Discover more from BowTied Bull
The Evergrande Fisaco, Avoiding Irrational Decisions and Africa!
Level 3 - Virgin DeFi Analyst
Welcome Avatar! Another “Lehman” type real estate pop has occurred in China with the Evergrande debacle. In short, $300B in loans are going through a default and the ripple effects could be substantial (IE. all the lenders are going to have large losses as well). While we’re no where near big enough to guess what China will do, we can conclude that there is a *high* chance that modern monetary theory will come into play. IE. print more money.
Luckily for you, none of this matters (from a long-term investment perspective). When risk is taken off the table all assets go down: stocks, crypto etc. We saw the same thing in March/April of 2020. Then the money printer went on and suddenly we were back and off to the races! Creating a massive divide between asset owners and non-asset owners (IE. rich vs. poor).
This was highly requested and since we *do not* have a deep focus on China we’re just going to put the high-level up front. Again. We don’t have expertise in China Real Estate (we have zero China Real Estate exposure).
You can research the implications from people who have been following it closely. Here are two solid people who have good threads on the topic: 1) Girolamo @INArteCarloDoss (LINK) with the thread here (LINK); and 2) TheLastBearStanding (LINK) with master thread here (LINK). Of the two we recommend starting with TheLastBearStanding as there are multiple threads that explain what is happening (in opinion format of course!).
Quick look at the Chaos (chart here LINK).
Big Picture for You: We’ve already seen this story play out in 2008-2009. When there is massive default (Lehman) governments decide to print money. The emergency bailout for 2008/2009 crash was ~$700B. Evergrande has ~$300B in liabilities. We have printed over $5T with another $3.5T bill being pushed through shortly.
Therefore? Our current bet is on a lot of monetary policy measures/bailouts to prevent a massive collapse (once again). In short, money printer go Brr and a continued push for Modern Monetary Theory (LINK)
While we’re getting some panic messages about the price action (of crypto) in September we’re not surprised (fortunately we have time stamp proof for the paid subs). In the end, none of this matters.
Both solutions end the same: 1) print tons of money? people will then question the value of the currency as they see *asset* inflation pick up - remember the stock market recovery in 2010-2019 and 2) if you allow for widespread default, there is a lot of near-term pain/suffering and people begin to question the merits of the system they are in (painful unemployment numbers).
There is no way we’re changing our macro view of the world since it leads to the same conclusion: the need for a new financial system designed for a deflationary environment as technology continues to eat jobs.
Quick Notes: 1) Currently the default size is about $300B (this would represent ~2.1% of China’s entire GDP). As another size reference, Hong Kong has an annual GDP of ~$350B. 2) the firm has roughly 200,000 employees and has projects in over 280 cities in China and 3) back in 2018 China actually noted that Evergrande was a potential systemic risk.
What to Look for: Only really two options (big picture), you allow for the default and cause a lot of pain across the globe (not just China). Many US companies and other Foreign Companies own Debt/Equity related to Evergrande. These firms will be forced to take a large loss.
The second option is money printing, bail outs and debt requirement/ceiling changes to kick the can down the road or lead to more inflation.
If we learned anything from the past two decades it is that inflation is seen as the “lesser evil”. That’s why our bet is on inflation (without knowing much about China). Even if steel/ore prices decline and housing constructions freeze up, the medium/long-term is likely a preference for inflation.
Some Empathy: While we don’t have much empathy for massive leverage. We do have empathy for the people who bought assets *prior* to construction. IE. there are people who paid cash up front for an apartment that was in construction - they tried to lock in a discount by paying upfront. These individuals are likely going to get burned as there is no one to construct the building. While you could say “never buy a home before it is completed”, this is *usually* a standard move in Real Estate. Conclusion? If you want to keep your risk profile low, we would recommend you stick with fully completed projects. Evergrande has taught us (again) that major collapses can occur.
Conclusion - Chicken and Egg: Say you’re in China and you panic sell stocks, RE, crypto and bonds. You sell everything. Well? What do you buy. This is the best way to stay focused. If you know that money printer go brrr and inflation is the preference do you want your money in cash? No. You want your money in something that will act as a better long-term store of value.
Part 2 - Avoid Irrational Financial Ideas
During the upturn (August) we got tons of questions about “quitting to go all in on crypto”. This makes very little sense. There is no reason to quit working to “focus on crypto full time”. If you’re working from home (as you should), there is enough downtime to follow as many projects as you like.
