# Evergrande Crisis



## m3s (Apr 3, 2010)

Chinese lenders use financial engineering mathamagic to sidestep lending restrictions and capital requirements.

Wealth Management Products have already invested in each other, meaning one soured product infected others. The outstanding value of off-balance sheet WMPs is over $3T... 24% of China’s GDP

Good thing our banks have fractional reserves and fiat backed by our imagination. No problems when we can just add some 0s


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## m3s (Apr 3, 2010)

Looks like one of the biggest bag holders is none other than the illustrious Royal Bank of Canada

Along with all the usual suspects Blackrock, HSBC, Goldman Sachs, government pensions et al

Ready for Lehman Bros 2.0?


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## james4beach (Nov 15, 2012)

Yeah, this is an interesting story.

Evergrande is a huge property developer. They have massive financial obligations, both money owed on bonds, also properties promised to buyers (with downpayments), and financially engineered products for retail customers.

Because Evergrande is so huge, it's pretty much guaranteed that the Chinese govt will bail them out. But despite the bailout, there is still talk about whether there may be contagion.


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## m3s (Apr 3, 2010)

james4beach said:


> Because Evergrande is so huge, it's pretty much guaranteed that the Chinese govt will bail them out.


I doubt China wants to bail out US banks and foreign government pensions. They can probably restructure in a way that benefits China most

What is RBC doing in this mess anyways? I don't think mainstream has even covered this yet btw


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## MrMatt (Dec 21, 2011)

We know China has an insane debt problem.

The thing I'm not clear on is if Evergrande is Chinese or Hong Kong.
Of course I'm not invested heavily there, because I don't trust reporting from some countries, so I'm not invested there.

I do have a token amount of BABA, but even then, that's a gamble because nobody knows what that stock represents, and nobody knows what the Chinese government is going to do next.

I am generally invested in Western companies, (Cananda, US, UK, EU) where the controls are pretty good. 
I've actually posted extensively about third world and developing market investments and my concerns there. I think there is a lot of potential, but a lot of risk that is much less of an issue here.


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## james4beach (Nov 15, 2012)

MrMatt said:


> I've actually posted extensively about third world and developing market investments and my concerns there. I think there is a lot of potential, but a lot of risk that is much less of an issue here.


Yeah I agree. I've never invested in China and don't plan to. Their industry is completely controlled by the communist party, and their political elite class is *extremely* crooked. That means they are stealing and interfering with business in every aspect.

It's not capitalism, it's not communism. It's just crooked and I won't invest in that environment.


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## Eder (Feb 16, 2011)

.It looks like the EV hype was their downfall.









Evergrande EV Stock Loses $80 Billion in World’s Worst Rout


Evergrande EV Unit Loses $80 Billion in World’s Worst Stock Rout




www.bloombergquint.com





I can't seem to find a link to RBC exposure to their bonds...any help?


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## damian13ster (Apr 19, 2021)

__ https://twitter.com/i/web/status/1438944431734919175
Interesting thread on the subject


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## Ukrainiandude (Aug 25, 2020)

*Exposed Bond Funds ex-China*
Some funds exposed to China Evergrande bonds include Loomis Sayles Funds I, RBC Funds Trust, BlackRock Multi-Sector Opportunities Trust, Nuveen Corporate Income November 2021 Target Term Fund (JHB), BlackRock Core Bond Trust, Krane Shares Trust, WisdomTree Trust, Nuveen Emerging Markets Debt 2022 Target Term Fund (JEMD) and Natixis Funds Trust II. China Minsheng Banking Corp., Ltd. is one of Evergrande’s largest creditors. According to the letter Evergrande sent to the Chinese government late in 2020, Evergrande’s liabilities involve more than 128 banks and over 121 non-banking institutions.


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## james4beach (Nov 15, 2012)

Ukrainiandude said:


> Exposed Bond Funds ex-China


Just because some mutual fund or hedge fund holds some Evergrande bonds, does not mean they are in any significant trouble.

They would have to have a high concentration for this to be a problem. That's why bond funds diversify among issuers.


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## kcowan (Jul 1, 2010)

james4beach said:


> Just because some mutual fund or hedge fund holds some Evergrande bonds, does not mean they are in any significant trouble.
> 
> They would have to have a high concentration for this to be a problem. That's why bond funds diversify among issuers.


Caanadian Bankers hold Evergrande Bonds because they are sheep and have no independent thought. They have proven it over and over.


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## m3s (Apr 3, 2010)

So Evergrande finally made the news in Canada but they haven't mentioned the RBC bags yet?


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## Eder (Feb 16, 2011)

No clue what I'm looking at. I messaged my bud that runs a fund for clarity on exposure and potential impact but have not heard back.

Looks like that total issue size is 1.5 billion so RBC has 3% of it? About 150$ million? Theres only 6 months to go so they've held it 2 years at 9.5%? Still trading at $50 or so?


Is that in USD or Hong Kong bucks?


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## damian13ster (Apr 19, 2021)

Eder said:


> Is that 45. billion? I messaged my bud that runs a fund for clarity on exposure and potential impact but have not heard back.


Million


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## m3s (Apr 3, 2010)

I have 2nd hand info that HSBC held emergency conferences last week

Haven't heard a single peep about RBC. Just happened to spot it on a few terminal screenshots


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## Eder (Feb 16, 2011)

damian13ster said:


> Million


So after 2 years at 9.5% and trading at $50 they lost perhaps 20 million so far? Or does RBC own a chunk of all their bonds?


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## damian13ster (Apr 19, 2021)

Eder said:


> So after 2 years at 9.5% and trading at $50 they lost perhaps 20 million so far? Or does RBC own a chunk of all their bonds?


