Chapter 2205 They are all liars
“There will be a cascading reaction of defaults at the bottom, causing the bonds above to gradually collapse.”
“When the underlying defaulted bonds reach a certain value, the entire building will collapse in an instant!”
Chen Mo said and took away the two bottom blocks again.
At this time, the entire building blocks lost the support of the bottom layer and fell to the ground in an instant, with the building blocks scattered all over the ground!
Rexel pursed his lips and remained silent.
"Do you think collapse is a gradual process?"
"Then you are totally wrong!"
"The current default rate of real estate bonds has reached 4%, which means that 100 out of every 4 borrowers will no longer repay their loans."
“Once the default rate reaches 8%, mortgage-backed bonds will be worthless!”
Chen Mo's words were like the words of Hong Zhongda Lu, shocking everyone at the scene with their scalps numb!
In the past, those who worked in finance only had a numerical concept of default rates.
Whether the default rate is 4% or 8%, it seems to be a very insignificant number in their minds.
Because common sense tells them that the bond will collapse only when the default rate reaches dozens of percent.
Unexpectedly, it only takes 8 points for the default rate of real estate bonds to collapse!
Rexel thought for a long time and directly pointed out the key: "The investment banks in the overlord are so smart, don't they know that MBS is very risky? Why do they continue to buy subprime loan bonds knowing that they are unreliable? Woolen cloth?"
Chen Mo just spit out three letters: "cdo."
Rexel frowned: "cdo? What cdo?"
Chen Mo explained: "CDO is also a bond, or financial product."
"Investment banks and financial institutions that bought MBS repackaged a bunch of unsellable junk bonds and asked rating agencies to give them a triple-A rating."
"You will be surprised to find that this pile of junk bonds that were not even C-grade have been put on the shelves again under different names and have become AAA-grade products that the public can buy."
"The public and Wall Street elites don't care what kind of garbage is contained in CDOs. After all, the economy is growing, housing prices are increasing, CDOs are also increasing in value, and they are making crazy money."
"Why are 65% of the bonds or financial products found on the market rated 3a? Because 3% of these so-called 95a rated products are junk composed of subprime mortgages!"
"So, if I say that a major collapse will occur at 8%, I'd better go higher!"
The ratings of Baguo’s bonds or financial products are as follows:
aaa, aa+, aa, aa-, a+, a- and so on to the d level.
However, the yield rate of D-level financial products is negative 90%. From the time the rating was issued to the present, no financial products or bonds have reached D-level.
The lowest is a C-.
Chen Mo's conclusion made everyone present think deeply and fearfully.
Rexel, in particular, couldn't help but gasp.
If what Chen Mo said is true, it means that at this moment, all the links in the financial chain of the hegemonic country's banks, investment banks, governments, rating agencies, etc., are all racing with their eyes closed!
The passengers don't know this, and they think the driver drives fast and steadily, and can take them to a wealthy destination early.
As everyone knows, when the speed reaches a certain level, let alone a car crash, even turning a corner may lead to a car crash and death!
"Mr. Chen, what you are saying is that the banks of the overlord are cheating, the investment banks are cheating, the government is cheating, and the rating agencies are also cheating.
Are they colluding together to deceive the people of the hegemonic country? "
Rexel asked.
"Isn't it?" Chen Mo asked with a smile.
Rexel fell silent.
After all, he is a chaebol, and he knows much better than Chen Mo, a native of Daxia, about what the financial world and officialdom of a hegemonic country are like.
"Mr. Cliff, the building will collapse! Once the subprime mortgage crisis occurs, do you think your industry will not be affected?"
"I'm afraid that a 50% reduction in assets will be considered minor by then! It may even lead to bankruptcy!"
"But now, there is an opportunity that not only allows you to avoid risks, but can even make you a huge fortune, allowing you to rise from the sixth-ranked chaebol to fifth, fourth, or even first!"
"You only need to follow me and buy CDS to short MBS and harvest the entire real estate market!"
"The collapse has already begun! The profit is dozens of times higher! You have no other way to avoid the risks brought by the subprime mortgage crisis except to follow up with short selling!"
Chen Mo's words were like a devil, making everyone present feel excited!
Especially the ordinary staff present!
In fact, they all particularly hate the banks of the overlord.
The annual interest rate on their credit cards is as high as a terrifying 25%, and they are still paying off their school loans.
If the subprime mortgage crisis really happens, ordinary people will have no way to escape. Most people may have to cut back on food and clothing, and their quality of life will drop by several levels!
This may not seem like much, but think about it, you now have meat for every meal, down several levels, that is, you eat steamed buns with every meal, or even only eat steamed buns once a day, you can bear it. This change?
Now, suddenly someone said that the officials and banks of the overlord were stupid the day before, and we should use their stupidity to resist risks, and even make huge profits!
Who can not be excited? !
"Whoo~~~~"
After a long time, Rexel spoke: "I have to admit, Mr. Chen, your eloquence is so good! If you were to do pyramid schemes, I would be able to defraud you of a large amount of money today."
"It's not that I'm eloquent, it's just that the facts are too cruel." Chen Mo said lightly.
"What you said is just a theory. As far as I know, the subprime mortgage problem has been around since 2006, but to this day, the subprime mortgage crisis has still not broken out."
"Finance and economics are very complex group issues. I think since it has not exploded, it shows that the hegemonic official has the ability to solve it, or at least delay it, and finally allow this issue to land softly."
Rexel said.
"Mr. Cliff, you are deceiving yourself. What kind of group do you think the Overlord officials are? You should know better than me, right?"
Chen Mo counterattacked.
Rexel pursed his lips and remained silent for a long time before sighing and saying: "Okay, I admit, I am convinced by your theory.
However, the Cliff Consortium is not my responsibility. This consortium is jointly controlled by three major families. "
"I know the officials of Baguo and the financial world of Baguo, but the other two major families don't."
Chen Mo: "If you have something to say, just say it."
Rexel: "Today I can ask the spokespersons of the other two major families to come forward. You need to prove your theory with practical actions to convince the spokespersons of the two major families."
