On October 4, 2021, Chinese luxury real estate developer Fantasia Holdings fails to pay $206 million in debt due. On October 3, the $260 million dollar note from Jumbo Fortune Enterprises matured. The dollar note is guaranteed by China Evergrande Group and its unit Tianji Holding Ltd. On October 4, China Evergrande and Evergrande Property announced the temporary suspension of trading without prior warning before the opening of the Hong Kong stock market. Evergrande has defaulted on the maturity interest of two US dollar bonds in late September, involving amounts of US$83.5 million and US$47.5 million respectively. Of course, these are not the only ones that face such challenges. According to the "Times Weekly" report, as of September 5 this year, a total of 274 real estate companies in mainland China have issued bankruptcy announcements. In 2020, 408 real estate companies issued bankruptcy announcements. The reason for the bankruptcy of mainland real estate companies is generally because of the rupture of the capital chain, resulting in debt defaults.
In August last year, the Chinese authorities set "three red lines" for real estate companies and restricted their financing according to the number of red lines they stepped on. Secondly, at the end of last year, the authorities also set the ratio of bank loans to developers’ own funds for real estate projects; Furthermore, since the beginning of this year, the CCP has continuously upgraded its "control" on real estate industry, controlling the housing market from the demand side, causing the rapid cooling of the market. Thus, the desire of real estate companies to speed up the sale of properties to collect the money has been dashed. The financing of real estate companies is restricted, the method of lending the new to repay the old is also blocked, and properties are generally not easy to sell. Therefore, many real estate companies’ capital chains were broken. Most of China's real estate companies quickly expand up through a high borrowing and high turnover approach, their leverage ratios are relatively high. For example, the real estate company that ranked first in sales in September- Country Garden, starts project design immediately once it acquires land plots, opens for pre-sale within 4 months, achieves positive cash flow in the 5th month, and starts to rush into a new land acquisition in the 6th month. This kind of high turnover becomes the way to maximize the interests of real estate enterprises. Under this business philosophy, the net operating cash flow of real estate companies has always been negative as a whole. In 2014, the net cash flow of all real estate companies was as high as negative 884 Billion USD. Since then, China has been forced to start destocking to improve cash flow for the real estate industry. By 2018, the net cash flow was negative 590 billion USD. By 2020, the net cash flow has deteriorated again and reached a negative 714 billion. From January to August this year, the number is negative 512 billion, and it is expected to exceed negative 776 billion USD for the entire year. Driven by greed, real estate companies do everything they can to expand rapidly, and their cash flow has always been negative. How can these companies not collapse?
0 Comments
China retreats behind the Great Wall. That says the club of European companies in the country. "China seems to have opted for greater economic and political control, and accepts that this could lead to lower growth," said Jörg Wuttke, chairman of the European Chamber of Commerce (EuKvK) in a new report. "Our biggest concern is: where is our place?"
From tech companies to the real estate sector and education, the space to do business for private Chinese companies has also been shrinking rapidly in recent months. A development that was already started last year when tech company Alipay was banned from going public at the last minute. Foreign companies are also noticing that the tide is turning in China. Foreign companies are being pushed out of the market in various sectors, says the Chamber of Commerce. For example, companies in several provinces were unable to sell their health equipment because they "had no Chinese majority shareholder." "China wants to do what it can do itself," says Wuttke. "Even if that is more expensive and potentially more polluting." Vulnerable economy 'Buy Chinese goods', seems to be the motto. US sanctions have convinced policymakers in Beijing that the country is vulnerable if supply chains are cut. And so China wants to become self-sufficient in a range of sectors, including the chip industry. China has said it welcomes foreign companies. But companies are noticing that the red carpet is no longer being rolled out for everyone. H&M was hit after it said it wouldn't use cotton from Xinjiang over concerns about Uyghur forced labour. "That's why companies ask themselves: am I next?" says Wuttke about this. The club of European companies in China is also concerned about the ongoing travel restrictions, related to Covid. They notice that it is more difficult to get specialists and talents to China. "China has become less attractive to send workers to. Foreigners are a dying breed in China." For the past year and a half, only limited visas have been issued by China. Incoming travelers face strict quarantines lasting up to three or four weeks. "There are now more foreigners in Luxembourg than in Beijing and Shanghai," said Wuttke. Luxembourg has more than 600,000 inhabitants, Beijing and Shanghai together just under 50 million inhabitants. However, turning your back on the market is not an option for most companies. In an earlier report by the same Chamber of Commerce, only 9% indicated that they wanted to run. "If you're not in China, you're not a global player," Wuttke says. "Twenty to thirty percent of global growth is in China, the growth potential remains enormous. But the price of self-sufficiency will eventually be paid by lower growth, and less innovation." Some local authorities are even giving properties away for free to solve their empty house – or ‘akiya’ – problem. Struggling to get on the property ladder? In search of adventure after months locked down in your poky little flat? Here’s a solution for you: move to Japan!