Your math is a bit off but yeah, the loss isn't going to be something affecting stability of the bank


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## Ukrainiandude (Aug 25, 2020)

It doesn’t matter, the bank of Canada is always there, to issue as much liquidity as needed for bankers. Bankers are friends they give generous donations to all major political parties. 
Taxpayers will will pay at the end. Inflation is just an another tax.


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## james4beach (Nov 15, 2012)

According to Bloomberg, the Evergrande bond prices already reflect a high probability of failure. So if the concern is that Canadian bond mutual funds have exposure, then it's largely already hit their prices. I don't see any reason to worry about bond mutual funds due to how heavily diversified they are.

If the concern is that RBC Capital Markets has some kind of leveraged exposure within their 'hedge fund' (capital market division), that's another matter and could be serious.

This is also the reason myself and @MrMatt keep arguing that we have to split up these entities, so that Capital Markets divisions are separated from the primary bank. That way we can let them do whatever stupid things they want on their own, and fail on their own, without causing other problems.

For example RBC Capital Markets should be a distinct company with its own balance sheet and its own stock ticker.


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## MrMatt (Dec 21, 2011)

Ukrainiandude said:


> It doesn’t matter, the bank of Canada is always there, to issue as much liquidity as needed for bankers. Bankers are friends they give generous donations to all major political parties.
> Taxpayers will will pay at the end. Inflation is just an another tax.


Playing with liquidity isn't a solution, it can help temporarily smooth things out, that's it.


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## Ukrainiandude (Aug 25, 2020)

MrMatt said:


> Playing with liquidity isn't a solution, it can help temporarily smooth things out, that's it.


It seems to be working so far, at least since seventies. 
After years of inflation, stagflation, and eroding U.S. gold stockpiles, *the value of the dollar was officially decoupled from gold in 1976*, ending the gold standard.

so define “temporarily“


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## Jimmy (May 19, 2017)

Evergrand is mainly a realtor. This wont spark any kind of economic or banking crisis and is like if Century 21 went bust. A commenter on Bloomberg said their debt at $300B is a drop in the $14T China economy.


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## MrMatt (Dec 21, 2011)

Ukrainiandude said:


> It seems to be working so far, at least since seventies.
> After years of inflation, stagflation, and eroding U.S. gold stockpiles, *the value of the dollar was officially decoupled from gold in 1976*, ending the gold standard.
> 
> so define “temporarily“


The dollar was decoupled in 1914.

But yeah the US decoupling looks fine if you cut out the 80's. Which was quite a rough time for many ordinary people.

Now again they've been pushing massive liquidity, and we have massive inflation pressure, and overleveraged entities (corporations, and individuals). It's not looking good.

Now I'm all for money supply games to try and smooth things out. But the continued use pushes disruptions in other areas. With inflation going up, it's time to pull back on the liquidity, but this will cause problems elsewhere, because we've been abusing these tools.


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## damian13ster (Apr 19, 2021)

Jimmy said:


> Evergrand is mainly a realtor. This wont spark any kind of economic or banking crisis and is like if Century 21 went bust. A commenter on Bloomberg said their debt at $300B is a drop in the $14T China economy.


That isn't really true.
They have 1.5mln apartments they took deposit for but didn't complete yet. You will have 1.5mln partially finished apartments hit a market at once. With highly inflated housing market in China (it is worse than Canada), that will result in some drop in prices that will send a shockwave through entire market responsible for 25% of China's GDP. Whether that shockwave will result in massive cracks in the system and liquidity problem remains to be seen.


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## sags (May 15, 2010)

China has built whole cities of empty apartments for the future. Some of them from the past are now fully functioning cities.

Adding some more to their stock isn't going to make much of a difference to the current housing market, because they aren't on the market for sale.

China will just write a cheque for the deposits, scoop up the apartments at fire sale prices, and re-plan their future building schedule accordingly.

Bond holders will get hosed, but they are big boys and earn fat profits by accepting a high level of risk and reward. They win some and lose some.

Losses may be eligible for deductions against the taxes on gains......so it isn't nearly as dire a situation as it may appear.

Holding a large stock of apartments to be used in the future is the long term plan of the Chinese government.

Maybe we could have learned something from their penchant for long term future planning.

They build apartments for occupancy 15 years in the future, at the cost of building them 15 years in the past.






Under-occupied developments in China - Wikipedia







en.wikipedia.org


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## damian13ster (Apr 19, 2021)

We are already learning from China on genocide, authoritarianism, and praising their rule.
Might as well learn how to screw up housing market as well I guess


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## Jimmy (May 19, 2017)

damian13ster said:


> That isn't really true.
> They have 1.5mln apartments they took deposit for but didn't complete yet. You will have 1.5mln partially finished apartments hit a market at once. With highly inflated housing market in China (it is worse than Canada), that will result in some drop in prices that will send a shockwave through entire market responsible for 25% of China's GDP. Whether that shockwave will result in massive cracks in the system and liquidity problem remains to be seen.


Yes it is . The Chinese have a glut of housing already. They demolition entire apartment blocks tha have sat vacant for years. 

At worse too if all the debt is bad (100% write down) , not likely, there is a $300B loss. That is only 2% of the entire economy. No big deal


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## damian13ster (Apr 19, 2021)

Lehman Brother's debt was about 3% of GDP.
If it was bailed out it wouldn't be that big of a deal. 
If it is allowed to fall then some other companies financially tied to Evergrande and the industry might also have liquidity crisis


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## james4beach (Nov 15, 2012)

There still is the possibility with contagion on Evergrande. These things are very unpredictable.

