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Evergrande shares plunge as much as 87% as trading resumes after 17 months

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Re: Evergrande shares plunge as much as 87% as trading resumes after 17 months

#161
post #144
post #75

Earlier quoted context omitted.

I agree with you, but it might not be completely irrational to buy an about to be bankrupt company. If the assets on book is sufficiently larger than the stock price, investors might get a payout when it gets sold off after fees. When Enron was liquidated, the last investors that bought the stock ended with an 8x RoI (according to an Acquired episode). Still an insane gamble obviously.

Short sellers can use bankruptcy as a way of closing out their positions and also in the process provide some market and liquidity. Short sellers borrowed stock and sold it based on the belief that the stock was going to drop in price and need to buy the stock to return it. Institutional investors will attempt to liquidate but are largely locked in as significant sales will take the price to zero. It is the irrationa…

If a company goes bankrupt, short sellers do not have to buy the stock to return it. The stock ceases to exist and the position is closed.

https://www.investopedia.com/ask/answers/maintain-short-posi...

Agreed about irrational retail investors keeping the price of Bed Bath and Beyond and Sears above $0.

Hilariously, the creditors/BBY management saw the price and sold stock into that crowd right before bankruptcy. The prospectus literally said something like "we plan to go into bankruptcy soon and this stock will be worthless, it's just providing slightly more value for our creditors" but meme stock traders bought it anyway.

Re: Evergrande shares plunge as much as 87% as trading resumes after 17 months

#162

As a lay person, it has been extremely difficult to figure out what is going on. I have a weak grasp on four points(with low confidence on any of them being completely accurate): 1. There is an excess supply of apartments including the ones that have already been sold. The demand side is mostly people buying second and third units as investments. 2. China is going through a weird demographic situation. The younger ge…

As an aside, but related to this topic, I can't wrap my head around on how one can purchase an apartment. My house's warranty deed explicitly defines the property I own, with references to plat maps that have very specific survey measurements, etc.

But if I buy a slice of a high rise building, what does the deed say? What does the plat map look like? Do I just own an N% slice of the underlying land? Do I own specifically the portion of the building that is M inches from the top of the foundation to M + Q inches above it, and X inches from the Northwest corner of the structure, etc?

For rentals, it's straightforward, since the owner pre-specifies the dimensions of the unit numbers. But how does one "own" a section of a multi-tenant structure? How does one insure just their unit, if fire and other damage risk is shared?

Re: Evergrande shares plunge as much as 87% as trading resumes after 17 months

#163
post #162

As a lay person, it has been extremely difficult to figure out what is going on. I have a weak grasp on four points(with low confidence on any of them being completely accurate): 1. There is an excess supply of apartments including the ones that have already been sold. The demand side is mostly people buying second and third units as investments. 2. China is going through a weird demographic situation. The younger ge…

As an aside, but related to this topic, I can't wrap my head around on how one can purchase an apartment. My house's warranty deed explicitly defines the property I own, with references to plat maps that have very specific survey measurements, etc. But if I buy a slice of a high rise building, what does the deed say? What does the plat map look like? Do I just own an N% slice of the underlying land? Do I own specific…

All ownership is a legal fiction, including land ownership.

Re: Evergrande shares plunge as much as 87% as trading resumes after 17 months

#164

Earlier quoted context omitted.

These questions indicate a misunderstanding of how markets inside China work. I suggest you don't look at "what makes sense" but more look at the reality of what's happening. What you are also missing is that sometimes, parties are not allowed to abandon ship. Couples who have bought homes with mortgages but are not moved in for years are not allowed to give up, they are not allowed to stop paying on threat of impris…

> the government didn't really want to arrest all the people, cause that would indicate they are not in control Objectively, not arresting them indicates they are not in control more than arresting them would.

of course, but the central government is all about seeming to be in control, not objectively in control.

mass arrest -> leads to questions about why 1000's of young couples are being arrested due to them not wanting to pay mortgages on houses they can't move into for years, and has no construction progress (the construction is abandoned), and this is a contagion that will lead to another city starting to rebel, leading to more mass arrests. Not talking about 1 or 2 people, but thousands.

vs.

the central government is taking care of the people by forcing a company into bankruptcy so they can't take advantage of people anymore.

The 2nd is the better narrative. That's what they picked. Doesn't make sense, but is what happened.

Re: Evergrande shares plunge as much as 87% as trading resumes after 17 months

#165
post #162

As a lay person, it has been extremely difficult to figure out what is going on. I have a weak grasp on four points(with low confidence on any of them being completely accurate): 1. There is an excess supply of apartments including the ones that have already been sold. The demand side is mostly people buying second and third units as investments. 2. China is going through a weird demographic situation. The younger ge…

As an aside, but related to this topic, I can't wrap my head around on how one can purchase an apartment. My house's warranty deed explicitly defines the property I own, with references to plat maps that have very specific survey measurements, etc. But if I buy a slice of a high rise building, what does the deed say? What does the plat map look like? Do I just own an N% slice of the underlying land? Do I own specific…

Have you considered what ownership in a company looks like? Even your plat map of the land, how much of the land do you own? Can you dig it looking for things? Can you regrade it?

And the very specific survey measurements are going to be based on landmarks that were likely planted for the purpose of making the survey work. Heaven help you if you have seismic activity move anything around.

