through all of this year I have felt
like that guy in Robocop, you know the
guy that was walking around going UGHHGHHGHH
and the main reason for that is because
graphics card prices have been at all
highs especially in relation to their
msrps which their msrps have been
inflated over the previous same series
numbers of graphics cards in the past
so we might have finally some good news
coming to the market if you're a gamer
and you're looking for a graphics card
if you're a person that say has a lot of
superannuation in America, I think they
call that
401ks then this could be maybe a bit of
bad news as well as if you're one of
those guys who owns nothing but crypto
this could also be some bad news and
what exactly is this bad news well comes
in the form of a company called
evergrand in china which is starting to
seriously let off some warning signs and
cracks in the system but there's also
some other potential news out there that
from the u.s government themselves have
not raised the debt ceiling and two of
these things combined together could
spell the start of the unwinding of the
bubble which of course the price of
crypto is heavily related to and in fact
i've been talking out in the past about
this whole bubble and what it's done so
sit back in your chair grab yourself a
hot green tea and i'll help explain why
you should be at least very cautious of
the upcoming months and if you're a
gamer and you've got some savings you
can be a bit happy and optimistic are
you tired of seeing this annoying
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today's video sponsor scd keys has you
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below welcome back to tech yes city and
you guys are telling me you love finance
mixed in with tech so this is going to
be a bit of a first for me in talking
about much greater problems or at least
much greater cracks that are popping up
in the economy and how it relates to a
potential massive deleveraging of the
system and once that deleveraging or if
that deleveraging occurs i don't have a
crystal ball and i you know admittedly
in the past i thought the graphics card
prices would have come down by now but i
was wrong in that prediction and of
course you can't predict when a bubble
exactly will pop but i feel like this
bubble is coming to a close and we'll
take a look why this is they've got for
starters a massive construction company
in china that is under massive financial
stress and the reason being is because
they have 300 billion in debt and
they're getting to the stage where
they're unable to service that debt and
basically if they can't make those
repayments on that debt they will
technically then go into default and
then the banks in turn will now have
essentially what's known as a bad loan
on their asset sheet which is really bad
and it can have the potential to
cascade and be like a domino effect
where things start unwinding across all
different industries and now you may be
sitting in your chair and thinking well
brian it's just 300 billion the feds
printed trillions of dollars and the
whole system seems to be absolutely fine
it's flush with cash and i'm going to
point to a texas ratio graph here which
basically points towards bad loans
versus total liabilities and once those
bad loans overpower the liabilities that
the bank has or essentially the ability
to get their repayments from those loans
this essentially can spell a default
from the bank itself and now we all know
from 2008 or if you didn't know 2008 a
massive bank known as lehman brothers
collapsed and actually in a five-year
period
after 2008 there was about 400
plus banks that collapsed
due to the pressures from that global
financial crisis and when we take a bank
like jp morgan they have currently 15
billion in bad loans and this is the
biggest bank in america at this point in
time so you could only imagine what 300
billion would do to even the biggest
bank in america and when you look at the
amount of sheer debt that even one
construction company holds in china that
has the potential to really cause some
devastating effects in the market and
you may be wondering why is this
happening why are these companies like
evergrand and there's actually a few
more of them that are going through
these lines why are they under this
stress and this has to do with china the
chinese government they've implemented
from august 2020 last year what is known
as a color code scheme where they've got
lines or essentially strikes and if you
don't meet these expectations or these
codes you will not be able to borrow an
increased amount of debt as opposed to
what you already have in other words you
cannot grow the company via debt any
longer so you're then relying on
repayments and asset growth itself to
pay and fund the future companies
operations which in this situation seems
to be a very bad thing but going through
these color codes we first of all got
green so if your company essentially has
a liability to asset ratio that is the
all the total loans that they have is 70
or under to what the company has in
solid assets then you are okay in that
field the next prerequisite is what's
known as a net gearing ratio this is
essentially known as loans to
shareholder equity so if this is less
than 100
in other words the company has borrowed
less money than the shareholders have in
equity to the company and you're also
still passing the line you're in that
green color code and then the third
prerequisite is a cash to short term
debt ratio of more than one x so in
other words if you don't have liquid
cash to cover your short term debt
that's usually considered 12 months or
less repayable debt then you'll
essentially cop yourself another strike
and you won't be able to borrow money so
in this case if we look at evergrand
they are hitting all three of these red
lines and so they can now no longer
borrow any more debt on top of what they
already have so we look at a chart of
companies that fall into these three
strikes at the moment there's evergrand
sitting right up the top along with
another company called greenland global
and then if we look after that we've
also got companies in the orange zone
and then the yellow zone and are vastly
approaching the red zone so in essence
this whole system has been designed by
the chinese government to try and take
away
from an asset bubble and bring back gdp
that's gross domestic product to
actually consuming and producing
services where in the real estate market
they've essentially created bubbles with
companies like evergrand by over bidding
massively over market rates just so they
can secure land and then get up
buildings and take people's deposits and
then keep this whole train of debt and
asset bubbles fueled but china's
realized well in history if we look at
bubbles they never end pretty so they're
trying to take their own approach to
de-leverage their whole system but that
is the first problem that we've spoke
