Chapter 528 The negotiation broke down

  In fact, as an investment bank, Stanley America is not qualified to participate in the Fed's decision-making meeting, let alone know the Fed's next move.

  Although the Federal Reserve is the central bank of the United States, it is not legally mandatory. This alliance of many banks adjusts the rise and fall of the base interest rate through the adjustment of the market money supply. Commercial banks can choose to join or not to join, but the Federal Reserve Bank is the largest loose consortium in the United States. Basically, the benchmark interest rate level it sets can set the tone for the national interest rate level.

The Federal Reserve's decision-making agenda is voted on by the Federal Open Market Committee FOMC. The twelve members include seven members of the Federal Reserve Board, the president of the New York Federal Reserve Bank, and the other four are rotated by the other 11 Federal Reserve Bank presidents. bear.

   Regarding the adjustment of interest rates, reserves, and whether to carry out positive and negative repurchases, etc., the FOMC needs to vote and announce the results. Although a large consortium may be one of the shareholders of the Federal Reserve, the members of the Federal Reserve Board are government agencies nominated by the president and approved by congressmen. Several other members are high-ranking and not dominant, so even Stanley The company has great powers, and it is impossible to know the results of the Fed's decision in advance.

  What they are based on is, of course, their judgment on the economic situation and expectations that may lead to subsequent changes. Of course, even if they guessed right, it is still unknown when the Fed will inject liquidity and how much it will inject.

  However, Soros took this into consideration in the trap he designed for Zhongshi. They use information asymmetry to create a message that they already know in advance that the Federal Reserve will intervene in the market. This is naturally good for the bond market, because after financial institutions obtain liquidity, the bond market will naturally restore liquidity.

   This is a huge plus, but not enough.

   Soon, a public relations team appeared outside the doors of institutions such as Standard & Poor's and Moody's. However, the ratings of some bonds have been raised slightly. Among them, BBB-level subprime mortgage bonds have been upgraded from "strongly recommended to underweight" to "appropriately underweight" in the outlook, and BBB-level subprime mortgage bonds have been upgraded to "appropriately underweight". Mortgage bonds were revised from "appropriately underweight" to "hold and wait and see", while A-rated bonds became "appropriately overweight", and AAA-rated bonds were revised to "strongly recommend overweight".

Coincidentally, these bonds are all subject bonds of the 07-1 ABX index, that is, bonds on housing mortgage loans issued in the first half of 2007, and Stanley is one of the big players in this part of the bond market. Some even say they are the biggest players.

  Bo Yun's treachery in this is naturally not for outsiders. However, in the explanations of Moody's, S&P and other institutions, they said:

“…Although many financial institutions, including the financial giant HSBC, suffered losses to varying degrees or even went bankrupt due to subprime mortgage loans, these news also had an impact on the subprime mortgage bond market. However, we carefully After studying the market trends, I believe that the current defaults are limited to the downstream of housing mortgage loans, and have not caused very serious consequences. In fact, this is a major reshuffle among the industries, and short-term shocks are unavoidable Yes. However, after Greenspan’s public speech, we have enough reasons to believe that the regulatory authorities have begun to pay attention to this issue, so in the visible expectation, some changes will inevitably occur in this market... This is why we adjusted the judgment level reason."

  With the so-called inside information, coupled with the rating agency's change of word, Stanley Company is full of confidence in this transfer business.

  In fact, the Stanley Company’s bond is very difficult because of the large amount, large losses, and the market outlook is particularly pessimistic. And Zhongshi’s recent large-scale cash-out happened to be noticed by them. Originally, Stanley Company planned to appear at a discount, but under Soros’ instigation, they successfully upgraded this part of the bond to a higher level with only a small cost. , After such a toss, the price of this part of the assets was greatly increased very quickly. If Soros and Stanley hadn't spoken first, I am afraid that Stanley would have wanted to sell this part of the assets long ago.

  Zhong Shi's team quickly flew over from Hong Kong, a professional team of ten people, including bond experts, interest rate experts, economists and mergers and acquisitions experts. Together with Stanley's negotiators at the Waldorf Astoria Hotel, these people began to negotiate the price of this batch of bonds day and night.

  First of all, they need to confirm the market price of this batch of bonds, and then analyze the quality of this batch of bonds to see if there is a possibility of long-term holding. In the end, the two parties sat down and began to bargain with each other based on the results of their respective analysis.

  Naturally, see-saw negotiations are indispensable in this process, and the scale of this part of the bond is too large. When Stanley Corporation bought this bond, it spent at least 30 billion U.S. dollars. But now, although it is not worth that much money according to the market value, who can guarantee that this part of the position will turn around at some point in the future, or even make a fortune.

The difference between the two parties lies in the expectation of the future income of this part of the position. Stanley insists that this part of the position will have great income in the future, and even for the consideration of price suppression, Tianyu Fund is unwilling to admit it Their positions will have huge profits in the future, so the two parties have a disagreement on the price. The prices quoted by each of them differ greatly, and they are basically in a situation where they cannot reach an agreement.

   "Zhong Sheng, I think their bonds are very risky. Even if we can finally reach an agreement, I am afraid that under the current situation, these bonds still have a certain risk of default."

  The speaker is Zhang Hua, forty-five years old, a middle-aged man in the prime of his life, but his temples are already gray, he looks a bit old, and there are already many wrinkles on his forehead. However, behind his pair of gold-rimmed glasses, a pair of cloudy eyes showed light from time to time. It was obvious that this was not an ordinary character.

