October 27, 2022
The last couple of years have been filled with globalized events that have impacted the world as a whole. Most notable among these was and, and still is, the Covid-19 pandemic, which of course had implications beyond just health, but impacted global economies in countless ways.
This is accompanied by other world events ranging from political to financial—encompassing everything from elections, short-term market crashes, unemployment, meme stocks, stimulus checks, the US debt ceiling, massive Chinese companies (*cough* Evergrande) defaulting on their debt…and, of course, cryptocurrency.
These events can understandably scare us, and maybe even make some investors worry about a financial crisis cropping up because of them.
Before we go that far, though, we might consider this.
All of these are noteworthy happenings and worth being concerned about, but it is also worth noting that trying to accurately predict a global financial crisis is not something most of us should venture to undertake. It always seems like the end of the world, until it isn’t. We can do nothing better than just be prepared, and analyze objectively.
That being said, here are a few things investors can keep a watchful eye on.
China & the Evergrande situation
Evergrande is a Chinese real estate Frankenstein–at least, it used to be. Evergrande has stretched itself thin over numerous industries, beyond just real estate development, with a hand in everything from wealth management to EVs. They’re also publicly traded, on the OTC that is, for about 35 cents a share (at the time of writing).
Oh, and they have over $300 billion in liabilities. Last year they reportedly generated “only” $77 billion in revenue, and they’re now falling behind on payments. At the end of September, they missed an $83 million dollar interest payment to overseas bondholders, and October balances remain outstanding too.
Why does this matter? China invests a lot of money into real estate, even more than the US. So, the Chinese real estate market is very valuable and many rely on it. Evergrande, with its 700+ ongoing projects, risks causing a contagious default that could spread throughout one of the world’s largest economies.