Chapter 1441: Audacious

Many times, if the direction is wrong, the harder you try, the more awkward it becomes.

Tan Kaixuan had always felt that Zhao Fusheng was wasting his talent in real business, because the guy had an incredibly keen sense for the financial markets.

From the very beginning of starting their venture to later developing in the United States, whenever it came to finance, Zhao Fusheng's judgments had never been wrong.

Although he was overly cautious at times, Tan Kaixuan still believed that Zhao Fusheng was suited for the financial business.

But Zhao Fusheng had never been very interested in financial matters. It was said that the financial division of Future Investment had been officially dissolved. In his own words, the financial market was too risky, and the Future Group had no plans to get involved.

But now, Zhao Fusheng actually proposed shorting U.S. stocks. Was the guy crazy?

"My god, have you lost your mind? Shorting U.S. stocks?"

Tan Kaixuan couldn't control his emotions and blurted out, "Do you have any idea how much money that would take?"

Obviously, shorting U.S. stocks required an amount of capital that was not in the tens or hundreds of billions, but a staggering figure.

Shorting is a term in stock and futures investment: for example, when you expect a stock to fall in the future, you sell your stock at the current high price, and then buy it back when the price drops to a certain level, the difference being your profit. Its characteristic is the trading behavior of selling first and buying later.

Shorting is an operation mode in stock, futures, and other markets, opposite to going long. In theory, you first sell the goods and then buy them back to return. Generally, a正规 shorting market has a neutral warehouse providing a platform for borrowing.

Shorting can be categorized by the underlying asset: futures shorting, stock shorting, index shorting. For derivative shorting tools related to stocks and indices, there are call warrants, call options, bull certificates; put warrants, put options, bear certificates. Call warrants are also called warrant call warrants. Put warrants are also called warrant put warrants. By type, there are currency warrants, crude oil warrants. Warrant call warrants are a type of call option with attributes like conversion ratio, premium, leverage, implied volatility, and hedge value. The same applies to warrant put warrants, just in the opposite direction. Among these, the main shorting tools can be said to be put warrants and bear certificates.

The reason Tan Kaixuan was surprised that Zhao Fusheng proposed shorting U.S. stocks was that he thought Zhao Fusheng was taking too big a risk.

"Uh, who told you we were going to be the first to stick our necks out?"

Zhao Fusheng chuckled upon hearing Tan Kaixuan's words: "Your company employs so many traders. Don't tell me they don't even know the most basic financial operations."

"What do you mean?"

Tan Kaixuan was stunned by Zhao Fusheng's words.

He wasn't stupid; Zhao Fusheng clearly had something behind his words.

At Tan Kaixuan's level, if it weren't for Zhao Fusheng's past track record that had long convinced him that Zhao Fusheng wouldn't make mistakes, he wouldn't easily take anyone's advice.

After all, the capital Tan Kaixuan now controlled was measured in billions.

"Lehman Brothers is definitely going to collapse," Zhao Fusheng said calmly. "But many people probably won't expect them to fail completely. Since that's the case, we have an opportunity."

"New Century Financial Corporation, if I'm not mistaken, this company might run into trouble even before Lehman Brothers," Zhao Fusheng said slowly.

New Century Financial?

Tan Kaixuan immediately became unsettled.

The reason was simple: this company was the second-largest subprime mortgage lender in the United States.

If it really happened as Zhao Fusheng said, then something big was definitely going to happen!

"What should we do?" Tan Kaixuan asked Zhao Fusheng.

At this point, he naturally trusted Zhao Fusheng's decision. No matter what, under Zhao Fusheng's guidance, he had never lost.

Zhao Fusheng smiled: "Simple. Clear out the stocks you hold, sell what needs to be sold, including real estate and the like."

"Huh?"

Tan Kaixuan was instantly dumbfounded. What was Zhao Fusheng up to?

With a light laugh, Zhao Fusheng said, "What's the matter, can't bear to part with it?"

