Chapter 9

Li Xu was now somewhat exasperated. They were clearly discussing the future layout, so how did the conversation suddenly jump to his marriage prospects? And it wasn't just a passing comment; they had to delve into it as if he were getting married tomorrow.

Alright, he knew that in high society, marriages were never a matter of personal choice. Arranged marriages with various families were inevitable, and his parents' marriage was also an arranged one. But please, he hadn't even turned 18 yet. Even if he were to get married, it should be at 21, right? Discussing this now was way too early!

Besides, there were still many changes to come... Well, these changes only he knew about, and it wasn't appropriate to tell others.

"Alright, that's enough." Grandfather seemed to realize he was upset and didn't press the topic further.

"You're going to Japan, right? When you come back, if you have time, you can also participate in the discussions. You need to take responsibility, Pipang. Don't be like your father, always doing whatever he pleases." Grandfather continued.

His tone was gentle, a stark contrast to the previous sternness. So... was this an apology?

Of course, as mentioned before, Grandfather always prioritized maintaining his authority in the family. Even if he knew he was in the wrong, he wouldn't easily admit it.

In fact, it was already quite good that he could adopt this attitude. The bond between grandparents and grandchildren did have some truth to it, and his grandson was indeed outstanding. If it were his father, even if he knew his words were a bit harsh, Grandfather would still have a "scolding you is necessary" expression.

So, in some aspects, family education in the East and West was quite consistent.

"Yes, Grandfather." Li Xu nodded. Given the situation, it seemed Grandfather was planning to end the conversation. That wouldn't do; he hadn't fully achieved his goal yet.

"Grandfather, can I know to what extent the new president will relax financial regulations after taking office next year?" he asked.

Li Xu didn't mention the possibility of Carter's re-election. First, even if Carter were re-elected, he would still have to relax financial regulations, as Grandfather and his friends had already discussed this. Second, from this year's party primaries, it was already certain that Carter would step down. His weak stance on the Soviet Union had already made a lot of people in the country unhappy.

"It's hard to say, but relaxing the review and management of securities issuance is definite," Grandfather replied after a moment's thought.

Indeed, it was a premeditated move. Li Xu stroked his chin. Most people had already realized that hoarding and speculation wouldn't work anymore, and they needed to use securities to make more money?

But this wasn't his concern. He brought it up to lead into his next point: "If that's the case, I have an idea that's more acceptable than junk bonds. The returns might not be as high as junk bonds, but the prospects are very broad."

"Oh?" Grandfather's interest was piqued. "What is it?"

"Mortgage-backed securities." Li Xu smiled slightly.

"Mortgage-backed securities?" Grandfather was somewhat disappointed. After all, he didn't have Li Xu's experience. If someone from Li Xu's previous life heard this term, they would probably be shocked.

"Asset securitization started in the 1970s, and mortgage-backed securities can and should be sold, but the profits won't be significant. Only luxury homes with good credit can be sold, and there won't be many transactions," Grandfather mused and shook his head slightly.

"Mortgage-backed securities can be bundled together and sold as a single security," Li Xu waited for this response. "The profit from a single mortgage is indeed small, but when many mortgages are bundled together, it adds up. And no one fails to pay their mortgage, right?"

Before Grandfather could respond, Li Xu continued: "I've heard of a trick some restaurants use. High-end ingredients can't all be sold in one day, like Greenland cod. If they're kept until the next day, they won't be fresh, and even at a discount, they might not sell.

So the chefs came up with a solution. They mixed a few fresh cod with mostly not-so-fresh cod to make a pot of soup. When customers came, the cod soup they ordered was fresh."

Grandfather raised an eyebrow but said nothing, while Li Xu continued: "Of course, there are only so many mortgages, even with subprime mortgages. But we can do this: repackage mortgage-backed securities into new products and sell them to other investors. After these securities are sold, they can be bundled again and sold to new investors."

At this point, Li Xu grinned. "This is like a gambler at a blackjack table who always wins. The onlookers start betting with each other that the gambler will keep winning. Then more people join in, betting that the person who bet on the gambler will win..."

"And the cycle continues, with more and more people joining in, until everyone in the room is involved," Grandfather interjected, his eyes gleaming. "As long as the gambler keeps winning, they will all keep winning."

