Lu Fei knew it very well, and all the people present also pretended to be confused.
Who on Wall Street doesn't know that Lehman and Goldman Sachs are life-and-death enemies?
The initiator is the Richard Fuld in front of him.
When he took over Lehman, the annual revenue was only US$3 billion. In just 14 years, it had achieved US$19.3 billion on its own, and it firmly ranked third among Wall Street investment banks.
Being squeezed out is Goldman Sachs, which is now in fourth place.
The two sides were at war in the millennium. Goldman Sachs suffered heavy losses due to the bursting of the Internet bubble. Lehman made a sneak attack without any sense of martial ethics, took the opportunity to go short-selling crazily, put Goldman Sachs to death, and even sniped at the investors who came to Goldman Sachs for help.
The tit-for-tat confrontation made everyone red-eyed.
In the end, Lehman stood and Goldman Sachs lay down.
The talker at Goldman Sachs at that time was Henry Paulson, and coincidentally, he is now the U.S. Treasury Secretary.
The reason why Lehman is still able to thrive and become the largest subprime mortgage giant is because behind it is the support of Federal Reserve Chairman Greenspan. He is a supporter of "The World is Flat", insists on financial innovation, and supports the development of CDOs and CDSs. , even P2P.
However, this big boss retired this year.
After sorting out these twists and turns, grievances and grievances, the guest list of the Christmas banquet naturally does not include Lehman, who is not far away from death.
At the scene, the most invited people were from the Goldman Sachs department.
Mr. Lu had long secretly chosen sides and said haha: Ying
"Ford, you Lehman have a banquet, and our three-body party also has a banquet. I can't ask you, Lehman's greatest hero, to leave and leave your party leaderless, right?"
"That's why we specially arranged the location next to Lehman. After a while, we will invite you here in person."
Carlson Bullock added astutely.
Lu Fei glanced at it. Is this explanation perfect?
Haha, so perfect!
Richard Fuld stopped asking questions, "Lu, what do you think of my proposal just now? Let's do CDS business with Lehman. We will give you whatever you want."
Damn it, Lehman, dare to snatch food from the tiger's mouth!
David Solomon said with a livid face: "Hey, this is the Christmas gift Lu specially prepared for me and Goldman Sachs."
"David, didn't you just refuse?"
There was disdain in Richard Fuld's tone.
What Goldman Sachs gave, Lehman can give.
What Goldman Sachs cannot provide, Lehman can still provide!
"No one refuses a gift from a friend at Christmas."
David Solomon immediately put aside the unpleasantness of Lu Fei cheating Goldman Sachs and pointed his gun at the arrogant Richard Fuld Ying.
"Let's not stand at the door. Let's all come in and have a drink."
Lu Fei smoothed things over, and under the watchful eyes of everyone, a group of them gathered in front of the balcony enclosed by the floor-to-ceiling windows, whispering.
"Since you are all interested, I would like to ask what is Lehman's CDS premium rate now? What is Goldman Sachs's now?"
John Paulson gets the hint in his eyes.
David Solomon shook his wine glass and bluntly said that Goldman Sachs charges premiums on a quarterly basis. Class 3A charges 0.3% of the face value, class A charges 0.6%, class 3B charges 2.5%, and class B charges...
"Why has it increased so much in just one year?"
Lu Fei frowned. From the whole year of 2006 to the first half of 2007, the 3A level was only 0.2%, and the 3B level was only 2%.
Don’t underestimate the 0.1% increase. The total CDS of Trisolaris Fund and Paulson Hedge Fund exceeds US$3.5 billion, and the premium in one year alone will be US$14 million more.
There are not so many bank robberies!
"The market price~"
Richard Fuld explained: "CDOs are rising, and CDS will naturally rise as well. But don't worry, Lehman is more diversified than Goldman Sachs. It doesn't matter if the quarterly premium rate is not appropriate. We still have the end of the month and the half year. , I recommend you choose semi-annual, the best discount and most cost-effective, 3A grade only costs 0.25%, A grade only..."
"Lu, we at Goldman Sachs also have half a year."
David Solomon couldn't help but feel a sense of immediacy as he was being raped in person. Lu Fei was Goldman Sachs's true love. How dare you, Lehman, steal it?
"Ahem!"
