Chapter 2743 Buying at the Bottom

If you are talking to your own people, then it is not good to be cool and cool. "After Fannie and Freddie are taken over, among the remaining four major investment banks on Wall Street, Merrill Lynch and Lehman, which are less powerful, will be under great pressure. ,"

Teacher Zhou immediately asked, "Do you think they can withstand such pressure?"

"It's difficult," Feng Yiping said. "Perhaps finding a bank to acquire them is their best outcome."

After all, the reason why these guys on Wall Street are so embarrassed now is that apart from the fact that they have developed so many derivatives that even they themselves can't figure out, the most fatal thing is still high leverage.

Like Lehman, due to the write-downs suffered from various losses, they have used the equivalent of US$10 billion in net assets to support US$690 billion in assets.

By analogy, it can be seen as a person with only 1 million, setting up a factory, and then very wildly accepting a large order of 69 million.

Because he has carefully calculated that he can get a loan from the bank with his 1 million as collateral - if you are smart, if you play multiple mortgages a few times, you can get several loans.

Secondly, you can borrow it from a friend.

Finally, we need to agree with each supplier on a relatively long accounting period, such as 3 months.

Stimulated by his large order of 69 million, many suppliers will finally agree to his request - which is equivalent to all suppliers providing him with a free fund that can be used for three months.

In the end, when he added it up, yo, the available funds were very sufficient. While running the factory smoothly, he could also buy himself a luxury car that made people look awe-inspiring at first sight - just like those private jets of Lehman Brothers.

Yes, Lehman Brothers has more than one private jet. They have a total of 6 aircraft, including a Boeing 767 large passenger jet, plus a helicopter for short-distance travel. It can be called a fleet.

This kind of calculation is very good. If it goes well, it is also feasible. It can completely complete the big order of 69 million yuan smoothly.

However, such a tight capital chain cannot tolerate any fluctuations. If an investor withdraws his capital midway, for example, even a very humble 500,000 yuan, it may jeopardize the operation of the factory.

Of course, with 500,000, he can still think of a way to dispose of the luxury car - that is, selling off assets and reducing the numerator of the leverage ratio to reduce the leverage.

Then, there is a supplier who has problems in its own operation and has lost a part of its capital chain. Don't panic. You can also think of a way to transfer part of the benefits that will be obtained in the end, that is, give the factory Selling part of the shares and recruiting people into partnership - this is selling equity financing and increasing the denominator of the leverage ratio to reduce leverage.

But he was so unlucky that he encountered a financial crisis. All suppliers had to collect funds to save themselves. Now, even if he sold himself, he could not complete the big order.

But he still has a chance, for example, to find a stronger company, you are not short of money, we have a well-functioning factory, and a big order with very good expected returns - this is the last resort, sugar daddy, looking for acquisition .

For Lehman and Merrill Lynch, the first two methods are useless. Assets, no matter what, who wants those toxic assets?

As for equity financing, with the precedents of Bear Stearns and Fannie and Freddie, who would dare to buy your equity?

Therefore, they have only one last option left, which is to seek acquisition.

"Being acquired," Teacher Zhou thought for a moment, "will it go smoothly?"

"If the U.S. government could guarantee their mortgage assets like Bear Stearns did, it would still be possible to get a suitable deal,"

"But now I feel that the one that cannot withstand it first will be used as a flag sacrifice by the U.S. government,"

Teacher Zhou said, "Then it's Lehman,"

Lehman is known to have bigger problems than Merrill Lynch. Just last year, like Blackstone, they spent a total of tens of billions of dollars to acquire a large number of commercial real estate just when housing prices were at a high price, including a high price of $22.2 billion. Axton Trust, the nation’s second-largest developer of high-end apartments.

How high is the leverage? They only contributed $250 million themselves.

Including Axton and other real estate projects, housing prices have generally fallen before they made much money. Therefore, Lehman, which focuses on commercial real estate and has also grown up with commercial real estate, is finally suffering.

"I also think it will be Lehman," Feng Yiping said.

