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On July 23 2023 00:34 KwarK wrote:
Owning a stock doesn't do anything, it's not mathematically possible to catch up with the rich.
Let's say you start with $0 invested, make $50k and invest 20% of your income every year, living on the $40k.
They start with $1m invested and invest none of their income every year. They also take out $40k of the growth each year to live on. They never lift a finger to work all their life.
After 32 years of hard work and saving you've hit a million dollars, assuming 7% average returns, and constant $10k contributions.
After 32 years of no work at all they're on $4m and accelerating into the distance. The gap between you has actually increased from $1m to over $3m.
That's not to say you shouldn't try anyway, it's better to accumulate and invest than to not. But the idea that you can break into the club if you just work hard and invest is false.
Yes, you will get defeated on an investment race by some random person who got 1m dollars out of nowhere while being capped at making 50k usd a year and saving only 20%. Is your hipothetical example supposed to mean anything? Good life =/= being super rich.
I'm not rich, but I can already afford an upper-middle life income (in my country) purely on my investments at 33 because I started at 18, working multiple jobs and entrepeneurship; I did have some luck, but also had bad luck and failed many times. It usually evens out.
You can def save more than 20% in the begining, and make more than 50k year, specially in the united states. I even plan on making it easier on my children by having them started when they are born, so people online can whine about them!
PD: I would add that inflation, high taxes, regulations, an stagnated economy and high interest rates make all of the above much much harder.
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United States41931 Posts
Sure, you can earn more than in the example I gave. I'm doing a lot better than that. But someone starting with 1m is fairly low end too. If you feel like you can catch someone who inherits 1m and never lifts a finger then use the example of someone who inherits 50m. Plenty of those around, 50m isn't that much money. That's just what 1m looks like after 2 generations of not fucking it up.
The point is that stock ownership works to enrich the rich, for every dollar you get as someone starting stock ownership the 1% get far more because they already own far more. Becoming an investor and getting your own investment returns doesn't close the gap, it widens it.
If you wanted to close the gap you'd be far better off having 100% of your meagre investment nationalized without compensation because it would cost you relatively little but cost the oligarchic owner class their inherited fortune.
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On July 24 2023 06:11 KwarK wrote:
Sure, you can earn more than in the example I gave. I'm doing a lot better than that. But someone starting with 1m is fairly low end too. If you feel like you can catch someone who inherits 1m and never lifts a finger then use the example of someone who inherits 50m. Plenty of those around, 50m isn't that much money. That's just what 1m looks like after 2 generations of not fucking it up.
The point is that stock ownership works to enrich the rich, for every dollar you get as someone starting stock ownership the 1% get far more because they already own far more. Becoming an investor and getting your own investment returns doesn't close the gap, it widens it.
If you wanted to close the gap you'd be far better off having 100% of your meagre investment nationalized without compensation because it would cost you relatively little but cost the oligarchic owner class their inherited fortune.
I don't care about the "gap" with the rich, I care about my wealth and standard of living. My point is that I expect the stock market to grow way more than the GDP of each country, and as such, I would hedge as much money as I could on getting aboard that horse.
Since I'm not consumed by blind hatred and envy towards richer people, I would not want to close any gap with the rich at the expense of brutal totalitarianism and decreased standard of living for everyone. No thank you.
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United States41931 Posts
There's a relationship between the rich hoarding all the new wealth produced by our society and the standard of living of people not in the 1%.
The gap matters, resources are finite and they are allocated in capitalism by bidding. The wider the gap gets, the more their whims outweigh your needs. The more of the overall output of the economy gets spent on building mega yachts instead of affordable housing.
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Yeah, there was an interesting think and discussion I had recently about how well investing in the stock market preserves wealth (over a long period of time like decades or a century). Since the stock market grows at about 8% per year, but GDP grows at only 3% per year, that means owning the same share of the economy in the future will buy a larger share of the consumer goods produced that year in the future. E.g. 100 years ago selling your ownership of 1% of the economy might get 5% of the goods and services produced that year, but now that P/E of companies have skyrocketed, cashing in your ownership of 1% of the economy might get you 50% of the goods and services produced this year. Actually 1.05^100 = 103.5, so that should be the actual multiple between the made-up 5% and 50% numbers.