It may come as a surprise given the population density of the country as a whole, but Japan has a real problem with abandoned houses, which is great news for prospective homeowners. In a bid to fill some of these empty abodes – known as akiya – local authorities are offering people the chance to snap up a house for as little as $500 (£362). Some are even giving properties away for free, offering renovation grants or subsidising childcare for young families who move into the area. And to help prospective buyers to find the perfect property, many have also set up online ‘akiya banks’, databases that list all of the abandoned houses available in an area. Conducted every five years, Japan’s most recent Housing and Land Survey in 2018 recorded a massive 8.49 million empty homes across the country – or 13.6 percent of the total housing stock. The country’s ageing population is largely to blame. Many houses are being left empty as older inhabitants move into care homes or pass away, with fewer young people to take them on afterwards. The issue is particularly pronounced in the prefectures of Wakayama, Tokushima, Kagoshima and Kochi, where home vacancy rates are all above 18 percent. And it’s not just rural areas where the properties can be found, with plenty of empty houses available on the outskirts of major cities including Tokyo and Osaka too. Already researching overseas removal companies? There a dozens of websites and blogs that collate the various akiya banks and offer advice on relocating. You might need to brush up on your Japanese first, though! The Hong Kong Stock Exchange did not say why it has suspended trading in Evergrande shares, but there is speculation that another major developer may buy out the company's property management unit. Shares of the embattled Chinese developer Evergrande were suspended on the Hong Kong stock exchange early Monday amidst heightened speculation about a potential sale. "Due to the suspension of trading in the underlying shares, trading in Futures & Options for China Evergrande Group (EVG) have been suspended until further notice," the Hong Kong Stock Exchange said in a statement, without listing a reason. This is the first time that the shares of the company, once China's top-selling developer, have been suspended. Evergrande is currently the world’s most indebted real estate group with debts surmounting billions. It could face one of China's largest-ever restructurings. The latest development comes as a Chinese financial news service, Cailian, said Evergrande’s property management unit may be taken over by another major developer.
How much does Evergrande owe? According to reports, Chinese regulators requested Evergrande avoid a near-term default on its dollar bonds and the nearly $83.5 million (€71.1 million) in dollar-bond interest payments due last month. At the same time, reports also said the central government had alerted local governments that the property giant could collapse. The payments that were due were on a $2 billion offshore bond and a $47.5 million dollar-bond. Evergrande's bonds would default if the company fails to settle the interest payment it owes within 30 days. In total, the company owes $305 billion (€262.7 billion) in the next two years. Reports said Evergrande had stopped paying staff and factory suppliers in its electrical vehicle unit. The Chinese government has imposed power curbs to deal with an imbalance in energy supply and demand. A broad range of manufacturing sectors have been affected by the cuts. Fresh power cuts were enforced in China on Wednesday, as coal supply shortages combined with high electricity demand from manufacturers, industry and households have pushed the non-renewable resource's price to record highs. China's power consumption is growing at almost double its usual rate, while the ruling Communist Party is trying to reduce energy intensity. The country's heavily controlled power pricing system prevents its generators from passing on their soaring coal costs to consumers, leaving them with no choice but to suffer losses or reduce output.
