Jim Chanos calls China syndrome

[RolfGunderson]

Posting this primarily for those who remember the 05 to 06 period of Fairfax. A reasonably interesting - and balanced (his miss on FFH is mentioned) - profile on Jim Chanos, with a focus on his present skepticism re: China.

 

http://www.theglobeandmail.com/report-on-business/rob-magazine/chanos-calls-china-syndrome/article2183539/singlepage/#articlecontent

 

DP

[Guest Hester]

Thanks for this

[Green King]

If China collapse what is going to be the next engine for growth?  The only reason that Germany, South America and many others is because of China`s spending in infrastructure.  Or is this world going to be in stasis like Charlie Munger said about Japan. 

 

[stahleyp]

If China collapse what is going to be the next engine for growth?  The only reason that Germany, South America and many others is because of China`s spending in infrastructure.  Or is this world going to be in stasis like Charlie Munger said about Japan.

 

You know, if we had world like that, stock valuations might very well get to where they were in the 1970s.  ;D

[oec2000]

A reasonably interesting - and balanced (his miss on FFH is mentioned) - profile on Jim Chanos, with a focus on his present skepticism re: China.

 

 

Agree with you - the G&M does tend to be balanced and less hysterical.

 

Chanos is virtually persona non grata on this board but his comments on China are worth paying attention to - no question of short and distort here imo.

 

Would like to hear from members here who are more familiar with China (or better still live there) what thoughts they have on Chanos's remarks.

 

 

[Green King]

A reasonably interesting - and balanced (his miss on FFH is mentioned) - profile on Jim Chanos, with a focus on his present skepticism re: China.

 

 

Agree with you - the G&M does tend to be balanced and less hysterical.

 

Chanos is virtually persona non grata on this board but his comments on China are worth paying attention to - no question of short and distort here imo.

 

Would like to hear from members here who are more familiar with China (or better still live there) what thoughts they have on Chanos's remarks.

 

There is a bubble and the prices of housing are far too high.

But the government has nothing else to do to grow the GDP.

Since to grow high tech you need great software (good and creative minds) which takes far longer to develop. For a good or expert employees that could create real change you would need at least 20 to 30 years to train them and China has only been developing for a few years.

So for China to continue to growth GDP it has to keep on building. (The local government also has its revenue coming for the selling of land and the extortion of the real estate contractors for bribes at each level of constructions.)

 

The question should be when will it happen.

Since most of the Wealthy and the Party Leaders are heavily invested. (So they would not allow it crash unless there is nothing else they can do about it.)

So this will last a long time. (5 to 6 years)

When all the money runs out to support it.

 

There is also the question of the one child policy and its effects.

There is one Child to two parents and four grandparents and if they are well off in some areas they all have a few apartments.

So when they get married and the grandparents die they would be inheriting at least 2 apartments. and if their parents die two more. The questions is in the long term who is going to live in them.

[S2S]

Good read, thanks for posting.

 

But Chanos also learned early on that the media can turn on you. A September, 1985, Wall Street Journal article accused him and several other prominent short sellers of underhanded tactics such as spreading rumours about companies. And he’s been getting hit with the same rap ever since: Chanos is an opportunist who quietly spoon-feeds reporters to cast a cloud over target companies. “I think every good investor is an opportunist,” says Grant. Over all, he says, Chanos is “a crusader for truth, justice and The American Way.”

 

Chanos makes no apologies. “We do not call journalists. They call here all the time.” When they do, he’ll explain his research. “We live by the rules,” he adds. It’s a crime to “knowingly pass on information that you know to be false.” In any case, he sees some hypocrisy in the name-calling. It’s fine for money managers and brokers who are long on a stock to explain why, but if a short dumps on a stock, “Oh my God, it’s pitchforks and torches.” In the final analysis, “The market is the ultimate arbiter.”

 

So true, as often witnessed right on this board.

[oec2000]

Green King,

 

Thanks for your insight.

 

It explains the disconnect one sees in China with exponential price increases in prime locations while at the same time you see many empty buildings that have been built in the middle of nowhere. (Anyone who has taken one of the heavily subsidized tours to Shanghai or Beijing would have noticed the hotels they put you in. Nice 4-star hotels but often in completely ridiculous locations.*)

 

At first, I couldn't understand why these clearly uneconomic projects were built but your explanation about the incentives for local governments and their officials to build clarifies this. Guess the government-owned banks ultimately eat the losses. I suppose China is still some ways from being a fully market economy in certain sectors.

 

Prem has also mentioned several times about his wariness about the excesses in China. Difficult to see how this ends without tears. Even in China, I don't think leaders can defy the laws of economic gravity indefinitely.

 

oec

 

 

* (For those who are interested, the tours are ridiculously cheap - $50 or $100 per person for a 1-week tour with accommodation in 4-star hotels and 3 meals a day all included! These prices are for Canadian residents; I have heard but have not confirmed that some torus are free for US residents!)