So, in one view holding onto stocks for generations makes you mega rich, while in other point of view you're just treading water in terms of your share of the economy while holding stocks. (If the second point of view doesn't make sense to you, think of ideal money as a store of value over time. If you worked for a year and contributed 1 / (300 million) to the economy in 2000, you should be able to save and cash in 1 / (300 million) of the economy in 2030.)
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When does inflation start to be called "Corporate" price gouging.
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You mean Fed and congress price gouching?
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On July 24 2023 06:11 KwarK wrote:
Sure, you can earn more than in the example I gave. I'm doing a lot better than that. But someone starting with 1m is fairly low end too. If you feel like you can catch someone who inherits 1m and never lifts a finger then use the example of someone who inherits 50m. Plenty of those around, 50m isn't that much money. That's just what 1m looks like after 2 generations of not fucking it up.
The point is that stock ownership works to enrich the rich, for every dollar you get as someone starting stock ownership the 1% get far more because they already own far more. Becoming an investor and getting your own investment returns doesn't close the gap, it widens it.
If you wanted to close the gap you'd be far better off having 100% of your meagre investment nationalized without compensation because it would cost you relatively little but cost the oligarchic owner class their inherited fortune.
I read some of posts before and I'm still not sure why this discussion is about gap. Yes, the rich gets richer in the stock market because of compound interest. After all, Charlie Munger said: The first $100,000 is a bitch, but you gotta do it. I don’t care what you have to do – if it means walking everywhere and not eating anything that wasn’t purchased with a coupon, find a way to get your hands on $100,000. After that, you can ease off the gas a little bit.
And just like you said, you only accumulate wealth if you don't mess up. If that richer than you person buys risky stock X or some risky crypto coin Y in big amounts, then gap may as well get narrower. Regardless, I agree with GoTuNk, it's about assets not being in some top 100 richest people list. If you end up there, then good for you. Otherwise, the main goal, at least for me, is not to work harder but to make money work for me.
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The rich get richer for far more reasons than mere compound interest, the world of accounting only truly opens up when one meets a wealth threshold that is simply unobtainable for the average retail investor, in no small part because many mistake their success relative to plain jane wage earners for proof of some secret insight. Note also these are the same kinds of people who mistakenly conflate concepts like inflation, price forces, and monetary base/money supply.
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United States41931 Posts
The gap dictates who gets to choose how finite resources are allocated. Nobody is objectively rich, people are only subjectively richer or poorer than others.
Within capitalism your wealth enables you to effectively vote for resources to be allocated to the things you want them allocated on. We have a system in which some people start with millions of votes and each year you're awarded more votes proportionate to how many votes you already have. Even as the number of votes the investing middle class has increases the overall power of their votes decreases. They're losing ground, not gaining it. The nominal number may increase and they may see themselves gaining more votes each year but they're losing the election on the overall direction of the economy.
To give a very simple example, there is sufficient labour and construction materials to perform one project. A rich man wants an extra stable for his third house and a poor family wants a home. They both bid on the project and the poor family win and get their house. That house provides them real value and they're able to work and contribute to the broader economy each year because of it. By the time their children are grown and want houses of their own the wealth of the rich man has grown many many times over while the bidding power of the children is still limited to the market value of the labour they can sell. They cannot afford houses, the whims of the rich man will always take priority over their needs. To make the situation even more perverse, the rich man is rich because he owns the factory that buys their labour. They perform the labour that makes him rich.
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I am a bit confused by the discussion going on. I am not sure I comepletey understand what is discussed here, it sounds like some kind of class conflict.
In aggregate, everything gets better for basically everyone. To kind of quote Mr- Buffet here, the healthcare available to the richest people in the 1950s is not as good as the minimum healthcare provided to everyone (at least in Germany) today.
This is basically true for a lot of markers on health, availability of resources, etc. As laid out in books like Factfulness.
Wealth is not constant in the way that the same 1.000 families that owned 25% of the world 50 years ago now own 33% of the world. From my understanding and knowledge it is well established that a substantial part of big family fortunes are lost after 2 generations - in the terms presented above, mess-ups happen quite frequently. Therefore, power shifts on the very top of the pyramid are happening constantly. This is true for big corporations as well as wealthy individuals.
Historically, I'd much rather live in a world where my house is not built because someones wants an extra stable, than a world with kings, lords and peonage. It seems historically inaccurate that the gap between the richest and everyone else is ever increasing. At least in terms of overall value created (operationalized in this instance as 'quality of life').
