Capítulo 16: Crazy Deal
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Liam waited patiently by the side, not rushing him.
An hour passed. Mark Baum's brows furrowed more with each page he turned, and soon, he reached the last section of the document.
Finally, he let out a long sigh, raised his head, and handed the document back to Liam.
"Mr. Baum, do you still want to continue with mortgage-backed securities?" Liam asked lightly, taking the document back.
"Call me Mark. Thank you, Liam. I never imagined the real estate market could be this shocking." Mark Baum shook his head, his voice low as he started the car. "I'm going to have my team conduct thorough investigations across the United States. There's definitely a bubble in the subprime mortgage market. I just want to know how big this damn bubble is and when it's going to burst!"
"It's clear that many of these loan contracts state that adjustable interest rates will take effect in 2007. By then, interest rates will spike, and many people won't be able to repay their loans that have suddenly doubled. The default rate on subprime loans across the United States will rise sharply, and the entire subprime mortgage market will burst like an over-inflated balloon," Liam said calmly.
His voice wasn't loud, but to Mark Baum, it sounded unusually cold.
"That would trigger a financial crisis affecting not just the United States but the entire world…" Mark Baum murmured.
The car fell silent for a while. After some time, Mark Baum spoke solemnly, "Liam, thank you. If it weren't for you, I would've continued with mortgage-backed securities. When the market crashes, I'd definitely go bankrupt. At that point, I'd have no choice but to jump off a building. I owe you a favor, a big one. If you need any help, just say the word."
Liam hesitated for a moment and then said, "There is something I need your help with."
"Just say it." Mark Baum wasn't surprised at all. He didn't think his charm was enough to make Liam run around for his career.
"I want to short the subprime mortgage market, but I have no way to do it. I hope you can help me with the ISDA (International Swaps and Derivatives Association) master agreement threshold problem; otherwise, I can't trade CDS directly," Liam explained.
That was why he was helping Mark Baum.
Even though he had $40 million in his possession, CDS (Credit Default Swaps) wouldn't be sold on the open market, so he couldn't buy them even if he wanted to.
And since Mark Baum was able to trade in mortgage-backed securities, he must have signed the ISDA Master Agreement.
Only by signing the ISDA Master Agreement can one trade high-risk financial derivatives, and this qualification is exactly what Liam needed.
"How much money do you have? If it's too little, I'm afraid I can't help you," Mark Baum asked, surprised.
He had heard a lot about Liam from Lickliter. It was said that this young man had come to the United States on a public scholarship to study, and his family background was quite ordinary. So where did he get the money to dabble in the financial market?
"I have $40 million. It's not much, but enough to participate in CDS transactions."
"$40 million? Where did you get that kind of money?" Mark Baum exclaimed, then realized his mistake. "Sorry, I didn't mean to pry into your privacy. I'm just surprised. This is very different from what I heard about you from Todd."
"It's okay; I was just lucky and made a successful investment over the past two months," Liam replied with a smile.
Though still puzzled over what kind of investment could yield such a huge return in such a short period, Mark Baum wisely refrained from prying further. Instead, he agreed readily, "$40 million is enough. I can help you get an ISDA agreement with Deutsche Bank. This bank is currently the largest seller of CDS in the market. I can introduce you to their trader, Greg Lippmann. He called me just the other day, trying his hardest to sell me CDS."
"Thank you very much."
"But you'll need to set up an investment company first. Individuals can't sign the ISDA agreement. If you trust me, I can help you with this," Mark Baum reminded.
"Thank you for your help," Liam said gratefully.
"This is just a small matter for me, but you're the one who's truly helped me. I need to go back and conduct a more detailed investigation of the subprime mortgage market... What's your phone number?" Mark Baum asked.
The two exchanged phone numbers, and Mark Baum drove Liam back to Butler University in his Ford Mustang.
Liam watched the car drive away, a faint smile appearing on his face.
He turned and looked to the west, toward the entrance of Butler University. His gaze was distant, as if it had pierced thousands of kilometers, reaching the Golden Gate Bridge standing tall on the far-off West Coast.
A week later, Liam, who was reading in his apartment, received a call from Mark Baum:
"Liam, I sent people to investigate over a dozen cities across the country, and the results are shocking. The subprime mortgage market isn't a bubble; it's a powder keg, like the Balkans before World War I. It's about to explode, yet people all over the United States are still buying houses. Those bankers should go to hell!"
"Mark, you sound very angry?" Liam said slowly.
"Of course, this is a financial crisis that will affect the entire world. Many people will lose their fortunes, and millions of ordinary people will lose their homes," Mark Baum said angrily.
