Reinventing the Millennium

The New York Times Institute has not achieved anything since its inception.

At first, Summers was very interested, wanting to get a feel for the U.S. social economy and show that he had inherited the economist skills from Summers.

However, at this moment, he suddenly became undecided, could not clearly see the situation, and could not identify the context. The research report originally scheduled for the first quarter was delayed, and he himself became a little boring due to this delay.

When Fang Zhuo gave him the suggestion of "analyzing Lehman," Summers still lacked interest, but agreed to do it, and handed the project over to people from Harvard Business School.

This research report on Lehman was originally conducted normally. However, as industry insiders provided quite detailed and reliable data as well as industry changes over the past few months, things gradually became interesting.

Today's housing market is in turmoil due to subprime debt defaults.

The collapse of housing subprime mortgage lenders that began in March spread to Bear Stearns, the fifth largest investment bank in the United States, in August, and two of its funds declared bankruptcy.

At the same time, Lehman's stock price once reached a high of $72.

The reason why the capital market reacted in this way is precisely because Lehman has made frequent moves in commercial real estate this year, with investment hitting record highs. Related bond issuances are very popular. In particular, in May, it leveraged and joined other institutions to spend huge sums of money to acquire the No. 1 property in the United States. Axton, the second largest developer of high-end apartments.

The acquisition value is as high as US$22.2 billion.

Stimulated by this, the capital market believes that Lehman's focus on commercial real estate is quite successful, which is different from institutions such as Bear Stearns, Citigroup, and Merrill Lynch that frequently report negative news.

Lehman shares bucked the trend and soared.

The problem is that the acquisition that was announced in May was not announced until August.

In the past four months, the subprime debt crisis and the credit crisis have caused changes in the commercial real estate and related mortgage securities. The commercial mortgage securities issued by Lehman with the Axton project lost sales.

Due to market changes, existing customers are increasingly tightening their purse strings.

Lehman’s commercial mortgage-backed securities, CMBS, are no longer liquid!

It was at this time that the New York Economic and Social Development Institute issued its first research report since its establishment, analyzing Lehman's failure in commercial real estate and using this case to issue a stern warning to the U.S. financial market.

——Lehman has a very serious problem, and this problem is probably just a microcosm of the financial market!

——The United States must be alert to the systemic financial risks caused by the subprime debt problem!

The Lehman case was handled by people from Harvard Business School. Seeing the big from the small was Summers' renewed interest in the case and his determination to give a warning.

However, "systemic financial risk" is far less noticeable than the "Lehman problem".

The data in this New York Economic Institute research report is very professional. It describes the funds, leverage, process, and problems of Lehman's acquisition of Axton quite expertly. Many figures have caused some institutions to question Lehman in the current environment. .

——In a US$22.2 billion acquisition, the New York Times speculated that Lehman actually paid less than US$300 million!

——The leverage ratio exceeds 40:1!

So, once this huge commercial real estate project is in hand, the notes, bank financing, commercial mortgages, equity bridge loans... all turned into ropes and tightened around Lehman's neck!

Was this project a success?

The New York Times report quoted people familiar with the matter...

——"Lehman is frantically giving away profits. They are even negotiating prices at 10%, 20%, or 30%. It's crazy, it's already crazy!"

——"No one dares to buy the CMBS issued by Lehman, because they are afraid of Lehman's default."

——"Walsh, who is in charge of this project at Lehman, called me and said that Lehman was willing to bear the first US$5 billion of default risk, but I still didn't dare to take it. I was afraid that this time it would be a US$10 billion default. The loss of 5 billion is enough to make me jump off the building!"

From industry changes, funding data to project facts and insider revelations, the New York Economic Institute's research report restored Lehman's difficulties in commercial real estate and CMBS in high definition.

Affected by this, Lehman's stock price took a big dive!

The stock price fell from US$72 to US$56 in a short period of time, a drop of 22.2%!

Lehman held an emergency press conference to deny the New York Economic Research Institute's research report and denounced it as a false smear.

Subsequently, bulls launched a counterattack and the stock price rebounded to $65.

However, without waiting for the New York Economic Exchange to issue a report, Goldman Sachs suddenly stepped aside and said that the liquidity crisis caused by the default of subprime debt has caused substantial instability in the commercial real estate securities market.

The New York Times reported that Goldman Sachs spoke out, and more institutions expressed their views to a greater or lesser extent.

The stock market voted with its feet, and Lehman's stock price fell again, plummeting from $65 to $49, and finally rebounded slightly to the $50 mark.

Compared with the high of 72, by the time Fang Zhuo was invited to Stanford, Lehman's stock price was 50.65, a drop of nearly 30%!

An international investment bank lost 30% of its market value in a short period of time, and what caused its plight was precisely a commercial real estate project that had previously been called a market model.

Everything that happened in a short period of time, when Fang Zhuo stood in the classroom of Stanford Business School, when asked about something that seemed to have some connection with him, he first let out a sincere sigh.

"Stimulate."

This is also the common feeling of the teachers and students in the business school who came to listen to the guests sharing their business experience today. Lehman's strengths turned into weaknesses, its profits turned into losses, and its stock price plummeted from a high level. This is too exciting!

However, what Fang Zhuo found exciting was one of the things that was not disclosed in the research report.

The money for Lehman's acquisition of Axton's operations, $9 billion here, came from Fannie Mae and Freddie Mac, the two largest home mortgage lenders in the United States.

Kong Yu has already started shorting Fannie Mae and Freddie Mac and has been adding more to them depending on the situation. He did not expect that this observation of Lehman would also involve Fannie Mae and Freddie Mac.

It can only be said that Lehman is indeed very powerful and has strong network resources.

"Mr. Fang, I heard that you were shorting Lehman before, and the New York Economic Institute, which issued a research report on Lehman this time, is also sponsored by you. Can I understand that this is a sniper attack on Lehman?" asked a student. is also an issue of considerable concern.

Fang Zhuo was very calm: "Before Lehman was punctured, did you also think that its commercial real estate projects were excellent? Without this report, would the excellent Lehman be the truth you think it is?" "

"Similarly, I do sponsor the New York Economic Institute, because Summers is an economist I respect very much. However, students, I am not the only one who sponsors this institution. Are other sponsors also sniping? Man?"

"The New York Economic Institute is an objective and independent third-party institution, and I look forward to it providing us with a deeper perspective."

The New York Institute of Economics was sponsored by Fang Zhuo, but having only one benefactor was too conspicuous, so the New York Institute of Economics conducted some alms, so that with more sponsors, he would feel comfortable among them.

Fang Zhuo continued to respond: "I am not secretive about shorting Lehman. If I want to snipe Lehman, there is nothing I dare not admit. But if there is nothing, there is nothing. There is no need for me to deny anything."

There is no need to deny anything for oneself, but Fang Zhuo also does his part to meet all the demands of the New Scriptures. He is denying them for the New Scriptures.

There was applause in the business school, and everyone felt that the world's top 50 richest man was sincere.

"Mr. Fang, many media call Lehman's stock price drop the 'Lehman moment.' What do you think of Lehman's prospects?" someone else asked.

Fang Zhuo laughed loudly when he heard this question.

"You shouldn't ask a question like that to a guy who shorted Lehman."

"Lehman moment?"

"No, I don't think this is Lehman's moment, this is just the beginning of Lehman."

Fang Zhuo made a prophecy related to interests: "Suffering from business pressure, financial pressure, and environmental pressure at multiple levels, when the stock price starts to fall, the real Lehman moment will not be far away."