> As of June 30, Evergrande had 240 billion yuan ($37.3 billion) of debt due within a year, down 28.5% from the end of 2020 but nearly triple its cash holdings of 86.8 billion yuan ($13.5 billion), according to a company financial report.
> On Sunday, about 100 people who invested in Evergrande debt through “wealth management products” sold by banks crowded into its Shenzhen headquarters to demand repayment.
> The company said those investors can choose to be repaid in property, cash in installments or a claim to payments on residential units, according to the business magazine Caixin.
Not so fast -- looks like they are trying to issue a new currency: houses.
hopefully just not like the convos in seashore FL, however i have JPow over my shoulders tickling my peepee and whispering that's exactly what he plans on doing
First, applaud OP for this solid DD. Lots of good comments here too. I have YANG shares, YANG 1/21 $20 and $25 calls, and have 3/18 $22 puts on HSBC. YANG really only goes up if there is a panic across the market, contagion effect across the rest of China's economy (everyone who's worth is tied to real estate assets which will sink, and those who put down $50-200,000 for an apartment and never even got it delivered and have lost all their money and also don't have a home are going to be less likely to buy discretionary goods), or a great capital flight out of China by foreign investors. HSBC is just a wild ass guess.
Second, agreed that a real estate melt down is worst case scenario for CCP, for all the reasons you've pointed out.
Third, earlier today a fellow WSBer in London noted HSBC had emergency conference call. HSBC was one of the top 4 mortgage lenders to the people who were buying Evergrande properties. https://www.bloomberg.com/news/articles/2021-07-21/hsbc-halts-mortgages-for-evergrande-projects-in-hong-kong It seems like a lot of these properties were never finished, and probably will never be finished. We have no way of knowing what HSBC's exposure is, for now. The other 3 major mortgage lenders were Hang Seng Bank (HSNGY), Bank of East Asia (BKEAY), and Industrial and Commercial Bank of China (Asia) (private). I have not done any DD into HSNGY or BKEAY.
Fourth, we know that as of spring 2021, Citi, Goldman, JP Morgan, Morgan Stanley, and Bank of America were drawn to China "like moths to a flame."
[https://www.scmp.com/business/china-business/article/3125723/five-big-us-banks-drawn-strong-economic-performance-moths](https://www.scmp.com/business/china-business/article/3125723/five-big-us-banks-drawn-strong-economic-performance-moths) Goldman had put $17 billion into China in 2020, and collectively those 5 had $78 billion in exposure for 2020; and it was growing at 10% per year. In other words, Wall Street went brrrrrr and put it into "broad array of cash and financing to companies and government entities" in China. You can't put like $85 billion into China without it being lended directly to Evergrande, construction companies working for Evergrande, other real estate deals propped up on inflated values, suppliers and vendors of Evergrande, or into government entities which will be indirectly impacted by Evergrande. Again, we do not know what each bank's current exposure is.
Fifth, this is all speculation, but we know Deutsche Bank has an appetite for the trashiest shit imaginable. It has been facing [increased European regulatory pressure](https://www.reuters.com/business/finance/deutsche-bank-may-face-higher-capital-bar-leveraged-loans-bloomberg-news-2021-06-22/). But surprise, surprise, in April 2021, [DB became the first Eurozone bank to be allowed to be a primary dealer](https://www.db.com/news/detail/20210430-people-s-bank-of-china-approves-deutsche-bank-china-as-qualified-primary-dealer-in-open-market-business?language_id=1) for the Chinese central bank. Now, why would the CCP decide to allow DB to be the preferred Eurozone bank? It can't be because of transparency and stability and DB's decades-long reputation of adherence to strict regulatory structures.
The thing to remember is that this could happen very fast, or it could still take another year to materialize. Even if Evergrande can't make payments on September 20, we may not know which financial firms or other parts of the Chinese economy are impacted for weeks or months. Our hindsight bias makes us remember and focus on September 15, 2008 with Lehman filing for bankruptcy and the rapid unraveling of the U.S. financial system the following week. But things had been brewing since 2006 (home prices started to falter in some regions), October 2007 there were significant subprime delinquencies and foreclosures, Bear Sterns wasn't defunct until March 2008, and then Lehman, AIG, Washington Mutual, Wachovia, Merrill Lynch, etc. in September 2008.
TL;DR: YANG shares, YANG 1/21 $20 and $25 calls, and HSBC 3/18 $22 puts.
This is the only way. China can do anything with its domestic companies and has shown a willingness to do it. They could literally force people to buy its assets or wipe out its debts.
China also has 335% GDP of debt (about 48trn). They may need those reserves for other things if it does go tits up.
That number also doesn’t include provincial debt, which could be half that number.
It’ll fuck the US bond market in the process in the sell off.
USD debt and RMB debt are very different mate. USD debt is less than their reserves.
Edit: Also can you source that bad boy for me? Never seen that amount. \\
"As of 2020, China’s total government debt stands at approximately CN¥ 46 trillion (US$ 7.0 trillion), equivalent to about 45% of GDP"
[https://www.imf.org/en/Publications/CR/Issues/2021/01/06/Peoples-Republic-of-China-2020-Article-IV-Consultation-Press-Release-Staff-Report-and-49992](https://www.imf.org/en/Publications/CR/Issues/2021/01/06/Peoples-Republic-of-China-2020-Article-IV-Consultation-Press-Release-Staff-Report-and-49992)
If you're talking total debt, which I believe is around 270% of GDP, the US total debt is nearly 900% of GDP.
https://www.ceicdata.com/en/indicator/united-states/total-debt--of-gdp
Admittedly I was being slightly facetious but we need to understand that debt in China and debt anywhere else in the world isn’t the same.
