Chapter 1081: Subprime Mortgage Crisis

For certain people, secrets must be openly disclosed.

For instance, when facing a doctor, if you conceal your illness, it will delay treatment.

Similarly, when facing a lawyer, if you are evasive, it will hinder important matters.

Zhao Fusheng and Tan Kaixuan were true friends who could confide in each other. Apart from his biggest secret, which he could not share, Zhao Fusheng had nothing to hide from Tan Kaixuan.

"You know, twenty years ago, at HSBC in Hong Kong, if you wanted to use their premium checkbook for big shots, you needed a deposit of over fifty million to apply," Zhao Fusheng said to Tan Kaixuan.

Tan Kaixuan frowned. "Really? Then the minimum amount would be five million, right?"

Ten percent of the amount—Tan Kaixuan naturally understood what that meant.

"Yes, so checks back then were truly impressive," Zhao Fusheng smiled and said to Tan Kaixuan. "But look at America now—everyone is borrowing like crazy. We have an old saying in China: 'eating tomorrow's grain today.' That's exactly what the Americans are doing."

Tan Kaixuan frowned again; clearly, Zhao Fusheng's words were hard for him to grasp.

Zhao Fusheng shrugged and continued, "Personally, I feel that the subprime mortgage business in the US will run into trouble sooner or later."

Tan Kaixuan was taken aback, never expecting Zhao Fusheng to bring this up.

"You mean some kind of crisis?" Tan Kaixuan looked at Zhao Fusheng and asked slowly.

Zhao Fusheng nodded. "Very likely. I feel that maybe within five years, perhaps even three, this crisis will erupt."

In fact, he knew very well that the subprime mortgage crisis would officially break out in the US around the end of 2006 and early 2007.

The subprime mortgage crisis, as the name suggests, refers to subprime mortgage loans, as opposed to prime mortgage loans given to borrowers with better credit. Because subprime borrowers lack or have insufficient proof of income and repayment ability, or have other heavy debts, their credit conditions are 'subprime,' and such real estate mortgage loans are called subprime mortgage loans.

Compared to prime borrowers who can get more favorable interest rates and repayment terms, subprime borrowers are often forced to pay higher interest rates and adhere to stricter repayment terms. This seemingly natural issue, however, was not truly implemented due to the past loose credit, active financial innovation, and rising real estate and securities prices in the US. As a result, the repayment risk of subprime mortgages shifted from potential to reality. In this process, some US financial institutions, for their own benefit, condoned the excessive expansion of subprime lending and the associated loan packaging and securitization, causing the scale of subprime mortgage defaults under certain conditions to expand to a crisis level.

Zhao Fusheng did not know the specifics, nor did he remember when it started, but he vaguely recalled reading an article that vividly described the collapse of Lehman Brothers.

"Do you know Lehman Brothers?"

Thinking of this, Zhao Fusheng asked Tan Kaixuan.

Tan Kaixuan was startled for a moment, then nodded. "Of course, Lehman Brothers is the fourth-largest investment bank in the US. I can't even compare to them. They're said to have assets over five hundred billion US dollars."

Being on Wall Street, he naturally knew the details of such giant companies.

"But don't you think this company is pursuing high profits while neglecting risks?" Zhao Fusheng looked at Tan Kaixuan and asked.

"What do you mean?" Tan Kaixuan frowned, clearly not quite understanding Zhao Fusheng's point.

Zhao Fusheng shrugged. "Think about it—if, and I mean if, the mortgage-backed securities held by Lehman Brothers cannot be cashed..."

Tan Kaixuan laughed heartily and waved his hand. "You're joking, that's..."

Before he could finish, he froze.

Many things in this world cannot be hypothesized, because once you do, you realize things can become terrifying.

Simply put, if doomsday came, what would human nature become?

If one day we were stranded on a desert island with a large group of people, would wealth matter? Would social status matter?

Would you come to blows with a former friend over a fish? Would you abandon your dignity for a bowl of hot soup?

No one knows the answer.

But at this moment, Tan Kaixuan's face turned quite grim.

Because if what Zhao Fusheng said was just alarmist talk, then he could dismiss it as a joke.

But what if what Zhao Fusheng said became reality?

The mere thought of that scene sent a chill down Tan Kaixuan's spine.