The things I just said do not really falsify KwarKs points, I believe. The proportion of the pie for the middle-class is shrinking since quite a while and money still rules the world. Just in context of the things outlined above, I am having trouble feeling the pain. Obviously there will always be injustice and there will always be the need to limit power.
But in terms of investing, I am totally in GoTunks camp. Do as well as you can over long periods of time, and you will find yourself in a good position and you will surpass a lot of people that started way ahead of you.
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Watch this cause a worldwide recession after hanging on to the edge for so long. Believe there are some major US Corporations that have sizeable chunks of money invested in Chinese real estate.
Investor confidence in China’s troubled property sector has been rocked again this week by reports that one of the country’s largest private building conglomerates missed interest payments on two bonds.
China’s vast real estate industry was long an important engine of growth in the world’s second biggest economy, accounting for as much as 30% of the country’s GDP.
But many major developers racked up huge debts, typified by the collapse two years ago of Evergrande which was followed by a wave of defaults across the industry.
The latest major industry player to get into trouble is Country Garden, once China’s largest developer.
Shares in the construction giant have plunged 16% in Hong Kong since Tuesday, after reports by Reuters and Chinese media that it missed interest payments on two US dollar-denominated bonds. Several of Country Garden’s yuan-denominated bonds were suspended from trading in Shanghai and Shenzhen on Tuesday after they dropped by more than 20%.
Country Garden did not respond to a request from CNN for comment.
On Tuesday, state-owned media outlet Paper.cn, citing an anonymous company source, reported that Country Garden suffered “temporary liquidity pressure” due to deteriorating sales and a difficult refinancing environment. It was “actively” seeking funds to resolve the debt crunch and would protect the legitimate rights of creditors, the person was quoted as saying.
Although Country Garden still has a 30-day grace period before it can be labeled as a defaulter, the collapse in market confidence shows investors are worried about the company’s future.
Ranked No.1 by sales last year, Country Garden is one of the few major private developers yet to default since a liquidity crisis engulfed China’s property sector more than two years ago.
China’s property industry has been mired in a historic downturn in the past two years. Households have grown reluctant to purchase new homes, as the now-defunct Covid curbs, falling home prices and rising unemployment discouraged would-be buyers.
A series of major defaults by property giants in 2021 also undermined confidence in the sector and led to many home buyers paying for apartments they never received, sparking rare protests.
New home sales by China’s 100 biggest developers dropped by 33% in July from a year ago, marking the steepest monthly decline since July 2022, according to industry statistics released last week.
Investors see the revival of the sector as crucial to the recovery of the economy after three years of self-imposed coronavirus pandemic isolation.
Recent signals from top policymakers suggest Beijing is getting increasingly worried about growth and have recognized the need to bolster the sector.
Last Monday, Premier Li Qiang pledged to “adjust and optimize” policies to ensure the healthy and stable development of the property market, urging cities to roll out measures that meet their own needs,
Last month, the People’s Bank of China said it would give developers another 12 months to repay their outstanding loans due this year.
Source
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Holy.... if this went through it would be historic. Minus a hostile takeover.
Investors should brace for volatile trading in steel stocks to start a new week. The steel company built by Andrew Carnegie and J.P. Morgan might not be independent for much longer.
On Sunday, United States Steel (ticker: X), the steel maker formed in 1901 by Carnegie and Morgan, announced it was exploring strategic alternatives after receiving “multiple unsolicited proposals.” Many organizations are looking to invest in or take over the steel maker.
“This decision follows the Company receiving multiple unsolicited proposals that ranged from the acquisition of certain production assets to consideration for the whole Company,” said CEO David Burritt in a news release. “The Board is taking a measured approach to considering these proposals, including seeking more information in order to evaluate proposals that are preliminary and subject to ongoing due diligence and review.”
One of the proposals appears to be from Cleveland-Cliffs (CLF), which announced Sunday a proposal to buy U.S. Steel X +0.98% for $17.50 a share and 1.023 shares of Cliffs’ stock. The proposal values U.S. Steel stock at about $35 a share. U.S. Steel shares closed Friday at $22.72 apiece.
“On July 28th I approached U.S. Steel’s CEO and Board with a written proposal to acquire U.S. Steel for a substantial premium, valuing the company at $35.00 per share with 50% cash and 50% stock,” said Cliff CEO Lourenco Goncalves in a news release. “U.S. Steel’s board of directors rejected our proposal, calling it unreasonable. As such, I believe it necessary to now make our proposal public to help expedite substantive engagement between our two companies.”
