the earliest stage of the subprime mortgage crisis, the two companies were able to pay a certain amount of cash, but not later.

Xia Jingxing thought about it for a while, nodded and said, "Yes, at that time, you two will need to broker some more deals."

Blankfein laughed loudly, "You have found the right person, you only need to pay enough premiums... and commissions, no matter how many counterparties you have, we can find you.

But Darren, you have to give me an accurate figure. Unlike synthetic CDOs, ordinary CDSs involve many players. "

Xia Jingxing glanced at Blankfein. What the latter said was that he was worried that he didn't have enough money.

In fact, Blankfein was right. Xia Jingxing's billions of dollars were distributed to the CDS trading market, which was not a particularly large number.

Xia Jingxing also couldn't say that there is no upper limit. After thinking for a while, he replied: "This requires statistics and analysis, and I can't give you a particularly accurate number for the time being."

"Okay, when you finish the statistics, just let us know."

As soon as Blankfein finished speaking, Mack immediately went on to say: "Daren, we at Morgan Stanley are the top three intermediaries in the CDO and CDS trading markets. If you have needs in this regard, just contact us."

Blankfein took a look at Mack Jinhang, still wanting to steal business?

Xia Jingxing smiled, but remained silent.

It would be good for the two companies to fight each other, and it would be convenient for him to negotiate a more favorable commission price.

Xia Jinghang didn't mention the matter of subprime mortgage bonds, and chatted with Mack and Blankfein about some gossip.

After a while, the two investment bank CEOs left with their subordinates.

After seeing off the two of them, Xia Jingxing returned to the house, saw Peter Thiel still standing on the balcony, and walked over.

"Peter, I've told you all the plans now? How about it, do you have the confidence to work with me on big things?"

Peter Thiel looked back at Xia Jingxing, with a worried expression on his face.

"Daren, why do I feel a little bit out of date?"

Peter Thiel did not lie, he was really frightened by Xia Jingxing's grand plan.

Billions of dollars were left without a penny, and all were poured into the subprime mortgage bond and its derivatives market.

He is very aware of the risks involved. If he is not careful, billions of dollars will be ruthlessly swallowed by the market.

Moreover, Xia Jingxing's method of not doing any risk hedging, anyone who saw it would subconsciously feel palpitations, it was too reckless.

That's billions of dollars, just put it on the gambling table with such a casual attitude.

He felt a little distressed when he saw it.

"Daren, I suggest you think about it carefully, or take part of the money, such as hundreds of millions of dollars, to invest in subprime derivatives."

Peter Thiel sighed, "Financial markets are the most ruthless, don't get carried away."

Xia Jingxing did not expect Peter Thiel to advise him like this, it seems that the other party still regards him as a friend.

"Don't think about it, I have already decided, 3 billion US dollars, don't keep a cent, and put it all in."

Staring into the distance, Xia Jingxing's eyes were burning with fire, "This is"

Moreover, unlike Goldman Sachs and Morgan Stanley, they could see that Xia Jingxing was crazily shorting the property market, and they did not have vigilance or suspicious thoughts.

The reason why Goldman Sachs and Morgan Stanley can repeatedly make big money, or escape from the financial crisis, relies on financial information from all directions.

As for his actions of shorting the property market, Xia Jingxing didn't want to expose it to the investment bank.

Because CDO, CDS and even the subprime ABX index are all traded over-the-counter and cannot be traded in the open market like stocks.

This requires investment banks such as Goldman Sachs and Morgan Stanley to pimp around and broker gambling deals.

It is true to say that they opened casinos in subprime debt. They could have guaranteed income in droughts and floods, but Lehman and Bear Stearns disliked that the casino commissions were too small, and they had to stop playing twice if their hands were itchy.

This is a mystery that the Chinese have understood for a long time. Those who run casinos cannot go to gamble, but Americans just don’t believe in evil, or because of good financial reports and bonuses, the management began to play tricks.

Simple!

You set up an SPV special purpose company in the Cayman Islands, and then issue a number of "bonds" with different repayment priorities in the name of this vehicle entity and sell them to investors.

The money delivered to you by investors is bought into other relatively safe bonds, and a certain amount of interest is obtained every year.

Finally, we will combine these interests with a part of the premiums we pay to you to make "higher interest" and pay them to investors every year.