Chapter 16: Crazy Deals

Mark Baum focused on looking at the documents in his hand. It was an analysis report compiled by Zhang Yu all night long in the past two days, which demonstrated in detail why the real estate subprime loan market collapsed.

Zhang Yu didn't rush, and waited patiently by the side.

Soon, an hour passed, Mark Baum's frown became tighter and tighter, and the document was turned to the last part.

Finally, he let out a long sigh, raised his head, and handed back the document in his hand to Zhang Yu.

"Mr. Baum, do you still want to do multiple loan securities?" Zhang Yu said indifferently after the result file.

"Call me Mark, thank you, Ronan, I never thought that the real estate market would be so shocking." Mark Baum shook his head and started the car, and said in a low voice, "I will send people all over the United States to conduct detailed inspections. Investigation, there must be a bubble in the subprime mortgage market, I just want to know how big this damn bubble is and when it will burst!"

"Obviously, many loan contracts stipulate that the adjustable interest rate will come into effect in 2007. At that time, the interest rate will rise sharply. Many people will not be able to repay the suddenly doubled loan. The default rate of subprime loans in the United States will rise rapidly. The subprime mortgage market will explode like a balloon," Zhang Yu said lightly.

His voice was not loud, but it sounded unusually cold to Mark Baum.

"That will be a financial crisis that will affect the whole United States, no, the whole world..." Mark Baum murmured.

There was a moment of silence in the car, and after a while, Mark Baum spoke solemnly:

"Thank you, Ronan. If it weren't for you, I would have continued to do multiple loan securities. When the market crashes, I will definitely go bankrupt. At that time, I can only jump off a building. I owe you a favor, a big favor." , if you need help, just mention it."

Zhang Yu pondered for a moment and said:

"I do need your help with something."

"You just say it." Mark Baum was not surprised at all, he didn't think that his charm was so great that Zhang Yu could run back and forth for his career.

"I want to short the subprime mortgage market, but I have no access. I hope you can help me solve the threshold problem of the ISDA (International Swaps and Derivatives Association) master agreement, otherwise I cannot directly trade CDS." Zhang Yu said.

That's what he's helping Mark Baum with.

Although he has $4000 million in hand, the CDS are not going to be sold on the open market at all, and he can't even buy them.

Since Mark Baum can do multiple securities loans, he must have signed the ISDA master agreement.

Only by signing the ISDA master agreement can one conduct high-risk financial derivatives transactions. This qualification is what Zhang Yu needs.

"How much money do you have? If it's too little, I'm afraid I can't help you." Mark Baum asked with some surprise.

He heard a lot about Zhang Yu from Lickritt. It is said that this young man came to study in the United States at public expense, and his family background is very ordinary. Where did he get the money to get involved in the financial market?

"I have 4000 million US dollars in my hand. Although it is not much, I can definitely participate in the CDS transaction."

"4000 million? Where did you get so much money?" Mark Baum yelled out, and then he realized his slip of the tongue, "Sorry, I didn't mean to inquire about your privacy, I was just a little surprised, this is the same as I learned from Todd I learned you very differently there."

"It's okay, I'm just lucky. I made a successful investment in the past two months." Zhang Yu smiled.

Although Mark Baum was still puzzled about what kind of investment could yield such a rich return in a short period of time, he was very measured and would not inquire about such things, but directly agreed:

"4000 million is enough. I can help you get the ISDA agreement with Deutsche Bank. This bank is currently the largest CDS seller in the market. I can introduce their trader Greg Lippmann to you. He was the day before yesterday. Call me and try to sell me CDS."

"Thank you."

"But you need to set up an investment company first. Individuals cannot sign the ISDA agreement. If you trust me, I can help you with this matter." Mark Baum reminded.

"Then I will trouble you." Zhang Yu said gratefully.

"It's just a little effort for me. You really helped me a lot. I need to go back and do further detailed investigation on the subprime mortgage market... What is your mobile phone number?" Mark Baum said.

Then the two exchanged cell phone numbers, and Mark Baum sent Zhang Yu back to Butler University, driving away in a Ford Mustang.

Zhang Yu looked at the car going away with a faint smile on his face.

He turned and looked to the west, which was the gate of Butler University, but his eyes were very far away, as if he had penetrated thousands of kilometers, and saw the Golden Gate Bridge standing on the far west coast.

...

A week later, Zhang Yu, who was reading a book in the apartment, received a call from Mark Baum:

"Ronan, I sent people to conduct investigations in more than a dozen cities across the country, and the results are shocking. The subprime mortgage market is not a bubble, it is a powder keg. It is the Balkan Peninsula before World War I. It is about to explode, and the entire United States People are still buying houses, those bankers should go to hell, Fark!"

"Mark, it sounds like you are very angry?" Zhang Yu said unhurriedly.

"Of course, this is a financial crisis that will affect the whole world. Many people will go bankrupt, and millions of ordinary people will lose their houses." Mark Baum's voice sounded very angry.

