The shortage in Evergrande drinks at Starbucks caused a ripple effect through economies world wide as the majority of the work force could no longer get their expensive bean water, which caused massive cuts in productivity. Truly scary times.
@@Green__one if you’re 1% leveraged, the level of economic collapse for you to lose everything would be a literal apocalypse. If you’re 300% leveraged, it’s really easy to lose everything. Therefore, there is a amount of debt between 1% and 300% leverage where you’ll never get screwed
I'm in the finest financial health of my life, despite the economic recession, and there are numerous industries that will provide you good returns on your investment. I have been able to produce my yearly income from investing over the last three months. Profits can be made even during a bear market. Make the most of it.
A lot of Evergande's debt was fraudulently hidden. They'd take on a partner for various projects and list their "shares" as assets. But these partners would get a guaranteed return of a few percent so this was really debt.
China's entire economy is a Real Estate Ponzi. The entire global economy is a Fiat Ponzi. It's about to collapse suddenly like a condo building in Florida. You've been warned.
@@cos3 the company had a very ponzi type structure. Namely how they needed profits from presales on current projects in order to pay loans procurred during previous projects.
"Contagious" is the word of the year. In fact, word of the years, all started with... you know, we are not ALLOWED to mention. Anyway, love your video.
Hey Richard, Don't know if it's the lighting but it looks to me like there's a lump on the right hand side (left in the video) of your neck. If it is indeed a lump you might wanna get that looked at. I hope I'm just seeing things though.
It feels weird that you didn't mention the elephant in the room: that a huge number of these real estate properties, even the finished ones, were completely uninhabited and purely built as investment properties with the expectation that property values would continue to rise forever. This was a massive bubble that everyone should have seen coming as far back as 2015. The CCP trying to curb this irresponsible financial practice may have ""caused"" this crisis, but only in the sense that it happened earlier rather than later. At least, that's my impression as a completely casual observer :P. Feel free to correct me if I'm wrong.
The housing bubble has existed for long time and many people predicted it's collapse but it kept going but this might be the finale nail in the coffin.
I agree with you. A few more points to add is that, China is now officially having a lower birth rate than Russia. Real estate price will go up predictably with population. If they are not expecting more young people to buy homes in the future, then real estate price will fall. It's interesting to see how rapid and strong some of the policy changes are happening in China recently.
I think you'll get massively different pictures if you look at different places. e.g. the percentage of inhabited properties in Detroit is probably going to be very different from downtown San Francisco. Of course blaming CCP will get you a lot of likes but I don't know if you made any point.
@@conradjoseph7865 Of course, but we're talking about entire ghost-towns, not just a 'normal' vacancy rate. Probably a good thing that this happened now rather than later with the low birth rate in China.
Interesting economic commentary, and explained well. I wonder how the investment situation arising from the Evergrande Crisis would affect the UK markets as opposed to the US markets. Obviously, the general economic factors would still apply, but one key difference is that UK markets are currently valued quite low on a historical P/E basis.
If the us crashes everything goes down, if we are comparing to lehman brothers in 2008 give me one example of an index that kept its back straight through that year.
If I'm understanding the balance sheet correctly, Evergrande has a debt-to-equity ratio of around 90%....so, for every dollar in equity, they've taken on nine dollars in debt....holy shit.....how can ANY company survive with that kind of leveraging....I can't bear to think what their liquidity and solvency ratios must look like.
@@tilarmeister You're absolutely right. That should have read 900%. Nevertheless, although the math was wrong, the point is still the same, Evergrande's debt to equity is outrageous. Er, agreed?
Not that I'm saying all debt is bad, but leveraging debt is dangerous. The whole global economy is built on the American model of low rates and leveraged debts taken against a companies implied "value" in the market. We owe more debt than the world has money to pay it back. What happens when it all fails?
Asset stripping and exponential wealth consolidation, followed by a culling of the masses in some fashion. Also hello from Sequim my fellow Washingtonian!!
Thank you for this excellent video on the Evergrande situation! I've been watching different videos on this as the event has unfolded, and yours is really a model of clear explanation and useful information. Very well done. As for Evergrande itself... Over on Patrick Boyle's channel he says it looks like the Chinese government is going to let the company fail - but slowly, with the government making sure that in-construction buildings are finished and employees paid for their work. Basically they're going to try to limit the chance of contagion within the Chinese economy. It isn't known yet if the Chinese government will prioritize the repayment of Chinese debt holders over foreign ones, but even if they do... I think it's like you said in your video. China just isn't connected to the world economy in the same way the United States is. The failure of Lehman Brothers shook the entire world, but the slow motion collapse of Evergrande probably won't spread much beyond Asian markets. Imo anyway.
