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The Chinese Dominoes Are About To Fall: Complete List Of Upcoming Trust Defaults

Tyler Durden's picture




 

As has been widely reported on these pages in the past month, after a near-reality experience almost claimed the first material Chinese shadow banking default, the Chinese government and central bank did what they do best: a mysterious "white knight" emerged out of nowhere, and bailed out the Credit Equals Gold #1 Trust. A few days later, we reported that China Development Bank lent 2 billion yuan to coal company Shanxi Liansheng, which owes almost 30b yuan to lenders including banks, trusts and asset management firms. And while we know how "difficult" it was for China to do the wrong thing and encourage moral hazard, despite repeated assurances by one after another PBOC director that this time the central bank means business, we have good news: these two narrowly averted Trust defaults are just the beginning - it is all downhill from here.

As Bank of America reports in an analysis by David Cui, the Trust defaults are about to get hot and heavy. To wit:

We believe that during April to July the market may see many trust products threatening to default, especially those related to coal mines. By our estimate, the first real default most likely could happen in May with a Sichuan lead/zinc trust product worth Rmb140mn. This is because the product is relatively small (so the government may use it as a test case), the underlying asset is not attractive (so little chance of 3rd parties taking it over) and we also have heard very little on parties involved trying to work things out. Whether this will trigger an avalanche of future trust defaults remains to be seen and this presents a key risk to the market in our opinion.

 

... it’s still possible that many of the upcoming cases in Apr-July may get worked out one way or the other. Nevertheless, as we believe that many of the underlying assets of the trust products are insolvent, it’s a matter of time that many products will ultimately default, in our view. Various bail-outs will only delay the inevitable.

From BofA's David Cui

12 potential defaults reported by the media

Table 1 summarizes the information on the 12 major potential defaults in the trust industry that have been reported by the media. Most of them are coal mine related and heavily concentrated in one area, Shanxi Province. So far it seems to us that most of them may get extended upon the due date. The only exception over the next few months appears to be a product issued by China Credit Trust for a lead and zinc miner in Sichuan, Nonggeshan. Even without any major default over the next few months, the process of debt restructuring can be messy and weigh heavily on market sentiment.

19 Feb 2014, Rmb109mn borrowed by Liansheng & arranged by Jilin Trust

  • Details: This Rmb109mn tranche is part of a six-tranche trust product worth a total of Rmb973mn arranged by Jilin Trust for Liansheng, a Shanxi coal miner. The other five tranches have matured since 2H 2013 and remain overdue.
  • Potential outcome: Repayment may be extended.
  • Reason: Liansheng is undergoing a debt restructuring coordinated by the Shanxi provincial government. 1) The provincial government plans to help out involved financial institutions to ensure the region’s access to ongoing financing. According to people close to the situation, the implicit guarantee practice will most likely continue with the Liansheng’s case. 2) Trust companies may have to follow banks to help the miner out. Banks have agreed to extend their mid/long term loans by three years. Top 3 banks have total debts of Rmb10.6bn to Liansheng; top 3 trust lenders, Rmb3.7bn.

(Shanghai Securities News, 2/11; Economic Information, 2/13)

21 Feb 2014, Rmb500mn borrowed by Liansheng & arranged by Shanxi Trust

  • Potential outcome: repayment may be extended.
  • Reason: Same as the Jilin Trust case.

(Caiing 1/27; China Securities Journal, 1/27; 21st Century Business Herald, 2/14)

07 Mar 2014, Rmb664mn borrowed by Liansheng & arranged by Changan Trust

  • Details: Other than the Rmb664mn product to mature on Mar 7, Changan Trust arranged another two products for Liansheng, totaling Rmb536mn which matured in Nov 2013. Both products remain overdue.
  • Potential outcome: repayment may be extended.
  • Reason: Same as the other Liansheng cases.

