Black Monday

[nztx]

https://www.abc.net.au/news/2021-12-...hina/100682242


Evergrande likely in default as debt deadline passes without payment

Failure by Evergrande to make $US82.5 million ($116 million) in interest payments due last month would trigger cross-default on its roughly $US19 billion of international bonds and put the developer at risk of becoming China's biggest defaulter.

And a second Chinese Developer in trouble - KAISA :

Adding to the crisis in China's once-bubbling property market, smaller developer Kaisa Group Holdings was also unlikely to meet its $US400 million offshore debt deadline on Tuesday, a source with direct knowledge of the matter said.

Non-payment by Kaisa would push China's largest issuer of offshore debt among developers after Evergrande into technical default, triggering cross defaults on its offshore bonds totalling nearly $US12 billion.

[winner69]

Very technical but sounds ominious -

SPX futures with DeMark Sequential sell Countdown 13 performing as we have been expecting. Now awaiting a price flip over the coming days. Potential downside wave 3 Price objective of 4383 if the downside wave 1 at 4500 is broken to downside.

[LaserEyeKiwi]

https://www.abc.net.au/news/2021-12-...hina/100682242


Evergrande likely in default as debt deadline passes without payment




And a second Chinese Developer in trouble - KAISA :

Not sure why everyone is worried about junk bonds defaulting. This is why they were classed as junk bonds. This isn’t gong to cause a domino effect as global institutions are not exposed to junk bond defaults. It’s mostly dumb retail that failed to grasp the risk involved.

[mcdongle]

Yep if you are in an international bond fund do some research into what they hold

[FTG]

Not sure why everyone is worried about junk bonds defaulting. This is why they were classed as junk bonds. This isn’t gong to cause a domino effect as global institutions are not exposed to junk bond defaults. It’s mostly dumb retail that failed to grasp the risk involved.

It is a little disconcerting that there remains a clear mismatch/disconnect in global markets in regards to pricing of risk. Unfortunately history shows us that most participants either ignore or fail to recognise this until well after the horse has bolted. Moreover, institutional participants have been (and sadly will be again) just as guilty of this sin as anyone else.

Junk Bonds have arguably been significantly mispriced for a long time, with the yields not being anywhere near commensurate to the level of risk. A case in point; Over 75% of US junk bonds are now yielding LESS than the official annual rate of inflation.

Whenever the "music stops", and default stats rapidly escalate, the entire Bond market, regardless of quality, (including MBS, Municipal, Corporate etc) can rapidly be put under immense pressure. From there we can then observe participants start shooting and then ask questions about who is holding the "time bombs".

A contagion effect is a very real threat in the event of just one or two bigger players (who have been aided & abetted by institutions I may add) going down.

However, there is one myth that certainly seems to still get oxygen, for now.

"They are too big to let fail".

[Bobdn]

Lol I just finished watching Closing Bell on CNBC on my Skybox. I treat it like a sports match so don't know what markets are doing going into it. Spoiler Alert....

...S&P has closed at a new record high.

Wow just 😲😳. WTF happened to the mini meltdown a few days ago. And oil is back.

Monster (in relation to my modest means) dirty old oil dividends coming my way this month. There will be Dividends!!! (Oil movie reference)

[NeverQuestion]

Evergrande just defaulted on 80 odd million in foreign debt repayments. China has made the statement they will prioritise home owners over investors.. Easy thing to say when majority taking the hit will be foreigners.. But the wider implacation on that is foreigners will pull all their money out of China.. So yay?

Evergrande is 800 million in debt. If this is another financial crisis then I'm picking that the true effects of this is a year out.

Are the cards starting to fall?

[Balance]

Evergrande just defaulted on 80 odd million in foreign debt repayments. China has made the statement they will prioritise home owners over investors.. Easy thing to say when majority taking the hit will be foreigners.. But the wider implacation on that is foreigners will pull all their money out of China.. So yay?

Evergrande is 800 million in debt. If this is another financial crisis then I'm picking that the true effects of this is a year out.

Are the cards starting to fall?

China’s GDP is 71 times larger than NZ.

So Evergrande’s debts while humongous at US$300 billion are in NZ terms, US$4.22 billion equivalent.

Will US$4.22 billion debt default sink the NZ economy? Don’t think so unless there is contagion. So watch out for that with Evergrande.

Plus China sits on a cushion of several trillion dollars of reserves vs NZ with net overseas debts.

Plus, Lehman Brothers collapsed with US$600 billion of debts to put some perspective on Evergrande’s IS$300 billion debts.

[Balance]

China’s GDP is 71 times larger than NZ.

So Evergrande’s debts while humongous at US$300 billion are in NZ terms, US$4.22 billion equivalent.

Will US$4.22 billion debt default sink the NZ economy? Don’t think so unless there is contagion. So watch out for that with Evergrande.

Plus China sits on a cushion of several trillion dollars of reserves vs NZ with net overseas debts.

Plus, Lehman Brothers collapsed with US$600 billion of debts to put some perspective on Evergrande’s IS$300 billion debts.

And it is critical to note the following:

1. The GFC in 2008 was as a consequence of the collapse of & default on the US subprime mortgages. Basically, mortgages not worth the paper they were written on as mortgagees can walk away in the States from their non-recourse mortgages. The amount of subprime mortgages outstanding in 2007 was estimated $1.3 trillion. ref : https://en.wikipedia.org/wiki/Subprime_mortgage_crisis

2. US GDP in 2008 was $14.71 trillion. Coincidentally, China's GDP in 2020 was $14.72 trillion.

When the Evergrande debt of $300 billion is measured against GDP (2%), it is small relative to just how big the subprime mortgages were to the US GDP (8.8%) in 2008.

Risk is contagion so that will have to be monitored very carefully.

[JohnnyTheHorse]

Contagion is a real risk and quite minor things can set off a fast chain reaction. Highly recommend reading John Mauldin's take on the economic sand pile:

https://www.mauldineconomics.com/fro...-and-sandpiles