Dow Plummets 500 pts as market all of a sudden stops ignoring elephant in the room

[Jimmy Higgins]

If there is one thing I have complained about thread after thread, it has been unsustainable corporate debt in China.

...

Okay, I haven't complained about that once. But right now the NYSE is whining and dropping 500 pts over fears that Evergrande won't be able to pay interest on its debt.

Evergrande, which is struggling to manage its $300 billion mountain of debt, was supposed to pay the interest on some of its bank loans Monday, according to Bloomberg. The company will also have to pay interest on two of its bonds worth more than $100 million later this week on two of its bonds, according to Refinitiv.

$300 billion in debt. Just to put things into perspective, Google (well, Alphabet has $15 billion in debt). Yes, Evergrande is a real estate developer and that requires more cash (well debt) than a software service, but Jebus! $300 billion and people are just starting to take notice? And $300 billion as a mountain? Sounds more like a blackhole. If this chart is accurate, the revenue for the company is around $55 billion (US). Again, if that chart is accurate, their growth is a hollow chocolate bunny based exclusively on unsustainable debt. It'd be nice if there was an economic catastrophe that wasn't caused by the US. But, we don't have to quite rush towards it.

Oddly, nothing yet about the US debt ceiling failure as we've already passed our debt limit and the US Government has apparently gotten used to that and is managing the tricks and trades of surviving until a threshold point that the GOP is again playing Russian Roulette with.

 

[T.G.G. Moogly]

If there is one thing I have complained about thread after thread, it has been unsustainable corporate debt in China.

...

Okay, I haven't complained about that once. But right now the NYSE is whining and dropping 500 pts over fears that Evergrande won't be able to pay interest on its debt.

Evergrande, which is struggling to manage its $300 billion mountain of debt, was supposed to pay the interest on some of its bank loans Monday, according to Bloomberg. The company will also have to pay interest on two of its bonds worth more than $100 million later this week on two of its bonds, according to Refinitiv.

$300 billion in debt. Just to put things into perspective, Google (well, Alphabet has $15 billion in debt). Yes, Evergrande is a real estate developer and that requires more cash (well debt) than a software service, but Jebus! $300 billion and people are just starting to take notice? And $300 billion as a mountain? Sounds more like a blackhole. If this chart is accurate, the revenue for the company is around $55 billion (US). Again, if that chart is accurate, their growth is a hollow chocolate bunny based exclusively on unsustainable debt. It'd be nice if there was an economic catastrophe that wasn't caused by the US. But, we don't have to quite rush towards it.

Oddly, nothing yet about the US debt ceiling failure as we've already passed our debt limit and the US Government has apparently gotten used to that and is managing the tricks and trades of surviving until a threshold point that the GOP is again playing Russian Roulette with.

The solution is pretty simple, just bail them out. Can't have these giants of industry held accountable for their actions when they have friends in gubmint that can get the money.

I don't see the problem.

 

[barbos]

If there is one thing I have complained about thread after thread, it has been unsustainable corporate debt in China.

...

Okay, I haven't complained about that once. But right now the NYSE is whining and dropping 500 pts over fears that Evergrande won't be able to pay interest on its debt.

Evergrande, which is struggling to manage its $300 billion mountain of debt, was supposed to pay the interest on some of its bank loans Monday, according to Bloomberg. The company will also have to pay interest on two of its bonds worth more than $100 million later this week on two of its bonds, according to Refinitiv.

$300 billion in debt. Just to put things into perspective, Google (well, Alphabet has $15 billion in debt). Yes, Evergrande is a real estate developer and that requires more cash (well debt) than a software service, but Jebus! $300 billion and people are just starting to take notice? And $300 billion as a mountain? Sounds more like a blackhole. If this chart is accurate, the revenue for the company is around $55 billion (US). Again, if that chart is accurate, their growth is a hollow chocolate bunny based exclusively on unsustainable debt. It'd be nice if there was an economic catastrophe that wasn't caused by the US. But, we don't have to quite rush towards it.

Oddly, nothing yet about the US debt ceiling failure as we've already passed our debt limit and the US Government has apparently gotten used to that and is managing the tricks and trades of surviving until a threshold point that the GOP is again playing Russian Roulette with.

The solution is pretty simple, just bail them out. Can't have these giants of industry held accountable for their actions when they have friends in gubmint that can get the money.

