Jim Chanos

[winston]

TOL:-

Wonder how his portfolio is doing today ?

[winston]

Jim Chanos: Moody's, S&P Wrong to Be Rosy on China

Hedge fund manager James Chanos, who has been a long-time skeptic on the Chinese growth story, is sticking with his gloomy view of ratings agencies Moody's and Standard and Poor's, saying their rosy outlook on China's debt only bolsters his bearish bet.

The famed short-seller said he's puzzled by the readiness of S&P, a division of McGraw-Hill Cos., to downgrade the sovereign debt of countries like the United States and much of Europe while continuing to give a nod of approval to China and its banks.

"The rating agencies are getting this one really wrong," Chanos, the founder and president of hedge fund Kynikos Associates, told the Reuters 2012 Investment Outlook Summit.

S&P earlier on Tuesday affirmed its long-term rating on China's sovereign debt at AA-minus, just one day after it threatened to downgrade 15 countries in the troubled euro zone, including that of Germany, Europe's biggest economy.

Moody's rates China at Aa3, with a positive outlook.

For at least a year now, Kynikos, with $6 billion under management, has been shorting shares of Moody's Investor Services and S&P parent McGraw-Hill.

Chanos, who specializes in making money when stocks fall in value, said China's housing bubble and opaque political and economic systems merit greater scrutiny and cynicism by the rating agencies.

He is shorting mining companies and construction companies that ship raw materials to China and is also betting against shares of some Chinese banks.

Chanos, who founded Kynikos in 1985 with $16 million, gained famed on Wall Street after his prescient call on accounting fraud at Enron a decade ago.

Since then, his most well-known target has been China, whose economy he says will eventually crash, driven by an unsustainable real estate bubble.

"It is already happening," Chanos said, citing what he said is a drop in new apartment sales across the country of about 40 percent year-on-year.

"Everybody is admitting transaction volumes have plummeted. This is what we saw in places like Las Vegas and Florida before the crash; transactions just stopped."

"We are short anyone involved in the China real estate boom," he added.

Recently, Chanos has been focused on China's banks, which he says have made and continue to make billions in risky loans without sufficient capital.

Kynikos is short shares of the Agricultural Bank of China , the country's largest county lender.

Outside China

The European banks have not escaped Chanos' glare, either. He has been short a number of European banks since the beginning of the year — before several nations enacted bans on short selling.

"The biggest commercial lenders in Europe are pretty much all in our portfolio," Chanos said, noting his skepticism that austerity measures will solve the debt crisis.

He has a more positive view, however, on the U.S. banking sector.

American banks "are not lending and their cost structures are still too high but that is not a death knell," Chanos said, although he is still noted caution.

He is staying away from any U.S banks with exposure to potentially vast mortgage write-downs. And while Kynikos is long Citigroup , Chanos emphasized that bet is a hedge against his short position on Chinese and European lenders.

The U.S housing market isn't the only one that gives Chanos jitters. He recently visited Australia, where he was "stunned" at urban real estate prices.

The housing market, in addition to the country's reliance on China to keep its economy afloat, is worrying, he said. Kynikos is short Australian miners.

"Australia has tied itself to the tiger's tail — I don't think that's a great place to be," Chanos said.

"But it is a lovely place to visit," he added. "I might go back for New Year's."

http://www.moneynews.com/StreetTalk/Cha ... /id/420254

[winston]

Hmmm.... it must have been very painful for him over the past two months, unless he has covered his positions ...

Chanos: How China could fail the world economy By Prieur du Plessis

Hedge fund manager Jim Chanos says slowing demand in China will continue and may have ripple effects around the global economy.


http://www.investmentpostcards.com/2012 ... pe+Town%29

[winston]

Deep Thoughts From Jim Chanos by Cullen Roche

Good interview here with Wall Street legend Jim Chanos. In the interview he discusses his background on Wall Street, how he got into short selling, his process for short selling, the psychology behind his approach and the asymmetries of the long and short side.

The middle portion of the interview on China is a must see. Chanos makes some really fascinating points on his short China thesis. He also dives into his short China thesis, how he got into this short theme and why he continues to believe the Chinese economy is due for a sizable decline.