(Caiing 1/27; China Securities Journal, 1/27; 21st Century Business Herald, 2/14)

31 Mar 2014, Rmb196mn borrowed by Magic Property & arranged by CITIC Trust

  • Details: invested in an office building in Chongqing. The Chongqing developer ran into financial problems in mid-2013. CITIC Trust tried to auction the collateral but failed to do so because the developer has sold the collateral and also mortgaged it to a few other lenders.
  • Potential outcome: The developer and the trust company may share the repayment.
  • Reasons: 1) When CITIC Trust sold the product, it did not specify the underlying investment project. 2) The local government has intervened, fearing social unrest. A local buyer of a unit in the office building committed suicide as he/she could not obtain the title to the property due to the title dispute between the trust and the developer.

(Source: Financial Planning Weekly, 3/6/2013; Guangzhou Daily, 4/6/2013, Boxun, 5/10/2013)

14 May 2014, Rmb1.5bn borrowed by Liansheng & arranged by China Jiangxi International Trust

  • Potential outcome: repayment may be extended.
  • Reason: Same as the other three Liansheng cases.

(Caiing 1/27; China Securities Journal, 1/27; 21st Century Business Herald, 2/14)

30 May 2014, Rmb140mn borrowed by Nonggeshan & arranged by China Credit Trust

  • Details: invested in a lead and zinc mine in Sichuan.
  • Potential outcome: Likely to default.
  • Reasons: 1) Compared to coal mines of Zhenfu and Liansheng, the lead and zinc mine is a much less attractive asset: it is located in the mountains over 5,000 meters in altitude, inaccessible for 6 months of the year due to weather conditions, with low lead/zinc content; 2) According to an unnamed regulator, the central government is comfortable with trust defaults in the range of Rmb100-200mn.

(Source: 21st Century Business Herald, 31/7/2012; Caiing, 1/27)

25 Jul 2014, Rmb1.3bn borrowed by Xinbeifang & arranged by China Credit Trust

  • Details: Xinbeifang is another Shanxi coal miner.
  • Potential outcome: repayment may be extended.
  • Reason: Xinbeifang is negotiating with an SOE to sell some of its coal mine assets.

(Source: China Securities Journal, 1/15)

27 Jul 2014, Rmb319mn borrowed by Hongsheng & arranged by Huarong Trust

  • Details: Hongsheng is a Shanxi coal miner. Huarong sold another trust product for it which will mature in 4 September 2014, worth Rmb63mn.
  • Potential outcome: repayment may be extended.
  • Reason: Hongsheng may have assets to secure more financing. It issued these two trust products to replace another trust product that matured in Q3 2012. The owner also issued other trust products using his personal property assets as collateral and raised Rmb1.2bn.

(21st Century Business Herald, 20/12/2013)

7 Sept 2014: Rmb400mn borrowed by Zengdai & arranged by CCB Trust

  • Details: 1) The proceeds of the product were invested in financial markets. 2) Its 1st tranche, worth Rmb400mn, matured in Mar 2013 with a 38% loss vs. an expected return of 20-30%. Investors agreed to extend the maturity of the product to Sept 2014. 3) Its 2nd tranche, worth Rmb359mn, matured in June 2013 with a 31% loss vs. an expected return of 20-30%. Investors agreed to extend the maturity of the 2nd tranche to Dec 2014.
  • Potential outcome: The trust company and the investment company may share the losses.
  • Reasons: 1) The investment company refused to repay investors in full at the original due date so the trust company may have to chip in; 2) By Jan 2014, the 1st tranche reported a narrower loss of 24%, and the 2nd tranche, also a narrower loss of 13%; 3) Zengdai may pay on behalf of its investment company for reputation’s sake.

(Source: Securities Daily, 9/7/2013; CCB Trust)

20 Nov 2014, Rmb600mn borrowed by Liansheng & arranged by China Jiangxi Int'l Trust

  • Potential outcome: repayment may be extended.
  • Reason: Same as the other Liansheng cases.

(Caiing 1/27; China Securities Journal, 1/27; 21st Century Business Herald, 2/14)

23 Dec2014: Rmb1.1bn borrowed by Xiaoyi Dewei & arranged by China Resources Trust

  • Details: Xiaoyi Dewei is a Shanxi coal miner. The trust product originally matured in Dec 2013 but repayment was extended to Dec 2014.
  • Potential outcome: Likely to default.
  • Reason: Both the miner and the trust company refused to repay investors in full at the original due date. There has been no reporting on asset sales by Xiaoyi Dewei.

