Chapter 133: Making Money from Brook's Bad Assets

Upon hearing Zhou Ming's sudden remark, all the students in the finance class were stunned. Of course, as finance students studying at Harvard Business School, they had heard of the disposal of non-performing assets, but they had only been briefed on the subject and had not delved into the industry. They did not understand why Zhou Ming had proposed this direction.

For most people, so-called non-performing assets are nothing more than equities, bonds and physical assets that are difficult to deal with.

Generally speaking, these non-performing assets are generated because companies or individuals have gone bankrupt and are no longer able to repay any debts. After the court liquidates all their assets, these assets can be stocks, bonds, bank deposits, real estate, land, or even a desk or a chair. Due to problems such as insolvency and difficulty in realising assets, these assets are classified as non-performing assets.

Non-performing assets are mostly bad debts and bad loans caused by investment mistakes, and they are generally difficult to deal with. Therefore, the disposal of non-performing assets is also a high-risk investment with a very low credit rating.

Zhou Ming looked around and saw all his classmates from the finance class. Except for some people from banking or securities investment families, everyone else looked confused. Zhou Ming couldn't help but say, 'I know you are all very confused. In your minds, you must all think that non-performing assets are assets that will definitely lose money. So if we invest in this industry, aren't we doomed to lose money?'

Many of his classmates in the finance class nodded subconsciously. Zhou Ming understood their views very well. In fact, even after more than 20 years, there are still many people in China who don't understand the huge potential benefits behind non-performing assets. This is not a lack of intelligence, but simply a difference in perception. In the eyes of most people, the reason why so-called non-performing assets are given the name non-performing assets is that they are, to put it bluntly, assets that have suffered losses. Then, how can ordinary people avoid such assets? Where would they have the interest to acquire and dispose of them?

As the old saying goes: wouldn't it be stupid to do a losing business?

But in reality, this is a manifestation of short-sightedness. Where there is money to be made, everyone flocks to it, and at the first sign of a loss, they avoid it like the plague. What's the difference between this kind of investment thinking and the old ladies buying food at the market?

And there's one more important point: for people who only look at the rise, there is a delay between their information and that of the real investors. By the time you know the news of the rise, the money has already been made. So if you enter the market at this time, there is a great risk of being locked in.

Zhou Ming vaguely remembered that in his previous life, a junior high school classmate of his had made tens of millions of dollars a year by dealing in non-performing assets. He had no other tricks up his sleeve, except that when there was a wave of coastal business closures in 14 and 15, he borrowed 800,000 yuan from the bank by mortgaging his property, and then used this money to acquire and deal in non-performing assets from various collapsed coastal businesses. Later, at the class reunion in 16, he showed up in a five million dollar Bentley.

Zhou Ming was deeply impressed by this story. Since Zhou Ming knew that the profits behind the disposal of non-performing assets were so huge, he thought, 'If I don't take advantage of this great opportunity, I'd be a fool. As for the fact that someone makes money, someone else loses money, Zhou Ming didn't care. After all, the ones who lose are the Americans, and Brook Investment Company is his enemy, so he doesn't have any conscience.

With this in mind, Zhou Ming said to all his classmates in the finance class: 'You think that there is bound to be a loss, but I can responsibly tell you that behind these non-performing assets is a huge profit that you would never imagine.'

Zhou Ming stopped there and Lin Muqing, who was very sensible, took over and explained to her classmates: 'In Hong Kong City, there are many people who specialise in dealing with this kind of non-performing assets. For example, you may have heard of the very famous Hung Hing and Tung Sing companies. However, the disposal of non-performing assets is not limited to these unscrupulous methods. In fact, there are many legal methods that can be used.'

Lin Muqing thought for a moment and then said, 'Let me give you an example from my own experience. My Si Ming Investment Company spent 5,000 US dollars to bid for a distressed asset package from the Hong Kong City Bank. After a year of disposal, I ultimately made a profit of 300 million US dollars from this distressed asset package.'

Upon hearing this figure, everyone in the finance class let out a gasp. Everyone had an expression of incredulous surprise. After all, even those from banking and investment banking families could not imagine that such a huge profit could be made from this non-performing asset. This was no longer just a windfall, but a windfall in the windfall industry.

'You didn't expect it, did you? So I'm opening a door to a new world for you this time. However, to deal with the non-performing assets, I'm not going to continue using Wharton Insurance Company, but to set up a new company and hand it over to you.' Zhou Ming said with a smile, and then asked Ye Ning, "I heard that you were just completing the accounting, so how much money do we have in our accounts now?"

'Teacher, since most of our accounts have not been unfrozen yet, we still have a total of about 5.6 million US dollars in funds to use,' Ye Ning replied.

'That's enough money, so you can take care of the new company,' Zhou Ming said.

With Zhou Ming's words, all the students in the finance class immediately cheered, but just as all the students in the finance class were a little excited and eager to try, the class president Chen Shu said, "Teacher Mu Qing, I completely believe what you said, but I think it's better to be cautious about some things."

