Volume 8 Final Chapter Chapter 1113 Subprime Mortgage
After sipping a little wine, Nan Yi and the other person talked about work.
After 16 or 17 years of development, Dream Town has long passed its pioneering period and is on track. It would be a waste to keep General Lai Huri here and he should move away.
"In Japan, the number of 3G users has surpassed that of 2G users, and the country has officially entered the 3G era. In South Korea, SKT has increased its investment in HSDPA networks, which can be considered 3.5G. After a few years of slump, Europe has also begun to accelerate the deployment of HSPA commercial networks.
The situation in North America is a bit slower. The CDMA2000 camp has a very strong advantage with hundreds of millions of users, so it is a bit difficult to adopt a better standard. However, North American operators generally adopt a strategy of low fees or no restrictions on data traffic, so the new standard will be popularized very quickly in the future.
We have been working on 3G in our country for some years, and now we are just one step away from the final stage. It is hard to say when this final stage will be completed, but it will definitely be before July 25, 2008. Just like we implemented the video call function in the Asian Games Village before the Asian Games in 1990, the 3G network must be launched before the Olympics.
Nan Yi picked up some revolutionary vegetables (wild chrysanthemum) and chewed them for a while. "The opening of 3G means the arrival of mobile Internet. PC applications have begun to be copied to mobile phones, or even migrated.
Ganfeng Technology is already working on 3G mobile phones based on the Golem mobile terminal system. The trial model will be available around the middle of next year. The carrier will appear, and content supply and applications will also follow.
Now is a great time for Internet entrepreneurship. We should modify the makerspace plan we discussed before and turn it into an incubation base for small Internet companies. We should also prepare an Internet investment summit and hold it once a year so that entrepreneurs who need investment can come to us on their own. We don’t need to search for them one by one…”
Nan Yi talked about a lot of things at once, from mobile Internet to investment, and then to cross-border e-commerce, direct sales model (setting up your own shopping website for external promotion), platform model (cross-border e-commerce platform), and many entrepreneurial models that can be realized in the current network environment, such as group buying and Weibo.
He hopes that Lai Huri will turn the makerspace into an operating model that combines angel investment and incubation base. He will not start a business himself, but support passionate entrepreneurs to start their own businesses, export ideas, office space, and funds, and support the emergence of a number of Internet companies.
After talking about the Internet, the two talked about the arrangements for Dream Town, the continuation of the business, who would take over after Lai Huri left, etc.
The next day, while getting up early to exercise, Nan Yi took a tour of the entire Dream Town. Many domestic R&D companies have settled in the High-tech Industrial Park, Buer Pharmaceutical's private biopharmaceutical industrial park, the Electronic Technology Entrepreneurship Park where LG, Xixing and Canon have settled, and the Animation Creative Park where Wangbei Pictures has settled.
Lai Huri shed countless sweat here, and Nan Yi invested a lot of brain cells here. After more than ten years of ups and downs, he finally laid the foundation for the current situation that can carry out his dreams.
The grand plan of the Dream Town Health and Recuperation City has given wings to the tourism industry in Coconut City, bringing some benefits to the city at present, and has not deviated from the framework of the common prosperity plan. The ill-gotten gains from real estate speculation eventually stayed in the city.
At noon, Nan Yi went to Su Meng's place and had a lunch that had no special meaning.
When the relationship ended, neither of them was hysterical. It was very calm, as if it was a trivial matter, and very friendly. It just locked up the most primitive impulse between men and women. Everything else remained the same, just like a pair of very good friends of the opposite sex, contacting each other by phone from time to time and caring about each other.
After leaving Su Meng's house, Nan Yi came to the college student restaurant again, still at the old place. As soon as he walked into the restaurant and saw familiar people, he uttered a dialogue.
"Schmidt, my telescope."
Yu Chuan looked at Nan Yi with a smile on his face, and imitated the unique dubbing accent, "Yes, Colonel."
"It's this bridge, that's it." Nan Yi's accent also changed to the dubbed tone.
Yu Chuan echoed, "It's this bridge, Colonel."
"The air was trembling, as if the sky was on fire."
"Yes, the storm is coming."
"Look, this city, it is Walter!" Nan Yi said, and then he went forward to hug Yu Chuan, "Old Yu, you are amazing. You have been guarding this shabby shop for more than ten years without moving."
Yu Chuan patted Nan Yi on the back and said with a smile: "You came back too late. The Chuanghairen band has already kicked you out."
Nan Yile said: "Is the band still there?"
"As long as I am here, the band will be here." Yu Chuan answered in a strong voice.
"A song?"
"OK."
Nan Yi played the harmonica and Yu Chuan played the saxophone, and the two collaborated on a song called "Waves of the Danube".