Goncalves has built Cliffs into the largest producer of flat-rolled steel in North America by acquiring AK Steel and the North American steel operations of ArcelorMittal (MT). Flat-rolled products become things such as car doors and filing cabinets. Long products are things such as structural beams and rebar.
A U.S. Steel-Cliffs combination would create a company with roughly 30 million tons of steel capacity with substantial iron ore assets. That would be the largest in America, according to World Steel Association Data. Number two would be Nucor (NUE).
Nine of the largest 15 steel companies in the world are Chinese. China produces more than half of the 2.1 billion metric tons of steel produced annually around the globe. The U.S. produces roughly 100 million tons and is a net importer of finished steel products. Being a net importer means that the price of steel around the world typically sets the price U.S. producers are able to charge.
Consolidation in the domestic industry could help producers better match supply and demand and achieve higher profit margins.
Investors might welcome consolidation. Coming into the week, U.S. Steel stock is down about 9.3% this year and off about 10% over the past 12 months. Cliffs stock is down about 9% so far this year and off about 25% over the past 12 months.
Steel stocks have been battling falling steel prices. Benchmark steel prices enter the week at about $750 a ton after peaking at about $1,300 a ton in March. A year ago, steel prices were about $800 a ton.
Source
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On August 10 2023 08:34 {CC}StealthBlue wrote:Watch this cause a worldwide recession after hanging on to the edge for so long. Believe there are some major US Corporations that have sizeable chunks of money invested in Chinese real estate. Show nested quote +Investor confidence in China’s troubled property sector has been rocked again this week by reports that one of the country’s largest private building conglomerates missed interest payments on two bonds.
China’s vast real estate industry was long an important engine of growth in the world’s second biggest economy, accounting for as much as 30% of the country’s GDP.
But many major developers racked up huge debts, typified by the collapse two years ago of Evergrande which was followed by a wave of defaults across the industry.
The latest major industry player to get into trouble is Country Garden, once China’s largest developer.
Shares in the construction giant have plunged 16% in Hong Kong since Tuesday, after reports by Reuters and Chinese media that it missed interest payments on two US dollar-denominated bonds. Several of Country Garden’s yuan-denominated bonds were suspended from trading in Shanghai and Shenzhen on Tuesday after they dropped by more than 20%.
Country Garden did not respond to a request from CNN for comment.
On Tuesday, state-owned media outlet Paper.cn, citing an anonymous company source, reported that Country Garden suffered “temporary liquidity pressure” due to deteriorating sales and a difficult refinancing environment. It was “actively” seeking funds to resolve the debt crunch and would protect the legitimate rights of creditors, the person was quoted as saying.
Although Country Garden still has a 30-day grace period before it can be labeled as a defaulter, the collapse in market confidence shows investors are worried about the company’s future.
Ranked No.1 by sales last year, Country Garden is one of the few major private developers yet to default since a liquidity crisis engulfed China’s property sector more than two years ago. Show nested quote +China’s property industry has been mired in a historic downturn in the past two years. Households have grown reluctant to purchase new homes, as the now-defunct Covid curbs, falling home prices and rising unemployment discouraged would-be buyers.
A series of major defaults by property giants in 2021 also undermined confidence in the sector and led to many home buyers paying for apartments they never received, sparking rare protests.
New home sales by China’s 100 biggest developers dropped by 33% in July from a year ago, marking the steepest monthly decline since July 2022, according to industry statistics released last week.
Investors see the revival of the sector as crucial to the recovery of the economy after three years of self-imposed coronavirus pandemic isolation.
Recent signals from top policymakers suggest Beijing is getting increasingly worried about growth and have recognized the need to bolster the sector.
Last Monday, Premier Li Qiang pledged to “adjust and optimize” policies to ensure the healthy and stable development of the property market, urging cities to roll out measures that meet their own needs,
Last month, the People’s Bank of China said it would give developers another 12 months to repay their outstanding loans due this year. Source
I don't know, I never felt like I wanted to invest in Chinese stocks or Chinese estate. The only Chinese company I can try first-hand is Aliexpress (Alibaba?) but it's not exactly known for quality as much as cheap stuff. Other than that, it's circle of competence for me. If I don't live in China to experience that company first-hand, why would I invest in it if I don't know it? I know some pretty smart guys like Warren Buffett and Charlie Munger invested in BYD (electric vehicles) but maybe they travelled to China before to get to know them first...