about and basically when we look at this
financial situation it has the potential
to just like any other bubble start
being a contagion of debt
for even not just china you might be
thinking well it's just chinese
construction companies brian but little
did you may realize that there's a lot
of different companies internationally
that are invested in these chinese
construction companies and also other
chinese assets and so if these assets
start essentially going down drastically
in value even people like australian
citizens who have superannuation or in
america people with 401ks that are
invested in these index funds could feel
a massive blow to their potential future
retirement funds due to events like this
though now we're moving on to the next
catalyst that could spell potential
danger for money markets and this is the
us debt ceiling which in july 2019 so
when donald trump was in parliament they
had the debt ceiling of 22 trillion
suspended for two years and in that time
since now 2021 up until july 31st they
have acquired a debt of now 28.5
trillion so they're coming over that
debt ceiling in a massive way basically
if i understand things correctly it
comes down to two parties in america
having to work together to pass the bill
and that is the democrats and the
republicans and from what i gather the
republicans are quite annoyed with what
is going on with america right now in
terms of how the debt is being utilized
and spent and so they refuse to pass
this debt ceiling and raise it or
suspend it any longer and so basically
what this means is that the u.s
government then cannot borrow any more
money or basically issue any more bonds
on the market and so they can't get any
funding in place and so if that happens
your basic public service could shut
down completely and this ranges from
things like police firemen to military
and government employees and they could
all be out of the job if this was to
turn into the worst case scenario though
the federal reserve themselves they do
have apparently a catastrophe plan in
place which they put into effect i think
from as early as 2011 in case something
like this was to happen so if the us
government was too default for the first
time in history then it would spell
absolute catastrophe for markets and
crypto being one of the most volatile
markets especially if we look at some of
these graphs if we look at the price of
ethereum even in the last week it's gone
from 5 000 aussie dollars all the way
down to 4
300 aussie dollars so what happens in
these situations is you've got volatile
assets like cryptocurrency and for
instance like small cap stocks
that have high amounts of debt people
who have equity in these types of
vehicles they essentially do what is
known as rush to the exit and if all
these people are trying to rush to the
exit at the same time then you're left
with on the other side of the fence who
is going to buy or close that
transaction and that is why historically
when you've seen prices crash
they crash very fast just like what
happened in may earlier this year with
bitcoin and ethereum and other
cryptocurrencies they crashed violently
and they crashed quickly because a lot
of people were running for the exits but
there wasn't the buyers on the other
side at those particular price points so
now this all ties in with the final
point that i'm going to make and this
relates to tech products and graphics
cards and that is the miners are buying
up a lot of these graphics cards in fact
i know someone locally here i buy
graphics cards off him for gaming pcs
but he told me recently there's a client
he has that is buying 50 rtx 3090s and
my eyes just like really took me back
i'm like wow that's a lot of money is
actually around 165
000 australian dollars just to buy these
50 gravis cards and so there's a lot of
miners putting a lot of capital into
cryptocurrency mining hoping that they
will then hash those transactions and
get their return on their money but as
i've warned my friend at the computer
store and also warned other people i
would tread very lightly because if this
thing does unwind then your
profitability and your return on
investment could even turn into a
negative endeavor and this is the exact
scenario that happened for a lot of
people back in 2018 where crypto already
experienced a massive deleveraging
process so nothing's ever guaranteed
never forget that and what happened in
2018 was something that i was actually
quite familiar with and that was
graphics cards became extremely cheap
because there was this just like small
cap stocks and risky assets there was
this massive rush to the exit door to
sell all the assets on the market before
they came worth less money and so
graphics card prices after the 2008
crypto crash became very cheap i mean i
was picking up gtx 1070s sometimes for
as cheap as 150 aussie dollars which
would be around 100 usd which i was
really surprised with how cheap
sometimes things can get so never forget
there's always a balance to things and
right now there's been way too much
borrowing in the markets in general and
what this leads to is can be a
catastrophic deleveraging process where
those that are caught not getting to the
exit in time are then left holding what
is known as the bag
and if you guys didn't know what's in
the bag it's packed full of [ __ ] so with
that aside i hope you guys enjoyed
today's video if you did i'm sure to hit
that like button also let us know in the
comment section below what do you think
will happen i think the next few months
are definitely going to be very
interesting to see what unfolds all eyes
are on these current
central banks essentially what they do
because they have more and more control
than they've ever had in history on our
financial system which finance has more
and more of a control of our life and
subsequently our lifestyles do that
aside we've got the question of the day
here which comes from eyes number 23 and
they ask ha ha ha ha ha does your fans
know what duries are
and uh in the previous video we did we
talked about the h170i cooler and how
420 was a magical number when it came to
smoking but the cooler doesn't smoke and
then there's a pack of duries on top of
that
cooler and basically what a pack of
duries is just a pack of cigarettes i
don't even know where the term comes
from i mean i'm from a state known as
queensland and so since we were kids we
always knew uh cigarettes or smokes as
duries or aka dozers which i believe
actually originated from
either brisbane or my hometown which is
only an hour drive the gold coast so i
don't know which city it was originated
from but it was either one of those two
can't tell you which one it was but
anyway hopefully that answers that
question for you and i'll catch you guys
in another tech video very soon if you
stayed this far and you're enjoying that
tech yes content be sure to slap that
sub button ring that bell catch you next
time peace out for now
[Music]
you