Chapter 560 Loss of counterparty

  The inter-bank trading market, which was originally a market for lending margin positions, has gradually developed into an extremely large market. Because the participants are not only commercial banks, investment banks, insurance companies, funds, foreign exchange dealers, etc. can participate in it; also because there are no geographical and time restrictions, this is a 24/7 market, and traders around the world can participate You can find counterparties here; moreover, because there are many types and methods of transactions in this market, there are everything from bills, bonds, cash, etc., and mortgages, lending, buying and selling, etc. can also be chosen arbitrarily.

Singapore.

  DBS Bank headquarters, although it was late at night, after receiving an urgent news, the head of the trading department had to hold an emergency video conference to discuss trading strategies.

   As the largest commercial bank in Singapore, DBS Bank has a strong state-owned color, and Temasek Holdings is their largest shareholder. This giant has long extended its tentacles to the Greater China region, and was one of the first few financial institutions to set up offices and branches in mainland China. And taking advantage of the Asian financial crisis, it annexed several local banks in Hong Kong and entered the Hong Kong financial market in one fell swoop.

The current DBS Bank is the largest commercial bank in Southeast Asia and an important force in the international financial market. Because the company's risk control is particularly good, it is known as one of the safest banks in the world. .

  Good risk control naturally means sufficient liquidity and core capital. Therefore, many financial institutions and commercial banks in the world are willing to conduct transactions with DBS Bank, not only lending funds, but also buying and selling bonds, international settlement and other businesses. These institutions include financial institutions from continental Europe, the United Kingdom and North America, and Bear Stearns is one of them.

  And this time the emergency meeting will start with an unknown trader.

  Lin Guodong is a bond trader at DBS Bank in Singapore. His main trading product is US real estate bonds. When the subprime mortgage bond crisis erupted in August last year, he just unloaded a large part of his position, allowing DBS to avoid a potential loss of up to 200 million Singapore dollars, so he was quickly promoted. as the supervisor of the group to which he belongs.

   From the outside world's point of view, Lin Guodong's reduction in holdings was lucky, and he reduced his position just before the crisis broke out. But Lin Guodong knew very well that this was definitely not due to luck. In fact, he had sensed some kind of danger before the crisis broke out, and friends from Quantum Fund reminded him in time, so he made up his mind to reduce some real estate bonds.

   After graduating from Princeton University, Lin Guodong did not choose to stay in the United States, but returned to the small country of Singapore. He first joined Temasek Fund to do bond analysis, and soon jumped to DBS Bank to do bond trading. Although this job is more stressful than pure analysis work, and most of the time works late at night, but in terms of salary It is much better than analysis work, because he has not paid off the loan to study in the United States.

In fact, Lin Guodong's career as a trader was not considered successful. It took him three years to get a salary and bonus of 530,000 Singapore dollars from DBS Bank. This is just below average for traders. Lin Guodong is also an ambitious guy, so many times he began to gradually deviate from the fundamentals and began to operate according to the rumors or inside information he heard.

In the past four years in New Jersey, besides studying, he spent most of his time on socializing, so Lin Guodong's contacts in the United States are not weak, and many people he knows have entered Wall Street. Therefore, we can often hear first-hand information from certain companies. And in his three-year trading career, under his deliberate flattery and flattery, he also made friends with many traders from other institutions, and these people naturally became his sources of various information.

  The last time he shorted U.S. subprime bonds was because he heard a Bear Stearns trader tell him that two hedge funds focused on subprime bonds within Bear Stearns had collapsed. It was precisely because it was faster than news reports that he was able to successfully sell a large number of US subprime bonds and avoid that risk.

   Now is the time to launch the news again, because the US market is too unstable recently, and various rumors are emerging one after another, so Lin Guodong feels that the opportunity has come again.

   "Hey Steve, any **** news lately?"

  Lin Guodong first called the Bear Stearns trader, who was the same trader who told him about the collapse of Bear Stearns' internal hedge fund last time. In exchange, Lin Guodong naturally told the other party an internal rumor about the British bond market.

"Lin, **** you, I haven't heard any useful news." The trader named Steve's voice was low, and he could faintly hear other noisy voices. In the transaction scene, Steve continued, "But damn, do you have any news about subprime mortgage bonds?"

"What?" Lin Guodong was so shocked that he couldn't believe his ears. The other party was in the center of the whirlwind, but he actually asked a person who was thousands of miles away about the news about the subprime housing mortgage bonds. It was beyond his expectation, "Steve, did I hear the **** right, are you asking me about the CDO?"

Upon hearing the other party's reaction like this, Steve was not surprised but delighted. He breathed a long sigh of relief, and then said lightly: "Oh, since you don't know, then just pretend I didn't say anything. How about it, today Got any **** bonds to quote?"

What Lin Guodong didn't know was that among some traders who came into contact with him, they generally had such an understanding of him, that is, this guy was very well-informed, whether it was the American, Asian or European markets, and this guy's news was very good. It's probably accurate.

   It was because of his honesty and equal exchange that Lin Guodong became famous in his circle, but he didn't realize it. Since the other party had no information to disclose, he had no choice but to give up. After politely inquiring about the quotations of several bonds, he hung up the phone. Without the inside story, he doesn't plan to make deals for the time being.

   Immediately afterwards, he made several phone calls. The other party either didn't know the news, or what he said was already reported in the news. Lin Guodong was very disappointed, it seemed that he would stay up all night in vain again today. He hung up the phone, intending to make a few transactions in the market before talking, anyway, to increase the profit in the account first.