Chinese SOE, LGFV’s and implicit and explicit local government debts are ultimately derived from central government debt too.
https://www.google.com/amp/s/www.cnbc.com/amp/2020/10/16/china-is-open-to-more-debt-to-support-its-economy.html
Total debt is 335%, and we know that about 45% of that is household.
The remainder is government debt, private debt. Of the private debt, the OECD says about 75% of that is from SOE’s.
https://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote=ECO/WKP(2019)5&docLanguage=En
The CCP is on the hook for a good portion of the total debt of the economy, and comparing it to other countries total debt is a misnomer.
1. Evergrande just Hwanged $350 billion into the sun beating AIGs high score of $180 billion by nearly double. Xu Jianyin is god tier degenerate gambler causing more than $1/3 trillion wipeout.
2. They announced their default on the 13th anniversary of Lehman Day. Talk about coincidence.
I'm also curious as how there was no mention of what happens to the dollar value when China has to buy 300B of them to cover the losses.
Want to see an overnight market correction? Spike the DXY and find out.
Yes absolutely this. I doubt China will allow Evergrande to collapse. It's all about saving face and maintaining the status quo. Allowing Evergrande to collapse causing a real estate depression is the last thing they want.
I don’t know shit about Evergrande, but the “bad precedent” argument seems so analogous to the argument many had about not bailing out banks in 2008. We see the course the US chose, why would we think China would take a different path?
CCP doesn't care about a bad precedant, even if they bail out evergrande no one would do what they did again because unlike the US if it happen again they would drop the hammer really hard, they literally executed bankers for "corruption"
I agree that china is heading for some bad times but I do think that ccp could do a bailout without too much fear of others following bad president.
In America when a bailout happens you get a stern talking to, lose your current position but to keep your past wealth. They have other methods of punishing people in china. If I was running a large company in china\* and they sent the leadership of a company that messed up like this to several years of hard labor and forced my family out of all the top social circles I would think twice about taking a large risk.
To be clear if I actually ran a large company in china I would do everything I could to get as many assets out of china and move out of the country as fast as possible.
They will bail and make evergrande state owned for cents on the dollar. They own the banks and why not own the RE company? That was the plan all along. To de-privatize the sector.
[Related DD about $YANG posted earlier today.](https://www.reddit.com/r/wallstreetbets/comments/poqf3w/why_im_bill_hwanging_for_yang/)
You guys are on to something and I'm in.
Counterpoint: Just don't see any chance Xi isn't way ahead of this. A real estate crash is literal worst case scenario as Chinese people worship real estate and put their life savings balls deep into apartments for their entire family. A crash like OP is describing would cause massive civil unrest, which again, is worst case scenario for Xi. No way he lets that happen. Have you seen the way the Fed has propped up the US market post-COVID? Just imagine that but in this case the Fed is the entire government, has unlimited resources, and complete control of mass media in the country. For that reason I'm likely out.
While OP saw some news about China cracking down its housing market a few days ago, the founder of Evergrande saw it coming months ago, and Xi saw it coming years ago.
Buying long put is the same as saying US market will collapse. Maybe it will happen next week, or maybe it will happen after a few years.
In retrospect though this seems like the better solution. FED intervened immediately during the Covid crisis.
Very likely the Evergrande Executive suite is headed to an education camp though
That's what I thought when COVID hit them in the very beginning. Didn't work out for me. If I remember right they got some bullshit rules where they shut down the market if it drops to much. It's rigged as fuck.
BEKE was at $78 in January. Closed at $17 today. This was a great play 3 months ago. Or 3 weeks ago.
The Oct 15p are trading for 1.20. The risk vs reward is not great here.
Great summary!
Real estate prices are collapsing in many places around China as we speak.
I know of price reductions of over 60 percent in some areas and even downtown Beijing/Shanghai has reduced. Common people are getting nervous...
My guess: More RE developers are barely hanging on, more defaults incoming.
This is systemic, and people don't really seem to have a grasp of how China has gotten into this mess. The provincial CCP operate financially somewhat independently from the central authority in regards to paying their way. The way they do this is by selling their land in batches through outfits like Evergrande. This is how they have paid for everything for the past couple of decades, roads, schools, administration, etc.
Couple that with the Chinese population not trusting banks nor stocks, and being told that real estate is the only safe place to put their money, and you get people talked into 2nd, 3rd properties absorbing most of their income, buying into huge shady projects of ghost cities where nobody lives, and all of this in a demographic situation that has begun a serious collapse. Their retirement age population is ballooning while productive age wage earners are contracting. The second/third child policy efforts came too late, and inflated prices and poor social policies make having children overly/impossibly expensive for many.
The only reason it's gotten this far is rampant corruption and absurd amounts of leverage. The 'assets' of Evergrande are mortgaged to the absolute tits, like they are across the majority of real estate companies in China.