"So you decided not to short the subprime mortgage market anymore, right?" Zhang Yu said slowly.

"..." There was no sound from the other end of the phone.

Zhang Yu paused and continued:

"After all, if you take action, the financial crisis will become more serious. Although it will not affect the overall situation, I think there will be tens of thousands of homeless people? You are so kind, you will definitely not make money This kind of black money."

"Uh..." Mark Baum was still speechless.

"Haha, Mark, you are a capitalist. How did you become so sympathetic? This is the fault of the US financial system. We have no way to stop it, or even delay it from happening, and the dollars you earn are king." Zhang Yu laughed road.

He is not American and has little sympathy for the American people.

"Well, you are right, you cold-blooded animal..." Mark Baum's voice was very helpless, "I have already contacted Greg Lippmann, and I am going to invest 10 billion US dollars, fully leveraged, and replace it with CDS ."

"Whoa, a billion dollars! Mark, why are you still in Indiana?"

"What do you mean?"

"You should go to Wall Street, you are a real boss!" Zhang Yu teased him with a smile.

"Come on, what is my little money, Wall Street is too deep, I can't grasp it," Mark Baum laughed at himself, "I found out in the past few days that a Wall Street fund manager named John Paulson, He bought 20 billion CDS a long time ago, and it is very likely that he will continue to increase, but he was just an unknown little player before, and it is said that Soros is standing behind him."

"We don't have to worry about others, as long as we get our share." Zhang Yu said in relief.

"Yes, do you have time on Monday? I have an appointment with Greg Lippmann to go to Wall Street to close the deal," Mark Baum said.

"Of course, I've been waiting for this day." Zhang Yu smiled.

"Very well, I will go to you on Monday. By the way, have you decided on the name of the company? The formalities have been completed." Mark Baum asked.

Zhang Yu thought for a while and said slowly:

"Let's call it Dream Investment Company. I hope to realize my dream with it."

"What's your dream? To become a billionaire? If it's this, I think you're about to achieve it." Mark Baum laughed.

"Of course not, I want to be the NBA champion coach."

"Ha, with all due respect, it's a lot harder than making $[-] million for you."

"So I'm going to make more money."

"Does this have something to do with money? You are too young, it is impossible for a team to invite you to coach." Mark Baum wondered.

"When I have the money to buy a team, I will naturally be the head coach." Zhang Yu said lightly.

This is the first time he has stated his goal in front of others. If it is not for shorting the subprime mortgage market with Mark Baum, he will not tell anyone.

"Whoa, 20-something NBA team owner? This is... crazy! But the real estate market is going to crash, so what's impossible? Go ahead, man!"

...

On Monday, Zhang Yu took Mark Baum's private jet and came to New York with him.

Seeing this narrow street full of tall buildings covering almost the entire sky and bustling with pedestrians, Zhang Yu was deeply moved.

Although he was an investment analyst in his previous life, he had never been here. Now he has become a basketball head coach, but he has set foot on this street with a huge sum of money.

This is the financial center of the world, Wall Street.

"Ronan, why are you in a daze, let's go." Mark Baum greeted him from the front.

Zhang Yu came back to his senses, followed, and went to Deutsche Bank with Mark Baum, his assistant and bodyguard.

They found Greg Lippmann, the chief trader of Deutsche Bank's CDS products, Mark Baum took out 5 million US dollars, Zhang Yu took out 4000 million US dollars, and they all increased their leverage by 10 times. $50 million CDS product.

CDS products correspond to COD bonds in the subprime mortgage market, which are divided into different ratings, from high to low, into 3A, 2A, A, 3B, 2B, B, among which 3A bonds are high-quality bonds guaranteed by the government, with the lowest risk and the highest yield The lowest, B-rated bonds are the riskiest bonds and offer the highest yields.

It was a perfect financial instrument for shorting subprime mortgage securities.

Its operating principle is as follows: Zhang Yu took out 4000 million U.S. dollars and added 10 times leverage to purchase a CDS product worth 4 million U.S. dollars and rated 3B, but he did not need to directly give Deutsche Bank 4 million U.S. dollars.

If the subprime mortgage securities have maintained a slight rise, he only needs to pay a monthly premium of 4% of the amount of 1 million US dollars, which is 400 million US dollars, until the 4000 million is lost.

In other words, as long as the subprime mortgage securities continue to rise for 10 months, Zhang Yu will lose all his money unless he injects new funds.

This is a crazy deal where everything is at stake.

Of course, if the subprime mortgage securities fell sharply in the trading market, he would get a huge return of not less than 1200% of the principal!

Walking out of Deutsche Bank, Zhang Yu seemed to have let go of a heavy burden. He looked up at the cramped sky, and suddenly said with a smile:

"Mark, I seem to have seen the future."

"Oh? What does the future look like?"

"Thousands of people are crying, but we are laughing!"

　These two chapters partly borrowed from the plots in "The Big Short", hope everyone knows, please recommend tickets and collections by the way.