[“Waves of the Danube” is the theme song of the Romanian film “The Story of Joe Son”. There was a saying at that time: Vietnamese movies are about planes and cannons, Albanian movies are inexplicable, Indian and Pakistani movies have singing and dancing, North Korean movies have crying and laughing, Romanian movies have hugging and embracing, and Chinese movies are about news briefs and the new look of the motherland.
Perhaps some people can come into this world thanks to Romania. In that era when social atmosphere was still very conservative, "The Story of Joe Song" was a very rare movie that ordinary people could watch with kissing and hugging scenes. ]
After the song ended, the two chatted casually for a while and collaborated on a few more songs, proving that the Sea Chuangren band still exists.
The two became acquainted with each other because of music, and the bond between them was limited to music. Neither side had tried hard to extend their tentacles into other areas, which was quite like the friendship between gentlemen that was as plain as water.
Because of this, the only topic between the two was music, and reminiscing about those people who had gone to sea back then, whom they were both familiar with. None of them stayed, and the latest one left quietly in 1993.
Because of this, Nan Yi did not sit for long and said goodbye with the nostalgia of his youth.
On the same day, Nan Yi also met with Bai Hui who came over. After initially investing 450,000 yuan in the Wuzhishan Rice Wine Factory, Nan Yi ignored the investment. Zhao Jinshui and Chen Wenqin who took over later did not worry about it either. However, the annual dividends could be received on time. Over the years, more than 10 million yuan was received.
Because of Bai Hui's honesty, Nan Yi didn't think about putting more people in the factory, nor did he think about selling the shares back to her. He just held on to them, taking some unexpected dividends every year, and maintaining the bond between the two of them, so that he could provide a safety net for the other party if anything happened.
After a journey, Nan Yi returned to the capital and stood in the classroom again, continuing the topic of the previous lesson.
Nan Yi wrote a word "Ninjna" on the blackboard and said to the students: "Ninjna, don't doubt it, although this word is very similar to Ninja, it does not mean ninja, and I did not spell it wrong.
Ninjna, this word is actually the abbreviation of "three-no" borrowers in the U.S. mortgage industry, which stands for No Income, No Job, and No Assets.
In the last class, I said that I bought a house with a loan in Tom's name. You don't have to doubt it. I was not kidding. I did buy more than one house in Los Angeles.
In fact, my motivation for buying the house was purely speculation.”
Nan Yi smiled at the students and continued, "In 2000, I used $200,000 to buy a property worth $10.72 million. I then rented out the house and used the rent to repay the mortgage. Of course, I needed to pay a little extra, as the rent was not enough to repay all the mortgage.
In February last year, I sold the house and the final net profit was $975,630. I have to say that taxes in the United States are very heavy. "
The number Nan Yi reported left most of the students dumbfounded, and several students raised their hands.
"Students who raised their hands, please put them down. I will not tell you the details of the operation now. This is an assignment for you to think about. Based on the data I gave you, you should restore my operation steps.
I can give you a little reminder that the difference in house price growth alone is not enough to generate such a huge profit. I still have a lot of operations to do... Qin Tao, I said, put your hands down. "
The student named Qin Tao stood up and said, "Teacher Nan, I don't want to ask you about the details of the operation. I want to ask whether you deposited the profits you earned in the bank or invested them in other new areas?"
"I invested in a stock in the domestic stock market and it tripled by accident. I just sold it last month and invested in another stock. The market has not fluctuated much for the time being, and the book profit is only 1.3%."
The students below opened their mouths again, and some of them were eager to raise their hands.
"Okay, don't raise your hands, and don't ask me which stock I'm holding. You should ask your family for tuition and living expenses. Most of you come from ordinary families. Your parents have worked hard to support you in school. Don't think about adding to their burden. Don't think about investing the meager income you earn from part-time jobs and tutoring outside of school into the stock market.
Investment or speculation is not something you should do at the moment. The fact that you can come here to study is enough to show that you are the best among your peers. It is not an exaggeration to say that you are the chosen ones of heaven.
However, the elites in the financial field are the best selected from among you. After years of study, they have a solid theoretical foundation and have gone through many thrilling actual combat. They are overwhelming you both in theory and practice.
Therefore, study hard first. If you are interested and have time, you can try a simulated trading session to get a basic understanding of stock market operations.
Of course, if you come from a well-off family, you can take out a little from your living expenses to experience the stock market. You should have the right mindset and treat it as paying tuition fees for learning. Don't think about becoming a legend.
If, I say if, any classmate becomes a legend, please do not tell other classmates. Legends are always lonely, there are only a few of them, and their so-called inspirational stories will kill countless people who also want to become legends.
That’s enough of this topic, let’s continue with the class…”
Nan Yi believed that what he said at the end would become nonsense. If the students sitting in this classroom did not have a competitive spirit, they would most likely not be admitted to Peking University. They all stood out as the best. Now that these best people have gathered together, who would want to be an ordinary one among them? Competition is inevitable, and he wanted to open up a new arena for these students.