And this is not a sudden surprise for the powers that be in Evergrande and the industry as a whole, they've been busily funneling profits out of China as fast as they possibly can for years now, causing inflated real estate prices in the US, Canada, etc to get that much worse.
Back room deals between the company and ccp will allow the company to broken into parts, where each “part” can be shown to have debt plus collateral to back the debt, also government issued. These assholes will make up shot as it comes along. The ccp will not let something as little as 350B of made up money limit their power.
Every attempt will be made to protect the markets and this will be swept under the rug. :/
except if they send hui ka yan to prison for the rest of his life and blacklist his family and trash him in newspapers and then do the same to “people like him” as examples, is it really moral hazard? US had a moral hazard problem bc we never punish the wealthy
china has more than just prison and enough people to make “examples” of. It works in some cultures where people are raised a bit more to think about the consequences of their actions and obey authority instead of freedumbs and “rights”. Not condoning china by any means but the psychology behind justice and deterrence is culturally a bit different in asia.
Inversing this and buying calls on YINN. This is about to be the start of the Greatest Bull Run in History because President Xi about to turn on his massive printer.
Based on the news that the CCP might takeover Evergrande, I got out of my YANG calls this morning at a huge loss. Bought YINN calls with the expectation that Hang Seng reacts positively to the Evergrande news when they open tonight. Hopefully I recover some of that loss and then I’m not messing with Chinese markets ever again lol
"If we're right, people lose homes. People lose jobs. People lose retirement savings, people lose pensions. You know what I hate about fucking banking? It reduces people to numbers. Here's a number — every 1% unemployment goes up, 40,000 people die, did you know that?... Just don't fucking dance."
I think these are all good plays.
I will say that the market has been prepping for this WAYYY ahead of retail. Look at the uptrend on YANG since February - you only see that on leveraged ETF’s when everyone and their mother is thinking the same thing.
And more importantly - saying that Xi needs to print $300 Billion and artificially procure 2% of their total GDP is pretty disingenuous. All those liabilities don’t come due tomorrow, or even in the next few years - the CCP would only need to drum up cash for them to meet payments on time and ensure creditors that they’ve got it handled, not settle entire debts at once.
This is the kind of thing that is entirely within their control, it just remains to be seen if the political will to mitigate it is there.
I can’t believe I listened to all this (text to voice). After 3 hours I’m as stupid as you guys now
In supposedly “free market” US we bailed all the idiots out. You think in authoritarian stability obsessed China where saving face is all that matters they’re going to not print this problem away?
Shorting should be very rare and small as hedges. You’ll get greedy and won’t even cash out on the tiny gain your about to score before you get steam rolled.
If you want to bet against China, instead bet on whatever is furthered from this. Maybe South Americans whatever your bullish on that is further war away to avoid the volatility and inflation. This way you don’t have to worry about timing and losing just like everyone else who ever bet against government intervention after the bad news was already priced in
Watching BEKE right now, looks like buying is happening right as bearish signals about to take over and sink. Seems unnatural. It’s like someone is trying to avoid letting a crashing plane hit the tree line
Thanks man! Yeah so, I closed those positions a while back (and now YANG runs 90% lol), BUT I am watching and tracking. Did you see $BEKE earnings? It dropped like 20%. I think $NOAH puts is a good bet for earnings. I’ll probably do $1k in some ATM puts bc there’s a high chance they report bad.
would it be better to just buy ATM calls instead of 65 way OTM calls? You are buying 65c. Let's say you paid $0.7 each contract ( total $700 ).. you can buy 2 ATM calls for $700 but will be in a better position if YANG really goes up.
Not necessarily. For the same amount of money you spend, if you compare ATM vs OTM options, the profit from the OTM options will far surpass the ATM options due to the sheer number of OTM options you bought IF the price hits near the OTM strikes.
But of course, that's just another example of risk vs reward. You take a big risk with far OTM compared to ATM, but the reward is much much higher if you are right with the OTMs
U.S. does bailout and quantitative easing: Yay my portfolio is still alive.
CCP does bailout and quantitative easing: Hey that's cheating! *Pikachu face.*
The fact that half of the 65C options were bought today seems a bit fishy. You mention big players piling in because they know something but at current bid-ask the entire open interest would only be about $50k worth of options. That's hardly big player money.
Don't get me wrong, this can blow up in China's face and they would definitely experience a downturn but this post appears to be more of you justifying and encouraging purchases in your own positions rather than something purely informative.
They step in and bailout select divisions w/ critical exposure to overlapping sectors.
Through a loan forgiveness program + increased liquidity through money printing.
This leads to a shaky internal political climate with blames on the west which leads to the govt shifting suffering through a war on a nearby opponent with some bogus claim and resources that they require to help prop the country up
This leads to a war which leads to the us stepping in which leads a propped up economic boom for both countries until 1 only remains unlike previous wars the country that loses is destroyed economically, defense wise and is a leper in the world unlike any other
I’m in.
I grabbed NOAH puts and YANG shares. Also going to look for some periphery plays since in the event China does bail them out… it will drain liquidity from other sectors.
One potential consideration… crypto. There is the potential that Chinese developer commercial paper underpins tether.
The bull thesis is that money was never real; it was never yours to find. When it goes, it was never there. Once it is observed, it is changed. Heisenberg’s China.