A broad range of industries have been affected, including power-intensive sectors like aluminium smelting, steel-making, cement manufacturing and fertilizer production. Meanwhile, residential users have also been hit in parts of northeast China, where they've been told to limit the use of water heaters and microwaves to conserve power. Elevators and traffic lights were also reportedly affected in some parts of the northeast.
Various factors at play Analysts say the country's rigid pricing system is seen as the major culprit for the shortages. It is not the first time China has struggled to balance supply and demand when it comes to energy, as central planners often underestimate demand growth. But this year, a perfect storm of factors has reportedly taken hold. The government of Guangdong province, China's biggest manufacturing center, said low water levels in hydropower reservoirs that provide a big share of its electricity had played a role. In Liaoning province, the government said that a decline in wind power and other sources had an impact in its electricity supply. A global shortage of natural gas may also be having an impact, as a number of major economies look to stock up on fuel simultaneously following the easing of COVID-19 restrictions. Climate Lockdowns: New CO2 monitoring credit card enables tracking of ‘carbon footprint on every purchase’ – ‘Monitors & cuts off spending when we hit our carbon max’ – Mastercard & UN join forces. Get ready for a Chinese-style social credit system scoring when it comes to your personal spending habits and how they impact “climate change.” A new credit card called Doconomy, has launched that is “working in tight collaboration with Mastercard” and an alliance with the UN Framework Convention on Climate Change (UNFCCC) is now available so you can monitor your personal CO2 budget on every purchase you make. The new CO2 monitoring Mastercard called Doconomy debuted in order to enable “all users to track, measure and understand their impact by presenting their carbon footprint on every purchase.” The credit cards feature the slogan on them reading “DO. Everyday Climate Action” and have a personal pledge on the rear of the card boasting: “I am taking responsibility for every transaction I make to help protect the planet.” The Mastercards feature the UN “Global Climate Action” logo on them as well.
Mathias Wikström, the CEO of Doconomy, explained, “Reducing carbon emissions needs to be prioritized by all parties. At Doconomy we are proud to engage and educate around our lifestyle’s impact on the planet…The financial sector has developed a tremendous efficiency. Now that same force can address the planetary fragility.”
This new CO2 monitoring credit card follows on the heels of the new study in the Journal Nature in August 2021 calling for “personal carbon allowances” that would monitor individuals’ CO2 emissions through smart meters and tracking apps. The rise in popularity of cryptocurrency and the digital token market received with enthusiasm the news that two of Wall Street's best-known funds will start investing in this revolutionary technology. George Soros and the Rockefeller family have taken their first steps to invest in cryptocurrency.
The man who managed to break the Bank of England was skeptical at the beginning of the year regarding virtual currencies, now however he gives its fund manager the go-ahead to start operating with these assets. Adam Fisher, who oversees the macroinvestments of Soros Fund Management and who moves $26bn from his headquarters in New York, has obtained internal permission to start trading with virtual currencies, the US news agency Bloomberg said. However, it is not Soros' first move regarding crypto markets, he has already been indirectly betting on them. His fund acquired a large share in 'Overstock.com' at the end of 2017, thus becoming the third owner of the e-commerce company. This company became the first retailer to accept digital tokens as a means of payment in August last year, as well as plans to launch a cryptocurrency stock market that can operate within the platform. The Rockefellers adopted a similar strategy, who announced in April a cooperation agreement with the CoinFund company that is dedicated to investments in crypto currencies. Venrock, the family's official venture capital arm, was the one who carried out the operation, and whose partner, David Pakman, called it a "long-term investment". The cryptocurrency market attracts more and more personalities, although it is not necessary to be one of them to start investing. Millions of people have already discovered the smartest strategies to invest with eToro, the leading social trading network worldwide. Thanks to the risk management tools offered by this platform, every user can protect their positions and enjoy deposits and withdrawals without complications and instantaneous execution. In addition, eToro offers its new members a free $100,000 account with which to measure and test their strategy. Due to the social nature of this community, users can discuss with the best eToro investors about cryptocurrency investment strategies such as Bitcoin, using the 'CopyTrader' technology that automatically clones the investment portfolios of the most successful traders.