Videos like this are exactly why I subscribed. I don’t have time to research these sorts of dynamic situations but as someone with investments would like to have a summary so I can remain informed. Your clear and concise delivery of dense information is great and the jokes thrown in are the chef’s kiss on top. Keep up the great work! Here’s to you hitting 1 million subs soon!
I never trust a business that has to depend on low interest rates and lots of continual borrowing stay afloat. If there's a hiccup in either of those, bad things tend to happen. Fractional Reserve Banking is one of the greatest evils in human history.
How to identify a Ponzi: 1. Needs a constant stream of cash to stay afloat. 2. Needs to generate profit regularly to maintain its image in front of public to keep the money flowing. Evergrand fit the bill perfectly.
Starting October 1st, major us banks have to start carrying 1 trillion in cash on hand separately from accounts. Kind of interesting timing as by the end of October if the us defaults, they come for bank money.
Great breakdown of the situation. It will be interesting to see what the Chinese government does or doesn't do. It doesn't sound like they are interested in a full bailout, maybe just damage control.
The biggest indicator that the Chinese government has no interest in saving Evergrande is that Evergrande is in its current situation precisely because of regulatory changes made by the Chinese government. The CCP is not one big happy family, but a group of thugs more afraid of the Chinese people than they are of each other. One group within the CCP has a near monopoly on power and another group has huge amounts of wealth. It seems to me that the group with all of the power is destroying the wealth of their rivals to prevent that group from using that wealth to wrest some power away from the group in charge. Xi Jinping has been on a kick lately of destroying wealth in China and there has to be a reason for this.
They probably won't bail out Evergrande because they want other companies to take their "3 red lines" seriously. The worst offender will be allowed to collapse, so that other companies will understand the importance of the policy and do what they can to limit new debt.
@@richardbell7678 idiotic comment. The Chinese govt actually does a good thing by exposing and punishing over leveraged companies engaged in fraudulent practices (something the US regime wished they could do, instead they r in bed with corporations) and yet u r finding something to complain about. Instead what did the US govt do in the 2000s...allow banks to rape the nation and then bailed them out with tax payer money. China does the opposite and u r upset? I don't understand.
I hope the correction happens asap so we can go back to decade long bull market with sane valuations. Yes it will suck for everyone but I am not sure what other options exist
Personally, I'm looking forward to a correction so I can pick up some dividend equities with decent returns. Not sure it will balance out the losses but it will make me feel better anyway. Not living with the ax constantly hanging over us would be a nice benefit too.
Good job getting into the weeds with Evergrande. Very clear explanation. I don't feel sorry for the Chinese- especially their government- but this isn't the first time this has happened when a company from a foreign country goes tits up and it affects the rest of the world's markets like it did with the 1998 financial crisis that emerged out of Russia. This is one of those situations where if a default occurs in China I can see a delayed effect happen in Western markets. My question is could it expose the vulnerability of derivatives?
A lot of companies are global and have revenue from China. If China falls, then global US companies also will lose out revenue from the downturn in China.
Seriously though , I don't know why but I feel it would be better for me if this happens & the global economy gets flushed down the toilet then at least I'll know I'm not alone in misery.
The really terrifying part of this is that a lot of bad debt of a lot of Chines companies got spun off as notes receivable to "asset management" companies. Most of these were from companies owned by party officials. Think Enron but on a national scale with an ultra protected class of investors.
Another perfect example of how the likelihood that humans learn from past mistakes is inversely proportional to the size of said mistake. A decade is a ridiculously short period of time for worldwide financial systems to get caught with their collective pants down again! Any system allowed to run without regulation or level-headed oversight is destined to fail - there is no such thing as 'too big to fail', it's truly 'too big _not_ to fail'. Thanks for the concise overview 👍
A similar kind of a thing was happening in India earlier where realty developers would take a bank loan to buy a land and start a project and then divert all the balance loan amount, deposits or funds received from the buyers to buy new land and start new projects leaving the earlier projects unfinished and delayed due to short of funds and causing bank defaults and buyers left with no ready property. The Indian government then introduced a law "RERA" that didn't allow realty developers to divert funds from unfinished project to another projects to avoid bank defaults and reduce bank NPAs.
I remember several years ago seeing reports about large numbers of abandoned real estate holdings in China maybe due to global warming caused flooding or what?