That is, all of this only works because we define it to do so. You can do the same with a high rise. Condos are very common and have well defined common areas and housing spaces. Things get more complicated when you consider time share ownership.

Re: Evergrande shares plunge as much as 87% as trading resumes after 17 months

#166
post #131
post #104

Earlier quoted context omitted.

The problem started long time ago when the central government took most of the tax revenue from the local provincial and city governments leaving them without funding to operate. As a compensation, they were granted the authority to sell the land use right of their lands. Land is never privately owned in China. What is sold is the right to use the land for a period of time. Since the state owned all the lands and the…

>Even the central government has no money. They have several trillion in US Dollars.

Those have equal obligations.

Re: Evergrande shares plunge as much as 87% as trading resumes after 17 months

#167
post #104

Earlier quoted context omitted.

The problem started long time ago when the central government took most of the tax revenue from the local provincial and city governments leaving them without funding to operate. As a compensation, they were granted the authority to sell the land use right of their lands. Land is never privately owned in China. What is sold is the right to use the land for a period of time. Since the state owned all the lands and the…

Greatly appreciate your detailed post. Very interesting! Could I kindly request that you update your post with references? This sounds very plausible, but it's difficult to acertain the veraciy of the claims. Even if the references are anectodal, or based on your experience, it would be really helpful to know where this knolwege is coming from.

Ha. You’re asking for a research paper. Which areas you want citation? You can certainly google on the areas that you're interested. I’ll see what I can do later today when I got the time.

Re: Evergrande shares plunge as much as 87% as trading resumes after 17 months

#168

As a lay person, it has been extremely difficult to figure out what is going on. I have a weak grasp on four points(with low confidence on any of them being completely accurate): 1. There is an excess supply of apartments including the ones that have already been sold. The demand side is mostly people buying second and third units as investments. 2. China is going through a weird demographic situation. The younger ge…

The total of Chinese Corporate debt was $29 trillion in one quarter at the end of 2021[1]. More than the U.S. Government debt.

Who’s on the other side of those mortgages? The Chinese government.

[1]: https://www.spglobal.com/marketintelligence/en/news-insights...

Re: Evergrande shares plunge as much as 87% as trading resumes after 17 months

#169
post #162

As a lay person, it has been extremely difficult to figure out what is going on. I have a weak grasp on four points(with low confidence on any of them being completely accurate): 1. There is an excess supply of apartments including the ones that have already been sold. The demand side is mostly people buying second and third units as investments. 2. China is going through a weird demographic situation. The younger ge…

As an aside, but related to this topic, I can't wrap my head around on how one can purchase an apartment. My house's warranty deed explicitly defines the property I own, with references to plat maps that have very specific survey measurements, etc. But if I buy a slice of a high rise building, what does the deed say? What does the plat map look like? Do I just own an N% slice of the underlying land? Do I own specific…

I've always wondered the same, and understood it as "owning the airspace" within the specific unit, but not having any ownership of a physical structure. No control over the maintenance of the building would be a concern -- seems very an extreme version of "neighborhood deterioration" could easily occur.

I know plenty of people in the US who own condos (usually part of a pair e.g. 1A/1B), but outside of major cities the idea of owning an "apartment" (a unit in a huge building full of hundreds of other units) is somewhat foreign. However, my relatives in eastern Europe own these types of apartments as their primary investment vehicle due to poorly performing native currency / stocks.

----

via ChatGPT:

"The ownership of an apartment or condominium within a multi-unit building is indeed different from owning a single-family home. Here's how it typically works:

### Deed and Plat Map

1. *Deed*: The deed for a condominium or apartment within a high-rise will usually refer to a "unit" as defined in a "master deed" or "declaration" that has been recorded for the condominium. It will contain a description of the unit and any associated "common elements" that you may have an ownership interest in (e.g., shared hallways, gardens, and sometimes amenities like a gym or pool).

2. *Plat Map*: This would typically include a map of the entire complex, including the boundaries and location of each individual unit, along with common areas. These maps are often extremely detailed and have to be filed with a local government office.

### Ownership Structure

1. *Air Space*: In essence, you own the "air space" confined by the boundary walls of your unit, sometimes specified down to the paint on the walls. The structural elements, building exterior, and common areas are usually considered "common elements" owned collectively by all unit owners.

2. *Percentage Ownership*: Yes, you often own a percentage of the common elements, including the land upon which the building is constructed. This is sometimes proportional to the size of your unit as a percentage of the total building or complex size.

### Insurance and Liability

1. *Individual Insurance*: You would typically have a specialized form of homeowner's insurance known as an HO-6 policy that covers the internal elements of your unit (fixtures, improvements, personal property, etc.) and may provide liability coverage for incidents within your unit.

2. *Master Insurance*: The homeowners' association (HOA) will generally have a "master" insurance policy covering damage to the common elements and the overall structure. This is funded by HOA fees collected from the unit owners.

3. *Shared Risk*: The risk is essentially communal, but individual unit owners are usually responsible for the deductible on the master policy for damages originating in their units. Some complex scenarios could involve subrogation between the individual and master policies.

Understanding your specific rights and responsibilities when purchasing a unit in a multi-unit structure is crucial, and legal counsel is usually advised to navigate the complexities. Always read the declaration, by-laws, and any rules and regulations to understand your ownership fully."

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