As a bystander, John Thornton reminded him calmly: "David, I learned a saying in China, 'Two dogs fight for a bone, and the third dog carries it away.' Didn't you realize that Lu is using us and Lei?" Man’s contradiction, are you going to make profits from your CDS contract again? Don’t fall into his trap.”
"you're right."
David Solomon suddenly realized it and looked at Richard Fuld to the left and Lu Fei to the right. You Chinese people are very bad!
Just when the three parties were at an impasse, among the crowd watching not far away, some who were watching the excitement and didn't mind the trouble joined in.
And those with a background in Goldman Sachs will not sit idly by.
Robert Rubin, Olsman and other party members who had already been labeled "Goldman Sachs" swarmed around David Solomon to build momentum.
Ivanka and Wang Dong stood on the periphery. Like them, many people were waiting to see a good show. After all, it had only been a few years. How could the Goldman Sachs group forget their hatred. They had no grudges against Lehman!
I want to see blood flowing into a river, I want to see blood flowing into a river!
"Lu, Goldman Sachs does not specialize in CDS. Its scale cannot satisfy your appetite. We are your best choice. Lehman is a deep participant, second only to AIG in size. And you can rest assured that once the relevant bonds default, Lehman will bear the responsibility for insurance compensation and will be responsible to the end."
Richard Fuld is tall, and when faced with the wolves of Goldman Sachs, he is like a bulldog, and he does not lose at all.
"Well, how much does it cost for Class 2A?"
Lu Fei touched his chin, looking impressed.
"Class 2A?!"
Not only Richard Fuld and David Solomon, but all the Wall Street giants and elites present looked at each other, as if they had seen a ghost.
But John Paulson's eyes lit up, and he immediately noticed Lu Fei's genius move. Today's 3A and A classes, due to the expansion of CDS scale, premiums continue to rise, and the 2A class, which has a small number, has higher payment costs. Low, but the odds are extremely high.
Almost, 20 to 1.
In other words, if you invest one dollar, you only need a few cents in premiums for three months, but if you win the bet, you will win $20!
"What, can't you do it?"
Lu Fei looked around, looking disappointed.
Richard Fuld and David Solomon looked at each other, neither daring to be the first to speak, fearing that their opponent would offer a lower premium.
However, this zero-sum game is not limited to the enemies of Goldman Sachs and Lehman. Wall Street hunters such as Merrill Lynch, Morgan Stanley, and Citigroup are here to target Lu Fei!
"Lu, we Merrill Lynch made the 2A level!"
In the crowd, Sean O'Neill suddenly raised his voice.
All of a sudden, one stone stirred up a thousand waves.
Seeing Merrill Lynch take action, James Caan and others rushed to grab the Class 2A swap contracts of the Trisolaris Fund. Even Robert Rubin did not care about the friendship of Goldman Sachs and fought hard for Citigroup.
"land!"
David Solomon did not dare to make the price public, so he walked up to Lu Fei and whispered: "0.38%, we only want 0.38%."
"So Richard, where are you Lehman?"
Lu Fei turned his head and cast his gaze at Richard Fuld, who was deep in thought. A strange glint flashed in his eyes.
CDS is a good short selling tool.
Traditional short selling requires you to buy the short-selling object, but CDS does not require that. Just like buying a stock and shorting it, but it rises by 50%, you will lose 50%, but CDS does not, no matter how much the short-selling object rises. , the premium will not change.
More importantly, CDS is not limited by quantity. In other words, as long as you are willing to buy it, you can supply it in unlimited quantities. Wall Street relies on this to earn huge premiums.
But obviously the premiums are fixed, and underwriting CDOs that look like crap, but you have to bear huge risks. Why are everyone scrambling to do such a thankless task?
Because no one believes that subprime mortgages will collapse!
So, why don’t you make money from prostitution?
Therefore, Richard Fuld, who firmly believed that subprime mortgages would not fail, quoted the lowest price, 0.35%, and won the bidding without any doubt, beating Goldman Sachs again.
"Widowed Bitchi!"
David Solomon was so angry that he lost to Lehman again, in front of almost the entire top circle of Wall Street.
It’s bearable, you can bear it if you’re familiar with it!
Everyone in the Goldman Sachs department felt the same way and were furious. Lu Fei also hated it. The promised Christmas gift to Goldman Sachs was to be humiliated by Lehman?
