Chapter 557 The Bear Stearns Conspiracy (1)

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  Despite the efforts made by the U.S. Treasury Department and the Federal Reserve, after entering 2008, bad news came one after another in the market.

   On January 4, the American Banking Association officially released data on consumer credit defaults, and the default rate rose to the highest point since 2001.

   On January 15, Citigroup, one of the world's largest commercial banks, announced a loss of US$9.83 billion in the fourth quarter, which once triggered a decline in global stock markets.

   On January 16, the rating agencies predicted that SIV bondholders would lose at least 47% of their assets.

   On January 17, the U.S. Department of Housing announced the number of housing starts in December last year. The number of 1.006 million households was the lowest in 16 years, a decrease of 14.2% from the previous month.

  On the same day, Wall Street investment banking giant Merrill Lynch announced in its fourth-quarter financial report that it had written down assets by 11.5 billion U.S. dollars, and the quarterly loss reached a staggering 9.91 billion U.S. dollars. In the last quarter, Merrill Lynch had just written down more than $7 billion, resulting in a loss of $2.24 billion. Although Wall Street had long expected Merrill's fourth-quarter losses, even the most daring analysts hadn't guessed that Merrill's losses were so severe.

However, the market is not full of bad news. In the market on this day, **** released its fourth quarter financial report, realizing a profit of nearly 3 billion US dollars. Under the influence of this news, the New York stock market appeared on this day. rose slightly.

  It was also on this day that the Federal Reserve published the Beige Book on the regular meeting of monetary policy decision-making, which stated:

  “…From November to December last year, despite several market turbulences, the U.S. economy maintained a moderate growth rate, although the pace of growth was slower than the previous period…”

“…We remain committed to maintaining this economic growth for some time to come, and despite the challenges facing the U.S. economy, the Committee is confident that it will be able to adjust monetary policy at the right time to give the U.S. economy a strong support..."

From this report, investors interpreted the message that the U.S. economy is not in recession, and the Fed is still in control of the situation, which boosts their confidence. Sensitive industry stocks have thus been boosted to some extent.

   On January 22, the Federal Reserve cut interest rates by 75 basis points again, and the base rate was 3.50%. Only eight days later, on the basis of the previous rate cut, the Federal Reserve once again announced a 50 basis point rate cut, and the base rate became 3.0%.

   On January 30, Swiss Bank (UBS) issued a financial announcement, claiming that because of the loss of subprime housing mortgage loans, UBS's loss in the fourth quarter of 2007 reached 11.4 billion US dollars, a record high.

  …

  Although the market is not precarious, the extremely chaotic situation has indeed created opportunities for many people. Some of the big players in the market began to contact secretly and frequently. They set their sights on a giant on Wall Street, Bear Stearns. And these people are mainly fund managers of top hedge funds, and the day of revenge has come.

   "How about it, is this meal satisfactory?"

   After waving to let the waiter finish clearing the plates, Soros looked at John Paulson sitting opposite him with a smile on his face, picked up the white wine and motioned to him slightly, and then took a small sip.

  Lunch is very simple, the main course is sea bass in milk sauce and fruit salad, served with some French biscuits, white wine as a side dish, this is all the food of the two billionaires. Paulson wiped his mouth and smiled contentedly. In fact, it is a great honor to be invited by Soros for a meal, and who cares about what to eat.

  There are several dinner invitations in this world that Paulson cannot refuse, just like the President of the United States, Buffett, or this one in front of him. If it was a year ago, Paulson would not have dared to think about it, but now he can sit in front of this legend calmly and eat delicious sea bass without any embarrassment or tension.

  If it is said that Soros invited Paulson, a rising star, to dinner because of his poor performance in the past year, and the two sides discussed their views on the current market together, then this statement is completely wrong. After parting ways with Druckenmiller, Soros outsourced funds to fund managers for most of his time, but last year, with his keen sense of smell, he sensed opportunities in the market and decisively came out again, while 32 The % rate of return is a reminder to the world that even though this legendary figure is old, his profound skill is still the same as before.

