"How cruel!"
In the office, Chen Guo said with a sad face.
Just two days ago, he was discussing with Chen Nian that the biggest difficulty in construction machinery projects is not technology, funds and resources, but the market.
As a result, now, the opponent has given us a heavy blow!
Direct price reduction of 20%!
What is this concept?
For many projects that require the use of large machinery, if this 20% cost can be saved, the profitability of the entire project may turn from negative to positive.
And, that's the impact on the table.
Under the table, the person in charge of the project is likely to receive millions or even tens of millions of personal benefits from such a big price reduction.
Under this huge temptation, the wind direction of the entire market will undergo irreversible changes.
How easy is it to fight against it?
Even if the plan mentioned by Chen Nian can really be realized and the product's technology is 10 years ahead of similar products, it may not be able to recover from this disadvantage.
Unless, while leading the technology by 10 years, the price will be lower than them.
This is pure idiotic talk.
Looking at Chen Guo with a bitter face, Chen Nian, who was sitting opposite, couldn't help but feel a little anxious.
A long time ago, he had thought about the "butterfly effect".
He knew that with his arrival, the situation in this world would definitely change and the balance between the various forces would be broken, but he did not expect that the impact would be so great.
The economic suppression was actually more than 10 years in advance.
Of course, the other party is not using extreme measures now. The so-called price dumping relies more on the inherent attributes of the market rather than administrative power.
But it can be seen that the other party's assessment of its own threats has actually developed by leaps and bounds.
It is very likely that in the short term in the future, their methods will be further upgraded and reach their peak quickly.
And is our side really capable of responding to them equally?
impossible.
Even 10 years from now, our equivalent means will be extremely limited, let alone now.
At present, the U.S. economy has not yet completely entered the hollowing-out stage, the first financial crisis after the 21st century has not yet arrived, and the mud of the Middle East quagmire has just reached their feet.
It can be said that the current United States is in its strongest form since the 21st century.
How easy is it to use our own undeveloped strength to collide with their strongest form?
This crisis is really beyond my ability to solve.
After thinking for a moment, Chen Nian said:
"If that doesn't work, can we raise tariffs equally and limit each other's import prices?"
"No, this goes against our WTO commitments."
"Of course, in fact, they were the first to break their promises, but the problem is that other Western countries and other partners don't care about this."
"What they can see is that we are practicing trade protectionism and arbitrarily raising tariffs."
"Once such an impression is solidified, it will have an even greater impact on us."
After pausing for a few seconds, Chen Guo continued:
"One more important thing is that we are about to enter 2006, and 2008 is the Olympic Games."
"This is a critical window period. We cannot make any big diplomatic moves at this juncture."
"I think you know what I mean."
"A lot of times, it's a last resort."
Chen Nian nodded helplessly. He had nothing to say about this matter.
However, mentioning 2008
Chen Nian's heart suddenly moved.
Although the butterfly effect has occurred, it is impossible for the storm to really sweep across all corners of the world.
At least, the causes of the financial crisis in 2008 should not have been affected.
No, it's even possible that it will get stronger.
The reason is simple. In the series of early confrontations, the United States lost a large amount of funds and foreign exchange. In the original soybean battle alone, the positions lost by major investment institutions reached hundreds of billions.
Not to mention the subsequent impact on several airlines due to the birth of the J-22 and J-20B, as well as the subsequent chain effects.
In a word, in the current US capital market, they are short of money.
So since we are short of money, where can we get the money fastest?
real estate.
CDS.
The so-called CDS, its official name is credit default swap, is essentially a financial instrument for leveraged investment.
A very simple example, suppose that a residential house sells for $100,000, but the customer only has $5,000 on hand. However, in order to quickly withdraw funds, the real estate company decides to sell the house to the customer. What should it do?
It's very simple. We guide residents to get loans of US$100,000.
But the problem is that with a "down payment" of US$5,000, the loan's leverage is as high as 20 times. No bank dares to do such a high-risk business, and the plan cannot be implemented at all.
At this time, things took a strange turn.
The customer wants to buy a house, the real estate company wants to sell the house, and the bank wants to earn interest, but because of the element of "risk", this seemingly "tripartite mutually beneficial" transaction cannot be concluded.
I have to say, this is definitely a major loss.
So, how to make up for this loss?
At this time, a genius in the banking system stood up.
He suggested that a third-party institution could be found as a guarantee for the transaction.
The bank pays the institution an insurance premium of US$500 every year, and the institution pays the bank the full amount of funds when a default occurs.
And if there is no default, the money belongs to the institution.
In this way, the bank's risks are transferred, and the transactions between real estate companies and customers can continue.
Upon hearing this proposal, the insurance company immediately made an actuarial calculation.
Subsequently, they found that the current default rate in the entire real estate market is extremely low, even less than 1%.
In other words, there is only a 1% chance that the insurance premiums they receive will require default compensation.
As long as their comprehensive insurance rate is greater than 1%, this business will be done.
So, naturally, the deal was done.
Everyone is happy and everyone gets what they want.
If things end like this, then the positive effects of CDS will undoubtedly far outweigh the negative effects.
However, capital is greedy and it will never stop here.
After seeing how insurance companies effortlessly made huge profits, third-party investment companies became interested.
They have to get a piece of the pie.
So, they found the insurance company and obtained the ownership of the CDS by paying the full amount in one lump sum.
With this precedent set, investment banks including JPMorgan Chase and Lehman Brothers suddenly came to their senses.
Isn't this a debt transaction?
Since it is a debt transaction, then go to the exchange!
As a result, CDS products were launched.