This nicely sums up why this kind of thing will just keep happening over and over. How is it even the tiniest bit different from the investment bank failures? They claim to have assets in all the future constructions they (hope to) eventually start building. Which would already be bad since due to this mismanagement, all the real estate they're selling will drop in price like crazy (and the same for everyone else on the market). But then multiply that by having debt on stuff they didn't even start building - and suddenly the debt is far larger than what they could ever hope to make on actually building and selling that real estate. It's still the good old problem of trying to increase wealth through printing money, and on a ridiculous scale. We should really, _really_ throw out Keynesianism. Not that there's any chance of that happening, of course, given how attractive it will always be to governments. In the meantime, the problem is getting bigger all over the world, and the crash will be just that much more painful.
@@LuaanTi They both thought the real estate market will just keep going up. Evergrande is selling some of its assets now and hoping to be able to make payment to its debts. Let's just hope the worst scenario won't happen. If you have any investment portfolio might be a good time to change to a cash position.
To me, this is the perfect plain bagel video. To the point, concise and yet not lacking nuance. I know you have been asking on twitter about video style and length, this is exactly what I enjoy from you! Thanks.
There is not gonna be much "dip" outside of China with all the low interest rates. If you are talking about investing in China, then that's a different story.
I agree. Not only such bearish trends create opportunities for new players, it helps to Better regulate the market in future. The 2008 recession caused BASEL to rethink capital structure of financial institutions.
China getting smacked is a good thing in my opinion. People getting the results they deserve for doing something stupid? A good thing. Sadly, I see China saving face by bailing out this company on the down low.
the most difficult things for this company, is no one buy their house right now. that a bad thing, bad for the company. but after bankrupt, they have lot of things could sale. the biggest part is land and house. and they are not on Chinese mainland stock maket yet, which means they have a lot of potential money could spend if their property could be bought by others already on the stock.
Problem is the chinese RE market is a Ponzi scheme and once the majority of investors start to withhold their investments in this market, as already many chinese have done, the RE market for any type of sales will diminish and prices for RE may be as low as 10% or less of pre-crisis prices. I have seen exactly this development in some european markets and hearing how speculative the chinese RE market have become it is clear to me that we will see this development also in China. Then lots and lots of chinese will lose their jobs ! Seems the chinese people have no idea about these things ...
Blown way out of proportion, Much of the assets are land assets and unlike financial instraments which can goto zero, these assets will just get auctioned off. Secondly they missed a bond payment in the grand scheme of things 19billion in foreign bonds is small compared to the hundreds of billion Leigh man brothers couldn’t pay when they defaulted. The rest of the debt were liabilities to homeowners and unfinished contracts
Debt can be "good" or "bad" when bought, but all debt can easily become "bad" pretty easily. It definitely needs to be taken seriously and only used strategically.
the difference with US 2008 gambling house of cards is that the Chinese don't have CDS and CDO squares and other completely useless financial gambling products. so debt is just debt, not something that will nuke the entire economy like the US housing casino did in 2008 dragging the whole world down the drain.
You didn't cover the housing bubble in China. It's huge and has been on the verge of popping for years and the extra stress that will be put on it in the event of Evergrande's bankruptcy might be the straw that breaks the camel's back.
There is no china housing bubble. In the US in 2008, people bought houses with no money down plus low interest. In China, all those apartments have been payed for cash even before they were built.
There are multiple warnings this last week in all Australian papers from CBA and IMF about house prices here which is very rare. They are very worried, and I know they don't care about individual lenders, only the system. I believe they know something is on the horizon and people are seriously struggling to keep up with repayments.
1. Thank you for making the video, Yay Bonus. 2. If they fail, it will hurt the people who purchased from them, so I want those people taken care of. 3. If they do fail and china is effect, please make a video to contrast and compare their housing issues Vs USA housing issues and the effect on the over all market.
I've got no idea how this will play out, I would think very few people actually know. Hopefully it's just 1 company collapsing, may be a few ripples, but all will be ok.
Thanks for explaining this, Richard. Lots of noise out there and I was just looking for someone to explain why this is a concern in a simple manner. Appreciate it
its always the estate firms. i would expect china to take precautions... looks like they are so concerned about peoples internet traffic that they cant find time to read financial reports of big companies wasting money
The central government repeatedly said in the past that they should stop pushing real estate prices as investment. But it's pretty hard to execute when you have companies that work collectively to leverage the market and liaisons in various banks/local systems that cooperate with them. Kind of why they are not bailing Evergrande out this time.
the fall of Lehman Brothers didn't kick off the financial crisis of 2008; it was the crisis that kicked off the fall of Lehman Bothers. HUGE difference. the corruption was not the result of a single entity acting in bad faith, which is why Burry isn't famous for buying put options against Lehman Brothers. the corruption of system-wide. that's not the case with China. China has an Evergrande problem, not a corrupt industry and banking sector problem. there's just no viable comparison.
