Evergrande's $300B Collapse, The Lehman Bros. of China?
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- Опубликовано: 3 окт 2024
- Evergande Group is the second largest property developer in China and with $300 billion of liabilities it is the most indebted property developer in the world. 2021 has not been a great year for them with their stock price declining ~80% year to date. They are running out of cash and are on the verge of defaulting on their debts. A disorderly collapse of the company could send shockwaves throughout China's financial system.
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The issue was they were able to list unsold property as "inventory" at whatever price they said it was worth.
So they were always able to paint a rosy financial picture by assigning high values to FAILED or unfinished projects and using those projects as collateral for loans.
So whenever they built a block of apartments, if those appartments couldnt be sold at a profit they'd just let them sit and rot and take out a loan for whatever amount they claimed the property was worth.
When lending laws were tightened and they actually had to sell those properties, it quickly became obvious that tens of billions of dollars on the financial statements was pure fiction and the company was actually hiding huge losses.
They have 330 billion in debt ( that we know of ) and nobody really knows what their "inventory" is actually worth.
The bizzare part is this is normal in China, the only reason its being shut down is the CEO backed the wrong horse in the latest internal power struggle inside the CCP.
Drop the mic. I'll get the door behind you.
All of those unfinished buildings makes it look post apocalyptic.
Epoch times level crap
I went all over China in 2012 and saw building after building after building that was unfinished and not being worked on. There were so many buildings that were even finished that had no activity around them. I thought it was weird and also obvious that things were a show.
Great summarization. One question - why should this affect US markets?
It's funny I did a report on this in 2012 and how it would eventually collapse. I was wondering the other day why it hasn't happened yet. Now I know it has just been getting worse for the last 10 years.
Bears have predicted 2000 of the last 2 economic collapses.
@@dinokknd but bears only need to be right once.
@@lionofpersis Peter Schiff has entered the chat.
Being wrong and late is like the same in the stock market
@@lionofpersis not really though. if he entered a short 10 years ago he'd probably be liquidated several times over
There’s a reason why Chinese spend so much money buying properties in Canada
And America. Not to mention the buyouts of small companies, my friend is always worried about losing her job to China they steadily get rid of departments. But hey it’s capitalism someone’s gotta buy, no matter who. It’s the dollar that matters, and last time Wall Street only looked at dollars was a disaster. Imagine if China decided to go full on homeland and withdraw us companies. They could steal some land claiming it’s theirs cause they bought it. I’m ready for fallout.
It’s a goddamn energy company why would we put an energy company of ours into Chinese hands???
Man they bought the Walforf Astoria. LOL
why ?
and america
if you could mention all numbers in same currency that would be great. jumping between hk dollars, chinese yuan and dollars makes comparing difficult.
Jup
I assume this is why all my flipping stocks are red
Yup, dont bother pulling out now, just throw more money in when the 'crisis' starts to turn around in maybe 1-2 months if China's economy truly falls.
The other reason is that the Rep/Democrats are having another pissing match and might cause another shutdown in USA.
@@farnoosh1952 I refuse to pull out AMC, I’m up 15k
@@Dee-ye2dk Did you buy it when it was worth $60-$40 during the short seller bomb? AMC was shorted and was one of the stocks like GME that the internet wanted to meme-stock to kill Hedge funds.
@@eternialogic I bought it at $16, about 20k ish
On , the U.S. government bailed out the financial services and insurance firm AIG. At over $180 billion, it was the largest bailout of a private company in history. AIG eventually returned to profit, repaying the government a total of $205 billion in 2012.
Leveraging is a quick way to get wiped out when things go south. Also, highly unlikely banks and consumers, lenders, were given full disclosure when asking for funds
Everybody that has been following the Chinese real estate boom in the past 15 years knew this was coming.
If you talk to the people of China, they will tell you they think the expansion will go on forever. Just like crypto junkies today.
@@Michael-db1ce Tulip's were big 500 years ago.
Great comment. I remember watching a 60 Minutes piece on Chinese ghost cities a few years ago and wondering, how are they going to make money with all of these vacant buildings? I guess they thought ‘if you build it they will come’. Speculation to the nth degree.
@@bigkahunaburger5185 yes reports on china's ghost towns gave been surfacing here and there for a long time.
As Napoleon once remarked “don’t interrupt the enemy when they are in the middle of making a mistake”
I'm just glad the China isn't going to come out of the coming financial crisis untouched (like they managed with the virus they made).
@@Nukestarmaster stop spreading baseless conspiracy theories
As a Chinese, I am loving how you guys just believe whateva ya media tells ya, I mean the same lot has been saying "China will for sure collapse" in the last 30 years every single year by the Economist... These anglo saxon media along with these content creators basically just form a feedback loop that amplify propoganda far and wide, I am loving it mate. The reality could not have been more different, but I guess you guys are just brainwashed to want to see China fail so ;) Lemme just enjoy my popcorn ;)
@@sharkb8754 China will be the new World Power. But they sure are better then any other shit country outside the West.