After all, during his time in the US, he understood certain aspects of the financial market far better than Zhao Fusheng. And the more he knew, the more he felt that if Zhao Fusheng's words came true, it might be a crisis affecting the entire world.

Taking a deep breath, Tan Kaixuan's expression turned serious. He stood up and began pacing in the office.

Clearly, he was thinking about what he could gain from this.

Zhao Fusheng, on the other hand, was indifferent. He had said what needed to be said; the rest was up to Tan Kaixuan's own choice.

After a long while, Tan Kaixuan looked up at Zhao Fusheng. "How much time do you think we have?"

Obviously, he was asking about the timing of the subprime crisis.

Zhao Fusheng remembered it was 2007, but he couldn't recall the exact time—after all, he wasn't a professional in such economic matters.

But regardless, such a major event would take some time to unfold. So Zhao Fusheng thought for a moment and said to Tan Kaixuan, "I estimate around the second half of 2006."

"Alright then!"

Tan Kaixuan gritted his teeth and said solemnly, "I'll keep you updated with information. When the time comes, how about we join forces to short the market?"

Holy shit!

Zhao Fusheng's eyes lit up, and he stared at Tan Kaixuan for a long time without speaking.

This guy was utterly ruthless!

He had only told him that the US financial market might face a crisis, and Tan Kaixuan was already thinking about shorting the entire market. In other words, if they seized the opportunity, they could make a killing.

After all, in the financial market, even a slight fluctuation involves billions of dollars.

If what Tan Kaixuan said was true, Zhao Fusheng's intuition told him this might indeed be a great opportunity.

Should he go for it?

A cold glint flashed in Zhao Fusheng's eyes. He looked at Tan Kaixuan and nodded. "Alright, I'll allocate funds to you then, and you'll handle the operations."

Since they were going to do it, they might as well go big. Zhao Fusheng decided to give the Americans a surprise with this opportunity.

...

...

Time waited for no one. After finishing his business in the US, Zhao Fusheng declined Tan Kaixuan's invitation to stay and play for a few more days, and returned to China with Dong Chenxi and the others.

"How did it go? Everything smooth?"

Sitting on the plane back home, Zhao Fusheng asked Dong Chenxi with a smile.

In the following days, he had mostly been sightseeing and hadn't asked about how Dong Chenxi's matters were progressing.

Dong Chenxi gave a wry smile, feeling helpless about her boss's hands-off management style.

"Do you trust me that much? What if I mess things up?" Dong Chenxi looked at Zhao Fusheng and asked.

Zhao Fusheng shrugged nonchalantly. "If you mess up, we'll just make a new plan."

Then he winked at Dong Chenxi. "Besides, I think you can definitely get things done, right?"

She was already tired of complaining about his attitude.

Pursing her lips, she said, "Overall, it went smoothly. We contacted a few internet companies, but honestly, I don't think they have much potential. They're all relatively mediocre projects, so I only made some symbolic seed investments."

Seed investment, in simple terms, means casting a wide net by investing in many projects, without knowing whether they will succeed—even the investors are uncertain.

"That's fine," Zhao Fusheng nodded. "We've only had a short time to look at these projects, and we don't have a clear view of their future prospects. Seed investment is already a big risk."

Although he had plenty of funds now, he understood the principle that even a wealthy family has no extra grain. Dong Chenxi's cautious investment approach was exactly what he needed.

"By the way, I think we should pay some attention to domestic internet companies," Dong Chenxi hesitated for a moment, then said slowly to Zhao Fusheng.

Hearing this, Zhao Fusheng frowned and then gave her a deep look. "What, do you have a good project?"

Since she brought it up, she must have a project in mind.

Dong Chenxi nodded. "Not exactly a good project, but I had someone do a survey earlier. The domestic e-commerce industry is currently in a development phase, and I think there's great potential there."

Oh!

Zhao Fusheng's eyes lit up, and he looked at Dong Chenxi differently.

He hadn't expected to have such a sharp person by his side.

Of course, he knew how bright the future of the e-commerce industry was. But the problem was that Ma Xiaoyun, the boss who doesn't like money, had already hitched his wagon to SoftBank. How could he possibly get a chance to stick his foot into the legendary Taobao?

Could Dong Chenxi give him a surprise?

At that moment, a glimmer of anticipation arose in Zhao Fusheng.