The wheels of history are rolling forward and running according to the established trajectory.
The subprime mortgage crisis that originated in the United States, after being hyped by financial institutions, became more and more influential like a trumpet shouting into the valley, and gradually became unstoppable.
Due to a huge debt of US$17.4 billion on Wall Street, which caused the capital chain to break, New Century Financial Corporation, the second largest subprime mortgage company in the United States, announced that it had filed for bankruptcy protection and laid off 54% of its employees.
On September 2, 2007, Deutsche Bank announced a profit warning and suffered a loss of 8.2 billion euros because of its 12.7 billion euro "Rhineland Fund" and the bank's own involvement in the U.S. real estate subprime mortgage market business.
and suffered huge losses.
The tenth largest mortgage lender in the United States, American Home Mortgage Investment Corporation, officially filed for bankruptcy protection with the court on September 6, becoming another large mortgage lender to file for bankruptcy after New Century Financial Corporation.
On September 8, Bear Stearns, the fifth largest investment bank in the United States, announced the collapse of two of its funds. The reason was also due to the subprime mortgage crisis, which resulted in losses of tens of billions of dollars.
On September 9, BNP Paribas, France's largest bank, announced that it would freeze three of its funds, also because they suffered huge losses from investing in U.S. subprime mortgage bonds. This move caused European stock markets to plummet.
On September 13, Mizuho Bank, Japan’s second largest bank, announced losses related to U.S. subprime mortgages of US$600 million. Japanese and Korean banks have already incurred losses due to the U.S. subprime mortgage crisis.
UBS Securities Japan estimates that Japan's nine largest banks hold more than 1 trillion yen in U.S. subprime mortgage-backed securities.
On January 22, 2008, from January 30 to March 6, the Federal Reserve urgently lowered the discount rate three times in a row, from 4% to 3.25%, releasing $750 billion in liquidity to the market.
The signs of the bubble bursting are already so obvious, but it is difficult to see this information in European and American media magazines. Only in professional financial magazines can you see relevant reports as big as tofu chunks.
On TV, government officials talk freely;
Claiming that the real estate market in the United States is developing steadily and orderly, the bubble is only partial, and it is more about problems in business operations, which are insignificant.
From Dallas to Connecticut, the streets are filled with advertisements for mortgage companies;
"The real estate market remains stable and has great potential."
Everyone is turning a blind eye to the coming disaster, just like the "elephant in the room". Although it is there, the real estate boom has blinded most people's minds and they are selectively ignoring it.
Loan money is too easy to come by, stimulating early consumption by groups who do not have the ability to repay.
Eisman, an investor in Red Hat Fund, went to a striptease bar at night for excitement. While chatting with a striptease girl, Eisman discovered that this erotic practitioner, who had no stable income and relied entirely on tips from customers, actually
I bought 5 houses and an apartment with loans.
According to general rules, before banks and loan companies issue mortgages to applicants, they must review the borrower's credit, whether he has a stable job, and the condition of his property.
But when Americans are speculating on real estate, no one checks your credit, and no one checks whether you can repay the loan on time.
The stripper filled in "therapist" in the occupation column and easily obtained multiple loans. When the house with the loan was remortgaged, she was able to obtain new loans to buy more houses.
Even if her job is obviously that of a precarious stripper, the bank will still grant her a loan. Some Americans even directly write down the name of their dog to get a loan to buy a house.
In order to encourage more people with meager incomes to consume in advance, the loan company came up with a "cool trick;
As long as the first few months of the loan are free and the interest rates are low in the first few years, you will earn money from the loan.
A Mexican strawberry picker with an annual income of $14,000 easily bought a house worth $720,000 with a loan even though he was penniless.
But if you carefully read the loan contract, you will find that although the first few months are interest-free or low interest rates, the monthly payments will increase year by year until the leeks are cooked.
Once you are unable to repay the loan, the house used as collateral will be repossessed, and you will have to sleep on the street.
The market is in a state of false prosperity, and the random spending is becoming more and more eye-catching.
Peak Tower, Victoria Peak, Hong Kong
In the big study
Wang Yaocheng held the World Financial Tracking Report (6) from the Hong Kong Guanfengyun Economic Research Center in his hand. He was shocked when he read it. He put the report on the table and stood up. He walked to the floor-to-ceiling glass windows and overlooked the densely populated Hong Kong city with high-rise buildings.
This international metropolis is still prosperous, with a constant flow of ships entering and leaving the port. A large amount of materials are re-exported through Hong Kong to various parts of the world every day, maintaining this regional status as an international trade transit port.
historically
After experiencing the world financial crisis in 2008, Hong Kong, which was hit hard, was unable to recover. It has not been relieved for many years.
How could the United States, which is far away on the other side of the Pacific, cause such great harm to Hong Kong's economy?
Wang Yaocheng has specific evaluation data in hand. As of the end of 2007, the world's financial derivatives amounted to 596 trillion U.S. dollars. How much of this is the subprime loan asset package packaged by Wall Street bankers?
It’s scary to think about it!
For lending banks, the risk of subprime loans is very high. After issuing a loan, it is equivalent to writing an IOU. The income of the person who writes the IOU is very unstable. If you lose your job and cannot repay the money, the IOU will be lost.
Yes, banks cannot guarantee that all loans will be recovered.
So what should we do? The bank came up with a clever idea:
Sell these IOUs that are about to explode at any time. I will get the money first, and the risk will be passed on to the person who takes over the IOUs.