"During the Great Depression in the United States, the U.S. Congress enacted a bill, the Securities Exchange Act of 1934, also known as the Glass-Steagall Act. The core of this bill is to strictly separate investment banking and commercial banking businesses to ensure that commercial banks avoid the risks of the securities industry. The bill prohibits banks from underwriting and operating corporate securities and can only purchase bonds approved by the Federal Reserve.
In fact, to put it simply, the US Congress does not want to see banks investing depositors' money in high-risk financial products.
Influenced by this act and some other provisions, from the 1930s until 1978, most financial practitioners working on Wall Street did not have high incomes. If their family burden was heavy, they might sell stocks on Wall Street during the day and work part-time as a waiter in a bar at night.
Working in the financial industry during that period was like being a three-generation poor peasant. People said that such people were of good family background, but as long as the family could make ends meet, no girl would be willing to marry into such a family. What was the point of marrying into such a family? Going hungry for nine meals a day for three days, and having seven people in the family share one pair of pants?"
"Ha ha……"
There was a burst of laughter from the audience. Nan Yi's unique and sarcastic jokes made it difficult for a group of young students to control themselves.
Nan Yi also had a smile on his face.
After a long time, the laughter in the classroom gradually died down, and Nan Yi clapped his hands to signal everyone to be quiet.
"Everything changed after Reagan came to power. In order to revive the sluggish US economy, Reagan appointed Donald Thomas Reagan, who was his ancestor five hundred years ago, as Secretary of the Treasury. To distinguish him, I call him Little Reagan.
Before Reagan Jr. became the Secretary of the Treasury, he was the CEO of Merrill Lynch, which means he was a part of Wall Street.
There is a rumor in the United States that Reagan was able to win the election because of the support of Wall Street. It is not known whether this rumor is true or not, but since Reagan Jr. became Secretary of the Treasury, the White House and Wall Street have entered a honeymoon period.
From then on, the United States began to implement the economic policy of "Reaganomics". For the specific content of this policy, students who are interested can go to the library or search the Internet themselves. I will not go into details here.
Starting in 1982, the United States relaxed restrictions on savings and loan banks and companies, allowing them to use savings deposits for venture capital. Pandora's box was opened, and by the end of 1989, more than 100 banks and companies went bankrupt, and many depositors lost their life's work. A total of more than 120 billion US dollars evaporated.
Most of it is cash, not fictitious market value, and it has not left the United States, nor has it been physically eliminated; it still exists, it just moves from one pocket to another.”
Nan Yi took a sip of water to moisten his throat and continued, "Let's go back a little bit in time. In 1938, when the Great Depression was still lingering, then-US President Roosevelt took the lead in establishing the Federal National Mortgage Association, which is now the famous Fannie Mae.
Since then, Americans have begun to enjoy 30-year fixed-rate mortgages. Buying a house is no longer out of reach, and owning a house has become a symbol of the American middle class.
The purpose of the housing loan policy at that time was to enable ordinary people to buy houses, and the purpose of people buying houses was simply to have a place to live and to preserve the value of their assets.
In 1968, the United States was deeply mired in the Vietnam War. In order to cover up its debts, the federal government decided to privatize Fannie Mae. After the privatization, Fannie Mae lost its government background, but at the same time it was no longer subject to government constraints and could purchase all qualified mortgages nationwide.
In order to avoid monopoly, the U.S. Congress approved the establishment of a third agency, Freddie Mac, in 1970. The second is Ginnie Mae, which is mainly responsible for the business of civil servants and veterans, and we can pretend that it does not exist.
Let’s fast forward seven years to 1977, when a man named Lewis Ranieri from Salomon Brothers Bank came up with a brilliant idea – mortgage-backed securities, or MBS.
Don't pay too much attention to nouns. They are not important. Nouns are given by people. They can be called mortgage-backed securities, or Shaolin Temple securities, or Wudang securities. Just make it as difficult to pronounce as possible and sound more upscale. The purpose is that ordinary people can't understand it.
For example, I could name my course Spiraling Deep Volume ARK Economics, and no one would understand what I was trying to say..."
"Haha..." The whole room burst into laughter.
"Don't laugh. I'm about to publish an economic masterpiece, Advanced Economics of Humankind, at my own expense. It contains a lot of difficult terms. In order to recover the cost, I plan to focus the final exam outline on this book. It's 298 per copy. There's a discount if you buy three copies at a time."
Amidst the laughter again, a female student shouted, "Teacher Nan, how much does it cost to publish your book?"
"100,000 yuan, no discount, and I have to underwrite 1,000 copies myself. I'm counting on you."
