PROTIP: Anyone like Lyn Alden that is offering premium stock tips is by definition a fraud, if you can beat the markets you just beat the markets and Scrooge McDuck-it, you don't run a damn newsletter.
~300 billion is the size of their debt (485 at the end of H1 2021). Their assets are at +2 trillion, +1 trillion in real estate alone.
Their problem is that with their current cash flow they can't pay their debt, ever, and now, they can't even keep up with the interest. But they're still in a position where selling off part of their inventory can offset the debt, and to my knowledge, that's what they've been trying to do.
That is, if their financial statements area real. That's the quid here, their position isn't particularly anomalous, but the market cap sits at 33 billion, very far from their declared assets, meaning the market doesn't believe those statements. Thats 60 to 1, where most REIT sit at around 2 to 1.
Their main problem is the large amount of unfinished homes (read: not producing any income) and you need money to fix that. My guess is that the government will step in to fix that point in particular.
From Wiki (https://en.wikipedia.org/wiki/Evergrande_Group), I looked at the source for total assets: https://finance.yahoo.com/quote/3333.HK/balance-sheet?p=3333...
At end of 2020: Total assets: 2.3T CNY -> 359B USD (@ 6.40 CNY/USD) Total debt : 0.7T CNY -> 109B USD (@ 6.40 CNY/USD)
Holding debt in another nation's currency involves risks but it is also the case that bond issuers can mitigate that risk with financial tools at the time of borrowing. It is doubly true that the CNY has and still is trading within a narrow band over the life of these debts, currency risks are not a factor in this story in any way.
On the contrary, the worst advice comes from people who have no accountability or reputation to worry about.
Quote: <<July 17, 2007—In a letter sent to investors, Bear Stearns Asset Management reported that its Bear Stearns High-Grade Structured Credit Fund had lost more than 90% of its value, while the Bear Stearns High-Grade Structured Credit Enhanced Leveraged Fund had lost virtually all of its investor capital. The larger Structured Credit Fund had around $1 billion, while the Enhanced Leveraged Fund, which was less than a year old, had nearly $600 million in investor capital.>>
After the incident, Bear took the bad assets onto their own balance sheet. Shortly thereafter, creditors starting asking hard questions: "What other crap is on your bloated balance sheet?"
That said, the PRC gov't might allow Evergrande to default on their offshore/external/USD debt, but provide a bailout onshore. That seems realistic. During the 2008 GFC, Deutsche had an enormous footprint in the United States (via commercial and investment banking). They got almost nothing from US Fed/Treasury during bailouts. Same for UBS. Why not? They were not American corporations.
I kinda get the impression that they want capital for manufacturing rather than property speculation.
Given how important house prices/construction is for their economy and growth, it's gonna be really interesting to see what they do (will they accept negative GDP growth to increase "common prosperity").
The blow up probably could have been less severe if they smoothed the landing.
My intuition (and the presumption in the U.S.) is that a market position allows a business to dispose of inventory in normal commercial channels more profitably than auctioning it at wholesale in a Chapter 7-style liquidation. Hence first-day motions in U.S. bankruptcy courts.
(Disclaimer: I worked on the Lehman Brothers bankruptcy but did not represent any U.S. or U.K. subsidiaries.)
Lyn Alden's site is a wealth of knowledge but I don't subscribe to any newsletters.
Well, they're expected to do that to maintain their stature as the "lighthouses" of the financial system
> Thomas Mazarakis, who heads Goldman’s fundamental strategies group, told select clients in an email that his unit often provided investment ideas that the firm had already traded on and the firm sometimes took the opposite approach, betting against particular instruments recommended by the group, the Times said.
> “We may trade, and may have existing positions, based on trading ideas before we have discussed those trading ideas with you,” the paper quoted Mazarakis as writing in the email. [1]
Would seem a good way to monetize your audience is to (a) get paid to (b) take positions and then (c) control the narrative around your positions - both publicly and to paying customers to gin the position up.
[1] https://www.reuters.com/article/us-goldmansachs-trades/goldm...
For all I know you are right about Alden's ethics, but the EMH is not baked into the definition of fraud.
In fact, many investors do offer public trading advice: it's common among short sellers to both short their targets and publish analyses explaining why they think their target is overvalued. This is controversial, but if it is clear to receivers of the advice that the advice comes from a short-seller whose positions are known, then I do not regard it as particularly unethical.
I've been reading everything I could on economy and finance in my early twenties and Lyn Alden blog is the only thing I needed then and wasn't available. She is pure gold — I know no one that is able to explain complex topics in this context with such clarity.
Hmmm , depends on what these "tips" entail right? What if another website offers long term hold advice via a newsletter and charges you for it? As a matter of fact, I do subscribe to one in India (no , I am not going to publicise it. DM me if you want to know) where the holding periods are anywhere between 2yrs to 5 yrs. There are disclosures that say whether the stock analyst holds the stock/bond etc.