The last portion of the interview discusses some of the global macro risks and how he’s been approaching some of the various influential policies and trends (via Market Folly):

http://pragcap.com/deep-thoughts-from-jim-chanos

[winston]

Chanos: China Is a Roach Motel, Don’t Invest There By Forrest Jones

Investors holding Chinese equities should sell now, and those considering entering the Asian giant’s stock markets hoping recovery will bring up share prices should stay away, said Jim Chanos, a hedge fund manager at Kynikos Associates.

The Chinese economy is deteriorating, and Beijing might take steps to make it appear otherwise via monetary policy measures like cutting interest rates or reserve requirements, but those who are caught in equities markets wishing to leave will find no buyers.

“It’s destined to suck Western capital into the country and have it never go out,” Chanos told CNBC.

“You’re almost in a classic emerging market roach motel, except it’s a really big one in that it’s very difficult to earn adequate returns for capital and get your capital back as a Western investor.”

Manufacturing in China remains weak, a private-sector survey of factory managers found.

The HSBC Flash China manufacturing purchasing managers’ index rose to 47.8 in September from 47.6 in August, though a figure below 50 denotes contraction.

“Manufacturing activities remain lackluster, thanks to weak new business flows and a longer than expected destocking process,” Hongbin Qu, chief economist for China at HSBC, said in a statement accompanying the survey.

China has loosened monetary policy in the recent past, namely byt cutting bank reserve requirements and other benchmark lending rates.

And further easing could follow.

“This is adding more pressure to the labor market and has prompted Beijing to step up easing over the past weeks. The recent easing measures should be working to lead to a modest improvement from Q4 onwards.”

China’s gross domestic product grew 7.6 percent in the second quarter, which represents a much slower clip when compared to the recent past.

However, China’s August trade surplus swelled to $26.7 billion as imports fell, which reflects softening internal demand, something Beijing has wanted to bolster for years.

“China’s growth is slowing pretty quickly. That’s stated [gross domestic product] — you’re never going to see negative GDP from China year-over-year, I don’t think, not under this regime,” Chanos said.

“But look at corporate profits, look what’s happening on the ground. Corporate profits are imploding over there,” Chanos added.

“Take a look at the Chinese stock market. It’s gone nowhere despite having one of the highest rates of growth of any emerging market, any market,” he said.

“GDP growth has been 9, 10 percent for 10 years and you’ve made no money in the Chinese stock market.”

http://www.moneynews.com/Street%20Talk/ ... /id/456921

[winston]

Jim Chanos: Forget Apple... Own this World Dominator instead

Jim Chanos, who oversees $6 billion as the founder and president at Kynikos Associates Ltd., said he's skeptical on Apple Inc. after the shares surged 71 percent this year.

Chanos prefers owning Microsoft Corp. (MSFT) to hedge wagers on declines in companies such as Hewlett-Packard Co., he said in an interview on Bloomberg Television's "In the Loop" with Betty Liu. The money manager, who rose to fame shorting Enron Corp., said he's shorting natural gas stocks and wouldn't own Treasurys.

"We're getting afraid of heights," Chanos said about Apple's share price. "It has had an enormous run. Something about it is holding us back in that it's had such a run."

Apple (AAPL), the world's most valuable company, reached a record $702.10 a share on Sept. 19. Analysts estimate profit at the iPad and iPhone maker may jump 60 percent in 2012 and increase 20 percent in 2013, according to data compiled by Bloomberg.

Microsoft shares have rallied 19 percent in 2012. The company's Surface tablet, designed to combat Apple's lead in the market, will go on sale later this year. The device will probably be cheaper than the iPad, Chanos said. Earnings at the world's largest software maker increased 3.4 percent in 2012 and are estimated to jump 11 percent next year, based on analyst projections tracked by Bloomberg.

Chanos sees more losses in natural gas producers after the stocks rebounded, he said at the Clinton Global Initiative in New York. A measure of oil and gas producers in the S&P 500 has rallied 17 percent from a low on June 4.

He said U.S. government bonds may decline as the Federal Reserve starts a third round of asset purchases to boost economic growth.

