China Evergrande Collapse

[errolanderson]

A major Chinese developer Evergrande Group appears in-collapse . . . .

Construction of unfinished properties apparently leaving more than a million home buyers in-limbo. Reported by Bloomberg, this accounts for more than 25% of China's economic output. Fire sales now pummel China's real estate market.

Not sure exactly how this will impact the western world, but it will . . . . Asian equities shaken.

[biglentil]

A major Chinese developer Evergrande Group appears in-collapse . . . .

Construction of unfinished properties apparently leaving more than a million home buyers in-limbo. Reported by Bloomberg, this accounts for more than 25% of China's economic output. Fire sales now pummel China's real estate market.

Not sure exactly how this will impact the western world, but it will . . . . Asian equities shaken.

Heard they have their hands in a large amount of Canadian real-estate. Wasn't the container ship that blocked the suez earlier this year called the Ever Given, strange coincidence. That incident seized up the movement of goods and this has the potential to seize up financial markets. Lehmans collapse triggered the great financial crisis in 2008 with a downgrade on its $60b in debt, Evergrande has defaulted on its $300b in debt. Your right Errol this could be the domino falling that starts a cascade of downgrades and defaults. What comes to my mind is given how much more leveraged the market is this time around, how much larger will the bailouts be or worse the bail ins?

[errolanderson]

Heard they have their hands in a large amount of Canadian real-estate. Wasn't the container ship that blocked the suez earlier this year called the Ever Given, strange coincidence. That incident seized up the movement of goods and this has the potential to seize up financial markets. Lehmans collapse triggered the great financial crisis in 2008 with a downgrade on its $60b in debt, Evergrande has defaulted on its $300b in debt. Your right Errol this could be the domino falling that starts a cascade of downgrades and defaults. What comes to my mind is given how much more leveraged the market is this time around, how much larger will the bailouts be or worse the bail ins?

Thanks for your comments biglentil. World is so financially intertwined . . . .

[agstar77]

Our just in time supply chains are the Achilles heel of the world economy. The advent of adverse events such as the pandemic and the usual weather disruptions will be the biggest challenge.

[errolanderson]

Thanks for your comments biglentil. World is so financially intertwined . . . .

This is now being called ‘China’s Lehman Bros crisis’.

Credit markets globally will be impacted, potentially disrupting trade (IMO). Will China’s gov’t takeover?

[bucket]

What capitalists are not usually government funded at the beginning or end?

Capitalize the profits socialize the losses.

Look at Air Canada Algoma Dofasco etc etc etc.

[errolanderson]

Group, this was posted by a Swedish analyst in the past 24 hours. More insight on debt woes in Asia. Reason for this post is; fallout will impact global markets, both equities and commodities (IMO).

Bank Meltdown Is Coming To China As Evergrande Crisis Triggers Commercial Real Estate Collapse
Epic Economist Sep 17, 2021

A catastrophic bank meltdown seems looming in China: The country's entire financial sector is getting extremely alarmed with the possibility of a major default crisis, given that one of its biggest property developers, Evergrande, recently announced that it became unable to pay its gigantic debt. That debacle has exposed the perilous state of China’s vast property sector and its consequences could have a ripple effect across global markets and lead to billions in losses.

Last week, Evergrande, the world’s most indebted property developer, warned that it would likely fail to meet its financial obligations, triggering widespread panic among investors, dealing a severe blow to its bonds, and resulting in trading suspensions in the markets of Shenzhen and Shanghai. The crisis led two credit rating agencies to downgrade Evergrande last week, and it sparked a shocking 80% collapse on its Hong Kong-listed shares since the beginning of the year. And at the beginning of this week, the Shanghai Stock Exchange stopped trading in Evergrande's May 2023 bond after it dropped more than 30%.
Right now, the Chinese developer is sitting under a colossal pile of liabilities that total more than $300 billion, after decades of borrowing to finance its rapid growth.

Over the past few weeks, Evergrande has been rushing to sell assets to generate cash but several companies are refusing to accept the firm's commercial paper. According to S&P analysts, the developer might be paying suppliers through transfers of its properties instead of cash.

In essence, the company has become exposed to a vicious debt cycle, and it doesn't have enough cash to finish its projects and generate further proceeds from sales. Only in August, sales declined by a staggering 26 percent compared to the same time last year despite the steep discounts. And, of course, the developer is in desperate need of that cash not only to service but also to reduce, its enormous debts.
Beyond financial markets, the most significant problems that could be triggered by the Evergrande downfall are a residential and commercial real estate collapse all across China, as well as a brutal crisis on the broader property sector.

Other worries include the growing possibility of a bank meltdown, as at least 128 banks are highly exposed to Evergrande's liabilities, according to a 2020 leaked document. On top of that, 121 non-banking institutions are also exposed, and all of them are at risk of facing billions in losses.
Analysts have been comparing the imminent bank meltdown in China to the 2008 collapse of U.S. investment bank Lehman Brothers, which sparked crises at counterparties and ended up collapsing global markets.

[crusher]

Can you say - Ponzi?

[shtferbrains]

Occured to me that all Chinese companies are less than 30 yrs old.
All run by executives that are basicly on earn as you learn. Lots of book education but no old mentors. History of government intervention.

[errolanderson]

22 percent collapse in iron ore last week . . . .

Adios inflation . . . .

[biglentil]

22 percent collapse in iron ore last week . . . .

Adios inflation . . . .

Dollars can only come into existence as debt. If that debt is not paid back what value do dollars have? We are in the death throws of the fiat monetary system. When debts are not repayed confidence is lost, without confidence in the dollar there is no purchasing power.

[jazz]

Errol, sources say Blackrock is the biggest holder of this firm.

The same firm buying up blocks of real estate in the US and runs ETF exchanges.

I suspect a bailout is being prepped.

[shtferbrains]

Dollars can only come into existence as debt. If that debt is not paid back what value do dollars have? We are in the death throws of the fiat monetary system. When debts are not repayed confidence is lost, without confidence in the dollar there is no purchasing power.

So where do you park accumulated wealth as an individual?
With liquidity?

[biglentil]

So where do you park accumulated wealth as an individual?
With liquidity?

Commodities in general, preferably physical. Hold onto grain inventory, prebuy inputs, fill those fuel tanks. If there is a banking crisis commodities we will likely experience a short term drop, followed by hyperinflation. That short term dip I anticipate will be very short lived. Following the 2008 crisis it lasted almost a year, after March 2020 flash crash it lasted but a few months, this crash may only last a few weeks before physical goods skyrocket.

Virtually every hyperinflationary period in history was caused by a massive crash followed by a loss of confidence. That loss of confidence it next to impossible to regain with fiat money. This time around they will try with central bank digital currency and universal basic income. Their goal is to kill the dollar to implement that monetary system of total control. All part of the notso 'Great Reset'.

[biglentil]

Jazz Lehman did not have to happen if the fed would of bailed out their $60b in debt. They let Lehman fall on purpose. I anticipate Blackrock a financier of CB's would prefer a wave of foreclosures they can scoop up for pennies on the $.