City Start Striving for Becoming a Rich Man

Chapter 703

“The picture shown on the blackboard can explain CDO well.”

“We can see that in products with no credit rating, we can further pack and slice to form the square of the CDS. In this way, the loan company can pick up new gold from the garbage in the garbage. Natural loan company You can continue to do this, and you can dig out gold from the rubbish in the rubbish.”

“But one thing is very important. AAA-level products and AAA-level products are also different. The risk of AAA-level slices in the CDO square is higher than the AAA-level slices in the original CDO, and the AAA-level slice risk in the CDO cubic It is also higher than the AAA slice in the CDO square.”

“The reason is very simple, because the’waterfall’ makes CDO’s AAA slices safer first, followed by the AAA slices in the CDO square, and so on. It can be said that the more frequently you pack, the risk of the AAA products you get The bigger, even though they are all AAA products.”

“Another very important point is that when the crisis comes, the association of CDO’s internal assets will increase sharply, which will lead to greater risks. Before the crisis, the risk of such associations was largely absent. emphasized.”

“In this way, the loan company created AAA-rated assets that investors rushed to buy, and successfully packaged and sold subprime loans.”

“CDS is a product similar to insurance. If you are worried that your counterparty A will default, you go to broker B to buy a CDS. Then, when A defaults, part of the loss caused by the default will be paid to you by B. ”

“And all you need to do is, if A does not default, you have to continue to pay B a part of the fixed capital at regular intervals, similar to insurance premiums.”

“Because of this characteristic, once a default event occurs, CDS is actually fueling the default to a large extent, because a company that sells CDS products will have to pay a huge amount of liquidated damages due to the default of various companies, and even It will cause your own breach of contract.”

“I have finished talking about the subprime mortgage, so let me now talk about why I wrote the subprime mortgage crisis on the blackboard just now.-”

“Until the second half of last year, the low interest rate period of many subprime loans expired. Subprime loan lenders are faced with the next high loan repayment amount. In this way, the first batch of loans unable to repay the loan is the Appeared.”

“What about the loan company? The method of the loan company is to confiscate the mortgaged property of the lender and sell it on the market to make up for their losses.

“And what are the consequences of doing this?”

“House prices have plummeted.” A student said below.

“Yes, the balance of supply and demand was broken, resulting in a rapid decline in housing prices.”

“Then it’s the turn to play without recourse!”

“Because of the fall in housing prices, many people who are new to mortgages suddenly discovered that my house is now worthless. Why should I pay a loan that is higher than the value of my house?”

“So they refused to pay the loan, and the second batch of loan defaults occurred. In this way, their houses were also liquidated as collateral and sold on the market, adding to the already sluggish housing market.(Read more @ wuxiax.com)

“Such a vicious circle has led to a great crisis in the payment of subprime loans and a sharp drop in housing prices.”

“At this time, mortgage companies are facing huge difficulties. Because of this, the price of CDOs plummeted, and the CDOs that mortgage companies tried to sell to investors no longer achieved the previous success.”

“As you can imagine, what will happen next?”

“Many mortgage companies and companies that have been misled by credit ratings to invest in CDO products will go bankrupt accordingly. In the bankrupted company, there may be a big investment bank Lehman!”

“Well, about the content of the subprime mortgage crisis, I will say here. Because this thing has not happened yet, if I say too much, some people may think that I am here as a magic stick to predict the future.”

“Teacher, please tell me again, if the subprime mortgage crisis, what kind of consequences will it cause, and how will the American House deal with it?”

Li Lian stood up and asked.

“Regarding the consequences, the subprime mortgage crisis will cause the collapse of the U.S. stock indexes and spread to the world. Regarding the response of American House, they will prohibit naked short selling, so that the domestic impact of American will not be affected. out of control.”

Naked short selling refers to an investment method in which investors directly sell non-existent stocks in the market without borrowing stocks, and then buy back stocks to obtain profits when the stock price drops further.

Traders who conduct naked short selling only need to buy stocks before the delivery date, and the transaction will be successful.

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Since naked short selling sells non-existent stocks, the volume may be very large, so it will have a severe impact on the stock price.

“Then how much impact will the subprime mortgage crisis have on my country’s housing market and stock market?”

“The impact of the housing market should be small. This is related to our domestic loan mechanism and land sales price. As for the deeper reasons. Everyone can think about it and think about the impact of the housing market on my country.”

“The stock market will definitely have a certain impact, but the impact should not be big. What will really suffer a loss is my country’s Zhengfu’s investment of more than 300 billion in the Emerican real estate market.”

“In fact, the biggest impact on our country is our exports. The subprime mortgage crisis will cause a slowdown in the American economy and global economic growth. The impact on our country’s economy cannot be ignored.”

……. …….

“The impact of export business will put tremendous pressure on the real economy, especially the industry. There will be a large number of small and medium-sized processing enterprises closing down, which will also exacerbate the severe situation of unemployment.”

“In the end, it will increase our exchange rate risk and capital market risk. In order to deal with the negative impact of the subprime mortgage crisis, American estimates that it will adopt a relatively loose monetary policy and a weaker U.S. dollar exchange rate policy.”

“The U.S. dollar will depreciate drastically, which means that our currency will appreciate drastically. And the risks that currency appreciation will bring, shouldn’t I need to say?”

This question is just a very basic question. If anyone who studies economics doesn’t even know this, then he really doesn’t know how to learn.

“Well, this class will preach here. After everyone goes back, you can start your own thinking. The time of the next class will change, and the specific time is to be determined.”

“In the next class, I will give you a practical lesson, and I will let you watch a speculative operation on the futures market.”

boom!

As soon as Ni Shixiao finished speaking, there was a loud discussion underneath.

“Wow! It’s actually looking at futures operations, great, I haven’t seen actual combat yet.”

“Dry goods! Full of dry goods, I am really looking forward to it. I really hope that this day will come soon.”

“In the futures market, I don’t know which product Mr. Ni will operate on.”

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It can be seen that the students are looking forward to the next class! versus.

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