"It's not that I can't bear to part with it, but isn't this too harsh?" Tan Kaixuan said helplessly.

In his view, Zhao Fusheng was clearly telling him to flee the United States.

Zhao Fusheng shook his head. "It's not harsh; it's that we have no choice."

He wasn't sure when the subprime mortgage crisis would erupt, because in the original timeline, Lehman Brothers' bankruptcy wouldn't happen until around 2008, yet now such news was already emerging. Zhao Fusheng felt this was not a good sign; perhaps the subprime crisis would break out early.

If that really happened, Zhao Fusheng believed the global economy would be severely hit.

There was no helping it—who could blame the Americans for fancying themselves the center of the world? If Wall Street truly went wrong, the world's economic circles would tremble. That statement was absolutely correct.

In the original timeline, the U.S. subprime mortgage crisis triggered a global financial storm, which in turn affected the world economy.

And now, in Zhao Fusheng's view, this risk still existed.

If it came to that, for Tan Kaixuan, one small misstep could mean total ruin.

This was no joke. Whether short-selling or going long, any business related to finance involved great risk.

For example, suppose you see stock A at 10 yuan and analyze that it will fall to 8 yuan within a certain period, but you don't hold stock A. You can borrow some stock A from someone who holds it, with an agreement to return the borrowed shares within a set time. Assume you borrow 100 shares of A, sell them at 10 yuan, and get 1,000 yuan in cash. If within the specified time the stock indeed falls to 8 yuan, you buy 100 shares of A at 8 yuan, spending 800 yuan, and return the 100 shares to the original holder. The original holder's share count remains unchanged, and you have earned 200 yuan in cash. However, if the stock rises to 12 yuan, you must buy 100 shares of A at 12 yuan per share, spending 1,200 yuan, and return the 100 shares to the original holder. The original holder's share count remains unchanged, and you have lost 200 yuan in cash.

And the outbreak of the subprime mortgage crisis was similar to this example.

Many investment banks, in order to reap huge profits, used leverage of 20 to 30 times. Suppose Bank A has its own assets of 3 billion; with 30 times leverage, that's 90 billion. That is, Bank A uses its 3 billion assets as collateral to borrow 90 billion for investment. If the investment yields a 5% profit, then A gains 4.5 billion in profit, which is a 150% windfall relative to A's own assets. Conversely, if the investment suffers a 5% loss, then Bank A loses all its assets and still owes 1.5 billion.

How high this risk is goes without saying.

"Trust me, exit the market as soon as possible, and then gather specific information about the mortgage institutions in the U.S.," Zhao Fusheng said after a moment's thought to Tan Kaixuan. "Focus on Lehman Brothers and New Century Financial."

"I understand."

Tan Kaixuan was silent for a moment, then gritted his teeth and said, "I'm just afraid that my shareholders here won't agree..."

"Then take those willing to go with you and leave," Zhao Fusheng said solemnly. "Old Tan, I'm not joking. I really have a bad feeling. I think if this subprime crisis does erupt, it could affect the whole world."

Tan Kaixuan's expression turned serious.

He really hadn't expected Zhao Fusheng to say something so grave.

A global financial crisis!

If it had been five years earlier, Tan Kaixuan might not have understood Zhao Fusheng's words, but now he deeply knew how terrifying the impact of such a global financial crisis could be once it erupted.

"I understand. I'll prepare right away," Tan Kaixuan said, not daring to delay. Even though it was midnight, he turned on the light and began to work.

Zhao Fusheng, who had hung up the phone, let out a sigh.

This was why he had always been reluctant to get involved in finance—because the risks were too high, and often these risks tempted people to try.

The Bane of True Fragrance?

Zhao Fusheng smiled wryly to himself, then quickly composed his expression and dialed Dong Chenxi's number.

At this moment, Future Investment couldn't afford to stay idle; it needed to get moving.