  In fact, Zhang Hua has been immersed in the bond market since he started working, especially housing mortgage loans and their derivatives. He used to work for a large hedge fund in the United States. He was invited back by Zhongshi last year to be the investment director of bonds. His annual salary reached 2 million US dollars, and he also had a certain amount of dividends. Of course, his own value is far more than that.

  During the break time of the negotiation, Zhong Shi called Zhang Hua to the tea room, and after carefully inquiring about the progress of the negotiation, he began to seriously discuss with the other party.

  Regarding Zhang Hua’s judgment, Zhong Shi pretended to ponder for a moment, then frowned and asked, “According to your judgment, is there any possibility that these bonds will be profitable in the future?”

Hearing Zhong Shi's words, Zhang Hua's heart skipped a beat. He naturally heard Zhong Shi's implication. His boss is not very optimistic about this business, but he has done so much work in advance, and he can't deny it completely. Now, he bit his bullet and said: "At present, it is unlikely to make a profit. However, this market is dynamic. If the situation they said really happens, this batch of bonds will not only have no liquidity problems. , and maybe you can really make a fortune.”

"If the U.S. subprime mortgage market continues to deteriorate, even if, as they say, the Fed releases liquidity to the market, it still cannot stop the deterioration of the market, then the value of these derivatives will be greatly discounted , Have you considered this situation?"

Zhong Shi's frown was even tighter, because Zhang Hua was regarded as his leader in the bond market, but even he did not fully realize the huge shock that the coming subprime mortgage bond market could bring , let alone others.

  Hearing Zhong Shi's words, Zhang Hua's face was obviously surprised. He never thought about this possibility at all, because the Federal Reserve is intervening in the market. What role is the Federal Reserve? He is very clear that before the complete integration of European currencies, the Federal Reserve can be said to be the central bank of the world. The function has also been weakened to some extent, but at least in the United States, the Federal Reserve is still able to "call the wind and call the rain" in economic activities and has unparalleled influence.

  The intervention of the Federal Reserve cannot solve the problem, what a problem it must be! For a while, Zhang Hua fell into deep contemplation.

Zhong Shi didn't force him either, knowing that he needed time to think now. In fact, if he didn't know how the giants of Wall Street were deeply involved in the subprime mortgage bond market and the credit default swap market, Zhong Shi would never One would think that the intervention of the Federal Reserve will not calm the mood of a market.

  In fact, apart from the CDO market, the crisis in the CDS (Credit Default Swap) market has not yet been highlighted. The market size of CDS is 50 times larger than that of the mortgage bond market. All securities that can be credit guaranteed can find corresponding derivatives in the CDS market, and Wall Street has spared no effort to develop new products over the years, and even carbon dioxide, diamonds, etc. can develop financial products, so the CDS market can naturally The credit default swap treatment of financial products with these things as the underlying is enough to show the scope and scale of this market.

   And the credit for all of this naturally comes down to Zhong Shi's paper.

   Zhang Hua’s misunderstanding of thinking is that he did not connect the two. In fact, even the collapse of the mortgage bond market is just a collapse of a trillion-dollar market. And if the CDS market is in turmoil, the entire financial system may tremble along with it.

"But..." After being silent for a long time, Zhang Hua finally couldn't figure it out. Although he had figured out the boss's intentions, he still planned to give it a try. After all, years of professionalism did not allow him to bow his head and admit defeat so easily, Numerous consortiums, including the Japanese government pension fund, Singapore’s Temasek Fund and the Saudi Petroleum Fund, have expressed interest in this tranche of bonds.”

  In addition to the Japanese government pension fund, the other two consortiums mentioned are sovereign funds. What they operate is a country’s foreign exchange reserves. Naturally, the talents selected are top-notch, even if they are placed on Wall Street, they are not inferior. And these people have expressed their favor for this part of Stanley's bonds. Could it be that the boss himself didn't think carefully enough?

Although Zhong Shi has become a legend, Zhang Hua has not joined the Tianyu Fund for a long time, and he has not yet fully experienced this "legend". The boss really doesn't understand the US housing mortgage market?

Zhong Shi is naturally aware of Zhang Hua's thoughts, but he doesn't intend to point it out. He smiled slightly and slowed down his tone, saying: "Since these sovereign funds are interested in these bonds, let them They can buy it. At this time, it is better for us not to take this kind of risk. After all, there are too many unknown factors, and we are only a small consortium, which has not yet reached the scale of Temasek and Saudi Oil Fund. .If there is a risk, we could be wiped out, don't you think?"

  Zhang Hua was speechless for a long time. In his heart, he agreed with Zhong Shi's statement, but he couldn't accept it emotionally, because he couldn't imagine that his boss was such a timid person.

  Yes, it is timidity!

  Before he believed that this part of the bonds had a risk of default, but based on his trust in his peers and his own professional judgment, Zhang Hua believed that this part of the bonds was still worth buying, but the price needed to be discussed carefully. Who doesn't want his "cowardly" boss to reveal the meaning of rejection in his words, which makes him feel very disappointed.

   However, a more disappointing scene soon happened again.

   "Hi, Zhang, I'm really sorry, our negotiations have been suspended. The Federal Reserve has started to intervene in the market, so we have to discuss this part of the bond with the next buyer. I hope we will have the opportunity to cooperate again!"

   While Zhang Hua was still at war between heaven and man, Stanley's chief negotiator, Richard Graham, came out. He was a strong white man with blond hair and blue eyes in a suit and leather shoes. After he nodded politely towards Zhong Shi, he curled his mouth and shrugged at Zhang Hua, indicating that he could do nothing, and then left with a mocking smile on his face.

   I'm sorry I didn't write it until now... I'm sorry for the delay at home due to some things in the past two days...

  

  

  (end of this chapter)