@@ha2kon539 Have you been following the news? That hasn't been a "baseless conspiracy theory" for at least six months now. We know that the Wuhan lab was preforming Gain-of-Function research (that is, genetically altering viruses to be more contageous) on bat coronaviruses. And all evidence points to the virus being leaked from the lab.
Evergrande is just the first to tip over, with a debt ratio of 153%. There are at least three more in the same category: R & F Properties (130%), Suntac China (90%) and Greenland Holdings (139%).
Those are the so-called “private sector” companies, the sleeping partners of which are the red princelings and family. Local governments, which largely rely on selling land as well as housing development, carry a larger debt ratio than that of the PRC.
As the dominoes begin to fall, one hopes that the Pentagon will keep a keen eye on Taiwan, because nothing will cheer the comrades more and divert their economic pain away from the cause.
Most of these properties are totally crap quality that no one lives in anyway. The investor just expects the capital value to go up. When it doesn’t you have social unrest and the CCP has to step in.
I sitting 95% in cash by now, waiting for dip
I was thinking you’d make a video on this since their deadline is Thursday and the contagion could spread if they default.
I remember when Japan's economy was so strong the Japanese were buying up everything and paying premium prices then the bottom fell out and their economy has had zero or negative growth since then. I can see history repeat itself but this time with China. It's possible Chinese imports get cheaper to sell more products in effort to cover their bets.
You're right, I'm an Australian and I remember back in the 1970's the Japanese were swarming our real estate and inflated the prices particularly on the Coast to such a degree that locals could not afford to even buy an apartment and in recent years China has been doing the same buying up huge areas but not occupying them, should not be allowed, but I know they are doing this all over the world.
@@jonathanmagic5633 it happens everywhere even white bread people do it...🤷🏼♂️ It's all about how unbalanced the market is when one side makes to much then exploits another country to buy cheap assets...ie all the racist sexist Australians in Bali 🤷🏼♂️
There are large differences between China and other countries.
In China the large banks are owned by the state.
Evergrande have a net debt of 100 billion USD, GM have a net debt of 90 billion USD and Ford 128 billion USD
@@qinby1182 We'll see how all this plays out.
@@qinby1182 how you know their net debt is 100 billion when there hasn’t been a full audit on their books?
Okay, how about the other sister companies: "Evershort, Evertall, and Everventi? I presume they also sell coffee.
I’m curious as to which cards will fall next…
Other developers. Then the banks.
If they go bankrupt, then I would say one of the major cards to fall would be creditors and debt holders (bonds, loans, etc.) that were invested in the company. I believe Blackrock owns a portion of it which would explain why their stock price has gone down.
The ones Evergrande used as Sheetrock in their tofu dreg buildings
@@Fallen7Pie even the Australian government does the same...I dare say all across they world development is the same...cheap and a over speculated market
Again, very well presented, understandable and great voice!
Watch Burry file that he owns Evergrande Credit Default Swaps
LOL,
Lmo
He's been paying premiums on them for years now 🤭🤣
Cds is that thing we use to clean up #2 or we use dollars?
Wow just wow. It’s over. Kinda like a really slow years long pump and dump with real physical assets.
Excellent video
No one is monitoring the Evergrande liability.
I love how big institutions just ignored to look at their balance sheets 😂
The CCP doesn't have the wherewithal to get out of this mess.
Blue light special, China.
I've been watching videos for years of empty buildings, empty cities. It's speculation on a scale I wouldn't have thought possible. This is an issue in other places like SE Asia where rents are cheap but prices are high. Speculation of getting a higher price someday and a little rent maybe along the way. But generally only in specific areas like major cities. Reasonable property price can be found further out.
I dont understand how you invest in real estate in a country where you can't own land?
Or in a country where you are not a citizen.
Can you stop saying "Hundreds of billions" or "millions of billions" or "thousands of trillions" in all of your videos? That's what people say when they actually have no idea what they are talking about. State a real number. Other than that your videos are a good watch but I cringe every time I hear these nonsense figures.
This explains China's frantic moves recently. I still have a feeling the other shoe is yet to drop.
Feelings are irrelevant, rumors are relevant
I'm sure there is an evergrande here in America waiting to go boom
What a class act of a trade
Sure, I can think of more than a few (Citadel Securities, a number of major banks, et cetera), but the US system is resilient against crashes in a way that state economies like China aren't.
@@Nukestarmaster 2008 crisis want's to have a word with you
Music to my ears.
Best Evergrande video I've watched this week.
