Chapter 201 Credit Default Swaps

……

In fact, they had already reached an agreement on Guo Shouyun's matter. On the premise of ensuring the interests of all parties, if the hound plan can be successfully completed, then naturally hello, hello, hello, everyone. But if they fail in the end, they have nothing to lose. On the contrary, he can reap a lot of interest from a large amount of money lent to Guo Shouyun.

Of course, if they are not satisfied with the 8% rate of return, they can also securitize the loan and put it into a derivative market. In short, there are many ways to make money, and several major financial giants who have mastered the advantages of customers and channels have full confidence in this.

Driven by such interests, the round table is not destined to reach any constructive agreement.

When Jeffrey Jilin left the private club with a gloomy expression, Oliver Barin chased after him from behind.

"Mr. Jilin, can you talk together?"

"Next time, there's still something to deal with within Enron!" Jeffrey Jilin shook his head.

What he said just now was not to shirk, although the current Enron seemed to be full of flowers to the outside world, there was already an undercurrent surging inside. This period of time was supported by huge revenues from California's energy crisis.

But both Jeffrey Jilin and Andrew Fasto, the CFO of Enron responsible for California's energy crisis, understand that this kind of gray income cannot last. If you want to continue to sustain the Enron empire, you must find new sources of income.

They joined forces with Goldman Sachs, JPMorgan, Citigroup, and Bank of America to launch the 'Hound Project', in addition to cracking down on Guo Shouyun, the largest Enron short in the financial market, but also with the idea of taking the opportunity to make money, or taking Guo Shouyun's companies with amazing profits into their hands.

But it's a pity that Guo Shouyun sold the most profitable Thorn Bird Publishing Company to Amazon, which disappointed Jeffrey Jilin, who was most optimistic about this area, but fortunately, the matrix group is also good.

"Mr. Jilin, I have some different ideas about the 'Hound Project', and I hope I can communicate with you!" Oliver Barin did not leave.

Jeffrey Jilin's eyes flashed, and his sharp eyes stared closely at Oliver Balin, who was smiling and looking very confident, and only said slowly after a while: "Get in the car!"

"Thank you!"

Oliver Balin smiled slightly, pulled open the back compartment of the Lincoln Extended and sat in.

"I don't have much time to delay, so just say what you think!" Jeffrey Jilin fasttracked.

A descendant of an old European aristocracy in decline, if it weren't for the fact that the other party had a lot of money in his hands and was also his own ally, he would not have anything to do with the other party.

Oliver Barin nodded, "I believe Mr. Jilin has also seen that Morgan, Goldman Sachs, Citigroup and Bank of America, which have made enough profits in the previous rise in Enron's stock price, are no longer too concerned about the success of the 'Hound Project'." ”

Jeffrey Jilin frowned, which was also where he was dissatisfied. In the past ten years, they have absorbed enough blood from Enron to support their rapid development, but at the critical moment, none of them are really willing to help.

But even so, Jeffrey Jilin is not good compared to these four companies, after all, the declining Enron has become very different from them in terms of strength, and they can only suffer by themselves.

"So... What about your opinion?"

"I think we can be flexible. Find a solution to the problem from within!" said Oliver Balin's eyes.

"Internal?"

"Not bad. … Google, LinkedIn, PayPal, Guo's, Phoenix, and even Apple, which was just acquired by Guo Shouyun, each company has internal contradictions that are not known to the outside world, and if we find it right, we can use the capital in our hands to make some articles. Even if it doesn't have a fundamental impact on the growth of these companies in the end, it can create ongoing disruptions that disrupt their development steps and thus affect their bottom line. When Bruce Guo's industrial chain is not so healthy, I believe that Goldman Sachs and Morgan will find themselves like vultures without our urging. ”

Jeffrey Jilin's eyes brightened after a moment of contemplation, "Mr. Balin, if you're okay for a while, I think we can sit down and discuss your entire plan in detail." ”

"Of course, it's my pleasure!"

A triumphant smile tugged at the corner of Oliver Balin's mouth.

If he first came to the United States, he participated in the Hound Project, just to take a breath, teach Guo Shouyun a lesson, and then recover the beauty he liked. But now this purpose has quietly changed, especially after learning about the good development prospects of Guo Shouyun's various companies.

If he could keep them for himself, it would be the most solid foundation for him to revive the great dream of the Bahrain family.

……

"Boss, Qin is here?"