  Although it can’t compare with Paulson’s annual rate of return of 700%, for a large fund with a total capital of 20 billion US dollars, this return is enough to satisfy all investors.

   "John, do you remember Long-Term Capital Management?"

  While John Paulson was still thinking about Soros' amazing rate of return in the past year, Soros suddenly mentioned an old event, and immediately pulled his thoughts back to 1998.

  Long-Term Capital Management (LTCM) is a real elite company. This hedge fund brings together top figures such as the father of Wall Street debt arbitrage, Meriwether, Nobel Prize winners Morton and Scholes, Federal Reserve Vice Chairman Mosley, and Salomon Brothers fixed income director Rosenfeld, It collapsed in 1998 when the yield of the European bond market fell sharply due to the default of Russian government bonds, and finally had to be liquidated sadly, which became a major event that caused a sensation on Wall Street at that time.

Even though so many years have passed, Paulson still has a fresh memory of the scene at that time, because this was the first hedge fund giant to fall at that time, and the background at that time was that hedge funds were all in the limelight for a while, and became a capital market leader. super darling.

"Yes, I remember very clearly." Paulson replied seemingly absent-mindedly, "Didn't 15 consortiums including Merrill Lynch and Morgan contribute their own funds to digest their positions? Speaking of which, Long-Term Capital Management It is as famous as your Quantum Fund, but I didn’t expect it to come to a dead end after only four years of establishment, which is really embarrassing!” After finishing speaking, he couldn’t help shaking his head.

  In the hedge fund world, Quantum Fund, Tiger Fund, Long-Term Capital Management and Omega Fund were collectively referred to as the four major hedge funds. But now that the big waves are washing the sand, except for Quantum Fund, which is still tenaciously surviving, the other three funds have long since disappeared.

   Isn't he reminding himself not to be complacent for a while, long-term survival is king? Such a thought suddenly popped up in Paulson's mind, which made him wake up immediately. In the past, he certainly would not have been so vigilant, but after a long conversation with Zhong Shi, he realized that the knot between his biggest benefactor and the person in front of him a few years ago was still unsolved, even though he was rationally He reminded himself not to choose to stand in line, but emotionally he was still on Zhongshi's side, so for every word Soros said, he thought and thought carefully before answering carefully.

"Not bad!" Soros didn't seem to notice the embarrassment on Paulson's face, and he still said to himself, "John, maybe you don't know that during the rescue of Long-Term Capital Management, the Ministry of Finance took the lead in finding Bell. Stern, the number one giant on Wall Street at the time, but do you know how Bear Stern answered?"

   Having said this, he deliberately paused, and looked at John Paulson with interest, to see how much the rising star could guess the truth.

Paulson is naturally familiar with the list of participants in the rescue. He only thought for a while before replying: "Bear Stearns did not rescue. Maybe it was because they thought that the positions of Long-Term Capital Management were not worth bailing out, or maybe they were There is a problem with the financial situation. To be honest, George, I really don't know about this part of the story, and I was still a nobody at that time!"

  He decided not to offend Bear Stearns, but secretly gave Soros a small boost.

Regarding his tact, Soros laughed out loud. He naturally knew that what the other party said was true, so he stopped making rounds and said bluntly: "Bear Stearns didn't have any financial problems at that time. They did think that the long-term capital Management is not worth bailing out, but the reason is funny, that is, long-term capital management is failing, and they don’t even bother to implement liquidation, so they don’t even intend to listen to the call from the Ministry of Finance. And earlier, in 1994, they had It brought down a capital management company called Askin, suddenly increased its margin position to force the other party to liquidate, and finally swallowed a large amount of their assets."

   Isn't this the law of the jungle? Is there anyone in Wall Street who doesn't know this cruel rule? Paulson was rather disapproving in his heart, but on the surface he still respectfully obeyed. He knew that Soros must have something else to say.

