China Just Got Bailed Out (What Investors Need to Know)

China just pulled the trigger on the biggest economic stimulus since the pandemic economists say China has Unleashed a quote unquote stimulus Blitz the country's Central Bank is leading the charge here it is pumping more money into the economy loans are being made cheaper one big area of focus is mortgage remember those videos about the Chinese economy collapsing and then it never happened except it almost just did but then it didn't because China just did one of these they injected some liquidity into the system and you remember what Robin Williams said about liquidity I talked to them about being like a group of junkies who relapsed going listen man I just need some liquidity you know what I'm saying I just ran into some bad subprime you know we just had complex formulas we just didn't factor in greed and panic you know I just need $85 billion by Tuesday we're talking trillions of Yuan being pumped into their system interest rates slashed and Banks given more financial liquidity and government support flowing into their real estate sector and this isn't just a story about China this is going to have a huge effect across the entire global economy especially across us markets which will have an effect on our investment portfolios and that's because China is the world's second biggest economy and if they sneeze the rest of the world could also catch a cold and the stimulus package could end up causing what people like to call a reverse verse market crash where instead of the usual collapse people associate with crashes we could see an explosion in asset prices meaning if you like to invest your money your portfolio and your 401ks could be affected so in today's video I want to help explain exactly what this means if you're invested in stocks and bonds and Bitcoin and how this new round of stimulus will affect everyone so let's get into it hi my name is Andre J hope you're doing well come for the finance and stay for the stimulus please stimulate that like button so I can continue making these very non-stimulating videos but to understand why China is doing this we have to look at their economy because after the pandemic China's economy never really recovered their real estate sector which makes up a huge 30% of their economy is not doing good right now developers like evergrand are collapsing under the weight of their own debt there's unfinished properties that litter the whole country and consumers are refusing to spend money because they've lost confidence in the market and when people stop spending in China a country where 70% of household wealth is tied up in real estate it becomes a downward spiral of what's called deflation in other words prices start to fall which sounds good at first but deflation is like poison for an economy it discourages spending incomes stop growing and companies make less money and China's economy could have easily turned into a full-blown recession which is also why the People's Bank of China stepped in and started up The Good Old Money printer and here's how much money they just printed first they lowered what's called The Reserve requirement ratio for banks by half a percent and that's estimated to free up about 1 trillion Yuan or roughly 142 billion us for New lending this money is now available for banks to lend to businesses and house holds hoping to jump start the economy but that's not all the bank also cut its 7day reverse repo rate which is basically the rate at which banks lend money to each other in the short term and that went down from 1. 7 to 1. 5% and I know that doesn't sound like a lot but it's a big deal because it lowers the cost of borrowing across the economy think of it like shaving off a little bit from your mortgage rate which might not seem like much but it adds up into billions of dollarss in savings across an economy the size of China's and for consumers the central bank has announced a half a%c Point reduction in the interest rate on existing home loans for context if your bank called you right now to lower your 30-year mortgage from 6% down to just 5.

5% on a $400,000 home loan you would save approximately $45,000 in total over the life of the loan now for China's economy it's estimated that this will save $50 million households around 150 billion yuan which is about 21 billion a year but wait there's more to this package China's also propping up its own stock market because the People's Bank of China announced a 500 billion yuan roughly 70 billion us to help institutional investors like their insurers Brokers and funds to buy more stocks essentially they're making it easier for institutions to access liquidity to prop up the market and on top of that China's also introduced a 300 billion uan about $42 billion US worth of a loan program to help companies buy back their own shares that's like if the Federal Reserve and papa po just called up Apple and said hey Tim Apple we'd like to extend to you a loan at our Ultra discounted interest rate so you could buy up your own stocks could you imagine what that would do to the stock market you don't have to because we've done it before during the 2008 financial crisis the US launched its own bailout package tarp the troubled asset relief program which was a $750 billion effort to stabilize our financial system which eventually of course led to asset inflation in the years that followed and here's where things get really interesting the question is what happens to investors here in the US when when another country the size of China starts to stimulate their economy so first stimulus packages AK money printers typically mean asset values go up means we're probably going to see stock prices in the US go up as well even though this is China's money printer turning on because historically every time a major economy rolled out a massive stimulus package there was a boost to equity markets and with China's stimulus package commodity are going up Global growth expectations are changing and the companies that have exposure to China will probably benefit if you look at a commodity based company for example those are up axon mobile at the time of filming this video for example is up 4% in one week and full disclosure I own some xxon Mobile in my stock portfolio it's been an amazing dividend stock but there's also another one ticker symbol FCX or Freeport MC which deals in mining things like gold and copper which I don't own in my portfolio but that stock is up 8% in one day and over 133% in one week that's insane when you remember that stocks are supposed to go up 8 to 10% in a year and this is not a coincidence and a big part of why it happens is because of China's new stimulus package and let's not forget about dividends in times of asset inflation companies p pass those gains onto shareholders in the form of higher dividends so if you're holding dividend paying stocks especially now that the Federal Reserve has lowered the interest rate by half a percent that means more cash from inflated asset prices that could be passed on to shareholders in the form of increased dividend payouts or even share BuyBacks and of course Bitcoin which I just got a chance to talk about to Michael sailor recently is also going up partially thanks to China's stimulus because every time a government steps in with more money the story around Fiat losing its value comes up in Bitcoin because it has a fixed supply of 21 million coins acts like a universal Global vacuum that sucks up all the extra printed money that's why Bitcoin is also up so China could be the reason why Bitcoin goes a lot higher from here which is also why this video is sponsored by yours truly I actually just made 40 videos with over 4 hours of training on how to safely protect your Bitcoin if you don't want to do what I did and lose over a million dollars by keeping your Bitcoin on an exchange and if you want to learn how to self custody and protect your Bitcoin with the highest security possible I'm going to leave a link down below where you can get my free checklist of what to do and if you want to dive deeper you can actually use coupon code Andre 40 to get 40% off at checkout by the way you don't actually have to buy anything you can find most of this training on YouTube for free but if you like my style of teaching I think you'll find a lot of value so to put this all together instead of collapsing I think we could see prices explode China's stimulus package which includes interest rate cuts and lowering the amount of money Banks need to hold in reserves and support for China's falling property Market is all designed to pump liquidity into the system and essentially prop up asset prices now in China we're already seeing how the stimulus package is making people with assets richer the hangsang index for example went up over 4% the day the stimulus was announced which was the best day of the market since 2020 companies like Alibaba jd. com and byd are already seeing double digit percentage gains and this could be just the beginning because it's not just about China when China pumps liquidity into its economy it creates a demand for materials that build stuff like oil and copper and steel and guess what the prices of those Commodities are also going up both copper and aluminum went up over 5% in the last 7 days all of this within hours of China's stimulus announcement and historically when asset prices in one part of the world inflate we see a spillover into other markets across the world in 2012 for example the ECB the European Central Bank introduced aggressive monetary policies to stabilize What's called the Euro zone so countries like Greece Spain Italy which were on the brink of default got rescued that year the US Stock Market went up 13.