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User Info Is It Ever To Be Grande? in forum [Market-Ticker]
Sonoran_monk
Posts: 111
Incept: 2021-08-16

Between a saguaro and an arroyo.
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@Mannfm11 - A real estate professor in college explained it like this, the reason you see so many apparently stupid development projects is that developers don't make any money unless they are in the midst of a project. They are always waiting for the next draw on the project and the amount of floating of their financing is epic. Even though a lot of developers have relatively small office staffs they still bleed money with no projects in the works and there have been more than a few examples of them spending too much of the build money on personal expenses and blowing up.

@Abelardlindsey - The departments originating the mortgages make fees, the departments selling the CMBS' make fees, the servicing makes fees, and holding the bonds makes coupon money. It is all about the money flow. Some risk manager will be willing to sign off on it with enough mental gymnastics and they figure if things get bad enough they can hot potato it to the next sucker. As we've seen that works until it doesn't. As Hemingway noted going bankrupt is gradual then sudden.
Mannfm11
Posts: 7415
Incept: 2009-02-28

DFW, Tx
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@Sonoran_monk: I grew up around this business. In the 70's here, one of the big builders was a hairdresser. They came from everywhere. A lot and a set of plans got you an interim loan. A lot of them bought Cadillacs, with the first draw. Paid their bill at closing and lived off the draw of the next home. One guy went bust in the middle of the 77-78 boom, with over 30 homes, on the ground. 3 years later he showed back up and he and another builder went to Texarkana and bought a S&L. That was a bomb. Everything stopped in 86

The dance finally had to stop in DFW. The story on BS business TV is the Chinese government took down this outfit to take some wind out of the bubble. I don't know, if this is registering, but construction is 1/3 or more of the Chinese GDP and it is investment, which multiplies its impact. Keynesians think demand drives the economy, but it is the other way around. Only an increase in the productive capacity of an economy produces growth. It is just like only people who work for a living pay taxes. They go into the cost of goods and services. World War II provided a basis for more investment.

They can shovel the paper losses under the rug. They can't shovel the growing pile of bad investments under the rug. At some point, it has to stop. The overhang of capacity is massive, whether we are talking about supply already on the ground, or the industrial capacity necessary to create such supply.

There are a lot of factors converging here. How much longer can Western societies, including Japan, continue their fake monetary systems, which finance the China bubble. Mutually assured destruction. China and India are enemies and south Asia is the likely next big demand for construction resources. The Chinese population has peaked and can only go down, in the number of adults, for a long time. There are a shortage of women.

Then we have the jabs. What, if they do kill a sizable percentage, of those who took them? A figure as low as 10% devastates the US and the need, for everything. That would be around 450,000 people here, removing demand, for a minimum of 150,000 housing units. The whole industry would be out of work, not to mention the missing key people, in a lot of areas. We have seen a century of population growth that has always produced a market. The whole structure comes down.


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The only function of economic forecasting is to make astrology look respectable.---John Kenneth Galbraith
Hungrylion
Posts: 22
Incept: 2021-04-30

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So does this **** blowup further by friday? Culled this comment from steven van metres channel

DanW58
3 hours ago
This will be far worse than Lehman Bros, Fannie Mae and Freddie Mac put together. Far worse.
The government are selling oil from their strategic reserve to make ends meet; they are flat broke.
And while the real estate debacle in America was about bad loans, and that's not the situation in China; what IS the situation in China is bad developers (overleveraged), bad construction companies (tofu buildings), and a real estate price bubble. So that is 3 bad things in China today versus 1 bad thing in the US in 2008.
And if I may add a fourth bad thing in China it would be the CCP dictatorship, that even in the rare cases when it is actually trying to do a good thing, it doesn't know how; I'm talking about the "3 red-lines" dropped suddenly out of nowhere. If we were doing something of the sort, such as we did with bank accounting standards, we first make it into a guideline, then we force it but only gradually. It took a CCP dictator to impose such a drastic change too fast, as well as too late.

So we are going to see a triple witching of feedback loops at work:
On Thursday Evergrande has to pay 47B and doesn't have a cent, so it has to DUMP properties to make the payment.
By Friday RE prices in China fall, putting many other developers' loans underwater.
More cockroaches die, further pushing RE prices down.
China's decades old love affair with RE comes to an end; the bubble pops.
If this happened anywhere else, RE prices would find a "book value" bottom; but in China there is no bottom, since most construction is done to such low standards that today's buildings are existential hazards.

