Chapter 82: Conservative Investors Striving to Diversify Risk
Leverage, that thing is really great!
The ability to leverage small amounts of money to make big deals is a gambler's dream and a "magic pill" for the financial world!
But as the saying goes, what goes around comes around.
There's no such thing as a free lunch; leveraging money is essentially borrowing money.
Making a fortune is naturally a cause for celebration, but once you lose money, the losses are not as simple as one plus one equals two; they multiply many times over!
It can make you experience what it means to be "bankrupt" in no time.
Back in the day, before the financial nuclear bomb of the subprime crisis exploded, there weren't so many rules and regulations surrounding leverage.
Since that battle, regulators in various countries have become more sophisticated, imposing strict restrictions and regulations on leverage not only on ordinary people but also on institutions like securities firms.
To put it bluntly, they're afraid of another global financial crisis, which would wipe out everyone.
Of course, in high-risk, high-return markets like futures and forex, high leverage is not uncommon.
"But then again, once it reaches a scale of tens or hundreds of billions, the leverage ratio gets lower and lower, right?"
Huang Fengwen of Fang Huan Investment is currently with one of his senior executives. Executive Director Liu was smoking in his office.
To leverage your assets, you need someone to act as a guarantor, and you need to have sufficient margin.
But when your initial capital grows from hundreds of millions or billions to hundreds of billions, the rules of the game change.
If it's a small amount of money, banks or securities firms might be happy to play leverage games with you.
But once the amount exceeds the bank's risk control limit, they won't bother with you. If you mess things up, who will the bank complain to?
This is when the financial giants known as "major brokers" take the stage.
"To be honest, even with a major brokerage firm acting as a go-between, a leverage of several billion is not something anyone can just take."
Unless your credit rating is off the charts, practically sky-high.
Executive Director Liu adjusted his glasses and analyzed the situation.
Does some random Tom, Dick, or Harry have billions of dollars and want to play with ten times leverage?
Which brokerage or bank would dare to take the challenge? Dream on!
Let alone ten times, even if you only play at two times, you still have to go through a strict credit assessment that would make them want to dig up your ancestors for eighteen generations.
Of course, there are always exceptions. If you are a globally renowned super-rich person, or have such a deep fortune that you can cover any losses, then brokerages and banks might consider it.
But in 99.9% of cases, the only response is to simply "get out."
For these financial institutions, risk control is more important than their own father!
After all, the 9/11 attacks and the subprime crisis were such a slap in the face that they still feel the sting.
"But... what exactly is Su Hao after, who's so focused on hooking up with those big brokers?"
Huang Fengwen took a deep drag on his cigar, his brow furrowed.
Large brokerage firms refer to the behemoths at the top of the financial food chain, such as top investment banks like Wall Street, Goldman Sachs, and Morgan Stanley.
Their main job is to help wealthy clients with money to burn, such as hedge funds, to make a name for themselves in overseas markets, or to facilitate their partnerships with various investment projects.
If a customer wants to increase leverage, they will lend at their discretion based on their own strict credit assessment system.
"It is said that they have gotten in touch with various hedge funds through large brokers and are still using their'stock lending services'."
Executive Director Liu added.
"Holy crap! He's even using stock lending? This kid's got some serious ambition!"
Huang Fengwen almost jumped up from his office chair.
Stock lending services are one of the core businesses of large brokerage firms, and also their unique expertise.
Simply put, it involves borrowing shares of specific companies from institutions or pension funds that hold massive amounts of stock, and then using these borrowed shares to short sell in the market!
Hedge funds, those hungry wolves, love to pull off this kind of shady tactic.
"So, Su Hao is now breaking his money into pieces and scattering it everywhere?" Huang Fengwen sorted out his thoughts.
"That's right, he's nothing like the Su Hao we know." Executive Director Liu nodded, his tone complicated.
In the past, Su Hao either didn't make a move at all, or when he did, it was with overwhelming force, concentrating his firepower to kill in one strike.
At this moment, Su Hao is directing that massive sum of 7 billion yuan, cutting it up and cutting it down again, feeding it to all sorts of financial products on the market like fish food.
"He's... finally figured it out and knows how to diversify his investments?" Huang Fengwen could hardly believe his ears.
To the average person, Su Hao's actions appear to be those of a diligent and risk-averse conservative investor.
"On the contrary, Chairman Huang." Executive Director Liu's words shattered Huang Fengwen's beautiful illusions.
When has Su Hao ever played by the rules?
If he were to honestly engage in value investing and risk diversification, the sun would rise in the west!
"Didn't they say he split the money up and acted on it separately?"
"It's true that the money was separated. But no matter how many detours it took, it all ended up in the same place, with the guns all aimed at one target— Zhongda!"
What kind of incredible feat is this?!
Huang Fengwen felt like his CPU was about to burn out. He'd gone through all that trouble, breaking the budget down into tiny pieces, only to end up focusing all his resources on one thing?
What's the point?