"The peculiarity of Africa is that it does not have the financial means today to protect and revive its economy like all the other continents have done," French Finance Minister Bruno Le Maire told RFI radio in May." World finance chiefs agreed in April to boost reserves (SDR) at the International Monetary Fund (IMF) by $650 billion and extend a debt-servicing freeze to help developing countries deal with the pandemic, although only $34 billion will be allocated to Africa. "France wants this to go much further by reallocating SDRs that are (scheduled) for developed countries," an official from the French presidency briefed reporters ahead of the summit." Macron has said he believes Africa needs a "New Deal" to give the continent a breath of fresh air. And today, he called on G7 nations to find an agreement as part of efforts to reallocate $100 billion in IMF Special Drawing Rights (SDR) to African states.
So how do we pay for the bailout? Macron told a news conference he would like the sale of gold reserves to help finance this planned aid for Africa. So is Macron about to join the hall of fame of infamous leaders selling gold at just the wrong time? Will the spotprice of Gold be affected as when Gordon Brown, UK Chancellor, sold gold in 1999? Or do you remember the effect of the sell of gold in 2016 by The Bank of Canada? Just look down at the grpah below. Let's start with the meaning of inflation and interest. Inflation is the diminishing value of assets: prices are rising on average. The opposite of inflation is deflation, where assets increase in value and prices fall on average. Interest is the payment for making assets available. The interest we are considering here is the refinancing rate set by the central bank. It is important to consider the difference in the nature of inflation and interest. Inflation is a given, while interest is an instrument (of the central bank). In other words, inflation is an external variable, and interest an internal variable. Because inflation benefits no one, the central bank tries to control inflation with the interest-rate instrument. Inflation decreases with higher interest rates. This has two causes. First, there is the effect on the exchange rate of corresponding currencies. After all, wealth investors will prefer to do so in currencies that yield the highest interest, which increases the demand for that currency, which increases the exchange rate (price) of the currency, which makes imports cheaper, which decreases inflation. there is the effect on the money supply (M). When interest rates rise, more is saved, reducing the amount of money in circulation. Here we can use the Fisher equation to reason about the price arrow.
The Fisher equation is as follows: M v = Y p The meaning of the variables is: M = money supply in circulation, v = turnover rate, Y = national product, p = price level. When M is decreased, another variable must change to keep the Fisher equation valid. The turnover speed and the national product will not change (just). The price level is the variable that will change. The Fisher comparison shows that the only possibility remains a decrease in the price level, with other advantages: money becomes more valuable, so there is a decrease in inflation. The foregoing has shown that inflation will go hand in hand with higher interest rates. Now we can still look at the effect of rising interest rates on the prices of shares and bonds. If interest rates rise, corporate debt will become more expensive. Moreover, consumption is declining because relatively more is saved. The two factors are unfavorable for companies. This will cause stock prices to fall. The price of bonds is determined by the nominal interest rate of the bonds and the market interest rate. When market interest rates rise, the nominal interest rate of the bonds will be relatively lower. As a result, the real interest rate of the bonds becomes lower and the price of bonds falls, in such a way that the real interest becomes equal to the market interest rate. source: tradingeconomics.com
