The Evergrande Crisis | Stocks & Crypto Sell Off.

everyone meet kevin here is this the

moment of truth is this the start of

another lehman brothers style great

recession will this be the start of

contagion and of course we are talking

about the evercraft collapse

folks we're going to talk about

everything that's going on in just a

moment after i mentioned that you can

get 40 off the amazing programs on

building your wealth via the links down

below including stocks and psychology of

money where i give you alerts for any

time i buy or sell stocks which last

week i did a chunk of selling might even

do a little bit of selling today to

prepare for a potential bigger debt

we'll talk about those strategies and

some of my thoughts in this video let's

get right into it chinese real estate

developer ever grand is on the brink of

bankruptcy and could default on its debt

now this company is the second largest

real estate developer in china and it's

drowning in debt the stock was down as

much as 16

while the chinese stock market was open

and is down over 90

over the last year went from like a 22

stock to like a two dollar stock now

remember folks this is a real estate

developer i know a lot about real estate

development you can't just take real

estate that's under development and then

all of a sudden go hey does anybody want

to buy it because nobody wants to buy

stuff that's under development people

want finished products if you have

supply chain shortages and you can't

finish your development as fast as you

thought you could and all of a sudden

you got to make a bunch of debt payments

but you haven't started selling

properties because you're getting

delayed for mismanagement or supply

chain shortages or whatever reason you

screwed and interest payments on a lots

of loans are due today monday with some

more deadlines coming up this thursday

so we've got some big deadlines coming

up especially given the fact that they

have

300 billion dollars of debt that's

billion with a b bravo billion dollars

of debt that they cannot pay off

this is leading some analysts to

describe this evergrand crisis as quote

china's lehman brothers moment a huge

obviously slap back to 2008 and the

question now is evergrand too big to

fail that is will china bail it out me

thinks not but we'll talk more in just a

moment about that bailout possibility

let's talk about this a little bit more

in detail

the company shocked this mark at the

market this week by admitting that well

a they can't pay off their debt

due on thursday and with some payments

due today and uh the fact that at the

same time as we've got this evergreen

disaster we have on wednesday federal

reserve chairman jerome powell reporting

on fomc meeting and talks about tapering

so this is going to lead to a lot of

uncertainty in the market this week and

guess what happens when there's

uncertainty in the market you've got a

massive company with 300 billion dollars

of debt and tons of bonds outstanding

which are known as commercial paper

which are held by companies throughout

the country and a world

what happens when we get double forms of

uncertainty well stocks usually go down

volatility usually goes way up usually a

strategy involves selling at the

beginning of the pain of uncertainty and

then buying back but timing the market

is usually a little risky we'll talk

about that in just a moment

but the fact that

evergren also cannot pay off or offload

its assets is another big issue see they

got 300 billion dollars of debt they've

got 200 million dollars of assets but a

lot of their assets are literally real

estate real estate is relatively

illiquid especially if it's not built

yet it's one thing if you have a single

family house and there's a tenant in it

paying rent and it's an occupied house

it has a furnace it has a kitchen it's

quite another thing when you have shells

of properties and people waiting but

can't buy the properties yet even though

they want to buy the properties because

they're still under development this has

now led ever grant to get new price

targets of literally a big fat zero

dollars the company has now warned its

investors twice that it is going to

default on its loans

this is now the most indebted property

developer in the world but who cares

right just let the property company go

bankrupt and forget about it right well

not so fast because guess who gets

screwed banks who made investments get

screwed which means they have to sell

and dump other assets and investments to

make up for the losses which means they

sell other stocks other bonds when they

sell other bonds other people sell their

other assets and potentially even dump

cryptocurrencies the same thing though

is also true for home buyers what

happens to home buyers who have put

deposits on these properties or other

property buyers who have put deposits on

these properties these deposits now get

tied up because the company's gone

bankrupt this means people have lost

their money and now potentially have to

sell other assets to come up with new

down payments to go buy other properties

but it's also it's not just banks and

home buyers or property buyers it's also

suppliers who could potentially be

getting screwed in that maybe they've

already delivered materials or provided

contracting services but now can't get

paid because the company is bankrupt

they're illiquid

given the fact that real estate

represents 29 of economic output in

china many are now wondering if china is

actually going to bail this company out

as it's potentially too big to fail

given that it is now the largest

well second largest real estate

developer but most indebted real estate

developer

and uh the company might also of course

be trying to convince the government to

bail them out but in the meantime

working with suppliers and contractors

to maybe even go as far as accepting

properties as payment to try to somewhat

stay alive like hey rather than us

paying you in money that we don't have

why don't we just give you the

properties well at the same time we hope

that the chinese government bails us out

ccp obviously doesn't want a sector of

the real estate market to collapse but

then on the flip side ccp also doesn't

want to come across like what the united

states did and start bailing out

companies that are just deemed too big

to fail it is a communist company or a

company's country so in my opinion if

the ccp were to bail out this company

they probably would bail them out by

taking ownership of the company at a

massive discount i mean the first people

who are going to get wiped are going to

be stockholders in this stock

this this company is

probably going to go to near zero

dollars especially if the ccc the ccp

comes in to bail them out i think ccp

coming to bail this company out means

their valuation is going literally into

the freaking toilet

the chinese communist party they know

how to drive a hard bargain okay they're

