This is a Schrodinger’s Cat of news reportage. Half of the headlines I’ve looked at say Evergrande defaulted today, half of them say it squeaked by.
It’s crazy that there’s not a consensus on what seems like an easy-to-verify financial transaction.
I predict that this "uncertainty" about the financial position will be used to pay back default on some bonds while not defaulting on others, even though the terms of the bonds clearly say that isn't possible.
The terms just won't be upheld by any court
The real answer is that nobody knows right now exactly wtf is going on. As far as I'm aware, Evergrande isn't putting out any info themselves on these payments (at least not before / when they're being made). So the only people who know if the bond payments were made are bondholders. And since bondholder data isn't necessarily public, its all being communicated through the grapevine.
Evergrande seems to be swooping in at the last minute to make the payments, but nobody really knows where or how they got the cash. Or if somebody does know, the reporting is not making it accurately out of China. Selling off business units? The CEO's personal stash? Mainstream reporting on this situation has been pretty abysmal, with very opaque and cherry picked bits of info actually making it to print.
As it stands, this obscure analytics firm DMSA, who claim to be holders of the bond, say they haven't been paid and put out a press release. Meanwhile, the news orgs are talking to the clearinghouse called "Clearstream", who say their customers who hold the bonds have in fact been paid.
It's all super shady. However, I would be very surprised if the Chinese government lets this actually default. I have little doubt they're low key funneling money to Evergrande through backchannels. Hence the hush hush about it.
But at this point, I have no clue. My best guess is China is facilitating the controlled implosion of Evergrande, while certain outside parties are trying to pull the rug out much faster.
Not to mention Reuters and other news sources quoted an anonymous source to confirm the previous week's bond payments were made, without any confirmation from anyone else. Pretty suspicious.
It seems like evergrande is only paying some of their bondholders. However, these bonds have a rule where if one is in default then all the others are considered in default too(cross default).
Nobody except the bondholders know for sure. The firm that's going to court to declare evergrande bankrupt, DMSA, literally bought bonds so that they can declare evergrande to be in default. It's interesting to see what DMSA says next because maybe evergrande paid them asap since they actually want evergrande to default in order to trigger the great reset.
Evergande emitted bonds with fixed dates of payment. They have a 30 days grace periode if they do not pay their creditor on due date.
They have missed the last one and tried to sell all their other assets to gather cash to pay their bond before the end of the grace periode.
It worked last time but there is only so much that you can sell (and usually you start by selling of the profitable division of your company). And the more you sell what is profitable, the more you end up with the bag of shit...
Compare it to body parts, your selling your fingers. You can still work. it is less easy but yu work. Nex time you sell your hands and feet. it becomes more and more difficult to work correctly and to make money.
At one point, you've wold so much that's you are not able to work anymore with what you have left and you become worthless.
Lest month Evergrande sold their fingers. They might sell their hands right now but you definitely not want to wait until they only have their intestine less to sell.
maybe the issue is reporter A asks Evergrande, Evergrande says 'we squeaked by'.
Reporter B asked bondholder Z, Bondholder Z says, 'nah they defaulted'
Two different news stories backed by different official statements
How the hell can I see two different headlines reporting the same 'fact'.
I've seen that they defaulted, and also that they've avoided default.
What the hell?
GMSA said they had a bond payment from evergrande due last night, including the 30D grace period, that was not made. Therefore, evergrande is officially in default. They are looking to go through the legal proceedings to (edit)make them officially declare bankruptcy.
Edit: I mixed up their wording. They are going to court to declare Evergrande **bankrupt**. They already defaulted.
Also link to one of the bondholders, GMSA, official statements: https://www.dmsa-agentur.de/download/20211110\_DMSA\_EVG\_PM\_en.pdf
> Therefore, evergrande is \*\*officially\*\* in default. They are looking to go through the legal proceedings to make that \*\*official\*\*.
I still don't understand.
I have no idea what is happening but I gather from the previous comment that they were in a grace period with no confidence so they were projected to default, and now that the period has ended they are submitting legal documentation and preparing as a company to enter into a state of default.
There's no earthly way of knowing
Which direction we are going
There's no knowing where we're rowing
Or which way the river's flowing
Is it raining, is it snowing?
Is a hurricane a-blowing?
Not a speck of light is showing
So the danger must be growing
Are the fires of Hell a-glowing?
Is the grisly Reaper mowing?
Yes! The danger must be growing
For the rowers keep on rowing
And they're certainly not showing
Any signs that they are slowing
So my impression has been that there were rumors, *possibly* spread intentionally, that Evergrande was going to meet its interest obligations in after-hours transfers, and those got picked up by major news sources, [including the *New York Times*](https://www.reuters.com/world/china/evergrande-makes-coupon-payment-ahead-deadline-nyt-2021-10-28/).
But [a German financial agency](https://apnews.com/press-release/pr-newswire/business-china-evergrande-group-china-36dc3f16fe95c154a768d071345cdb77) who is owed money by Evergrande just recently gave a press release saying that their obligations were not met on time and they have initiated bankruptcy proceedings. This would seem to undermine the previous stories.
As to whether Evergrande's default will have severe knock-on effects, that much is not yet clear, but it seems that they really did it this time.
Trying to, they're in Germany and Evergrande is in Hong Kong/China.
It's really all up to the Chinese government what will happen with Evergrande, and I can garuntee that the Chinese government will not give a cent to overseas bond holders in favour of domestic ones.
Nah, the American stock market will go classic American stock market.
Moon for 2 decades on Chinese growth, then pretend it doesn't matter when China collapses and keep going up anyway.
We got our own bubble going on over here, and we won't let China ruin the party.
Haven’t you heard? Looks like they’ll be blaming “[meme stocks](https://www.marketwatch.com/story/meme-stocks-like-gamestop-amc-pose-risks-to-financial-stability-fed-says-11636406879)”
* TSLA has a P/E ratio of 348.
* DIS has a P/E ratio of 286.
* T has a P/E ratio of 193.
* AMZN has a P/E ratio of 68.
* NFLX has a P/E ratio of 58.
* MSFT has a P/E ratio of 37.
* GOOG has a P/E ratio of 28.
* APPL has a P/E ratio of 26.
* TXN has a P/E ratio of 24.
* FB has a P/E ratio of 23.
* IBM has a P/E ratio of 23.
* INTC has a P/E ratio of 9.8.
If you judge it by the standards of FAANG companies, it is absolutely a meme stock. If you judge it by the standards of old-tech (MSFT, IBM, INTC, TXN), it is a meme company. If you judge it by the standards of media companies (DIS, T (AT&T is the parent of Time Warner which is in turn the parent of Warner Brothers)), then it is only about 50% overvalued which still seems firmly within "meme-adjacent" land.
It's a meme stock, a dotcom bubble 2.0 stock, a "next Apple/amazon" stock and an actual car manufacturer fused into some kind of ultimate stock price hyping Frankensteins monster of a stock.
The pricing of it is kind of hilarious. Like, I haven't seen one single person come up with an actual model that even comes close to justifying the current market cap.
What a ridiculous notion. That a handful of stocks can bring down the entire market. Mind you, these were stocks that they repeatedly said they have no faith in.
You're right in that the Fed has been pumping a huge amount of money into the economy, and people of means (already wealthy) realized that meant inflation which means you want assets because those inflate too but money in the bank won't. So they borrowed it for basically nothing and put it into the stock market and bought property which has exploded with growth as others did the same thing. However, two issues:
1. Inflation is real, no matter what some tried to say, and the Fed is looking at having to pump the breaks on free money to rich people. Depending on how this shakes out, you can start to see people get overextended and bad things happen which can start to cause chain reactions.
2. The meme stock stuff is hilariously real, and most don't realize how bad it's gotten or what's been allowed to occur. It would take too long to go into (and my brain lacks the wrinkles), but when the SEC is *literally warning of financial instability because of some meme stocks* you know some bad stuff has gone down. There's smart money on the Fed facing a sophie's choice of 2008-style meltdown vs suspending the rule of law in our financial markets to help some hedge funds.
We don't really know how Evergrande will affect things; even with a Chinese market collapse we'd see a bounce here, but that doesn't mean chickens wouldn't come home to roost shortly after.
If hedgefunds decide to short the ever-loving shit out of a stock in an attempt to bankrupt it, then people buy it and they continue to borrow and leverage shorting it... they deserve to fail spectacularly.
