Welcome back to the channel everyone today, i want to really dig down and explain why a market crash is good for amc. Firstly, i want to talk a little bit more about what exactly is going on and why it's going to impact the market and crash the market so much and how that's actually beneficial for amc. So stay tuned and let's make some money. But before i dive into the video be sure to sign up with moomoo using the special thomas james, investing promotion.

Not only do you get a free stock worth up to 350 dollars and a second free stock with a guaranteed value of around fifty dollars. But you also get a third free stock with another guaranteed value of thirty dollars. So that's a guaranteed value of at least eighty dollars worth of free stocks, just for signing up with moomoo and depositing you could also sell those free stocks and get about two free shares of amc just for signing up linked in the description below and also you're Down there be sure to sign up with blockfi to get up to 250 dollars worth of free bitcoin, also linked in the description below, and now i want to dive straight in with the key information so zero hedge has explained evergrande like this, that it's a chinese Ponzi like developer, using borrowed money to acquire land, collecting, pre-sale cash before projects even start and then borrowing more money to invest in new projects. Now, that's obviously a very sketchy practice using borrowed money to buy over inflated land and then collecting money from customers before you've.

Even finished the work before you've even started the work and using that money to roll onto new projects before you've even started. The first zero hedge says that that sounds like a certain eevee maker, i'm guessing nicola, who are obviously taking customers money when they haven't even finished a single ev or a single electric truck or even a hydrogen powered truck. Now this is effectively the root of evergrande's problems, the fact that they're so over leveraged, but what kind of impact does this have on the chinese market and also the us market, and how actually has that spun massively out of control? Well, dr trillian says that it's not just the default of evergrande. That's the threat.

Yes, every grand they do have three to five hundred billion dollars worth of debt, but that's not the sole threat. You've also got the over leveraged banks and institutions which are massively massively long on the market and very over leveraged on those long positions. At a time when the market is at an all-time high on the schiller, p e ratio and could potentially be considered overvalued and also remember that it's not just the evergrande debt, there's also the derivatives on that debt and also synthetic collateralized debt obligations and swaps. On that debt, as well and dr trillions reckons all of that is tethered to wall street and we're just about to experience the margin call of all margin calls now.

You might also remember this clip from the big short where mark baum is talking about just how many synthetic cdos are out there, betting against subprime loans right now back in 2008. At some point all right, let's say you have a pool of 50 million in subprime loans. How much money could be out there? Betting on it, in your synthetic ceos and swaps right now tonight, 50 million billion dollars? What, if the mortgage bonds that michael brewery discovered, were the match? How much bigger is the market for insuring mortgage bonds than actual mortgages about 20 times? So, therefore, the three to 500 million dollars of evergrande debt could just be the match. There could be up to 10 trillion dollars in synthetic clos and swaps out there betting against it right now.

Now some of you might say, hang on tom, there's no way that credit default swaps and synthetic clos or synthetic cdos still exist in the market today. Right well, china, sovereign credit default swaps have just jumped to a near one-year high and therefore, credit default swaps are out there right now. Betting on that evergrande debt. Right as we speak, and on top of that, here's an article back from 2019 that talks about investors piling back into synthetic cdos and therefore synthetic cdos are out there as we speak right now as well, whether the market for credit default swaps and synthetic cdos or Synthetic clos is as big or bigger, or maybe smaller than it was in 2008, would be very interesting to know.

Maybe there's a wrinkle brained ape out there that can figure out just how many synthetic clos and credit default swaps are out there right now. Betting against the evergrande dare now bo boone ross on twitter has explained why this is actually a good thing for amc. So this morning, during pre-market, the wrinkle-brained ape, and i were discussing the futures pre-market and what our predictions held during this i said, i wanted to end down, provided the wider market ended down as well. The reason for this is because of the difference between assets and liabilities when anyone makes a play on margin, regardless of what the play is, they owe money to someone in retail's case.

It's our brokers to hedge funds and market makers, it's banks and other large financial institutions during times of market crashes. Potentially, what we're at the start of the value of your assets drops normally a lot faster than the value of your liabilities, the value of what you would have to pay if all of your bets went bad. So if you started with a hundred dollars in assets and a thousand dollars in liabilities or margin, you have a ratio of one to ten or one dash, ten or one over ten. However, if your assets drop by ten percent and your liabilities by only five percent, then suddenly the ratio is ninety dollars to nine hundred and fifty dollars or roughly two to twenty one or one to ten point 10.55, the quicker your assets fall, the higher the ratio Goes when the ratio reaches a certain point, our short hedge funds get margin called during this they're told to pony up more assets or cash as collateral or start closing out of some of your positions.