At this moment, Lu Fei seemed to have expected it, and he glanced at Carlson Bullock, and he asked innocently and stupidly: "I remember Lehman's CDS scale is 460 billion US dollars, in case something happens , I said that if Lehman goes bankrupt and there is no way to pay compensation, what should we do then?"
"Our Lehman bankrupt? Haha, haha!"
Richard Fuld almost spit out his wine and laughed, "You actually think Lehman will go bankrupt. This is the funniest joke I've heard this year! Guys, some people actually doubt that Lehman will go bankrupt?"
"Haha, haha~"
In an instant, the whole hall was laughing, and some people even laughed so hard that they laughed. Every sound of laughter was full of ridicule.
"Lu, don't you also think that Lehman will go bankrupt because it can't afford the money? No?"
Richard Fuld laughed with tears in his eyes.
"David, what do you think?"
Lu Fei didn't answer first, but asked David Solomon.
"Huh, it's hard to say!"
There was sourness in David Solomon's words. From the bottom of his heart, he did not believe that Lehman would go bankrupt, but he would never let go.
Others are afraid of Lehman, but we at Goldman Sachs don’t care!
"But there is always a slight possibility. After all, CDS itself has a probability of one in ten thousand. Isn't the probability of Lehman bankruptcy not one in ten thousand? Richard, what do you think?"
Lu Fei raised a smile.
Looking at this smile, Richard Fuld felt awkward and snorted: "Then what do you want?"
"Since you cut off my Christmas gift to Goldman Sachs, David, how about I give Goldman Sachs another gift?"
Lu Fei said bluntly that he was worried that such large compensation would make Lehman bankrupt, so he also did CDS for Lehman.
CDS, as long as there are buyers and sellers, can make a gambling-style swap contract for any specified credit event. If a default event does occur, the insured buyer will receive compensation from the underwriting seller, which means the risk is transferred to the underwriting party. .
What he wants is Goldman Sachs to guarantee that if Lehman goes bankrupt, the Three Body Fund can all cash out and profit from Goldman Sachs.
It is equivalent to adding another CDS to CDS!
Everyone present was an expert, and they immediately figured out the link. Rather than buying insurance, it was clearly sending money to Goldman Sachs, and it was in Goldman Sachs' favorite form, "Lehman Bankruptcy." Everyone showed their understanding. smile.tassel
"Lu, I think this CDS is completely unnecessary!"
Richard Fuld scowled.
"Haha, I don't think what Lu said is unnecessary."
Before Lu Fei could say anything, David Solomon was the first to refuse, "Besides, this is a Christmas gift to us at Goldman Sachs. You Lehman must be too lenient."
"David is right, this is a transaction between Goldman Sachs and Lu, and Lehman has no right to interfere!"
Robert Rubin, John Thornton and other Goldman Sachs officials finally seized an opportunity to counterattack and struck hard quickly.
No matter how conceited and tough Richard Fuld is, he can't beat four hands with two fists, and it is very difficult to parry.
He showed an awkward but polite smile: "It's just a joke, you just shout and kill."
"Yes, yes, today is Christmas."
Lu Fei saw enough of the commotion, showed a playful smirk, finally smoothed things over, and raised his glass:
"Here's to you, cheers!"
"Here's to you, cheers!"
All the people with evil intentions spoke in unison.
…………tassel
After the banquet, the Goldman Sachs department held a small meeting alone.
David Solomon invited John Thornton to the company, formed a think tank with John Waldron and others, and sat down to advise Lu Fei on the CDS "Lehman Bankruptcy Unable to Pay CDS Compensation".
"Do you think there is any fraud here?"
"No, I don't think there is any problem. Lu made it very clear when he came to me. He asked you to attend the banquet on behalf of Goldman Sachs because he wanted me to be the intermediary to mediate the conflicts between everyone."
John Thornton analyzed: "If Goldman Sachs wants to continue its activities in China, Lu is the most suitable candidate compared to Liu. And if his fund wants to be active in the United States, it cannot do without Goldman Sachs. He knows this very well. Don’t you know it clearly?”
"What Thornton said is not unreasonable, otherwise we wouldn't have invited so many of Goldman Sachs's people to the banquet, but our mortal enemy Lehman was not invited. This is a signal from Lu!"
John Waldron nodded in agreement.
"But, have you ever thought that if you buy so many CDS, if the corresponding CDO depreciates, Sanbody is likely to get three to four billion US dollars from Lehman."
