Chapter 928: 928
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The trading here is 24 hours a day, so after watching it for a while, Yang Jing returned to her room with satisfaction, and Henry, David and Cesar followed in.
Yang Jing personally poured a glass of champagne for everyone. Then she picked up the glass and said with a smile, "come on, cheers to our brilliance!"
"Cheers to our glory!" the three men held up their glasses and said in unison.
The result of this investment or speculation is very brilliant. After the three major markets were launched respectively, the three investment institutions under the name of Dragon Fund have made huge profits in these three markets.
Just in terms of international gold and international crude oil futures, the profit of Dragon Fund has exceeded the market value of General Electric!
Although the global financial crisis triggered by the subprime mortgage crisis has not yet entered the high tide, KY investment fund, disguised by international hot money, has made more than $200 billion just from shorting the U.S. subprime mortgage and the U.S. stock market!
Their speculation is absolutely brilliant.
After a sip of wine, Henry smiled and said, "it's amazing that the outside world is amazed at John Paulson's profits. They never know that compared with us, the profits of John Paulson's Paulson fund are only a small part."
Cesar also smiled: "don't forget, we are international hot money."
A word amused everyone on the scene, and even David, who was usually silent, laughed.
Not to mention the profits of the international gold and international crude oil futures market, just shorting the U.S. subprime mortgage and the U.S. stock market made the profits of KY investment fund exceed the U.S. stock disaster in 1987, and this is only the beginning.
The subprime mortgage crisis in the United States has begun to detonate the global financial market. A global financial crisis is inevitable to break out. This is the battlefield for KY investment fund and Pacific Capital to obtain greater profits in the next stage.
"You and those little guys have done very well, and there is a John Paulson in front of us to attract the attention of the outside world. We will be safer this time," Yang Jing said with a smile.
This is not what Yang jingluan said. It is really that it is extremely dangerous for the United States to make national wealth. At the time of the U.S. stock market disaster, the U.S. government caught many guys who were unable to make money after the event. Otherwise, KY investment fund "took the initiative" to stand up and give money to support the market and buy back a large number of shares. Maybe Henry would also be invited by the U.S. government to have tea at that time.
The same is true of the subprime mortgage crisis. However, compared with the stock crash 20 years ago, the financial regulation in the United States has become loose at this time, and it coincides with John Paulson, who is known as the "empty God" in the future, so this KY investment fund is like a duck to water in the subprime mortgage crisis.
From the middle and late 1990s to the first decade of the new century, two "Paulson" on Wall Street are famous. One is Henry Paulson, the former chairman and CEO of Goldman Sachs and the US Treasury Secretary in 2006. The other is John Paulson, who made a lot of money because of shorting the subprime mortgage in the subprime mortgage crisis and is known as the "God of emptiness" by later generations.
Before the outbreak of the subprime mortgage crisis, John Paulson had no reputation in Wall Street. Until he met his old friend Paul Pellegrini in 2004, two guys with the same odour saw what the huge bubble in the US housing market was, and then decisively broke the subprime mortgage. Finally, he dropped 25 billion dollars in the US housing market to make short loans to the US. Then it took more than a year to turn this $25 billion into $45 billion, with a direct profit of $20 billion.
John Paulson is also known as the "God of emptiness" because of his short selling this time.
In fact, John Paulson's success is inseparable from Paul Pellegrini.
Paul Pellegrini was born in Italy and came to Wall Street in the 1980s. He worked as a middle level investor in Lazard brothers and tried venture capital several times. It was also at that time that he met John Paulson, who had worked in Bear Stearns.
At that time, two people could only be regarded as two small shrimps on Wall Street.
Unlike John Paulson, Pellegrini worked as several agents after leaving zarad brothers, but they all didn't go well, and his two marriages ended in failure.
Even before he met John Paulson again in 2004, the guy was in a state of unemployment.
However, after years of on-the-job experience, Pellegrini has developed his outstanding financial analysis ability and created his unique investment thinking. He is no longer subject to the rules of the Wall Street financial system and no longer completely dependent on the credit rating and rating agency rating, but collects financial information and makes his own comprehensive analysis as the basis for investment judgment.
When the two met again, John Paulson's life was not very comfortable.