Time to sell everything but actual land/houses. Unless you're in Canada or Australia, then maybe you should sell your house and move to a better country. They are WAY too inflated right now. I am very lucky to be where I am.
I hope they fail & colapse. I don't see the point of milking a dead cow. Get it over & done with. You can't spend more than you make & borrowing money on an appreciating assets indefinitely. Assets can depreciate. It is an unsustainable business model.
This whole time I thought an evergrande was a drink at Starbucks
You're thinking of an Ever-venti
No, it was a drink at 7-1-1 called "Ever-Gulp!"
I thought it was a big boat that got stuck in the mud earlier this year
The shortage in Evergrande drinks at Starbucks caused a ripple effect through economies world wide as the majority of the work force could no longer get their expensive bean water, which caused massive cuts in productivity. Truly scary times.
@@news2hedz227 that’s evergreen ship.
Yet another lesson on how seemingly "good" debt can become "bad" under its own weight
One could almost say, that there's no such thing as good debt.
@@Green__one twenty tons of broccoli isn’t good for you, but an ounce is. To quote the comment above me, the toxicity is in the dosage
@@Green__one if you’re 1% leveraged, the level of economic collapse for you to lose everything would be a literal apocalypse. If you’re 300% leveraged, it’s really easy to lose everything. Therefore, there is a amount of debt between 1% and 300% leverage where you’ll never get screwed
@White wolf "The Difference Between Medicine And Poison Is The Dose" so classic :D
@White wolf paracelsus neat
I'm in the finest financial health of my life, despite the economic recession, and there are numerous industries that will provide you good returns on your investment. I have been able to produce my yearly income from investing over the last three months. Profits can be made even during a bear market. Make the most of it.
@Robert James It's just by making investments with my advisor's assistance in the stöcks and Cryptó markets.
@Robert James Personally,i trade with Victoria.L.Davies . Her services are exceptional and her returns are great
@Robert James You can connect with her on what'saap
+135
2641
A lot of Evergande's debt was fraudulently hidden. They'd take on a partner for various projects and list their "shares" as assets. But these partners would get a guaranteed return of a few percent so this was really debt.
Interesting!
When you put it like that, it's like an inverse Ponzi scheme lol
China's entire economy is a Real Estate Ponzi. The entire global economy is a Fiat Ponzi. It's about to collapse suddenly like a condo building in Florida.
You've been warned.
@@cos3 the company had a very ponzi type structure. Namely how they needed profits from presales on current projects in order to pay loans procurred during previous projects.
7% return isn't really a few. It is not loan shark material but it isn't very little either
"They could do whatever they want because the government would just bail them out".
Like the banks did back in the subprime mortgage crisis?
Dave Ramsey probably loving this to highlight the danger of debt and leverage.
They didn’t get the Monkeynomics upgrade, there not “to big to fail”
they went late game with too many IMF loans
Finally, the professional opinion we were all waiting for. Thank you very much Richard, we wish you all the best
Great vid bro! Awesome explainer :)
Nice to see you here. Would love to see a collab between you and the plain bagle.
@Ozzie climate refo that's a short term investment and we don't do that shit over here
Hey missed you bro ! About time for your next master class I’ve been waiting !!
"Contagious" is the word of the year. In fact, word of the years, all started with... you know, we are not ALLOWED to mention. Anyway, love your video.
Go ahead, say it.
@@Salien1999 COVIDIOTS PAN
i'll just say CUPID just to mask it
Spot on
Covid? Wonder what youtube does when that happens
Thanks to Evergrande for supplying material for extra Bagel content
Hey Richard,
Don't know if it's the lighting but it looks to me like there's a lump on the right hand side (left in the video) of your neck. If it is indeed a lump you might wanna get that looked at.
I hope I'm just seeing things though.
That's a good spot Bart!
Can confirm it's a lump
Came here to say this also. Better to be safe and get it checked
It feels weird that you didn't mention the elephant in the room: that a huge number of these real estate properties, even the finished ones, were completely uninhabited and purely built as investment properties with the expectation that property values would continue to rise forever. This was a massive bubble that everyone should have seen coming as far back as 2015. The CCP trying to curb this irresponsible financial practice may have ""caused"" this crisis, but only in the sense that it happened earlier rather than later.