We never know what kind of derivatives the banks have on these things. That's why they are unpredictable situations. We won't really know whether it will become a thing, or just fizzle out and become a nothingburger


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## Jimmy (May 19, 2017)

Again this is a realtor not a bank. Banks lend to each other and issue commercial paper and form the credit/lending marklet. When Lehman failed it created a credit crisis- banks wouldn't lend to each other in the overnite market for fear they wouldn't get repaid.

They could let this co fail and it wouldn't effect the banking and credit market system. China would probably step in and help citizens effected but let the co fail


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## damian13ster (Apr 19, 2021)

Jimmy said:


> Again this is a realtor not a bank. Banks lend to each other and issue commercial paper and form the credit/lending marklet. When Lehman failed it created a credit crisis- banks wouldn't lend to each other in the overnite market for fear they wouldn't get repaid.
> 
> They could let this co fail and it wouldn't effect the banking and credit market system. China would probably step in and help citizens effected but let the co fail


They aren't a realtor.
Much closer description would be real estate developer. 
They also are largest shareholder in one of the banks, and own life insurance company.
They certainly have stake and play a role in financial system. How extensive? I have no clue. But it isn't negligible


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## Ukrainiandude (Aug 25, 2020)

james4beach said:


> There still is the possibility with contagion on Evergrande. These things are very unpredictable.
> 
> We never know what kind of derivatives the banks have on these things. That's why they are unpredictable situations. We won't really know whether it will become a thing, or just fizzle out and become a nothingburger


Chinese government sits on $2 trillion reserves, and Chinese central bank can also print money as much as needed as everyone else, why would they risk it with bankruptcy. Bailed out it will be. Unless western banks are deeply stuck into it, then it can be allowed


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## damian13ster (Apr 19, 2021)

Well, you can buy bonds 3 cents on dollar for a yield of over 400% then 

The same reason why US let Lehman fail and shot themselves in the foot - politics.
China is pushing hard to deleverage. They don't want to send a signal that any company is 'too bid to fail' so it is a balancing act. It is unlikely they will get it perfect. The question is which side they are going to fall onto


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## Eder (Feb 16, 2011)

Evergrande bonds are trading at $50 ...yielding 19% looks like. (Am I reading the quotes right?)


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## damian13ster (Apr 19, 2021)

A par for bonds is 1,000, not 100.


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## Jimmy (May 19, 2017)

damian13ster said:


> They aren't a realtor.
> Much closer description would be real estate developer.
> They also are largest shareholder in one of the banks, and own life insurance company.
> They certainly have stake and play a role in financial system. How extensive? I have no clue. But it isn't negligible


Semantics I meant they are in the real estate sector They own and sell real estate assets and have other businesses but the reals s estate is the problem,

They will have no effect on the financial system. They trade on the HK index Hang Seng which is down only 3.27% this month reflecting their impact


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## Eder (Feb 16, 2011)

damian13ster said:


> A par for bonds is 1,000, not 100.


OK thx...it makes sense now.


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## Eder (Feb 16, 2011)

Jimmy said:


> hey will have no effect on the financial system.


DOW Futures may not agree.


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## Ukrainiandude (Aug 25, 2020)

Evergrande: why most analysis is dead in water and how best to understand and navigate what’s happening? Both denialists and alarmists are getting it wrong. Let’s start by understanding this: what is happening is the result of a CCP-initiated policy change to curb leverage.
1/N
It started a while back and has seen other defaults, including SOEs. What are the specific policy changes? Most important is the introduction of the 3 red lines a year ago:

L/A < 70%
net leverage < 100%
cash to ST debt > 1
2/N
What’s the point of the 3 red lines?
First and foremost to forestall a systemic crisis that could have brought down the whole financial sector if left unchecked. Real estate amounts to a significant chunk of China GDP with strong linkages upstream and downstream.
3/N
And believe it or not, the sector was levered to the gills. The 3 red lines are hardly draconian, yet all the CCC, a large chunk of the B and a good 1/3 of the BB did not pass them a year ago. Needless to say, it was really not too early. But there is more to it than leverage
4/N
One common practice of these construction companies,a game Evergrande excelled at, was to bid land at prices significantly higher than market. It didn’t matter to them, coz the risk got transferred to flat buyers and banks that financed the purchase.
5/N
That model worked well for local governments, banks and households because house prices were going up. So much so over the last 15 years, that a serious affordability crisis emerged in major cities AND HH debt soared way above disposable inc - below HH debt as % GDP
6/N
So we established that we are in the phase of pricing the tail risk. All in all pretty China centric for now. How could it create contagion beyond. There are significant losses already for the international holders of China credit and equities. That’s one channel.
14/N
Any broader contango on towards the financial sector in China will prompt temporary policy responses like liquidity injection (done this week). But don’t expect a turnaround. They can’t. How will it resolve itself? Well, it started with leverage as the big issue.
15/N

And guess who is taking note? The miners are. That’s how contagion works. Aussie miners are the obvious play here: you can see that RIO has established a downtrend and is looking primed for a large move down. $BHP and $FMG looking equally awful. 
21/N









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## m3s (Apr 3, 2010)

Don't like the looks of the open in asia

Started to go risk off last week and will continue


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## Ukrainiandude (Aug 25, 2020)

_China is in the midst of a massive real estate bubble. I mean way, way bigger than the US real estate bubble was back in 2007 and 2008.

People don't invest in stocks over there. Instead they invest in real estate. It can take multiple generations for people to even save up enough for a down payment. The cost of real estate is astronomical, and it's only been going up and up for many many years. Hence why people invest in it.