The consequences to us:
Besides whatever investment ties we have with China, what we will face is supply chain disruptions while the dominoes fall.
That includes Walmart and Dollarama closings, and lack of many industrial products from cans of spam to circuit boards
Tickerguy
Posts: 177794
Incept: 2007-06-26
A True American Patriot!
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Blow up by Friday?

Meh. Not seeing that in the credit markets at this point.

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I don't give a flying **** if you're offended.
Sonoran_monk
Posts: 111
Incept: 2021-08-16

Between a saguaro and an arroyo.
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@Mannfm11 - Indeed. It seems the US and Chinese economies are full of bullet holes and we are stumbling forward propelled only by momentum and adrenaline. Face plant incoming.
Greenacr
Posts: 317
Incept: 2016-03-15

Northern Ohio
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You have to spend time in China to truly appreciate both the breadth and scale of their false construction boom and the extremely low quality of construction. Combine all that with no real maintenance of any infrastructure and it all is guaranteed to fail.

Shanghai, Shenzen, Xian, Beijing and every other city all congested with construction cranes. Finished building after finished building ...... empty. I remember staying in a 5 star JW Marriott in Shanghai that was maybe three years old and it was already is disrepair with cracked windows and falling exterior panels. New 8 lane highways that almost guaranteed a back injury if you hit one of the potholes. Brand new, gorgeous airports...... with the roofs leaking. Could go on an on.

The thing that amazed me most about China was the lack of zoning. You would see a chemical shop next to a grocery store next to an auto garage, next to some other industrial shop next to an open air market. US company's (mine included) located factories there not only to employ quasi slave labor but to avoid any and all forms of environmental regulation/compliance.
Abelardlindsey
Posts: 561
Incept: 2021-03-26

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Yes, the Chinese are leading us into an ever grander future.

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It's all in the mitochondria.
No liability, No mandates
Sonoran_monk
Posts: 111
Incept: 2021-08-16

Between a saguaro and an arroyo.
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A grandiloquent future with ever increasing amounts of lies.
Budget-racer
Posts: 70
Incept: 2016-03-14

Virginia
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There's an interesting account on YouTube if you want to see some stuff from their time living in China. Most videos should have a link to several other accounts with similar content. Pretty sure they have some with the empty cities and it's about as creepy as you'd imagine.

()
Vernonb
Posts: 2663
Incept: 2009-06-03

East of Sheol
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I can only hope the compromised family of John Kerry is also invested in Evergrande since he apparently failed to disclose holdings in Chinese companies.
Conflicts of interests are everywhere.

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"Mass intelligence does not mean intelligent masses."
Mannfm11
Posts: 7415
Incept: 2009-02-28

DFW, Tx
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@Budget-racer: Almost new, looks like Detroit.

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The only function of economic forecasting is to make astrology look respectable.---John Kenneth Galbraith
Abelardlindsey
Posts: 561
Incept: 2021-03-26

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The shoddy workmanship presented in the youtube video is not surprising to anyone who has spent time in China. Even high rises have some of these construction flaws. Recently a 50+ story high rise in Shenzhen had to be evacuated and shutdown because it was swaying too much in moderate winds. There is also an on-going scandal that many of those supertalls in Pudong (Shanghai) may have had concrete made from sea sand used in the construction of their foundations.

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It's all in the mitochondria.
No liability, No mandates
Dishwasher
Posts: 8
Incept: 2021-08-05

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I think this is the next move in the new cold war. I don't know much about finance but I saw a comment that said 'your economy runs on debt' from what I think was a Ch-troll. I think it may be a trap for the western economies, and the plan is for Ch to do whatever is necessary to shrug off the internal difficulties, the main plan is the disturbance in the international markets.
Abelardlindsey
Posts: 561
Incept: 2021-03-26

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David Goldman, one of the few people who has anything intelligent to say on the internet, is also talking about EverGrande:

https://asiatimes.com/2021/09/evergrande....

David Goldman is well worth the time to read.

This is a case where the central government is trying to preemptively pop a bubble before it get really out of a control.

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It's all in the mitochondria.
No liability, No mandates
Abelardlindsey
Posts: 561
Incept: 2021-03-26

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I got to ask it somewhere.

Do ya think the Feds are gonna default on the debt come October 18?

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It's all in the mitochondria.
No liability, No mandates
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