Inflation in the US is taking off rapidly and is evident in everything from commodity price rises to the official inflation measures from the US Government (Bureau of labor Statistics). The latest US Producer price Index (PPI), a gauge of wholesale prices in the US, has just been released (13 May) and shows a rise of 0.6% in April, which was twice as fast as economists had predicted. https://www.bls.gov/ppi/
This surge in the PPI now brings the annual wholesale price inflation rate for the year to April to 6.2%, from 4.2% a month earlier, and is the highest PPI rate since 2009 (when the current version of the PPI was introduced). Within the PPI surge, prices of services, wholesale prices for food, partly finished goods all rose in April, and raw material costs are noticeably higher than last year. A day previously (Wednesday 12 May) the US Government announced that the Consumer Price Index (CPI) rose 0.8% month-on-month for April (versus 0.2% expected), and that the CPI rose to 4.2 per cent for the 12 months to end of April, up from 2.6% at the end of the March. This 4.2% rise is the biggest consumer price inflation rise since September 2008 and reflects higher consumer prices across most items measured. https://www.bls.gov/cpi/ With commodity prices rising steeply across the board, and producers needing to pass costs on to consumers, it looks like official US inflation data can’t hide the inflation truths any longer, despite BLS calculations being famous for minimizing reported inflation. The Federal Reserve says that this inflation is transitory, as the US economy rebounds from 2020, but the Fed would say that, as they may need to, but cannot practically, raise interest rates, and are now boxed in. Higher inflation also worries stocks markets, makes real interest rates more negative, and is positive for the gold price. Inflation statistics will be important to watch over the rest of this year, and don't be surprised to see inflation headlines crop up with increasing frequency in the media throughout the rest of 2021. In a shocking retraction, the bullion bank dominated London Bullion Market Association (LBMA) has just announced that it has been overstating LBMA silver vault holdings by a massive 3,300 tonnes of silver.
This overstatement relates to the total quantity of physical silver bars that the LBMA claimed were being held in LBMA vaults in London as of end of March 2021. These LBMA vaults in London are operated by three banks, namely the infamous JP Morgan, the equally infamous HSBC, and the maybe not so infamous ICBC Standard Bank, and three security vaulters, Brinks, Malca Amit and Loomis. On 9 April, to much fanfare, the LBMA published updated monthly vault data for London vaulted silver bars, claiming that as of end of March 2021, total silver held in LBMA London vaults had risen by a whopping 11.04% during March from 1.125 billion ozs (34,996 tonnes) to 1.249 billion ozs (38,859 tonnes), i.e. an increase of 124 million ozs or 3863 tonnes. Continue Reading at BullionStar.com… Investing in silver has a few advantages: you can own the physical commodity, it is more liquid than gold, is scarce, and has many practical uses. Not only that but its supply and demand ratio has been expanding all over the United States. For example, there is demand for silver in solar panel production, electronics, and medical devices. There is even an IRA backed by silver! Because the silver price tends to decrease and become stable during times of economic prosperity and growth, it’s not a recommended buy. However, when the market is declining, it’s a good investment option because it is expected to hold its value during that rough time and you can expect a higher ROI afterwards. Also, if you are considering investing in both of these metals i.e gold and silver, then it can yield a great deal of benefits.
Different ways to invest in silver:
The World Economic Forum just had their Davos Agenda 2021 meeting in January. Now The Great Reset has been something talked about in detail since the pandemic started. But are we seeing The Great Reset happening right before our eyes? I think we are starting to see the slow implementation of The World Economic Forum's Great Reset right now. It's like a chess match, nothing happens right away, many moves are made before the endgame.
