In May, the BFT (British Fortune) Fund finally reached a final agreement with the eight oil companies on its major oil contract and received the first installment of liquidated damages.
After a brief dip in mid-April, international oil prices surged back to $110 per barrel, and by May,
they had soared to $120 per barrel. The oil companies, no longer harboring illusions, negotiated with the BFT Fund to waive the liquidated damages required for the funds previously delivered on the spot crude oil, only paying the penalty for the undelivered crude oil.
Of course, the BFT Fund wasn't at a loss, as it had already made a substantial profit from reselling the spot crude oil to United Energy Group and its partners, including Reliance Industries, CNPC, and Sinopec.
Ultimately, the BFT Fund profited over $10 billion on its $30 billion oil contract.
Combined with the $22.5 billion invested in gold spot and futures, and the over $28.5 billion in profits recovered, the BFT Fund will have over $68.5 billion in its accounts.
The liquidated damages from these oil companies are payable in two installments, with the first installment due in May and the remaining balance due two months later.
Even so, the BFT Fund currently has over $60 billion in its accounts.
The next step is to wait for the full unfolding of the subprime mortgage crisis.
Interestingly, as early as July 2006, New York University Professor Rubini proposed a controversial view at the time—predicting the possibility of a recession for the American economy, arguing that this "catastrophic" downturn would occur in 12 stages.
The following are
the steps: 1. The worst real estate recession in American history;
2. Further losses on subprime mortgages, far exceeding estimates of $250 billion to $300 billion;
3. Massive losses on unsecured consumer credit, including credit cards, auto loans, and student loans; 4.
Credit downgrades by specialized credit insurers, jeopardizing their AAA ratings; 5.
The commercial real estate market collapses;
6. The bankruptcy of major regional and national banks; 7.
Hundreds of billions of dollars in paper losses on the balance sheets of financial institutions; 8. A
wave of corporate loan defaults; 9. The collapse
of the shadow financial system ;
10. A further decline in the stock market;
11. The draining of liquidity from financial markets; and
12. The beginning of a vicious cycle...
It's fair to say that there are always those who see things clearly, but in times of prosperity, such voices are drowned out.
In Baron's previous life, while researching the subprime mortgage crisis, he encountered this initially seemingly "radical" prediction, which ultimately proved to be perfectly accurate.
The subprime mortgage crisis has reached its fifth stage, with the commercial real estate market poised for collapse. Baron knew that soon, America's "two housing agencies" would collapse, necessitating a government takeover.
He waited until the sixth stage, when major banks began to fail, for the BFT Fund to begin entering the market.
However, Baron hadn't anticipated how quickly this process would unfold.
In early June, Baron temporarily left China and arrived in America aboard the USS Devonshire.
Meanwhile, the subprime mortgage crisis was once again experiencing significant volatility.
Over the past week, the stock prices of Fannie Mae and Freddie Mac, the "two housing
agencies," had plummeted by nearly 50%. If estimated at their current lows, their stock prices would be over 90% below their peak in a year. As you can imagine, the stock prices of these two companies plummeted rapidly, and Black Swan Fund profited handsomely from its short positions on the two housing companies.
This time, however, Barron traveled to California.
Fannie Mae and Freddie Mac were facing government takeover, and in California, IndyMac Bank was also facing bankruptcy.
Over the past 11 days, its customers had withdrawn over $1.3 billion in panic.
Because IndyMac also handles mortgages, which account for a significant portion of its revenue, it was significantly impacted by the subprime mortgage crisis.
It was rumored that if IndyMac declared bankruptcy, the Federal Deposit Insurance Corporation (FDIC) might take over.
Barron's visit was to investigate the possibility of taking over the bank, though this would depend on whether he could secure the right terms.
As of March 31st of this year, IndyMac Bank had total assets of $32 billion and deposits of $19 billion.
However, due to the panic triggered by the subprime mortgage crisis, IndyMac could declare bankruptcy at any moment.
This kind of panic also happened to Northern Rock Bank. Last month, a senator wrote to bank regulators, asking them to take measures to prevent IndyMac Bank from failing.
After the news broke, the market panicked, and IndyMac Bank customers rushed to bank branches to withdraw their money, resulting in a bank run. IndyMac Bank lost $1.3 billion in deposits in 11 days.
"Yes, IndyMac Bank may declare bankruptcy at any time. If I get a call now telling me that they have gone bankrupt, I will not be surprised at all."
After the plane landed in Los Angeles, Barron met with California Governor Schwarzenegger who was waiting there. He said to Barron with a serious face:
"Barron, my friend, will you rescue this bank?"
"This is exactly why I came here from China, but you have to understand that I am a businessman, so although I will not be stingy about spending money, I will not do things that will not be rewarded. At least I need a bank that can recover in the future."
"According to the investigation conclusions and the information I have received, IndyMac Bank is not actually that bad. At least it is not hopeless. If there is a large amount of capital injection, it can still be saved..."
"Don't we still have the FDIC?"
Hearing Barron's words, Schwarzenegger couldn't laugh:
"If we wait until the Federal Deposit Insurance Corporation takes over, then IndyMac Bank may not be able to revive..."
"Because too many banks will repeat the same mistakes?"
"Yes, I'm afraid that's not an exaggeration."
It's estimated that if the Federal Deposit Insurance Corporation were to take over IndyMac, the cost would be between $4 billion and $8 billion, potentially setting a record for bank acquisition costs.
A collapse of IndyMac would be the second-largest bank failure in American history, surpassed only by the 1984 bankruptcy of Continental Illinois National Bank.
"Now, I need to negotiate with the IndyMac board of directors and the heads of the relevant institutions to see if a sale is worthwhile."