"You're taking an awful lot of principal risk for very little reward," Chanos said about Treasurys.

Source: Bloomberg

[behappyalways]

A Short Story for a Long Winter's Night By LAWRENCE C. STRAUSS

Short seller Jim Chanos sees big trouble brewing among leveraged natural-gas producers. Why he still views China as a bubble and is wary of Brazil's Petrobras and Vale, too.

Jim Chanos has made a very nice living and a big reputation out of seeing what others overlook, particularly when it comes to overvalued companies. The prominent short seller's big wins include sniffing out problems at Enron, Tyco, and WorldCom in the early 2000s before those companies imploded.

Chanos figures that if he and his colleagues get two-thirds of their picks right, they are doing very well. This year, as equity markets have rallied, the two short funds he runs are down slightly, versus an 18% decline through November for short sellers tracked by the Dow Jones Credit Suisse Hedge Fund Index.

Chanos, 55 years old, founded his own firm, Kynikos Associates, in 1985 and currently oversees about $6 billion of assets. He remains bearish on China, and more recently has been taking a skeptical view of leveraged natural-gas exploration-and-production companies. Barron's sat down with Chanos recently at his midtown Manhattan office.


Barron's : Let's start with your big-picture view.

Chanos: As we went into 2012, we thought, from an investment point of view, that the U.S. was the best house in a bad neighborhood. Since then, pretty much all of the bad neighborhoods have done well, including the U.S., whereas people were pretty cautious a year ago and were looking at the world as a glass half-empty.

They are now pretty ebullient and see the world as a glass half-full. So we are seeing opportunities in names that we had covered earlier this year or in 2011 or 2010. We are seeing lots of new ideas on the short side, both in the U.S. and globally, and generally we have a lot to do.

The world has come around to the view that the central banks generally are omnipotent and have solved all the world's problems, but we are a little bit less sanguine on that point of view.


What's wrong with that view?

Evan Kafka for Barron's

"For every job we add in natural gas, we are losing half a job in coal." -- Jim Chanos

.The central banks, like any committee, may get something right, and they may get something wrong. But they are not right all the time. And investing one's capital on the basis of where central banks are planning their policy moves is a little bit frightening.

Because there is too much liquidity?

Well, liquidity is a double-edged sword. It can raise asset prices. But it can also create overcapacity, overconfidence, and overvaluations. Right now, it is on the road to doing all three.

You mentioned that you are seeing opportunities in names that you covered. What do you mean by that?

There are lots of things that we've actually made a fair amount of money on in 2010 and 2011 that we took off the sheets, but that we are now looking at again, because many of them have doubled and tripled again.


What are some of the common mistakes that you see value investors making?

Value investing is just one tool in an investor's arsenal. All things being equal, one would prefer to buy stocks cheaply than dearly. But I'm afraid that too many value investors stop the process by just looking at valuation and, in effect, looking at the rear-view and side mirrors, not through the windshield.

You have to be very careful, because we looked at our returns over the past 10 years, and, particularly since the advent of the digital age, some of our very best shorts have been so-called value stocks.

One of the differences in the value game now versus, say, 15 or 20 years ago, is that declining businesses, while they often throw off cash early in their decline, find that cash flow actually reaches a tipping point and goes negative much faster than it used to.

So, in the past, value investors looked at declining free cash flows and put some discount rate on that. And then they got a value, and then they would say, "Gee, there is the possibility of a call-option value of the business inherent to all its other opportunities. So, if I can buy it at some discount to that present value, I'm in good shape."

But we've seen time and time again where the cash flows do not gradually decline. Nor do managements seem very willing to pay out cash flows when they are in a declining business. They often use them to make acquisitions, trying to save the business on a Hail Mary basis.

The advent of digitization in lots of businesses also means that the timing gets compressed, meaning that you need to move quickly or you are roadkill on the digital highway. That's true whether you look at companies like Eastman Kodak [ticker: EKDKQ], or Blockbuster, or the newspapers.

Value investors have been drawn to these companies like moths to the flame, only to find out that the business has declined a lot faster than they thought and that the valuation cushion proved to be anything but.


Let's turn to China, on which you have been bearish since late 2009.