If you don't, we will do it for you. So that brings us to today the wider market is falling, causing amc and gamestop to fall as well i'll come to negative beta in a second thread and fall harder than the wider market as well. But, most importantly, it causes the market makers and short hedge fund assets to full and as for liabilities, we know that they are sure amc and gamestop, but they will also be very heavily long in other assets, normally tracking the wider market, like being very, very long On apple, amazon, tesla, microsoft and other companies, like that, all in all this means that their total liabilities will drop, but not as much as their assets, and sometimes it even rises. And that's because yes, a lot of these hedge funds and institutions are short on amc and short on amc in a big way because they have synthetic shorts as well.

But all of these hedge funds are also very very long on the market and actually the majority of their largest positions are in companies like amazon, tesla, netflix, apple, microsoft and so on and so forth. Amc short positions are only a smaller portion of their portfolio. It's like having say ten thousand dollars invested in apple and only a hundred dollars invested in amc or 100 shorting amc. Yes, amc just fell, meaning that their 100 short position on amc went up a little bit.

Maybe it went up by 10 to 110 great, a 10 profit, but also their ten thousand dollar long position on apple just dropped by about three percent, which is three hundred dollars and therefore they've lost three hundred dollars on their apple position and only gained ten dollars. On their amc short position, so therefore, the hedge fund overall still lost a lot of money and a lot of assets so today, being down and ending down, may feel like a lost battle, but it may long term help to win the war. Then again it might not, they might be able to scramble or the fall in the dow on the s. P 500 may just be a panic and start recovering tomorrow through the rest of the week.

Time will tell this is the best chance we've had since january of igniting the short squeeze, and this is kind of what i was explaining my video the other day. Yes, amc is down today, but a lot of their large long positions were also down as well. When these long positions continue going down, the fund will eventually get margin called and will have to cover their amc short, causing amc to rock it upwards. Now i think, there's also another beneficial way to look at it in terms of shares on loan being recalled.

Yes, we know that blackrock have a very large long position in amc, but we also know that blackrock are lending out all of those shares to hedge funds, which a lot of people have been very very annoyed about. But we also know that blackrock has a very large exposure on the evergrande debt and also on the debt of many other chinese property companies as well, and also could very potentially have a lot of exposure to credit default swaps and synthetic close and synthetic cdos. And much much more, therefore, the face value of their holdings in the evergrande debt could only be a very small portion of their total exposure. So therefore, blackrock could potentially be hit very, very hard by this and may even go bankrupt or have to sell off their amc position.

So i was having a little dig around and a little look to figure out what happens if blackrock do have to sell off their shares or are forced to sell off their shares? What happens when a broker wants to sell loan down shares if the firm is unwilling to continue to lend their shares out to the options trader? The brokerage firm has the right to call any short seller to return the shares at any point. In this case, the short seller will have to return the shares to the brokerage firm by purchasing them on the market, regardless of whether they end up incurring a loss or a profit based on the current market share price. If you are the one whose shares are being lent out by your broker to the short seller, your part in the short sale transaction will have no effect on your ability to sell the shares during the short sale. Your shares are the ones currently being designated as lent out by the brokerage firm, but the broker essentially owes you the shares.

When you want to sell the shares, the broker is required to replace your shares, so you may sell them on the market. So basically, what this means is that if blackrock want to sell off their amc position or are forced to sell off their amc position, they have to first recall those shares because obviously they're being lent out in order to sell them. Therefore say if blackrock are loaning. 30 million shares to citadel.

That means that citadel would have to cover those 30 million shares, shorted buy them all back and return them to blackrock and obviously that caused a massive rise in the amc price. Now, i guess obviously blackrock would then sell their shares, but i think a lot of apes would eat up that dip and buy all the shares off them. Potentially citadel could buy all of blackrock shares after and use that to cover more of their short position. But again it just means that citadel are going to have to go into the market and buy 30 million more shares from blackrock.

We also have some more words of encouragement from vanguard. A spoonful of patients may help the portfolio go up, vanguard, insights. Clearly, vanguard are just encouraging all of us to be patient and to continue holding our amc, because the end game is near guys be sure to. Let me know down in the comments below what you think about the market crash, having a positive impact on the amc squeeze and also while you're down there be sure to sign up with moomoo to get that special thomas james.

Investing promotion and the free shares, and also sign up with block five to get up to 250 dollars in free bitcoin 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.