Li Xu spread his hands. To be honest, the people on Wall Street were indeed very clever. Capital is the most adept at exploiting loopholes. This endless cycle was something they could create. As long as people kept paying their mortgages, the cycle could continue, and most people would make money.

However, this was an ideal state. The real situation was much more complex. The greed of capital, the needs of the government, and the侥幸 of people would all affect and cause this fragile cycle to lose control.

Not to mention, could investment institutions resist the enormous profits at their fingertips and carefully review the qualifications of people buying homes?

Li Xu was only using the simplest terms to describe the subprime mortgage situation. If he were to delve deeper, it would be too confusing.

Moreover, despite making a $50 million deal and aiming to earn $1 billion by 1993, his knowledge of finance was limited. Without the family's backing, he would be just an ordinary trader.

The reason he brought this up now was, first, to help Grandfather open a new path to wealth and boost his own reputation for the future. Second, in his previous life, conspiracy theories about the subprime mortgage crisis were rampant. If this was a conspiracy by Wall Street and capitalists, then as a descendant of capitalists, or a future capitalist, he should invent and carry out this conspiracy!

As for whether it would lead to an early subprime crisis, don't overthink it. Throughout the 1980s, the U.S. financial market was chaotic but also highly dynamic, with countless mergers and investments. After this, there would be the IT bubble. The subprime crisis in the early 2000s was both accidental and inevitable.

Even if he didn't act, Solomon Brothers would do this in two years. In fact, Solomon Brothers became the leading investment bank on Wall Street in the 1980s largely due to mortgage-backed securities.

If not for their arrogance and greed, which offended many people, and the SEC's relentless pursuit, almost no one would have come to their aid. They might not have been acquired by Travelers Group but might have acquired Travelers Group instead.

Of course, even if they were to do this, Morgan Stanley shouldn't be directly involved. It would be best to let others take the lead and avoid fully entangling Morgan Stanley. It's a good habit to keep your hands clean.

This way, they might not get the biggest slice of the pie, but they wouldn't become the target of everyone's criticism and could maintain a certain level of prestige—important for Grandfather's plans.

After a long sigh, Grandfather, who had closed his eyes after speaking, finally finished his thoughts and looked at Li Xu with a complex expression. "If your mother weren't Japanese, that would be better, Pipang."

Li Xu rolled his eyes. "Please allow me to remind you, Grandfather, even if Father had married someone else, the child might not have been me."

Though his mother in this life was very... difficult, he would never back down when it came to defending her.

Though his words were somewhat disrespectful, Grandfather didn't mind, only huffing in dissatisfaction.

Of course, he wasn't really upset. Saying such things clearly showed that he was regretful that Li Xu, with such insight and talent, would face an unbreakable glass ceiling in the future, which was very regrettable.

So... this time, he should be able to earn Grandfather's respect, right?

"What do you want, Pipang?" Grandfather asked.

He knew that Li Xu wouldn't offer this idea without any conditions. In fact, this was exactly what he had in mind, but...

"Well..." Li Xu chuckled, subconsciously adjusting his posture and leaning back in his chair. "You know, I have... um... a girl in my life..."

Grandfather, though not opposed to having a mistress, had no good attitude about it. After all, he was a bastard himself and had never had a mistress in his decades with Grandmother, almost comparable to the old Rockefeller.

But he didn't say anything, just nodding to acknowledge it. Li Xu then selectively recounted the events with Bao Mu and the others.

"This is an opportunity. The entire U.S. is shifting its industrial base, and that place, like Japan and South Korea, is a good location. We can't let them have key industries, but the electronics industry is not among them. Both Father and I have shares in IT companies, and we can use Northrop to get more involved. After all, their combat aircraft and the F-5 have a close connection, and the government now allows aircraft companies to seek partnerships abroad." Li Xu summarized.

He then added, "I know Northrop's board wants to compete for Air Force contracts, but it would be good to use their funds to practice before that."

"Consider it, but what does this have to do with what you want?" Grandfather asked straightforwardly.

"Well..." Li Xu chuckled, instinctively adjusting his posture and leaning back in his chair. "Hollywood is still out of my reach, but playing in the Eastern Hollywood is still possible."