A veteran credit analyst has encouraged holding meme stocks GameStop and AMC Entertainment ahead of what he expects will be a “financial meltdown” caused – in part – by the demise of Chinese property giant China Evergrande.
Dr Marco Metzler, an advisory board member at German Market Screen Agency, warned in a LinkedIn post that markets are “extremely overvalued” and a crash will happen “very soon.”
“(This is the) last opportunity to hedge against the crash and even benefit from it,” Metzler said.
“Now is the last opportunity to sell shares and bonds as well as most of crypto currencies. (sic)”
Metzler went on to say there are only two stocks he would hold at this time: AMC Entertainment Holdings (AMC) and GameStop (GME).
“Go long on AMC/GME and crypto currencies backed with AMC/GME,” he urged, before saying the reason for this advice would be explained in another post “soon.”
Evergrande crisis escalates
Metzler, like many observers, has long been sounding alarm bells over the status of China Evergrande, claiming the extent of the company’s problems were being covered up.
This concerns have been more than justified, with Evergrande today revealing there’s no guarantee it will have enough funds to honour debt repayments.
The company’s founder Xu Jiayin (otherwise known as Hui Ka Yan), who has previously off-loaded personal assets to try and keep the business afloat, has been summoned by local government officials to address the matter.
The government is helping Evergrande’s poor management, but that won’t help international bondholders
“Chinese authorities announced … that they will be monitoring Evergrande for its “poor” management by sending a task force into the company,” Metzler said.
“In addition, according to rumors (sic), the founder has been missing since he has been summoned.
“This would not be the first time that Chinese billionaires have disappeared without a trace after actions and statements that the state does not like.”
State intervention for Evergrande?
Metzler says local government officials looking into Evergrande’s problems have so far focused mainly on resuming construction work, which had previously been halted on many of the developer’s projects.
“The priority has been to help suppliers and contractors to whom Evergrande owes money and to ensure that buyers who have purchased unfinished homes from the debt-ridden company receive them.
“Indeed, massive protests previously arose from customers who got into this precarious position through ominous wealth management products (WMPs) offered by real estate companies like Evergrande.”
It has also just emerged that China’s central bank will cut reserve requirements for banks, while promoting healthy development of the property sector.
It appears to be an attempt to reinforce previous messages to investors that Evergrande’s woes could be contained and not have the enormous global flow on effects many analysts fear.
Metzler fears that regardless of any government intervention, international investors will be badly hit.
“As long as the government does not publicly stand up for the foreign debts of the real estate companies, but only sends regulators into the company, I don’t see any chance that the international bondholders will recover their money,” he said.
Metzler’s survival plan
Metzler said that two weeks ago he went short with all of his funds, buying put options on market indices worldwide with a strike price below 50% of current values.
“After the market has crashed by more than 50% and by then many banks will go into default I will sell the put options,” he said.
“With the capital gains I will buy gold. This tangible gold will be stored in Liechtenstein, the home base of my FMPC Capital investment firm.
“The stored gold will be the colleteral (sic) for a new stablecoin which is fully convertable (six) into physical gold stored in Liechtenstein.
“At this time all market participants will have lost the faith in the existing currencies and trust has to be build up going back to a gold standard.”
“The new stablecoin will be the ground for a start into the new economic world after the ‘Great Reset.'”