Why 2022 Will Be Worse Than 2008 | Explaining The Epic Housing Crash Theory
Explaining the theory on why 2022 will be worse than 2008
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THE THEORY:
The 2022 Real Estate Collapse is going to be Worse than the 2008 One, and Nobody Knows About It - Time to Call your Mom: / the_2022_real_estate_collapse_is_going_to_be
FIRST PROBLEM (THE RISK IS NOT ACCURATE):
When Wall Street buys real estate, they are subject to one risk assessment which is AUM - assets under management. This is the amount of money these companies are managing for their investors. So when they get approved on a loan and they buy a house - they're just showing their wallet.
However, the actual risk assessment in real estate is subject to a lot of things like housing values, rental rates, the company’s stock value, and even other things like crime rates and other local conditions none of which have anything to do with the size of their wallet. So that’s the first risk.
SECOND PROBLEM (LIQUIDITY):
Money in real estate is not like money in stocks where you can push a button and instantly move money around because money in real estate takes a long time to shuffle - and that’s no good if you’re an institution - you want that speed. So they’ve created the solution - which in and of itself is problem which is asset leverage.
One of the reasons why these hedge funds and banks can borrow an insane amount of money is because they can shuffle an insane amount of money really fast - with things like asset backed securities, and derivatives which are what you call “liquid”. This means they can be bought and sold instantly. Liquidity is good - it solves the problem of needing money fast - if bank is lending money and it needs to force a sale to get it’s money back because it’s borrower failed to pay - the borrower can sell off their derivative and pay everything back. In theory. But here’s where the problem is.
THIRD PROBLEM (DERIVATIVES):
The derivatives market - is estimated to be anywhere between $500 trillion and $1 quadrillion - based on nothing - it’s not backed by anything. So it’s like going to the casino with borrowed money to ask for more money - and the Casino gives you more money, thanks to your borrowed money. So leverage gone bad is what triggers derivatives to collapse.
FOURTH PROBLEM (MISLABELED ASSETS)
Take for example - Evergrande - one of China’s largest real estate developers. They haven't been able to make payments since around September of last year. They just missed their $2.1 billion payment and normally when this happens - you would assume the credit rating of such a company would be in default. The worst credit rating you can have. However, some credit agencies are keeping quiet about their rating and they haven’t officially labeled them in default.
HOW DOES THIS TIE TOGETHER?
The reason that Evergrande - which is one of many companies that could be in trouble is tied to the US housing and loan market is because the same people who hold that debt also invested trillions of dollars of equities that they've taken margin loans against to buy trillions of dollars of US Housing.
So they used risky, and volatile assets to qualify for loans to buy stable and illiquid real estate in the US. Meaning - their fate is somewhat tied together.
MY OPINIONS:
Watch the video to find out!
SOURCES:
/ the_2022_real_estate_collapse_is_going_to_be
https://www.visualcapitalist.com/all-...
https://www.globest.com/2022/03/31/wh...
https://homeguides.sfgate.com/using-c...
https://www.cnbc.com/2022/05/04/why-i...
*None of this is meant to be construed as investment advice, it's for entertainment purposes only. Links above include affiliate commission or referrals. I'm part of an affiliate network and I receive compensation from partnering websites. The video is accurate as of the posting date but may not be accurate in the future.
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