I don't see the problem.

US bailing out Chinese company?

 

[funinspace]

If there is one thing I have complained about thread after thread, it has been unsustainable corporate debt in China.

...

Okay, I haven't complained about that once. But right now the NYSE is whining and dropping 500 pts over fears that Evergrande won't be able to pay interest on its debt.

I have

But my own reference only contained a partial picture, as I was dealing with what you focused upon. China's total private/public debt isn't in any better shape than the US. See the first interactive chart (Total debt-to-GDP ratios in major economies) in the below reference. The US, China, and the EU are all around 290% for total debt of all types.

Ref: https://www.cnbc.com/2021/06/29/china-economy-charts-show-how-much-debt-has-grown.html

Yeah, it appears that China is intending to let Evergrande fail enough to met out some punishing losses to tame the speculative fever. $300 billion is big. But US companies in general aren't a lot better. ATT for example has about $147 billion in debt. Also, the debt/equity is more telling for a company anyway.

A pretty chart:

 

[Keith&Co.]

The solution is pretty simple, just bail them out. Can't have these giants of industry held accountable for their actions when they have friends in gubmint that can get the money.

Yeah, it's hard to see why the stock market is reacting this way when such a big failure always forces a government to step in and shore things up.

Unless this IS the friends-in-high-places step? Crash the market, a little, so the governments feel threatened? They're not ASKING for a bailout, they're making their case...bail-out or we cry havoc, and let slip the dogs of debt.

 

[untermensche]

Is this just the latest way the rich will destroy the economy with their blind greed and lack of concern for their externalities?

 

[Jimmy Higgins]

If there is one thing I have complained about thread after thread, it has been unsustainable corporate debt in China.

...

Okay, I haven't complained about that once. But right now the NYSE is whining and dropping 500 pts over fears that Evergrande won't be able to pay interest on its debt.

I have

But my own reference only contained a partial picture, as I was dealing with what you focused upon. China's total private/public debt isn't in any better shape than the US. See the first interactive chart (Total debt-to-GDP ratios in major economies) in the below reference. The US, China, and the EU are all around 290% for total debt of all types.

Ref: https://www.cnbc.com/2021/06/29/china-economy-charts-show-how-much-debt-has-grown.html

Yeah, it appears that China is intending to let Evergrande fail enough to met out some punishing losses to tame the speculative fever. $300 billion is big. But US companies in general aren't a lot better. ATT for example has about $147 billion in debt. Also, the debt/equity is more telling for a company anyway.

A pretty chart:
View attachment 35385

Debt in the US has soared in large part due to interest rates. Borrowing money has been so cheap... for too long. So the companies that borrowed to grow (ie consolidate the market), that might work out.

 

[T.G.G. Moogly]

The solution is pretty simple, just bail them out. Can't have these giants of industry held accountable for their actions when they have friends in gubmint that can get the money.

I don't see the problem.

US bailing out Chinese company?

Did I say U.S. gubmint?

 

[Toni]

The solution is pretty simple, just bail them out. Can't have these giants of industry held accountable for their actions when they have friends in gubmint that can get the money.

Yeah, it's hard to see why the stock market is reacting this way when such a big failure always forces a government to step in and shore things up.

Unless this IS the friends-in-high-places step? Crash the market, a little, so the governments feel threatened? They're not ASKING for a bailout, they're making their case...bail-out or we cry havoc, and let slip the dogs of debt.

There are indeed rumors to the effect that the crash is actually a way to help those with special kinds of friends.

Maybe someone can tell me why we should care if a Chinese company goes crash?

 

[Jimmy Higgins]

The solution is pretty simple, just bail them out. Can't have these giants of industry held accountable for their actions when they have friends in gubmint that can get the money.

Yeah, it's hard to see why the stock market is reacting this way when such a big failure always forces a government to step in and shore things up.

Unless this IS the friends-in-high-places step? Crash the market, a little, so the governments feel threatened? They're not ASKING for a bailout, they're making their case...bail-out or we cry havoc, and let slip the dogs of debt.

There are indeed rumors to the effect that the crash is actually a way to help those with special kinds of friends.

Maybe someone can tell me why we should care if a Chinese company goes crash?