After four years in Bear Stearns, Paulson decided to switch from investment bank to fund management, joined Grus partnership fund, became one of the partners, and officially began his fund management career. In 1994, he saw the momentum of hedge funds, shared an office with several other small hedge funds and founded Paulson hedge fund, specializing in M & A arbitrage and event driven investment.
In those years, Paulson's little days passed fairly well, especially at the beginning of the new century. Paulson saw the huge bubbles in the Internet, and decided to start shorting the Internet. This allowed his Paulson fund to earn more than 5% a year in the first two years of the new century, and the scale of his fund also increased to 600 million dollars.
The performance of the Paulson fund in the burst of the Internet bubble has attracted the attention of many investors. By the year 2005, the scale of the Paulson fund has reached 4 billion dollars.
Although the size of the fund has increased nearly sevenfold, Paulson still feels very uncomfortable. Why? It's simple, because Paulson feels a little aimless.
This is the fatal place of hedge funds, because he is in charge of hedge funds with a scale of $4 billion, but he does not know the direction of investment. Over a long period of time, it will inevitably lead to the dissatisfaction of investors.
At this time, the U.S. economy is booming, especially the real estate market. However, Paulson is not interested in the U.S. real estate market. Mortgage loans, financial derivatives and real estate are mixed waters. Most of them stay out of the real estate boom. So what are his goals?
Therefore, Paulson's life was not comfortable when he met Pellegrini.
But at this time, he met Pellegrini, and his old friend showed him a direction.
Although Pellegrini is in a state of career, his sense of smell has always been very sensitive. Especially in the past two years, the great heat of the U.S. real estate market made him smell an unusual smell.
So Pellegrini began to study the American real estate market. He studied interest rates for decades and found that they had little impact on the housing market. This means that although bullish people try to whitewash, the Fed's interest rate cut is not the reason for the recent sharp rise in house prices. But after reading academic, government documents and data, Pellegrini was frustrated that he could not quantify the extent of the price of housing and what time the bubble began. He can't even prove that this price rise is different from the past.
In order to get a new conclusion, Pellegrini added a "trend curve" to the housing market data, which clearly shows the recent price rise of the housing market. This time, Pellegrini stepped back and began to pay attention to a longer historical period. He found the annual real estate data after 1975
Then suddenly, the answer came out: from 1975 to 2000, after taking inflation into account, the annual growth of house prices in the United States was only 1.4%. However, from 2000 to 2005, house prices in the United States soared by more than 7% every year!
In other words, US house prices need to shrink by 40% to coincide with historical trends!
This rise in house prices has never been seen before, and Pellegrini also found that every time house prices fall in history, they will fall below the trend line, that is to say, if house prices really fall now, they will really fall thousands of miles.
When Pellegrini told Paulson the results of his analysis, Paulson immediately realized that this was a once-in-a-lifetime opportunity.
At the beginning of 2006, it was generally believed that house prices would never fall across the United States; Mortgage experts continue to advocate that the real estate market and housing mortgage market will continue to prosper; Good news is frequently seen in major media. Most of the big names on Wall Street share the same view. Credit rating agencies have also given AAA ratings to Wall Street's financial products.
"Experts are blinded by the prosperity of the real estate market." after receiving Pellegrini's analysis results, John Paulson resolutely abandoned the scoring of rating agencies. He personally led his 45 member team to track thousands of house mortgages and analyze the specific conditions of personal loans available one by one.
With the gradual deepening, Paulson became more and more convinced that investors greatly underestimated the risk of the mortgage market, and it was more and more difficult for creditors to recover their loans.
Before the outbreak of the subprime mortgage crisis, the relationship between CDOs and CDs in the U.S. real estate market was like this. The higher the risk of CDOs, the higher the value of CDs guaranteed for them. However, during the real estate boom, most people thought that CDO was not too risky, so the price of CDs was very low.
So Paulson decisively invested $150 million in July 2006 to establish the first short CDO fund and began to build a large number of positions.
At the same time, he bought cheap CDs while shorting dangerous CDOs.
Paulson's team began to rummage through the market looking for low-quality CDOs, that is, CDOs with high risk. His goal is not the healthiest and most mature, but the certificate that no one can return to the sky. Then they buy CDs insurance contracts for these CDO shares.