But the problem is that there are huge numbers of residences that have been purchased as investment properties, and they are vacant. Huge swaths of unfinished apartment buildings have been demolished because the construction wasn't finished._

Why does this sound familiar? Canada = China?


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## Ukrainiandude (Aug 25, 2020)

If that’s true.
The Chinese government has actually been saying it won't bail out these real estate companies that grow to big for their own good. China doesn't want individual companies in their country to big because they don't want corporations to have more influence then the government


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## james4beach (Nov 15, 2012)

Expect volatility this week. Many things are lining up:

Friday was triple witching day, expiration of all futures and index options. That is often volatile including for the day after since all these contracts are settling. Wednesday, the Federal Reserve has a public release. Plus, Evergrande uncertainty.


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## Jimmy (May 19, 2017)

There was a good article today in the Globe which mentions Lehman and the dissimilarities. ie Their debt is held in mutual funds vs banks ( w Lehman) so investors will lose instead.

They are rattling the markets a little though w the HK down 3.3%. The feeling is the govt will get involved in the event of a default.


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## MrMatt (Dec 21, 2011)

james4beach said:


> Expect volatility this week. Many things are lining up:
> 
> Friday was triple witching day, expiration of all futures and index options. That is often volatile including for the day after since all these contracts are settling. Wednesday, the Federal Reserve has a public release. Plus, Evergrande uncertainty.


And an election, which will likely result in a minority government. I think they'll get most seats settled tonight, but it could be all week.

My personal recommendation, don't do anything till next week. There will be lots of crazy, andyou'll be late to the party no matter what you do.


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## m3s (Apr 3, 2010)

MrMatt said:


> There will be lots of crazy, and you'll be late to the party no matter what you do.


I managed to get just ahead of this one. I hesitated last week expecting to see more reaction by the end of last week but I didn't want to hold too much over the weekend

Almost as if the msm was buying someone a bit of time before hyping it up all of a sudden on the weekend..


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## m3s (Apr 3, 2010)

Jimmy said:


> There was a good article today in the Globe which mentions Lehman and the dissimilarities. ie Their debt is held in mutual funds vs banks ( w Lehman) so investors will lose instead.
> 
> They are rattling the markets a little though w the HK down 3.3%. The feeling is the govt will get involved in the event of a default.
> 
> ...


LOL at "most of the debt is in global mutual funds and ETFs ... not important financial institutions"

I'm sure the CCP will get involved but somehow I doubt restructuring will be in favour of the foreign mutual funds and ETFs


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## sags (May 15, 2010)

The markets are skittish.

Crypto was supposed to be a safe haven in such circumstances, but it is in decline as well.

Bitcoin has fallen from $48,600 USD to $43,800 USD in 24 hours. That is an 8% drop....compared to stock index drops of 2-3%.


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## kcowan (Jul 1, 2010)

I wonder is some of the holders will sell off Canadian RE to shore up their capital?

For sure new demand will evaporate!


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## Eder (Feb 16, 2011)

Well its a long over due crisis. I don't have much cash to deploy but will look to add to my banks if they can drop some more 10%. Hopefully this isn't just a quick blip.I think we are all looking for a market pull back.


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## sags (May 15, 2010)

Gold is up a little......so James4B will be happy.


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## potato69 (Mar 21, 2018)

Eder said:


> Well its a long over due crisis. I don't have much cash to deploy but will look to add to my banks if they can drop some more 10%. Hopefully this isn't just a quick blip.I think we are all looking for a market pull back.


I have about 10K sitting around that I have no huge plans for. I'm considering the same thing but looking to just buy VCN or something as it'll be in a non-registered account.


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## newfoundlander61 (Feb 6, 2011)

I have some cash as well to put to work but this may take a bit longer to play out.


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## james4beach (Nov 15, 2012)

sags said:


> Gold is up a little......so James4B will be happy.


I am. In fact my RRSP is completely unchanged since Friday, thanks to the strength of bonds and gold.


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## MrMatt (Dec 21, 2011)

james4beach said:


> I am. In fact my RRSP is completely unchanged since Friday, thanks to the strength of bonds and gold.


that diversify across asset classes seems to be a good idea.
Myself, I'm down today, but I don't care. I'm up a stupid amount TTM.


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## james4beach (Nov 15, 2012)

MrMatt said:


> that diversify across asset classes seems to be a good idea.
> Myself, I'm down today, but I don't care. I'm up a stupid amount TTM.


Normal to be down on a day like today.

And admittedly, I may have over diversified or spread out to the point that I reduce my returns too much. Ideally one should have some amount of diversification while still maintaining high performance.

It's a tough balance.


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## MrMatt (Dec 21, 2011)

james4beach said:


> It's a tough balance.


Impossible balance, just pick a "good" one for your risk tolerance and go with it.


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## Jimmy (May 19, 2017)

FYI There was a really good article by Morgan Housel on how to deploy cash in these pullbacks. Basically he looks at how much cash to deploy based on the % of the decline.
It is behind a paywall so I cut and pasted the section below. His ex was if he had $1000 in cash for simplicity.

If the Market falls by … i invest … Historical frequency
10% $100 every 11 months
15% $220 every 24 months
20% $300 every 4 years
30% $130 every decade
40% $125 every few decades
50% $125 2–3 times per century



> I deploy the most cash when the market falls
> by 20% because that’s both a big decline and one
> that, historically, occurs pretty frequently. A 50%
> or greater crash represents the biggest opportunity,
> ...


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## m3s (Apr 3, 2010)

sags said:


> Crypto was supposed to be a safe haven in such circumstances, but it is in decline as well.
> 
> Bitcoin has fallen from $48,600 USD to $43,800 USD in 24 hours. That is an 8% drop....compared to stock index drops of 2-3%.