(Source: Financial Planning Weekly, 11 Nov 2013)

15 Jan 2015, Rmb1.2bn borrowed by Hongsheng’s owner & arranged by Minmetals Trust

  • Details: the collateral is the Shanxi coal miner’s personal property assets.
  • Potential outcome: May be replaced by a new trust product.
  • Reason: Same as the July 2014 Rmb319mn trust product issued by Huarong Trust.

(21st Century Business Herald, 20/12/2013)

2Q/3Q 2014 – the next peak maturing period for collective trusts

We consider the trust market the most vulnerable part of the major financing channels for companies, i.e. loan, corporate bond and trust. The quality of the borrowers in the trust market tends to among the lowest. Within the trust market, collective trust products, i.e. those sold to more than one investor, tend to be risker than single trust products, i.e. those sold to a single investor. This is because investors in single trust products tend to be more substantial in resources, thus most likely more sophisticated in their risk control.

The Wind database lists close to 12,000 collective trust products, worth Rmb1.34tr, which cover roughly half of the collective trust market (Rmb2.72tr as of the end of 2013). It has reasonably good quality data series on the issuing dates and amounts raised. However, data on maturing dates are sporadic. We estimate that the average duration of the trust products is around 2 years. Based on this assumption and the issuing dates, we have mapped out a rough maturing profile of the collective trust market. As we can see from Chart 1, 2Q and 3Q this year will be the next peak maturing period for this market.

Coal mine trusts maturity schedule

We went through the offering documents of the top 200 collective trust products by size (the smallest being Rmb400mn), worth some Rmb145bn in total. They represent roughly 10% of the trust products in the Wind database and 5% of the overall collective trust market. We identified the industries of the issuers, the regions where their businesses are located and the maturity dates of the products. Table 2 summarizes the results.

We believe that coal mine trusts are the most likely to default over the coming months because 1) coal price has dropped sharply in recent quarters; 2) most of the issuers are private enterprises; and 3) they tend to be from provinces whose governments rely heavily on resources related income, e.g., Shanxi and Inner Mongolia. On the other hand, the property market has been reasonably buoyant in recent times while LGFVs generally have access to re-financing until the implicit guarantee is removed (a whole different topic worthy another report later). Based on the maturing schedule of the top 200 collective trust products, we expect more noise about coal mine trust defaults around Apr, June and July (Chart 2).

Table 3 lists the coal mine trust products that are in our study.

For the trust market, we only have data on approximately half of the collective trust market, which in turn, accounts for about a quarter of the overall trust market. So essentially, we only covered about 1/8 of the total trust market with our analysis. Single trusts are less risky than collective trusts. Nevertheless, if the solvency issue is a systemic problem as we expect, many single trusts will ultimately default by our assessment.

Our analysis has largely zoomed in on coal mine trusts because they represent the clear and present danger given how depressed the coal market has been. However, property related trusts may come under increasing pressure as we sense that the property market may be turning south in small cities. As a result, some of those related products may threaten to default reasonably soon. Then we have the big unknown – LGFV trusts. Whether and when they may default is largely a political decision in our opinion.

 

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Wed, 02/19/2014 - 23:06 | 4455675 TeamDepends
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Look out berow!

Wed, 02/19/2014 - 23:14 | 4455711 VD
VD's picture

if the only went in on tungsten mines rather than lead/zinc....

Wed, 02/19/2014 - 23:34 | 4455790 max2205
max2205's picture

Print damn it!

Wed, 02/19/2014 - 23:42 | 4455820 idea_hamster
idea_hamster's picture

I think that the Fed should just buy these.  The WMP-version of CARP -- we could call it WARP.

Expand the Fed balance sheet a bit and create a new flow of hot money into China that can be re-funnelled back through the CCB to buy USTs.

Because, why not, right?  