On the other hand, most of us know Google (YouTube, Google search), Microsoft (Windows, Azure, etc), McDonald's, Amazon, etc. Recognisable brand and we have used them. Why would you invest in something unknown...
Btw, I haven't invested in all of companies mentioned. Just examples.
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On August 15 2023 06:20 SC-Shield wrote:Show nested quote +On August 10 2023 08:34 {CC}StealthBlue wrote:Watch this cause a worldwide recession after hanging on to the edge for so long. Believe there are some major US Corporations that have sizeable chunks of money invested in Chinese real estate. Investor confidence in China’s troubled property sector has been rocked again this week by reports that one of the country’s largest private building conglomerates missed interest payments on two bonds.
China’s vast real estate industry was long an important engine of growth in the world’s second biggest economy, accounting for as much as 30% of the country’s GDP.
But many major developers racked up huge debts, typified by the collapse two years ago of Evergrande which was followed by a wave of defaults across the industry.
The latest major industry player to get into trouble is Country Garden, once China’s largest developer.
Shares in the construction giant have plunged 16% in Hong Kong since Tuesday, after reports by Reuters and Chinese media that it missed interest payments on two US dollar-denominated bonds. Several of Country Garden’s yuan-denominated bonds were suspended from trading in Shanghai and Shenzhen on Tuesday after they dropped by more than 20%.
Country Garden did not respond to a request from CNN for comment.
On Tuesday, state-owned media outlet Paper.cn, citing an anonymous company source, reported that Country Garden suffered “temporary liquidity pressure” due to deteriorating sales and a difficult refinancing environment. It was “actively” seeking funds to resolve the debt crunch and would protect the legitimate rights of creditors, the person was quoted as saying.
Although Country Garden still has a 30-day grace period before it can be labeled as a defaulter, the collapse in market confidence shows investors are worried about the company’s future.
Ranked No.1 by sales last year, Country Garden is one of the few major private developers yet to default since a liquidity crisis engulfed China’s property sector more than two years ago. China’s property industry has been mired in a historic downturn in the past two years. Households have grown reluctant to purchase new homes, as the now-defunct Covid curbs, falling home prices and rising unemployment discouraged would-be buyers.
A series of major defaults by property giants in 2021 also undermined confidence in the sector and led to many home buyers paying for apartments they never received, sparking rare protests.
New home sales by China’s 100 biggest developers dropped by 33% in July from a year ago, marking the steepest monthly decline since July 2022, according to industry statistics released last week.
Investors see the revival of the sector as crucial to the recovery of the economy after three years of self-imposed coronavirus pandemic isolation.
Recent signals from top policymakers suggest Beijing is getting increasingly worried about growth and have recognized the need to bolster the sector.
Last Monday, Premier Li Qiang pledged to “adjust and optimize” policies to ensure the healthy and stable development of the property market, urging cities to roll out measures that meet their own needs,
Last month, the People’s Bank of China said it would give developers another 12 months to repay their outstanding loans due this year. Source I don't know, I never felt like I wanted to invest in Chinese stocks or Chinese estate. The only Chinese company I can try first-hand is Aliexpress (Alibaba?) but it's not exactly known for quality as much as cheap stuff. Other than that, it's circle of competence for me. If I don't live in China to experience that company first-hand, why would I invest in it if I don't know it? I know some pretty smart guys like Warren Buffett and Charlie Munger invested in BYD (electric vehicles) but maybe they travelled to China before to get to know them first... On the other hand, most of us know Google (YouTube, Google search), Microsoft (Windows, Azure, etc), McDonald's, Amazon, etc. Recognisable brand and we have used them. Why would you invest in something unknown... Btw, I haven't invested in all of companies mentioned. Just examples.
I don't see the connection between you not knowing about a major Chinese construction company and the assertion that its bankruptcy may cause a global recession.
The idea isn't that the recession is caused directly by this company being heavily invested in by Bulgarian investors. It's that the company is heavily invested in by Chinese banks/investment funds and this company going bankrupt causes financial problems for a few of those, which leads to a lowering of trust, a tightening of requirements for loans and a slowdown of the Chinese economy. That in turn has a knock-on effect on investment banking worldwide, and maybe some of those banks are overinvested and lose money, which in turn causes a global lack of trust and increased requirements for loans, and just like that, your one local construction company going belly-up causes a global recession. Just like some US banks getting overconfident with subprime mortgages caused a global recession, despite you personally never even considering a cheap mortgage for a nice house in Tampa.