Same thing with the 2020 covid crash. All risky assets drop with uncertainly.

There was lots of time to watch covid and this develop. The harder part is how long will this last and what will central banksters do


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## Ukrainiandude (Aug 25, 2020)

m3s said:


> Same thing with the 2020 covid crash. All risky assets drop with uncertainly.
> 
> There was lots of time to watch covid and this develop. The harder part is how long will this last and what will central banksters do


S&P 500 isn’t even on 3 months low.


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## m3s (Apr 3, 2010)

Ukrainiandude said:


> S&P 500 isn’t even on 3 months low.


Buy the dip then

China is on a holiday weekend and Evergrande date is Thurs

Contagions takes time to spread.. remember covid?


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## damian13ster (Apr 19, 2021)

Evergrande is not even my biggest worry when it comes to the markets.
Debt ceiling vote is


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## Ukrainiandude (Aug 25, 2020)

damian13ster said:


> Evergrande is not even my biggest worry when it comes to the markets.
> Debt ceiling vote is


Congress has raised the debt ceiling 14 times from 2001 to 2016. The debt ceilingwas raised a total of 7 times (total increase of $5365bil) during Pres.
Prior to the debt ceiling crisis of 2011, the debt ceiling was last raised on February 12, 2010 to $14.294 trillion.
The crisis began in January 2013, when the United States reached the debt ceilingof $16.394 trillion that had been enacted following the debt ceiling crisis of
The debt ceiling was raised again in 2014, 2015, and early-2017. In Sept. 2017, with U.S. debt exceeding $20 trillion for the first time.


what is going to be different this time? Everyone wants to eat.


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## m3s (Apr 3, 2010)

damian13ster said:


> Debt ceiling vote is


Either the US will start to repay their debts responsibly or they increase the ceiling once again? There's really only 1 option and nothing changes?

Just print more juicy fiat. The kids don't seem too bothered with that burden


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## damian13ster (Apr 19, 2021)

m3s said:


> Either the US will start to repay their debts responsibly or they increase the ceiling once again? There's really only 1 option and nothing changes?
> 
> Just print more juicy fiat. The kids don't seem too bothered with that burden


So far Republicans aren't willing to play ball.
And Democrats aren't willing to make any concessions. 
Usually the parties managed to both move closer to the center, but now no one wants to budge.

And to answer Ukrainiandude: the ceiling has been in effect for couple of weeks now. You can see fed balance slowly going to 0. About mid-october US will default on its debts if there is no debt ceiling agreement. I believe it has happened once already in 2011.

If there is an agreement, then treasuries will be issued at blistering pace


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## Ukrainiandude (Aug 25, 2020)

damian13ster said:


> About mid-october US will default on its debts if there is no debt ceiling agreement.


There will be an agreement, republicans want to eat, and democrats want to eat.


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## m3s (Apr 3, 2010)

Tax hikes coming for US too

How much bigger can the house of cards get and can it withstand something like evergrande huffing and puffing around

American colleagues are buying houses sight unseen with blind bids and no conditions


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## damian13ster (Apr 19, 2021)

m3s said:


> Tax hikes coming for US too
> 
> How much bigger can the house of cards get and can it withstand something like evergrande
> 
> American colleagues are buying houses sight unseen with blind bids and no conditions


Their housing market is much more reasonable than Canadian and it is decent protection against inflation. 

Tax hikes but only for the poor. SALT cap repeal is the single tax policy that benefits solely the rich and no one else.

One thing at a time though. Next 4-5 weeks are damn scary. I honestly have no idea which way the markets and economy is going to go


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## Jimmy (May 19, 2017)

Article in the Globe today. There could be pain for Evergrande and maybe a few other real estate firms but it won't lead to a larger problem for the economy. They think the situation is a little 'overdone' and China will contain the 'contagion'.



> “The [Chinese] property sector is a mess and, no question, more pain is coming,” said Leland Miller, chief executive officer of China Beige Book, a private analytics firm that tracks the country’s economy. “But there is no real risk of wider contagion because China is fundamentally a non-commercial financial system.”
> 
> 
> Beijing can order Chinese lenders to lend to whomever the government deems appropriate, and force counterparties to do business with whomever the government chooses, Mr. Miller said in an interview. For that reason, he sees no danger of an economy-wide freeze on lending and financial transactions such as occurred in the United States after Lehman went bust.
> ...


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## damian13ster (Apr 19, 2021)

How China deals with their real estate bubble will be an interesting case study for Canada.
It isn't easy deflating a massive market with crazy valuations without impacting customer behavior and economic activity too much


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## MrMatt (Dec 21, 2011)

damian13ster said:


> How China deals with their real estate bubble will be an interesting case study for Canada.
> It isn't easy deflating a massive market with crazy valuations without impacting customer behavior and economic activity too much


The thing is Canada is pretty open about the massive amounts of Government debt, and liabilities.

China is still hiding a lot of information, they've got way more debt than anyone realizes.


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## m3s (Apr 3, 2010)

Jimmy said:


> Article in the Globe today. Article in the Globe today. There could be pain for Evergrande and maybe a few other real estate firms but it won't lead to a larger problem for the economy. They think the situation is a little 'overdone' and China will contain the 'contagion'.


