Welcome back to the channel everyone today, i want to talk about the suspension of the evergrande stock and the incoming default of the evergrande group, and i also want to talk about a market veteran predicting an 80 correction in the s p. 500. By the end of the year, so stay tuned and let's make some money, but before i dive into the video, if you haven't already be sure to sign up to moomoo using the special thomas james, investing promotion. Not only do you get a free stock with up to 350, and not only do you get a second free stock with a guaranteed value of fifty dollars, but you also get a third free stock with another guaranteed value of thirty dollars.

On top of that, that's at least eighty dollars in guaranteed free stocks, just for signing up to moomoo and depositing at least a hundred dollars. You can always sell those free shares and get at least two entirely free shares of amc just for signing up and depositing link in the description below, and i want to dive straight in with the key information, so goodbye, 426 trillion dollar derivatives market. To those wondering sure, they're not 100 negative, fair value yet, but the majority are rehypothecations of rubbish with much less positive, fair value than stated when markets crash so does the positive, fair value of derivatives. Thus equalizing realized losses, as bloomberg.

Tweeted saying latest shares in china. Evergrande and its property management unit were suspended from trading on monday as a fresh debt test loom for the developer, underscoring broader risks that have left credit markets on edge. Now, in my video the other day, i noted that boss bluntz had updated his due diligence on the derivatives market when you include the holding companies of those top 25 financial institutions. The total derivatives market is worth 426 trillion dollars.

A lot of that is held input and call options. Obviously, you've also got other kinds of derivatives like interest rate swaps, other forms of swaps, forward contracts and more, but a lot of it is held in options now. Obviously, when a market crashes, the fair value of those options is going to go way out of whack and is going to also crash massively and therefore the 426 trillion derivatives market is going to be basically worthless. At that point, and when those options expire, unrealised losses, turn into realized losses, fx hedge also tweeted, saying china ever grind the default expected to be the biggest ever and therefore also bigger than lehman in 2008.

Therefore, this is going to have a massive massive impact. Not only on chinese property developers, but also on chinese financial institutions and banks, and that impact is also going to be felt worldwide, even in u.s and uk markets as well, because obviously us and uk financial institutions and banks also have massive massive interest in china. And even specifically in this evergrande, dare predators have also said that evergrande is on the hook for a 260 million dollar jumbo fortune note due october 3rd and interestingly, this note, or this bond has a five-day grace period and not a 30-day grace period for payment until The full and therefore, by what october, 8th we will know for sure whether evergrande is about to default. Now i personally think it's very, very unlikely that evergrande will be able to make this bond payment.

They've missed the last three over the last two weeks and they also can't even afford to pay staff or suppliers they've already sold off as much inventory and assets as they can and still yet don't have enough cash to make these boundary payments. Potentially, the ccp could bail them out. If they do, it's only likely that they'll bail out the onshore bonds and not the offshore bonds and considering the evergrande stock has been suspended. It sounds like to me they won't be making this note repayment and on top of that, evergrande isn't the only stock that's currently suspended in the hong kong market.

You've also got zing yang mao jin group. You've got gti holdings, you've got china, bazar development, china supply chain million stars. I cable communications, dragon crown group, evergrande, evergrande services and hobson development, as you can see, there's a very large number of development companies or supply chain companies or cable related companies. Basically, anything to do with property development in china is severely underwater and are all going into default, and we've got some updated bank of america.

Information as well. Bank of america's latest earnings show they lost 58 billion dollars in the first two quarters of 2021 in their trading derivatives and liabilities and assets. Portions, that's bad! That's very bad! Obviously, they're also the clearinghouse for 97 of all citadel securities is trades, and it's also the margin holder for citadel as well. Therefore, citadel have borrowed all of their money from bank of america not sure to what extent.

But in 2008 the banks failed with a leverage of 35 to 1. right now, from what i can tell most institutions are leveraged somewhere in the range of 75 to 200 to 1.. Now these leverage ratios are to do with the leverage between derivatives and assets. Obviously, in the clip that i've played you from the big short back, then credit default swaps and synthetic cdos were in the ratio of 50 to 1 on the underlying bonds.

Right now, from what corey can tell, banks are currently leveraging the ratio from 75 to 1 to 200 to 1 on that same assets to derivatives ratio just quickly, rewinding a little bit here to citadel. We know that citadel are leveraging the ratio of seven point one to one all the way to eight to one and therefore, all of that cash is being borrowed directly from bank of america. Obviously, citadel have something like 35 billion dollars in equity of their own and they've borrowed the additional 200 billion dollars to make up that 235 billion dollar asset position. All of that cash has been borrowed from bank of america.