Its price is speculated higher and higher, just like a stock, squeezing out the last vestiges of potential of the original contract.
The only pillar of its existence is the ever-rising room.
Because, as house prices rise, so will the value of the original contract.
But can house prices really keep rising?
Obviously not.
Most of these CDS trading contracts that have driven up housing prices actually come from subprime loans, that is to say, loans specifically provided to people with low education levels, low financial capabilities, or who have already had a record of default.
There is no doubt that the probability that they will not be able to repay the loan is very high.
So in the end, the real estate bubble was burst, and the biggest financial crisis in the 21st century came.
Looking back at the entire process of the financial crisis, the most critical point is the hype of CDS.
So what if the CDS hype is faster now than in my previous life?
Chen Nian perked up and said to Chen Guo:
"Help me find out the current size and default rate of U.S. subprime loans."
"Also, please help me see the latest transaction size and price of CDS in the US financial market."
Hearing Chen Nian's question, Chen Guo opened her mouth in shock.
"What do you mean? Why do you suddenly want to check this thing?"
Chen Nian pondered for a moment and then said:
"I have an idea now."
"This dumping strategy obviously cannot be made by Caterpillar itself."
"Behind them, it can be said that there must be official support from the United States."
“If we want to support it, we must invest money.”
"Then what if, their officials have no money?"
"You mean, you want to start directly from their capital chain?"
"That's unlikely."
Chen Guo looked a little confused, but he still picked up the phone in his hand and called the economic advisor of the Spark Group.
It was Chen Feiyun who answered the phone.
After listening to his request, Chen Feiyun also asked the same question:
“Why do you need this data?”
Chen Nian explained all his thoughts and judgments on the subprime loan and CDS markets, and the latter was speechless.
"Xiao Nian, where did you know these things?"
“The financial and economic knowledge requirements required by CDS are not something that ordinary people can figure out just by looking at them.”
"Saw it by chance in the library."
Chen Nian replied without changing his expression.
".Okay, let's just say I saw it in the library."
"However, although the theory you mentioned is correct, the trend is not necessarily correct."
"According to our understanding, the current default rate in the U.S. subprime mortgage market is still extremely low. At most, it is between 1% and 2%."
"Such a default rate is actually not enough to trigger the storm you are talking about."
"You must know that their financial market is an extremely mature market and their tolerance for risk is also quite high."
"There must be a lag in default rates."
Chen Nian interrupted Chen Feiyun and said firmly.
"Lagging? This is indeed a problem, but we cannot effectively judge it. The simple reason is that the other party's unemployment rate remains at a low level, and the average wage level has even increased."
"In this case, there's no reason why their default rates should go up."
"Then check their residential housing transfer rate, and check the number of new second-home purchases by urban residents. If these two data increase year-on-year, it proves that my judgment is correct!"
"Okay, I'll do it now."
At this moment, Chen Nian's authority came into play. Although Chen Feiyun still had doubts about Chen Nian's judgment, out of trust, he still chose to implement it to the letter.
After hanging up the phone, Chen Guo looked at Chen Nian and asked:
"So, what is your plan? Even if something goes wrong with the CDS you are talking about, what can we do?"
"You have to solve this problem from the capital chain, but I really can't see how this has much to do with the capital chain."
Hearing Chen Guo's words, Chen Nian laughed and replied:
"This is actually not something that technicians need to understand. Next, I need you to do something for me."
"No matter what the price is, no matter how big the pie is, we must hold back our domestic companies and never let them advance their purchase plans because of Caterpillar's discounts."
"I need time, and this time must be at least 6 months."
"clear."
Chen Guo nodded.
Although he doesn't understand economics, he understands technology and equipment.
He knows that if domestic companies really take advantage of this opportunity to make large purchases, the demand for construction machinery in the next one or two, or even two or three years will be filled by foreign investment, and there will be no market space for domestic equipment even if it is manufactured.
This vacuum period is enough to drive units involved in the project, including XCMG and Sany, to death.
The two discussed the specific plan for a while, and Chen Guo felt more and more that Chen Nian was mature in the overall strategy. But before he could sigh, the phone on the table rang.
It was Chen Feiyun who called. As soon as the call was connected, he couldn't wait to say:
"Xiao Nian, the situation is just as you expected!"
"It is true that their default rate has not increased significantly, but the second-hand housing transaction market is indeed more active than ever. In fact, according to rough statistics, the second-hand housing turnover rate in some big cities has reached more than 5%!"
"In addition, the number of second homes you mentioned is currently not available, but I consulted several colleagues in the United States. According to their information, at least in his circle, the investment attribute of housing has been deeply rooted in the hearts of the people."
"That is to say, this data will definitely not be low. All your inferences have come true!"
Chen Feiyun's words revealed undisguised surprise, and then he continued:
"Does that mean that in the next step, their default rate will increase? Is our opportunity here?"
Chen Nian shook his head subconsciously and replied:
"No, it's not enough."
"The way things are going, they can last at least one to two years."
"We have to add fire to them, and it's up to you to find a way."
"My suggestion is that on the one hand, we should start with CDS, and on the other hand, we can consider how to make their housing prices plummet in a short period of time."
"Understood, I will arrange it!"
Chen Feiyun hung up the phone excitedly, while Chen Guo in the office was still confused.
He asked:
"So, what exactly are you planning to do?"
Chen Nian smiled and replied:
"It's very simple."
"I'm going to trigger a financial crisis in the United States."
I've had to eat a little less these past two days because I'm working on my teeth.
At present, the initial plan is to extract two teeth, fill one, and have another root canal tomorrow...