Just like playing drums and passing flowers when I was a child, Wall Street bankers played a financial derivatives game: after packaging and selling the IOUs, the middlemen made a profit on the difference, and they did not have to bear the risk of mortgage defaults.
After such garbage was resold layer by layer, international credit agencies gave it a high rating, and then sold it as a financial product to investors around the world, including a large number of middle class people and entertainment stars in Hong Kong. This is how they fell into the trap, using almost all their wealth.
I bought financial products from Lehman Brothers and ended up losing all my money.
Therefore, when the global financial crisis hit, the Hong Kong market was wailing, and investors jumping from tall buildings were reported in the news from time to time.
Wang Yaocheng let out a long sigh. Even he was powerless against such a huge disaster.
In order to cope with the financial crisis, the Wang Consortium has made comprehensive preparations. In accordance with the instructions, the consortium companies have increased cash reserves, stopped quarterly dividends, stopped corporate mergers and acquisitions and expansion, and maintained continuous and abundant cash flow.
At the same time, several companies with the largest number of employees, including Yangtze River Technology Group, Yellow River Technology Group, Carrefour Supermarket Group, Hong Kong and Shanghai Hotels Group, and HSBC Bank, have carried out layoffs and downsizing plans.
Further reductions in production capacity will be accompanied by the loss of nearly 360,000 jobs at the consortium level across the world.
As of the end of March 2008
The cash pool of the consortium has further accumulated to US$460 billion after three financial quarters from the level of US$381.5 billion in June 2007, which has greatly enhanced the strength of the consortium enterprises to cope with the financial crisis.
Facing the infinitely beautiful spring scene outside the window, Wang Yaocheng's emotions were complicated and difficult to understand. In the face of a global financial disaster, personal power is always small.
At this time, He Chen, the head of the Secretariat, opened the door and walked in with an irrepressible joy on his face, holding a thin report in his hand.
"Chairman, the latest news comes from the American consortium in New York; they intend to sell the equity of Samsung Group in Korea. The American consortium headed by Citibank has officially sent us a negotiation invitation. You see..."
"oh……"
Wang Yaocheng took this thin document and quickly read its contents.
He pondered without expressing his position, walked back and forth a few times, and said;
"Let's put it aside for now. It's not us who are anxious now. Sometimes rushing is not a deal. Didn't Dong Mingzhu's negotiations with the Korean Peninsula LG Group end in failure?
Haha, without being pushed to the cliff, these negotiating opponents always think that there is something rare to live in, and often make unrealistic demands.
This is the case for EDF, the Swiss ABB Group, and the Korean LG Electronics. Now it’s Samsung Group’s turn, and I don’t think the situation will be much better.
Oh...by the way, how is President Li Jianxi's health?"
Regarding this situation, the Secretariat has always focused on following up, and He Chen answered immediately;
"After President Li came back from the rescue for a cerebral hemorrhage last year, his physical recovery is still very good, but the right half of his body is hemiplegic and he has difficulty moving.
However, at the beginning of the year, because the company's business situation was stimulated again, President Li became too excited and suffered a recurrence of the disease. Now he is completely unable to leave the bed, and is accompanied by symptoms such as facial paralysis and slurred speech.
According to reliable sources from the hospital;
Since the patient can no longer be stimulated, the Samsung family has been hiding the business status of the company, hoping that his health will improve."
"Well, regarding President Li's physical condition, the Secretariat must continue to focus on following up."
"Understood, we have reliable news channels at Seoul Samsung Hospital and can deliver first-hand medical information at any time."
"That's good, don't relax."
"The Secretariat will definitely follow up and keep an eye on it."
Wang Yaocheng nodded. As long as Samsung Group is in the hands of the ambitious and talented Li Zairong, the threat will be reduced by 80%. It is best if nothing needs to be done now.
Before the financial crisis, cash was king and the rule was supreme.
At this time, any mergers and acquisitions that significantly reduce cash reserves are inappropriate, and the ducks that need not be cooked will run away.
When the financial turmoil sweeps across the world, you will find that the market is full of incredibly cheap merger and acquisition targets. Not to mention the US$460 billion in cash held by the royal family fund, even several times more will not be enough to spend.
"Achen, please inform the Fixed Asset Management Office of the consortium to arrange for an appropriate reduction in the weight of Atlantic Business Machines' stocks. The range... shall not exceed 10%, and strive to withdraw about 40 billion U.S. dollars in cash."
"Chairman, do you have any specific requirements?"
"Well, due to the launch of smartphones, Atlantic Business Machines' profitability has reached a new level, and its market value has also skyrocketed to more than 410 billion U.S. dollars. You should make a plan to appropriately reduce the weight in installments, and reduce the weight every month.
It is advisable to hold 3% and complete it in three to four months.”
"Chairman, I understand. I will immediately work with the Fixed Asset Management Office to formulate a detailed reduction plan and submit it to the New York Stock Exchange for approval. If there are no other instructions, then I will go down and do the work."
"Okay, let's go."
Wang Yaocheng watched He Chen leave, tapping his slender fingers on the table and pondering;
It seems that the bankers on Wall Street have realized that paper can't stop the fire, and are now starting to raise funds and sell off assets all over the world to cope with the upcoming earth-shattering financial disaster.
Whoever can persist the longest in the financial crisis is likely to escape the disaster and survive.
At this time, cash flow is more important than any asset.
Once the capital chain is broken, the consequences are self-evident.
People on Wall Street know how serious this global financial crisis will be, because they are the ones who caused it.