Thu, 02/20/2014 - 00:56 | 4455925 TruthInSunshine
TruthInSunshine's picture

Reckoning draws closer by the day, and it's quite a bit LESS than the oft-repeated "6 months away, give or take." Japan & China are in full blown "make up completely fabricated statistics" mode, and even by that unicorn metric, things aren't looking so great for them. The truth is much more raw. As for the EU & U.S., they're sucking wind. Check out the layoffs, closings and shrinkage otherwise in the restaurant, retail and now, even manufacturing businesses in the U.S., which are not widely reported on by the Main Stream Financial Press (which has a conflict of interest in reporting on such matters) but can be tracked at sites like dailyjobcuts.com. I'll go a step further; I think that revisions to economic data will show that the U.S. re-entered economic contraction back in Q3 of 2013, and that we're going to experience a more steep economic decline over the next 2 years than we did in 2008 to 2010, which will break many of the resilient survivors who were clinging on, and will murder those who went into further debt in the intervening time period*.

 

*Confidence Fairy Soweth & Reapeth

[W]ithout exception, throughout history, the masses do not understand there is a crisis until well after it has already begun, and they've already committed to many purchases, indebtedness and other forms of dis-saving, that they wouldn't have committed to had they known accurate information sooner.

Hence, the "confidence fairy," which governmental employees, politicians and business spokespeople all actively perpetuate in their own methods and by various tactices, is a serial and mass killer of efficient markets and rational economic behavior (as it severely distorts essential economic information that is relied upon by economic and market participants).

Thu, 02/20/2014 - 01:17 | 4456102 FL_Conservative
FL_Conservative's picture

Wi Go Lo.

Ho Li Fuk.

It Tu Rate.

Thu, 02/20/2014 - 08:08 | 4456616 GetZeeGold
GetZeeGold's picture

 

 

Time to sell the US Treasuries.....I hear Belgium is looking to buy.

Thu, 02/20/2014 - 09:00 | 4456726 TheFourthStooge-ing
TheFourthStooge-ing's picture

They have to park all that waffle money somewhere.

Thu, 02/20/2014 - 08:21 | 4456632 negative rates
negative rates's picture

An apple a day keeps the dentist away.

Wed, 02/19/2014 - 23:31 | 4455777 BandGap
BandGap's picture

So the word "trust", as in "Trust" Fund, really is a misnomer.

It's a mad wolrd, this.

Wed, 02/19/2014 - 23:44 | 4455827 idea_hamster
idea_hamster's picture

These WMPs are "trusts" in the same way that "hedge funds" are funds that hedge:  not at all, and basically the exact opposite.

Wed, 02/19/2014 - 23:51 | 4455851 Caviar Emptor
Caviar Emptor's picture

Thought it had to do with saving hedgehogs..

Thu, 02/20/2014 - 08:37 | 4456661 TheFourthStooge-ing
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Shrubbery funds, such as Ni, Peng, and Neewom, are popular in certain beknighted areas, or so I've heard.

Thu, 02/20/2014 - 02:05 | 4456229 El Oregonian
El Oregonian's picture

It only gets BITTER from here.

Thu, 02/20/2014 - 06:36 | 4456513 new game
new game's picture

agreed- trust me :)

Wed, 02/19/2014 - 23:09 | 4455689 Wahooo
Wahooo's picture

The weak are failing. That's bullish!

Thu, 02/20/2014 - 01:50 | 4456192 Four chan
Four chan's picture

it's the new amerikan way, so why not export that to china like our jobs and middle class?

Thu, 02/20/2014 - 08:57 | 4456717 TheFourthStooge-ing
TheFourthStooge-ing's picture

Alas, alas, three times alas, new 'amerikan' way under US citizen of A system infused nuancements vigourously. Describings as "The weak are failing. That's bullish!" gives picture apparently, but somehow on a thriving detail lacks veracity.

For biggest weaks in US citizen of A system, failurous outcome is unpermitted. They are running a business of extorting the less weak, farming the not-yet-poor.

Wed, 02/19/2014 - 23:09 | 4455693 BudFox2012
BudFox2012's picture

Funny, Jim Cramer was just singing the praises of Chinese Trusts on his show today, so this can't be true...

Wed, 02/19/2014 - 23:54 | 4455859 Caviar Emptor
Caviar Emptor's picture

Yes. Didn't he also predict the crash if '87?

Thu, 02/20/2014 - 02:08 | 4456234 El Oregonian
El Oregonian's picture

No, he said he bought hash in '87

Thu, 02/20/2014 - 08:24 | 4456636 negative rates
negative rates's picture

No he said he watched Mash for the last time in 87.