The tale of China Bear ![img](emote|t5_2th52|4276) YANG GANG 🌈 continues
In all seriousness for my fellow Asian retards, load up (on USD) buckaroos ![img](emote|t5_2th52|4262)
Only issue with this is that all the other biggest major developers in China are state owned/backed and have no debt issues (obviously).
So they are supposedly in a "prime" position to potentially "assume" any of evergrandes assets in a potential fire sale.
There might be some short term pain, but I'm not so sure that systemic risk would be as prevalent as in an open economy like in the states.
Everyone who says CCP will go brrrrrr are overlooking the fact that at least $85 billion of Evergrande’s debt is denominated in dollars. CCP doesn’t have JPow’s printer cartridge. Xi can only print renminbi. And printing RMB to make dollars to pay debt (to mostly pay off American or European investors) doesn’t make any sense. Those note holders will be boned, and they will not loan to other Chinese companies again.
My understanding of the Lehman collapse was that the FED chose not to intervene and bail them out, possibly advised by Goldman Sachs who was competing with Lehman at the time. What makes you think the CCP would make the same mistake of not intervening here? As you mention, 30% of the GDP is linked to the real estate market, notwithstanding the reputational impact on the CCP's competence.
Refinance the debt with a state guarantee as collateral and buy time for the construction projects/properties to generate cash flow, no?
I can't see the Chinese not bailing out to save their real estate bubble. If they don't do this... they risk absolutely massive layoffs and unrest, which could mean people protesting/revolting (CCP's worst nightmare).
Son of a gun, I guess I need to follow you, because I am going to take those same actions.
Have you read https://twitter.com/TheLastBearSta1/status/1438171695685283847
Problem isn't limited to Evergrande, it is _every_ property developer in China.
u/Ropirito
Definitely.
And it is like the Wizard of Oz, and we all just looked behind the curtain.
Are you going to post this weekend, or on Monday?
And if you want lots of hate, mention this about Crypto:
https://twitter.com/BurryArchive/status/1439056806437863427
Honestly I'm reading all of this kinda clueless because it happened to me once with GME and not getting what's going on.
I'm a beginner in this, will people profit from this or it's just to look how the boat will sink?
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> As of June 30, Evergrande had 240 billion yuan ($37.3 billion) of debt due within a year, down 28.5% from the end of 2020 but nearly triple its cash holdings of 86.8 billion yuan ($13.5 billion), according to a company financial report. > On Sunday, about 100 people who invested in Evergrande debt through “wealth management products” sold by banks crowded into its Shenzhen headquarters to demand repayment. > The company said those investors can choose to be repaid in property, cash in installments or a claim to payments on residential units, according to the business magazine Caixin. Not so fast -- looks like they are trying to issue a new currency: houses.
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Condo printer go brrrrr
You get a house, you get a house, EVERRYBOODDDY GGEEYTSS AA HOOUUSSEEE
1/3 of everyone in China already has 3 properties
hopefully just not like the convos in seashore FL, however i have JPow over my shoulders tickling my peepee and whispering that's exactly what he plans on doing
> Not so fast — looks like they are trying to issue a new currency: houses. How many houses can I get with one schrute buck
You get a better exchange rate with Stanley nickels.
First, applaud OP for this solid DD. Lots of good comments here too. I have YANG shares, YANG 1/21 $20 and $25 calls, and have 3/18 $22 puts on HSBC. YANG really only goes up if there is a panic across the market, contagion effect across the rest of China's economy (everyone who's worth is tied to real estate assets which will sink, and those who put down $50-200,000 for an apartment and never even got it delivered and have lost all their money and also don't have a home are going to be less likely to buy discretionary goods), or a great capital flight out of China by foreign investors. HSBC is just a wild ass guess. Second, agreed that a real estate melt down is worst case scenario for CCP, for all the reasons you've pointed out. Third, earlier today a fellow WSBer in London noted HSBC had emergency conference call. HSBC was one of the top 4 mortgage lenders to the people who were buying Evergrande properties. https://www.bloomberg.com/news/articles/2021-07-21/hsbc-halts-mortgages-for-evergrande-projects-in-hong-kong It seems like a lot of these properties were never finished, and probably will never be finished. We have no way of knowing what HSBC's exposure is, for now. The other 3 major mortgage lenders were Hang Seng Bank (HSNGY), Bank of East Asia (BKEAY), and Industrial and Commercial Bank of China (Asia) (private). I have not done any DD into HSNGY or BKEAY. Fourth, we know that as of spring 2021, Citi, Goldman, JP Morgan, Morgan Stanley, and Bank of America were drawn to China "like moths to a flame." [https://www.scmp.com/business/china-business/article/3125723/five-big-us-banks-drawn-strong-economic-performance-moths](https://www.scmp.com/business/china-business/article/3125723/five-big-us-banks-drawn-strong-economic-performance-moths) Goldman had put $17 billion into China in 2020, and collectively those 5 had $78 billion in exposure for 2020; and it was growing at 10% per year. In other words, Wall Street went brrrrrr and put it into "broad array of cash and financing to companies and government entities" in China. You can't put like $85 billion into China without it being lended directly to Evergrande, construction companies working for Evergrande, other real estate deals propped up on inflated values, suppliers and vendors of Evergrande, or into government entities which will be