The Great Reset that was proposed by the World Economic Forum is looking to forgive all the world's debt and has us live by the slogan, "You'll Own Nothing, And You Will Be Happy". Now first and foremost, we are starting to see a slow implementation of a universal basic income. It was actually what the World Economic Forum talked about and advocate for in the Davos agenda 2021 meeting that happened a few weeks back. Starting with the continual stimulus packages that we have received in the past few months to help stimulate the economy, seems like a slow inoculation into government dependency. Since we can't work where are we going to get our money from? Secondly, The Great Reset talks about how having ALL of our debts forgiven. Well who's going to buy them? The Federal Reserve? Sure, but with the sale of debt, comes the control of the debt. And whoever controls debt, controls YOU! The great reset is all about debt forgiveness but then we won't be able to own anything ever again......and we will be happy about it. I'm not completely convinced that the World Economic Forum is looking to do this for the good of the people. They literally said, "You'll Own Nothing and Be Happy" about it. Would you like to NOT own your home, car, business? I sure would like to own all of the things I've worked very hard for and I can speak on behalf of most people who own those things. Lastly, the Davos agenda 2021 got into cryptocurrency. Currently crypto is decentralized and lacks certain regulation from major regulatory bodies. That is a beautiful thing, but the World Economic Forum has already spoke about crypto in their Davos agenda 2021 meeting that happened a few weeks back. With the Great Reset, the fiat currency will crash because of the reckless printing from The Federal Reserve. So expect to see heavy regulation and government intervention with crypto. The latest vault reporting data from the London Bullion Market Association (LBMA) in London, which is now released on the 5th business day of the month, claims that as of the end of March, there were 1.25 billion ozs (38,859 tonnes) of silver in the LBMA London vaults, which would be an 11% increase on the total claimed to be held in those vaults at the end of February. To put this into perspective, that’s an extra 3,863 tonnes that the LBMA claims has arrived into its vaults in London during March, or an extra 124.2 million ozs. That’s nearly as much silver claimed to be added by the LBMA during March, as the Sprott Physical Silver Trust PSLV holds. (PSLV holds 130.97 million ozs of silver).
Said another way, 3863 tonnes added to the London LBMA vaults during March would be 124,200 wholesale silver bars (each bar weighing about 1000 ozs). These 124,200 bars are stored 30 bars per pallet. This would be 4,140 pallets extra pallets of silver bars. Usually these vaults store pallets of silver 6 pallets high. That would be 690 extra towers of pallets, each 6 pallets high. It would mean that 193 containers (each allowed to carry a maximum of 20 tonnes) arrived at the London vaults during March, or over 8.4 containers on average per day, every business day, and that the vault staff had to move and store 180 pallets each day. All of this in an environment where everyone from refiners to Mints to wholesalers to bullion retailers are reporting availability issues in sourcing physical silver bars right now. Seems plausible, right? And this LBMA vault data does not even break down how much each of the LBMA London vaults of JP Morgan, HSBC, Brinks, Malca-Amit, Loomis, and ICBC Standard, claim to hold. Which is why, if the LBMA vault data on silver (and gold) is to be even remotely trusted (which is a far stretch), then it is now time to independently and physically AUDIT THE LBMA VAULTS. Not that this will ever happen given that the LBMA is run by the bullion banks which run the paper silver and gold markets. But it needs to happen. More info @ https://www.lbma.org.uk/prices-and-data/london-vault-holdings-data
In the days before the pandemic, 20 or 30 people would squeeze together around the long table and, over coffee and Danishes, listen to recordings of the Bible, according to people who were there. First might come the Old Testament, perhaps Isaiah or Lamentations. Then came the New, the Gospels, which called out to the listeners drawn from a path known more for its earthly greed than its godly faith: Wall Street. Hitting the play button and then receding into the background was the host, Bill Hwang, the mysterious billionaire trader now at the center of one of the biggest Wall Street fiascos of all time. The story thus far -- of a mind-boggling fortune made in stealth and then wiped out very publicly in a blink -- has sent shock waves through some of the world's mightiest banks. Estimates of the potential size of his position before it imploded have spiraled toward $100 billion. The Securities and Exchange Commission is looking into the disaster, which has set teeth on edge in trading rooms across the globe. But those accounts tell only part of the story. Interviews with people from inside Hwang's circle, Wall Street players close to him and documents associated with his multimillion-dollar charitable foundation fill in missing puzzle pieces -- ones that haven't been reported previously. The picture that emerges is unlike anything Wall Street might suspect. There are, in a sense, not one but two Bill Hwangs.