Thu, 02/20/2014 - 08:24 | 4456637 GetZeeGold
GetZeeGold's picture

 

 

No.....he had the stock pick of '08.

Thu, 02/20/2014 - 01:05 | 4456075 Bunga Bunga
Bunga Bunga's picture

Cramer did it again?

Wed, 02/19/2014 - 23:11 | 4455698 NoDebt
NoDebt's picture

Once again, I don't want to give away the ending here, but just SIT AND WATCH.  You will be amazed.

(Ok, Ok, I'll give away the ending this time:  PBOC will bail out EVER DAMNED LAST ONE OF THEM.  THey're in the same box as the Fed was in 2008.  They WILL bail them out.)

Wed, 02/19/2014 - 23:16 | 4455718 Seasmoke
Seasmoke's picture

Of course they will.....and yet I still fool myself thinking this is why I hold physical Gold 

Wed, 02/19/2014 - 23:19 | 4455733 NoDebt
NoDebt's picture

So do I.

Wed, 02/19/2014 - 23:31 | 4455776 Pure Evil
Pure Evil's picture

They don't have to bail them all out, just a few.

Nationalize the majority, thereby eliminating them from the pile, while working on the most prominent before they collapse.

Wed, 02/19/2014 - 23:37 | 4455799 NoDebt
NoDebt's picture

You're right, they don't have to bail them ALL out.  Just the ones that matter.  If they think they can let one slip here and there without starting the dominoes falling, they'll let it fail.  But what they are going to find, I think, is that MANY of them have the possibility of starting the cascace, even if they are relatively small.

Remember the earlier posts on ZH about the relative size of Chinese QE and their leverage ratios, which dwarf those of the US and Japan combined.  Less wiggle room to absorb a "shadow banking" default than anyone else on the block.

Thu, 02/20/2014 - 02:11 | 4456240 walküre
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The PBoC is NEITHER the Fed nor the BoJ. Period. The corruption in China is so deep, it's absolutely insane to believe that the Chinese central bank has any more control over financial politics and the outcome of years and years of manipulation and corruption than the Chinese politbureau.

They can and will implement censorship and they can try and mask the fallout from these defaults, but defaults will happen. Mark my words.

The difference in the US is that all the political and financial machinations are by and large run by the same group of people from the same tribe. They have each others backs. The Japanese have code and discipline and a very gulible loyal population.

Not so in China. The PBoC and the political leadership are in way over their heads here.

Thu, 02/20/2014 - 06:41 | 4456516 new game
new game's picture

it may be as simple as who is blowing who or who is married to who or who bent over for who...

does who = wu? wufukwi?

Thu, 02/20/2014 - 00:06 | 4455795 mjcOH1
mjcOH1's picture

"Of course they will.....and yet I still fool myself thinking this is why I hold physical Gold "

 

I owned it because an ounce could be traded for $20 in FRNs, a bad horse, or a good suit in 1914.
And because an ounce can be traded for $1200 in FRNs, a bad horse, or a good suit in 2014.

 

But then there was the boating accident.

So I will miss out on $12,000 in FRNs, a bad horse, or a good suit in 2020.

Wed, 02/19/2014 - 23:16 | 4455721 Tinky
Tinky's picture

So it's all good, right?

Wed, 02/19/2014 - 23:22 | 4455735 NoDebt
NoDebt's picture

Good is a relative term.  When you have choices between bad and worse, you choose bad.  We chose a path that was OBVIOUSLY frought with moral hazard (and are now paying the price of that choice by gutting the goose that lays the golden egg- sacrificing the middle class).  So will they.  They're good at copying, those Chinese.

Fri, 02/21/2014 - 14:26 | 4462559 Jack Napier
Jack Napier's picture

There is always a 3rd, 4th, 5th, 6th... inifiinite amount of choices. Bad and worse can both take a hike. Preparedness will enable such a luxury. Skills help too. People with skills don't need money.

Wed, 02/19/2014 - 23:36 | 4455796 FieldingMellish
FieldingMellish's picture

As long as they shoot the trustees, I'm OK with that. China deals with these things a little differently.