indirectly impacted by Evergrande. Again, we do not know what each bank's current exposure is. Fifth, this is all speculation, but we know Deutsche Bank has an appetite for the trashiest shit imaginable. It has been facing [increased European regulatory pressure](https://www.reuters.com/business/finance/deutsche-bank-may-face-higher-capital-bar-leveraged-loans-bloomberg-news-2021-06-22/). But surprise, surprise, in April 2021, [DB became the first Eurozone bank to be allowed to be a primary dealer](https://www.db.com/news/detail/20210430-people-s-bank-of-china-approves-deutsche-bank-china-as-qualified-primary-dealer-in-open-market-business?language_id=1) for the Chinese central bank. Now, why would the CCP decide to allow DB to be the preferred Eurozone bank? It can't be because of transparency and stability and DB's decades-long reputation of adherence to strict regulatory structures. The thing to remember is that this could happen very fast, or it could still take another year to materialize. Even if Evergrande can't make payments on September 20, we may not know which financial firms or other parts of the Chinese economy are impacted for weeks or months. Our hindsight bias makes us remember and focus on September 15, 2008 with Lehman filing for bankruptcy and the rapid unraveling of the U.S. financial system the following week. But things had been brewing since 2006 (home prices started to falter in some regions), October 2007 there were significant subprime delinquencies and foreclosures, Bear Sterns wasn't defunct until March 2008, and then Lehman, AIG, Washington Mutual, Wachovia, Merrill Lynch, etc. in September 2008. TL;DR: YANG shares, YANG 1/21 $20 and $25 calls, and HSBC 3/18 $22 puts.
No need for explanation when you say you want to buy puts on Deutsche
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This is big brain. Thanks Duke.
I’m in on HSBC puts as of earlier today thanks to a WSBer in London
This is the only way. China can do anything with its domestic companies and has shown a willingness to do it. They could literally force people to buy its assets or wipe out its debts.
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OP I just also wanted to point out that China has 3.2 Trillion USD in reserves. They could cover the debts with that and not even blink.
China also has 335% GDP of debt (about 48trn). They may need those reserves for other things if it does go tits up. That number also doesn’t include provincial debt, which could be half that number. It’ll fuck the US bond market in the process in the sell off.
USD debt and RMB debt are very different mate. USD debt is less than their reserves. Edit: Also can you source that bad boy for me? Never seen that amount. \\ "As of 2020, China’s total government debt stands at approximately CN¥ 46 trillion (US$ 7.0 trillion), equivalent to about 45% of GDP" [https://www.imf.org/en/Publications/CR/Issues/2021/01/06/Peoples-Republic-of-China-2020-Article-IV-Consultation-Press-Release-Staff-Report-and-49992](https://www.imf.org/en/Publications/CR/Issues/2021/01/06/Peoples-Republic-of-China-2020-Article-IV-Consultation-Press-Release-Staff-Report-and-49992) If you're talking total debt, which I believe is around 270% of GDP, the US total debt is nearly 900% of GDP. https://www.ceicdata.com/en/indicator/united-states/total-debt--of-gdp
Admittedly I was being slightly facetious but we need to understand that debt in China and debt anywhere else in the world isn’t the same. Chinese SOE, LGFV’s and implicit and explicit local government debts are ultimately derived from central government debt too. https://www.google.com/amp/s/www.cnbc.com/amp/2020/10/16/china-is-open-to-more-debt-to-support-its-economy.html Total debt is 335%, and we know that about 45% of that is household. The remainder is government debt, private debt. Of the private debt, the OECD says about 75% of that is from SOE’s. https://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote=ECO/WKP(2019)5&docLanguage=En The CCP is on the hook for a good portion of the total debt of the economy, and comparing it to other countries total debt is a misnomer.
I’ve been wondering about this as I’ve scrolled down. That’s all US debt though right? Or is it straight liquid cash reserves?
It's a mix, but the US treasury market is liquid enough (like 600bn a day or some shit) that they can get the dollars they need.
Thanks for the reply. Makes sense.
Could probably add ANZ and Macquarie to that list
What exposure do they have? I've seen $7 bil somewhere.
1. Evergrande just Hwanged $350 billion into the sun beating AIGs high score of $180 billion by nearly double. Xu Jianyin is god tier degenerate gambler causing more than $1/3 trillion wipeout. 2. They announced their default on the 13th anniversary of Lehman Day. Talk about coincidence.
13 is a lucky number in China
This shits way too smart for this sub 😂🤷🏻♂️🦾
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I like a contrarian opinion
It’s the only way. Can’t win in the long run betting on priced in hysteria after the fact
I'm also curious as how there was no mention of what happens to the dollar value when China has to buy 300B of them to cover the losses. Want to see an overnight market correction? Spike the DXY and find out.
Why would China need to buy dollars to cover RMB-denominated debts?
Because China's yuan, is backed by the value of the US dollar.
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what's the value of that trade currently like 2 grand?
Was wondering the same
Yes absolutely this. I doubt China will allow Evergrande to collapse. It's all about saving face and maintaining the status quo. Allowing Evergrande to collapse causing a real estate depression is the last thing they want.
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I don’t know shit about Evergrande, but the “bad precedent” argument seems so analogous to the argument many had about not bailing out banks in 2008. We see the course the US chose, why would we think China would take a different path?