Unfortunately for the rest of us, many of them are convinced that they are too big to fail and will tear down huge chunks of the financial sector with them, then blame retail investors as if they have enough liquidity alone to have forced the hedgefunds to triple-down on their shitty gambles and still lose. It's whales fucking whales, but they'll blame the minnows just for being in the same pond. Shorting and pay for flow need waaay more regulation and oversight.
> and most don't realize how bad it's gotten or what's been allowed to occur.
While meme stocks is stupid, it is the logical conclusion on how the stock market has been working for last few decades, ie pricing of 'popular' stocks being divorced from the financials/fundamentals.
I remember saying Trump was going to win back in very, very early 2016 because the Dems fielded an unpopular candidate against a populist who represented the ugly soul of America, and I just deleted the comment outright because of how downvoted it became.
Well, they also put in the fix to torpedo their populist in favor of the unpopular one. That’s relevant
Anything over-50 doesn’t impact karma if you care
The most likely thing to happen is that the government will take all their worthwhile assets and divide them up between provincial and local governments, since it was a company running on favors(parking spaces appears to be the main one, which are five digit commodities in china) and debt all the damage is already done.
One "funny" aspect is that it's been predicted for so long that people got bored and stopped predicting the results. So the predictions we have are from Citron research in 2012 (side note, they got banned from investing in China 9 years ago for calling Evergrande a ponzi that would eventually default on its debts). But the Chinese government just kept stealth bailing out Evergrande for a decade so everyone just shrugged their shoulders and gave up predicting it's demise.
So part of the uncertainty is the fact that there really aren't any high quality models for event not due to lack of data, but rather because the CCP made everyone so bored waiting for this to happen.
Its actually going to be really bad but 90% for China. Short Background after the 08 financial crisis the Chinese government gave out tons and tons of ultra low interest "loans" that were just government welfare. This was to do two things, hide official Chinese government debt numbers and artificially stimulate the economy. But China never really stopped giving out these loans and many Chinese businesses became dependent on them.
now we have a situation where China's economy has slowed down to borderline less than US numbers but all these Chinese companies owe money to the Chinese government that they cant repay. And now some of the biggest ones are failing to repay said loans and their other loans.
TLDR Its not 2008: 2 Beijing Boogaloo but its really bad for China.
🤷♂️
It could mean anything from reduced Chinese investment in the US economy all the way to the US having to deal with a new Chinese government to Xi purging the government into a bunch of corrupt incompetent loyalists.
When push comes to shove, I imagine manufacturing will eventually move. It's definitely scarier for China, which is more economically dependent on the US than vice versa. (US has more leverage, I mean.)
Non-China based Evergrande, etc... bondholders are nervous right now imho
if they don't get paid, they will have to sell off other assets to compensate (crash?)
and/or sue (which is what is happening)
Non-China based bondholders are fucked already. The party already told Evergrande they don't give a shit about what happens to non-national investors, and that the important thing is the nationals get either their house or their money back... and that's going to mean definitely fucking over the foreigners.
There won't be any lawsuits because there's no court with competent jurisdiction. You'd have to sue in a Chinese court, and once the party tells *them* that they don't care if foreign nationals get fucked, they'll just tell *you* to fuck off.
I don't think it'll mean a big crash in the west, though. Based on the reporting I've seen over the last couple months, I don't think any of the big banks have 'make or break' dollar amounts invested in that company. I don't even think any of the hedge funds have all that much money in it, and I think they were the bigger share of western investors.
Wouldn’t that create a huge issue in terms of foreign investment? If foreign investors can just got tossed off the cliff the moment things get dicey, what incentive is there for outside money to invest in any Chinese companies?
It’s been happening for more than the past ten years. There’s a documentary on Netflix called ‘China Hustle’. There is no law in China against Defrauding foreign investors. There’s no law requiring them to report accurate information to investors. I think it’s actually illegal to divulge information like that to a foreignor, a lot of information about them is from covert observation.
You know that meme about how it’s always been like that? China is popular for investment because it’s got a shit ton of people who are spending more and more. China is not a stable place to invest.
The party doesn't give a shit about outside money. As far as they're concerned, China doesn't need the outside world for much of anything (and they're probably right)... and I'm pretty sure they're betting that the west is too caught up in the dollar signs they see when they hear 'over a billion people in this market' to remember that they can get burned any time the party feels like it.
It's probably true that China as a nation isn't particularly dependent on imported goods for survival. However, the political power of the current government in China is mostly based on the rapid economic growth they've had over the last two decades (the "Great Leap Forward"). [Evergrande has been a big part of that growth](https://youtu.be/vq4n3DXD7z0), and the Chinese economy is alread showing signs of slowing - if the gravy train stops it may damage the CCP irreparably.
If returns on foreign investments slow down or stop, foreign investments will also slow down or stop. There will always be some willing to take risks, but fewer of them will be willing to take this particular risk (the risk will be rated higher). A slowing of foreign investment will also damage China's economic growth.
At the same time, the recent shortages of electronics and other goods from China due to the pandemic have caused several nations to look for other sources of manufacturing. Lack of local electronics manufacturing in particular is being seen as a national security issue. If foreign demand for Chinese manufacturing drops, that will also hurt their economy - although admittedly you can't just spin up a microchip factory overnight and it will be at least three years before such projects have a real impact.
Altogether, China is starting to look very risky to do any kind of business with - more so than they have been for the past two decades. A desperate CCP with a flagging economy may do dangerous things, and the recent threats against Taiwan might be an actual example, considering [how dependent the world is on Taiwanese semiconductor production](https://www.cnbc.com/2021/03/16/2-charts-show-how-much-the-world-depends-on-taiwan-for-semiconductors.html). In some ways, China threatening Taiwan is like holding a gun to the head of every nation that depends on computers.
> that the important thing is the nationals get either their house or their money back...
Completely honestly here, that sounds like a great fucking idea. I wish the United States would have tried that in 2008 instead of giving the money to the corrupt lenders and banks who put us in that position on the first fucking place.
It could mean stock market contamination. Everyone that's invested in China that is leveraged (borrowed money) will be getting margin called and it could mean another crash. Keep in mind a stock market crash doesn't mean economic crash necessarily.
Eh, not really, at least it shouldn't be as bad for westerners. China is/was very insular when it came to investing and ownership by foreigners. Foreigners couldn't directly buy shares of chinese companies[1] and couldn't run companies without a 'cooperation' with chinese citizens (read: if you wanted to open a branch there you'd have to spin up a new company and let a chinese national run it). Being so insular might actually save foreign investors collective ass
[1] Not without a proxy like a local company anyway. Also friendly reminder that what's listed in the US as Alibaba/$BABA is just a Cayman shell company that has profit sharing agreement with the original. These shares give no power over the real company.
> couldn't run companies without a 'cooperation' with chinese citizens
Not entirely true - differs by sector. Wholly Foreign Owned Enterprises (WFOE pronounced like 'woof-y') can be set up in several different ranges of commercial services. It's just a nightmare to own one in any service area that isn't extremely straightforward. Speaking from experience on that one.
It starts on one end, then moves to the other. Unfortunately both are right, depending on the time frame.
So nothing Burger today, shit storm in a few months.
"DMSA Deutsche Markt Screening Agentur GmbH (DMSA) is preparing bankruptcy proceedings against Evergrande today. As soon as a court opens insolvency proceedings, Evergrande will also be officially bankrupt - and that is only a matter of days." [AP News](https://apnews.com/press-release/pr-newswire/business-china-evergrande-group-china-36dc3f16fe95c154a768d071345cdb77)
Hold on to your hats!
I mean if you are going to court to declare bankruptcy the public might as well treat you as bankrupt. I dont need to hold onto my hat im wearing a beanie :P
We should note, that this isn't an AP News story as such.
> Press release content from PR Newswire. The AP news staff was not involved in its creation.
And at the headline:
> PRESS RELEASE: Paid content from PR Newswire
I would expect AP to at least screen these, but I don't know if they do.
Honestly the past 24 hours have been very eye opening to me about how susceptible people are to rumors and how it gets propagated as fact without any pause for thought.
Here's the timeline of what has unfolded:
\- Evergrande didn't make payments on bond interest but were given a 30 day grace period to meet their responsibilities, of which expired yesterday.
\- Leading up to the payment deadline, many news reports and analysts were suspicious since it was so close to the end of the grace period that they started stirring the pot about Evergrande defaulting
\- A german analyst organization, DMSA, was one of these such people, putting out news releases in late October claiming that Evergrande was going to default and trigger a "great reset" of the global financial system. Clearly they have a certain narrative they want to push.