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On August 15 2023 16:19 Acrofales wrote:Show nested quote +On August 15 2023 06:20 SC-Shield wrote:On August 10 2023 08:34 {CC}StealthBlue wrote:Watch this cause a worldwide recession after hanging on to the edge for so long. Believe there are some major US Corporations that have sizeable chunks of money invested in Chinese real estate. Investor confidence in China’s troubled property sector has been rocked again this week by reports that one of the country’s largest private building conglomerates missed interest payments on two bonds.
China’s vast real estate industry was long an important engine of growth in the world’s second biggest economy, accounting for as much as 30% of the country’s GDP.
But many major developers racked up huge debts, typified by the collapse two years ago of Evergrande which was followed by a wave of defaults across the industry.
The latest major industry player to get into trouble is Country Garden, once China’s largest developer.
Shares in the construction giant have plunged 16% in Hong Kong since Tuesday, after reports by Reuters and Chinese media that it missed interest payments on two US dollar-denominated bonds. Several of Country Garden’s yuan-denominated bonds were suspended from trading in Shanghai and Shenzhen on Tuesday after they dropped by more than 20%.
Country Garden did not respond to a request from CNN for comment.
On Tuesday, state-owned media outlet Paper.cn, citing an anonymous company source, reported that Country Garden suffered “temporary liquidity pressure” due to deteriorating sales and a difficult refinancing environment. It was “actively” seeking funds to resolve the debt crunch and would protect the legitimate rights of creditors, the person was quoted as saying.
Although Country Garden still has a 30-day grace period before it can be labeled as a defaulter, the collapse in market confidence shows investors are worried about the company’s future.
Ranked No.1 by sales last year, Country Garden is one of the few major private developers yet to default since a liquidity crisis engulfed China’s property sector more than two years ago. China’s property industry has been mired in a historic downturn in the past two years. Households have grown reluctant to purchase new homes, as the now-defunct Covid curbs, falling home prices and rising unemployment discouraged would-be buyers.
A series of major defaults by property giants in 2021 also undermined confidence in the sector and led to many home buyers paying for apartments they never received, sparking rare protests.
New home sales by China’s 100 biggest developers dropped by 33% in July from a year ago, marking the steepest monthly decline since July 2022, according to industry statistics released last week.
Investors see the revival of the sector as crucial to the recovery of the economy after three years of self-imposed coronavirus pandemic isolation.
Recent signals from top policymakers suggest Beijing is getting increasingly worried about growth and have recognized the need to bolster the sector.
Last Monday, Premier Li Qiang pledged to “adjust and optimize” policies to ensure the healthy and stable development of the property market, urging cities to roll out measures that meet their own needs,
Last month, the People’s Bank of China said it would give developers another 12 months to repay their outstanding loans due this year. Source I don't know, I never felt like I wanted to invest in Chinese stocks or Chinese estate. The only Chinese company I can try first-hand is Aliexpress (Alibaba?) but it's not exactly known for quality as much as cheap stuff. Other than that, it's circle of competence for me. If I don't live in China to experience that company first-hand, why would I invest in it if I don't know it? I know some pretty smart guys like Warren Buffett and Charlie Munger invested in BYD (electric vehicles) but maybe they travelled to China before to get to know them first... On the other hand, most of us know Google (YouTube, Google search), Microsoft (Windows, Azure, etc), McDonald's, Amazon, etc. Recognisable brand and we have used them. Why would you invest in something unknown... Btw, I haven't invested in all of companies mentioned. Just examples. I don't see the connection between you not knowing about a major Chinese construction company and the assertion that its bankruptcy may cause a global recession. The idea isn't that the recession is caused directly by this company being heavily invested in by Bulgarian investors. It's that the company is heavily invested in by Chinese banks/investment funds and this company going bankrupt causes financial problems for a few of those, which leads to a lowering of trust, a tightening of requirements for loans and a slowdown of the Chinese economy. That in turn has a knock-on effect on investment banking worldwide, and maybe some of those banks are overinvested and lose money, which in turn causes a global lack of trust and increased requirements for loans, and just like that, your one local construction company going belly-up causes a global recession. Just like some US banks getting overconfident with subprime mortgages caused a global recession, despite you personally never even considering a cheap mortgage for a nice house in Tampa.