"Man, do you want the CDO of new century finance?"
"Nonsense, such rubbish... Oh, no, of course I want such an excellent CDO. I want as much as I have!"
"Liar loans and interest only loans account for the majority?"
"Falk, do you need to say that? Bring it to me and take as much as you have!"
"Man, do you want the CDO of mortgage loans in the overheated real estate market in California and Nevada?"
"Yo, do you have many? I want them all..."
In this way, Paulson searched for those high-risk CDOs and cheap CDs in the hot real estate market. His move even caused a laugh on Wall Street.
Especially in the following months, the U.S. real estate market is still prosperous and there is no sign of depression. Therefore, Paulson's fund has been losing money - he has continuously invested more than one billion dollars.
Investors have hurriedly asked him several times whether he should stop the loss. He flatly refused: "no, I have to add."
Paulson did what he said. He even established the second short CDO fund again and continued to increase investment.
Paulson's practice caused a lot of ridicule and ridicule at that time, but he still insisted on doing so. He has the spirit that everyone is drunk and I wake up alone, although thousands of people are gone.
But his desperate approach did not disappoint him. Even if he paid more than $1 billion from July 2006 to the end of 2006, he still did not flinch.
Finally, his persistence brought him huge wealth!
The subprime mortgage crisis finally broke out, and Paulson, who made a lot of short positions in advance, finally got the huge return he should get in this subprime mortgage crisis - US $20 billion!
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The trading here is 24 hours a day, so after watching it for a while, Yang Jing returned to her room with satisfaction, and Henry, David and Cesar followed in.
Yang Jing personally poured a glass of champagne for everyone. Then she picked up the glass and said with a smile, "come on, cheers to our brilliance!"
"Cheers to our glory!" the three men held up their glasses and said in unison.
The result of this investment or speculation is very brilliant. After the three major markets were launched respectively, the three investment institutions under the name of Dragon Fund have made huge profits in these three markets.
Just in terms of international gold and international crude oil futures, the profit of Dragon Fund has exceeded the market value of General Electric!
Although the global financial crisis triggered by the subprime mortgage crisis has not yet entered the high tide, KY investment fund, disguised by international hot money, has made more than $200 billion just from shorting the U.S. subprime mortgage and the U.S. stock market!
Their speculation is absolutely brilliant.
After a sip of wine, Henry smiled and said, "it's amazing that the outside world is amazed at John Paulson's profits. They never know that compared with us, the profits of John Paulson's Paulson fund are only a small part."
Cesar also smiled: "don't forget, we are international hot money."
A word amused everyone on the scene, and even David, who was usually silent, laughed.
Not to mention the profits of the international gold and international crude oil futures market, just shorting the U.S. subprime mortgage and the U.S. stock market made the profits of KY investment fund exceed the U.S. stock disaster in 1987, and this is only the beginning.
The subprime mortgage crisis in the United States has begun to detonate the global financial market. A global financial crisis is inevitable to break out. This is the battlefield for KY investment fund and Pacific Capital to obtain greater profits in the next stage.
"You and those little guys have done very well, and there is a John Paulson in front of us to attract the attention of the outside world. We will be safer this time," Yang Jing said with a smile.
This is not what Yang jingluan said. It is really that it is extremely dangerous for the United States to make national wealth. At the time of the U.S. stock market disaster, the U.S. government caught many guys who were unable to make money after the event. Otherwise, KY investment fund "took the initiative" to stand up and give money to support the market and buy back a large number of shares. Maybe Henry would also be invited by the U.S. government to have tea at that time.
The same is true of the subprime mortgage crisis. However, compared with the stock crash 20 years ago, the financial regulation in the United States has become loose at this time, and it coincides with John Paulson, who is known as the "empty God" in the future, so this KY investment fund is like a duck to water in the subprime mortgage crisis.
From the middle and late 1990s to the first decade of the new century, two "Paulson" on Wall Street are famous. One is Henry Paulson, the former chairman and CEO of Goldman Sachs and the US Treasury Secretary in 2006. The other is John Paulson, who made a lot of money because of shorting the subprime mortgage in the subprime mortgage crisis and is known as the "God of emptiness" by later generations.