not going to bail this thing out at

desirable terms and they're going to be

a lot harsher in a bailout than in my

opinion the united states government was

in 2008. so in the meantime this is why

the company is trying to just dump

properties and say hey

instead of me paying you why don't you

just take the property and i mean the

easiest way to consider this is just

look at

the way real estate works let's say you

have a house worth two hundred thousand

dollars and i owe you a hundred fifty

thousand dollars uh what if i just said

to you like hey do you want the house

well ordinarily you might think sure i

mean if i take a 200 000 property and i

sell it after fees maybe i'll get 180

000 right

okay well fair then you'd still be up a

little bit right but what happens if so

much real estate now gets dumped that

that property is no longer worth 150 000

but it's worth 120 000 because we've now

led to a real estate collapse thanks to

evergren's disaster which who knows how

that's going to affect global real

estate values

big question nobody knows

so reality here is when a company starts

trying to give away its properties at

substantial discounts

you know they're screwed like really

badly screwed i think there's no

question at this point how badly they

are screwed now also worth suggesting

that uh right now

a restructuring is possible and this

could potentially mean some form of debt

refinancing uh maybe other uh you know

companies come in and say hey why don't

we just refinance the 300 billion

dollars of debt you have uh at uh you

know some form of discount to the

existing debt holders there'd be a lot

of negotiations related to this uh but

uh nothing's going to be desirable for

the company there is no desirable option

for the company here and there are going

to be a lot of people who lose money and

and this is where i think it's worth

talking about the contagion that we

could see in the broader stock market

around the world and how we should

potentially prepare ourselves for buying

opportunities not just in stocks but

also in crypto see

endless companies and even tether hold

debt in companies potentially like

evergreen and this is why we might be

seeing

prices in crypto fall maybe because as

these bonds become worthless maybe

tether holdings are becoming a little

less worth worthwhile uh but beyond that

i really think one of the big reasons

we're seeing drops in the stock futures

stock prices here shortly and crypto

prices is because institutions who make

up 70 of even crypto trading are

probably dumping to prepare for the

contagion that that is likely to come

out of uh this evergreen disaster now

again we could in you know five hours

wake up to news or just be have a cup of

coffee to news that all of a sudden

uh this solution has been solved and

some kind of uh

restructuring deal has been met and and

the crisis appears that it's likely to

be averted and i would expect we'll see

a very quick u-turn in the stock market

and in the crypto markets but in the

meantime

it does seem entirely possible that it

might not be a bad idea to take some

potential higher risk investments uh

sell them while well

you know you still have gains or you're

gonna break even or whatever and

potentially hold those just so you have

ammunition to buy the dip

in other opportunities now i personally

would not recommend liquidating my

entire portfolio i would take some of my

portfolio maybe sell a little bit so

that i could re-buy but again you'll

have to be very very quick because you

could miss the dip

and uh and you could miss the bottom and

end up buying higher than where you were

but i think if your intention is to

rebuy i think there's a big trade

opportunity here whether it's in crypto

or stocks and i don't believe that's

paper handy i believe that's that's

called trading but again trade with a

trade portion of your portfolio not your

entire portfolio of course anytime i buy

or sell i will send alerts as i always

do in the stocks and psychology money

group linked down below

something else to consider is that we

can also hear that everground will be uh

kept alive in some form of zombified

form where basically we know that they

can't continue to make their payments

but maybe we can get the company to

finish building their 1.4 million homes

that the company has already pre-sold

and if they they finish building these

homes then then those homes could be

sold the big question here is will

suppliers and contractors actually be

willing to complete those homes and i

believe that is going to be a quite a

big ask i i don't think keeping the

company alive in a zombified form will

create a lot of confidence in

contractors or even home buyers i i

would personally expect that if the

company were to be announced to hey

we're going to survive in a zombified

form just to finish building these homes

i would expect a lot of home buyers to

just want their deposit back and i think

a lot of contractors won't actually work

for the company so i'm not super

enthused about this

i really don't see anything good coming

out of this i think this situation is

likely to get worse before it gets

better i would not touch this stock with

a 10-foot pole i also expect there to be

more chinese regulation coming on other

companies and i really think that this

sort of collapse here it will be a

motivating factor for more pain for wind

for example in macau related stocks uh

in casino regulation i think there'll be

more pain for the alibabas uh in njd.com

of the world because

china's not going to want to see an

evergreen happen all over again i think

they're going to

try to be even more aggressive on the

regulation and their crackdowns because

of this going on and again the pain in

the chinese markets will be felt

globally and i do think that

institutions will pursue a substantial

amount of selling

to prepare

for this

this potential buying opportunity

because that's what i really see this as

i don't see this as a broader systemic

issue for the united states stock market

beyond uh a painful dip

a painful dip that will be an

opportunity uh and uh and then we'll

move on

we'll recover from that uh from that dip

but i do not see this as a systemic

issue for our stock market i think uh

and i hope that this will just be

another arcade goes where you have the

uh ghost disaster a bunch of people lose

billions of dollars and then we move on

it's an expectation that i have i'm

willing to trade this i'm willing to

dump uh certain stocks in certain crypto

and uh be prepared to essentially

buy the dip and uh buy back at cheaper

prices uh again not with my entire

portfolio but some of my portfolio yes

so thank you very much for watching i

appreciate all of you if you like this

kind of content consider subscribing get

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and folks we'll see you in the very next

video thanks again

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