Jim Chanos

[BlackCat]

Recent 1 hour presentation by Chanos to some students. On China.

http://www.ritholtz.com/blog/2010/02/ch ... -in-china/

He is saying that China real estate and infrastructure is a bubble. Not calling for a pending crash/depression/collapse.

Production overcapacity:
- Fixed asset investment as a % of GDP growth, highest ever recorded for any country. This can't go on forever, and unless used productively, the maintainence/depreciation costs will kick in.
- New Ordos city - empty.
- South China Mall - Worlds largest - empty.
- Worlds tallest Village (small suburb outside Beiging) Building 6th 7th and 8th tallest skyscrapers in world.
- Manufacturing capcity increases last year (textiles 11%, chemicals 27%, metals 30%). New factories being buiuld while others lying idle.

Property fever has caught hold:
- People keep empty condominium's as a store of value.
- Top TV show abt how real estate prices affect people. eg: One woman became mistress, another comitted suicide. Show has now been pulled.
- Girls only want guys with an apartment.
- 20% and 16% vacancy rates, and building still going on.
- Companies having nothing to do with real-estate are not developing it. eg: Tobacco company developing 70 storey building to rent out.
- 2.6bn sq meters non-residential real-estate under construction. This is the '5x5 cubicle for every man, woman and child'.

How he would short:
- Global building materials suppliers.
- Western traded Chinese property developers.
- He does not short in HK/China. I think he mentioned S'pore once, but nothing here either.
- Natural resource shorts: Aust, Brazil, Canadian companies.
- "You're all smart students, you can figure it out for yourselves".

Timing. Can he see a catalyst? No, if he could everyone would see it too. As a short-seller, he is usually early.

Can China go the same route as Korea to develop its own world class products? This what we must watch out for if we want to see China to escape the trap of growth through increasing inputs, truly become developed and become a peer to the US. Milestones to watch: aviation industry (commercial aircraft), maybe alternative energy sector.

[winston]

As a short-seller, he is usually early

This is how I always get into trouble

[mojo_]

Never “Short” a Country That Has $2 Trillion in Cash By Keith Fitz-Gerald, Money Morning

( I'm very disappointed with this guy. He does not even know what's currency reserves. A foreign currency reserve ALWAYS has a corresponding local currency liability of the same amount. Therefore, a country with a US$2.3t of US$ reserve is not necessary richer than a country with only US$200m of US$ reserve )

I'm well aware that bond king Bill Gross has been sounding the alarm about a China bubble, and that Forbes magazine is predicting a major meltdown by the Asian giant. I've also heard all about noted short-seller James S. Chanos - who made his name by correctly calling the Enron Corp. demise - who recently described China as "Dubai times 1,000 - or worse."

http://moneymorning.com/2010/01/21/inve ... n-china-6/

ok...so, i dont understand what you mean...

A foreign currency reserve ALWAYS has a corresponding local currency liability of the same amount. Therefore, a country with a US$2.3t of US$ reserve is not necessary richer than a country with only US$200m of US$ reserve

can u please educate me? thanks...

Some insights into what it means to have massive forex reserves in this article (a rebuttal of the above article):
Never short a country with $2 trillion in reserves?
(long article but quite educational for me)

[-dol-]

As a short-seller, he is usually early

This is how I always get into trouble

I always get into trouble for being "too late"

[winston]

Chanos Bullish on Cisco, Bearish on Greece, China By: Dan Weil

James Chanos, the famous short seller, likes Cisco stock, but he’s not so enthusiastic about Greece and China.

“Cisco’s obviously on the cutting edge of this stuff (communications technology),” says Chanos, one of the first to spot Enron’s woes.

“They were early on in figuring out that the consumer was going to drive the technology upgrades in this cycle to a great extent," he told CNBC.

"To (CEO John) Chambers’ credit, they saw this ahead of the curve better than most, so I think they’re probably the best positioned.”

Cisco recently reported that its profit rose 23 percent to $1.85 billion in the quarter ended Jan. 23, up from $1.5 billion a year earlier.

As for Greece, many investors worry that it will default on its sovereign debt.

“Greece has long been a society of many chiefs and no Indians,” Chanos said.

“They’ve got some real problems that they don’t even want to fess up to themselves. Whether the EU (European Union) does anything to help them out, I don’t know.”

On the China front, Chanos sees a bubble.

“The bubble that’s going on in commercial and residential construction, infrastructure construction and manufacturing construction is unlike anything we’ve ever seen.”

Economist Andy Xie says that fiscal and monetary tightening steps by China’s government will soon end the real estate bubble.

“It’s very difficult to see this demand continuing,” he told Bloomberg.

http://moneynews.com/StreetTalk/James-C ... /id/349388

[mojo_]

Wonder what Chanos will make of the data in this Capland slide set that shows China residential property is very healthy - good affordability, hi savings rate, demand > supply?

CapitaLand Group Full Year 2009 Results

[LenaHuat]

Hi mojo
Well, Capland also gave these remarks in slides 47 and 48:

We won’t chase up land prices to add on to speculation
– Prefer to walk away with peace of mind

Some degree of speculative demand in Tier 1 cities.
Central government is taking steps to rein in market.
We will be more worried if the government does nothing abt it.

I think Chanos has given a pretty balanced view of things. Affordability in Beijing and Shanghai are obviously sliding (read CapLand's charts). Many buyers are drawing upon their parents' savings to buy. Speculation in Hainan Isle right now is unbelievable! Vacancies differ from city to city. SohoChina is having some problems with commercial property buyers in Beijing.

In conclusion, I'm inclined to think that there is a property bubble in some sectors and some parts of China. This is like saying and not saying, I suppose
More importantly, it's scaring the lights out of the CCP. I expect more tightening.

[mojo_]

Lena, thanks for making the effort to go thru the big slide set with a fine tooth comb and your analysis and comments thereafter. Also your insights into the China residential mkt.

When I first saw the Capland slides on residential prop, I remembered BlackCat's transcript of Chanos video on China residential mkt and immediately went into cognitive dissonance. So now I have the views of a very seasoned residential property player as well, thanks.

[LenaHuat]

Hi mojo
Oh no, I'm not at all a seasoned property player. But maybe I do have an occasional black tongue.
It's 50 basis points more of tightening by the Chinese Central Bank

More importantly, it's scaring the lights out of the CCP. I expect more tightening.

[winston]

Mr. China Bear will be appearing on CNBC soon ..