Easy Tycoon

Chapter 928 Return of $200 Billion
The trading here is non-stop 24 hours a day, so Yang Jing returned to his room satisfied after watching it for a while, and Henry, David, and Cesar also followed in.

Yang Jing personally poured a glass of champagne for everyone, then raised the glass and said with a smile: "Come on, let's toast to our glory!"

"Cheers to our glory!" The three said in unison, raising their glasses high.

The result of this investment or speculation is very brilliant. After the three major markets were launched respectively, the three major investment institutions under the name of the Dragon Fund have already obtained huge profits in these three markets.

Just in terms of international gold and international crude oil futures, the profit of the evil dragon fund has already exceeded the market value of a general electric!
Although the global financial crisis triggered by the subprime mortgage crisis has not yet reached its climax, the KY investment fund, which uses international hot money as a cover, has already made more than 2000 yuan in profits just from shorting the U.S. subprime mortgage and the U.S. stock market. One hundred million U.S. dollars!
Their speculative action this time is absolutely brilliant.

After taking a sip of wine, Henry said with a smile: "It's a pity that the outside world is amazed by John Paulson's profit. They will never know that compared with us, the profit of John Paulson's Paulson Fund is only Just a small part."

Cesar also smiled and said, "Don't forget, we are international hot money."

This sentence amused everyone at the scene, and even David, who is usually unsmiling, laughed heartily.

Leaving aside the profits of the international gold and international crude oil futures markets, just shorting the U.S. subprime mortgages and the U.S. stock market this time made KY investment funds more profitable than the U.S. stock market crash in 1987, and this is just the beginning.

The subprime mortgage crisis in the United States has begun to detonate the global financial market. A financial crisis sweeping the world is inevitable. This is the reason why KY Investment Fund and Pacific Capital will gain greater profits in the next stage. battlefield.

"You and those little guys are doing a good job, and there is John Paulson in front of us to attract the attention of the outside world. We will be safer this time." Yang Jing said with a smile.

This is not Yang Jing's nonsense, it is actually an extremely dangerous thing to make a fortune in the United States.When the U.S. stock market crashed back then, the U.S. government caught a lot of guys who made national fortunes afterwards. If KY Investment Fund hadn't "actively" stepped forward to support the market and repurchased stocks in large quantities, maybe Henry would have been arrested at that time. The U.S. government invites you in for tea.

The same is true of the subprime mortgage crisis this time, but compared with the stock market crash 20 years ago, the financial supervision in the United States has become looser at this time, and it coincides with John Paul, who is later known as the "empty god" Ersen was in front, so this time KY Investment Fund was even more comfortable in the subprime mortgage crisis.

From the mid-to-late 90s to the first decade of the new century, there were two famous "Paulsons" on Wall Street. One was the former chairman and CEO of Goldman Sachs, and Henry Paul who served as the US Treasury Secretary in 2006 Sen, the other is John Paulson, who made a fortune by shorting subprime mortgages during the subprime mortgage crisis, and was hailed as the "empty god" by later generations.

Before the subprime mortgage crisis, John Paulson was not famous on Wall Street until he met his old friend Paolo Pellegrini in 2004. Two guys with the same smell saw the US real estate market. That huge bubble, and then decisively shorted the subprime mortgages. In the end, he made a heavy bet of 250 billion U.S. dollars in the U.S. real estate market to short the U.S. subprime mortgages. After more than a year, the 250 billion U.S. dollars became 450 billion U.S. dollars, direct profit up to 200 billion U.S. dollars.

John Paulson was also hailed as the "empty god" because of his short selling this time.

In fact, John Paulson's success is inseparable from Paul Pellegrini.

Paolo Pellegrini was born in Italy and came to Wall Street in the 80s. He worked as a mid-level investor in Lazard Brothers and tried several venture capital investments.It was also at that time that he met John Paulson, who was working at Bear Stearns.

At that time, the two of them could only be regarded as two small shrimps on Wall Street.

Unlike John Paulson, who had a smooth journey, Pellegrini worked as an agent for several times after leaving Zarad Brothers, but they all did not go well, and his two marriages also failed. Ended with failure.

Even before he met John Paulson again in 2004, the guy was in a state of unemployment.

However, after years of experience in the workplace, Pellegrini has developed outstanding financial analysis skills and created his unique investment thinking. He is no longer subject to the rules and regulations of the Wall Street financial system, no longer completely dependent on credit ratings, Rating agencies do ratings, but collect massive amounts of financial information and analyze it comprehensively, and use it as a basis for investment judgment.

And when the two met again, John Paulson's life was not very comfortable.

After working in Bear Stearns for four years, Paulson decided to switch from investment banking to fund management, and joined Gruss Partners Fund as one of the partners, officially starting his fund management career. In 1994, he saw the momentum of hedge funds, shared an office with several other small hedge funds, and founded Paulson Hedge Fund, which specializes in M&A arbitrage and event-driven investment.

In those years, Paulson’s small life was not bad, especially at the beginning of the new century, Paulson saw the huge bubble in the Internet, and decisively began to short the Internet, which made his Paulson Fund in In the first two years of the new century, the annual profit exceeded 5%, and the size of his fund increased to 6 million US dollars.