"Considering the relationship between Lehman and Goldman Sachs..." Teacher Zhou suddenly laughed, "Haha, this is not surprising,"

Being able to say such things to Feng Yiping shows that Teacher Zhou really does not regard Feng Yiping as an outsider.

As for the meaning of Teacher Zhou's words, everyone in the industry, including Fuld, who must be in a panic at this time, also knows.

"Yeah, I think, at this very moment, Paulson also needs to express his attitude,"

"Haha," Teacher Zhou laughed again, "Yiping, when it comes to politics, I think many domestic business leaders do not understand it as deeply as you do."

Feng Yiping understood why Teacher Zhou praised himself so much, "In the United States, it's impossible not to pay attention to these things,"

"That's why you have always been so steady," Teacher Zhou said. "Do you have any specific suggestions about our investment... Otherwise, I ask them to ask you directly for advice?"

He didn't ask which Wall Street company to invest in, because their previous communication had actually excluded Lehman and Merrill Lynch, and the remaining ones were only Goldman Sachs and Morgan Stanley.

Considering that if it weren't for Feng Yiping's report, we almost invested in Morgan Stanley at the end of last year, then Morgan Stanley is naturally more likely.

Morgan Stanley at this time also needs more funds.

"No," Feng Yiping refused quickly.

Talking to Teacher Zhou about these things is considered communication, but if Teacher Zhou asked other people to call, it would be asking people to ask for advice.

Feng Yiping estimated that the caller would not be very happy.

"Everyone should know what to do at this time, and I don't have any suggestions, but we must try to make the term of the transaction price reset clause as long as possible, at least one year,"

The transaction price reset is a right that wealth sovereign funds generally require when investing.

For example, after they invest in a company, if within a certain period of time, assuming it is within a year, the company sells its shares again, and the transaction price is lower than the price when they invested-that is, the stock price has fallen sharply, then they have the right to adjust the original transaction according to the new price.

This undoubtedly avoids large losses after investment.

When we invested in Morgan Stanley, those guys just forgot this one point, and as a result, they lost a lot within a year.

"Also, considering the subsequent development, I suggest that the shares we hold should not be forcibly converted into common shares after expiration,"

"What do you mean?" Teacher Zhou was silent for a while, "They may become commercial banks?"

It's easy to talk to people who know the business, "Yes, I think this possibility is not ruled out,"

Goldman Sachs and Morgan Stanley are now not regulated by the Federal Reserve because they are investment banks, but they will be regulated by the Federal Reserve after they become commercial banks.

Holding 10% of the shares is the regulatory red line of the Federal Reserve. If it exceeds 10%, it will be very difficult to get the approval of the Federal Reserve.

In that case, if the shares converted into stocks exceed 10%, the best way is to sell more than 10%. Considering that the stock price may not have recovered at that time, it is equivalent to cutting losses.

Even if it is a partial loss, any form of loss will be frustrating for investments made with the intention of bottom-fishing.

"I will just repeat these two points that everyone knows," said Feng Yiping.

"Yiping, you are too modest. Thank you for your reminder."

At this time, Mr. Zhou was very impressed by the vision of this student who he had not met much at school. They had never thought of the second point mentioned by Feng Yiping.

This vision is really far-sighted.

"Also, I don't know what arrangements you have now, but if there is anything we can help, just tell us. You are the most grateful person in the domestic financial system now."

That's because Feng Yiping's report has helped many financial institutions avoid huge losses.

Not long after finishing the call with Mr. Zhou, Marika just snuggled into Feng Yiping's arms, and his phone rang again. The caller was from CIC, "Mr. Feng, thank you very much for your advice, and thank you very much for your report last year, which successfully helped us avoid huge losses."

At the end of last year, they and Morgan Stanley agreed to a 10% investment of US$5.6 billion, equivalent to US$50 per share.

And Morgan Stanley's current stock price is less than half of US$50. When they think about it now, they are also sweating.

"We warmly welcome you to come to the company to guide our work when it is convenient for you,"

This attitude is also humble enough.

Feng Yiping was also in a good mood because he successfully helped us avoid huge losses. "I wish you success in bargain hunting."