Chapter 2688 Good Idea

Facing his subordinates looking into his eyes, Feng Yiping thought for a moment before saying, "Everyone's analysis just now is very accurate and correct, but I have to say that until now, no one has realized how bad the situation will be next."

Several major commercial banks are now facing huge risks, and at least one or two of the remaining four major investment banks are also facing great risks. Private equity will also have a harder time... Isn't this bad enough?

"We all know that this subprime mortgage crisis originated from Wall Street, so everyone focuses on Wall Street,"

"Because, for example, the most recent crisis that everyone has experienced, the Internet bubble that began in 2000, so many high-tech companies went bankrupt, but the biggest impact was mainly Silicon Valley,"

"That crisis actually only had an indirect impact on the banking industry and the real economy. The company went bankrupt and the shareholders lost everything, and the companies in other industries were still thriving,"

"We all know that at that time in Silicon Valley, real estate was still appreciating,"

"But everyone, this crisis is completely different from the Internet bubble,"

"The essence of this crisis is the result of Wall Street's neglect of risk control and their wrong confidence in the real estate market, or in other words, they have no judgment at all, but just follow the crowd and put "It is a fact that housing prices will continue to rise,"

"Based on this false fact, in the actual operation process, blindly use high leverage to carry out hedging operations..."

"But is Wall Street the only one doing this?" Feng Yiping asked, "No, in fact, the entire US financial market has a trend of hedge fundization,"

"Think about it, it's not just banks and investment banks, nor is it just private equity, from people who borrow subprime loans to buy houses, to government agencies that rely on related derivatives to reduce interest to relatively increase income... More and more market participants are playing the game of leveraged trading in some form,"

"From the perspective of the entire national economy, we can even say that the United States is a huge hedge fund,"

This is the first time that everyone has heard such a view, and because this view is quite bold, it has caused a whisper.

"As we all know, overseas investors own a large number of U.S. assets, and the United States also has a large number of investments overseas,"

"The difference is that about two-thirds of foreign investment in the United States is debt, such as U.S. Treasury bonds held by China; while two-thirds of U.S. investment overseas is equity, such as General Motors, Ford, Microsoft, Google... Most U.S. companies' investments in China are equity,"

"That is, the United States has been using low-interest capital from other countries to develop its own businesses. Isn't this the model of hedge funds?"

This can be said to be what Feng Yiping envied the most about the United States.

Think about us, how difficult was it to use some foreign capital in the past few decades?

That is, the situation has improved slightly in recent years, so the country's control over foreign exchange has been relaxed, but the United States, as long as it prints some Treasury bonds, will immediately have a lot of funds delivered to them.

It seems that there are still a few points of return, but just like we have kept our money in the bank over the years, the interest has always been unable to keep up with inflation, how can the few points of return on U.S. Treasury bonds withstand the Fed's frequent quantitative easing?

Of course, the good things cannot be taken by the United States. Just like more traditional banks are more stable and diversified banks are the most panicked when facing subprime loans, the United States will also panic when encountering such a thing.

"And we know that the common weakness of all leveraged investments is that when liquidity ebbs, their capital chain will be affected at the same time, that is, the United States is now very short of money,"

"The essence of the subprime crisis is a debt crisis, and there are problems with the repayment of those subprime loans. How big will this problem be?"

No one can answer this question, probably because they all think that the relevant data should exceed their imagination.

"In the United States, the total amount of residential mortgages is about 10 trillion US dollars, and the value of the properties used as collateral, at the peak before, generally did not exceed 130% of the loan amount. Now house prices have plummeted, repayment default rates have soared, and the potential credit losses of problematic mortgages,"

Feng Yiping paused, "It should have exceeded 1 trillion US dollars,"

He said it easily, and many people present sweated all of a sudden, 1 trillion US dollars?

John quickly estimated that the total market value of the five major investment banks on Wall Street, plus the major commercial banks, was only about one trillion US dollars.

Tsk!

But that's not the end.

"Don't forget that the recession must have led to other credit losses," Feng Yiping added faintly.

"I estimate that the accumulated holes in the entire US financial system are estimated to be trillions of dollars,"

"Such a huge loss is not enough to fill the entire Wall Street, so this time is different from the Internet bubble a few years ago. The shareholders of some financial institutions will not lose enough money, and creditors are likely to suffer some losses,"

He waved his hand, "The ending of Bear Stearns, stock investors almost lost everything, while debt investors were able to get out of it unscathed. I think it's hard to happen again,"

"The Federal Reserve can save one Bear Stearns, but it may not be able to save the second or third Wall Street," he shook his head, "Next, I estimate it will be a bloody storm,"

"And this crisis will no longer be a subprime mortgage crisis, but will escalate into a financial crisis," Feng Yiping asserted again.

"So, what is most needed to get through this crisis safely?" He asked everyone with a smile.

"Money!" shouted more than one person.

"That's right," Feng Yiping stretched out his hand and made a gesture of counting money, "that's money, lots of dollars,"

"And the good news is, haha, we happen to have no shortage of money,"

"Not only are we not short of money, we also have sufficient funds to look for opportunities,"

Many people laughed, and some even clapped.

At this moment, this is really good news for everyone to rejoice.

Speaking of which, like the situation in all high-tech parks in Silicon Valley, in NEXTDOOR Park, employees in the business sector are always lower than the engineers.

But in the face of such an opportunity, those guys who dress casually, are relatively taciturn, but are actually very proud, have no place to use, and this is a good opportunity for them to show their abilities.

"Therefore, at times like this, we don't have to rush and have more patience, because in the end, we will get better conditions,"

"Make good use of the current opportunity and make more preparations. Believe me, we will definitely have a bumper harvest this autumn,"

"Yeah!" The crowd was instantly excited.

Feng Yiping felt that if some of them were released at this time, they would dare to run up to any big boss on Wall Street and say, "Hey, do you want to sell your company?"

…………

Feng Yiping left Cummins and John behind and asked straight to the point, "After listening to your analysis just now, if the situation worsens further, will we encounter less resistance in acquiring Hilton?"

Although this acquisition will be initiated by Goldman Sachs in the future, it is only to make things smoother, and the main opinions must be taken by themselves.

Feng Yiping believes that Blackstone, which only acquired Hilton in July last year, will not be willing to change hands so quickly.

He originally hoped that Goldman Sachs and the others would cooperate and force him, but if they didn't use it, that would be for the best. Goldman Sachs and the others were not owed any favors.

Cummins glanced at John, who smiled and gestured to him.

"I think there's a possibility that Blackstone, which is desperate for cash, will be more welcoming to a deal like this that leaves them with a significant burden on their assets," Cummins said.

This means that confidence is still somewhat lacking.

It seems that he also knows that Blackstone will not change hands of Hilton easily.

Seeing that he had nothing to add, John said, "Feng, are our funds really sufficient?"

Feng Yiping thought about Li Ruiyuan for a while, nodded and said, "It's enough."

"In this case, I wonder if we can acquire Hilton and at the same time express our willingness to acquire some of EOP's properties from Blackstone?"

"We know that Blackstone's remaining EOP properties also occupy more than 10 billion US dollars of their funds, and now, obviously no one is willing to acquire the properties,"

Feng Yiping's eyes lit up. This was an idea that should make Blackstone interested, thus reducing the difficulty of the acquisition.

The question is whether those properties purchased now will result in losses in the future.

And that's not a problem. After next year, when the economy picks up, the office buildings held by EOP will naturally appreciate in value.

"Not bad," Feng Yiping patted him on the shoulder, "Haha, that's what we'll do!"