Sha Zhu's Rebirth in the Courtyard: Starting with Hitting Someone in the Head

Chapter 407 Year-End Warning

On the day of Lichun (the beginning of spring), Shen Zhixia returned to Beijing.

She got out of the car, wearing a dark gray coat, a scarf wrapped around her chin, and carrying a suitcase. She saw He Yuzhu and the other two who were there to greet her.

"Brother He, Sister Xiao'e, Sister Zhu Lin, I'm back."

Lou Xiao'e took the suitcase from her hand. "Zhixia, you're finally back. Your grandchildren are all in Beijing, what are you doing staying in Hong Kong?"

Shen Zhixia laughed and patted her on the shoulder, "It's all because you handed it over to two newspapers for me, otherwise I would have come back long ago."

Zhu Lin stepped forward and took her arm. "Sister Zhixia, let's go inside. It's cold outside."

He Yuzhu smiled and stepped aside to let the doorway open, and the three of them walked inside side by side. He didn't follow, but turned and went to the study.

Hearing the voices, Jingchuan ran out from the east wing. "Grandma, did you come to see me?" He ran up to Shen Zhixia and looked up at her.

Shen Zhixia reached out and touched the top of his head: "You've grown taller. Are you happy that Grandma will be living in Beijing from now on?"

Jingchuan held onto her leg tightly, and the three of them tried to persuade her for a while. Only after confirming that she wouldn't leave again did the little one giggle and run back.

That evening, He Yuzhu sat at his desk, the financial terminal on, data scrolling across the screen. Several printed English reports lay before him, numbers circled in red pen on the margins.

A new message popped up on the financial terminal: On February 16, 2007, New Century Financial Corporation, the second largest subprime mortgage lender in the United States, issued a financial warning.

Subprime mortgage defaults surged dramatically, prompting a significant increase in loan loss provisions and the disclosure of a sharp rise in subprime mortgage default rates. The company also forecast significantly lower-than-expected profits, causing its stock price to plummet that day.

He Yuzhu knew that this was a significant early sign of the subprime crisis, but it had not yet fully erupted.

On Lunar New Year's Eve, the children all came back to celebrate.

Upon arriving at the courtyard, He Xiao and the other two went straight to the study. Once seated, He Yuzhu pushed the report to the center of the table: "Take a look at this."

He Xin took the report and flipped through a couple of pages, his gaze lingering on a few lines of numbers. The data was circled in red pen in the margins, with question marks next to the words. After reading it, he handed the report to He Xiao.

After He Yuzhu and the other two finished reading, they spoke: "Yesterday, the stock price of New Century Financial Corporation fell by nearly 15%. HSBC Holdings set aside a huge $1.8 billion in bad debt reserves overnight, specifically to hedge against the bad debt risks arising from the US subprime mortgage crisis."

The combination of these two pieces of news means that the housing credit bubble in the United States, which has lasted for many years, has cracked for the first time in the open market.

Currently, the global market reaction is muted. Ordinary investors and small and medium-sized institutions completely fail to understand the risks involved, simply viewing it as two companies experiencing operational problems.

Most Wall Street investment banks and financial analysts remain bullish, unanimously believing that the US housing market has a solid foundation, short-term fluctuations are nothing to worry about, and the US stock market bull run will continue.

He Yuzhu looked at his three sons without a trace of doubt and continued:

"The risk of bad debts from the US subprime mortgage crisis has surfaced. The market is not taking it seriously now; it's just the calm before the storm."

After the New Year, you will all return to your posts and focus entirely on the dynamics of overseas lending and mortgage institutions. This year has been a year of escalating risks; the bad news will come in waves, each more intense than the last, and the pace will not stop.

The three brothers knew their father's overall plan; their faces were serious and solemn, but their eyes were full of excitement.

He Yuzhu glanced at them: "Alright, stop pretending to be so serious, your eyes are practically gleaming. After the New Year, you all go back and keep a close eye on this matter. Make sure everything that needs to be prepared is ready."

He turned to He Xin, "What's the progress of your SPV architecture?"