I put 0 weight in some globe journo nowadays

Billionaires were on emergency conference calls and flying to China last week. It could be nothing but that journo isn't privy to the info that has yet to surface

With all the money printing people are conditioned to immediately "by the dip" One of these days buy the dip will turn out to be a dead cat

Something like Evergrande could be a catalyst. I mean the markets are higher than pre-covid


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## damian13ster (Apr 19, 2021)

These numbers show just how big a headache Evergrande is for China


If Evergrande were to fail, the fallout would affect millions of people, including employees, buyers, creditors, suppliers and investors.




qz.com


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## Ukrainiandude (Aug 25, 2020)

Let’s see how it goes 
China Evergrande unit says to make *onshore* bond interest payment on Sept. 23

The company's coupon payment totals 232 million yuan ($35.88 million), according to Refinitiv data.



> Evergrande is also due to make an $83.53 million coupon payment on an offshore dollar bond on Thursday. The Shenzhen exchange filing did not mention the offshore bond.





> Evergrande is due to pay out interest worth $83 million on a 5-year, U.S.-dollar denominated bond, with an initial issue size of around $2 billion. Another interest payment on a 7-year dollar bond is due next Wednesday, on Sept. 29.





> Fitch Ratings, which last week warned that "a default of some kind appears probable," estimates the company has $129 million in coupon payments due by Sept. 30 and $850 million by Dec. 31. Another six payments come due in January, according to Refinitiv data.


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## Ukrainiandude (Aug 25, 2020)

From Reddit 
Even if they miss payment tomorrow, they have 30 days to do it without penalty according to the bonds covenants. Tomorrow missed payment will NOT count as a default. They have 2 payments tomorrow- looks like they will make good only on the onshore bonds @ 36 mil and will miss the 83.5 mil @ 8.25% dollar denominated bonds. There are also about 80000 investors that invested 6 billion $ in their “wealth management affiliate” that is offering 12% interest, matching Bernie Madoff rate of return. How do they feel?


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## Ukrainiandude (Aug 25, 2020)

Sources close to the Chinese Government have told Asia Marketsa deal that will see China Evergrande restructured into three seperate entities is currently being finalised by the Chinese Communist Party and could be announced within days.








Imminent China Evergrande deal will see CCP take control | Asia Markets


China Evergrande is likely to be split into three seperate entities in a deal that could be announced within days.




asiamarkets.com





will RBC bond holders get their money?


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## m3s (Apr 3, 2010)

Ukrainiandude said:


> will RBC bond holders get their money?


Yes. As soon as CCP gets Meng Wanzhou


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## sags (May 15, 2010)

Privatize the profits and socialize the losses ? Let the idiots get fleeced. It sends a message to future idiots.


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## damian13ster (Apr 19, 2021)

sags said:


> Privatize the profits and socialize the losses ? Let the idiots get fleeced. It sends a message to future idiots.


You just described CMHC and Canadian Government


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## Ukrainiandude (Aug 25, 2020)

damian13ster said:


> You just described CMHC and Canadian Government


Does not China have China Mortgage and Housing Corporation ? CMHC


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## sags (May 15, 2010)

This is a real estate developer who issues high risk junk bonds. You pays your money and you takes your chances.

Greed is good......as long as the government guarantees it is a one way bet.


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## Ukrainiandude (Aug 25, 2020)

SINGAPORE—Chinese authorities are asking local governments to prepare for the potential downfall of China Evergrande Group, according to officials familiar with the discussions, signaling a reluctance to bail out the debt-saddled property developer while bracing for any economic and social fallout from the company’s travails.

The officials characterized the actions being ordered as “getting ready for the possible storm,” saying that local-level government agencies and state-owned enterprises have been instructed to step in only at the last minute should Evergrande 3333, -5.99% fail to manage its affairs in an orderly fashion.
They said that local governments have been tasked with preventing unrest and mitigating the ripple effect on home buyers and the broader economy, for example by limiting job losses—scenarios that have grown in likelihood as Evergrande’s situation has worsened.


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## MrMatt (Dec 21, 2011)

The problem with "too big to fail" is that some failures are "too big to stop".

China has a monstrous debt problem they are keeping hidden. Governments and state owned enterprises have crazy intermingling. 
It's really a financial disaster waiting to happen.


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## m3s (Apr 3, 2010)

MrMatt said:


> It's really a financial disaster waiting to happen.


Not that it's worse, but US is debating how to raise their debt ceiling again and pay trillions for neglected infrastructure at the same time

Canada has AAA credit rating yet Canada's default swap market trades at much worse rates than the USA rated lower. Those credit ratings are bs

The global economy is on toothpicks


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## MrMatt (Dec 21, 2011)

m3s said:


> Not that it's worse, but US is debating how to raise their debt ceiling again and pay trillions for neglected infrastructure at the same time
> 
> Canada has AAA credit rating yet Canada's default swap market trades at much worse rates than the USA rated lower. Those credit ratings are bs
> 
> The global economy is on toothpicks


Well I think that the risk of inflation is very high. TIPS are quite negative.
I think the US situation looks bad, but you can see it. I agree it isn't worse in the US.

I think the situation in China is far worse, you can't see the problem, and they dont' like to admit mistakes.

Canada also has an infrastructure problem, we spent the last century building it, and have fallen sorely behind on maintenance.


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## m3s (Apr 3, 2010)

Evergrande has more liabilities due next week

Not much info on what happened behind closed doors last week

What a mess


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## Ukrainiandude (Aug 25, 2020)

*China Hidden Local Government Debt Is Half of GDP, Goldman Says

The total debt of local government financing vehicles rose to about 53 trillion yuan ($8.2 trillion) at the end of last year from 16 trillion yuan in 2013, the economists wrote in a report. That’s equal to about 52% of gross domestic product and is larger than amount of official outstanding government debt.*
Some other findings:


The liabilities of local financing vehicles are mostly concentrated in construction, transportation and industrial conglomerates sectors, with these three sub-industries borrowing close to 40% of the total LGFV debt
Jiangsu tops all the provinces in the size of the borrowing, with about 8 trillion yuan in 2020
Tianjin, Beijing, Sichuan, Guizhou and Gansu are the most leveraged provinces as a share of local economic output

Around 60% of the bonds issued by local platforms are used to repay maturing debt in 2020-2021, rather than new investment.
Bloomberg - Are you a robot?