So hasn't there been imposed necessary bank regulations after 2008 or is China different? I know a few US banks have failed recently for other reasons, but experts still say it's not anything near 2008.
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Again. All is well.
Aug 15 (Reuters) - China suspended publication of its youth jobless data on Tuesday, saying it needed to review the methodology behind the closely watched benchmark, which has hit record highs in one of many warning signs for the world's second-largest economy.
The decision announced shortly after the release of weaker-than-expected factory and retail sales data sparked rare backlash on social media amid growing frustration about employment prospects in the country.
It also marks the latest move by Chinese authorities to restrict access to key data and information, a trend that is unnerving overseas investors.
Fu Linghui, a spokesman for the National Bureau of Statistics (NBS), said the release of data would be suspended while authorities look to "optimise" collection methods.
"In recent years, the number of university students has continued to expand," Fu said. "The main responsibility of current students is studying. Society has different views on whether students looking for jobs before graduation should be included in labour force surveys and statistics."
This issue, as well as the definition of the age range currently set at 16-24, "needs further research," Fu said.
In recent months, China has restricted foreign users' access to some corporate registries and academic journals, and cracked down on due diligence firms operating in the country, a vital source of information on China for overseas businesses.
"The declining availability of macro data may further weaken global investors' confidence in China," said Ting Lu, chief China economist at Nomura, adding that youth unemployment was expected to have risen in July.
Source
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On August 15 2023 17:35 SC-Shield wrote:Show nested quote +On August 15 2023 16:19 Acrofales wrote:On August 15 2023 06:20 SC-Shield wrote:On August 10 2023 08:34 {CC}StealthBlue wrote:Watch this cause a worldwide recession after hanging on to the edge for so long. Believe there are some major US Corporations that have sizeable chunks of money invested in Chinese real estate. Investor confidence in China’s troubled property sector has been rocked again this week by reports that one of the country’s largest private building conglomerates missed interest payments on two bonds.
China’s vast real estate industry was long an important engine of growth in the world’s second biggest economy, accounting for as much as 30% of the country’s GDP.
But many major developers racked up huge debts, typified by the collapse two years ago of Evergrande which was followed by a wave of defaults across the industry.
The latest major industry player to get into trouble is Country Garden, once China’s largest developer.
Shares in the construction giant have plunged 16% in Hong Kong since Tuesday, after reports by Reuters and Chinese media that it missed interest payments on two US dollar-denominated bonds. Several of Country Garden’s yuan-denominated bonds were suspended from trading in Shanghai and Shenzhen on Tuesday after they dropped by more than 20%.
Country Garden did not respond to a request from CNN for comment.
On Tuesday, state-owned media outlet Paper.cn, citing an anonymous company source, reported that Country Garden suffered “temporary liquidity pressure” due to deteriorating sales and a difficult refinancing environment. It was “actively” seeking funds to resolve the debt crunch and would protect the legitimate rights of creditors, the person was quoted as saying.
Although Country Garden still has a 30-day grace period before it can be labeled as a defaulter, the collapse in market confidence shows investors are worried about the company’s future.
Ranked No.1 by sales last year, Country Garden is one of the few major private developers yet to default since a liquidity crisis engulfed China’s property sector more than two years ago. China’s property industry has been mired in a historic downturn in the past two years. Households have grown reluctant to purchase new homes, as the now-defunct Covid curbs, falling home prices and rising unemployment discouraged would-be buyers.
A series of major defaults by property giants in 2021 also undermined confidence in the sector and led to many home buyers paying for apartments they never received, sparking rare protests.
New home sales by China’s 100 biggest developers dropped by 33% in July from a year ago, marking the steepest monthly decline since July 2022, according to industry statistics released last week.
Investors see the revival of the sector as crucial to the recovery of the economy after three years of self-imposed coronavirus pandemic isolation.
Recent signals from top policymakers suggest Beijing is getting increasingly worried about growth and have recognized the need to bolster the sector.