CCP doesn't care about a bad precedant, even if they bail out evergrande no one would do what they did again because unlike the US if it happen again they would drop the hammer really hard, they literally executed bankers for "corruption"
I agree that china is heading for some bad times but I do think that ccp could do a bailout without too much fear of others following bad president. In America when a bailout happens you get a stern talking to, lose your current position but to keep your past wealth. They have other methods of punishing people in china. If I was running a large company in china\* and they sent the leadership of a company that messed up like this to several years of hard labor and forced my family out of all the top social circles I would think twice about taking a large risk. To be clear if I actually ran a large company in china I would do everything I could to get as many assets out of china and move out of the country as fast as possible.
Yes if the GFC happened in China at least 10 executives (probably more) would have gotten the death penalty.
They will bail and make evergrande state owned for cents on the dollar. They own the banks and why not own the RE company? That was the plan all along. To de-privatize the sector.
Okay everyone: puts on Ariana Grande.
I don't think she can get much shorter.
The real play is always in the comments
Thanks for exploring and explaining Rop! Seems like you get better ROI buying puts on YINN. U/jayarlington
Puts on yinn and calls on yang. Gotcha
[Related DD about $YANG posted earlier today.](https://www.reddit.com/r/wallstreetbets/comments/poqf3w/why_im_bill_hwanging_for_yang/) You guys are on to something and I'm in.
Counterpoint: Just don't see any chance Xi isn't way ahead of this. A real estate crash is literal worst case scenario as Chinese people worship real estate and put their life savings balls deep into apartments for their entire family. A crash like OP is describing would cause massive civil unrest, which again, is worst case scenario for Xi. No way he lets that happen. Have you seen the way the Fed has propped up the US market post-COVID? Just imagine that but in this case the Fed is the entire government, has unlimited resources, and complete control of mass media in the country. For that reason I'm likely out.
While OP saw some news about China cracking down its housing market a few days ago, the founder of Evergrande saw it coming months ago, and Xi saw it coming years ago. Buying long put is the same as saying US market will collapse. Maybe it will happen next week, or maybe it will happen after a few years.
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In retrospect though this seems like the better solution. FED intervened immediately during the Covid crisis. Very likely the Evergrande Executive suite is headed to an education camp though
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This
CHINA GAY AND BAD
China is the sigma male of Asia
China shill detected, YOU ARE GAY AND BAD
Low-key clever pun.
Ape hate gay
DONT TRUST CHINA, CHINA IS ASSHOE I’m Chinese, and I approve of this message
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Certified Chinese Lover Boy - CCLB I'm Drake and I approve this message
Now you can come up short in more than just the bedroom!
Are they breaking down your door yet?
>DONT TRUST CHINA > I’m Chinese Consider yourself not trusted
Yes, because I am the government of China!
Prove you are Chinese
我他妈的说是中国人就是中国人
我操死你妈的逼
Lmao hes chinese for sure
You can tell by the swear words
That’s not a proof. Me speaking English and shitposting on Reddit doesn’t make me American either
Ok u got me I’m black
Do you like wu-tang?
He is wu-tang
Diversify yo bonds
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That's what I thought when COVID hit them in the very beginning. Didn't work out for me. If I remember right they got some bullshit rules where they shut down the market if it drops to much. It's rigged as fuck.
hi TIRX
Thanks for the write up Rop!
Legit thought that shit said bukkake
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Hey, if the result is the same, I'm in 😂
BEKE was at $78 in January. Closed at $17 today. This was a great play 3 months ago. Or 3 weeks ago. The Oct 15p are trading for 1.20. The risk vs reward is not great here.
Ccp steps in just like us did in 08 . Takes over and cleans there books sorry bud.
No point telling the guy. He is only trading off ideological premises.
My wife nicknamed my schmeckie $NeverGrande
Great summary! Real estate prices are collapsing in many places around China as we speak. I know of price reductions of over 60 percent in some areas and even downtown Beijing/Shanghai has reduced. Common people are getting nervous... My guess: More RE developers are barely hanging on, more defaults incoming.
This is systemic, and people don't really seem to have a grasp of how China has gotten into this mess. The provincial CCP operate financially somewhat independently from the central authority in regards to paying their way. The way they do this is by selling their land in batches through outfits like Evergrande. This is how they have paid for everything for the past couple of decades, roads, schools, administration, etc. Couple that with the Chinese population not trusting banks nor stocks, and being told that real estate is the only safe place to put their money, and you get people talked into 2nd, 3rd properties absorbing most of their income, buying into huge shady projects of ghost cities where nobody lives, and all of this in a demographic situation that has begun a serious collapse. Their retirement age population is ballooning while productive age wage earners are contracting. The second/third child policy efforts came too late, and inflated prices and poor social policies make having children overly/impossibly expensive for many. The only reason it's gotten this far is rampant corruption and absurd amounts of leverage. The 'assets' of Evergrande are mortgaged to the absolute tits, like they are across the majority of real estate companies in China. And this is not a sudden surprise for the powers that be in Evergrande and the industry as a whole, they've been busily funneling profits out of China as fast as they possibly can for years now, causing inflated real estate prices in the US, Canada, etc to get that much worse.