"Hahaha……"
When the classroom quieted down again, Nan Yi continued to talk about the topic, "At that time, Ranieri's MBS was still very crude and could not be operated on a large scale because Salomon Brothers could not buy too many real estate mortgage loans until another man appeared."
Nan Yi turned around and wrote the name "Paul Volcker" on the blackboard. "In 1979, Paul Volcker, then chairman of the Federal Reserve, started raising interest rates to curb inflation. He raised the interest rate to 22.36% through continuous interest rate hikes. Through violent interest rate hikes, inflation in the United States finally subsided.
But as interest rates continued to rise, banks were losing money on every mortgage they lent, and because Regulation Q set a cap on bank deposit interest rates, which at the time was 5.25%-5.5%, well below the inflation level.
Americans are unwilling to keep their money in banks, preferring to put it in money funds. As a result, savings and loan banks continue to lose money and cannot raise enough funds, with 2,900 facing bankruptcy.
In order to save the savings and loan banks, the US Congress passed a tax exemption bill in 1981, stipulating that after the savings banks sold the loans, the Treasury Department would return the taxes paid in the first 10 years as a subsidy. This gave the savings and loan banks sufficient motivation to sell the mortgages, and Salomon Brothers took this opportunity to buy a large number of them.
At the same time, Ranieri also brought in Fannie Mae and Freddie Mac to provide mortgage loans for Salomon Brothers. Although the two houses had been privatized, in the eyes of the American people, they were companies that would never fail and had official endorsement. Ranieri created a type of bond called mortgage bonds, which was an upgraded version of MBS, thus ushering in a new era in the bond market, namely subprime loans.
Nan Yi explained the principle of subprime mortgages in easy-to-understand language.
"In order to attract more loan customers, subprime mortgage companies represented by New Century launched a zero down payment policy. My Tom got a loan from this company. Cats can get loans, dogs can get loans, not to mention homeless people on the street.
As far as I know, there are already a considerable number of people in the United States who have no long-term repayment ability and have purchased houses through subprime mortgages. Some of them can pay off their mortgages for half a year to a year, while others have very unstable incomes and may default on their loans at any time.
Although there is no down payment, there are still some expenses incurred during the house buying process. Which student can tell me why people with unstable income would choose to buy a house now? "
“I am optimistic about the trend of housing prices.”
"They are not for living in, they are for speculation."
“…”
The students rushed to answer.
Nan Yi turned around and wrote the four words "subprime mortgage crisis" on the blackboard, and then drew a circle around the word "crisis".
"Subprime loans may not be a scam, but it can definitely be said to be a Ponzi scheme, a game of passing the parcel. When no new players join, it will collapse. As far as I know, there are not many new players in the United States now, and the big players on Wall Street have already gone to Europe and the United States to invite new players.
However, even if more new players join the subprime mortgage game, as long as the core of the game, the 'mortgage contracts', no longer increase, the game will collapse. "
Nan Yi lowered his head and looked at his watch. "There is less than a minute left before the get out of class ends. I have a second assignment for you. Make a chart of US housing prices from 1970 to the present, and then analyze the trend of US housing prices in the next year. I want to see the conclusion, and I also want to see the basis for your support for the conclusion. The data you cite must be detailed and accurate.
This assignment is quite difficult, so you just need to hand it in before the end of the month. In the first class next month, we will continue to discuss the subprime mortgage issue.
In the next class we will talk about Iceland's economy. You can prepare in advance or not. My class will still be a good class. I will still be a good guy. Okay, wait for the bell to ring and leave the get out of class on your own."
Having said that, Nan Yi packed up his things and prepared to leave. However, this time it was not so easy for him to leave as several students approached him while shouting.
"Teacher Nan, don't leave!"
"Teacher Nan, please teach us for a while..."
"Teacher Nan..."
"Stop it, I said my class won't be delayed." Nan Yi looked at the student approaching and scolded, "It's the weekend, if you want to go to the Internet cafe to grab a computer, go early, if you want to date, you can leave now."
"Teacher Nan, can I treat you to a meal?"
The person who was speaking was Du Wenhua. His father's name was Du Shuangwang, a well-known tycoon in Ikh Ju League. It was unclear how much assets he had, but it was said that the coal he dug a day could be sold for two to three million. He had suffered a lot from being uneducated, so he named his son Wenhua .
"Student Du, you don't have to eat. If you have anything to say, we can talk about it in the next class."
"Teacher Nan, can I treat you to a meal?"
The person who is speaking now is a girl, Xue Xiaomin. Her background is not very clear. She is wearing a Metersbonwe top, Jack Jones cropped pants, and a pair of Nike shoes. This combination is not too expensive, but every time Nan Yi sees her, he can find that she is dressed differently. It can be seen that Xue Xiaomin's family is not poor.
"Student Xue, the same goes for you." Nan Yi nodded to the students and said, "Happy weekend everyone, go eat and stop crowding around."