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## Ukrainiandude (Aug 25, 2020)




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## sags (May 15, 2010)

It is a meaningless statistic without the offset of their assets.


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## sags (May 15, 2010)

China's per capita debt........

_According to the last data point published, China per capita debt in 2019 was *5,844 dollars per inhabitant*. _

The US per capita debt......

_In 2020, the gross federal debt in the United States amounted to around *80,885 U.S. dollars* per capita. _


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## sags (May 15, 2010)

Then there is the US global trade deficits.....I would be more concerned with the US than China.

With a new round of $1,400 stimulus checks pouring in and the domestic economy continuing to show substantial improvement, *the imbalance in goods and services with the rest of the world swelled to $74.4 billion*, the Commerce Department reported Tuesday.

That’s the highest level ever in a data series that goes back to January 1992, and represents a 57.6% increase from the same period a year ago and higher than the $70.5 billion in February.

*The trade imbalance with China increased more than 22% to $36.9 billion. The deficit with Mexico rose 23.5% to $8.4 billion.*


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## sags (May 15, 2010)

Evergrande is a fart in a windstorm to the Chinese.


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## sags (May 15, 2010)

moved


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## MrMatt (Dec 21, 2011)

sags said:


> China's per capita debt........
> 
> _According to the last data point *published*, China per capita debt in 2019 was *5,844 dollars per inhabitant*. _
> 
> ...


I underlined the important part.
There is lots of hidden debt


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## m3s (Apr 3, 2010)

sags said:


> Then there is the US global trade deficits.....I would be more concerned with the US than China.


That's nice

We already know US can just raise the debt ceiling and print all the USD they want. They don't have much choice now they already spent it and nobody has even proposed spending less going forward. Austerity measures will be for the younger generations not the boomers

The question is whether China will do like the west and burry the debt away for the future generations to find


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## sags (May 15, 2010)

How much did it cost past generations to build all the infrastructure in the world that you were born into ?

Imagine the cost of building all that infrastructure at today's costs. Networks of highways, hospitals, bridges and tunnels, railroads, airports.......etc.etc.etc.

Young people today should be grateful for the industrious nature of past generations, which also provided the CPP, EI, and universal health care.

Future generations will have to pay for what is being built and replaced today, just as past generations paid for what they inherited.

Despite all the doom and gloom from some quarters, the debt to GDP today is far lower than it was at intervals in the past.

We survived and thrived back then and I expect we will continue to do so.

Note..... the debt to GDP in the 1940's was twice as high as it is today, yet that was during a period of massive growth in Canada.

Also note.......the decline in the % of government revenue required to pay the interest cost to service the debt in the recent past.

The % of revenues cost of servicing the debt has never been lower.


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## MrMatt (Dec 21, 2011)

sags said:


> Young people today should be grateful for the industrious nature of past generations, which also provided the CPP, EI, and universal health care.


Yes they should be grateful, instead they tear down statues and decry the mistakes that were made.


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## m3s (Apr 3, 2010)

sags said:


> Young people today should be grateful for the industrious nature of past generations, which also provided the CPP, EI, and universal health care


The excessive lifestyle of the outgoing generation is unsustainable

CPP, EI and universal healthcare rely on the continuous expansion of a younger base of wage slaves and printing of paper wealth. Eventually we will have to populate like India and China and deplete the natural resources to keep the charade going. US social security will already be at risk this decade and Canada is heavily dependent on them for defense and trade

Indeed thank you for destroying the climate with your industrious nature


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## Eder (Feb 16, 2011)

Maybe we can get flags across the nation lowered to 1/4 mast. That will fix all the hurt feelings.


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## sags (May 15, 2010)

_Indeed thank you for destroying the climate with your industrious nature _

And pollution, overfishing, poisoning our fresh water sources, dumping radioactive waste into the ocean, and all kinds of horrific deeds.

There is no doubt that humans are self destructive, but the young inherit the world and what they do with it is up to them.


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## m3s (Apr 3, 2010)

We could send the righteous boomers to the COVID free zone of Alberta. The sinister ones for starlight tours of their catholic residency schools


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## Ukrainiandude (Aug 25, 2020)

Ever nice.


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## Ukrainiandude (Aug 25, 2020)

Indebted developer Evergrande is set to sell part of its stake in its property services unit, the second asset sale in as many weeks as the liquidity-squeezed property giant scrambles to raise cash.

Trading in shares of Evergrande and Evergrande Property Services was halted Monday morning. In a filing with the Hong Kong exchange, Evergrande said it requested the trading halt ahead of an announcement about a “major transaction.”

Evergrande Property Services said that the announcement constitutes “a possible general offer for the shares of the Company.”

Chinese developer Hopson also suspended trading of its shares, citing an impending announcement of a “major transaction” to acquire the shares of a Hong Kong-listed company, without specifying. Chinese state media Global Times reported, citing unnamed media reports, that Evergrande will sell about 51% of its property services arm to Hopson for more than $5 billion.

Last week, Evergrande said it will sell a $1.5 billion stake in Shengjing Bank to a state-owned asset management firm.