   Just as he turned on the Reuters terminal and was about to look for a few bonds with little volatility, the phone rang again. The life of a trader is that every day he is either placing an order or answering/calling to inquire about the price, so Lin Guodong just glanced at the phone, then skillfully put the microphone on his shoulder with his head, concentrating on the computer while greeting Screen. In front of him, there are eight screens, and all kinds of data and information flow incessantly for him to observe, analyze and digest.

   "Lin, a big insider, a big enough insider!" A familiar voice sounded, and the words were full of anxiety and surprise.

   "Really?" Lin Guodong remained indifferent. He could already recognize who the speaker was. He was an alumnus he knew in Princeton. He was currently doing investment analysis at Quantum Fund, and his name was Daniel Johnson. Regarding this person, Lin Guodong dislikes this person deep down, because the other party's utilitarianism is too strong, and only two or three of the ten news released are true, so even if the other party is so excited to say that there is an inside story, Lin Guodong's reaction was still indifferent.

Daniel naturally knew his position in the other party's mind, and immediately explained: "Lin, the news this time is guaranteed to be 100% true and reliable, and you will see it soon. This is definitely a super inside story, involving A giant on Wall Street, I believe you will be interested."

"Really?" Lin Guodong's finger that was tapping the buy order just stopped, looked around, took the microphone into his left hand, and covered his mouth with the other hand at the same time, and asked in a low voice, "Daniel , What is the news? What happened to Wall Street?"

"It's Bear Stearns!" Daniel directly named the institution without the slightest hesitation, "They're in big trouble, very big trouble. You should know that Bear Stearns is the largest holder of subordinated bonds on Wall Street." Institutions, it is said that they have a position of 50 billion US dollars, which is more than Stanley. I just got the news that their internal positions have suffered huge losses, at least 12 billion US dollars, which is more than the losses of their internal hedge funds Too much."

   "What?" Lin Guodong was completely shocked. Although there have been news about huge losses recently, this is the first time he has heard of a loss of such a scale and proportion. Different from the reaction of the outside world that only focuses on the amount of losses, traders often measure from the size of positions and the amount of losses, because factors such as liquidity and risk control must also be considered.

  A $50 billion position with a loss of $12 billion, a staggering 24% if all this is true. Generally speaking, for a huge position, the stop loss point is set relatively high, generally around 10%, and there are also higher ones, but 24% is definitely beyond the industry standard and the psychological expectations of any rational investor. So Lin Guodong only thought for a moment before he came to a conclusion that shocked him even more, "Market liquidity?"

"Yes, there is insufficient liquidity. It is expected that the losses on this part of the bond will continue to intensify!" Daniel said in a serious tone, "So buddy, you'd better not deal with them anymore. I mean any transaction, including bonds, bills , By the way, there is cash. Any transaction with them at this time may get you into the trouble of insufficient liquidity, and I don't want to see you get fired."

  After hanging up the phone, Lin Guodong felt very heavy. Although he had heard before that Bear Stearns had fallen into a situation of insufficient liquidity, the frequent appearances of Bear Stearns' high-level executives made these rumors spread for a while and then stopped abruptly. And now Daniel told him that it was all true and that Bear Stearns' top brass was just playing a game of "The Emperor's New Clothes."

  Suddenly, he remembered the phone call he had with Bear Stearns trader Steve, although the other party really probably didn't know anything, and even made an abnormal move to ask him for information. Thinking about it now, maybe Steve was testing himself to see how much negative news he knew about Bear Stearns, and this news was most likely to appear in the CDO market, that is, subprime debt.

Thinking of this, Lin Guodong had believed most of what Daniel said. When he looked at the Reuters terminal in front of him again, the prospects of those US real estate subprime bonds that had just been selected through fundamental analysis had become uncertain. The owner of the stock is Bear Stearns, and the quoted price is generally 2 to 5 basis points cheaper than the market price. Before he got the internal news about Bear Stearns, Lin Guodong was about to call the other party to lower the price.

  As the saying goes, he should continue to suffer from the chaos. Lin Guodong only thought for two seconds before decisively pressing the cancel button. He really didn't dare to take risks in this transaction. And soon the analysis that Bear Stearns might sell the bond at an ultra-low price due to its huge loss was also reported to the management of DBS Bank. Naturally, Lin Guodong would not copy them as they were. What he submitted was a complete report, carefully analyzing the liquidity prospects of these bonds, and the final conclusion was not to conduct similar bond transactions with Bear Stearns.

   What he never thought of was that his report fired the first shot in the collapse of Bear Stearns.

  …

   "Has the message been delivered?"

   Shortly after Daniel told Lin Guodong about Bear Stearns, Soros personally called the analyst to inquire about the progress of the incident.

   "Everything is settled, boss!" Daniel hurriedly reported that there are not many opportunities to talk to the big boss. Although within the Quantum Fund, it is difficult for these analysts to have a direct intersection with Soros, everyone knows that Soros is not a high-ranking figure. On the contrary, he is also willing to give some sincere opinions and suggestions to the bottom employees. If his time permits. So Daniel decided not to let go of this plan, and asked boldly, "Boss, why should I send news to DBS Bank, they are just a bank in Southeast Asia. If you can choose, those banks from Europe or the United States are not better ?”

"This is really a tricky question, Daniel, you've got to the core of the question!" Soros chuckled without hiding it, and answered bluntly after joking, "There are two reasons, first, Their risk control is the best. Number two, they're an Asian bank. Do you understand?"

  (end of this chapter)