Zhou Ming raised an eyebrow. It seems that Chen Shu, the class president, still has some skills. At least he is very calm.

Zhou Ming knew that Chen Shu was being tactful because he didn't want to embarrass him, but in fact he was worried about the non-performing assets. After all, high returns usually come with high risks. If not handled carefully, it is likely that all the investments will be lost and not a penny will be recovered. Otherwise, if it was really that easy, why would banks or other investment banks not handle it themselves, but instead sell it to someone else at a low price? Are the banks all idiots?

With these thoughts in mind, Zhou Ming said to Chen Shu, 'I understand what you mean, Chen Shu. I know how to deal with the non-performing assets I mentioned, because the non-performing assets I plan to take over are the mortgage properties of those subprime loans held by Brook Investment Company.'

"When I was persuading those minorities before, I promised them that I would return their properties to them. Now is the time for me to keep my promise,' Zhou Ming said, 'Of course, considering their ability to pay, I will not sell them all at once, but rather provide them with rental services, that is, sign a long-term rental contract with them. As long as they pay me rent every month, they can go back and live in their original house, and as long as they live here for a certain period of time, I can give the house to them.'

"In this way, I will have a very stable channel for cashing in. I have also done some research, and most of these people are capable. Even for those who are not, I can lower the rent appropriately.' Zhou Ming said, 'According to my calculations, if I spend five million yuan to buy these non-performing assets, and rent all these houses back to those people, it will take a maximum of five months to get my money back, and the rest will be profit.'

If Zhou Ming's previous proposal to deal with non-performing assets only surprised the students in the finance class, then now they were shocked by Zhou Ming's idea.

Indeed, if assets were classified, after Brook Investment Company went bankrupt, in order to pay off the company's debts, all the mortgaged properties of subprime loans would be auctioned off. However, the auction of tens of thousands of properties and cars could not be completed overnight, not to mention the negative impact of so many assets entering the market at once. Undoubtedly, these assets would eventually be classified as non-performing assets.

At this time, Zhou Ming can indeed buy all these mortgaged properties in one go and then rent them out, which not only fulfils his promise to those minorities who helped him cause the subprime mortgage crisis, but also makes a huge profit by disposing of non-performing assets.

However, there is a major problem here. There are so many mortgaged properties, no matter how bankrupt Brook Investment is, it is impossible for him to sell them all at such a low price, right? Unless Congressman Brook has gone crazy!

Chen Shuli, Yang Ye and their classmates from the finance class looked at each other, at a loss for words in the face of Zhou Ming's confidence. In the end, Chen Shuli stood up and said, 'Teacher, I think if it is successful, then this will undoubtedly be a very successful disposal of non-performing assets. But the key is how to make Brook Investment Company sell its mortgaged assets at a low price. Is this not the topic we are going to discuss next?'

Zhou Ming smiled and nodded at Chen Shu and said, 'My classmate comrade, if you are questioning my decision, just say so. I am not that arbitrary.'

Chen Shu was embarrassed by Zhou Ming's words and scratched his head. 'Teacher, I didn't say that. In fact, I also support your ideas very much. I just think that getting the collateral assets of Brook Company is the key to all problems.'

Zhou Ming nodded again and said, 'That's true, but I already have a good solution. I wonder if you remember a black woman named Cindy who came here yesterday.'

Ye Ning immediately said, 'I remember, she is the family representative of the ethnic minority in the Vidda community, and she came to discuss housing issues with you. She said that you promised them housing.'

'That's her. She told me an interesting story when she left yesterday. She said that her subprime mortgage was arranged through a friend at Brook Investment Company. It seems that her friend was recently promoted because of his outstanding performance, and the company gave him a bonus of more than 100,000 yuan. He bought a sports car, but recently, due to the subprime mortgage crisis, the company seems to be looking for trouble with him.'

Zhou Ming paused for a moment, then continued, 'I can understand that this Ms. Cindy was a little jealous when she said all this, but for me, it provided me with an important piece of information, and that is, this salesman, I might be able to use him.'

All the students in the finance class were confused, and Li Yang was surprised and opened his mouth wide, stunned, and asked, 'Teacher, you're not thinking of using this salesman to get all those properties out, are you?'

Zhou Ming shrugged, 'Why not give it a try? Anyway, I know that Brook Investment has already fallen into the subprime mortgage crisis and is definitely short of funds. He will be eager to realise the value of those mortgaged properties, and that's my chance.'

After saying this, Zhou Ming stood up: 'Okay, next, let's do a good job of helping those who have applied for personal bankruptcy to do a good job of inventorying their properties. After all, I promised them, I still have to do it. Please remember, whether we are investing or in finance, integrity is still the most important thing!'

At the end, Zhou Ming smiled again: 'Of course, it would be even better if we could make some money on the side!'