Soros was very satisfied with Paulson's attitude, and continued to bewitch: "So, John, you should be clear. The investment bank and us are just a cooperative relationship, and there is so much else. In fact, To a large extent, there is still a serious competition between us and them. Look at how many tricks they have played over the years, setting up hedge funds internally, private wealth management business, all of which are competing with us for the market. Damn Yes, these guys have already taken over the investment banking business, half of the fixed income business, and now they are eating away at our hedge funds, what a bunch of greedy guys."

   Paulson has a deep understanding of what Soros is complaining about, but these things are issues for the regulators to consider. Up to now, he still hasn't figured out what Soros wants to say. But he was not in a hurry, because Soros would always say something.

Although he was "complaining", Soros had been observing Paulson's performance on the opposite side. Seeing that the other party still did not show even a trace of curiosity or resentment, he couldn't help secretly admiring that this guy was really able to calm down. gas.

"so…"

Then it was time to test the patience of both parties. Paulson did not speak, and Soros did not continue. The two were silent for five minutes. In the end, Paulson scratched his head and asked inexplicably. .

"John, I've said so much, don't you understand?" Soros deliberately pretended to be shocked, and asked again and again, "We, hedge funds, cannot be bullied by investment banks forever. This is Haven’t you heard all the content I want to express? We should teach them a lesson, a lesson that will never be forgotten?”

  After Soros uttered these words, Paulson finally fully understood that the last sentence is the key point, and everything before it is foreshadowing. As for the stocks of short-selling investment banks, he had made similar investments before, so after Soros said, he just subconsciously nodded in agreement, and replied casually: "If you are short-selling, besides looking at the fundamentals, you also need to look at... "

"Short?" Soros' unbelievable voice immediately sounded again, this time Soros's face was full of shock, and it didn't look like a fake, "John, did you understand what I said? I mean Teach them a lesson, a lesson they will never forget, and let them know that we in the hedge fund world are not theirs!"

  Seeing Soros' expression, Paulson's heart skipped a beat, and a thought that he had never thought about suddenly popped up. God, what a crazy person would have to come up with this idea! Paulson trembled with shock, but soon the horror turned into excitement, yes, excitement.

  The lesson Soros said is not to short the stock of a certain investment bank, but to bring down the company completely and short it until it goes bankrupt!

   Paulson himself is not a law-abiding person, otherwise he would not bet all his funds on the CDO market, otherwise he would not be able to obtain an astonishing 700% rate of return. So after fully understanding what Soros meant, he was indeed a little shocked at first, but soon this shock turned into excitement, the kind of excitement after making money.

   "Is it just the two of us?" Soon, Paulson discovered a problem. Although their combined fund management scale is as much as 30 to 40 billion US dollars, these funds have already been invested in the market. If there is no accident, it will be difficult to realize them in the short term. Therefore, if an investment bank is to be forced to go bankrupt If not, their liquidity may not be enough.

"Of course it's not you and me!" At this time, Soros regained the attitude of an old god, shaking the wine glass in his hand gracefully, and said one name after another that surprised Paulson, "And Julian. Robertson, Jim Chanos, Kenneth Griffin. How, if this is the case, it should be enough!"

   Giants, all are giants in the market. Paulson yelled in his heart, with these few people together, I am afraid that there are not many things they cannot do in this world. He didn't know how Soros persuaded others, but he knew very well that Soros' statement that the hedge fund industry taught the investment industry a lesson was pure nonsense, at least in his opinion, it was a big joke.

   "The last question, what is our goal?" After pondering for a long time in his heart, Paulson decided to follow Soros in this vote.

  Soros didn't answer immediately. After drinking the wine in the glass, he curled his lips and replied disdainfully: "John, didn't I tell you?"

   Paulson was dumbfounded! (The novel "The Son of Finance of the Great Era" will have more fresh content on the official WeChat platform, and there will also be a 100% lucky draw gift for everyone! Open WeChat now, click the "+" sign on the upper right to "add friends", Search the official account "qdread" and pay attention, hurry up!)

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  (end of this chapter)