Before the outbreak of the subprime mortgage crisis, John Paulson had no reputation in Wall Street. Until he met his old friend Paul Pellegrini in 2004, two guys with the same odour saw what the huge bubble in the US housing market was, and then decisively broke the subprime mortgage. Finally, he dropped 25 billion dollars in the US housing market to make short loans to the US. Then it took more than a year to turn this $25 billion into $45 billion, with a direct profit of $20 billion.
John Paulson is also known as the "God of emptiness" because of his short selling this time.
In fact, John Paulson's success is inseparable from Paul Pellegrini.
Paul Pellegrini was born in Italy and came to Wall Street in the 1980s. He worked as a middle level investor in Lazard brothers and tried venture capital several times. It was also at that time that he met John Paulson, who had worked in Bear Stearns.
At that time, two people could only be regarded as two small shrimps on Wall Street.
Unlike John Paulson, Pellegrini worked as several agents after leaving zarad brothers, but they all didn't go well, and his two marriages ended in failure.
Even before he met John Paulson again in 2004, the guy was in a state of unemployment.
However, after years of on-the-job experience, Pellegrini has developed his outstanding financial analysis ability and created his unique investment thinking. He is no longer subject to the rules of the Wall Street financial system and no longer completely dependent on the credit rating and rating agency rating, but collects financial information and makes his own comprehensive analysis as the basis for investment judgment.
When the two met again, John Paulson's life was not very comfortable.
After four years in Bear Stearns, Paulson decided to switch from investment bank to fund management, joined Grus partnership fund, became one of the partners, and officially began his fund management career. In 1994, he saw the momentum of hedge funds, shared an office with several other small hedge funds and founded Paulson hedge fund, specializing in M & A arbitrage and event driven investment.
In those years, Paulson's little days passed fairly well, especially at the beginning of the new century. Paulson saw the huge bubbles in the Internet, and decided to start shorting the Internet. This allowed his Paulson fund to earn more than 5% a year in the first two years of the new century, and the scale of his fund also increased to 600 million dollars.
The performance of the Paulson fund in the burst of the Internet bubble has attracted the attention of many investors. By the year 2005, the scale of the Paulson fund has reached 4 billion dollars.
Although the size of the fund has increased nearly sevenfold, Paulson still feels very uncomfortable. Why? It's simple, because Paulson feels a little aimless.
This is the fatal place of hedge funds, because he is in charge of hedge funds with a scale of $4 billion, but he does not know the direction of investment. Over a long period of time, it will inevitably lead to the dissatisfaction of investors.
At this time, the U.S. economy is booming, especially the real estate market. However, Paulson is not interested in the U.S. real estate market. Mortgage loans, financial derivatives and real estate are mixed waters. Most of them stay out of the real estate boom. So what are his goals?
Therefore, Paulson's life was not comfortable when he met Pellegrini.
But at this time, he met Pellegrini, and his old friend showed him a direction.
Although Pellegrini is in a state of career, his sense of smell has always been very sensitive. Especially in the past two years, the great heat of the U.S. real estate market made him smell an unusual smell.
So Pellegrini began to study the American real estate market. He studied interest rates for decades and found that they had little impact on the housing market. This means that although bullish people try to whitewash, the Fed's interest rate cut is not the reason for the recent sharp rise in house prices. But after reading academic, government documents and data, Pellegrini was frustrated that he could not quantify the extent of the price of housing and what time the bubble began. He can't even prove that this price rise is different from the past.
In order to get a new conclusion, Pellegrini added a "trend curve" to the housing market data, which clearly shows the recent price rise of the housing market. This time, Pellegrini stepped back and began to pay attention to a longer historical period. He found the annual real estate data after 1975
Then suddenly, the answer came out: from 1975 to 2000, after taking inflation into account, the annual growth of house prices in the United States was only 1.4%. However, from 2000 to 2005, house prices in the United States soared by more than 7% every year!
In other words, US house prices need to shrink by 40% to coincide with historical trends!
This rise in house prices has never been seen before, and Pellegrini also found that every time house prices fall in history, they will fall below the trend line, that is to say, if house prices really fall now, they will really fall thousands of miles.