The performance of the Paulson Fund in the bursting of the Internet bubble also attracted the favor of many investors. By 2005, the size of the Paulson Fund reached 40 billion US dollars.

Although the size of the fund has increased nearly sevenfold, Paulson still feels uncomfortable.why?Simple, because Paulson felt a little aimless.

This is the terrible thing about hedge funds, because he is in charge of a hedge fund with a scale of 40 billion US dollars, but he doesn't know the direction of investment. After a long time, it will inevitably cause dissatisfaction among investors.

At this time, the US economy was booming, especially the real estate market, which was extremely hot, but Paulson was not interested in the US real estate market.He doesn't get involved in the messy waters of mortgage loans, financial derivatives and real estate. He mostly stays out of the real estate boom, so what is his goal?

Therefore, when he met Pellegrini, Paulson's life was not comfortable.

But at this time, he met Pellegrini, and his old friend pointed him in a direction.

Although Pellegrini is in a career state, his sense of smell has always been very sensitive.In particular, the boom in the US real estate market in the past two years made him smell something unusual.

So Pellegrini began to study the US housing market.He studied interest rates over several decades and found they had little effect on the housing market.This means that despite all the whitewashing by bulls, the Fed cutting interest rates is not at all the reason for the recent surge in house prices.But after reading academic and government literature and data, Pellegrini was frustrated: he simply could not quantify the extent to which housing prices were overvalued, nor did he know when the bubble started.He couldn't even prove that the price increase this time was different from the past.

To draw new conclusions, Pellegrini added a "trend curve" to the housing market data, clearly showing the extent of recent price increases in the housing market.This time, Pellegrini took a step back and started looking at a longer historical period, finding data on properties for each year after 1975.
And then suddenly, the answer came out: Between 1975 and 2000, U.S. home prices grew by just 1.4 percent a year after adjusting for inflation.However, during the six years from 2000 to 2005, US housing prices soared at an annual rate of more than 7%!
In other words, US housing prices need to shrink by 40% to match historical trends!
This level of housing price rise has never been seen before, and Pellegrini also found that every time housing prices fell in history, they fell below the trend line, which means that if housing prices really fell at this moment, it would be a real drop. up.

When Pellegrini told Paulson the results of his analysis, Paulson, who was naturally foolish and bold, immediately realized that this was a once-in-a-lifetime opportunity.

At the beginning of 2006, people generally believed that housing prices would never fall across the United States; housing loan experts kept advocating that the property market and housing mortgage market would continue to be booming; good news was frequently seen in major media.The vast majority of Wall Street's biggest names make the same argument.Credit rating agencies have also issued AAA ratings for Wall Street's financial products.

"Experts were blinded by the prosperity of the real estate market." After getting Pellegrini's analysis results, John Paulson decisively abandoned the rating agencies' ratings. He personally led his 45-member team to track thousands of Wan's housing mortgage, and analyze the specific situation of the personal loans that can be obtained one by one.

With the gradual deepening, Paulson became more and more convinced that investors greatly underestimated the risk of the mortgage market, and it became more and more difficult for creditors to recover their loans.

Before the outbreak of the subprime mortgage crisis, the relationship between CDOs and CDSs in the US real estate market was as follows: the higher the risk of a CDO, the higher the value of the CDS guaranteed for it.But during the housing boom, most people believed that CDOs were not too risky, so the price of CDS was very low.

So Paulson decisively invested 2006 million US dollars in July 7 to establish the first short CDO fund, and began to build a large number of positions.

At the same time, he shorted dangerous CDOs while buying cheap CDS.

Paulson's team began to search the market for low-quality CDOs, that is, CDOs with high risks. His goal was not the healthiest and most mature ones at all, but the kind of certificates that no one could recover.They then buy CDS insurance contracts for those CDO shares.

"Dude, do you want the CDO of New Century Finance?"

"Nonsense, such rubbish, no, of course I want such a top-quality CDO, as many as I want!"

"What about scammer loans and interest-only loans?"

"Fake, do you need to talk about it? Bring it to Lao Tzu, as much as you want!"

"Dude, do you want a CDO for mortgages in overheated housing markets in California and Nevada?"

"Yo, do you have many in there? I want them all."

In this way, Paulson scoured the hot real estate market for those high-risk CDOs and cheap CDS, which even caused ridicule on Wall Street.

Especially in the following months, the U.S. real estate market was still booming, and there was no sign of sluggishness. Therefore, Paulson's fund has been losing money-he has continuously invested more than one billion Dollar.

Some investors hastily asked him several times if he should stop the loss.He rebuffed flatly: "No, I'm going to raise."

Paulson did what he said, and he even established a second short-selling CDO fund again in a bet style, and continued to increase investment.

Paulson's approach caused a lot of ridicule and ridicule at the time, but he still insisted on doing it, with the spirit that everyone is drunk and I am sober, although thousands of people will go for it.

But his desperate approach did not disappoint him, even though he lost more than one billion US dollars for it from July 2006 to the end of 7, he still did not flinch.

In the end, his persistence brought him a huge fortune!

The subprime mortgage crisis finally broke out, and Paulson, who had made a large number of short positions ahead of time, finally obtained the huge return he should have received in this subprime mortgage crisis - 200 billion US dollars!

(End of this chapter)