Eighty-nine years ago, as soon as the news of the outbreak of the subprime mortgage crisis in the United States came out, I was confused. Subprime loans? It seems to be a concept far away in the sky.
However, as time goes by, the subprime mortgage crisis continues to ferment, affecting more and more areas. One financial institution after another declared bankruptcy, the five major investment banks on Wall Street disappeared collectively, and the financial industries of the United States, Japan, and Europe were hit hard.
Gradually, the damage spread from the financial sector to the real economy, and the US government stepped in to rescue the market.
As a result of the subprime mortgage crisis, US$5 trillion has evaporated in the United States alone, more than 8 million people have lost their jobs, and more than 6 million people have become homeless.
The subprime mortgage crisis is known as the biggest economic crisis after 1933. The movies "Too Big to Fail", "Profit Storm", and "Incarceration" all reflect the various aspects of this financial crisis from different aspects.
But when the movie "The Big Short" came out, I still watched it three times. I prefer this angle. What were people doing before and after the crisis? In the face of such a huge financial crisis, didn't anyone notice it in advance?
It turns out that some people did have foresight, look at the performance of several figures in financial institutions in this storm.
Build a position and board the ship
Michael Barry (the namesake of the movie and the prototype) is the founder of Scion Captical LLC (Sion Fund Company), a famous hedge fund manager and stock investor .
He was the first to discover the risks in the U.S. real estate market in 2005, predicted that the real estate market would collapse in 2007, and seized the opportunity to invest in it.
Convinced the bank to create an insurance policy (credit default swap) for him that would give him a huge return if the real estate securities fell, but if they did not, his huge premium would be for nothing.
He visited more than a dozen banks to buy this insurance. After hearing his request, the account managers suppressed their inner ecstasy and immediately completed the deal.
No one thinks that real estate loans will default, real estate securities will fall, and why not collect premiums for nothing.
What he did became a running joke. Goldman Sachs also sent him a greeting card to congratulate him on becoming the first person to purchase such insurance.
The smart man Weinert (a trader at Deutsche Bank who was not successful at the time) overheard the news, thought it was indeed an opportunity, and decided to profit from it.
So I called around to sell this idea. When 8% of mortgage loans are in default, the entire system collapses.
There were too many people who rejected him. When a fake false call came to Mark Baum's fund company, Mark caught the point.
? "Someone is shorting the real estate market."
So he made an appointment with Weinette and listened to his opinions. However, he did not blindly follow him and buy immediately. Instead, he went to a small town in the south to investigate.
Bubbles, bubbles everywhere.
Mortgage brokers try their best to issue mortgages to people with unqualified credit scores because the high commission allows them to drive a BMW 7 Series; homeowners who collect rent on time each month let their mortgages last more than 90 days Failure to pay after due date.
On the way to the end of the inspection, Mark’s fund also came on board immediately.
Two young people who opened a fund company in a garage accidentally got the news that someone was shorting the real estate market. After analysis, they determined that it was an opportunity, so they invited their neighbor Ben Hockett (a retired banker) to join in and join the game.
Their highlight is that they made a very smart decision to bet on high-grade real estate securities with low premiums and affordable prices. Since the collapse of the bottom layer will inevitably lead to the collapse of the upper layer, whoever buys will win. At this point, neither Barry nor Mark were as ruthless as them.
Everyone is on board, and all that is left is waiting, a long and painful wait. Medium in expectations, medium in disappointment, medium in doubt. Waited for two whole years.
The real estate default rate has increased a lot, but the security prices have remained unchanged. Doubts always accompany them. What kind of torment it is. On the one hand, they hope that they will win, but on the other hand, they are betting on the economic collapse of the United States. If the bet wins, how many people will suffer losses.
Wait and take action?
Ben and his two young neighbors used their own capital and assumed less pressure. They did not doubt their judgment, but were anxious. Wait, take action when the boat is about to leak, and make a profit. (This cool, stylish chief trader---was originally played by Brad Pitt.)
Mark's fund continues to bear the burden of money from parent company Morgan Stanley. There was pressure on them to sell, and there were internal disagreements and disputes. Fortunately, Mark is a perseverant person who sticks to his guns and is the last big deal to be made.
His sadness comes from the fact that he recognized the essence of the matter but was unable to do anything. Were the risks of these financial derivatives not discovered by the higher-ups? Not necessarily, they just don't care. Because, in the end, ordinary taxpayers will foot the bill.
From 2005 to 2007, the profit of Michael Barry's fund dropped from +18.9% when he bought the insurance to as low as -19.8%. In 2007, when he liquidated his position, the profit was +489%.
His journey was too painful. Investors were suspicious, ridiculed, threatened, and sued one after another. In order to keep the core insurance part, he had to use his privileges and not allow investors to withdraw their capital.
After the subprime mortgage crisis, Barry closed the fund. For the sake of a winning deal, he felt that he had lost too many beautiful things in his life.
His admired mentor and investor only spoke to him through a lawyer. He should also be deeply disappointed with human nature. Why can't he trust him more and bear more responsibility in the tortuous journey.
Facts have proved that his judgment was completely correct.
?
Don’t say I have a sharp eye
I am just like the foolish old man who moved mountains
Read every piece of data< /p>
Don’t say anything about the iron heart
The facts wrapped in the gorgeous data
It also stands in front of you and me
Driven by interests< /p>
How many people prefer magnificence
But I see the truth
Don’t just see the victory after the smoke and fire
From the time of sale to clearance Waiting
Pressure from all sides with the power of a tsunami
Almost crushed me
Questioning doubts? Ridiculing and threatening
All I have is Holding a firm sword to resist
I just look for opportunities from the data
I have no intention of uncovering the darkness of the system
Predictions that are contrary to reality
Cannot bring support, understanding and praise
Under the rubble of financial collapse
Carrying a pot of gold
Walking on the edge of collapse ? Exhausted physically and mentally
This is not the world I want to see
The greed of the upper class
But the common people pay for it
My first A man who shorted subprime mortgage bonds
accidentally went down in history
------This article only pays tribute to Dr. Michael Barry, the man who was short-selling subprime mortgage bonds before the subprime mortgage crisis. Everyone is drunk, but I am a sober fund manager
There is no market that rises and falls straight away. This is true for stocks, and it is also true for real estate.
The reason why risk can turn into danger is because she wears a gorgeous coat and has a charming smile. She stays with us, laughs with you, and enjoys the easy and high profits. The seemingly endless feast of gourmet food will give you a fatal blow when your mind is most relaxed.
The same is true for risks in the economic field, and so are the risks in nature.
The final outcome of the five major investment banks in the United States:
Lehman Brothers (the fourth largest investment bank in the United States) went bankrupt,
Bear Stearns (the fifth largest investment bank in the United States) ) was on the verge of bankruptcy, and was acquired by JPMorgan Chase through the mediation of the Federal Reserve
Merrill Lynch (the third largest investment bank in the United States) was acquired by Bank of America
The top two investment banks, Goldman Sachs and Morgan Stanley, became Bank holding company.
AIG, the largest insurance company in the United States, suffered serious losses and was finally capitalized and nationalized by the Federal Reserve.
Danger is right in front of us, but people often choose to turn a blind eye