Wed, 02/19/2014 - 23:42 | 4455819 NoDebt
NoDebt's picture

The problem in China is that you've got "party officials" or their relatives in on a lot of these things.  So, yeah, you'll see some people get prosecuted/imprisoned/shot, but it won't be those who are really pulling the strings.  The US is a neophyte when it comes to cronyism compared to China.

Thu, 02/20/2014 - 01:02 | 4456065 ejmoosa
ejmoosa's picture

Well, they won't have to print dollars at least.  They can just sell some more of the treasuries they hold.  After all, better to sell them now before they become worthless as well.

Wed, 02/19/2014 - 23:10 | 4455701 Thomas
Thomas's picture

Wei Tu Lo 

Wed, 02/19/2014 - 23:15 | 4455713 TheRideNeverEnds
TheRideNeverEnds's picture

Whats to stop them from just printing more money?  The only reason this would happen is if they have a reason to let it happen, what motive would they have? 

Wed, 02/19/2014 - 23:17 | 4455723 NoDebt
NoDebt's picture

Exactly.  There's nothing stopping them.  

Thu, 02/20/2014 - 00:35 | 4455988 TruthInSunshine
TruthInSunshine's picture

The ONLY way China can minimize the full, brutal force of what awaits it is to print CNY like Bernanke on meth.

China's exports are flagging BADLY, as the rest of the increasingly poorer world passes on many of Chinese manufactured discretionary widgets.

So, history says currency debasement followed by a massive fire sale is in the works for a nation that desperately needs to support its massive labor pool and export-intensive economic model.

Thu, 02/20/2014 - 02:16 | 4456249 walküre
walküre's picture

Sure they will have a printfest to cover the problems. China is a lot closer to becoming Weimar than the US. Their own people don't trust the Mao paper and don't like holding it or have converted to alternatives. China may be a low cost producer but China cannot combat hyperinflation!

Thu, 02/20/2014 - 08:16 | 4456624 hootowl
hootowl's picture

With 200 million more young men than women, China will have little option but to send the men abroad to fight and die in an off-shore war.  If the Chinese economy tanks, even a little, tens of millions of starving, unemployed, disenfranchised young chinese men will be a force for chaos that even the much-vaunted Chinese politbureau will not be able to contain.

China is not the cohesive national entity that so many people think it is.

Wed, 02/19/2014 - 23:16 | 4455719 BandGap
BandGap's picture

Hey, what could go wrong?

Wed, 02/19/2014 - 23:21 | 4455739 OldPhart
OldPhart's picture

Ho Lee Fuk, Sum Ting Wong?

Wed, 02/19/2014 - 23:25 | 4455760 disabledvet
disabledvet's picture

Melissa Lee better be showing up in too tight Stilletto heels, too tight leather and with a whip for tomorrow's edition of the Fast Money Five "House of Pain" trade.

This is exactly what the USA went through...only without the insurance, without the regulation and no "BAZOOKA."

You wanna play with the big boyz? You need a BAZOOKA mister!

https://www.youtube.com/watch?v=FKXOevtekJI

Wed, 02/19/2014 - 23:29 | 4455772 Randoom Thought
Randoom Thought's picture

... and it is all meaningless.

Wed, 02/19/2014 - 23:46 | 4455773 deflator
deflator's picture

 I can remember way back when President Clinton granted WTO status to China and lifted all barriers for U.S. corporations to move manufacturing to China.

 The ultimate conclusion of any argument against was, "We" can destroy China financially anytime "we" feel like it. They were idiots then and they are idiots now. Wealthy and bosses of companies and governments but still idiots in the greater scheme of things.

 Was it Napoleon who said, "Do not awaken the sleeping giant for when the sleeping giant awakens, let the nations tremble."?

 The concensus among useful idiots is that making  China an integral part of extrapolating the U.S. economic model globally is a free lunch because when the U.S. is finished using China they can simply drop her like a used rubber and she will go away. Sad but true that this is and has been U.S. foreign policy for many years.

Wed, 02/19/2014 - 23:51 | 4455850 john39
john39's picture

Bill Clinton, just doing his part to destroy the American middle class.

