bump

USD/Yuan surpassed 7 last night both offshore and onshore, and PBOC fixing has been complacent about weakening the yuan further.

i think this space will be a thing to look at for august.

Waiting for the nightly peg numbers has been a fun game this week. It seems to me if Trump REALLY wanted to screw China he would aim for a much stronger dollar rather than much weaker.

USDCNH 7.1778

testing the PBOC peg band after the friday post-market tariff shenanigans

https://deep-throat-ipo.blogspot.com

Blog worth reading years back... But also given how long he's been writing about alibaba drives home how long this could really take to play out and how much could change in that time.

If the Chinese debt bubble and economy collapses …

1. What will be the prior indicators that within weeks or a few months it's about to happen?

2. How will it affect the global economy? How catastrophic?

3. How will it affect the U.S. economy? How catastrophic?

Also, what is the probability this happens within the next 2 years? Greater than zero? Greater than 10, 20, 30 … percent? Not gonna happen?


PairTheBoard

All of that bank debt is de facto government debt.

If that “collapses” in any meaningful way beyond a controlled demolition (such as CCP allowing out of favor coal mines to go bankrupt), **** is going to hit the fan.

How that **** is gonna fly after hitting the fan, nobody knows. But it definitely won’t be pretty.

It’s not happening any time soon. Chinese economy is still fundamentally pretty strong with a lot of low hanging fruits. In 10-20 years, when the urbanites basically are caught up to lower end of OECD cities and China can no longer paper over economic weakness with high growth, China is going to have a lot of trouble implementing vital but unpopular reforms. For example, they need better enforcement of tax collection. Lol at collecting taxes from people who already can’t afford the skyrocketing rent of Shanghai.

https://www.economist.com/finance-an...esheybiglender

Study showing that China's credit lending is extremely prolific and aggressive.

The play in China is telecom. 5g. I'm looking for company recommendations.

bump, 4 years LOL

whose got some dart tosses as far as puts if evergrande ends up being problematic?

The CCP is determined to drag this out. Unlike in the Lehman situation, the debt is owned mostly by government controlled entities (or at least heavily influenced). By decree, essentially, CCP already have told creditors to extend payments or straight up rollover. We're looking at haircuts of major lenders in all but name. A catastrophic failure is extremely unlikely, because a lot of CCP officials are invested in Evergrande and Evergrande properties if nothing else.

The CCP and Evergrande will try to get foreign investors to shoulder some of the fall, and very likely most of it. Evergrande already employed bankers and law firms to restructure their US denominated debt. Simultaneously, CCP is already telling media outlets to say Evergrande will NOT get bailed out (despite it is currently being bailed out in all but name).

Grizy, does anyone know how much of the debt is held by government controlled entities in yuan terms vs overseas banks in dollar terms?

Been trying to contextualize the gap between china supposedly having it contained while they mostly transact in dollars and not yuan. I'm inclined to think if they mostly settle in dollars then there's a nonzero chance their evergrande debt is held in dollars w overseas lenders.

in 17) he says bills owed to construction companies are all RMB and mis-translated at some point in the news

https://twitter.com/Barton_options/s...70473840517124

i've seen estimates that there is only $7 billion in exposure to US banks

it does feel like to me the larger surprise for global markets could be in commodity prices dropping beyond all estimates, assuming that the chinese real estate issue is handled internally, unless they can somehow maintain the prior levels of construction as well as holding up real estate prices

Only 7-8billion out of 300 billion owed is US denominated. Most of the creditors are government-controlled entities (state banks and local governments mainly.)

Their entire business model was to borrow money from state owned banks to buy (70 year lease technically) land from local governments (which would push to get Evergrande loans, and many officials got kickbacks) and then develop with customer prepayments/deposits (often money borrowed from state banks) properties.

This isn't a financial crisis as we understand financial crises in the US. This is the CCP putting the screws on Evergrande and the property market intentionally. They are not after a collapse of Evergrande or the property market (that would cause actual revolts among the property obsessed Chinese middle class). They just want to cool down the property bubbles around the country.

The Chinese real estate market will continue to rise. The Chinese is more obsessed with real estate than Indians are with gold.

evergrande is only problematic if the CCP chooses for it to be problematic. this is such an easy thing to fix with selective haircuts and making the bank lenders and depositors whole.

Clayton I went the other way today and bought long dated BABA calls. Negative China sentiment is at a peak right now. It always goes in waves. 12 months from now China might be loved again.

it sounds like the chalk short is WYNN but evergrande just announced

China Evergrande Group’s onshore property unit said it negotiated a plan with bondholders to pay interest due Sept. 23 on domestic notes, without clarifying the terms of the arrangement - BBG

so there was a nice pop in a lot of stuff. i'm sure the IV's and greeks of all the related names will be out of whack between now and FOMC.

This is my biggest position right now. I also bought a ton of long dated BABA calls today and a bunch over the past week in the low 150s. Mostly 150 june 2023s, with some 2024s in the mix and 125s.

I'm doing debit spreads. selling the weekly .15 delta calls to collect some premiums in case we keep dipping or going side ways for a bit but enough room to manage it in case we rally to roll it.

I'm close to just putting my whole account into these.

I can't even imagine voluntarily choosing to own any adr out of china long-term. Is there really any chance the rug doesn't eventually get pulled from those? As a temporary play it could work out very well here though as the ccp is likely to want to send a message

yes there is a very good chance nothing happens.

but I bought options for a reason, not the underlying. just looking at the probabilities here and in a few cases sentiment normalizes and BABA goes somewhere between 200-400 per share.

Pretty good bet Chinese government and company officials got their money out already. They are just squeezing the foreigners and little guys until the CCP feels satisfied they've sent the message that the property market should cooldown a bit.

The problem for them is to sustain their target economic growth rates, they'll allow the market to grow again soon enough.

Pretty remarkable stat, china stocks have returned ~0 over the last 30 years

https://twitter.com/EconomPic/status...EE4vpTUwQ&s=19

Credit issues appear to be expanding into other areas of the economy beyond just developers , many of their suppliers too

https://twitter.com/caixin/status/15...9T3e6LpjQ&s=19

Along with mortgage boycotts being organized for promised but undeveloped real estate as well as bank runs caused by local governments being short of money

Of course the CCP can make virtually any individual debt disappear instantly if they want to, but this large-scale...?

wow 4 years clayton talked abou tit.

also anyone buying into the theory CCP kinda made evergrande sink due to self sabatoge, they know that 30% of eco was in housing market nad wanted to slowly filter it out,

I don't really buy it but the biggest case of evidence was the 3 rules they made in what 2020? 20201?

Always hard for me to tell how real videos like this are

bump

ayyy lmao