Christian Capitalist One of them walks for hours through New York's Central Park listening to recordings of the Bible and embraces a new, 21st-century vision of an age-old ideal: that of a modern Christian capitalist, a financial speculator for Christ, who seeks to make money in God's name and then use it to further the faith. A generous benefactor to a range of unglamorous, mostly conservative Christian causes, this Hwang eschews the trappings of extravagant wealth, rides the bus, flies commercial and lives in what is, by billionaire standards, humble surroundings in suburban New Jersey. Then there's the other Bill Hwang: a former acolyte of hedge fund legend Julian Robertson with a thirst for risk and a stomach for volatile markets -- a daring trader who once lost a fortune betting against German automaker Volkswagen AG while running a hedge fund that was supposedly focused on Asian stocks. This is also the Bill Hwang who then went on to quietly become one of the most successful alumni of Robertson's vaunted Tiger Management. This one masks his dangerous leveraged bets from public view via financial derivatives, was once accused of insider trading and pleaded guilty in 2012 to wire fraud on behalf of his hedge fund, Tiger Asia Management. That same Bill Hwang, it turns out, is also a backer of one of Wall Street's hottest hands of late, Cathie Wood of Ark Investments. Like Hwang, Wood is known to hold Bible study meetings and figures into what some refer to as the "faith in finance" movement. And here, at last, is where the Bill Hwangs collide. The fortune he amassed under the noses of major banks and financial regulators was far bigger and riskier than almost anyone might have thought possible -- and these riches were pulled together with head-snapping speed. In fact, it was perhaps one of the greatest accumulations of private wealth in the history of modern finance. And Hwang lost it all even faster. Archegos -- a Greek word often translated as "author" or "captain," and often considered a reference to Jesus -- was believed by many traders doing business with the firm to be sitting atop $10 billion of assets. That figure, representing Hwang's personal fortune, was actually closer to $20 billion, according to people who did business with Archegos. To put that figure in context: Bill Hwang, a name few even on Wall Street had heard until now, was worth more than well-known industry figures like Ray Dalio, Steve Cohen and David Tepper. Even more remarkable is the breakneck speed at which Hwang's fortune grew. Archegos started out in 2013 with an estimated $200 million. That's a sizable fortune but nowhere near big money in the hedge fund game. Yet within a decade, Hwang's fortune swelled 100 times over, traders and bankers now estimate. Much of those riches accrued in the past 12 to 24 months alone, as Hwang began to employ more and more leverage to goose his returns, and as banks, eager for his lucrative trading business, eagerly obliged by extending him credit. Hwang's success enabled him to endow his own charity, the Grace & Mercy Foundation, which had almost $500 million of assets as of 2018, according to its most recent tax filing. One institution close to Hwang, and a beneficiary of his foundation, is The King's College, a small Christian school in the heart of New York's Financial District. In a statement to Bloomberg, the college said it was grateful for his generosity and that "our prayers are with Mr. Hwang and his staff." McDonald's Job The story of both Bill Hwangs begins in South Korea, where he was born Sung Kook Hwang in 1964. The tale he has told friends and associates is a familiar one of immigrant striving -- followed by financial success that few even on Wall Street can fathom. Hwang grew up in a religious household (like roughly a third of Koreans, his parents were Christian). When he was a teenager, the family moved to Las Vegas, where his father got a job as a pastor at a local church. Hwang has told friends that he arrived in the U.S. unable to speak or write in English and only picked up the language while working nights at McDonald's. Soon after, his father died and his mother moved the family to Los Angeles. Hwang went on to study economics at the University of California, Los Angeles, and then picked up an MBA at Carnegie Mellon University in Pittsburgh. Finance beckoned -- and Hwang, it turned out, was very good at it. While a lowly salesman at Hyundai Securities, part of the sprawling Korean chaebol the Hyundai Group, he caught Julian Robertson's eye. Hwang, not yet 33, was then handed a golden ticket to Wall Street: an offer to join Robertson's Tiger Management, then at the top of its game. Hwang quickly distinguished himself by introducing Robertson