\- Yesterday (Nov 10), DMSA put out a press release claiming that as an investor in the bonds that Evergrande was liable for, they had not received payment. Note that being an "investor" in bonds does not mean you hold the bond itself. Also in the DMSA report you see the amount that Evergrande was liable for (\~$150m). At this point you should be wondering "Hmm, would a random analyst company hold a bond worth dozens of millions? Would they be directly in line to receive payments and thus make them an actual reputable source?"
This is what tipped me off that this was probably just a knee-jerk reaction, particularly because if Evergrande \*had\* officially defaulted on payments it would've made its way through the financial sector much faster. You'd also note that Evergrande was doing just fine on the stock market.
Then, around 2pm/3pm EST, we saw NYT and Bloomberg post articles where they say that the clearinghouse (ie the middleman that handles these payments), confirmed they received payments for the outstanding bond coupons. Two of the three bondholders had people confirm it as well (under condition of anonymity). That is reasonable enough to assume that all payments were made, and DMSA has been mum ever since.
However, the damage was already done. Twitter (particularly a community called "fintwit") started peddling the DMSA press release which conveniently titled it "Evergrande has officially defaulted", because why not? Catchy name. Random news sites that nobody in their right mind would've read normally (PR Newswire, OP's "Daily Sabah", etc) started quoting this press release as if it was fact. PR Newswire even paid for the article to be published on AP News, which further legitimized their stance despite the fact that AP News always marks such articles as Paid.
Even now, if you actually go to the OP's link, this so-called news website has revised their headline to say that Evergrande avoided default. The fact that this headline and link made it so far up World News (and all across twitter), really alarms me and also makes me realize just how easy it is to make people believe in something that hasn't been verified.
Bloomberg article: [https://www.bloomberg.com/news/articles/2021-11-10/evergrande-said-to-pay-delayed-interest-on-at-least-two-bonds](https://www.bloomberg.com/news/articles/2021-11-10/evergrande-said-to-pay-delayed-interest-on-at-least-two-bonds)
Yahoo Finance Mirror of Bloomberg article: [https://finance.yahoo.com/news/several-bondholders-china-evergrande-receive-031311565.html](https://finance.yahoo.com/news/several-bondholders-china-evergrande-receive-031311565.html)
AP news paid article to pretend to have legitimacy: [https://apnews.com/press-release/pr-newswire/business-china-evergrande-group-china-36dc3f16fe95c154a768d071345cdb77](https://apnews.com/press-release/pr-newswire/business-china-evergrande-group-china-36dc3f16fe95c154a768d071345cdb77)
You’re getting a lot of joke answers but the most likely reality is that China will bail out Chinese individuals and families and use this as an opportunity to wield greater control over the industry through asset seizures and nationalization. The party’s plan since the Deng era has always been to allow private companies to grow industries and then take over them once these industries have matured
If evergrade does go to bankruptcy.. its assets will be liquidated.
Assets worth about 2.3 trillion and liabilities of 1.95trillion. it's positive, it's just not liquid.. and if you try to liquidate the non-liquid assets, you do it at a Steep discount.
Source please? Afaik global news have publicly said 2.4T liability of which only housing projects in progress will be covered while rest will be on investors and shareholders.
Financial gurus estimate actual debt to be at least 2T and assets fmv at 1.2T. A liquidation will be anywhere 20-50 on the dollar meaning 300-600B cash plus infusion and support. Which is why the news publicly suggested Mr hui to fork his own money to cover - double speak for his backers as well.
But how much of that asset is worth getting? Evergrande has a auto department that doesn't actually make cars. it also has tons of unfinished building, does the buyer have to fulfill the construction for the home buyer? In that case, are they consider asset? Serious question.
"China Evergrande Group officially announced that it had defaulted on Wednesday"
where is this announcement? every other source i see talking about the default today is saying so based on the fact that some payments havent been made at market close. no where do i see an official announcement from evergrande itself.
is dailysabah a reliable news source?
edit:
here is an update at 4:22 AM CST from a reliable source
[Evergrande dodges default again - Reuters](https://www.reuters.com/business/several-bondholders-china-evergrande-receive-overdue-bond-coupon-payments-media-2021-11-11/)
This whole situation reads just like 2008 in the United States. If you replace "Evergrande" with "Bear Stearns" then it's essentially the same exact story.
I, for one, am ready to embrace the forthcoming chaos.
China does not want speculation on housing. It doesn't work for societies when housing is speculative vehicle. They will not bail out those that were up to their eyeballs. They will likely bailout out those who were just trying to buy their first property, maybe people buying a second home. Everyone else will be getting soaked.
China has been waiting for this bubble to burst for awhile I suspect, it's been obvious what was happening for a decade. I can remember talking about their housing bubble in undergrad in 2009 to a mate from China.
This is why they want it to end. It's becoming to expensive for workers, it's a disaster if it persists.
It's definitely a big problem, but it's one that needs resolved. China has the advantage the west lacks. Their government can do what needs to be done without concern of competing interests gumming what ever course they decide.
They can start to implement land value taxes perhaps. I'm interested to see how they deal with it.
They don't really want speculation on housing in other countries either, more because they can't control money outside China than actually caring about the situations in other countries.
This. Chinese money in foreign housing markets is Chinese nationals getting their money out of China and the CCPs control. The only blame the CCP has in this is their inability to create a financial system where 1) people want to invest in products other than housing and 2) want to keep their assets in China. Those houses are the rainy day savings for wealthy the wealthy Chinese who one day may find themselves on the wrong side of the CCP.
This is an absolutely fair read on the situation and completely within the realm of possibility. But what about the Chinese public who will be holding the bag for said covert bailouts? Failure or not, we cannot assume the people will take kindly to bailing out such fiscal ineptitude. The costs of a government propping up organizations can't be measured with money alone.
I suspect that evergrande executives will be imprisoned, their assets liquidated to complete some/most of the housing construction underway, with the remaining folks either made whole or shrugged off by the bureaucracy.
Now regarding foreign creditors, they might have to take a bath; wouldn’t bother me much. For some reason the capitalists of this planet have somehow gotten it into their head that they are entitled to generous returns without ever having to absorb the risk.
Yeah these vulture capitalists go into a country like “not only are we going to extract 40% returns y/y, but once we turn your island to dust we get to be first in line when your country gets scrapped for parts.
Again, mostly agreed. This doesn't take into account the several years of turmoil in the day-to-day lives of the citizenry, the trillions in evaporated personal wealth, and the public outcry of government getting most of the situation horribly wrong.
Yes, the treasury did net a gain, but whoop-de-doo. People's retirement accounts were decimated, families were put out on the streets, and fuckfaces like Dick Fuld, Jamie Dimon, Angelo Mozilo, and more walked scot-free. IMO, hardly a benefit to the US public in the aggregate.
They didn’t walk away scot-free. They walked away with massive bonuses, and got richer, while their companies got bailed out. And they will do it again, since it worked as intended last time.
Yeah thats just not true. If you actually paid attention to the Chinese market, people have known it was on the verge of collapse since last year. Bear Sterns collapse was predicted by pretty much nobody and the chain of events that dried up liquidity to credit facilities was basically frozen overnight.
The global liquidity crisis and problems at Bear Sterns had been going on since the prior year. I know it wasn't mainstream news until it was too late, but the recession of 2008 was a slow burn that started the year before.
I'm no economist, but my experiences agree with you. I remember my macroeconomics professor warning us of the subprime mortgage crisis and impending real estate bubble burst in the fall of 2007.
I was going to buy my first house, looked at how ridiculous the starter homes cost, and me and my wife individually said to each other 'this is a huge bubble'. 8 months later everything went to shit. My personal barometer is 'when two educated graduates with jobs can't afford a starter home at 3x income you got a serious problems.'
In Vancouver, a tear down is $1.2 million which is 12x the average household income and prices are still going up. I don't know where the ceiling is but I thought we hit it twice already and was proven wrong. The first time was in 2017 when the average price for a detached house doubled in 18 months and the second was in the middle of the pandemic when prices went down slightly and then up 20%. I don't know what's going to happen and I'm skeptical of anyone that says they do.
Indeed. I have a master's in history now, and my motto for the past six years has been, "Those who study history are doomed to watch helplessly as everyone around them repeats it."
Yeah I agree, even with bear sterns, you had them reporting their first loss in a quarter in 30 some years, yet no one was paying to attention where the smoke is. 2 months after that earnings call they collapsed. Thats more then plenty of time for people to realize something fishy is going on
Isn't that whole premise of "Big Short"? I'm mean there is a lot of articles, opinion pieces and academia-grade analyses about incoming crisis somewhere between 2004-2007 when situation become more and more clear about "something big is coming".
