too big to fail...
evergrande
- Thread starter Pyrexcup
- Start date
their debt is largely internal but there has been talk of off-balance sheet debts too. the real problem is the cascading repercussions for the off-shore bond holders who more than likely used the evergrande bonds for collateral. if the leverage is massive enough which many people assume it is, there'll be a ripple effect of margin calls.
will the chinese government dip into their foreign exchange reserves to pay off the $260 million owed to international bond holders all at once?
who knows.
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Any chance their debts are owed to other governments?they're debt is largely internal but there has been talk of off-balance sheet debts too. the real problem is the cascading repercussions for the off-shore bond holders who more than likely used the evergrande bonds for collateral. if the leverage is massive enough which many people assume it is, there'll be a ripple effect of margin calls.
will the chinese government dip into their foreign exchange reserves to pay off the $260 million owed to international bond holders all at once?
who knows.
Vandelay
Life is absurd. Lean into it.
they're debt is largely internal but there has been talk of off-balance sheet debts too. the real problem is the cascading repercussions for the off-shore bond holders who more than likely used the evergrande bonds for collateral. if the leverage is massive enough which many people assume it is, there'll be a ripple effect of margin calls.
will the chinese government dip into their foreign exchange reserves to pay off the $260 million owed to international bond holders all at once?
who knows.
Yeah I see in the notes it appears to 23 billion. I don't think that's enough to cause major repercussions internationally. But what do I know. I know if the full 300 billion defaulted, I know that would be major. Maybe you only need a few dominoes to fall.
It's mostly internal, so yeah Xi can takeover but it's far from guaranteed all mainland creditors would get repayed. The government will prioritize repaying ordinary citizens who've made billions in down payments on condos still under construction.
that billion dollar figure is just the total debt for international bond holders out of the 300 billion evergrande has debt for. they don't have to pay billions right now. the problem is that the $260 million owed to international creditors immediately could actually have debts attached to because of leverage that could amount to billions of dollars. so when lenders who accepted evergrande bonds as collateral see that evergrande is about to default and is worthless, the debtors will get margin called. if they can't pay, then they will start to be forcibly liquidated or default.
edit: i was wrong to disregard the 20 billion dollar international bond debt, missed payments tanks the entire thing and if 20 billion dollars is leveraged 10,20,30,40,50 times then this will be massive.
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Margin Debt Is Rising. It’s a Risk, Too.
‘Margin Debt’ Is Rising. It’s Becoming a Risk for Stocks.
By
Jacob Sonenshine
Updated Dec. 3, 2021 7:42 am ET / Original Dec. 2, 2021 2:41 pm ET
Using margin debt can amplify gains, and losses. Above, a scene from the floor of the New York Stock Exchange.
Spencer Platt/Getty Images
Margin debt has been on the rise. That means risk to the stock market is increasing, a danger that has worsened as share prices have fallen recently.
Margin debt—the amount of money traders have borrowed to buy new shares, using their stockholdings as collateral—has hit a level close to an all-time high. It’s at $936 billion, according to Yardeni Research, up 40% from this time last year.
Using margin debt can amplify returns on an investor’s cash because a trader can hold a bigger position using the same amount of their own money. But the same is true on the downside. If the share prices fall, the investor—saddled with debt—sees his or her portfolio value plummet more than it would have otherwise.
The rising amount of debt is concerning, but more worrisome is the percentage of the stock market’s value that the debt represents. Margin debt is currently 2.4% of the S&P 500 ‘s aggregate market capitalization of $38 trillion. Just before the pandemic, it was at roughly 2%. To be sure, the current level of margin debt relative to the stock market’s value is still below its high, the 3.5% that it reached around the time of the 2008-2009 financial crisis. The lowest point since the mid-1990s was below 2%.
In any event, the combination of rising margin debt and slipping stock prices augments the risk to the market. When the value of the shares a trader purchases on margin falls to a certain point, the broker that lent the money demands that the trader deposit additional cash in the account. Either the trader has the money available, or he or she must sell stocks to raise the cash.
If the stock market falls enough, many traders will receive margin calls, which could force even more selling that would drag prices down. “Margin is at a record high,” said Liz Ann Sonders, chief investment strategist at Charles Schwab. “That increases the possibility of more margin calls if we get more [market] weakness.”
That risk to the market is certainly higher than it was just a few weeks ago. The S&P 500 has fallen about 3% from the record level it hit in November, hit by uncertainty over how well existing vaccines will work against the Omicron variant, not to mention word from the Federal Reserve that it may end the bond buying it has used to support the economy sooner than planned.
A stock market moving downward is often a reason to buy. This time, it could be a sell signal.
‘Margin Debt’ Is Rising. It’s Becoming a Risk for Stocks.