"So you've decided not to short the subprime mortgage market anymore, right?" Liam asked slowly.
"..."
There was silence on the other end of the phone.
Liam paused for a moment, then continued, "After all, if you do something, the financial crisis will worsen. Although it won't impact the overall situation, there could be thousands or even tens of thousands more homeless people. You're so kind, surely you won't make such dirty money."
"Uh..." Mark Baum was still speechless.
"Haha, Mark, you're a capitalist; how come you've become so compassionate? This is the fault of the American financial system. We have no way to stop it or even delay its occurrence. The dollars we earn are king," Liam said with a smile.
He was not American and had little sympathy for the American people.
"Well, you're right, you cold-blooded animal..." Mark Baum's voice was helpless. "I've already contacted Greg Lippmann and am ready to invest $1 billion, fully leveraged, to exchange for CDS."
"Wow, $1 billion! Mark, why are you still in Indiana?"
"What do you mean?"
"You should be on Wall Street; you're a real big shot!" Liam teased with a smile.
"Come on, my little money is nothing. Wall Street is too deep; I can't control it," Mark Baum said with a self-deprecating laugh. "I've heard lately that a fund manager named John Paulson on Wall Street has already bought $2 billion in CDS, and he'll likely keep increasing his position. He was just an unknown player before, and it's rumored that Soros is backing him."
"We don't need to worry about others, as long as we get our share, that's enough," Liam reassured.
"Yes, are you free on Monday? I have an appointment with Greg Lippmann to go to Wall Street to complete the transaction," Mark Baum said.
"Of course, I've been waiting for this day," Liam replied, smiling.
"Great, I'll come to see you on Monday. By the way, have you thought of a name for the company? The formalities are complete," Mark Baum asked.
Liam thought for a moment and slowly said, "Let's call it Dream Investment Company. I hope to realize my dream through it."
"What's your dream? To become a billionaire? If that's it, I think you'll realize it soon," Mark Baum said with a laugh.
"Of course not. I want to be an NBA championship coach."
"Ha, with all due respect, that's much harder than making $100 million."
"So I'm going to make more money."
"Does that have anything to do with money? You're too young; there's no way any team would invite you to coach," Mark Baum said, puzzled.
"When I have enough money to buy a team, I'll naturally become the head coach," Liam said calmly.
This was the first time he had told anyone about his goal. If he hadn't wanted to short the subprime mortgage market together with Mark Baum, he wouldn't have told anyone.
"Wow, a twenty-something NBA team owner? That's... crazy! But the real estate market is about to crash, so what's impossible? Just go for it, man!"
On Monday, Liam flew to New York with Mark Baum on his private jet.
Looking at the narrow street in front of him, with tall buildings blocking almost the entire sky and the hustle and bustle of pedestrians, Liam felt deeply moved.
Although he was an investment analyst in his previous life, he had never been here. Now, he had become a basketball coach, but he had set foot on this street with a huge sum of money.
This is the world's financial center, Wall Street.
"Liam, what are you daydreaming about? Hurry up; we're going to be late," Mark Baum urged.
Liam nodded slightly and quickly followed.
Twenty minutes later, the two arrived at Deutsche Bank's New York office, where they met Greg Lippmann, the chief trader for credit default swaps. He was a middle-aged man with a Mediterranean haircut, wearing a black suit and glasses.
Liam didn't expect Greg Lippmann to have a humorous personality and be a quick talker, but he immediately felt a bit uneasy when he saw Liam and Mark Baum.
When he heard that Mark Baum was going to buy $1 billion in CDS and Liam wanted to buy $40 million, his whole face lit up with joy.
"Guys, you're the smartest investors I've ever met. But don't you feel a bit paranoid about the subprime mortgage market?" Greg Lippmann began his sales pitch.
Mark Baum shook his head with a smile. "If it's paranoia to think a bubble is going to burst, I'll gladly be a paranoid."
Liam added calmly, "Mr. Lippmann, you should be grateful for our paranoia; otherwise, you wouldn't be able to sell these CDS."
Greg Lippmann laughed heartily. "That's true. I guess you're right; I should be grateful."
Then they shook hands and sat down to sign the ISDA Master Agreement.
After completing all the procedures, Liam left Deutsche Bank's building with Mark Baum, feeling a sense of accomplishment. As they walked down Wall Street, the sun was setting behind them, casting long shadows.
They knew that the real storm was just beginning.
End of this chapter
Note: This novel as you see I changed the name and nationality, as such is more complicated translate it I hope you support.
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