At least, that's my impression as a completely casual observer :P. Feel free to correct me if I'm wrong.
Well there is always certain amount of vacancy rate in any place, talking about ~5% in an average US city
The housing bubble has existed for long time and many people predicted it's collapse but it kept going but this might be the finale nail in the coffin.
I agree with you. A few more points to add is that, China is now officially having a lower birth rate than Russia. Real estate price will go up predictably with population. If they are not expecting more young people to buy homes in the future, then real estate price will fall. It's interesting to see how rapid and strong some of the policy changes are happening in China recently.
I think you'll get massively different pictures if you look at different places. e.g. the percentage of inhabited properties in Detroit is probably going to be very different from downtown San Francisco. Of course blaming CCP will get you a lot of likes but I don't know if you made any point.
@@conradjoseph7865 Of course, but we're talking about entire ghost-towns, not just a 'normal' vacancy rate. Probably a good thing that this happened now rather than later with the low birth rate in China.
Funny how "The Intelligent Investor", written over 7 decades ago, still seem so relevant in today's market.
Ah bought that many years ago, still didn't read it :p thanks for the reminder!
@@spicycatgames1448 start reading yet?
Is it a good read?
@@iloveramennoodle01 Yes, most definitely.
Interesting economic commentary, and explained well. I wonder how the investment situation arising from the Evergrande Crisis would affect the UK markets as opposed to the US markets. Obviously, the general economic factors would still apply, but one key difference is that UK markets are currently valued quite low on a historical P/E basis.
If the us crashes everything goes down, if we are comparing to lehman brothers in 2008 give me one example of an index that kept its back straight through that year.
The UK markets are valued low because the companies are not expected to grow though
If I'm understanding the balance sheet correctly, Evergrande has a debt-to-equity ratio of around 90%....so, for every dollar in equity, they've taken on nine dollars in debt....holy shit.....how can ANY company survive with that kind of leveraging....I can't bear to think what their liquidity and solvency ratios must look like.
Err. If debt to equity ratio is 90%, it means for every $9, there’s $10 equity
@@tilarmeister You're absolutely right. That should have read 900%. Nevertheless, although the math was wrong, the point is still the same, Evergrande's debt to equity is outrageous. Er, agreed?
Not that I'm saying all debt is bad, but leveraging debt is dangerous. The whole global economy is built on the American model of low rates and leveraged debts taken against a companies implied "value" in the market. We owe more debt than the world has money to pay it back. What happens when it all fails?
Asset stripping and exponential wealth consolidation, followed by a culling of the masses in some fashion. Also hello from Sequim my fellow Washingtonian!!
Thank you for this excellent video on the Evergrande situation! I've been watching different videos on this as the event has unfolded, and yours is really a model of clear explanation and useful information. Very well done.
As for Evergrande itself... Over on Patrick Boyle's channel he says it looks like the Chinese government is going to let the company fail - but slowly, with the government making sure that in-construction buildings are finished and employees paid for their work. Basically they're going to try to limit the chance of contagion within the Chinese economy.
It isn't known yet if the Chinese government will prioritize the repayment of Chinese debt holders over foreign ones, but even if they do... I think it's like you said in your video. China just isn't connected to the world economy in the same way the United States is. The failure of Lehman Brothers shook the entire world, but the slow motion collapse of Evergrande probably won't spread much beyond Asian markets. Imo anyway.
Videos like this are exactly why I subscribed. I don’t have time to research these sorts of dynamic situations but as someone with investments would like to have a summary so I can remain informed. Your clear and concise delivery of dense information is great and the jokes thrown in are the chef’s kiss on top. Keep up the great work! Here’s to you hitting 1 million subs soon!
I never trust a business that has to depend on low interest rates and lots of continual borrowing stay afloat. If there's a hiccup in either of those, bad things tend to happen.
Fractional Reserve Banking is one of the greatest evils in human history.
How to identify a Ponzi:
1. Needs a constant stream of cash to stay afloat.
2. Needs to generate profit regularly to maintain its image in front of public to keep the money flowing.
Evergrand fit the bill perfectly.
Ponzi Style Business Models never *End* well *ALWAYS* .
Considering they've been hiding a lot of their debt in subsidiary companies the more apt comparison would probably have been Enron...
Starting October 1st, major us banks have to start carrying 1 trillion in cash on hand separately from accounts. Kind of interesting timing as by the end of October if the us defaults, they come for bank money.
Doubly interesting timing if you consider that October 1st is China's National Day, the beginning of a seven day public holiday.
