My absurd experiences in North America over the years

When Lucy brought Li Fu to the private club on the top floor of the Forrest Building, Cole was playing chess with an elderly man with gray hair.

This man's name is Richard Vaughn, and he graduated from New York University's Stern School of Business.

In recent years, he has served as an economic advisor to the Forrest family and participated in numerous business decisions.

Lucy didn't know him, but she knew it would be impolite to interrupt them at this time, so she and Li Fu waited quietly in the distance.

About twenty minutes later, the two had a winner, and Cole turned to look at them.

Lucy took a deep breath, adjusted her pace, and approached politely. "Excuse me for disturbing you both, but I have a real estate market analysis report here. It's urgent and may require immediate review."

Cole looked up at his sister, raising an eyebrow slightly.

He knew that Lucy wouldn't usually talk about work in this kind of setting, but now she was so anxious that she must have something urgent to say, so he took the heavy document.

As the sound of pages turning grew louder, his initial nonchalance was replaced by a hint of seriousness.

After reading it, he handed the report to Richard Vaughn.

"Mr. Vaughn might want to take a look as well."

Vaughn adjusted his glasses and took the report with both hands.

He looked more closely, but his expression remained unchanged.

About ten minutes later, he looked up and his gaze swept over Li Fu like a hawk's. "Young man, did you write this report? Predicting the financial market requires a decade of consistent data accumulation. Isn't the data model in your report too aggressive?"

Li Fu did not rush to refute.

They were standing in a location overlooking Nashville's most bustling neighborhood, but a year later, even that location saw its value plummet.

"Sir, I understand that the market has a self-regulating mechanism," he said politely, but his tone was as steady as a rock. "However, have you noticed that the leverage in the subprime market has ballooned to a critical point? As the default rate among underlying borrowers rises, those heavily packaged MBS (mortgage-backed securities) and CDOs (collateralized debt obligations) will eventually become the powder keg that ignites the market."

Richard Vaughn scoffed, tapping the chessboard lightly with his fingertips. "That's alarmist. The Federal Reserve won't stand idly by and watch liquidity dry up. There's never been a systemic collapse in modern history."

Kerr agrees with this.

Today, the United States has become an extremely large financial empire with a highly mature operating system.

A systemic collapse is probably very difficult to occur.

He holds this view not because he lacks knowledge.

Rather, given the historical context, it is difficult for an individual to have the foresight to break through their own cognitive limitations.

Li Fu did not continue to answer, but instead took out a data chart and precisely projected it onto the chessboard. The chart curve pierced through the illusory optimism like a sharp blade.

"Mr. Warn, please consider this: since 2005, the subprime mortgage default rate has climbed by 37%, yet the three major rating agencies are still labeling junk bonds with AAA. Do you really believe the market can remain rational?"

The figure of 37% is extremely glaring, meaning that more than a third of the people have already defaulted.

Bad debts caused by defaults can severely restrict a bank's normal liquidity. If defaults are concentrated, they can even lead to a bank's bankruptcy.

The default rate is still gradually rising.

The air suddenly became tense.

Cole's gaze lingered between the charts and Li Fu, his knuckles tapping unconsciously on the table.

He suddenly caught a glimpse of a handwritten note on the last page of the document: "If a storm comes, the Forrest family's real estate, which accounts for about nine percent of their total assets, could potentially devour 30 percent of their profits."

This is by no means alarmist.

Real estate is a major project affecting people's livelihoods, and even commercial real estate's main customers are small and medium-sized enterprises.

If a project incurs huge losses, abandoning the project might recover some of the losses, but it will cause a significant decline in business reputation.

It also makes it easy to lose the trust of ordinary people.

If the project doesn't become a complete failure, it means we'll have to keep pouring money into this bottomless pit. If we do that, it's no surprise that it will devour the profits and surpluses of other industries.

Richard scoffed. "You probably don't understand the rules of the game on Wall Street at all. Do you think those conglomerates and actuaries haven't analyzed this data? They're still standing firm, aren't they?"

Li Fu met the other person's gaze intently. "Precisely because I am not at the Wall Street poker table, I can see the essence of things clearly. Houses are ultimately for people to live in, not for financial derivatives. Once this bubble is blown bigger and bigger, it is bound to burst."

Richard was about to retort...

Lucy stepped in at the right moment, preventing them from escalating the argument further. "No matter what, these predictions may be radical, but we should still take them seriously."

Cole fell silent for five minutes.

A sudden downpour began outside the window, the rain curtain falling like an iron curtain, shattering Nashville's neon lights into fragments.

"Mr. Vaughn, in your experience, what should we do if it really develops into a systemic risk?" He clearly trusted the family's economic advisor more.

There's nothing we can do about it.

Richard Vaughn is, after all, a veteran professor, and he has offered some very good advice over the years.

"I think that's very unlikely," Richard shook his head.

He doesn't think much adjustment is needed.

At most, they would subcontract low-profit projects to transfer the risk.

"The possibility is quite high," Li Fu said, looking at Cole. "We have an old Chinese saying, 'A wise man does not stand under a crumbling wall.' We don't need to jeopardize the overall situation for a potentially huge risk..."

Those real estate projects were dispensable to the Forrest family anyway.

It would be a complete loss to let these things affect our main business.

Cole clearly understood Li Fu's subtext.

"I need to think about this matter some more. I'll leave this report here for now." He put away the documents; it concerned a major industrial restructuring, and he didn't have enough authority to handle it.

Richard Vaughn was instructed to leave first.

When he left, the old gentleman still regarded Li Fu's views as alarmist.

He was certainly aware of the dangers of the subprime crisis.

However, Wall Street and the Federal Reserve would theoretically never stand idly by and allow this to happen.

He believes that the US financial system is already very mature.

Systemic risk is a joke.

Li Fu knew that many professional scholars and even investment banks held this view.

Therefore, he was too lazy to argue.

The truth will prove them right in the future.

"Li, thank you so much for writing this report," Cole patted Li Fu on the shoulder. "You go back first, I'll let you know when I have the results."

Then he looked at Lucy, "Come with me to see Father!"

This final decision rests with their father, Thomas Forrest.

Thomas was the one who laid the foundation for the Forrest family's business empire, and was also the brother and supporter of Bill Forrest, a powerful figure in Congress.

He's a big shot in the whole of America.