Chapter 483 Investing in new funds

   "Mr. Zhong, hello, welcome to New York. It is my great honor to be favored by you, and this is what I say from the bottom of my heart."

  The speaker is about fifty years old, with a medium build and an ordinary appearance. The slightest highlight is probably the high hairline, which almost extends to the top of his head, which also fully shows his broad and shiny forehead. But Zhong Shi didn't pay attention to these things. The fund manager in front of him, who was not very famous, was managing a fund that was in dire straits. Frowning and tight lips were his most common expressions, but what Zhong Shi noticed What I found was that behind those thick glasses, there is a kind of firm determination and perseverance.

  This is an extremely egotistical person. When he believes that he is right about the market, he will stick to it no matter what, even if his fund is losing money day by day. Zhong Shi secretly sighed in his heart.

  John Paulson is the name of this person. This fund manager, who will be called the "God of Making Money" by Wall Street in the future, is bowing to Zhong Shi at this time, with a completely obsequious appearance.

In the eyes of Paulson, who puts a very low profile, the guy opposite him who has just turned 30 is the real legend: it is said that he got involved in the financial market when he was a teenager, and he was involved in the global stock market crash in 1987. At that time, I made a fortune shorting the S&P, and then participated in several transactions that shook the market, such as the European currency crisis in 1992, the global bond market crisis in 1994, the London copper attack in 1996, and the Asian financial turmoil in 1997, and all of them became the winners. What surprised Paulson the most was that in 1998, when the international hot money was trying its best to attack the Hong Kong capital market, it turned out that this person in front of him almost single-handedly defeated all the heroes.

This resume alone is enough to make Paulson pay homage to Zhongshi, and now the new fund he raised has been favored by such a top boss. I have to say that this is indeed a great honor .

Paulson wanted to know how the investor in front of him dealt with the shares that were said to account for 5% of the entire market, but he wisely didn't say so, because he knew very well that today he was the one being asked , not the party making the inquiry.

What he didn't know was that when the Hong Kong stock market reached around 18,397 in 2000, Zhong Shi began to sell off the stocks he held before one after another. Before the technology stock bubble collapsed, all of them were sold out, excluding the dividends he had earned in the past few years. In addition to interest, the US$15 billion Zhong Shi originally invested in the Hong Kong stock market has become as much as US$40 billion. This transaction became the most profitable transaction in Zhongshi's transaction history, bar none.

  At this time, eight years have passed since 1998. The whole world has undergone earth-shaking changes, and so has the corresponding financial market.

  Since the beginning of the new century, central banks of various countries have begun to use quantitative easing policies when interest rate tools have partially failed, which has also brought the entire world into the "big currency era".

  So-called Quantitative Easing

  Easing (QE for short) refers to the operation mode in which the central bank buys medium- and long-term treasury bonds to increase the basic money supply in the market and inject a large amount of liquidity into the market to stimulate the economy when the interest rate is extremely low (close to 0). Different from open market operations, when the central bank implements quantitative easing, the target is medium and long-term interest rates, the amount is larger, and the duration is longer, so the effect is more obvious.

This kind of policy first appeared in the Japanese market. Because of the "liquidity trap" in the Japanese market, that is, after the failure of reducing interest rates to stimulate investment and consumption, no amount of interest rate reduction can change the economic downturn or even tightening. In this case, it is necessary to reduce the real interest rate by changing the long-term interest rate, thereby stimulating consumption and investment.

To put it simply, due to the market downturn, although there is sufficient liquidity in the market in the short term, people are still willing to hold currency for the sake of prudence, rather than releasing this part of liquidity into the operation of the economy, so the market The real interest rate is positive. In this case, in order to dispel people's concerns, the central bank purchases long-term treasury bonds to lower long-term interest rates, thereby dispelling people's concerns and releasing liquidity to the market.

  When the medium- and long-term interest rates fall, there is no need for funds to stay in medium- and long-term government bonds, so they will shift their targets to places with higher yields, such as investing in the real economy, which is exactly what central banks want.

  This is the so-called "big currency era", the essence of which is to issue additional currency, and with the increase in liquidity in the market, inflation is inevitable from a certain point of view. Of course, these have been taken into account at the beginning of the policy implementation, so when these liquidity is injected into the market, the wealth of the whole society will inflate like a balloon.

  Hedge funds, whose capital management scale reached billions or tens of billions, which were previously rare, have sprung up one after another in recent years. Although Soros and others are still famous, they are no longer the masters of the market. In markets such as treasury bonds, stocks, and futures, transactions of billions and tens of billions of dollars abound, and any one of these markets can accommodate dozens of hedge funds without any problem. And the whole world is no longer dominated by hedge funds. Global macro strategy hedge funds seem to have come to an end overnight.

With the expansion of the financial market, all kinds of weird trading tools and methods have been invented one after another, and more resources and varieties have been manufactured as new targets and put on the market for people to choose, such as natural gas, page trading, etc. rock oil and even carbon dioxide. But these are not bad, anyway, there are still physical things as the target. It is unbelievable that even more bizarre things have emerged one after another. For example, the insurance industry, which is actively participating in the market, has proposed the concept of credit transactions, and has also formed an extremely huge market.