There are multiple bubbles in the Chinese economy. Pop one, and you've got disaster potential.
So, they're in imminent default now. How are you guys doing?
Great breakdown of the situation. It will be interesting to see what the Chinese government does or doesn't do. It doesn't sound like they are interested in a full bailout, maybe just damage control.
The biggest indicator that the Chinese government has no interest in saving Evergrande is that Evergrande is in its current situation precisely because of regulatory changes made by the Chinese government. The CCP is not one big happy family, but a group of thugs more afraid of the Chinese people than they are of each other. One group within the CCP has a near monopoly on power and another group has huge amounts of wealth. It seems to me that the group with all of the power is destroying the wealth of their rivals to prevent that group from using that wealth to wrest some power away from the group in charge. Xi Jinping has been on a kick lately of destroying wealth in China and there has to be a reason for this.
They probably won't bail out Evergrande because they want other companies to take their "3 red lines" seriously. The worst offender will be allowed to collapse, so that other companies will understand the importance of the policy and do what they can to limit new debt.
Fannie and Freddie received bailout and became a government property, think of that in communism structure
@@richardbell7678 They seem to be taking that show worldwide. They are redistributing the wealth of the entire world, to the top.
@@richardbell7678 idiotic comment. The Chinese govt actually does a good thing by exposing and punishing over leveraged companies engaged in fraudulent practices (something the US regime wished they could do, instead they r in bed with corporations) and yet u r finding something to complain about. Instead what did the US govt do in the 2000s...allow banks to rape the nation and then bailed them out with tax payer money. China does the opposite and u r upset? I don't understand.
I hope the correction happens asap so we can go back to decade long bull market with sane valuations. Yes it will suck for everyone but I am not sure what other options exist
Personally, I'm looking forward to a correction so I can pick up some dividend equities with decent returns. Not sure it will balance out the losses but it will make me feel better anyway. Not living with the ax constantly hanging over us would be a nice benefit too.
I love how you genuinely laughed out loud when you mentioned Chinese gov is a communism party ( I am Chinese :))
It is communism lmao as in the CHINESE COMMUNIST PARTY aka CCP
@@rizzoli7 he is just trying to improve his social credit score😌
Hey, Tiananmen square Massacre happened !
@@rizzoli7 they aren't very communist though lol. Kinda like how North Korea isn't exactly a republic.
-30000 social credit points
Good job getting into the weeds with Evergrande. Very clear explanation. I don't feel sorry for the Chinese- especially their government- but this isn't the first time this has happened when a company from a foreign country goes tits up and it affects the rest of the world's markets like it did with the 1998 financial crisis that emerged out of Russia. This is one of those situations where if a default occurs in China I can see a delayed effect happen in Western markets. My question is could it expose the vulnerability of derivatives?
Maybe this will teach wall street not to invest in china 🇨🇳.
thanks for the video. Could you make a video on portfolio re-balancing? with the nitty gitty details of managing capital gains taxes, exit loads etc.
Xpeng nio and all Chinese stock will fall another 20%
Who would have guessed that one of the biggest news stories of this year would be about the Chinese Lehman brothers
The petito-laundrie news is bigger, so far.
A lot of companies are global and have revenue from China. If China falls, then global US companies also will lose out revenue from the downturn in China.
Seriously though , I don't know why but I feel it would be better for me if this happens & the global economy gets flushed down the toilet then at least I'll know I'm not alone in misery.
@@ardenfernandes1763 In the global market, everyone is undercut by somebody else.
I'm keen to see the domino affect on the Crypto market 😎...
Especially with Chinese cryptocurrencies like VET
Buy the dip
@@TheMiloking yessir and sell the greed
The really terrifying part of this is that a lot of bad debt of a lot of Chines companies got spun off as notes receivable to "asset management" companies. Most of these were from companies owned by party officials. Think Enron but on a national scale with an ultra protected class of investors.
Hey man can you make a video on Computer Share (DRS) THANKS!
finally! I was waiting for your insight. Keep them coming. Thanks!
Who would buy an apmt priced at 46x average annual salary? Of course, those who expect prices are going to 47+ times! Did I hear bubble!
It feels like a giant ponzi scheme of paper writing
Another perfect example of how the likelihood that humans learn from past mistakes is inversely proportional to the size of said mistake. A decade is a ridiculously short period of time for worldwide financial systems to get caught with their collective pants down again! Any system allowed to run without regulation or level-headed oversight is destined to fail - there is no such thing as 'too big to fail', it's truly 'too big _not_ to fail'. Thanks for the concise overview 👍
Evergrande just declared bankruptcy just for anyone reading comments now lol
Land speculation and financial & economic disaster: name a more iconic duo
More bad news of China? Of course 😂. Thats why i dont touch Chinese stocks
Pretty soon America’s debt will explode too!