Among other things, same reason why the Europeans learned they needed to care more about the US mortgage crisis. The higher up money is everywhere. $300 billion is a tremendous amount of debt. Looking at AT&T, they have nearly $150 billion, Ford over $110 billion.

Jebus! So glad they consolidated all those corporations with more and more debt. A difference though is that both of those companies provide services that get used all the time. Also, those debt levels are near their annual revenue totals. Real estate developers can run into hard times quite quick. No one has to be able to rent.

 

[Loren Pechtel]

1) They're too big for China to let them fall.

2) The Chinese government should bail them out anyway--it's the government that's been pushing for all the construction. This is their overbuilding starting to crack, Evergrande is simply the first to get pushed to the wall.

China is massively fucked.

 

[funinspace]

Well, that elephant must have taken up residence next to the invisible dragon in the garage for now...my investments are within sneezing distance of when this freak out day occurred.

And the PRC is trying to help:
https://www.bloomberg.com/news/arti...-billion-into-system-amid-evergrande-concerns

The People’s Bank of China pumped in 110 billion yuan ($17 billion) of cash with seven- and 14-day reverse repurchase agreements. That was the largest addition through open-market operations since late January, when a funding squeeze sent interbank rates soaring. Prior to Thursday, the PBOC had injected liquidity for three straight sessions, stoking bets that Beijing hopes to soothe market nerves over Evergrande.

But still so far no bailout for Evergrande, so maybe just a tropical storm the next round...
https://www.cnbc.com/2021/09/23/chi...sible-storm-if-evergrande-fails-wsj-says.html

Chinese authorities have told local officials to prepare for a potential demise of heavily indebted property developer Evergrande, The Wall Street Journal reported Thursday.

Local officials described the signals from Chinese authorities as “getting ready for the possible storm” and said the government told them they should only step in at the last minute to prevent spillover effects from Evergrande’s demise, the WSJ report said.

 

[Elixir]

Well, that elephant must have taken up residence next to the invisible dragon in the garage for now...my investments are within sneezing distance of when this freak out day occurred.

Right, and quite predictable. Day trader's dream - again.

...But still so far no bailout for Evergrande, so maybe just a tropical storm the next round...

The Chinese government is pretty much like the US government - it belongs to the rich, and they don't pay for "bailouts" if they can avoid it.

Evergrande Gave Workers a Choice: Lend Us Cash or Lose Your Bonus

"... and you still have to work, or else!."

I think this opinion piece is spot-on:

Evergrande Borrowed From Everyone

 

[TV and credit cards]

All so much CNBC drama. Anyone see just how this would affect markets outside China? I read scary claims a couple days back with no details. I guess Jerome Powell said yesterday something to this effect also. Property buyers and investors should be made whole. Suppliers should be next in line. Banks holding this debt definitely should have known better. It will be interesting to see how the communists handle this.

Thanks for the Bloomberg link Mr. Moneybags.

 

[Jimmy Higgins]

All so much CNBC drama. Anyone see just how this would affect markets outside China? I read scary claims a couple days back with no details. I guess Jerome Powell said yesterday something to this effect also. Property buyers and investors should be made whole. Suppliers should be next in line. Banks holding this debt definitely should have known better. It will be interesting to see how the communists handle this.

Thanks for the Bloomberg link Mr. Moneybags.

So market starts week with projectile level diarrhea and by Thursday, snortin' cocaine like the 80s and up for the week. I think it is time for an intervention on Wall Street, they clearly need help.

 

[Elixir]

All so much CNBC drama. Anyone see just how this would affect markets outside China? I read scary claims a couple days back with no details. I guess Jerome Powell said yesterday something to this effect also. Property buyers and investors should be made whole. Suppliers should be next in line. Banks holding this debt definitely should have known better. It will be interesting to see how the communists handle this.

Thanks for the Bloomberg link Mr. Moneybags.

"Ah ain't got no money, but ah could if I'da wanted."
Seriously, I'm retired and live on a pittance (haven't taken a vacation or eaten in a restaurant in over 2 years).
Market vagaries are interesting though... and you should always take at face value the views of anyone who links to an article that begins with
"I am very far from an expert on the situation..."

 

[TV and credit cards]

All so much CNBC drama. Anyone see just how this would affect markets outside China? I read scary claims a couple days back with no details. I guess Jerome Powell said yesterday something to this effect also. Property buyers and investors should be made whole. Suppliers should be next in line. Banks holding this debt definitely should have known better. It will be interesting to see how the communists handle this.