When Pellegrini told Paulson the results of his analysis, Paulson immediately realized that this was a once-in-a-lifetime opportunity.
At the beginning of 2006, it was generally believed that house prices would never fall across the United States; Mortgage experts continue to advocate that the real estate market and housing mortgage market will continue to prosper; Good news is frequently seen in major media. Most of the big names on Wall Street share the same view. Credit rating agencies have also given AAA ratings to Wall Street's financial products.
"Experts are blinded by the prosperity of the real estate market." after receiving Pellegrini's analysis results, John Paulson resolutely abandoned the scoring of rating agencies. He personally led his 45 member team to track thousands of house mortgages and analyze the specific conditions of personal loans available one by one.
With the gradual deepening, Paulson became more and more convinced that investors greatly underestimated the risk of the mortgage market, and it was more and more difficult for creditors to recover their loans.
Before the outbreak of the subprime mortgage crisis, the relationship between CDOs and CDs in the U.S. real estate market was like this. The higher the risk of CDOs, the higher the value of CDs guaranteed for them. However, during the real estate boom, most people thought that CDO was not too risky, so the price of CDs was very low.
So Paulson decisively invested $150 million in July 2006 to establish the first short CDO fund and began to build a large number of positions.
At the same time, he bought cheap CDs while shorting dangerous CDOs.
Paulson's team began to rummage through the market looking for low-quality CDOs, that is, CDOs with high risk. His goal is not the healthiest and most mature, but the certificate that no one can return to the sky. Then they buy CDs insurance contracts for these CDO shares.
"Man, do you want the CDO of new century finance?"
"Nonsense, such rubbish... Oh, no, of course I want such an excellent CDO. I want as much as I have!"
"Liar loans and interest only loans account for the majority?"
"Falk, do you need to say that? Bring it to me and take as much as you have!"
"Man, do you want the CDO of mortgage loans in the overheated real estate market in California and Nevada?"
"Yo, do you have many? I want them all..."
In this way, Paulson searched for those high-risk CDOs and cheap CDs in the hot real estate market. His move even caused a laugh on Wall Street.
Especially in the following months, the U.S. real estate market is still prosperous and there is no sign of depression. Therefore, Paulson's fund has been losing money - he has continuously invested more than one billion dollars.
Investors have hurriedly asked him several times whether he should stop the loss. He flatly refused: "no, I have to add."
Paulson did what he said. He even established the second short CDO fund again and continued to increase investment.
Paulson's practice caused a lot of ridicule and ridicule at that time, but he still insisted on doing so. He has the spirit that everyone is drunk and I wake up alone, although thousands of people are gone.
But his desperate approach did not disappoint him. Even if he paid more than $1 billion from July 2006 to the end of 2006, he still did not flinch.
Finally, his persistence brought him huge wealth!
The subprime mortgage crisis finally broke out, and Paulson, who made a lot of short positions in advance, finally got the huge return he should get in this subprime mortgage crisis - US $20 billion!
The trading here is 24 hours a day, so after watching it for a while, Yang Jing returned to her room with satisfaction, and Henry, David and Cesar followed in.Yang Jing personally poured a glass of champagne for everyone. Then she picked up the glass and said with a smile, "come on, cheers to our brilliance!""Cheers to our glory!" the three men held up their glasses and said in unison.The result of this investment or speculation is very brilliant. After the three major markets were launched respectively, the three investment institutions under the name of Dragon Fund have made huge profits in these three markets.Just in terms of international gold and international crude oil futures, the profit of Dragon Fund has exceeded the market value of General Electric!Although the global financial crisis triggered by the subprime mortgage crisis has not yet entered the high tide, KY investment fund, disguised by international hot money, has made more than $200 billion just from shorting the U.S. subprime mortgage and the U.S. stock market!Their speculation is absolutely brilliant.After a sip of wine, Henry smiled and said, "it's amazing that the outside world is amazed at John Paulson's profits. They never know that compared with us, the profits of John Paulson's Paulson fund are only a small part."Cesar also smiled: "don't forget, we are international hot money."A word amused everyone on the scene, and even David, who was usually silent, laughed.Not to mention the profits of the international gold and international crude oil futures market, just shorting the U.S. subprime mortgage and the U.S. stock market made the profits of KY investment fund