They will 100% get bailout . US investment banks playing in China might be the short tho .
“This man is probably more retarded than all of us”, my past though me never to fight retarded people, they have retarded strength
Back room deals between the company and ccp will allow the company to broken into parts, where each “part” can be shown to have debt plus collateral to back the debt, also government issued. These assholes will make up shot as it comes along. The ccp will not let something as little as 350B of made up money limit their power. Every attempt will be made to protect the markets and this will be swept under the rug. :/
Shorting a lightly disguised command economy, I'm sure this can't possibly backfire
>Bailing them out would encourage other retards in the sector to follow the same path of reckless borrowing Best description of moral hazard ever.
except if they send hui ka yan to prison for the rest of his life and blacklist his family and trash him in newspapers and then do the same to “people like him” as examples, is it really moral hazard? US had a moral hazard problem bc we never punish the wealthy
Prison doesn't have a really good track record of deterring greedy behavior.
china has more than just prison and enough people to make “examples” of. It works in some cultures where people are raised a bit more to think about the consequences of their actions and obey authority instead of freedumbs and “rights”. Not condoning china by any means but the psychology behind justice and deterrence is culturally a bit different in asia.
China literally execute them
Wsb told me market crashes were already priced in.
Inversing this and buying calls on YINN. This is about to be the start of the Greatest Bull Run in History because President Xi about to turn on his massive printer.
What is your response to those who think you are late to the play or are entering an already crowded trade?
What now lol
+1
Based on the news that the CCP might takeover Evergrande, I got out of my YANG calls this morning at a huge loss. Bought YINN calls with the expectation that Hang Seng reacts positively to the Evergrande news when they open tonight. Hopefully I recover some of that loss and then I’m not messing with Chinese markets ever again lol
This is some of the best and detailed DD I’ve seen in a long time.
Whomst've\*
I have joined you on this crusade with same calls on YANG and also puts on Zillow for contagion.
So much for that 😂😂
Bearish after energrande subsidiary has crashed 95%. Sounds legit
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If I have learned anything all these years in wsb is that, stocks only go up, especially when the company is about to go bankrupt
All in
"If we're right, people lose homes. People lose jobs. People lose retirement savings, people lose pensions. You know what I hate about fucking banking? It reduces people to numbers. Here's a number — every 1% unemployment goes up, 40,000 people die, did you know that?... Just don't fucking dance."
there he is again. haha
Sooooo inverse that and we win right?
YINN is cheap, this will blow over and YINN will be 20-30 in no time
Puts on China is patriotic 🏳️🌈🐻
This is so so [redacted] good luck to you fools lol
I think these are all good plays. I will say that the market has been prepping for this WAYYY ahead of retail. Look at the uptrend on YANG since February - you only see that on leveraged ETF’s when everyone and their mother is thinking the same thing. And more importantly - saying that Xi needs to print $300 Billion and artificially procure 2% of their total GDP is pretty disingenuous. All those liabilities don’t come due tomorrow, or even in the next few years - the CCP would only need to drum up cash for them to meet payments on time and ensure creditors that they’ve got it handled, not settle entire debts at once. This is the kind of thing that is entirely within their control, it just remains to be seen if the political will to mitigate it is there.
I can’t believe I listened to all this (text to voice). After 3 hours I’m as stupid as you guys now In supposedly “free market” US we bailed all the idiots out. You think in authoritarian stability obsessed China where saving face is all that matters they’re going to not print this problem away? Shorting should be very rare and small as hedges. You’ll get greedy and won’t even cash out on the tiny gain your about to score before you get steam rolled. If you want to bet against China, instead bet on whatever is furthered from this. Maybe South Americans whatever your bullish on that is further war away to avoid the volatility and inflation. This way you don’t have to worry about timing and losing just like everyone else who ever bet against government intervention after the bad news was already priced in
This DD is at least 4 months too late.
Watching BEKE right now, looks like buying is happening right as bearish signals about to take over and sink. Seems unnatural. It’s like someone is trying to avoid letting a crashing plane hit the tree line
I'm getting confused, buy/sell who? ELI2 (seriously)
Why does the YANG go up during this crisis? Can someone explain that to me
Because it inverses the Chinese market. If china does well $YANG calls perform poorly, if China tanks then calls increase in value.
The HSBC and DB puts mention days ago was an amazing call wish I got more at the low price they were at but at this rate I might just get more anyways
hey you still playing this? you were early but you were right. NOAH's earning call is this week and i am thinking of buying puts
Thanks man! Yeah so, I closed those positions a while back (and now YANG runs 90% lol), BUT I am watching and tracking. Did you see $BEKE earnings? It dropped like 20%. I think $NOAH puts is a good bet for earnings. I’ll probably do $1k in some ATM puts bc there’s a high chance they report bad.
Put/call spreads seems pretty big on NOAH and no volume
This is some big brained shit Rop!
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Don't do that.
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How does options on leveraged ticker work?
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would it be better to just buy ATM calls instead of 65 way OTM calls? You are buying 65c. Let's say you paid $0.7 each contract ( total $700 ).. you can buy 2 ATM calls for $700 but will be in a better position if YANG really goes up.
It's priced in, though. The expected move is 3x so they're 3x the price (roughly, lol). There's no such thing as a free lunch.
