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  1. #1
    Cleveland Steamer missouridawg's Avatar
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    Financial Guys - Who can tell us what the effects of Evergrande is going to be?

    This looks like a pretty major financial event.


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  2. #2
    300 billion in debt. Lehman had 600 billion in debt. Two more conglomerates collapsing and unable to make their debt payments. Seems like I read somewhere that the state of California was heavily invested in china real estate. A reset is way overdue. Who knows the timing of any reset...but, Evergrande might be the first domino to fall.


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  3. #3
    One sentence hot takes.
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    The Great Reset is coming, but this isnít itÖ
    Last edited by Leeshouldveflanked; 09-20-2021 at 01:29 PM.


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  4. #4
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  5. #5
    It's a nasty little event for Chinese investors. It appears Beijing wants it to fail in order to run off a lot of the speculators, but it won't let it collapse and crush everything. It will spill over to other markets in the form of risk off/panic selling, but by all accounts, there is not a ton of foreign exposure unlike Lehman which was just the tip of an iceberg that was intertwined in global markets.

    To give you an idea of how 17ed up the Chinese housing bubble is, look at the size of the markets at the end of 2019.

    China Housing $52 Trillion
    China Bonds $12 Trillion
    China Stocks $8 Trillion

    US Housing $26 Trillion
    US Bonds $44 Trillion
    US Stock $34 Trillion

    So imagine what a US housing bubble would look like if we sold $50 Trillion dollars worth of stocks and bonds and put it into housing. It's one of the biggest speculative bubbles in the world and is ready to pop, but Beijing won't let all of the air out at once.


    Domestically, it looks like a good excuse for profit taking and risk off. The turmoil may give the Fed the excuse the Doves are looking for to postpone tapering. The S&P was up nearly 40% YOY and over 20% for the year. The 200 day moving average is all the way down at $4100. It would be really normal and healthy to get down to that level soon as we have not tested it in over a year. Overall, US household savings is strong. Pent-up demand is strong. Inflation is stronger. Jobs are available. The bull market is not stopping anytime soon. It's just a breather.


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  6. #6
    Quote Originally Posted by Maroon Eagle View Post
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    Love me some Yogi quotes!


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  7. #7
    Quote Originally Posted by LittleBigDog View Post
    300 billion in debt. Lehman had 600 billion in debt. Two more conglomerates collapsing and unable to make their debt payments. Seems like I read somewhere that the state of California was heavily invested in china real estate. A reset is way overdue. Who knows the timing of any reset...but, Evergrande might be the first domino to fall.
    Is it possible for a state to be invested in a foreign housing market? Maybe Iím misunderstanding you and you mean invested in it from a supply chain standpoint.


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  8. #8
    IBleedMaroonDawg's Avatar
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    Quote Originally Posted by Leeshouldveflanked View Post
    The Great Reset is coming, but this isnít itÖ
    I don't know anything but someone mentioned it might just be the tip of the iceberg. Would that be bad for China, us, or everyone?

    2008 dealt me a death blow so I want to make sure I prepared. It really makes me sick when I watch the movie "The Big Short". My life might be a lot different.


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  9. #9

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    Chinese citizens are definitely heavily invested into the California housing market. Not sure about the other way around.


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  10. #10
    Maroon Eagle's Avatar
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    Most certainly, yes.

    Think state pension funds.





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  11. #11
    Expect more of the same tomorrow, it will get worse. I’m unloading & buying back in bearish. It is full meltdown panic, short or Put anything related to Chinese housing. I’m taking a big bear position on: EWH. A bounce back would take a total saving maneuver.

    I will be taking up others as well. It is time these people pay for trying to control crypto over the years & unleashing COVID & trying to cover it up. Worse case, China has their own 2008 housing bubble pop. People will die as a direct result.. sigh. Take care of yourselves & more importantly the do$h


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  12. #12
    Probably referring to the state's pension funds. There was a big to do about the pension fund manager for the state being Chinese born a couple of years ago and supposedly investing lots of the pension fund's money in China. Some of the investments were in companies on Trump's shit list so it made lots of headlines. In reality, the pension fund only had international exposure through FTSE an MSCI index funds. That means someone with nothing to do with the state of California is picking which stocks are and are not part of the index. A lot of YOU reading this probably own a lot of this same shit. I know I do.

    The total exposure to China was $3 billion dollars or 0.5% of the total $450 billion dollar fund. It's one of those things where the truth gets twisted and distorted by lying ass media. Case and point... If you have your 401K in the Vanguard 2040 Target Retirement fund, you currently have 1.2% exposure to China. Or nearly 2.5 times as much as the California pension fund. Do you know how much of that is in Chinese state owned companies? How often does the index dump and add those companies?


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  13. #13
    Quote Originally Posted by JoeLee'sSocks View Post
    Probably referring to the state's pension funds. There was a big to do about the pension fund manager for the state being Chinese born a couple of years ago and supposedly investing lots of the pension fund's money in China. Some of the investments were in companies on Trump's shit list so it made lots of headlines. In reality, the pension fund only had international exposure through FTSE an MSCI index funds. That means someone with nothing to do with the state of California is picking which stocks are and are not part of the index. A lot of YOU reading this probably own a lot of this same shit. I know I do.

    The total exposure to China was $3 billion dollars or 0.5% of the total $450 billion dollar fund. It's one of those things where the truth gets twisted and distorted by lying ass media. Case and point... If you have your 401K in the Vanguard 2040 Target Retirement fund, you currently have 1.2% exposure to China. Or nearly 2.5 times as much as the California pension fund. Do you know how much of that is in Chinese state owned companies? How often does the index dump and add those companies?
    GotchaÖ this makes sense.


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  14. #14
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    So what youíre saying is the people that will be affected are the ones invested in the Chinese market? Canít say I feel sorry for them then.


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  15. #15
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    I think you have to respect the headline. It's also been no secret this was coming for this company (Evergrand's debt was trading at $.50 on the dollar 6 months ago) and there's likely many more like this in China I bet. I doubt it hits our US financial institutions, but may put a dent in commodity demand, so inflation fears could begin to calm down.

    It's not systemic by any means, but it's going to painful for the Chinese economy with out an financial bailout by the PRC. In the end this is bad for China and probably not too many else other than some risk takers in the credit markets like some European banks who possibly lent to them. They seem to always be caught up in this type of stuff.

    It does hurt that it's happening at the worse seasonal period for the market (September), covid is not under control world wide, we're over due for a correction, growth has slowed down, but should be temporary among other factors.

    I'd be surprised if the market drops more than 10% overall, but Evergrand is not the sole reason. Wouldn't be surprised if you see a rescue plan in the next few days from PRC and market rallies. I'm not saying this is likely, but it's what folks are waiting to see what happens: does the PRC step in or not? Either way, stay long, but this is also why you always have cash on hand so you can take advantage of good prices when a correction comes. Good time to rebalance too if it's been a while.
    Last edited by TheStateUofMS; 09-20-2021 at 07:21 PM.
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  16. #16
    TheStateUofMS's Avatar
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    I heard China was building 21million apartments per year.
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  17. #17
    TheStateUofMS's Avatar
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    If you are invested in any Emerging Market fund you likely have anywhere 30-50% exposure to China in that fund.
    MSU Class of 2011


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