Chapter 1362: Crysis

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Excellent model steps are very pleasing to the eye, especially at present, the fashion circle has not yet been occupied by all kinds of Internet celebrity second-generation it girls who can only "walk".

Inside elite's training base.

Simon enjoyed an instant performance, but didn't stay too long, and quickly left with Grace, leaving behind a group of extremely disappointed girls from all over the world.

Still affected by Simon, the big butterfly, the fashion circle has changed beyond recognition.

Just like this time, except for the two Korean models Shin Chae-hye and Jeon Woo-jin who had been arranged in advance, they were also the ones who had never made their mark in history, and Simon didn't know anything else. The only thing is a young face with a thin waist and long legs, which is pleasing to the eye.

Leaving Brooklyn, Simon and Grace flew to a shooting range in Greenwich by helicopter.

I haven't played with big guns for a long time, and spent the rest of the afternoon happily emptying out more than a dozen magazines.

Grace accompanied the whole process, watching her little man standing in the shooting range with an exaggerated Barrett on his shoulders, he was dazzled, and at a certain moment, he felt self-destructive and wanted to run to be his It's great that the target just disappears like that.

Stay overnight at the manor in the northern suburbs of Greenwich.

Guests are invited to have dinner tonight, the b-girl couple, and John Meriwether, the head of the long-term capital management company where b-girl's husband Mark Sinner works.

As the Alia company quickly competed with Bloomberg and showed an overtaking posture, the alia software has also become an important information dissemination tool for the Westeros system to influence international financial trends. In fact, it is equivalent to the right to speak in finance, which is very important. Keep an eye on the mess of girl b.

However, today's dinner topic is not Aaliyah, but Long-Term Capital Management.

Some time ago, Simon asked Girl A to collect data on hedging positions of bonds in various mainstream countries, which was the basis for the topic of this dinner.

First, let's talk about the operating methods of Long-Term Capital Management.

This is a financial transaction model created by John Meriwether during his time at Salomon Brothers. It once contributed more than half of Salomon Brothers' profits. Later, Salomon Brothers collapsed due to the national debt scandal. Meriwether's team was not affected, but left an independent portal , established Long-Term Capital Management.

Its main method of operation is to use the difference in interest fluctuations of bonds of various countries in different periods to conduct gambling games.

The core is still the zero-sum game of futures versus bets.

The professional model is of course very complicated, but in the simplest terms, for example, the United States issues a batch of 10-year treasury bonds with a coupon rate of 8% per annum. Due to the difference in the international financial environment, after the bond is issued, the actual transaction process may not necessarily be 8%, maybe 7%, or 9%. Of course, this is just for the convenience of examples. Low, maybe only 0.01%.

Long-Term Capital Management used this position to bet against others. I am optimistic that the interest rate of this batch of US Treasury bonds will rise from 8% to 9% in three months, so I established a bullish position, which is probably the case.

However, because the fluctuation ratio of bond interest rates is very, very low, the kind of 0.01%, if you want to get enough income, you need to use more than 100 times leverage to establish a very large position.

According to the data recently collected by Simon, Long-Term Capital Management currently holds a spread hedging position of more than 300 billion U.S. dollars, while the principal used by Long-Term Capital Management is only 2 billion U.S. dollars, which is more than 150 times leverage.

If it was ten years ago, even five years ago, this matter would not have much to do with Simon.

It's different now.

As the scale of the Westeros system becomes larger and larger, the correlation between the entire Westeros system and the global economic trend becomes stronger and stronger.

Therefore, Simon does not want to see a large-scale systemic financial risk that may affect the Westeros system.

How did the once-long-term capital management company almost trigger the global financial tsunami?

very simple.

Probably in the second half of 1998, the Asian financial turmoil spread to the whole world, and the attention turned to Russia. With its economy in jeopardy, it had to seek help from the imf like many Asian countries.

At this critical point in time, Long-Term Capital Management believes that according to the usual practice, Russia will definitely reach a rescue agreement with the imf. The worst case involves the national sovereign credit. Even if Russia sells iron, it will not allow its own national debt to default.

