Chapter 531 The Koch Family
As early as January this year, HSBC Holdings first increased its reserve amount for subprime mortgage loans in the United States and issued a warning that it might significantly increase its reserves.
Then on February 13, New Century Financial issued a fourth-quarter profit warning.
The next day, New Century Financial's stock fell 36%, and the subprime loan index ABX fell 5 points.
The market felt the chill of subprime loans for the first time.
In March, HSBC Holdings announced its performance and increased its reserve amount for subprime mortgage loans in the United States by US$7 billion, a total of US$10.573 billion, an increase of 33.6%!
As soon as the news came out, the stock market plummeted that day, with the Hang Seng Index falling 777 points, a drop of 4%!
On April 2, New Century Financial, the second largest subprime mortgage company in the United States, filed for bankruptcy protection.
"With the collapse of New Century Financial, the subprime bond market has been hit hard, and our profits are continuing to rise..."
In fact, the Black Swan Fund's profits from shorting New Century Financial's stock price alone exceeded $1.5 billion!
On March 14, New Century Financial was ordered to suspend trading. It should be noted that in the short two months from January 11 to March 14 before the suspension, their stock price had fallen from a high of $32.06 to only 67 cents.
The bankruptcy of New Century Financial was also a reluctant move after it faced a debt of nearly $15 billion from Wall Street.
It can be said that although New Century Financial has declared bankruptcy, the losses it has caused to related financial institutions still exist, just like the first domino to fall, and there will be chain reactions in the future.
In fact, the impact of the subprime mortgage crisis is gradually expanding and spreading.
In February of this year, it was just the initial signs, and it cannot even be called the arrival of the crisis.
At that time, in addition to the Black Swan Fund, there were also some small and medium-sized funds including the Paulson Hedge Fund, which had already held bets and waited for the crisis to come...
The key is that other funds, unlike Barron, did not know the evolution of the subprime mortgage crisis and the key time nodes - many of them had already noticed the unhealthy state of the mortgage market before 2006, so they entered the market earlier than the Black Swan Fund - for example, the Paulson Hedge Fund began to build positions in early July last year.
What they didn't expect was that the market's reaction was so "sluggish" that they didn't even see a large-scale price drop until the subprime mortgage debt market had problems in February.
Therefore, many short-selling funds had to sell some of their tightly held chips in order to reduce their holdings, including the Paulson Hedge Fund - there is no doubt that most of these released chips were taken by the Black Swan Fund.
The Black Swan Fund's short-selling strategy for the subprime mortgage crisis is divided into several stages according to the process of its transmission.
In the initial stage, the main focus was on subprime loan claims, including shorting CDO and absorbing CDS, as well as shorting related subprime loan issuers...
When this stage began to enter the harvest period, shorting related banks and financial institutions began...
After that, it was natural to short the entire stock market.
The spread of the entire subprime mortgage crisis was almost like this.
Just after New Century Financial Corporation declared bankruptcy, in April, most people in the market did not realize that this incident would cause a disaster to the entire financial system, nor did they realize its destructiveness to those investment banks. They just thought that the real estate industry and related financial institutions had risks.
When the destructive power of the subprime mortgage crisis was transmitted to the financial system, investment banks continued to find huge losses, which would lead to the depletion of liquidity in the market, so in the next stage, the stock market would have problems.
Similarly, the subprime mortgage crisis in the United States, because of the large-scale investment of institutions and investors in Europe, Japan, South Korea and other countries, also transmitted the financial crisis to these developed countries.
In these countries, the destructive power of financial institutions to the stock market was also transmitted.
When developed countries are in deep crisis, in order to stabilize the market, they need to withdraw funds and investments from other countries, so those countries are also affected, and the debt crisis of many countries breaks out.
Therefore, it is not surprising that when Barron attended this high-end cocktail party in Los Angeles, he saw that the bigwigs looked relaxed and the hall was full of laughter.
"I heard that you set up Murdoch in England..."
The old man who came over to talk to Barron was named Charles Koch.
Speaking of this name, many people may not have an impression, but if you say Koch brothers or Koch Industries, then you may have heard of it.
"It's a little inaccurate, Mr. Koch, I just did some business with Mr. Murdoch."
It seems that Charles Koch did not agree with Barron's answer. He shook his head and said:
"It's just a face-saving statement for him. We all know what's going on."
It can be seen that Charles Koch and Murdoch don't get along very well.
In lists like the Forbes Rich List or the Global 500, the names of the Koch brothers or Koch Industries are rarely seen.
But it doesn't mean that they are not rich enough or strong enough, but because Koch Industries, like DS Group, is a private non-listed company and does not publish its financial statements.
Of course, because DS Group has too many external investments, its size can still be roughly estimated by the number of shares held - but after Barron injected some assets into private equity funds such as Caesar Fund and Global Industrial Investment Fund, his personal wealth in DS Group has become more and more a mystery.
The wealth and influence of the Koch family should not be underestimated. The Koch Industries Group, which it controls, is involved in many fields such as oil and gas transportation, foreign trade, agriculture, forestry, animal husbandry and finance, and has developed into one of the world's largest private enterprises.
If we list the titles of Koch Industries, it is --
The world's largest petroleum coke trader;
The world's largest asphalt supplier;
The world's largest feed production group;
One of the world's largest refinery equipment manufacturers, producing various chemical production equipment;
One of the world's largest crude oil traders, with an annual crude oil trading volume of more than 700 million tons...
And --
The largest liquefied petroleum gas processing group in North America, accounting for 25% of the total North American market;
The largest pipeline transporter in North America, with the longest petrochemical product pipeline in North America;
The sixth largest power supplier in the United States, with power supply business covering all 50 states in the United States...
Last year, in 2006, Koch Industries once announced operating data, and its sales revenue exceeded 100 billion US dollars that year.
In fact, the Koch family, which originated from Dutch immigrants, is an important part of the American Ansa consortium, and the Koch brothers are keen on politics and are very influential in the United States.
In general, Barron has no conflict of interest with the Koch family, so he doesn't mind establishing some friendship with them.
It now seemed that Charles Koch had a new regard for Barron, and the two soon began chatting.