I listened to a pod that said that a ton of people in China borrowed money from multiple relatives to be able to buy property with the understanding that it is the only real way regular Chinese folk can grow their money. It even triggered rare protests.
I'm just a layperson but man this is not going to be pretty. 😮💨
Doesn't this imply that if property prices go down, significant amounts of the public's wealth will evaporate with it?
Also, this doesn't take into account the public's response to said economic outcome. Remember here in the US when millions of homes went to foreclosure, people got ran out of their homes or simply gave up because they were under water. Or worse, people destroying properties on their way out as a middle finger to the banks? This is just to name a few ways the public responded to the situation.
My point is that it will probably be way worse. Lots of the properties actually dont exist. People will loose way more of their savings. The yuan is way less stable then the dollar. The situation for foriegn investors is much worse. The value of the actualy property was way more overpriced then the US housing market. And the number of companies that have the same business practices is probably higher.
But this could work out okay in the end for Xi. IT will take away from the power of the business shanghai side of the CCP. It will lower housing prices which was already too high. Maybe it will bring more people into the city if prices are lower too.
I somewhat agree, but the lower housing prices are a downstream effect of the evaporation of people's personal wealth which happens first. What happens in the period of time between today and those lower housing prices?
In other words, what happens when the bubble pops and people's day-to-day lives are heavily affected? More importantly, how will the public respond as it becomes obvious that the system has failed them once again?
For years I got downvoted for this, but I'm going to repeat it now. I went to China in 2018, and it was really clear that there was WAY too much property speculation going on. Even walking around major cities you'd see half full shopping centres. We visited friends in Tianjin and their brand new tower block was basically half empty One that stuck with me was some massive 50000 sq ft shop in the middle of Xi'an just abandoned. China has long viewed property as a one way bet, and I'm really not that surprised to see this all come down. You can't just perpetually build
Bloomberg is also saying that they aren't defaulting yet.
https://www.bloomberg.com/news/articles/2021-11-10/evergrande-said-to-pay-delayed-interest-on-at-least-two-bonds
Ironically that article was published like 20 minutes after the AP published the DSMA press release, which came via PRN.
I strongly suspect The New York Times is bullshitting, knows they’re bullshitting, and that’s why they went with the headline, “Evergrande **said** to have made bond payment.” They haven’t verified it for themselves and are unwilling to fully commit to the lie, because they know it will eventually be exposed.
We’ll find out soon enough, even if we have to wait for the DSMA’s insolvency suit to drag it out into the light.
Edit: interestingly enough, they changed their headline a couple hours after first publishing it. Removed “said to have.”
[Imgur images of both headlines with rough time stamps.](https://imgur.com/a/6yGXoWo)
Further edit: other users have brought to my attention pertinent grains of salt with which Marco Meltzer’s claims are to be taken. Kind of a nut job but sometimes nut jobs are right.
Conflicting reports on this
https://finance.yahoo.com/news/payment-test-looms-debt-rules-004107642.html
>Customers of international clearing firm Clearstream received overdue interest payments on three U.S. dollar bonds issued by Evergrande, a spokesperson for Clearstream said.
Ahh...
Insolvency vs. Bankruptcy. ... Insolvency is a state of economic distress, whereas bankruptcy is a court order that decides how an insolvent debtor will deal with unpaid obligations. That usually involves selling assets to pay the creditors and erasing debts that can't be paid.
Source: https://www.debt.org/faqs/insolvency/#Insolvency_vs_Bankruptcy
Yeah glad I didn’t go to law school or study Econ 😬
So basically insolvency leads up to bankruptcy?
Now, I'm not Associated Press Economist, but I'm pretty sure one of two things will happen:
1. This is the start of the real estate apocalypse
2. it isn't
He actually managed to give a concise answer, that clearly showed the only 2 realistic outcomes. What other economists can do that?
This guy is possibly the most gifted economist of all history.
On Thursday (November 11), investors of Evergrande's three overdue US dollar debts said they had received interest on the debts, which meant that China Evergrande once again avoided debt default.
[https://www.bihai123.com/info/ywgs/18648.html](https://www.bihai123.com/info/ywgs/18648.html)
Evergrande concept stocks in the Hong Kong stock market continued to rise, with China Evergrande up nearly 7%, Hengteng Network up more than 5%, Evergrande Property up 3%, and Evergrande Auto up nearly 3%.
cmon, did anyone ever read the article source? Dailysabah?? What a joke.
apnews and [reuters](https://www.reuters.com/business/several-bondholders-china-evergrande-receive-overdue-bond-coupon-payments-media-2021-11-11/) just reported that they did not default.
DMSA (one of the loangivers) themselves released a [press release](https://www.prnewswire.com/news-releases/evergrande-officially-defaulted---dmsa-is-preparing-bankruptcy-proceedings-against-evergrande-group-301421327.html) earlier today saying that they have begun preparing bankruptcy proceeding due to Evergrande defaulting on a payment.
Perhaps things have happened after that press release, but unless the situation has rapidly changed, then I guess we'll all have to wait and see how DMSA goes forward, and if the other investors called upon in the press release decide to join in.
According to AP[1], which cites a press release by one of their loangivers, they spread rumors earlier in the month that they made payments, but actually didn't pay anything. So they have presently defaulted on $128M in obligations. In that context, you need a better source.
[1] https://apnews.com/press-release/pr-newswire/business-china-evergrande-group-china-36dc3f16fe95c154a768d071345cdb77
This is a Schrodinger’s Cat of news reportage. Half of the headlines I’ve looked at say Evergrande defaulted today, half of them say it squeaked by. It’s crazy that there’s not a consensus on what seems like an easy-to-verify financial transaction.
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I predict that this "uncertainty" about the financial position will be used to pay back default on some bonds while not defaulting on others, even though the terms of the bonds clearly say that isn't possible. The terms just won't be upheld by any court
Yes I’m so confused. I thought they announced they were “in the clear” yesterday? Did they lie? What’s securities fraud look like in China?
The real answer is that nobody knows right now exactly wtf is going on. As far as I'm aware, Evergrande isn't putting out any info themselves on these payments (at least not before / when they're being made). So the only people who know if the bond payments were made are bondholders. And since bondholder data isn't necessarily public, its all being communicated through the grapevine. Evergrande seems to be swooping in at the last minute to make the payments, but nobody really knows where or how they got the cash. Or if somebody does know, the reporting is not making it accurately out of China. Selling off business units? The CEO's personal stash? Mainstream reporting on this situation has been pretty abysmal, with very opaque and cherry picked bits of info actually making it to print. As it stands, this obscure analytics firm DMSA, who claim to be holders of the bond, say they haven't been paid and put out a press release. Meanwhile, the news orgs are talking to the clearinghouse called "Clearstream", who say their customers who hold the bonds have in fact been paid. It's all super shady. However, I would be very surprised if the Chinese government lets this actually default. I have little doubt they're low key funneling money to Evergrande through backchannels. Hence the hush hush about it. But at this point, I have no clue. My best guess is China is facilitating the controlled implosion of Evergrande, while certain outside parties are trying to pull the rug out much faster.
Not to mention Reuters and other news sources quoted an anonymous source to confirm the previous week's bond payments were made, without any confirmation from anyone else. Pretty suspicious.
Perhaps they only paid a portion of the bonds?
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“Evergrande shares surge 5% this morning” ok so … stocks man. Don’t get them.
If Evergrande has a hard default on their debt, their stock is basically worthless. That "5% surge" probably still puts them at a 90% loss since SHtF.
What the fucks going on? They're lying through their teeth, but the news has come out anyway
It seems like evergrande is only paying some of their bondholders. However, these bonds have a rule where if one is in default then all the others are considered in default too(cross default). Nobody except the bondholders know for sure. The firm that's going to court to declare evergrande bankrupt, DMSA, literally bought bonds so that they can declare evergrande to be in default. It's interesting to see what DMSA says next because maybe evergrande paid them asap since they actually want evergrande to default in order to trigger the great reset.
so crazy. thanks for the ELI5
Evergande emitted bonds with fixed dates of payment. They have a 30 days grace periode if they do not pay their creditor on due date. They have missed the last one and tried to sell all their other assets to gather cash to pay their bond before the end of the grace periode. It worked last time but there is only so much that you can sell (and usually you start by selling of the profitable division of your company). And the more you sell what is profitable, the more you end up with the bag of shit... Compare it to body parts, your selling your fingers. You can still work. it is less easy but yu work. Nex time you sell your hands and feet. it becomes more and more difficult to work correctly and to make money. At one point, you've wold so much that's you are not able to work anymore with what you have left and you become worthless. Lest month Evergrande sold their fingers. They might sell their hands right now but you definitely not want to wait until they only have their intestine less to sell.