Thu, 02/20/2014 - 00:00 | 4455862 deflator
deflator's picture

"President Bill" President is a lifetime title. Reporters only began using, "former" in front of the title President during President Nixons lifetime.

 When President Obamas two terms are up and there is another current sitting President do you think the mainstream media will use former in reference? I doubt it

Thu, 02/20/2014 - 07:59 | 4456603 MeMongo
MeMongo's picture

Kinda fitting, seeing how he was the real "first black president":-)

Wed, 02/19/2014 - 23:33 | 4455787 Jack Burton
Jack Burton's picture

Very interesting. So have the Chinese been playing at the fiancial engineering game that the western bankers have taken to such new heights in the last decade? I suppose they have learned this art, as I understand that many Chinese have attented the best US business schools, and taken their learning back to China. One wonders, really, what is taught in these Business Schools that seem filled with the sons and daughters of America's ruling elites. We do know that but for the United States Government Tax Payer, American Savers and the US Federal Reserve Central Bank, that nearly every major bank and investment house would have gone bankrupt in the 2008 crash. But they did not, the resuce was epic, and they have gone on to greater riches than any dared to dream of. They simply play a game that they can not lose.

Thu, 02/20/2014 - 00:01 | 4455887 Caviar Emptor
Caviar Emptor's picture

The Chinese and USA systems must of necessity converge to maintain symbiosis in a Mutually Assured Financial Destruction world. That goes economically And also politically. Been saying it for quite a while.

Thu, 02/20/2014 - 03:01 | 4456324 Dr. Bonzo
Dr. Bonzo's picture

Exactly. Same schools. Same internships. Same zip codes. Same names in the iphones. Same outcome.

 

 

Wed, 02/19/2014 - 23:34 | 4455789 Yes_Questions
Yes_Questions's picture

 

 

 

Chinese Banksters have nets on their buildings too?

Wed, 02/19/2014 - 23:39 | 4455808 marginnayan
marginnayan's picture

Melissa Lee to present tomorow's CNBC "Fast Money" show in Victoria Secrets's next gen Bikini that will take the entire world by surprise. She might even try to take it off the during the show to display her naked beauty.

TV Show rated R. Viewer discretion is advised. Ratings for the show should go through the roof with tomorrow's show. LOL.

Thu, 02/20/2014 - 08:09 | 4456618 therover
therover's picture

Make it pay per view and have an hour of just Melissa strutting around in Victoria Secrets garb and I will pay. If Mandy shows up, I will pay triple.

Thu, 02/20/2014 - 00:19 | 4455924 holdbuysell
holdbuysell's picture

The moral hazard is going to get so high that some institution is going to establish a tiny $1B shadow bank-enabled trust that pays 100% interest per year and then warn of imminent default (and then get bailed out). /major sarc and hyperbole here but one can see where this goes

This is clearly becoming a game of the wealthy getting 'alpha' returns at the expense of the people. I put 'alpha' in quotes because when the government guarantees any piece of junk out there for fear of contagion, any piece of junk becomes essentially risk free. And voila! A risk free 10%, 20%...pick your number.

Ridiculous.

Thu, 02/20/2014 - 09:05 | 4456739 waterwitch
waterwitch's picture

Sorry I missed the hyperbole.

Thu, 02/20/2014 - 01:08 | 4456083 Colonel Klink
Colonel Klink's picture

Funny that chart looked like the number of mortgage resets for the US, yet we never had the HUGE crash because it was papered over by Paulson/Bernanke/CONgress.

Chinese will do the same.

Thu, 02/20/2014 - 01:56 | 4456210 GoldenDonuts
GoldenDonuts's picture

China = Japan 2.0

Thu, 02/20/2014 - 03:34 | 4456373 yrbmegr
yrbmegr's picture

They need to hurry up with that war.

Thu, 02/20/2014 - 07:23 | 4456445 hero HNL
hero HNL's picture

I know from watching Japanese television, many chinese WMP have already defaulted & people have been crying in front of city hall asking for help. The whole system is too corrupted & no one knows the true magnitude of the problem.