Full of information! 🏆👏
I guess you could call it an evergrande crash LMAO
get out
Even if stock holders get anything, US-listed ADR won't. That is the risk in these ADR.
I will never touch china adrs
Evergrande have a net debt of 100 billion USD, GM have a net debt of 90 billion USD and Ford 128 billion USD
It is me or anyone else thinking they were running one GIANT Ponzi scheme?
Best explanation video I have seen so far!
Thank you for explaining this
I enjoyed the stock footage of camels, it really helped.
Hey nice video thanks can you go one on the China debt crisis tooo?
Too big companies are risky lot. As big companies come with big liabilities. Furthermore, there is no regulator monitoring their performance.
Once burst, it is too late to salvage..
but the commodities are going to be affected the most
This is not Lehman. I'd say this is more like Japan during their real estate bubble.
The real issue is the local governments derive revenue by selling land to developers. If the pace of real estate development slows, you will see a cascading effect in revenue across the board. Not a huge giant crash like the GFC, but stagnation like Japan in the 1990s and beyond.
“They mistook leverage for genius” - Steve Eisman
They leveraging everyones money over there
When I went to China new buildings fell apart faster than old buildings
Wall Street about to mad
Wall Street taking profits today, retail investors left to hold baggage
Still have people telling me Carthage will rise to topple Rome
Don’t forget that Rome destroyed itself.
@UCMNPJb65mn_M7dEsiezQSuw Ok? dúmbass
@@yudistiraliem135 or did it transform into the Roman catholic church. Pope still lets priests get away with all the kid f*cking in the church...like a Roman emperor - Galba I think?
@hasslfoot this is exactly what I mean by people telling me Carthage will rise to topple Rome. as though PR isn't a tool or war or privilege of victory
😂😂😂I thought I have problems with my business needing to find $300k quick smart, until I heard Evergrand needs to find $300 billion quick smart 😂
Yes, but how do we profit from this!?
Now thats the real question
@@Landstalker1999 looking into farm lands in Europe
comparing Investment bank with Construction company is like comparing Investor with assets
Welp, as soon as you said they accumulate capital to meet payments by offering the public massive discounts on their products, I knew it couldn't last.
pft. only $300B... Lehman brothers was &619B
I love this channel
It is definetly not a Lehman Brothers sized company
How is this related to Lehman Brothers(Financial service) and Evergrande (Real estate group)? I don't understand.
The Chinese don't invest in stocks they invest in real estate
Lehman had a massive amount of securities related to real estate
@@Riddingwithvivian So is that why most Chinese stocks are in the downtrend? If real estate is their biggest investments and it defaulted wouldn't be beneficial if they start buying Chinese stocks again?
@@jimjim435 Hi, so the same case as in Evergrande?
@@alexdurden2745 Its all tied together. China's economy is heavily relied by the state, you could even go so far as to say it isn't real. So all these headlines about China taking over in the last 20 years have been bullshit. China is not taking over the world if anything there fate is closely related to Japans
I was just about to suggest you do a video on this
The biggest problem is China is demographics really. Officially women in China have 1.3 children and the population will half in 80 years. Unofficially women in China actually have about 1.18 children.
Obviously you need people to live in the buildings you are constructing...but the population is declining. 🤷🏻♂️
Buildings are used as investment drivers and means to preserve value. Nobody needs to live in it for the buildings to appreciate in price. Chinese don’t want to hold the yuan in their savings given inflation.
@@wyw201 When you have an oversupply houses are not a good store of value. Look at house prices in depopulating countries (Japan, Italy, Eastern Europe, Spain etc.)
@@thomas316 Obviously that is true, however for the past 20 years, the assumption is that real estate debt will achiever parity with capital investments. China’s real estate market has outgrown both Shanghai and Shenzhen index. It is a better store of value than stock market, bonds and the Yuan.
@@thomas316 Just as the Federal Reserve can print money to fill in the gaps in 2008 recession, the bank of China have been throwing money into the real estate market to prevent it from crashing. As such, housing supply is dependent on capital supply and not population.
@@wyw201 Time will tell but I suspect that demography is destiny.
They wanted to cool down the property market, which was out of control a long time. And now it will cool down.
This is like a Ponzi scheme except using property instead of $ $ $. This is different to Lehman Brothers because most of the debts are internal vs Lehmann brothers debts which is based on the US green back. There will be no bailout unless it's collapse affects the rest of the economy.
All these bathroom sized condos are total worthless! The prices are abnormally high most of these property owners rents out. And occupancy rate as best 50%.