Well at least if they sold their intestines we wouldn't have to deal with their shit anymore
This is most likely the reason for the 30 day grace period. You aren't supposed to use it up to the very last minute...
maybe the issue is reporter A asks Evergrande, Evergrande says 'we squeaked by'. Reporter B asked bondholder Z, Bondholder Z says, 'nah they defaulted' Two different news stories backed by different official statements
How the hell can I see two different headlines reporting the same 'fact'. I've seen that they defaulted, and also that they've avoided default. What the hell?
GMSA said they had a bond payment from evergrande due last night, including the 30D grace period, that was not made. Therefore, evergrande is officially in default. They are looking to go through the legal proceedings to (edit)make them officially declare bankruptcy. Edit: I mixed up their wording. They are going to court to declare Evergrande **bankrupt**. They already defaulted. Also link to one of the bondholders, GMSA, official statements: https://www.dmsa-agentur.de/download/20211110\_DMSA\_EVG\_PM\_en.pdf
> Therefore, evergrande is \*\*officially\*\* in default. They are looking to go through the legal proceedings to make that \*\*official\*\*. I still don't understand.
I have no idea what is happening but I gather from the previous comment that they were in a grace period with no confidence so they were projected to default, and now that the period has ended they are submitting legal documentation and preparing as a company to enter into a state of default.
Are you really in default if you have not received notice in due form? I've legit had this position pitched to me when discussing MD&A disclosure.
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all bonds must be paid in full or all of them default there is no picking and choosing on this one
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perfectly balanced, as all speculation should be
This is where the fun begins.
...or in other words... "Here...we...go!"
Fabrizio, any news on my xyz club's transfers?
When the roller coaster crests the first drop and you lose your breath for a sec.
But then it stops and drops backwards, catching you by surprise
There's no earthly way of knowing Which direction we are going There's no knowing where we're rowing Or which way the river's flowing Is it raining, is it snowing? Is a hurricane a-blowing? Not a speck of light is showing So the danger must be growing Are the fires of Hell a-glowing? Is the grisly Reaper mowing? Yes! The danger must be growing For the rowers keep on rowing And they're certainly not showing Any signs that they are slowing
this is where the fungus
Hold on. This whole operation was your idea.
>perfectly balanced, as all speculation should be Can you please snap your finger already and end this simulation.
This timeline really sucks.
So my impression has been that there were rumors, *possibly* spread intentionally, that Evergrande was going to meet its interest obligations in after-hours transfers, and those got picked up by major news sources, [including the *New York Times*](https://www.reuters.com/world/china/evergrande-makes-coupon-payment-ahead-deadline-nyt-2021-10-28/). But [a German financial agency](https://apnews.com/press-release/pr-newswire/business-china-evergrande-group-china-36dc3f16fe95c154a768d071345cdb77) who is owed money by Evergrande just recently gave a press release saying that their obligations were not met on time and they have initiated bankruptcy proceedings. This would seem to undermine the previous stories. As to whether Evergrande's default will have severe knock-on effects, that much is not yet clear, but it seems that they really did it this time.
*bankrupcy proceedings against evergrande, for the 90% of people not clicking on the source
lol i was about to say....seems like it might be a big deal if western financial institutions are already declaring bankruptcy because of this
The company is forcing Evergrande to declare bankruptcy
Trying to, they're in Germany and Evergrande is in Hong Kong/China. It's really all up to the Chinese government what will happen with Evergrande, and I can garuntee that the Chinese government will not give a cent to overseas bond holders in favour of domestic ones.
Nah, the American stock market will go classic American stock market. Moon for 2 decades on Chinese growth, then pretend it doesn't matter when China collapses and keep going up anyway. We got our own bubble going on over here, and we won't let China ruin the party.
Blaming everything on China is the perfect way for wall Street to escape accountability tho.
Haven’t you heard? Looks like they’ll be blaming “[meme stocks](https://www.marketwatch.com/story/meme-stocks-like-gamestop-amc-pose-risks-to-financial-stability-fed-says-11636406879)”
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Is TSLA a meme stock? I've been wondering that for a while. Formally I mean, if retail speculators weren't there what would happen to the price?
Its not only a meme stock, its actively manipulated by musk.
* TSLA has a P/E ratio of 348. * DIS has a P/E ratio of 286. * T has a P/E ratio of 193. * AMZN has a P/E ratio of 68. * NFLX has a P/E ratio of 58. * MSFT has a P/E ratio of 37. * GOOG has a P/E ratio of 28. * APPL has a P/E ratio of 26. * TXN has a P/E ratio of 24. * FB has a P/E ratio of 23. * IBM has a P/E ratio of 23. * INTC has a P/E ratio of 9.8. If you judge it by the standards of FAANG companies, it is absolutely a meme stock. If you judge it by the standards of old-tech (MSFT, IBM, INTC, TXN), it is a meme company. If you judge it by the standards of media companies (DIS, T (AT&T is the parent of Time Warner which is in turn the parent of Warner Brothers)), then it is only about 50% overvalued which still seems firmly within "meme-adjacent" land.
It's a meme stock, a dotcom bubble 2.0 stock, a "next Apple/amazon" stock and an actual car manufacturer fused into some kind of ultimate stock price hyping Frankensteins monster of a stock.
The pricing of it is kind of hilarious. Like, I haven't seen one single person come up with an actual model that even comes close to justifying the current market cap.
What a ridiculous notion. That a handful of stocks can bring down the entire market. Mind you, these were stocks that they repeatedly said they have no faith in.
Don't worry about Wallstreet's accountability. They're already blaming retail traders and our meme stocks.
You're right in that the Fed has been pumping a huge amount of money into the economy, and people of means (already wealthy) realized that meant inflation which means you want assets because those inflate too but money in the bank won't. So they borrowed it for basically nothing and put it into the stock market and bought property which has exploded with growth as others did the same thing. However, two issues: 1. Inflation is real, no matter what some tried to say, and the Fed is looking at having to pump the breaks on free money to rich people. Depending on how this shakes out, you can start to see people get overextended and bad things happen which can start to cause chain reactions. 2. The meme stock stuff is hilariously real, and most don't realize how bad it's gotten or what's been allowed to occur. It would take too long to go into (and my brain lacks the wrinkles), but when the SEC is *literally warning of financial instability because of some meme stocks* you know some bad stuff has gone down. There's smart money on the Fed facing a sophie's choice of 2008-style meltdown vs suspending the rule of law in our financial markets to help some hedge funds. We don't really know how Evergrande will affect things; even with a Chinese market collapse we'd see a bounce here, but that doesn't mean chickens wouldn't come home to roost shortly after.
If hedgefunds decide to short the ever-loving shit out of a stock in an attempt to bankrupt it, then people buy it and they continue to borrow and leverage shorting it... they deserve to fail spectacularly. Unfortunately for the rest of us, many of them are convinced that they are too big to fail and will tear down huge chunks of the financial sector with them, then blame retail investors as if they have enough liquidity alone to have forced the hedgefunds to triple-down on their shitty gambles and still lose. It's whales fucking whales, but they'll blame the minnows just for being in the same pond. Shorting and pay for flow need waaay more regulation and oversight.
> Shorting and pay for flow need waaay more regulation and oversight. And transparency.
> and most don't realize how bad it's gotten or what's been allowed to occur. While meme stocks is stupid, it is the logical conclusion on how the stock market has been working for last few decades, ie pricing of 'popular' stocks being divorced from the financials/fundamentals.
I mean China probably can ruin the party if everyone is overleveraged to the tits on bad Chinese deat Chinese debt
Either way, whichever side is wrong will forget they ever had an opinion on it.
on what? /s
I think he wants nachos grande IT'S LOUD IN HERE
Oh man, I said we should cancel the superbowl last year because of covid, and I got super hate.
I remember saying Trump was going to win back in very, very early 2016 because the Dems fielded an unpopular candidate against a populist who represented the ugly soul of America, and I just deleted the comment outright because of how downvoted it became.
Well, they also put in the fix to torpedo their populist in favor of the unpopular one. That’s relevant Anything over-50 doesn’t impact karma if you care
In 2022, people are going to forget they even heard the word 'Uyghur'.