  In short, everything that can make money can be securitized.

  The cause of all this today is Zhong Shi's paper "Gaussian Connection Dependency Function".

  Originally, this paper was only praised within the University of Chicago, and the giants on Wall Street did not realize the importance of this paper. But after the new century, when Wall Street desperately needed more trading varieties, these elites were very distressed about the correlation between different trading varieties. In this era of quantification, if there is a model that can Linked to the degree of risk correlation, the entire financial world will be changed accordingly.

Soon, someone noticed Zhong Shi’s paper, and then mathematical geniuses began to develop a large number of various models based on this paper, and based on these models, various new financial products began to be derived , For example, CDS, that is, Credit Default Swap (Credit Default Swap), and another example, CDO, that is, Collateralized Debt Obligation.

  When Wall Street gradually realized the importance of Zhong Shi's paper, they began to marvel at the genius of this young man. Of course, no institution would want to hire him ignorantly, because the top hedge funds in the survival chain of Wall Street have all been beaten by him, and other institutions will naturally not seek to make fun of themselves.

  In the past few years, interested people on Wall Street have been paying attention to Zhong Shi's movements. Many people even flew to Hong Kong waving checks, asking him to help them manage their funds. Naturally, they all came here with high spirits and returned disappointed. There are also many young talents who are gearing up to turn Tianyu Fund into their clients, but all of them have met with ashes on the nose. In the past few years, except for showing a little hideousness on the Hong Kong stock market, Zhong Shi and his fund seemed to have disappeared out of thin air, and they never appeared in the market again.

  Paulson also sent an invitation letter to Tianyu Fund in Hong Kong by coincidence. Who would have thought that he would get a reply, and it was Zhong Shi himself who came to visit, which naturally made Paulson feel flattered.

"Okay, I don't need to say more words of praise, John." Zhong Shi took off his windbreaker, and soon someone took the windbreaker and hung it on the hanger. After thanking him again, Zhong Shi went straight to the Paulson Institute I walked inside and said as I walked, "I think your invitation can be considered, so I flew over here. Of course, I am quite optimistic about your fund and I am very interested, but before I decide whether to invest, I must have a detailed understanding of your investment direction and strategy, and the reasons for all of this."

"Of course!" After leading Zhong Shi respectfully into the reception room, Paulson personally served a cup of coffee, delivered a thick stack of documents, and introduced, "This is our team's research report on US real estate. All our strategies and investment plans are based on the results of these investigations. Believe me, all these are real and reliable data, and the future market development will be as I expected!"

  What he did not elaborate on is that these materials are market analysis reports drawn up by a research team of nearly 50 people led by him, after continuous tracking of nearly 10,000 room transactions in major cities across the United States. This report alone has condensed the efforts of everyone at the Paulson Fund.

"Really?" To Paulson's disappointment, Zhong Shi just flipped through two pages casually, then pushed the stack of materials aside with a half-smile expression on his face, "But according to my I understand that your fund is losing money, losing money all the time, this should be a fact.”

Hearing this, Paulson's face suddenly showed embarrassment, and after smacking his lips for a long time, he said unnaturally: "Yes, this is indeed the truth. But our dawn is coming, Zhong Zhong Sir, you can take a look at our analysis results. If the U.S. real estate market continues its false prosperity like this, it will collapse one day.”

   Speaking of which, he was already a little discouraged. That's right, if the funds you manage have been losing money, what capital is there to convince investors? Especially investors like Zhong Shi, this is the top existence in the market!

   "So, what we need are firm, loyal investors who have no doubt about our judgment!" Thinking of this, Paulson added another sentence.

  John Paulson shorted the CDO, that is, secured debt obligations. Simply put, this is a fixed-income security, and its targets are mostly bonds, treasury bonds, bank loans, and other claims. What the Paulson Fund has shorted is the CDO for housing loans.

  For the real estate market, because of the perfect credit system, buying a house with a mortgage has become a generally accepted method, and buying and selling houses can also be an investment tool. For banks, lending out loans has become their money-making tool.

When the market is booming, no matter who you are or what your credit rating is, as long as you intend to buy a house, the bank is willing to provide him with a loan. Even if he fails to pay, the bank can take back his house at that time, because the house appreciates , so the bank does not lose money.

  For those lenders who can repay the interest and principal on a regular basis, these loans are naturally high-grade loans because of the credit guarantee. For those loans that may not be repaid or will default, they are called subprime loans.

  But banks will never be so stupid as to hold these loans in their own hands. They will find investment banks to package these loans into securities and sell them to spread the risk. This is CDO.

  Paulson's fund was shorting the fixed-income securities of these home loans.

   PS: The new chapter has begun, and there will be more excitement in the future. I look forward to more book friends coming to pay attention and support, thank you all! By the way, I would like to thank book friend Aniu Xiaodi 1 and Xiao Qi for voting for the miracle of civilization!

  

  

  (end of this chapter)