Chapter 267: Great Swindler
Evelyn Capet might have been spurred on by her son's developments in recent years. After discovering that Charles wanted to acquire UFC, she stayed in New York for three more days before directly flying to Las Vegas.
She was determined to secure the UFC for Capet Sports. With the family owning a Gulfstream G550 private jet, traveling was quite convenient.
Meanwhile, Charles was living like a king in New York, surrounded not only by his sexy female assistant and Victoria's Secret models but also accompanied by Hollywood's hottest actresses.
At the same time, big news broke out in Hollywood: after Tom Cruise took control of United Artists, he held a wedding in Italy with his girlfriend, Katie Holmes, who had already given birth to their daughter.
Tom Cruise, being the top Hollywood superstar, once again dominated the Hollywood newspaper headlines with his marriage.
In Manhattan's Upper East Side, at a business cocktail party held at the Mark Hotel, Charles was chatting with John Paulson, head of Paulson Hedge Fund.
Having predicted the U.S. real estate market downturn early on, Charles and John Paulson shared similar tastes.
Paulson Hedge Fund had been shorting risky CDOs since mid-year while buying cheap CDS. Compared to Charles's straightforward and aggressive leverage to short real estate stocks, Paulson Fund's strategy was more complex and less risky.
"Now that the CDOs have dropped in price and the CDSs seem to be going up in price, congratulations! I believe Paulson Fund will welcome a wave of investments soon!" Charles chuckled. The man before him would become famous as the king of hedge funds during the subprime mortgage crisis.
"Charles, you also took action, and seemingly more decisively and boldly than I did," John Paulson smiled with a hint of meaning.
"I'm just playing around. How much does Paulson Fund manage? And how much do I have?" Charles shook his head. Who would have guessed that Charles directly used ten times leverage?
John Paulson nodded. It wasn't hard to find out that Capet Fund gathered over $1 billion through mortgage loans from Goldman Sachs, Merrill Lynch, JPMorgan Chase, and other banks.
However, spreading so many accounts and using ten times leverage to short Fannie Mae and Freddie Mac stocks wasn't easy to trace.
"Charles, we share the same view. What do you think about the subprime mortgage crisis this time?" John Paulson asked.
Charles grinned, "I'm just sitting and watching!"
"You, really... What do you think the impact will be?" John Paulson was a bit perplexed.
"The impact, huh? Real estate price drop will inevitably lead to a decline in real estate company stocks. Banks with large investments will increase their debts and bad accounts, causing bank stocks to fall," Charles glanced at John Paulson and smiled again. "And then it's up to the government. After all, the current U.S. Treasury Secretary, Henry Paulson, used to be the chairman and CEO of Goldman Sachs!"
"It seems you are confident that there will be government intervention in the financial market?" John Paulson smiled slightly. By that time, it wouldn't just be a real estate bubble.
"John, I didn't say anything. I just said house prices will drop. When buyers can't pay off loans, won't banks have a bunch of bad debts? Isn't it normal for those stocks to fall?" Charles raised his glass and clinked it with John Paulson's.
He mentally dedicated the toast to the hedge fund king who would become a legend next year!
"Charles!" After John Paulson left, another person approached Charles.
Patrick Brink, CEO of HSBC USA under HSBC Holdings, arrived.
"Good evening, Patrick!" Charles had recently taken a loan from HSBC.
"Do you know about Madoff Investment Fund?" Patrick Brink asked with a smile.
"The investment fund established by former NASDAQ chairman Bernard Madoff?" Charles responded.
Patrick Brink nodded, "It's a fund that never loses money. Interested?"
Bernard Madoff, the damn head of the Wall Street scam of the century! With the financial crisis looming, how could I invest?
"I heard the Madoff Investment Fund guarantees at least a 10% annual return no matter what, right?" Charles smiled. It seemed HSBC had invested a lot.
Patrick Brink nodded, "Many banks, hedge funds, and individual investment groups are clients of Madoff Investment Fund due to its high minimum investment requirement."
"Oh? What's the minimum?" Bernard Madoff had earlier infiltrated the Jewish Country Club in Palm Beach, Miami, where clients were mainly Jews and invitation-only.
Now, Madoff Investment Fund, operating as a pyramid scheme, targeted European banks and funds as its main client base. Charles had no detailed understanding because he didn't have the money before and wouldn't pay attention to a great swindler.
"Initially, it was $300,000, then rose to $1 million, then $5 million, and now the minimum investment is $10 million!" Patrick Brink shrugged.
Charles's mouth twitched. No wonder the clients were mainly banks and funds. This $10 million threshold indeed blocked many individual investors.
"Does HSBC have a partnership with Madoff Investment Fund?" Charles asked.
"We always invest. This time, we have about $1 billion to invest," Patrick Brink explained.
"I heard Madoff Investment Fund manages more than $50 billion now."
"Oh? Charles, are you interested?"
"Now, with the U.S. real estate market in turmoil, it might turn out like the Japanese real estate bubble. How can I miss such a guaranteed money-making investment?" Charles sighed.
"It seems like BNP Paribas, Bank of Austria, Santander Bank, Credit Suisse, and others all have substantial investments in Madoff Fund. If it weren't for Capet Pictures requiring a massive cash flow for its movie business, I would have invested my money in Madoff Fund."
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