My Age of Investment

Xia Jingxing looked at Mack who was speaking with a smile, "I need financing."

As if he had already guessed Xia Jingxing's thoughts, Mack asked calmly, "How much do you need?"

Xia Jingxing didn't say anything, but compared five fingers.

"Five times leverage, that's no problem."

After finishing speaking, Mack suddenly realized, no! Their investment bank has given Vision Capital this leverage ratio.

"It can't be fifty times, right? Darren, do you want to trade foreign exchange?" As he spoke, Mack himself laughed.

Blankfein looked at Xia Jingxing suspiciously while thinking quickly in his mind.

Suddenly, Blankfein seemed to think of something, his eyes widened, and he asked in an uncertain tone, "50 billion dollars?"

"Yes, a $50 billion stock position!"

Xia Jingxing looked at the two of them with a smile, "How is it? Is this job going to be done? Stock transaction fees and financing interest returns will be a very impressive figure."

Mack shook his head again and again, and said solemnly: "It's too high, 5 billion US dollars leveraged ten times, the risk is too great!"

"Yes, Darren, counting the warning line, you don't need to really reach a 10% stock price fluctuation, just a few points of fluctuation, and your $5 billion will evaporate directly from the market."

Blankfein said in a serious tone, "I know you want to short the stock market, even if the subprime mortgage crisis continues to expand as envisioned by Vision Capital, a 10% stock price fluctuation is easy to appear.

If you add someone against you, the risk of liquidation is even greater. "

Xia Jingxing smiled, "Misunderstood, I dare not use ten times the leverage! Didn't I say it? A new fund of 5 billion US dollars, plus the income that is about to be realized, CIC also invested in one of our 1.5 billion For US dollar funds, the margin can reach at least US$10 billion.”

Mack's face became calmer, "Oh, so it's still five times leverage?"

He thought about it, and then smiled wryly: "The risk is still not small. If there is a short position of tens of billions of dollars, once there is a big market fluctuation, there will be a lot of movement to close the position, and it is very likely that the position will be exhausted."

"Not very likely,

Yes for sure! Blank Sanskrit said with certainty.

"Isn't this the same leverage as before?"

Mack took a look at Xia Jingxing, "We are smart people who don't say dark words. Previously, Envision's capital was small, and even if it closed its positions, it would not cause fluctuations in the market.

You are now tens of billions of dollars, and quantitative changes have caused qualitative changes. "

Blankfein nodded in agreement: "Yes, Daeron, it's not that we don't want to help. We can't afford such a big matter."

Xia Jingxing sighed, "How about using the financial investment tool of "total return swap"?"

Total Return Swap, Total Return Swap, referred to as TRS contract, means that the buyer of credit guarantee transfers the total income of the reference asset to the seller of credit guarantee during the agreement period. The total income can include principal, interest, prepaid expenses and asset price Capital gains from favorable changes in capital, etc.

Blankfein narrowed his eyes slightly, "You mean to ask Goldman Sachs and Morgan Stanley to sell short for you?"

"Yes, you guys control the account, as long as the investment is completed and the income is delivered, so the leverage can be looser, right?"

In fact, Xia Jingxing probably also knows that the amount of funds is too large, and the leverage will be severely restricted by the investment bank, because this is a game of risks between the two parties. If the leverage is too high, the investment bank will easily be dragged down by customers and cause losses.

The total return swap is relatively easier to accept.

This is also a credit derivative and is a sibling to CDS credit default swap/swap.

The two sides of the CDS transaction agree on whether there will be a breach of contract, and the total return swap agreement is similar to "holding stocks on behalf of others". The investment bank is entrusted to help do long or short, and the proceeds belong to the customer. The investment bank earns some transaction fees and financing. Benefit.

At the same time, this operation has another advantage, avoiding the information disclosure of hedge funds, and not having to reflect the investment on the balance sheet, so as to achieve the effect of concealing itself.

However, investment banks need to face the dual risks of credit risk and market risk.

In Buffett's 2002 letter to shareholders, he warned of the risk of "total return swaps": total return swaps make margin requirements like a joke. When Charlie and I read the derivatives activities described in the footnotes of major banks' financial reports, The only thing we can understand is that we simply don't understand how much risk there is in these activities...

In fact, the old man's description is a bit exaggerated, and the deposit still needs to be paid, otherwise the investment bank is also worried about being prostituted for nothing.

Considering Envision Capital's impressive record and asset management scale, Blankfein was already moved. He said, "Daren, how much security deposit are you willing to pay?"

"20%."

Xia Jingxing is also a little afraid that the leverage ratio is too high and it will screw up, so conservatively ask for five times leverage, and at the same time reserve a certain amount of funds in his hand. When a stock rebounds, he can call for margin at any time to ensure nothing goes wrong.

Blankfein didn't speak, but looked at Mack, who looked thoughtful.

In order to make a little money, spend tens of billions to play with customers, the business of investment banking is so difficult.

But having said that, since there are such mature products in the market, the risks and solutions have been fully considered.

Wall Street investment banks are all veterans, and they have always been the only ones who cheated hedge funds, and it is rare for hedge funds to cheat them.

If it does happen, it is also a low-probability event, and the big deal is to offset it with profits.

This is the same thing as selling insurance, allowing a certain percentage of risk.

"Okay, Morgan Stanley will take over this job."

Considering this year's unsightly financial report, Mack feels that the business of Envision Capital can still be tried.

Xia Jingxing looked at Blankfein, who nodded, "No problem, we will take it too."

After finally persuading the two white gloves, Xia Jingxing showed a slight smile on his face, and said, "We still have a small request, to hire Goldman Sachs and Morgan Stanley to design highly leveraged put derivatives and sell them to major investment institutions. Trade with our counterparty."

Blankfein was taken aback for a moment, then laughed loudly: "No problem, this is a value-added service."

It is not once or twice to do this kind of dirty work, Blankfein is familiar with it.

Last year, Goldman Sachs helped Envision Capital design a synthetic CDO, and the sales volume was very good. A large number of investment institutions bought this product and became rivals with Envision Capital.

With the occurrence of the subprime mortgage crisis, these investors have lost their pants, while Vision Capital has made a lot of money.

If you want to do some fancy work, you can't do without the help of Wall Street investment banks.

As long as you give money, any rival investment bank can fool you.

Of course, the transaction is absolutely fair, and the winner or loser depends on the differences in perceptions of subprime loans among institutions.

Mack took a deep look at Xia Jingxing. At such a young age, his heart was as dark as theirs, and only such a person can play Wall Street!

"Okay, this is very simple."

Mack smiled all over his face, responding to matching opponents, they can earn a commission as an investment bank, why not do it?

The intermediary is like this, eat two ends, and sometimes take the money from one end to help the other end.

Xia Jingxing, Blankfein and Mack had a secret discussion in the room for more than two hours. When they walked out, the people outside had already left.

Xia Jingxing called Ivanka and was about to leave when Paulson called to stop her.

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