Last Monday, Premier Li Qiang pledged to “adjust and optimize” policies to ensure the healthy and stable development of the property market, urging cities to roll out measures that meet their own needs,
Last month, the People’s Bank of China said it would give developers another 12 months to repay their outstanding loans due this year. Source I don't know, I never felt like I wanted to invest in Chinese stocks or Chinese estate. The only Chinese company I can try first-hand is Aliexpress (Alibaba?) but it's not exactly known for quality as much as cheap stuff. Other than that, it's circle of competence for me. If I don't live in China to experience that company first-hand, why would I invest in it if I don't know it? I know some pretty smart guys like Warren Buffett and Charlie Munger invested in BYD (electric vehicles) but maybe they travelled to China before to get to know them first... On the other hand, most of us know Google (YouTube, Google search), Microsoft (Windows, Azure, etc), McDonald's, Amazon, etc. Recognisable brand and we have used them. Why would you invest in something unknown... Btw, I haven't invested in all of companies mentioned. Just examples. I don't see the connection between you not knowing about a major Chinese construction company and the assertion that its bankruptcy may cause a global recession. The idea isn't that the recession is caused directly by this company being heavily invested in by Bulgarian investors. It's that the company is heavily invested in by Chinese banks/investment funds and this company going bankrupt causes financial problems for a few of those, which leads to a lowering of trust, a tightening of requirements for loans and a slowdown of the Chinese economy. That in turn has a knock-on effect on investment banking worldwide, and maybe some of those banks are overinvested and lose money, which in turn causes a global lack of trust and increased requirements for loans, and just like that, your one local construction company going belly-up causes a global recession. Just like some US banks getting overconfident with subprime mortgages caused a global recession, despite you personally never even considering a cheap mortgage for a nice house in Tampa. So hasn't there been imposed necessary bank regulations after 2008 or is China different? I know a few US banks have failed recently for other reasons, but experts still say it's not anything near 2008.
China is different. In China, banks are state-owned and used for political purposes. Non-performing loan ratios are a lot higher but the system is very opaque so it's not clear how problematic that really is. Personally, I don't think there is a huge risk for financial problems in the Chinese financial sector to spread to the financial sector in the rest of the world because there are capital controls so exposure is limited. That's the opposite of the US financial sector which is very open. The US has the deepest capital markets in the world and almost everyone can invest there so pretty much every country is exposed to that. But financial flows are very complex so who knows what'll really happen.
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So more rate hikes it is. Unless price gouging suddenly starts to vanish.
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Well it finally happened, Evergrande files for Bankruptcy protection in the US today. So this is China's, despite desperate attempts at prevention, Lehman Brothers moment.
So....
+ Show Spoiler +is it a worldwide recession yet?
NEW YORK, Aug 17 (Reuters) - China Evergrande (3333.HK), which is the world's most heavily indebted property developer and became the poster child for China's property crisis, on Thursday filed for protection from creditors in a U.S. bankruptcy court.
The company sought protection under Chapter 15 of the U.S. bankruptcy code, which shields non-U.S. companies that are undergoing restructurings from creditors that hope to sue them or tie up assets in the United States.
An affiliate, Tianji Holdings, also sought Chapter 15 protection on Thursday in Manhattan bankruptcy court.
A lawyer for Evergrande did not immediately respond to requests for comment.
Evergrande's filing comes amid growing fears that problems in China's property sector could spread to other parts of the country's economy as growth slows.
Since the sector's debt crisis unfolded in mid-2021, companies accounting for 40% of Chinese home sales have defaulted.
The health of Country Garden (2007.HK), China's largest privately run developer, is also worrying investors after the company missed some interest payments this month.
Evergrande recently had $330 billion of liabilities. A late 2021 default triggered a string of defaults at other builders, resulting in thousands of unfinished homes across China.
In a filing in the Manhattan bankruptcy court, Evergrande said it was seeking recognition of restructuring talks under way in Hong Kong, the Cayman Islands and the British Virgin Islands.
Evergrande has said creditors may be able to vote this month on a restructuring, with possible approval by Hong Kong and British Virgin Islands courts in the first week of September.
The company proposed scheduling a Chapter 15 recognition hearing for Sept. 20.
Last month, Evergrande posted a combined $81 billion loss for 2021 and 2022, prompting investor worries about the viability of a debt restructuring plan it proposed in March.
On Monday, its electric-vehicle unit China Evergrande New Energy Vehicle Group (0708.HK) announced its own proposed restructuring.
That plan called for a $2.7 billion debt-for-equity swap, and a nearly $500 million share sale that would give Dubai-based automaker NWTN (NWTN.O) a 27.5% stake.
Evergrande NEV's combined 2021 and 2022 loss was nearly $10 billion.
Trading in China Evergrande shares was suspended in March 2022.
Source
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EPT![[image loading]](https://i.imgur.com/lYazz2R.png)