Exception to the Rule: We’ll go ahead and throw a number out there. If you want to quit and go “full time crypto” which just means “try and outperform the market”, you need at least $10M (bare minimum). That’s a good rough number. Even if you are a terrible investor and your total portfolio only goes up 5% a year that is $500K US Token and after taxes it is closer to $400K US Token. At this level of wealth it is basically impossible to screw up so you’re free to do whatever you like.
The Standard Rule: We’ve made one modification to this. Before we said “2x career income and you can quit”. For some leniency we’re saying 2x *net after tax income* and you should quit. We’ve already seen hundreds of people pull this off from this time tested advice. As your business scales you simply bleed the income stream dry and become a “mediocre” performer while you free up extra hours to build your e-comm business (or other online biz).
Example: if you work on Wall Street as an associate you’ll earn around $300-350K US Token *Gross* Income. This is actually $186K-$214K after taxes (LINK to calculator). Take your business income, say it is ~$400K in profit after taxes. You should quit. If you move to Florida or Texas you will be making more than 2x your career income (easily).
Quick Logic: The reason why you cannot “go all in on crypto” with a net worth of say $2M US token is quite simple - you will bleed. If you have an income stream of say $10,000 a month (after tax), you would easily pay your living expenses and not be forced to bleed. Can you imagine being forced to pay living expenses in the summer (May to Mid-July) with BTC in the $30K range only to see it go back up ~45% to where it is today? Brutal.
“Grey Area”: As usual there is always a small obscure area. If you have say $5M a paid off home and are single… Perhaps you can go “all in on crypto”. To us this still doesn’t make any sense at all. Having zero income is always a recipe for stress and disaster. While you will probably be fine, the stress part just isn’t worth it. There is zero reason to add stress if your life is already set.
Autist Note for Insane DeGens: Since people are born gamblers we’ll leave on this note. Even if you want to go against this advice (which has worked for a decade at this point), please *do not* quit if you cannot pay living expenses. If you’re an absolute degenerate, you should always have just enough cash flow to cover annual living expenses (work any easy white collar job).
If you’re simply reading about crypto and clicking buttons, that is not an income stream. An income stream is anything *stable* that will pay for all of your annual expenses.
Final Note: If you’re searching for 100x gains it means your cash flows are too low. The chances of finding the needle in the haystack? Next to zero. You are still going to lose to the whales because they can *afford* to buy 30-40 positions with $10,000-25,000 US Tokens in each coin. The chances they find the next 100x is higher by a factor of 30-40! Autist note: the same guys who bought BTC at $100 and invested in the ETH ICO are still alive. They didn’t give up. They are still out there researching. The competition has gone *up* not down.
In short, your best risk/reward is to start a small business if a 300-500% return isn’t life changing money for you.
Part 3 - Africa, NFTs and More!
Clownhattan in Africa! We’re currently live in Nairobi, Kenya with the Clownhattan project. This is the second Continent (North America was first - New York) and now we’ve got Africa - Nairobi Kenya. (Yes this is a hint if we’ve done two continents so far).
If you want to swing by and take photos or videos the location is here (LINK). This is right above Standard Chartered. Be sure to send photos/videos to our twitter handle and we’ll be sure to highlight it! (LINK).
What a Clown World (LINK): We’re updating the site and please make sure your bank clown/institution clown is on the website. If it is not it is hard for us to add it to any future troll events (ping us on Twitter). Note: usually takes a few days to add each one and we do updates in groups.
Special Thank You! There were a TON of problems when it came to pulling this off. The phrase BANKS ARE ZEROS above a bank was unsurprisingly difficult to get through. Then there was the video editing issue… then there was another massive issue we’ll leave out for privacy purposes.
Anon ends up being Snoop! Unsurprisingly, many anons are actually quite wealthy in the real world. Despite the pathetic claims that they are living in basements it turns out that medici is Snoop Dogg (LINK). There are a lot of other ultra wealthy anons on CT (hint if you’re rich you want to be as anon as possible unless you’re already too big to put the lid on it). Autist Note: some are wondering about the writing changes. Our best bet is that a lot of the content particularly the threads were organized by promoters and other members of the establishment surrounding Snoop.
Important note on this. The photos/writing style do not line up on the Cozmo account. Rather the interesting thing is how shady or intelligent the crypto rich are. Either 1) paid for the misdirection which is big marketing in itself or 2) run by a manager/team
Disclaimer: None of this is to be deemed legal or financial advice of any kind. These are *opinions* written by an anonymous group of Ex-Wall Street Tech Bankers who moved into affiliate marketing and e-commerce.
Daily Reminder: You ARE EARLY. Too much negativity/cope. Everyone reading this is extremely early. If you stay on top of technology, there is always a new opportunity.