A similar kind of a thing was happening in India earlier where realty developers would take a bank loan to buy a land and start a project and then divert all the balance loan amount, deposits or funds received from the buyers to buy new land and start new projects leaving the earlier projects unfinished and delayed due to short of funds and causing bank defaults and buyers left with no ready property. The Indian government then introduced a law "RERA" that didn't allow realty developers to divert funds from unfinished project to another projects to avoid bank defaults and reduce bank NPAs.
1 month later, they defaulted
I remember several years ago seeing reports about large numbers of abandoned real estate holdings in China maybe due to global warming caused flooding or what?
Can't really compare Evergrande‘s situation to the failed investment banks. There are no trillion-dollar worthless securities this time.
This nicely sums up why this kind of thing will just keep happening over and over. How is it even the tiniest bit different from the investment bank failures? They claim to have assets in all the future constructions they (hope to) eventually start building. Which would already be bad since due to this mismanagement, all the real estate they're selling will drop in price like crazy (and the same for everyone else on the market). But then multiply that by having debt on stuff they didn't even start building - and suddenly the debt is far larger than what they could ever hope to make on actually building and selling that real estate.
It's still the good old problem of trying to increase wealth through printing money, and on a ridiculous scale. We should really, _really_ throw out Keynesianism. Not that there's any chance of that happening, of course, given how attractive it will always be to governments. In the meantime, the problem is getting bigger all over the world, and the crash will be just that much more painful.
@@LuaanTi They both thought the real estate market will just keep going up. Evergrande is selling some of its assets now and hoping to be able to make payment to its debts. Let's just hope the worst scenario won't happen. If you have any investment portfolio might be a good time to change to a cash position.
To me, this is the perfect plain bagel video. To the point, concise and yet not lacking nuance. I know you have been asking on twitter about video style and length, this is exactly what I enjoy from you! Thanks.
I am a Bookkeeper and I am sure glad I DON'T work there the stress levels would be absolutely off the charts :(
You really think I won't bail them out? The women don't call me 'Daddy' Xi for nothing now
Quality content. Together with couple videos from Patrick Boyle, this really helps explaining the situation in all details.
Why everyone sees these situations as "bad", i prefer to look at them as opportunities if there are "corrections" in the stock market.
There is not gonna be much "dip" outside of China with all the low interest rates. If you are talking about investing in China, then that's a different story.
Buy the Chinese dip
I agree. Not only such bearish trends create opportunities for new players, it helps to Better regulate the market in future. The 2008 recession caused BASEL to rethink capital structure of financial institutions.
A high quality appraisal of economic events. Thank you!
A new subscriber here. Great information without China bashing.
ok so i have found this video a week after upload and i have noticed absolutely nothing change with the world
Clicked on this thinking the 'apparently kid' grew up
1.4 million residential units to finish up ? Classic builder problem getting ahead of themselves.
China getting smacked is a good thing in my opinion. People getting the results they deserve for doing something stupid? A good thing. Sadly, I see China saving face by bailing out this company on the down low.
That was us in 2008 and only the poor suffer in the end. We aren’t any better rn imo bc of the covid stimulus.
👍🏻😀 Short, information dense and easy to understand, keep it up. Love your content from beginning.
Very neutral fact based summation
Been a frequent watcher from the early days of this channel, its just a cut above. Bravo pal, keep it up
Shame. I always liked her songs too.
Moral Hazard?? Are you serious?
Chinese government, Greedy company like Evergrande and Morality don’t go in same sentence
the event that will crash the market.... sneaks on ya
this event literally was on every media
the most difficult things for this company, is no one buy their house right now. that a bad thing, bad for the company. but after bankrupt, they have lot of things could sale. the biggest part is land and house. and they are not on Chinese mainland stock maket yet, which means they have a lot of potential money could spend if their property could be bought by others already on the stock.
Problem is the chinese RE market is a Ponzi scheme and once the majority of investors start to withhold their investments in this market, as already many chinese have done, the RE market for any type of sales will diminish and prices for RE may be as low as 10% or less of pre-crisis prices. I have seen exactly this development in some european markets and hearing how speculative the chinese RE market have become it is clear to me that we will see this development also in China. Then lots and lots of chinese will lose their jobs ! Seems the chinese people have no idea about these things ...