"Dad, I saw that my older brothers were so serious, so I could only go along with them." He Xin replied with a smile, "It's all done. All forty entities are in place, scattered across different jurisdictions, and can be launched at any time. The CDS side has already started building positions in batches, and is currently about 40% complete. We will continue to push forward after the Spring Festival."

He Yuzhu nodded: "Well done. The market isn't panicked enough yet, it's not the time to invest heavily. We're just laying the groundwork now."

On the first day of the Lunar New Year, the three brothers, He Xiao, He Chen, and He Xin, returned to their posts, and everyone was on standby.

After the start of spring, overseas markets seemed to remain peaceful and prosperous, with indices not falling sharply and public opinion still bullish.

However, astute top-tier capital and large asset management institutions have already sensed the danger and have begun to quietly reduce their holdings of risky assets, shrink their subprime business, and exit the market to avoid risks.

The market has completely split into two factions, with the differences between bulls and bears widening and undercurrents surging, just waiting for a point to completely detonate.

Throughout the latter half of February, the turmoil was only undercurrents, without any explosive negative news.

By March, as spring arrived and the weather warmed, everything came back to life, and peace reigned in China. Meanwhile, the American market across the ocean couldn't hold on any longer.

The subprime mortgage crisis, which had been brewing for over a month, has finally come to the forefront.

New Century Financial's bad debts could no longer be contained, its capital chain completely broke down, it was on the verge of complete bankruptcy, and its stock price plummeted continuously, with the single-day drop crushing historical records.

This isn't the only one.

A large number of small and medium-sized subprime lending institutions have been reported to have suffered huge losses, ceased operations, laid off employees, and broken capital chains.

The US subprime mortgage market deteriorated across the board, with widespread mortgage defaults and a skyrocketing bad debt rate, exposing the vulnerabilities of the entire credit system to the light of day.

In just half a month, overseas financial news outlets were filled with negative news.

The market sentiment, which had initially been one of hoping for a lucky break and waiting to see what would happen, collapsed instantly, and panic quickly spread throughout the European and American financial circles.

Hong Kong, the top-level operation center of Zhonghuan Financial.

All three brothers were on duty, staring intently at the scrolling real-time news and plummeting data on the large screen, their expressions extremely solemn.

From the warning in February to the confirmed collapse in March, the entire trend unfolded exactly as my father predicted at the end of last year for 07, down to the month.

At that moment, the three brothers were deeply shocked.

They are all top professionals in their respective industries, and have witnessed countless cycles, fluctuations, and market turning points.

They know very well that the most terrifying thing about the capital market is uncertainty.

No one can accurately predict fluctuations, no one can pinpoint the turning point of a cycle six months in advance, and no one can predict the entire three-year global financial crisis from its beginning, development, climax to its bottom.

But their father did it.

While everyone around the world was immersed in the euphoria of the US bull market and firmly believed in economic prosperity, they foresaw potential problems in advance.

When the market first issued a warning, and everyone ignored it, we were convinced that this was just the beginning.

This vision and perspective, which surpasses all the world's top capital, filled the three brothers with the utmost respect.

At the same time, they also truly felt the cruelty of the global capital market. The seemingly prosperous and stable economic system was already rotten and hollow inside.

A credit bubble that went unnoticed could bring several financial institutions to the brink of bankruptcy in just over a month, causing widespread panic in overseas markets.

Especially He Xiao and He Chen, who used to manage companies and profit from industry profits. Now they are finally getting a real feel for the essence of top-tier capital games.

He Xin sighed inwardly, "When the wind blows, everyone revels; when the wind falls, nothing remains." A sense of awe took root in the hearts of the three brothers.

He Xiao stood in front of the large screen, looking at the continuous bankruptcy warnings, and spoke in a deep voice.

"It matches perfectly."

"It was just a warning before the Lunar New Year, but it officially took effect in March. The speed at which the risk spread was exactly as Dad predicted."

As the person in charge of the whole situation, he was absolutely certain at this moment. His father's overall plan would not go astray.

This three-year-long harvest has now begun in earnest.