David Solomon looked serious: "If compensation is paid, it means that real estate and subprime mortgages will collapse..."
“But will subprime collapse?”
John Thornton asked: "We all know that subprime mortgages are rock solid and there's no way they could collapse."
"Right."
David Solomon immediately corrected him, "No, that's not necessarily the case. That's not necessarily the case. This year, interest rates have been raised six times in a row, and the interest rate has reached 5.5%. The floating mortgage interest rate will rise to more than 15%. There must be a large number of homeowners who cannot afford it." rise."
John Waldron didn't take it seriously, "Didn't Rubin reveal this news? The interest rate hike is just to cool down the real estate market. But overall, the entire real estate market is still operating steadily. As long as the real estate industry remains stable, subprime mortgages will continue to rise." It will definitely be stable." Ying
"But I still feel uneasy."
David Solomon knows very well that it has nothing to do with subprime mortgages, only Lu Fei. This bastard would be so stupid. He bets on CDS and goes against the entire American finance. Isn't this looking for death?
"What else are you worried about?"
John Thornton was puzzled.
"We do CDS, in addition to earning premiums, we also do a hedge for our own CDO. Lu's fund has a hairy CDO, no hair at all!" David Solomon touched his Mediterranean bald head, "He sold it All the CDO's money is invested in CDS. With this kind of operation, I really doubt whether he can play finance? Is he still the same Lu who competes with us in soybeans, oil, and gold?"
"This, I have the most say."
John Thornton said with a smile: "I have lived and worked in China for so many years. According to my observation, the Chinese people have a character flaw, that is, they are obsessed with face. In the words of Lu Xun, 'face is the spiritual program of the Chinese people'..."
"Who is Lu Xun?"
David Solomon and John Waldron looked at each other.
"A great Chinese writer is equivalent to Hemingway."
John Thornton continued, "He said that Chinese people are obsessed with saving face and suffering, and the more successful people are, and the earlier they succeed, the more they need face, and the less they can accept failure."
John Waldron slapped his thigh: "Yes, isn't that the kind of person Liu is? He was knocked down time and time again by Lu. He just wanted to save face and wanted to take revenge again and again. As a result, Lianxiang failed again and again. Repeated battles and defeats, repeated defeats and repeated battles.”
"All right……"
David Solomon's suspicions were mostly gone, but he still had worries. What if the subprime mortgage crash happened like Lu Fei's bet on? After all, God always stood behind this Oriental man through mysterious means.
Unexpectedly, America was not protected even once!
"So what if it collapses?"
John Waldron doesn't care, not to mention Freddie Mac and Fannie Mae, as well as the Federal Reserve as the last line of defense. Even if there is a problem, the stock of subprime mortgages is only 1.5 trillion US dollars, even if 30% of the subprime mortgages are If the bonds are rotten, they will only cost more than 500 billion yuan.
This amount is just a drop in the ocean for the United States, which has a GDP of 1.3 billion and a debt market of 25 trillion.
Within the entire federal deposit insurance system, the scale of this loss only accounts for 3.6% of the total assets of financial institutions.
It’s completely within the tolerance of the United States!
"Waldron is right. If it collapses, Lehman will be the one to pay for it. You don't think Lehman can't afford it, right?"
John Thornton didn't take it to heart, "Even if Lehman couldn't afford the compensation and it really went bankrupt, wouldn't the Federal Reserve just watch it go bankrupt and not save it? So, just enjoy the premium of Lu's CDS with peace of mind. It’s the settlement fee given to us.”
"Pfft!"
John Waldron couldn't help laughing: "Thornton, what you say is just adding insult to injury. I estimate that Lu's investment in the CDS project has already lost two to three billion. If he continues to persist, he may lose one billion, but it will be in vain." We earn tens of millions in premiums every year and raise Goldman Sachs' stock price. Today we are eating from him and drinking from his Romanée-Conti. Aren't we just beasts?"
"Just think of him as atoneing for his previous sins, burning himself and illuminating us, hahaha, hahaha~"
David Solomon finally made up his mind to make this deal.
The three-body bet won, and Lehman paid the loss.
If you lose the three-body bet, you can earn insurance premiums.
Anyway, no matter whether we win or lose, Goldman Sachs will not lose money inside or outside!
There is no reason not to do it! Only fools would not do it!