Let's add to this that over half of the brick and mortar locations for bank of america are still closed with signs on them that have instructions telling you how to access any safety deposit boxes. You may have there and a large number also state on the doors that they will not be reopening and they issued a 15 billion dollar bond in april to raise cash. I haven't even yet begun to read the pandora papers which were released on the derivatives world. The derivatives world is worth hundreds of trillions of dollars and it's all basically promised money that doesn't exist and if you do want to read more on the pandora papers, i'll leave the link to this twitter thread and this link here down in the description below as Well, also, on top of this bank of america also recently filed a shelf to offer up to 120 billion dollars in debt and equity securities over time.

Bank of america's market cap is currently 362 billion and therefore that's an offer that would dilute the stock by a whopping 33. Now, obviously, this article is back from august, but it's still relevant right now and if anything, even more relevant right now to what's going on with bank of america, bank of america filed a shelf registration on monday, which is obviously going to be back in august with The sec to allow it to issue up to 123 billion dollars in debt securities warrants preferred stock and equity securities. Over time. Proceeds of any offerings will be used for working capital to fund investment in or credit to, subsidiaries to repay debt, to invest in other businesses and for general corporate purposes.

So i guess i am going to be picky here and pick specific words. But bank of america are issuing up to 123 billion dollars in equity and stock for working capital because they basically don't have enough cash to meet day-to-day needs. So i guess what is a shelf offering and a shelf offering is an sec provision that allows an equity issuer such as a corporation or bank, to register a new issue of securities without having to sell the entire issue at once. So, instead of making one giant share issue that dilutes the stock of 33, all at once, they can issue it in separate little stages whenever they like.

The issuer can instead sell portions of the issue over a three year period without re-registering the security or incurring penalties. This lets the company adjust the timing of the sale of a new issue to take advantage of more favorable or less favorable market conditions should they arise in the future. So basically, bank of america made a secret provision a little while ago that if everything does hit the fan, they can issue 123 billion dollars of new equity and get 123 billion dollars of cash on a whims notice whenever they, like. The company maintains any unissued shares.

As treasury stock, where they remain secretly on the shelf until offered for public sale, so instead of needing a government bailout or instead of needing to spend months and months on all the complex paperwork that comes with a share issue, they've basically already got it and they've Got it on the shelf, so they can issue all of this new equity straight away in an emergency now a 48-year market vet says, i think, we're heading for disaster and he warns that inflation will be more persistent than expected and forced the fed to pull money Out of the system and says stocks will crash at least 65 by the end of the year as a result. Now, obviously, this was written on june 26th and, as of yesterday, he's just updated his estimate to not a 65 crash, but an 80 crash that articles on business insider. Unfortunately, i don't have their premium subscription. So i can't read you that updated story, but this is the exact same story just a few months ago, instead of being an 80 crash.

At this point, he reckoned only a 65 crash. So basically, just imagine this article replicated as of yesterday, but made even worse. David hunter is warning that stocks will top in the months ahead before falling at least 65 or updated stocks have topped and are now about to full 80 hundred said that inflation will be less transitory than the fed expects, and this will result in the central bank Pulling liquidity from markets, so this david hunter is the chief macro strategist at contrarian, macro advisors and so far his predictions have remained generally on track as well. Therefore, he clearly knows what he's talking about in december, for example, when the s p 500 sat around three thousand seven hundred dollars, which was then all-time high levels at that point, hunter said that he expected the index to surge to four thousand five hundred dollars towards The middle of 2021.

now, obviously, that article was written back in june and his target of five hundred dollars didn't quite come to fruition. It was at four thousand two hundred dollars, which is still very close, but, interestingly, in september we hit an all-time high of four thousand five hundred and thirty six dollars on the s p. 500. Therefore, he was very, very accurate.

He also predicted earlier this year that yields on 10-year treasury notes would drop to around 1.2 percent after jumping more than 80 basis points to 1.73 from january to march. And if we have a look at that 10-year treasury note, it jumped to 1.745 and then fell to a low of 1.175, so very, very close to 1.2 percent. And the article goes on to say. But now is where hunter's predictions get interesting.

And he has said and reiterated this week, obviously back in june, that he believes the s p 500 will top in around july or august mere weeks from now, which it did it topped. In august, the topping process may appear benign at first, as stocks may test their highs again after peaking. But as the fall approaches he said, stocks will begin their descent towards a 65 to 80 drop from around 4 500 levels. Hunter said, the catalyst for such a catastrophic decline would be inflation and therefore it seems like so far.

His predictions have been very, very accurate, so he could be on track for a massive 80 s. P 500 market correction guys be sure to. Let me know down in the comments below what you think about the evergrande stock being suspended and what you think about the s p, 500, potentially falling by 80 and while you're down there be sure to sign up to moomoo using the special thomas james, investing promotion To get three free stocks and as always guys if you enjoyed this video, be sure to check out some of my others. Alternatively, subscribe to the channel and ding that notification bell, because that way, you'll be alerted when i upload a new video cheers.