Posted on 01/10/2010 5:19:28 AM PST by FromLori
Contrarian investor Jim Chanos, known for his short selling prowess, has now made it known that he is betting against one of the biggest stars of today: China Inc.
Chanos and his aptly named fund, Kynikos (Greek for ‘cynic’) earned their stripes in Wall Street by foreseeing the problems of Enron, Tyco (NYSE: TYC), Boston Market and other corporate megastars. Chanos warns that China’s economy is hyperstimulated by credit excess and headed for a spectacular crash. He even suspects that the growth rate of 8% is cooked. Chanos doesn’t seem to be bothered by the fact that he is betting against the collective wisdom of the likes of Warren Buffet, George Soros, and Wilbur Ross, among others.
Chanos is focusing on infrastructure-related commodities like copper and iron ore in his bet against China. A point to be noted is that he excludes gold from the list as it not an infrastructure commodity. According to him, the main risk is that China will overproduce and end up with a surplus that it cannot sell.
It is widely believed by analysts that a lot of speculative foreign inflows are doing the rounds in China’s real estate sector, leading to potential asset bubbles. Popular opinion is that China’s growth will sustain its momentum with what remains from the $586 billion government stimulus program for exports and consumption. What also goes unsaid is that most of the world is betting on China to lift the global economy out of recession.
In the meantime, other strategists like Robert Griffith of Cazenove Capital have gone on record to say that India and Brazil present safer options compared to China.
US companies like Ford (NYSE: F), Microsoft (NASDAQ: MSFT [FREE Stock Trend Analysis]), Google (NASDAQ: GOOG) and others that are heavily invested in the Chinese shangri-la may want to take note of the billionaire investment wizard who once foretold the fall of Enron.
China’s a lot of hype.
I think they have a huge bubble themselves and then there is our debt lol now our own fed is forced to buy that 80% last year.
...we’ve got the best regulated financial reporting in the world, and yet we have scandals like Enron....I can’t imagine the chicanery that’s going on in China.
Chanos may be a fair amount of hype too. A few years ago, the WSJ published his fund’s track record. I was shocked at how much money could have been lost investing with him unless you timed your entry point very well.
Communist China has always been a tenuous situation....even as the Cheerleaders for Communist China were pumping it up.
You cannot maintain an economy by basing it on modified Communism.....artificially non-market lower wages....and pilfering jobs from other countries based solely on paying producers less (non-market) to crate and manufacture.
Communist China has no one who creates anything....they scavange and steal...but no creators or real entrepeneurs. Also, China’s workforce is so low-paid that they cannot rely on domestic consumption during a sagging economy....prison labor is never great for an economy.
You can bet...if and when Communist China collapses....the Liberal Free Trader Globalists will still be pushing “Free Trade with Communist China works”.
I bet Stalin, Lenin, Brezhnev, and the other Soviet Commies are now sitting in hell wondering where all the Liberal Free Trader Globalists were when the USSR needed help....Mao and the ChiComs got a lot of help
I agree; I think the whole “emerging markets” thing is a house of cards as well..
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