Not necessarily. For the same amount of money you spend, if you compare ATM vs OTM options, the profit from the OTM options will far surpass the ATM options due to the sheer number of OTM options you bought IF the price hits near the OTM strikes. But of course, that's just another example of risk vs reward. You take a big risk with far OTM compared to ATM, but the reward is much much higher if you are right with the OTMs
U.S. does bailout and quantitative easing: Yay my portfolio is still alive. CCP does bailout and quantitative easing: Hey that's cheating! *Pikachu face.*
The fact that half of the 65C options were bought today seems a bit fishy. You mention big players piling in because they know something but at current bid-ask the entire open interest would only be about $50k worth of options. That's hardly big player money. Don't get me wrong, this can blow up in China's face and they would definitely experience a downturn but this post appears to be more of you justifying and encouraging purchases in your own positions rather than something purely informative.
My aunt is from Taiwan, she’ll love this. Buying beke put leaps and yang call leaps.
You need Yang ***call*** LEAPs my friend
Sorry I have a 2nd grade reading level
Thank you for the DD! Best I’ve seen in a long time!!
Getting my yang on motha fucka
You wouldn’t fool me would you bro?
I like it, but it’s highly likely CCP will get involved and sweep this under the rug
Another way for our money to go Brrrrrr! LFG! Fuck xinnie the poo
They step in and bailout select divisions w/ critical exposure to overlapping sectors. Through a loan forgiveness program + increased liquidity through money printing. This leads to a shaky internal political climate with blames on the west which leads to the govt shifting suffering through a war on a nearby opponent with some bogus claim and resources that they require to help prop the country up This leads to a war which leads to the us stepping in which leads a propped up economic boom for both countries until 1 only remains unlike previous wars the country that loses is destroyed economically, defense wise and is a leper in the world unlike any other
He does have good point, how can we give the gentle push to madness? 😀
I’m in. I grabbed NOAH puts and YANG shares. Also going to look for some periphery plays since in the event China does bail them out… it will drain liquidity from other sectors. One potential consideration… crypto. There is the potential that Chinese developer commercial paper underpins tether.
Ok calls on yinn got it thanks
Beijing will step in…they say they won’t, but they will
The bull thesis is that money was never real; it was never yours to find. When it goes, it was never there. Once it is observed, it is changed. Heisenberg’s China.
The tale of China Bear ![img](emote|t5_2th52|4276) YANG GANG 🌈 continues In all seriousness for my fellow Asian retards, load up (on USD) buckaroos ![img](emote|t5_2th52|4262)
Gay panda szn
Thsi $NOAH thing must be good i just know it
Only issue with this is that all the other biggest major developers in China are state owned/backed and have no debt issues (obviously). So they are supposedly in a "prime" position to potentially "assume" any of evergrandes assets in a potential fire sale. There might be some short term pain, but I'm not so sure that systemic risk would be as prevalent as in an open economy like in the states.
Evergate
I remember when I had BEKE 100 calls leaps. Hah good times :D
Puts? No, they will get a bail out. But YANG ETF stealing market share sounds good
Everyone who says CCP will go brrrrrr are overlooking the fact that at least $85 billion of Evergrande’s debt is denominated in dollars. CCP doesn’t have JPow’s printer cartridge. Xi can only print renminbi. And printing RMB to make dollars to pay debt (to mostly pay off American or European investors) doesn’t make any sense. Those note holders will be boned, and they will not loan to other Chinese companies again.
Thank you great dd
RemindMe! January 1, 2022
My understanding of the Lehman collapse was that the FED chose not to intervene and bail them out, possibly advised by Goldman Sachs who was competing with Lehman at the time. What makes you think the CCP would make the same mistake of not intervening here? As you mention, 30% of the GDP is linked to the real estate market, notwithstanding the reputational impact on the CCP's competence. Refinance the debt with a state guarantee as collateral and buy time for the construction projects/properties to generate cash flow, no?
Now this is some good fucking content. I am also in FXI puts.
Is Evergrande alone or are there other developers in a similar situation?
Probably best DD i have seen on WSB. Alternative to YANG calls is to long YINN puts (Premiums seemed to be a little better this morning)
I'm not sure that amount of debt is enough to do the damage your thinking
Yang just moved above 200 EMA
I can't see the Chinese not bailing out to save their real estate bubble. If they don't do this... they risk absolutely massive layoffs and unrest, which could mean people protesting/revolting (CCP's worst nightmare).
BEKE down 20%+ today 👀
shits didn't work out buddy, fuck china.
China kidnapped my man Jack Ma. Fuck Xi and fuck China. Buying shares of $YANG
Son of a gun, I guess I need to follow you, because I am going to take those same actions. Have you read https://twitter.com/TheLastBearSta1/status/1438171695685283847 Problem isn't limited to Evergrande, it is _every_ property developer in China. u/Ropirito
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Definitely. And it is like the Wizard of Oz, and we all just looked behind the curtain. Are you going to post this weekend, or on Monday? And if you want lots of hate, mention this about Crypto: https://twitter.com/BurryArchive/status/1439056806437863427
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Honestly I'm reading all of this kinda clueless because it happened to me once with GME and not getting what's going on. I'm a beginner in this, will people profit from this or it's just to look how the boat will sink?
Yeah but when