Now that the direction has been determined, Long-Term Capital Management decisively chose to be bullish when interest rates plummeted due to systemic panic, and used ultra-high leverage to establish positions of hundreds of billions of dollars.

As a result, everyone knows.

Russia suddenly turned the table, stopped playing, allowed the ruble to depreciate, actively defaulted on its national debt, and closed the trading market.

As a result, not only Russia's domestic bonds, but also Europe, Latin America and Southeast Asia were devastated, and fell across the board. The extreme market directly led to the breakdown of Long-Term Capital Management's positions.

The foundation of the international financial market is based on the national credit established by the country behind it for a hundred years. Winning or losing must be honored. If it cannot be honored, the credit will collapse, and the entire financial system will be wiped out. Therefore, under extreme market conditions, huge losses will be the first Swallow the trader itself, and then the exchange platform where the position is located. If the exchange capital is also exhausted, if the international financial system does not want to collapse, the country needs to rescue it.

198

In the 7-year stock market crash, the federal government mobilized large sums of money to rescue the Chicago Board of Trade overnight.

In the subprime mortgage crisis in 2008, the same extreme market conditions, in order to avoid the collapse of the financial system, the US government even poured hundreds of billions of dollars into the mess left by the huge positions on Wall Street to make up for the hole.

In between, the Long Term Capital Management crisis of 1998, as well.

Even if it is only based on the current position of Long-Term Capital Management, a leverage of 150 times can support a fluctuation of 0.67% in bond spreads at most. Under normal circumstances, fluctuations of 0.01% will not cause a liquidation. However, Mao Xiong turned the table This extreme market directly caused the fluctuation of international bond interest rates to exceed 1% in the short term, and a liquidation was inevitable.

Inside the manor restaurant in the northern suburbs of Greenwich.

John Merriwether originally thought that Simon, like those rich people who have been flocking to Long-Term Capital Management in recent years, wanted to invest money in his own company, and he was unavoidably complacent. Unexpectedly, when they were chatting, the other party's topic was Turn to things that allow him to compress the company's position to avoid extreme market conditions.

Even with the decline of Salomon Brothers, John Merriwether has not experienced any setbacks in recent years, including the 87 stock market crash that year. Not only did they not lose money, but they made money from it.

Therefore, even in front of Simon Westeros, who has trillions of dollars in assets and once had amazing performance in the field of hedging, John Meriwether, who believes that his own model is absolutely infallible, is still very upset: "Simon, maybe you are not too Understand our model, heh, speaking of it, there are definitely not many people who can understand our model, and this was formulated with the participation of two Nobel Prize winners, I think your worries are a bit unnecessary."

Simon has patiently explained his worries just now. Seeing John Merriweather like this, he is not angry. He stands too high and looks down on all sentient beings. It is difficult for him to have strong emotional fluctuations on too many things now. Hearing the words, he just said: "John, frankly speaking, how your company operates has nothing to do with me. If the operation of Long-term Capital Management Company is limited to itself, I will not bother at all, but your position is too large, and the current international financial form is always Extreme fluctuations may occur, which may lead to a systemic financial tsunami, so you'd better seriously consider my suggestion, reduce your leverage ratio to less than 50 times as soon as possible, and the position size should not exceed 100 billion U.S. dollars."

Simon's tone was still calm, even if he was still a little reluctant in his heart, John Merriweather would not be so stupid as to turn his face against Westeros, and finally nodded: "Okay, Simon, I will seriously consider it."

Simon continued, taking it for granted in his tone: "It's not about thinking, John, if you don't respond, then I will respond for you, just a few phone calls."

Now Meriwether's expression was a little ugly.

Girl B and her husband Mark Hill looked at each other, but did not intervene tactfully.

Simon's attitude was still calm, but the so-called "a few phone calls" sounded like a thunderbolt to Meriwether and the others.

very simple.

Drain from the bottom of the pot.

Since Simon specially invited Merriweather, he wouldn't let himself waste his saliva.