Evergrande’s debt has stoked investor concern as it warned twice it could default, roiling markets. The property giant has also missed interest payments on two offshore bonds in recent weeks, leaving overseas investors in limbo. So far, the firm has remained silent on those payments.

Buckling under the weight of more than $300 billion in debt, Evergrande has been trying to offload stakes in other assets.

It sold property units to suppliers and contractors to offset some of its outstanding payments. As of Aug. 27, those outstanding debts amounted to around 25.17 billion yuan ($3.8 billion), according to Evergrande’s latest financial statement.

Vishnu Varathan, head of economics and strategy at Mizuho Bank, said that “targeted and partial asset disposal to meet obligations is a fairly low bar.”

“The real question is whether there will be sustainable financing/cash-flow arrangements to keep the property sector as a going-concern,” he told CNBC, referring to functioning businesses generating cash-flows rather than being squeezed by liquidation.

Varathan added: “The wider point is that with a wall of obligations, restoring confidence is key. Whereas the general direction is still pointing to creditors making a bee-line and home-buyers being spooked.”

Evergrande also faces another deadline — a dollar note worth $260 million, issued by Jumbo Fortune Enterprises and guaranteed by Evergrande, was set to mature on Monday.

Non-payment would constitute a default and put pressure on the yuan, Varathan said

Indebted Evergrande set to raise more cash from partial sale of its property services unit


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## Ukrainiandude (Aug 25, 2020)

HONG KONG (Reuters) -Chinese state-owned Yuexiu Property has pulled out of a proposed $1.7 billion deal to buy China Evergrande Group's Hong Kong headquarters building over worries about the developer's dire financial situation, two sources said.


Exclusive-Evergrande's $1.7 billion Hong Kong headquarters sale flops as buyer withdraws -sources


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## m3s (Apr 3, 2010)

My spidey sense is tingling

China puts the global economy on edge the very moment the US economy is on the ropes while they carry out beach landing assault drills across from Taiwan. The supply chain is clogged and semiconductor chip shortage impacts absolutely everything. US military still licking its wounds from a 20 year war

Why did we rely on Taiwan for something as critical as processor chips..


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## sags (May 15, 2010)

It makes me wonder if the release of the covid virus from the military controlled lab in Wuhan was deliberate, to cause chaos, supply chain disruptions, and do exactly what you have outlined. Was the conquest of Taiwan being planned ?

One scientist whistle blower from China has said as much, and many of the high ranking officials from the Trump administration say they believe the evidence clearly revealed the virus was released from the lab......either accidentally or wilfully.

The quandry question appears to be what to do about it,....... with the answer being nothing much.

The Canadian government continues to refuse to reveal what went on in the Winnipeg lab they claim as a classified national security matter.


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## MrMatt (Dec 21, 2011)

sags said:


> It makes me wonder if the release of the covid virus from the military controlled lab in Wuhan was deliberate, to cause chaos, supply chain disruptions, and do exactly what you have outlined. Was the conquest of Taiwan being planned ?


You know you're sounding like a Trump era conspiracy theorist.

I'd suggest you look into the reports of COVID at the 2019 military games. Much more interesting conspiracy stuff.

I'm honestly not sure if China would actually be arrogant enough to think they could control a bioweapon like this.


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## m3s (Apr 3, 2010)

My crew partner was at the 2019 military games in Wuhan.

I think "evidence clearly revealed the virus was released" is a stretch from suspicious circumstances surrounding Wuhan. I believe it was open source pre-pandemic that commercial home ancestry kits like 23-and-me sold the DNA data to China. Anti-vax disinformation is pushed by foreign cyber operators on social media. America is divided and in disarray

The timing is all very convenient. Beijing Olympics just 4 months away now. Russia occupied Crimea after Sochi 2014



MrMatt said:


> I'm honestly not sure if China would actually be arrogant enough to think they could control a bioweapon like this.


Can't be blamed for a virus you can't control

They have more control of their people


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## Eder (Feb 16, 2011)

well what do you know









China Evergrande Makes Overdue Interest Payment on Dollar Bonds, State Media Says


The unexpected payment to international bondholders allows the struggling Chinese property giant to stave off what threatens to spiral into the biggest corporate default in Asia.




www.wsj.com


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## m3s (Apr 3, 2010)




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## Ukrainiandude (Aug 25, 2020)

Evergrande has been the most high profile example of China's debt crisis but there are others in the property sector with similar issues. 
Their total *combined debt is estimated to be more than $5tn,* according to Japanese banking giant Nomura. That's almost the size of Japan's economy.

*Fresh concerns have been raised about China's property sector as Kaisa Group has become the latest developer to miss a payment to investors.*
Kaisa said it was facing unprecedented pressure on its finances due to a challenging property market.
It comes as rival developer Evergrande Group is still reeling under the weight of more than $300bn (£222bn) of debt..








Kaisa Group: Missed payment triggers fresh China property fears


It comes as embattled property developer Evergrande faces another debt deadline on Saturday.



www.bbc.com


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## m3s (Apr 3, 2010)

China could be heading for financial and societal collapse


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## m3s (Apr 3, 2010)

Lots of protests and bank runs across China

Fractional reserve banking can only work for so long


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## gardner (Feb 13, 2014)

I do believe the PRC have painted themselves in a corner on real-estate and real-estate related borrowing and banking. I wonder how much of the Taiwan posturing and carrying on is linked to efforts to distract from the financial outlook. In the event of serious collapse, the national government would undoubtedly step in to bail the most favoured institutions out, but the average joe in the streets would bear the brunt of the problem, still losing all their savings. And, of course, foreign stakeholders will get nothing.

I'm glad I don't own any emerging markets and it reinforces why I steered clear: too much China in there.


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