exceed the U.S. stock disaster in 1987, and this is only the beginning.The subprime mortgage crisis in the United States has begun to detonate the global financial market. A global financial crisis is inevitable to break out. This is the battlefield for KY investment fund and Pacific Capital to obtain greater profits in the next stage."You and those little guys have done very well, and there is a John Paulson in front of us to attract the attention of the outside world. We will be safer this time," Yang Jing said with a smile.This is not what Yang jingluan said. It is really that it is extremely dangerous for the United States to make national wealth. At the time of the U.S. stock market disaster, the U.S. government caught many guys who were unable to make money after the event. Otherwise, KY investment fund "took the initiative" to stand up and give money to support the market and buy back a large number of shares. Maybe Henry would also be invited by the U.S. government to have tea at that time.The same is true of the subprime mortgage crisis. However, compared with the stock crash 20 years ago, the financial regulation in the United States has become loose at this time, and it coincides with John Paulson, who is known as the "empty God" in the future, so this KY investment fund is like a duck to water in the subprime mortgage crisis.From the middle and late 1990s to the first decade of the new century, two "Paulson" on Wall Street are famous. One is Henry Paulson, the former chairman and CEO of Goldman Sachs and the US Treasury Secretary in 2006. The other is John Paulson, who made a lot of money because of shorting the subprime mortgage in the subprime mortgage crisis and is known as the "God of emptiness" by later generations.Before the outbreak of the subprime mortgage crisis, John Paulson had no reputation in Wall Street. Until he met his old friend Paul Pellegrini in 2004, two guys with the same odour saw what the huge bubble in the US housing market was, and then decisively broke the subprime mortgage. Finally, he dropped 25 billion dollars in the US housing market to make short loans to the US. Then it took more than a year to turn this $25 billion into $45 billion, with a direct profit of $20 billion.John Paulson is also known as the "God of emptiness" because of his short selling this time.In fact, John Paulson's success is inseparable from Paul Pellegrini.Paul Pellegrini was born in Italy and came to Wall Street in the 1980s. He worked as a middle level investor in Lazard brothers and tried venture capital several times. It was also at that time that he met John Paulson, who had worked in Bear Stearns.At that time, two people could only be regarded as two small shrimps on Wall Street.Unlike John Paulson, Pellegrini worked as several agents after leaving zarad brothers, but they all didn't go well, and his two marriages ended in failure.Even before he met John Paulson again in 2004, the guy was in a state of unemployment.However, after years of on-the-job experience, Pellegrini has developed his outstanding financial analysis ability and created his unique investment thinking. He is no longer subject to the rules of the Wall Street financial system and no longer completely dependent on the credit rating and rating agency rating, but collects financial information and makes his own comprehensive analysis as the basis for investment judgment.When the two met again, John Paulson's life was not very comfortable.After four years in Bear Stearns, Paulson decided to switch from investment bank to fund management, joined Grus partnership fund, became one of the partners, and officially began his fund management career. In 1994, he saw the momentum of hedge funds, shared an office with several other small hedge funds and founded Paulson hedge fund, specializing in M & A arbitrage and event driven investment.In those years, Paulson's little days passed fairly well, especially at the beginning of the new century. Paulson saw the huge bubbles in the Internet, and decided to start shorting the Internet. This allowed his Paulson fund to earn more than 5% a year in the first two years of the new century, and the scale of his fund also increased to 600 million dollars.The performance of the Paulson fund in the burst of the Internet bubble has attracted the attention of many investors. By the year 2005, the scale of the Paulson fund has reached 4 billion dollars.Although the size of the fund has increased nearly sevenfold, Paulson still feels very uncomfortable. Why? It's simple, because Paulson feels a little aimless.This is the fatal place of hedge funds, because he is in charge of hedge funds with a scale of $4 billion, but he does not know the direction of investment. Over a long period of time, it will inevitably lead to the dissatisfaction of investors.At this time, the U.S. economy is booming, especially the real estate market. However, Paulson is not interested in the U.S. real estate market. Mortgage loans, financial derivatives and real estate are mixed waters. Most of them stay out of the real estate boom. So what are his goals?Therefore, Paulson's life was not comfortable when he met Pellegrini.But at this time, he met Pellegrini, and his old friend