If Meriwether is unwilling to execute, Simon will call on the investors of Long-term Capital Management to withdraw their capital. With the intertwined influence of the Westeros system, it is not difficult to do this now.

After the dinner, the Meriwethers left first, and Simon stayed with the B-girl couple to chat about Alia's affairs before sending them off.

The time came to more than nine o'clock in the evening.

After seeing off girl b and his wife, Simon returned to a living room on the side of the villa. When he asked about something, girl a brought over a document that had just been sorted out during the day.

Since dinner, Grace has been listening in, because a man stuffed a director of the Bank of New York Mellon, and she didn't want to live up to the man's entrustment. Grace worked hard to learn some financial courses by herself, so just during the dinner Zhong also probably understood the discussion between Simon and Meriwether.

At this time, holding the fruit plate prepared by herself and snuggling up to the man, while delivering the fruit to the man's mouth, Grace asked: "The one you mentioned, the possibility of national debt default in Asia or Eastern Europe, shouldn't happen easily?"

Simon took a bite of the apple, continued to flip through the documents in front of him, and said, "Because everyone thinks it won't happen, we need to pay attention."

Grace thought for a while and said, "Since you think this kind of thing might happen, maybe you can short it in advance?"

Simon smiled and said: "In the stage of primitive accumulation, in order to obtain enough funds as soon as possible, it is no problem to let go of betting a few times, but if you keep doing this, there will be a day of overturning sooner or later, so, for me, financial means are essential , but it can only be regarded as an auxiliary, the core is to do real various physical businesses. The most important problem for the Federation now is to turn this matter upside down. I remember Buffett told an interesting story, Buffett, you know ?”

Grace tapped her chin on the man's shoulder and listened attentively: "Of course."

Simon continued: "Buffett said that a group of financial elites were stranded on a deserted island because of an airplane accident. As a result, only two people went to engage in production activities such as planting, gathering, hunting, etc., and everyone else started to play around with the production materials of these two people. Various financial operations, do you know what the result is?"

"They must all be starving to death," Grace said with a smile, "However, I think there are such a group of people, and they shouldn't be stupid enough to do such a stupid thing."

"The problem is that the current trend of the Federation is like this, a large number of entities move out, investment banks

The proportion of financial industries such as insurance and insurance is increasing. "

Grace thought for a while and said, "Isn't everyone talking about globalization now? I think this is just a trend of division of labor."

"Imagine," Simon said, "if some extreme events happen in the future, such as wars, and globalization suddenly breaks, you will find that the federation will suddenly become a deserted island where two people are engaged in production and a group of people are engaged in finance. , what will be the result?"

Grace imagined along the man's train of thought, then shuddered a little, looked up at Simon: "So, what are you going to do?"

Simon continued to flip through the documents in front of him, and said lightly: "We can't change it, we can only take care of ourselves, westerosian, do you understand, you are also a westerosian now."

A man's words always seem to carry a bit of magical power. Hearing what he said, Grace nodded her head naturally, and then slapped him again: "I'm just your Westerosian."

"Then don't be lazy and give me another apple."

"Well, hehe."

Grace only felt that her body was soft, she chuckled and sent an apple to the man's mouth, carefully holding the fruit plate in her hand, and glanced at the document Simon had been looking at just now: "What is this?"

"Draft agenda for the g8 summit."

Grace thought for a while before reacting: "I saw it on the news recently, on June 8th, the one in Birmingham, England."

"yes."

The g8 summit must be familiar to those who come later.

Coincidentally, this year's summit is the first g8, and Russia was only approved to join in the second half of last year. In addition, the core of this year's topic is also very interesting, globalization.

Grace continued curiously: "What are you doing looking at this?"

"It will pass by then," Simon said, "There is a reception arranged over there, everyone gathers and chats casually."

"Um."

Grace expressed her understanding, but she couldn't help feeling a little admiration and pride.

A group of people who are understated and chatted casually by my little man, but they are the heads of state of the most powerful group of countries in the world.

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