Rebirth: My dad is a coal boss

Lin Hao had set his sights on the subprime mortgage crisis in 2008 a long time ago. This crisis is undoubtedly the most important and influential financial storm in the next decade, and it is also an unprecedented investment opportunity. Therefore, Lin Hao has begun to lay out in advance, and the acquisition of Bank of Julius Baer is a key step in the plan.

Lin Hao's foundation is still too shallow now. It is still in the initial stage, and the problem of tight funds is particularly prominent. This time, Lin Hao went around Asia and Europe. After returning, the balance in the account was almost at the bottom.

For this subprime mortgage crisis, Lin Hao plans to take two steps. The first step is to cooperate with King of Understanding since last year. At the same time, many related financial products have been launched in the securities market.

Now with Bank of Julius Baer, ​​we can finally start to expand! At present, many investment banks in the market use 20 to 30 times leverage to make high profits. For example, there is an institution called Bank A, which has assets worth $3 billion, but through up to 30 times leverage, it can borrow an astonishing $90 billion for investment. In this way, if the bank successfully achieves a 5% return on investment, it will earn an impressive profit of $4.5 billion, equivalent to 150% of its assets. However, on the other hand, if the investment suffers a 5% loss, the bank will not only lose all its own assets, but will also owe $1.5 billion in debt.

Due to the extremely high risk of leveraged operations, banks usually do not easily engage in such risky operations according to conventional regulations and requirements. However, faced with the temptation of huge profits, there are always people who rack their brains to find workarounds. As a result, a clever strategy came into being - putting leveraged investment in the guise of "insurance". This so-called "insurance" is the famous CDS (credit default swap).

Taking banks as an example, suppose that Bank A finds institution B as a partner in order to avoid leverage risks. Institution B here can be other banks or various financial institutions such as insurance companies. A proposed to B: "How about you provide default insurance for my loan? I am willing to pay you up to 50 million yuan in insurance fees every year for ten years, totaling 500 million yuan. If my investment is safe and sound and there is no default, then you can easily pocket the 500 million yuan insurance premium; but if there is a default, you will have to bear the corresponding compensation liability."

A thought: "If there is no default, I can make 4.5 billion!" His eyes flashed with excitement, and then he thought: "Then I will take out 500 million yuan from the 4.5 billion yuan for insurance, so I can still make a net profit of 4 billion! Even if there is a default, I am not afraid, anyway, there is an insurance company to compensate me!" For A, this is undoubtedly a business that is sure to make money, and he secretly rejoices in his heart.

B is a shrewd person, and he did not immediately accept A's invitation. Back home, B began to think carefully and conduct in-depth statistical analysis of relevant data. After some research, he was surprised to find that the default rate was less than 1%! This number made B very satisfied. He thought: "If I do 100 such businesses, I can get a total of 50 billion insurance money! Even if only one of them defaults, the compensation amount is only 5 billion, but even so, I can still make 40 billion!"

A and B both thought that this deal was very beneficial to them, so they immediately made the deal without hesitation, with joy on their faces. This deal made both of them very satisfied.

After B did this insurance business, C was jealous. C ran to B and said, how about you sell these 100 CDS orders to me, and give you 200 million for each contract, a total of 20 billion. B thought, it would take me 10 years to get my 40 billion, and now I can get 20 billion in one transaction, and there is no risk, so why not, so B and C immediately made a deal

In this way, CDS was divided into pieces of CDS, which flowed to the financial market like stocks and could be traded and bought and sold. In fact, after C got this batch of CDS, he did not want to wait for 10 years to collect 30 billion, but put it up for sale at 22 billion; D saw this product and calculated that 40 billion minus 22 billion, there was still 18 billion to earn, which was not expensive, so he bought it immediately.

After B made this insurance business, C was jealous. So, C ran to B and said, "Hey! Why don't you sell me those 100 CDS orders? I'll give you 200 million for each contract, a total of 20 billion."B thought that it would take ten years for his 40 billion to arrive, but now he could get 20 billion by reselling it, and there was no risk. It was a great deal. So B agreed to C without hesitation, and the two quickly reached a deal (equivalent to C receiving 30 billion insurance money and assuming insurance liability).

In this way, CDS was divided into pieces of CDS, which flowed into the financial market like stocks and could be traded and bought freely. In fact, after C got this batch of CDS, he did not plan to wait ten years to receive 30 billion, but put it up for sale at a price of 22 billion. At this time, D noticed this product. After some calculations, he found that he could still earn 18 billion by subtracting 22 billion from 40 billion. This was the "original stock" and the price was not expensive, so D immediately bought these CDS (equivalent to D receiving 28 billion insurance money and assuming insurance liability)

After reselling, C made a net profit of 2 billion US dollars! A and B were dumbfounded when they saw this result. That was 2 billion US dollars! And there was no risk! Since then, these CDS have been repeatedly hyped in the market, and the price of CDS has continued to rise. Today, the total market value of CDS has reached 62 trillion US dollars, which is an astronomical figure! And all this is just because of a contract...

Above, A, B, C, D, E, F and other roles are making huge fortunes. In essence, these funds come from the profits of A and investors similar to A. However, most of these profits come from the subprime loan business in the United States.

Subprime loans are mainly provided to ordinary American real estate investors. These people could only afford to buy the houses they lived in, but seeing the rapid rise in housing prices, they began to think about real estate speculation. So, they used their houses as collateral and borrowed from banks to buy investment properties.

The interest rate of this loan is as high as 8% to 9%, which is difficult for them to afford with their own income. However, they have a clever strategy: continue to mortgage the house to the bank, borrow more money to pay the high interest, and thus achieve the goal of "making money out of nothing".

At this moment, A is very happy because his investment is bringing him rich returns. B was also very happy because the market default rate was extremely low and his insurance business could continue. Then, C, D, E, F and others also made profits and were all immersed in the joy of wealth growth.