 

Worth watching these programs although they are in Japanese:

About shadow banking:

https://www.youtube.com/watch?v=q7TXHxi2hvE

About urbanization:

https://www.youtube.com/watch?v=HGHGGuUAugA

Thu, 02/20/2014 - 06:59 | 4456529 zippy_uk
zippy_uk's picture

So - is this another 2008 bank failure scenario where anyone who shorts financial institutions makes tons of money ? How best to play this ?

Thu, 02/20/2014 - 07:24 | 4456555 hero HNL
hero HNL's picture

Short brent.

Thu, 02/20/2014 - 07:59 | 4456606 buzzsaw99
buzzsaw99's picture

the only way to win is not to play. [/wopr]

Thu, 02/20/2014 - 07:04 | 4456536 fijisailor
fijisailor's picture

Look at the total quantity of these defaults in RMB.  In comparison to US bank failures the Chinese failures are NOTHING.  This article is just anti Chinese propaganda to distract from the massive US failures.

Thu, 02/20/2014 - 08:36 | 4456658 Tall Tom
Tall Tom's picture

If I want to take out a building then 500 lbs of TNT will serve to do that. But who has 500 Pounds of TNT lying around the house?

 

So I look for structures which I can exploit...like Gas Meters. In that way One Pound of explosive may rupture the Gas Meter and the building will be destoyed in the ensuiing fire. One to 500 leverage...

 

It is not the amount of the charge..or the amount of the Default...which will destroy the structure. It is the consequential affects that can bring the whole thing down on top of itself.

 

It is kind of like the Twin Towers...you know?

 

Which small default will be critical is anyone's guess. But the Chinese have to figure out the consequential Affects of each one of them. And if they miss then there will be a runaway catastrophic implosion.

Thu, 02/20/2014 - 07:54 | 4456595 buzzsaw99
buzzsaw99's picture

Crony politicians and bankers have been picking winners

Since eating boogers in their prep school dinners

Thu, 02/20/2014 - 07:54 | 4456596 stocktivity
stocktivity's picture

It's all Bullshit!!!

Thu, 02/20/2014 - 08:03 | 4456612 Rising Sun
Rising Sun's picture

no no no

 

you pay now!!!!!

Thu, 02/20/2014 - 08:22 | 4456634 ChacoFunFact
ChacoFunFact's picture

No ticki no shirty we give em back dirty!

End usury.

Thu, 02/20/2014 - 08:23 | 4456635 ChacoFunFact
ChacoFunFact's picture

No ticki no shirty we give em back dirty!

End usury.

Thu, 02/20/2014 - 08:25 | 4456639 F em all but 6
F em all but 6's picture

Well, lets look at the bright side. China has plenty of brand new skyscrapers that these trust executives can utilize. I hear the first step off the top is a bitch.

Thu, 02/20/2014 - 08:35 | 4456655 Fred123
Fred123's picture

I see a lot of comments that China can do the same thing as the US did in 2008. Their currency is pegged to ours, will that make a difference? I don't know the details but I suspect it will make a very big difference on just what they can do.

Thu, 02/20/2014 - 08:43 | 4456679 AdvancingTime
AdvancingTime's picture

China faces a huge debt overhang from years of overbuilding. Loans are now coming due on factories that sit idle because of weak demand. In the past many of the investment decisions were driven by politics. This has created massive overcapacity. Money has been poorly allocated and often shoveled into deep holes like ghost cities and bridges to nowhere. Now they must pay for past economic sins, more details in the post below,

http://brucewilds.blogspot.com/2013/11/china-land-of-overcapacity-and-de...

Thu, 02/20/2014 - 08:56 | 4456713 Sufiy
Sufiy's picture


Koos Jansen: January Chinese Gold Demand All-Time Record, 247 Tons 

Koos Jansen reports on continued unprecedented appetite from China for Gold, according to his information, after  the unprecedented demand of 2,181 tons of Gold from China in 2013 Chinese Gold demand hits All-Time record of 247 tons in January. 

 

http://sufiy.blogspot.co.uk/2014/02/koos-jansen-january-chinese-gold-dem...

Thu, 02/20/2014 - 10:00 | 4456941 NEOSERF
NEOSERF's picture

Coal there, coal here, asset sales get exhausted, restructurings and layoffs exhausted, bankruptcy...walllaaa...debt free to start the next 20 year cycle...aint capitalism grand?

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