to the Korean markets -- at the time headed into the teeth of the Asian financial crisis -- and masterminding what turned into a lucrative stake in SK Telecom Co. Hamptons Lunch Tiger colleagues say Hwang was one of Robertson's most successful proteges -- a quiet, methodical analyst with intense focus. Even today, he keeps his desk free of all clutter, the better to focus his mind. Robertson, these people recall, dubbed him "the Michael Jordan of Asian investing." Robertson, now 88, still considers Hwang a friend, and the two lunched together in the Hamptons a few months ago. "He's not one to be tiny, that's one thing for sure," Robertson told Bloomberg after news of the Archegos losses broke. Hwang would eventually strike out on his own as a so-called Tiger cub. Initially, Hwang shot the lights out, returning an annualized 40% through 2007, when he managed $8 billion. The hot streak didn't last. In late 2008, his Tiger Asia incurred stinging losses on a big bet against Volkswagen. Many other hedge funds were shorting the German automaker, too, and when Porsche Automobil Holding SE abruptly announced that it would raise its stake, all hell broke loose. VW soared 348% within 48 hours, crushing shorts like Hwang. Tiger Asia ended the year down 23%. Many investors pulled their money, angry that a hedge fund that was supposed to be focusing on Asia somehow got caught up in the massive squeeze. GameStop Frenzy It was a painful and instructive lesson for Hwang, people who know him say. In the future, he'd hunt out stocks that many traders were shorting and go long instead. Millions of amateur investors took up that approach this year during the social media-fueled frenzy over GameStop and other stocks. But before the next success, Tiger Asia ran into more trouble -- this time, trouble big enough to bring Hwang's days as a hedge fund manager to an end. When Tiger Asia pleaded guilty to wire fraud in 2012, the SEC said the firm used inside information to trade in shares of two Chinese banks. Hwang and his firm ended up paying $60 million to settle the criminal and civil charges. The SEC banned him from managing outside money and Hong Kong authorities prohibited him from trading there for four years (the ban ended in 2018). Shut out of hedge funds, Hwang opened Archegos, a family office. The firm, which recently employed some 50 people, initially occupied space in the Renzo Piano-designed headquarters of the New York Times. Today it's based further uptown, by Columbus Circle, sharing its address with the Grace & Mercy Foundation. "My journey really began when I was having a lot of problems in our business about five or six years ago," Hwang said in a 2017 video. "And I knew one thing, that this was a situation where money and connections couldn't really help. But somehow I was reminded I had to go to the words of the God." That belief helped Hwang rebuild his financial empire at dizzying speed as banks loaned him billions of dollars to ratchet up his bets that unraveled spectacularly as the financial firms panicked. What ensued was one of the greatest margin calls of all time, pushing his giant portfolio into liquidation. Some of the banks may end up with combined losses of as much as $10 billion, according to analysts at JPMorgan Chase & Co. As a bruised Wall Street points its collective finger at Hwang, his Christian associates have rallied around him. Doug Birdsall, honorary co-chairman of the Lausanne Movement, a global group that seeks to mobilize evangelical leaders, said Hwang always likes to think big. When he met with him to discuss a new 30-story building in New York for the American Bible Society, Hwang said, "Why build 30 stories? Build it 66 stories high. There are 66 books in the bible." Before so much went so wrong so fast, Archegos appeared to be ramping up. A year ago, Hwang petitioned the SEC to let him work or run a broker-dealer; the SEC agreed. It's impossible to say where Bill Hwang, the hard-charging financial speculator, ends, and Bill Hwang, the Christian evangelist and philanthropist, begins. People who know him say the one is inseparable from the other. Despite brushes with regulators, staggering trading losses and the question swirling around his market dealings, they say Hwang often speaks of bridging God and mammon, of bringing Christian teaching to the money-centric world of Wall Street. |
Thank you for choosing to make a difference through your donation. We appreciate your support.
This website uses marketing and tracking technologies. Opting out of this will opt you out of all cookies, except for those needed to run the website. Note that some products may not work as well without tracking cookies. Opt Out of CookiesCategories
All
Archives
April 2024
|