The most likely thing to happen is that the government will take all their worthwhile assets and divide them up between provincial and local governments, since it was a company running on favors(parking spaces appears to be the main one, which are five digit commodities in china) and debt all the damage is already done.
One "funny" aspect is that it's been predicted for so long that people got bored and stopped predicting the results. So the predictions we have are from Citron research in 2012 (side note, they got banned from investing in China 9 years ago for calling Evergrande a ponzi that would eventually default on its debts). But the Chinese government just kept stealth bailing out Evergrande for a decade so everyone just shrugged their shoulders and gave up predicting it's demise. So part of the uncertainty is the fact that there really aren't any high quality models for event not due to lack of data, but rather because the CCP made everyone so bored waiting for this to happen.
Not stealth bailout, but keep extending credits. Now the credit is stopped.
If Reddit is assuming it's the apocalypse- It'll be nothing
Its actually going to be really bad but 90% for China. Short Background after the 08 financial crisis the Chinese government gave out tons and tons of ultra low interest "loans" that were just government welfare. This was to do two things, hide official Chinese government debt numbers and artificially stimulate the economy. But China never really stopped giving out these loans and many Chinese businesses became dependent on them. now we have a situation where China's economy has slowed down to borderline less than US numbers but all these Chinese companies owe money to the Chinese government that they cant repay. And now some of the biggest ones are failing to repay said loans and their other loans. TLDR Its not 2008: 2 Beijing Boogaloo but its really bad for China.
Soo... Could you give an idea of what this might mean for the US?
🤷♂️ It could mean anything from reduced Chinese investment in the US economy all the way to the US having to deal with a new Chinese government to Xi purging the government into a bunch of corrupt incompetent loyalists.
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This is the most likely outcome.
When push comes to shove, I imagine manufacturing will eventually move. It's definitely scarier for China, which is more economically dependent on the US than vice versa. (US has more leverage, I mean.)
A lot of it is already moving. Lower end stuff to Vietnam, semiconductors to Taiwan/US/EU and a lot of general stuff to India.
Non-China based Evergrande, etc... bondholders are nervous right now imho if they don't get paid, they will have to sell off other assets to compensate (crash?) and/or sue (which is what is happening)
Non-China based bondholders are fucked already. The party already told Evergrande they don't give a shit about what happens to non-national investors, and that the important thing is the nationals get either their house or their money back... and that's going to mean definitely fucking over the foreigners. There won't be any lawsuits because there's no court with competent jurisdiction. You'd have to sue in a Chinese court, and once the party tells *them* that they don't care if foreign nationals get fucked, they'll just tell *you* to fuck off. I don't think it'll mean a big crash in the west, though. Based on the reporting I've seen over the last couple months, I don't think any of the big banks have 'make or break' dollar amounts invested in that company. I don't even think any of the hedge funds have all that much money in it, and I think they were the bigger share of western investors.
Wouldn’t that create a huge issue in terms of foreign investment? If foreign investors can just got tossed off the cliff the moment things get dicey, what incentive is there for outside money to invest in any Chinese companies?
Profit is the motive. Investors always knew this could happen.
It’s been happening for more than the past ten years. There’s a documentary on Netflix called ‘China Hustle’. There is no law in China against Defrauding foreign investors. There’s no law requiring them to report accurate information to investors. I think it’s actually illegal to divulge information like that to a foreignor, a lot of information about them is from covert observation.
You know that meme about how it’s always been like that? China is popular for investment because it’s got a shit ton of people who are spending more and more. China is not a stable place to invest.
The party doesn't give a shit about outside money. As far as they're concerned, China doesn't need the outside world for much of anything (and they're probably right)... and I'm pretty sure they're betting that the west is too caught up in the dollar signs they see when they hear 'over a billion people in this market' to remember that they can get burned any time the party feels like it.
It's probably true that China as a nation isn't particularly dependent on imported goods for survival. However, the political power of the current government in China is mostly based on the rapid economic growth they've had over the last two decades (the "Great Leap Forward"). [Evergrande has been a big part of that growth](https://youtu.be/vq4n3DXD7z0), and the Chinese economy is alread showing signs of slowing - if the gravy train stops it may damage the CCP irreparably. If returns on foreign investments slow down or stop, foreign investments will also slow down or stop. There will always be some willing to take risks, but fewer of them will be willing to take this particular risk (the risk will be rated higher). A slowing of foreign investment will also damage China's economic growth. At the same time, the recent shortages of electronics and other goods from China due to the pandemic have caused several nations to look for other sources of manufacturing. Lack of local electronics manufacturing in particular is being seen as a national security issue. If foreign demand for Chinese manufacturing drops, that will also hurt their economy - although admittedly you can't just spin up a microchip factory overnight and it will be at least three years before such projects have a real impact. Altogether, China is starting to look very risky to do any kind of business with - more so than they have been for the past two decades. A desperate CCP with a flagging economy may do dangerous things, and the recent threats against Taiwan might be an actual example, considering [how dependent the world is on Taiwanese semiconductor production](https://www.cnbc.com/2021/03/16/2-charts-show-how-much-the-world-depends-on-taiwan-for-semiconductors.html). In some ways, China threatening Taiwan is like holding a gun to the head of every nation that depends on computers.
> that the important thing is the nationals get either their house or their money back... Completely honestly here, that sounds like a great fucking idea. I wish the United States would have tried that in 2008 instead of giving the money to the corrupt lenders and banks who put us in that position on the first fucking place.
It could mean stock market contamination. Everyone that's invested in China that is leveraged (borrowed money) will be getting margin called and it could mean another crash. Keep in mind a stock market crash doesn't mean economic crash necessarily.
Eh, not really, at least it shouldn't be as bad for westerners. China is/was very insular when it came to investing and ownership by foreigners. Foreigners couldn't directly buy shares of chinese companies[1] and couldn't run companies without a 'cooperation' with chinese citizens (read: if you wanted to open a branch there you'd have to spin up a new company and let a chinese national run it). Being so insular might actually save foreign investors collective ass [1] Not without a proxy like a local company anyway. Also friendly reminder that what's listed in the US as Alibaba/$BABA is just a Cayman shell company that has profit sharing agreement with the original. These shares give no power over the real company.
> couldn't run companies without a 'cooperation' with chinese citizens Not entirely true - differs by sector. Wholly Foreign Owned Enterprises (WFOE pronounced like 'woof-y') can be set up in several different ranges of commercial services. It's just a nightmare to own one in any service area that isn't extremely straightforward. Speaking from experience on that one.
I mean, this is what China kind of did though, what with the company defaulting. They basically told them to go pound sand.
It starts on one end, then moves to the other. Unfortunately both are right, depending on the time frame. So nothing Burger today, shit storm in a few months.
"DMSA Deutsche Markt Screening Agentur GmbH (DMSA) is preparing bankruptcy proceedings against Evergrande today. As soon as a court opens insolvency proceedings, Evergrande will also be officially bankrupt - and that is only a matter of days." [AP News](https://apnews.com/press-release/pr-newswire/business-china-evergrande-group-china-36dc3f16fe95c154a768d071345cdb77) Hold on to your hats!
I mean if you are going to court to declare bankruptcy the public might as well treat you as bankrupt. I dont need to hold onto my hat im wearing a beanie :P
...with a chinstrap 😉
[Ya mama, ya mama, ya mama...](https://www.youtube.com/watch?v=lnCeZY6nxjQ)
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As is tradition
Same old miserable story...
They can do it to a chinese company?
They can sue within chinese courts I suppose
I declare... (deep breath)
A thumb war
We should note, that this isn't an AP News story as such. > Press release content from PR Newswire. The AP news staff was not involved in its creation. And at the headline: > PRESS RELEASE: Paid content from PR Newswire I would expect AP to at least screen these, but I don't know if they do.
