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

Chapter 409 Bear Stearns Liquidation

Summer arrives quickly in Hong Kong; the humidity of May hasn't even dissipated before the heatwave of June is already sweeping in from the sea. In the Mid-Levels villa area, air conditioners blast air, keeping the humid heat out of the windows.

Several reports were spread out in front of He Xin. He held a cup of coffee in his left hand and used his right hand to click on the screen to refresh the latest market news.

His gaze froze after he clicked on it. Bear Stearns, the fifth-largest investment bank in the United States, announced that two of its hedge funds were ceasing to accept redemptions from investors due to severe losses in their subprime mortgage-backed securities investments.

He Xin read the message from beginning to end. Was it about to begin?

The phone on the table rang, and when he picked it up, it was his older brother, He Xiao.

"Third brother, did you see that?"

"Just saw the news. Bear Stearns has stopped redemptions for two funds. One is quite large, and both are heavily invested in subprime-related securitized products. Now, if investors want to get their money out, well, they can only dream about it."

He Xiao asked on the other end of the phone, "How will the market react?"

He Xiao was still a little worried. "How's your portfolio going? Should we ask Dad?"

"The CDS position building is 70% complete and progressing according to plan. Dad said there's no rush this year, just maintain a steady pace." He Xin's voice was confident: "Big brother, don't worry. This matter is bigger than it appears on the surface. The suspension of redemptions from Bear Stearns' funds will have a rapid chain reaction."

"Understood. Then keep an eye on it."

That same evening, the lights were on in the study across the courtyard. He Yuzhu sat in front of the financial terminal, watching the messages scroll by on the screen without looking back.

He picked up the dedicated phone line and dialed Hong Kong.

He Xin answered the phone: "Dad, did you see Bear Stearns?"

"Okay. I'll make a call to put your minds at ease and tell you not to worry."

He Xin paused for a moment on the other end of the phone: "Dad, you should call my eldest brother. He just called me to ask if I wanted to consult you. The positions are still progressing according to the original plan, so you can rest assured about my work."

He Yuzhu lit a cigarette. "You brat. Do I need your permission to make a phone call? Your older brother has a lot in mind and considers things carefully. The fact that we both called you shows that you don't give people a very stable impression. You need to reflect on yourself. Just stick to the original pace. I'm not going to argue with you anymore."

"Okay, I get it. I'm just keeping a youthful mindset."

He Yuzhu didn't hang up. "Bear Stearns has bigger problems than they say. Right now it's just the funds stopping redemptions, but it will get bigger later. When you're increasing your positions, leave enough room for maneuver, don't overextend yourself. There will be even bigger fluctuations later."

He Xin said seriously, "I understand, Dad. I'll proceed gradually."

As June continued, bad news began to emerge one after another. On June 14, Bear Stearns released its quarterly report, showing a 10% year-over-year decline in quarterly profits. On June 22, Bear Stearns announced plans to provide $32 billion in loans to its funds to save the company.

The news caused market tension.

He Xin sat in the trading center, watching the series of numbers jump across the screen. Liu Shaoqian stood beside him, holding the latest trading record of the day: "Mr. He, the June CDS position is progressing smoothly. The unrealized profit is continuing to grow."

He Xin didn't turn around: "How much?" Liu Shaoqian gave a number. After hearing it, He Xin tapped his fingers rhythmically on the table. He remembered his father's words: don't rush, keep up the original pace.

"Shaoqian, continue with the second batch of positions, but don't rush it."

Liu Shaoqian responded and turned to leave.

It was early July, just as summer vacation had begun. A car was parked at the entrance of the National Martial Arts Training Base. He Yang and He Jing'an got in the car carrying a bag; they didn't have anything else with them.

He Tie and his ten male team leaders waved goodbye to the two men, their eyes filled with envy as they watched the car drive away. He Tie was itching to go, wishing he could go to Hong Kong with them right then and there.

He Yang and his companion will spend a summer vacation at the Lantau Island training center. Every summer after the He family members turn sixteen, they go to Hong Kong to receive military training.

He Yuzhu walked to the side of the group, his gaze sweeping over the young faces.

"Look away, everyone. Don't envy them. The rules are there; you'll have to wait a few more years."

He Tie stepped forward: "Grandpa, you can shoot guns there every day. We've been there once, and He Yi and the others were incredibly envious."

"Silly boy. Have you forgotten how He Yangjing came back last summer and was tanned like he came from Africa? Over there, you have to learn wilderness survival, basic firearms, teamwork, and everything else. The living and eating conditions are not like at home, and you have to endure a lot of hardship. It's not like you're going on a vacation to enjoy yourself."

He Lin couldn't help but say, "Even if it's tough, we'd still go, as long as we get to shoot every day."

"What's the rush?" He Yuzhu smiled and patted He Tie, who was closest to him. "As you get older, it will be your turn eventually. Your task now is to establish a solid foundation at the base. You must strengthen your Ming Jin (internal energy) and not slack off on your basic skills."

He Mu said in a low voice, "Then let's practice hard and look forward to that day."

The others nodded in agreement, their earlier envy gradually subsiding, replaced by a sense of anticipation.

"Alright, stop standing around at the door." He Yuzhu waved his hand. "Go back and study. Tonight's sparring session is going to be absolutely disciplined."

The ten boys responded in unison, turned around and went back to the base, heading towards the library.

The evening breeze of late July still carried the lingering heat, and night enveloped Hong Kong Island and Beijing. Meanwhile, it was daytime on Wall Street in New York. The twelve-hour daylight saving time difference meant that time was perpetually out of sync between the two sides of the ocean.

On July 31, 2007, a major piece of bad news broke during trading on the US stock market.

Bear Stearns' two hedge funds, which had been barely surviving after suspending redemptions in June, finally succumbed to the massive subprime mortgage defaults and officially announced their liquidation and bankruptcy. In just over a month, the value of the 20 billion yuan fund nearly disappeared, leaving countless investors with nothing.

The shocking negative news that broke in New York at noon traveled across the ocean to the financial centers of Beijing and Hong Kong. By the time it reached the dead of night, most Chinese people were sound asleep and no one was aware of the beginning of this storm.

Only the financial terminals, which are on duty around the clock, constantly pop up glaring red warning messages.

The following day, mainland media published news reports that all blurred the timeline, attributing the incident to the financial turmoil of August 1st.

The world only saw it as a small, localized crisis on Wall Street, unaware that this was the first huge rift torn open by the global subprime mortgage tsunami, quietly setting the stage for an economic disaster that would sweep the entire world.