Best discovery 🙀on utube this year 😎🙏🖖
Blown way out of proportion, Much of the assets are land assets and unlike financial instraments which can goto zero, these assets will just get auctioned off. Secondly they missed a bond payment in the grand scheme of things 19billion in foreign bonds is small compared to the hundreds of billion Leigh man brothers couldn’t pay when they defaulted. The rest of the debt were liabilities to homeowners and unfinished contracts
@Mom since the day you cared about the ever grande employees
Debt can be "good" or "bad" when bought, but all debt can easily become "bad" pretty easily. It definitely needs to be taken seriously and only used strategically.
the difference with US 2008 gambling house of cards is that the Chinese don't have CDS and CDO squares and other completely useless financial gambling products. so debt is just debt, not something that will nuke the entire economy like the US housing casino did in 2008 dragging the whole world down the drain.
First Evergreen, now Evergrande.
Coincidence? I don't think so.
It will be worse than 2008
Get ready for the next crisis!
Cash is king
You didn't cover the housing bubble in China. It's huge and has been on the verge of popping for years and the extra stress that will be put on it in the event of Evergrande's bankruptcy might be the straw that breaks the camel's back.
There is no china housing bubble. In the US in 2008, people bought houses with no money down plus low interest. In China, all those apartments have been payed for cash even before they were built.
The company sounds like the US government the last 50 years. Endlessly borrowing and spending, without regard to the consequences.
Ape nation is not concerned.🚀
There are multiple warnings this last week in all Australian papers from CBA and IMF about house prices here which is very rare. They are very worried, and I know they don't care about individual lenders, only the system. I believe they know something is on the horizon and people are seriously struggling to keep up with repayments.
Long term investing, diversification, dollar-cost-averaging. If you are doing these, you can breathe a lot easier, and keep on keeping on.
You informed me 😃👏🏿
1. Thank you for making the video, Yay Bonus. 2. If they fail, it will hurt the people who purchased from them, so I want those people taken care of. 3. If they do fail and china is effect, please make a video to contrast and compare their housing issues Vs USA housing issues and the effect on the over all market.
I am learning from Tintin
Hey man. You got them million dollar eyes hiding behind those defunct glasses. Hint!!!!
I've got no idea how this will play out, I would think very few people actually know. Hopefully it's just 1 company collapsing, may be a few ripples, but all will be ok.
New versions of the "CDO" are at work.
Thanks for explaining this, Richard. Lots of noise out there and I was just looking for someone to explain why this is a concern in a simple manner. Appreciate it
Thanks for the vidéo, i was waiting for it
This could be used to set a trend of finally addressing moral hazard.
its always the estate firms. i would expect china to take precautions... looks like they are so concerned about peoples internet traffic that they cant find time to read financial reports of big companies wasting money
The central government repeatedly said in the past that they should stop pushing real estate prices as investment. But it's pretty hard to execute when you have companies that work collectively to leverage the market and liaisons in various banks/local systems that cooperate with them. Kind of why they are not bailing Evergrande out this time.
Same here with me Bagel, My portfolio has been going down the drain while I try trading,l just don't know what I'm doing wrong
Love your art on the wall. Very cool.
Thank you. You made very complex subject so simple even a noob like me can understand. Really appreciate your effort. Thank so much.
the fall of Lehman Brothers didn't kick off the financial crisis of 2008; it was the crisis that kicked off the fall of Lehman Bothers. HUGE difference. the corruption was not the result of a single entity acting in bad faith, which is why Burry isn't famous for buying put options against Lehman Brothers. the corruption of system-wide. that's not the case with China. China has an Evergrande problem, not a corrupt industry and banking sector problem. there's just no viable comparison.
2021 Could it get worse?
2022 Hold my Beer......
2023 Zombies? Aliens? Mandatory K Pop?
All I cared about is how good of a day it was to dollar cost average into the S&P this month.
Time to sell everything but actual land/houses. Unless you're in Canada or Australia, then maybe you should sell your house and move to a better country. They are WAY too inflated right now. I am very lucky to be where I am.
C'mon... Crash so I can buy lots of assets.
You got your wish 😂
My previous comment requesting you to see the PWC's Going Concern comment on Evergrande's Dec2020 financials (p77) was deleted. Care to explain?
I hope they fail & colapse. I don't see the point of milking a dead cow. Get it over & done with. You can't spend more than you make & borrowing money on an appreciating assets indefinitely. Assets can depreciate. It is an unsustainable business model.