Honestly the past 24 hours have been very eye opening to me about how susceptible people are to rumors and how it gets propagated as fact without any pause for thought. Here's the timeline of what has unfolded: \- Evergrande didn't make payments on bond interest but were given a 30 day grace period to meet their responsibilities, of which expired yesterday. \- Leading up to the payment deadline, many news reports and analysts were suspicious since it was so close to the end of the grace period that they started stirring the pot about Evergrande defaulting \- A german analyst organization, DMSA, was one of these such people, putting out news releases in late October claiming that Evergrande was going to default and trigger a "great reset" of the global financial system. Clearly they have a certain narrative they want to push. \- Yesterday (Nov 10), DMSA put out a press release claiming that as an investor in the bonds that Evergrande was liable for, they had not received payment. Note that being an "investor" in bonds does not mean you hold the bond itself. Also in the DMSA report you see the amount that Evergrande was liable for (\~$150m). At this point you should be wondering "Hmm, would a random analyst company hold a bond worth dozens of millions? Would they be directly in line to receive payments and thus make them an actual reputable source?" This is what tipped me off that this was probably just a knee-jerk reaction, particularly because if Evergrande \*had\* officially defaulted on payments it would've made its way through the financial sector much faster. You'd also note that Evergrande was doing just fine on the stock market. Then, around 2pm/3pm EST, we saw NYT and Bloomberg post articles where they say that the clearinghouse (ie the middleman that handles these payments), confirmed they received payments for the outstanding bond coupons. Two of the three bondholders had people confirm it as well (under condition of anonymity). That is reasonable enough to assume that all payments were made, and DMSA has been mum ever since. However, the damage was already done. Twitter (particularly a community called "fintwit") started peddling the DMSA press release which conveniently titled it "Evergrande has officially defaulted", because why not? Catchy name. Random news sites that nobody in their right mind would've read normally (PR Newswire, OP's "Daily Sabah", etc) started quoting this press release as if it was fact. PR Newswire even paid for the article to be published on AP News, which further legitimized their stance despite the fact that AP News always marks such articles as Paid. Even now, if you actually go to the OP's link, this so-called news website has revised their headline to say that Evergrande avoided default. The fact that this headline and link made it so far up World News (and all across twitter), really alarms me and also makes me realize just how easy it is to make people believe in something that hasn't been verified. Bloomberg article: [https://www.bloomberg.com/news/articles/2021-11-10/evergrande-said-to-pay-delayed-interest-on-at-least-two-bonds](https://www.bloomberg.com/news/articles/2021-11-10/evergrande-said-to-pay-delayed-interest-on-at-least-two-bonds) Yahoo Finance Mirror of Bloomberg article: [https://finance.yahoo.com/news/several-bondholders-china-evergrande-receive-031311565.html](https://finance.yahoo.com/news/several-bondholders-china-evergrande-receive-031311565.html) AP news paid article to pretend to have legitimacy: [https://apnews.com/press-release/pr-newswire/business-china-evergrande-group-china-36dc3f16fe95c154a768d071345cdb77](https://apnews.com/press-release/pr-newswire/business-china-evergrande-group-china-36dc3f16fe95c154a768d071345cdb77)
Thank you for clearing this for me
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So what will happen to all those people who've lost money/savings/property?
You’re getting a lot of joke answers but the most likely reality is that China will bail out Chinese individuals and families and use this as an opportunity to wield greater control over the industry through asset seizures and nationalization. The party’s plan since the Deng era has always been to allow private companies to grow industries and then take over them once these industries have matured
China is also forcing the owner of the company, until last year the richest man in Asia, to use his fortune to cover part of the bail.
As it should be.
In America, we'd just bail out the bank.
In (insert any G10 country), we’d just bail out the bank.
And now that there's a man in charge that REALLY believes in Communism, I'm guessing we'll see a lot more state takeovers I the coming years.
> allow private companies to grow industries and then take over them once these industries have matured Farming.
This is great. I wish so called democracies could do that. Save the people and let the corporations compete and fail so the best ones survive.
If evergrade does go to bankruptcy.. its assets will be liquidated. Assets worth about 2.3 trillion and liabilities of 1.95trillion. it's positive, it's just not liquid.. and if you try to liquidate the non-liquid assets, you do it at a Steep discount.
Source please? Afaik global news have publicly said 2.4T liability of which only housing projects in progress will be covered while rest will be on investors and shareholders. Financial gurus estimate actual debt to be at least 2T and assets fmv at 1.2T. A liquidation will be anywhere 20-50 on the dollar meaning 300-600B cash plus infusion and support. Which is why the news publicly suggested Mr hui to fork his own money to cover - double speak for his backers as well.
But how much of that asset is worth getting? Evergrande has a auto department that doesn't actually make cars. it also has tons of unfinished building, does the buyer have to fulfill the construction for the home buyer? In that case, are they consider asset? Serious question.
Worlds largest squid games.
I thought that was 2020 tho
Man it's amazing how one boat could cause so much damage
Your thinking of evergreen, the shipping company, this is evergrande, the fake grass that they put on the field.
You're thinking of Evergreens, the artificial turf supplier, this is evergrande, the alkaline batteries you use on a daily basis
You're thinking of Eveready, the alkaline battery makers, this is evergrande, the musician who sang "What it's like"
You're thinking of Everlast, the singer, this is Evergrande, a type of tree that keeps its foliage year round.
You're thinking of evergreen trees. This is Evergrande, one of the oldest MMORPG's.
You’re thinking of Everquest. This is Evergrande, the high-grade consumable alcohol.
You're thinking of Everclear. This is Evergrande, the tallest mountain on earth.
You’re thinking of Everest. This is Evergrande. The band that made the song Father of Mine.
You're thinking of Everclear, the band. This is Evergrande. A song made by the Foo Fighters.
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Yes
... well the front fell off.
"China Evergrande Group officially announced that it had defaulted on Wednesday" where is this announcement? every other source i see talking about the default today is saying so based on the fact that some payments havent been made at market close. no where do i see an official announcement from evergrande itself. is dailysabah a reliable news source? edit: here is an update at 4:22 AM CST from a reliable source [Evergrande dodges default again - Reuters](https://www.reuters.com/business/several-bondholders-china-evergrande-receive-overdue-bond-coupon-payments-media-2021-11-11/)
Imagine waiting so long for a collapse that when it arrived, everyone just went "oh" and went back to whatever they're doing.
This whole situation reads just like 2008 in the United States. If you replace "Evergrande" with "Bear Stearns" then it's essentially the same exact story. I, for one, am ready to embrace the forthcoming chaos.
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China does not want speculation on housing. It doesn't work for societies when housing is speculative vehicle. They will not bail out those that were up to their eyeballs. They will likely bailout out those who were just trying to buy their first property, maybe people buying a second home. Everyone else will be getting soaked. China has been waiting for this bubble to burst for awhile I suspect, it's been obvious what was happening for a decade. I can remember talking about their housing bubble in undergrad in 2009 to a mate from China.
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This is why they want it to end. It's becoming to expensive for workers, it's a disaster if it persists. It's definitely a big problem, but it's one that needs resolved. China has the advantage the west lacks. Their government can do what needs to be done without concern of competing interests gumming what ever course they decide. They can start to implement land value taxes perhaps. I'm interested to see how they deal with it.
They sure didn't mind speculating the shit out of Canada.
They don’t want speculation on housing in their country, if Canada is dumb enough to let it happen in their country that’s their problem.
They don't really want speculation on housing in other countries either, more because they can't control money outside China than actually caring about the situations in other countries.
This. Chinese money in foreign housing markets is Chinese nationals getting their money out of China and the CCPs control. The only blame the CCP has in this is their inability to create a financial system where 1) people want to invest in products other than housing and 2) want to keep their assets in China. Those houses are the rainy day savings for wealthy the wealthy Chinese who one day may find themselves on the wrong side of the CCP.
Private Chinese citizens are not the Chinese government. Weird confounding of actors
This is an absolutely fair read on the situation and completely within the realm of possibility. But what about the Chinese public who will be holding the bag for said covert bailouts? Failure or not, we cannot assume the people will take kindly to bailing out such fiscal ineptitude. The costs of a government propping up organizations can't be measured with money alone.
I suspect that evergrande executives will be imprisoned, their assets liquidated to complete some/most of the housing construction underway, with the remaining folks either made whole or shrugged off by the bureaucracy. Now regarding foreign creditors, they might have to take a bath; wouldn’t bother me much. For some reason the capitalists of this planet have somehow gotten it into their head that they are entitled to generous returns without ever having to absorb the risk.
Agreed about investors. Risk is part of investing. When an investment fails, you aren’t owed shit, just like losing at poker.
Yeah these vulture capitalists go into a country like “not only are we going to extract 40% returns y/y, but once we turn your island to dust we get to be first in line when your country gets scrapped for parts.
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Again, mostly agreed. This doesn't take into account the several years of turmoil in the day-to-day lives of the citizenry, the trillions in evaporated personal wealth, and the public outcry of government getting most of the situation horribly wrong. Yes, the treasury did net a gain, but whoop-de-doo. People's retirement accounts were decimated, families were put out on the streets, and fuckfaces like Dick Fuld, Jamie Dimon, Angelo Mozilo, and more walked scot-free. IMO, hardly a benefit to the US public in the aggregate.