Thanks for the Bloomberg link Mr. Moneybags.

So market starts week with projectile level diarrhea and by Thursday, snortin' cocaine like the 80s and up for the week. I think it is time for an intervention on Wall Street, they clearly need help.

I wonder how much unsophisticated retail investing can be driving the market these days. It’s not just the percentage of retail to institutional investors but the ability of social media to band them together and execute with commission free trades. A lot of people dove into the market during the pandemic.
If the markets are being bounced around by people reading news stories with little substance and reading earnings reports they do not understand, then an intervention is necessary.

All so much CNBC drama. Anyone see just how this would affect markets outside China? I read scary claims a couple days back with no details. I guess Jerome Powell said yesterday something to this effect also. Property buyers and investors should be made whole. Suppliers should be next in line. Banks holding this debt definitely should have known better. It will be interesting to see how the communists handle this.

Thanks for the Bloomberg link Mr. Moneybags.

"Ah ain't got no money, but ah could if I'da wanted."
Seriously, I'm retired and live on a pittance (haven't taken a vacation or eaten in a restaurant in over 2 years).
Market vagaries are interesting though... and you should always take at face value the views of anyone who links to an article that begins with
"I am very far from an expert on the situation..."

I couldn’t read it. While I’d love to have access to Bloomberg, their prices are too rich for my blood (I’m cheap). And they were quick to clamp down access through “reader view”.

 

[funinspace]

I wonder how much unsophisticated retail investing can be driving the market these days. It’s not just the percentage of retail to institutional investors but the ability of social media to band them together and execute with commission free trades. A lot of people dove into the market during the pandemic.
If the markets are being bounced around by people reading news stories with little substance and reading earnings reports they do not understand, then an intervention is necessary.

I've seen quite a bit of splaining on market behavior since the pandemic and government handouts done suggesting that small retail investors have driven XYZ things in the market. Personally, I haven't found such explanations well grounded in facts. TSLA (Tesla) for example has tripled in value since the pandemic, gaining roughly $500 billion in value. A napkin analysis: 300 million people getting say $5000 in monopoly money put it into stocks, would only be $1.5 trillion. So just TSLA stock would suck up a third of that monopoly money. Now multiply that by the hundreds of stocks that have exploded, and I just don't see how this monopoly money explains very much.

All so much CNBC drama. Anyone see just how this would affect markets outside China? I read scary claims a couple days back with no details. I guess Jerome Powell said yesterday something to this effect also. Property buyers and investors should be made whole. Suppliers should be next in line. Banks holding this debt definitely should have known better. It will be interesting to see how the communists handle this.

Thanks for the Bloomberg link Mr. Moneybags.

"Ah ain't got no money, but ah could if I'da wanted."
Seriously, I'm retired and live on a pittance (haven't taken a vacation or eaten in a restaurant in over 2 years).
Market vagaries are interesting though... and you should always take at face value the views of anyone who links to an article that begins with
"I am very far from an expert on the situation..."

I couldn’t read it. While I’d love to have access to Bloomberg, their prices are too rich for my blood (I’m cheap). And they were quick to clamp down access through “reader view”.

Ah, I didn't quite catch the intent, besides assuming humor. The Bloomberg link was within my 'free' limit viewing. I don't have a subscription, but bumped into the article while searching on Evergrande, as I had been periodically looking up news on their fiasco. I also can be cheap, when there are reasonable alternatives...

 

[SLD]

This whole thing is grossly overblown. Ever grande has almost no ties to any US company. It’s default will not impact matters globally. The US economy will not be impacted. Companies go bankrupt every day. China does have serious issues but Xi can easily handle this issue. It’s not going to tank the entire Chinese economy anyways. That’s too dependent on manufacturing exports. Not real estate investment.

A more important looming issue is the debt ceiling debate. Republicans are deliberately planning to crash our economy so they can blame Biden and the democrats. We have to end the filibuster.

 

[TV and credit cards]

Pretty good article on the overbuilt housing market and it's effect on the Chinese economy: https://financialpost.com/fp-finance/evergrande-and-the-end-of-chinas-build-build-build-model

China’s vast real estate sector, which contributes 29 per cent of the country’s gross domestic product...

There is enough empty property in China to house over 90 million people.