"Let him in!"

Although a few days have passed, Guo Shouyun will still be a little embarrassed when facing Wendy. He knew that this was the work of oriental thinking in his bones. Wendy, by contrast, is much more calm. Different cultures determine different patterns of thought and behavior.

After glancing at the man sitting on the couch, somewhat avoiding her gaze, Wendy smiled and turned to walk out. She finally discovered the not-so-genius side of the man she loved.

"Boss!"

Seeing Qin Zhicheng walk in, Guo Shouyun quickly regained his shrewd and capable appearance.

"Sit!"

"Okay!"

After he sat down, Wendy handed him a glass of water.

"Thank you!"

"You're welcome!"

After smiling, Wendy turned and walked out.

"How's it going, are there any results from the investigation?"

"There it is!"

As he spoke, Qin Zhicheng took out a large stack of documents from his briefcase and put them in front of Guo Shouyun. Before the advent of tablets, office models were relatively 'bulky'.

These are the details of the bonds issued by Worldcom and Arthur Andersen. A total of 37 teams involved 18.362 billion US dollars. Of these, 21 are rated triple-A by Standard & Poor's, Moody's and Fitch, while the remaining 16 are also above A. ”

As the second-largest telephone and telegraph company in the United States and one of the top five law firms in the world, WorldCom and Arthur Andersen are naturally among the best of all companies in the United States, and it is no surprise that they issue bonds with high ratings.

Guo Shouyun flipped through the information in his hand, and an excited smile gradually appeared on his face.

The reason why he asked Qin Zhicheng to collect information on these bonds was to prepare to play a financial derivative product called 'credit default swap'.

If you look at the technical financial jargon, 'credit default swaps' are not easy to understand. Because it's not really a swap product at all. It is an insurance policy that is primarily for corporate bonds, with premiums paid semi-annually and fixed terms.

For example, you could pay $200,000 a year for a 10-year credit default swap on $100 million of General Electric bonds. The maximum amount you can lose is $2 million ($200,000 per year for ten years).

If GE defaults on its debt repayments over the next 10 years, resulting in no income for bondholders, the maximum amount you can get is $100 million.

It's a zero-sum bet: if you get $100 million, the guy who sold you the credit default swap product loses $100 million. This is also an asymmetric bet, just like roulette. You may lose the chips you put on the table, but if you bet right, you will get 30x, 40x, or even 50x your bankroll.

Of course, it's not easy to get excess returns. This is because the price of a 'credit default swap' is not determined by any independent analysis, but by the ratings of the bonds by Fitch, Moody's and Standard & Poor's. If you want to insure a 3A-rated bond that is considered risk-free, known as a credit default swap, you'll need to pay 20 basis points, or 0.20%, for riskier A-rated bonds, you'll need to pay 50 basis points, or 0.50%, and for the more insecure 3B-rated bonds, you'll need to pay 200 basis points, or 2%.

Because corporate bonds have a higher priority than stocks, the risk of default is low. As a result, the probability of a credit default swap is also low. This dictates that if you want to make excess returns by buying a company's credit default swap products, it's best to investigate which company is facing bankruptcy. Obviously, this is an ultra-high-risk job. Of course, high risk also means high returns.

The most important thing is that this kind of speculative product, which is very risky for others, is very low risk for Guo Shouyun. Because he knows very well which business will fail in the future.

Moreover, investing in a credit default swap requires less capital than shorting a company's stock. If he insures $10 billion in triple-A corporate bonds for ten years, then he only needs to pay $20 million a year to be enough. If the other party defaults at any point in the decade, then he will receive $10 billion. Of course, the premise is that the financial insurance company he is insured can afford to pay for it.

Looking at the information in his hand, Guo Shouyun seemed to hear the sound of gold coins falling into the money bag. He realized that this was a more suitable speculative market for himself than stocks and futures. And after investing, he doesn't need to pay attention every day, he just needs to wait for the harvest period to arrive. After thinking about these things clearly, Guo Shouyun's heart became hot.

Putting down the information, he raised his head and asked in a hurried tone, "Old Qin, how many people are in your team now?"

"One financer, one legal officer, three analysts, two negotiators, one assistant, plus me for a total of nine people!" Qin Zhicheng said quickly.

"Add three more financial negotiators, and then your task in the next phase is to help me buy the credit default swaps of WorldCom and Arthur Andersen. By the way, and Enron!"