Chapter 493 Paulson loses money
"According to our investigation, John Paulson's Paulson Hedge Fund has raised some funds, initially up to US$150 million, and began shorting CDOs in July..."
Phelan O'Neill, CEO of Black Swan Fund, told Barron's:
"This also means that he holds the same view as us, except that he entered the market earlier. The U.S. real estate market is still booming, and there is no sign of an imminent recession on the surface, so as of now, maintaining Ersson hedge funds have been losing money on this."
The size of the Black Swan Fund has increased from the initial investment of US$50 million by IC Capital and Blue Valley Capital to a total of US$100 million. After the two companies each added an additional US$2 billion in funding, it has exceeded US$4 billion...
In fact, up to now, the assets they control have exceeded 5 billion US dollars, because after the initial investment of these funds into real estate-related debt and stocks, as well as the related financial loan industry, they have already invested nearly 10 billion dollars during this period. Billions of dollars in paper profits.
Just like the strategy of Paulson Hedge Fund, through a complex fund operation model, it shorts subprime loan-related debt CDOs while acquiring subprime loan insurance debt CDS which are very cheap at this time...
Prior to this, the Black Swan Fund was bullish on CDOs. Therefore, unlike the Paulson Hedge Fund, which continued to lose money, they made profits on the opposite side.
The CDOs and CDS they mentioned are two types of bonds related to subprime loans, which are also the main reasons for the formation of the subprime mortgage crisis.
It would be very troublesome to explain this. To explain it in relatively simple terms, in the United States, home purchase loans are divided into several grades based on the qualifications of the lender. And some lenders have not good qualifications, so they can only Use subprime loans with higher interest rates - therefore, the borrowers of subprime loans have lower credit ratings and the corresponding risk will be higher.
But at the same time, banks and lending institutions are not willing to take too high risks, so what should we do? Of course, it is to use Wall Street's core technology - claims under various names to offset risks, or transfer risks.
Just like when DS Capital acquired O2 Telecom, it provided 5 billion pounds of high-interest financing to Barclays Bank and Goldman Sachs Group. At that time, these two banks sold most of the loans through the issuance of underlying debt. Under their joint operation, this kind of bond can even be rated as a higher buy level, and has an interest rate that is much higher than the market, so it is very popular.
The same is true in the subprime loan market. Wall Street financial institutions, including investment banks such as Goldman Sachs and Morgan Stanley, used those high-interest subprime loans as collateral to issue a bond called a CDO. They even used Through financial innovation, the original high-risk subprime loan claims were combined with some low-risk, high-credit bonds, and through certain means, the ratings of such CDO claims were improved.
In this way, in the eyes of some uninformed investors, CDO is completely the best investment product, with a high credit rating and high interest rates. What are you waiting for? Buy it now.
As for CDS claims, it can be understood as the risk hedging of CDO claims, which is the insurance purchased for those subprime loans. Just like if earthquakes occur frequently in your location, then your willingness to buy insurance for your house and property will be Gao, if there has never been an earthquake where you are, then I am afraid that almost everyone will not think of spending money to buy earthquake-related insurance.
Therefore, if the real estate market continues to prosper, then housing prices will continue to rise, then the price of CDO will continue to rise, while the price of CDS will fall.
On the contrary, the price of CDO will fall and the price of CDS will rise - because if house prices fall, those home buyers who take out subprime loans at high interest rates are likely to be unable to repay their loans and thus cease supply.
Why is this so?
Because the real estate market is so hot now, too many people are buying houses, and more than just one - because house prices continue to rise, and it is too easy to get a loan. At the hottest time of the real estate market, even in England, the loan ratio It can reach 120%, that is, if you buy a house for 1 million pounds, the bank dares to lend you 1.2 million pounds of funds!
What's more, in the United States, many people, in such a crazy atmosphere, take out revolving loans to buy a house. They buy a house, then go to the bank to borrow more funds, buy a house again, and then take out a loan...
As long as housing prices continue to rise, this method is equivalent to applying leverage and can obtain returns several times or even ten times.
It's like Phelan O'Neal told Barron something, that is, after he came to the United States, he went to a dance club - well, it's the kind you think of, but don't think too much, Phelan O'Neal is Went to investigate...
During the chat, he discovered that even a dancer in this club said that she had bought five houses... all with loans!
This shows how hot the real estate market in the United States is now, or how dangerous it is.
Although Barron knew that the subprime mortgage crisis would not take shape until nearly the end of this year, he was deeply involved in it after all. Therefore, in order to prevent changes, the Black Swan Foundation will launch a new project next month. It began to gradually withdraw from long positions in real estate and financial markets, and instead began to do what Paulson Hedge Fund is doing now - shorting CDO debt and starting to buy CDS debt.
At that time, we will inevitably need to make bets with those big investment banks...
…
"How are you feeling lately, honey."
Barron didn't stay in New York long, and soon went to Los Angeles. At the Flower of Leith Manor, he met Fan Bingbing, who was still staying here.
"It's good. Although it's a little visible now, I feel fine. I don't have much pregnancy reaction. It's just that I was not used to eating Western food before, but it's much better after I changed to a Chinese chef."
Fan Bingbing is now more than three months pregnant, and her belly is slightly bulging, but wearing a slightly wider skirt, it is not too obvious.
During Barron's absence, Fan's mother took the time to come here to stay with Fan Bingbing for two weeks.
She also told her parents about Fan Bingbing and Barron. Although at the beginning, her parents were still a little bit unable to accept her daughter's plan to give birth to a "foreigner" without any status. , but Fan Bingbing has always had his own ideas. Seeing his daughter's insistence, they finally had to accept it.
Before that, Fan's mother and the others also checked the information about Barron and knew that he was a British Duke and was very rich, ranking fourth on the world's richest list.
But after all, I didn't have much feelings about these. After all, Fan Bingbing's family has always been relatively wealthy - there is no doubt about this. After all, in that era, she could always support her to study in art schools, not to mention being rich. He's very expensive, he must be much richer than the average person.
It wasn't until Fan's mother came to Los Angeles that she entered the Flower of Leith Manor and looked at this huge and gorgeous manor that she had never seen before, as well as Fan Bingbing's life at this time - there were more than 100 people living in the manor every day. 15 personnel of various types, including maids, chefs, medical teams, bodyguards, drivers, etc., are all serving Fan Bingbing alone. It can be said that he is receiving comprehensive care.
Moreover, these were all purchased and arranged by His Highness the Duke at will.
At this time, Fan's mother had a deeper understanding of Barron's status.
Now that she sees that her daughter is taken care of so well and that Barron has given her solid protection, she is finally able to slowly accept Fan Bingbing's choice.