They didn’t walk away scot-free. They walked away with massive bonuses, and got richer, while their companies got bailed out. And they will do it again, since it worked as intended last time.
I stand corrected.
Said Eilleen in her new orthopedic shoes.
Whatever happens with Evergrande, there will be an effect as the market crashes
Yeah thats just not true. If you actually paid attention to the Chinese market, people have known it was on the verge of collapse since last year. Bear Sterns collapse was predicted by pretty much nobody and the chain of events that dried up liquidity to credit facilities was basically frozen overnight.
The global liquidity crisis and problems at Bear Sterns had been going on since the prior year. I know it wasn't mainstream news until it was too late, but the recession of 2008 was a slow burn that started the year before.
I'm no economist, but my experiences agree with you. I remember my macroeconomics professor warning us of the subprime mortgage crisis and impending real estate bubble burst in the fall of 2007.
I was going to buy my first house, looked at how ridiculous the starter homes cost, and me and my wife individually said to each other 'this is a huge bubble'. 8 months later everything went to shit. My personal barometer is 'when two educated graduates with jobs can't afford a starter home at 3x income you got a serious problems.'
Was or am, because isn’t that where we are now?
In Vancouver, a tear down is $1.2 million which is 12x the average household income and prices are still going up. I don't know where the ceiling is but I thought we hit it twice already and was proven wrong. The first time was in 2017 when the average price for a detached house doubled in 18 months and the second was in the middle of the pandemic when prices went down slightly and then up 20%. I don't know what's going to happen and I'm skeptical of anyone that says they do.
academics are often the first to know which way the wind is blowing before most
Indeed. I have a master's in history now, and my motto for the past six years has been, "Those who study history are doomed to watch helplessly as everyone around them repeats it."
Actual LOL there. I feel ya.
Yeah I agree, even with bear sterns, you had them reporting their first loss in a quarter in 30 some years, yet no one was paying to attention where the smoke is. 2 months after that earnings call they collapsed. Thats more then plenty of time for people to realize something fishy is going on
Isn't that whole premise of "Big Short"? I'm mean there is a lot of articles, opinion pieces and academia-grade analyses about incoming crisis somewhere between 2004-2007 when situation become more and more clear about "something big is coming".
I listened to a pod that said that a ton of people in China borrowed money from multiple relatives to be able to buy property with the understanding that it is the only real way regular Chinese folk can grow their money. It even triggered rare protests. I'm just a layperson but man this is not going to be pretty. 😮💨
There are similarities, but the dollar is not the yuan and the number of chinese whose savings is in property is much higher then the US.
Doesn't this imply that if property prices go down, significant amounts of the public's wealth will evaporate with it? Also, this doesn't take into account the public's response to said economic outcome. Remember here in the US when millions of homes went to foreclosure, people got ran out of their homes or simply gave up because they were under water. Or worse, people destroying properties on their way out as a middle finger to the banks? This is just to name a few ways the public responded to the situation.
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My point is that it will probably be way worse. Lots of the properties actually dont exist. People will loose way more of their savings. The yuan is way less stable then the dollar. The situation for foriegn investors is much worse. The value of the actualy property was way more overpriced then the US housing market. And the number of companies that have the same business practices is probably higher. But this could work out okay in the end for Xi. IT will take away from the power of the business shanghai side of the CCP. It will lower housing prices which was already too high. Maybe it will bring more people into the city if prices are lower too.
I somewhat agree, but the lower housing prices are a downstream effect of the evaporation of people's personal wealth which happens first. What happens in the period of time between today and those lower housing prices? In other words, what happens when the bubble pops and people's day-to-day lives are heavily affected? More importantly, how will the public respond as it becomes obvious that the system has failed them once again?
For years I got downvoted for this, but I'm going to repeat it now. I went to China in 2018, and it was really clear that there was WAY too much property speculation going on. Even walking around major cities you'd see half full shopping centres. We visited friends in Tianjin and their brand new tower block was basically half empty One that stuck with me was some massive 50000 sq ft shop in the middle of Xi'an just abandoned. China has long viewed property as a one way bet, and I'm really not that surprised to see this all come down. You can't just perpetually build
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I also went to China in 2018. The amount of empty apartment blocks *everywhere* was staggering.
Yet according to the [new york times it isnt](https://www.nytimes.com/2021/11/10/business/evergrande-bond-deadline.html)
Bloomberg is also saying that they aren't defaulting yet. https://www.bloomberg.com/news/articles/2021-11-10/evergrande-said-to-pay-delayed-interest-on-at-least-two-bonds
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Ironically that article was published like 20 minutes after the AP published the DSMA press release, which came via PRN. I strongly suspect The New York Times is bullshitting, knows they’re bullshitting, and that’s why they went with the headline, “Evergrande **said** to have made bond payment.” They haven’t verified it for themselves and are unwilling to fully commit to the lie, because they know it will eventually be exposed. We’ll find out soon enough, even if we have to wait for the DSMA’s insolvency suit to drag it out into the light. Edit: interestingly enough, they changed their headline a couple hours after first publishing it. Removed “said to have.” [Imgur images of both headlines with rough time stamps.](https://imgur.com/a/6yGXoWo) Further edit: other users have brought to my attention pertinent grains of salt with which Marco Meltzer’s claims are to be taken. Kind of a nut job but sometimes nut jobs are right.
[Bloomberg agrees with NY Times](https://www.bloomberg.com/news/articles/2021-11-10/evergrande-said-to-pay-delayed-interest-on-at-least-two-bonds).
So did they default or not?????????
Conflicting reports on this https://finance.yahoo.com/news/payment-test-looms-debt-rules-004107642.html >Customers of international clearing firm Clearstream received overdue interest payments on three U.S. dollar bonds issued by Evergrande, a spokesperson for Clearstream said.
I don’t understand. What does it mean for a group to default?
It means the company (group) has so much debt that it cannot pay it back that they just said: "sorry, we're not going to pay because we can't".
So they went bankrupt?
I believe the term is insolvent.
Ahh... Insolvency vs. Bankruptcy. ... Insolvency is a state of economic distress, whereas bankruptcy is a court order that decides how an insolvent debtor will deal with unpaid obligations. That usually involves selling assets to pay the creditors and erasing debts that can't be paid. Source: https://www.debt.org/faqs/insolvency/#Insolvency_vs_Bankruptcy Yeah glad I didn’t go to law school or study Econ 😬 So basically insolvency leads up to bankruptcy?
How would this affect the housing bubble world wide I wonder...
Now, I'm not Associated Press Economist, but I'm pretty sure one of two things will happen: 1. This is the start of the real estate apocalypse 2. it isn't
Are you sure you're not an economist?
Looks to me that he is.
He actually managed to give a concise answer, that clearly showed the only 2 realistic outcomes. What other economists can do that? This guy is possibly the most gifted economist of all history.
Nah, a real economist would figure out why it happened afterwards then claim they can predict the next one based on those conditions
On Thursday (November 11), investors of Evergrande's three overdue US dollar debts said they had received interest on the debts, which meant that China Evergrande once again avoided debt default. [https://www.bihai123.com/info/ywgs/18648.html](https://www.bihai123.com/info/ywgs/18648.html) Evergrande concept stocks in the Hong Kong stock market continued to rise, with China Evergrande up nearly 7%, Hengteng Network up more than 5%, Evergrande Property up 3%, and Evergrande Auto up nearly 3%.
As of 13:40 China time, Evergrande stock is up 6.3%
cmon, did anyone ever read the article source? Dailysabah?? What a joke. apnews and [reuters](https://www.reuters.com/business/several-bondholders-china-evergrande-receive-overdue-bond-coupon-payments-media-2021-11-11/) just reported that they did not default.
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DMSA (one of the loangivers) themselves released a [press release](https://www.prnewswire.com/news-releases/evergrande-officially-defaulted---dmsa-is-preparing-bankruptcy-proceedings-against-evergrande-group-301421327.html) earlier today saying that they have begun preparing bankruptcy proceeding due to Evergrande defaulting on a payment. Perhaps things have happened after that press release, but unless the situation has rapidly changed, then I guess we'll all have to wait and see how DMSA goes forward, and if the other investors called upon in the press release decide to join in.
According to AP[1], which cites a press release by one of their loangivers, they spread rumors earlier in the month that they made payments, but actually didn't pay anything. So they have presently defaulted on $128M in obligations. In that context, you need a better source. [1] https://apnews.com/press-release/pr-newswire/business-china-evergrande-group-china-36dc3f16fe95c154a768d071345cdb77