By
Jacob Sonenshine
Updated Dec. 3, 2021 7:42 am ET / Original Dec. 2, 2021 2:41 pm ET
Using margin debt can amplify gains, and losses. Above, a scene from the floor of the New York Stock Exchange.
Spencer Platt/Getty Images
Margin debt has been on the rise. That means risk to the stock market is increasing, a danger that has worsened as share prices have fallen recently.
Margin debt—the amount of money traders have borrowed to buy new shares, using their stockholdings as collateral—has hit a level close to an all-time high. It’s at $936 billion, according to Yardeni Research, up 40% from this time last year.
Using margin debt can amplify returns on an investor’s cash because a trader can hold a bigger position using the same amount of their own money. But the same is true on the downside. If the share prices fall, the investor—saddled with debt—sees his or her portfolio value plummet more than it would have otherwise.
The rising amount of debt is concerning, but more worrisome is the percentage of the stock market’s value that the debt represents. Margin debt is currently 2.4% of the S&P 500 ‘s aggregate market capitalization of $38 trillion. Just before the pandemic, it was at roughly 2%. To be sure, the current level of margin debt relative to the stock market’s value is still below its high, the 3.5% that it reached around the time of the 2008-2009 financial crisis. The lowest point since the mid-1990s was below 2%.
In any event, the combination of rising margin debt and slipping stock prices augments the risk to the market. When the value of the shares a trader purchases on margin falls to a certain point, the broker that lent the money demands that the trader deposit additional cash in the account. Either the trader has the money available, or he or she must sell stocks to raise the cash.
If the stock market falls enough, many traders will receive margin calls, which could force even more selling that would drag prices down. “Margin is at a record high,” said Liz Ann Sonders, chief investment strategist at Charles Schwab. “That increases the possibility of more margin calls if we get more [market] weakness.”
That risk to the market is certainly higher than it was just a few weeks ago. The S&P 500 has fallen about 3% from the record level it hit in November, hit by uncertainty over how well existing vaccines will work against the Omicron variant, not to mention word from the Federal Reserve that it may end the bond buying it has used to support the economy sooner than planned.
A stock market moving downward is often a reason to buy. This time, it could be a sell signal.
I don't have any puts right now.
SPY and QQQ if theres a market crash.
SPY closed $10 down for the week since I wrote this and QQQ is down $17 as well. not a crash but I missed my chance anyway
some U.S pension funds might be holding some.
shyt.
DJ Paul's Arm
Veteran
Margin Debt Is Rising. It’s a Risk, Too.
‘Margin Debt’ Is Rising. It’s Becoming a Risk for Stocks.
By
Jacob Sonenshine
Updated Dec. 3, 2021 7:42 am ET / Original Dec. 2, 2021 2:41 pm ET
Using margin debt can amplify gains, and losses. Above, a scene from the floor of the New York Stock Exchange.
Spencer Platt/Getty Images
Margin debt has been on the rise. That means risk to the stock market is increasing, a danger that has worsened as share prices have fallen recently.
Margin debt—the amount of money traders have borrowed to buy new shares, using their stockholdings as collateral—has hit a level close to an all-time high. It’s at $936 billion, according to Yardeni Research, up 40% from this time last year.
Using margin debt can amplify returns on an investor’s cash because a trader can hold a bigger position using the same amount of their own money. But the same is true on the downside. If the share prices fall, the investor—saddled with debt—sees his or her portfolio value plummet more than it would have otherwise.
The rising amount of debt is concerning, but more worrisome is the percentage of the stock market’s value that the debt represents. Margin debt is currently 2.4% of the S&P 500 ‘s aggregate market capitalization of $38 trillion. Just before the pandemic, it was at roughly 2%. To be sure, the current level of margin debt relative to the stock market’s value is still below its high, the 3.5% that it reached around the time of the 2008-2009 financial crisis. The lowest point since the mid-1990s was below 2%.
In any event, the combination of rising margin debt and slipping stock prices augments the risk to the market. When the value of the shares a trader purchases on margin falls to a certain point, the broker that lent the money demands that the trader deposit additional cash in the account. Either the trader has the money available, or he or she must sell stocks to raise the cash.
If the stock market falls enough, many traders will receive margin calls, which could force even more selling that would drag prices down. “Margin is at a record high,” said Liz Ann Sonders, chief investment strategist at Charles Schwab. “That increases the possibility of more margin calls if we get more [market] weakness.”
That risk to the market is certainly higher than it was just a few weeks ago. The S&P 500 has fallen about 3% from the record level it hit in November, hit by uncertainty over how well existing vaccines will work against the Omicron variant, not to mention word from the Federal Reserve that it may end the bond buying it has used to support the economy sooner than planned.
A stock market moving downward is often a reason to buy. This time, it could be a sell signal.
AMC/GME