If China save Evergrande, there will be Evergrande 2.0. How many can China save at that time ? How this company is run is a bit crazy and Evergrande is not the only one. The main difference between USA and China is that USA can print money and borrow against its owns currency. US dollar is quite use internationally just like the GBP, EURO and the YEN. This is why Japan can go to 200% debt to GDP and print tons of money without having to suffer massive inflation issue. However, that is not the case for China. Doing so will put increasing risk to the country as it is already in International trade decline with many western countries watching closely on it. Sometime, you need to let it fall so that it became an example for other badly manage companies that they need to get their act together. Saving it can only make things worse for the country in the future. Evergrande is just one out of many trouble company.
All I know is; we better use this opportunity to get rich!
banks and creditors just giving out loans to already heavily leveraged companies when there is a Real estate bubble is disgusting as they know fine well that when the bubble bursts it will be the tax payers that will foot the bill. 2008 should have been the lesson every bank and creditor learned from but NO. they are too greedy and know the common person who pays taxes will bail them out.
The word Fucked comes to mind
those houses are so ugly and compact, they look like termite nests
Its over billion of them
Should investigate why they can secure more loan even the company are at high leverage..
This is like a Ponzi scheme except using property instead of $$$.
This is different to Lehman Brothers because most if not all debts are internal. Lehman Brothers debt was based on the US green back which is the currency of the
I will never understand why companies over leverage themselves like this when it’s obvious they will lose everything.
Because the CEO and C level executives, who are the real decision makers, can make money and leave.
What happens to Evergrand really depends on the intelligence of the CCP
Impact will hit us and uk market. Especially on those unit trust investments that invested into evergrande.
Hold your breath until Thursday .... then run!
Evergrande will just go into receivership and become a state owned enterprise
This is it
reuters just said evergrande making interest payments....stop the fud!!!!!!!!!!!!!!!!!!!!!
What the hell is happening in China right now!
At first ANT & Alibaba ,then Tencent & gaming,then edtech collapse and now this.
According to modern monetary theory, Chinese government can just print money to pay for this company‘s debt and there will be no repercussions for it.
What could possibly go wrong?
1:53 they are just gonna get bailed out
From 2.54 to .30 and they a horrible business plan.
How did the Chinese people fall for the worst real estate bubble ever? A lifetime of government oversight, telling them what is right. People grow up to say "of course you buy a home. Everyone knows that. Look everyone else is getting rich the longer we wait". Social engineering. We did it bad in the west with the American dream, but this phenomenon is so much bigger in so many more ways. This is bigger than people realize.
They dont have a choice, they only able to invest in real estate. So basically ccp force people to partocipate into ponzi scheme
That was not very detailed for a 9 minute video…. This thing is quite big. A lot of banks has bought Evergrande bonds and bundled them into securities and sold them to pensions and whatnot… If this is like Lehman, then it will take some time before the market can price everything in. Chinas markets are closed until Wednesday. I reckon we have a dip there as well.
This is great for the young people of China before they get into the property market haha.
Wish it happens here lol
Buy the dip!
And keep buying 😎
I really hope this stays contained to China. I don’t want my US stonks to go down
Maybe devalue the DMB
3.8 million people that will be out of work, I feel sorry for the people who have lost their savings.
Evergrand =🧢
"Chancellor on brink of second bailout for banks"
When the state wants free welfare homes...they buy it pennies on the dollar 😂😂😂😂😂
I wouldn't be surprised if Xu Jiayin was forced to hand over chunk of his fortune by Chinese authorities.
Greed, greed, greed is the root of all suffering
Would it be prudent to buy their stocks after they fall? Sorry I know this is bad
And just like that we will bounce at year end and every one will
Ask “ how ? What happened ? “ 🙄
did they delete the app and blocked any emails? worked for robinhood users.
Mark my words. This will be Canada before long.
I’m surprised it isn’t sooner. For example, why the hell is a car that’s $30,000 in all other parts of the world, sold for $47,000 in Canada?
@@Deetroiter because y’all use Monopoly money and not USD
Canada does t have huge construction companies building fuckloads of housing.
In fact it doesn't really do much construction at all.
Sounds to me like they need to stop building so many big buildings and focus on the real situation
The Chinese consumers are not very smart.
Put a down payment on your house, and wait 5+ years for it to be completed.... Thank you; NEXT!
/Lonewolf Liberties
A great big money laundering machine, if there ever was.
Facts 💀
Do you ever wondered what will be next grande collapse?
Chinese people: more complicated than you guys think
So funny to see all the comments here. Yes it is an big issue. We have heard the collapse stories for 10 years. It might come but 100% sure much later than some gov go for bankruptcy. You guys have no idea on how capable Chinese people is to fix it as we are an united nation!
For reasons unknown I am actually excited about an upcoming recession and the Bear Market 😎😎😎
How much did you make in SPX puts today? Lol jk
New name to be Formergrande.
*FUD* , Dont dump your coins
Evergrande didn't pass the vibe check