We haven't changed our thinking much at all on China. Our view is twofold. There is a credit bubble going on in China, and they have an unsustainable economic model. That yields you all kinds of interesting possible ideas, whether it is in the property market, the steel sector, or in all kinds of areas where they are just simply building more of it, even though there are no economic returns.

Take a look at China's steel sector; it will be unprofitable in 2012, and yet they are adding more and more capacity. So, because China is obsessed with GDP [gross domestic product], and Western investors and observers are also obsessed with China's growth, China has an investment-driven model where they simply want to produce GDP growth.

So they stick a shovel in the ground and build another bridge or highway. They can continue showing GDP growth, as long as there is credit to support that investment. The problem is that most of these investments, at this point, do not generate an economic return and haven't for a while.

So you have the dichotomy of a country growing its GDP but destroying wealth. I view it as a stock that's rapidly growing, but whose earnings are below its cost of capital. Any finance professor would tell you that's a company that is liquidating and going to run into the wall. That's what China is doing. But it can go on for a while.


What are some of the companies in China that you are shorting?

We would be short pretty much all of the large banks. We have talked about Agricultural Bank of China [601288.China] publicly, but I would stay clear of all of them. They are all going to have issues. I would also avoid the property developers, the Chinese steel sector, and the Chinese cement sector.

You've also been shorting two Brazilian companies, Vale [VALE], the world's largest producer of iron ore, and Petrobras [PBR], the energy outfit. What's your thesis?

With Vale, it is just a giant bet that the construction bubble goes on forever in China.

The stock hasn't done well this year, down about 5%.

It has been a good performer on the short side. You have to understand that for a lot of the mining companies in Brazil and Australia, the model has changed.

In the past, the governments, to develop jobs, would work hand-in-hand with these companies to build port facilities, railheads, and other infrastructure to help them export this stuff. Now it is almost the opposite.

Not only do the companies have to pay for all this stuff themselves, but the government adds extra taxes and sees it as sort of a patrimony. So the business model has changed dramatically for a lot of the extraction-type companies, Vale being one of them.

What about Petrobras, whose shares have fallen about 17% this year?

We call it Brazil's ATM because you have a state energy giant that cannot charge full-market prices downstream for its gasoline or its diesel fuel, which subsidize the consumers of Brazil. And yet Petrobras has to incur all of the increasingly expensive costs of finding oil offshore.

In the past 12 months, Petrobras had cash flow of roughly $30 billion, capex [capital expenditures] of roughly $40 billion, and declining revenue and production. It is not a good business for outside shareholders. It is, in effect, a national utility where the outside investors are being asked to finance it.


Could you talk about a mistake you made and what you learned from it?

At the dawn of the digital age, when we shorted AOL [AOL] back in 1996, it basically went up eightfold on us. Although it didn't put us out of business, it certainly caught our attention. We learned about timing.

Interestingly, as Time Warner [TWX] found out later, the accounting issues were actually very real. Their churn was actually much higher than they were letting on. But we also had a healthy regard for the ability of corporations to be gullible and to fall for the same hot trends as everyone else.

You can never get the timing exactly right, even if you are right on the fundamentals, ultimately. But on the other hand, you can be very, very right and still lose lots of money, so you have to construct your portfolio accordingly and never let one position ever be too large. That was a good lesson, and it probably saved us a lot of money.

Thanks, Jim.

http://online.barrons.com/article/SB500 ... rticle%3D0

[winston]

Jim Chanos on Daily Ticker: Stay Away From U.S. Tech Firms

http://globaleconomicanalysis.blogspot. ... -from.html

[winston]

Why Jim Chanos is Wrong About China's "Ghost Cities" by Greg Madison

http://moneymorning.com/2013/05/15/why- ... st-cities/

[winston]

CARL ICAHN: ‘I Don’t See Jim Chanos On The Forbes 400 List’By GuruFocus

“I’ve been on the other side of him [Chanos] many times and I’ve made fortunes being against him,” said Icahn.

“I don’t mean this in a derrogatory way, but I don’t see Chanos on the Forbes 400 list,” he said.


http://www.thetradingreport.com/2013/05 ... -400-list/