showed him a direction.Although Pellegrini is in a state of career, his sense of smell has always been very sensitive. Especially in the past two years, the great heat of the U.S. real estate market made him smell an unusual smell.So Pellegrini began to study the American real estate market. He studied interest rates for decades and found that they had little impact on the housing market. This means that although bullish people try to whitewash, the Fed's interest rate cut is not the reason for the recent sharp rise in house prices. But after reading academic, government documents and data, Pellegrini was frustrated that he could not quantify the extent of the price of housing and what time the bubble began. He can't even prove that this price rise is different from the past.In order to get a new conclusion, Pellegrini added a "trend curve" to the housing market data, which clearly shows the recent price rise of the housing market. This time, Pellegrini stepped back and began to pay attention to a longer historical period. He found the annual real estate data after 1975Then suddenly, the answer came out: from 1975 to 2000, after taking inflation into account, the annual growth of house prices in the United States was only 1.4%. However, from 2000 to 2005, house prices in the United States soared by more than 7% every year!In other words, US house prices need to shrink by 40% to coincide with historical trends!This rise in house prices has never been seen before, and Pellegrini also found that every time house prices fall in history, they will fall below the trend line, that is to say, if house prices really fall now, they will really fall thousands of miles.When Pellegrini told Paulson the results of his analysis, Paulson immediately realized that this was a once-in-a-lifetime opportunity.At the beginning of 2006, it was generally believed that house prices would never fall across the United States; Mortgage experts continue to advocate that the real estate market and housing mortgage market will continue to prosper; Good news is frequently seen in major media. Most of the big names on Wall Street share the same view. Credit rating agencies have also given AAA ratings to Wall Street's financial products."Experts are blinded by the prosperity of the real estate market." after receiving Pellegrini's analysis results, John Paulson resolutely abandoned the scoring of rating agencies. He personally led his 45 member team to track thousands of house mortgages and analyze the specific conditions of personal loans available one by one.With the gradual deepening, Paulson became more and more convinced that investors greatly underestimated the risk of the mortgage market, and it was more and more difficult for creditors to recover their loans.Before the outbreak of the subprime mortgage crisis, the relationship between CDOs and CDs in the U.S. real estate market was like this. The higher the risk of CDOs, the higher the value of CDs guaranteed for them. However, during the real estate boom, most people thought that CDO was not too risky, so the price of CDs was very low.So Paulson decisively invested $150 million in July 2006 to establish the first short CDO fund and began to build a large number of positions.At the same time, he bought cheap CDs while shorting dangerous CDOs.Paulson's team began to rummage through the market looking for low-quality CDOs, that is, CDOs with high risk. His goal is not the healthiest and most mature, but the certificate that no one can return to the sky. Then they buy CDs insurance contracts for these CDO shares."Man, do you want the CDO of new century finance?""Nonsense, such rubbish... Oh, no, of course I want such an excellent CDO. I want as much as I have!""Liar loans and interest only loans account for the majority?""Falk, do you need to say that? Bring it to me and take as much as you have!""Man, do you want the CDO of mortgage loans in the overheated real estate market in California and Nevada?""Yo, do you have many? I want them all..."In this way, Paulson searched for those high-risk CDOs and cheap CDs in the hot real estate market. His move even caused a laugh on Wall Street.Especially in the following months, the U.S. real estate market is still prosperous and there is no sign of depression. Therefore, Paulson's fund has been losing money - he has continuously invested more than one billion dollars.Investors have hurriedly asked him several times whether he should stop the loss. He flatly refused: "no, I have to add."Paulson did what he said. He even established the second short CDO fund again and continued to increase investment.Paulson's practice caused a lot of ridicule and ridicule at that time, but he still insisted on doing so. He has the spirit that everyone is drunk and I wake up alone, although thousands of people are gone.But his desperate approach did not disappoint him. Even if he paid more than $1 billion from July 2006 to the end of 2006, he still did not flinch.Finally, his persistence brought him huge wealth!The subprime mortgage crisis finally broke out, and Paulson, who made a lot of short positions in advance, finally got the huge return he should get in this subprime mortgage crisis - US $20 billion!
