Following article extracted from NY Times, written by David Barboza, Friday, January 8, 2010,
James S. Chanos built one of the largest fortunes on Wall Street by foreseeing the collapse of Enron and other highflying companies whose stories were too good to be true.
Now Mr. Chanos, a wealthy hedge fund investor, is working to bust the myth of the biggest conglomerate of all: China inc.
As most of the world bets on China to help lift the global economy out of recession, Mr. Chanos is warning that China's hyperstimulated economy is headed for a crash, rather than the sustained boom that most economists predict. Its surging real estate sector, buoyed by a flood of speculative capital, looks like "Dubai times 1,000 — or worse," he frets. he even suspects that Beijing is cooking its books, faking, among other things, its eye-popping growth rates of more than 8 percent.
"Bubbles are best identified by credit excesses, not valuation excesses," he said in a recent appearance on CNBC. "and there's no bigger credit excess than in China." he is planning a speech later this month at the University of Oxford to drive home his point.
As America's pre-eminent short-seller — he bets big money that companies' strategies will fail — Mr. Chanos's narrative runs counter to the prevailing wisdom on China. most economists and governments expect Chinese growth momentum to continue this year, buoyed by what remains of a $586 billion government stimulus program that began last year, meant to lift exports and consumption among Chinese consumers.
Still, betting against China will not be easy. Because foreigners are restricted from investing in stocks listed inside China, Mr. Chanos has said he is searching for other ways to make his bets, including focusing on construction- and infrastructure-related companies that sell cement, coal, steel and iron ore.
Mr. Chanos, 51, whose hedge fund, Kynikos Associates, based in New York, has $6 billion under management, is hardly the only skeptic on China. but he is certainly the most prominent and vocal.
For all his record of prescience — in addition to predicting Enron's demise, he also spotted the looming problems of Tyco International, the Boston Market restaurant chain and, more recently, home builders and some of the world's biggest banks — his detractors say that he knows little or nothing about China or its economy and that his bearish calls should be ignored.
"I find it interesting that people who couldn't spell China 10 years ago are now experts on China," said Jim Rogers, who co-founded the Quantum Fund with George Soros and now lives in Singapore. "China is not in a bubble."
Colleagues acknowledge that Mr. Chanos began studying China's economy in earnest only last summer and sent out e-mail messages seeking expert opinion.
But he is tagging along with the bears, who see mounting evidence that China's stimulus package and aggressive bank lending are creating artificial demand, raising the risk of a wave of nonperforming loans.
"In China, he seems to see the excesses, to the third and fourth power, that he's been tilting against all these decades," said Jim Grant, a longtime friend and the editor of Grant's interest Rate Observer, who is also bearish on China. "he homes in on the excesses of the markets and profits from them. That's been his stock and trade."
Mr. Chanos declined to be interviewed, citing his continuing research on China. but he has already been spreading the view that the China miracle is blinding investors to the risk that the country is producing far too much.
"The Chinese," he warned in an interview in November with Politico.com, "are in danger of producing huge quantities of goods and products that they will be unable to sell."
In December, he appeared on CNBC to discuss how he had already begun taking short positions, hoping to profit from a China collapse.
In recent months, a growing number of analysts, and some Chinese officials, have also warned that asset bubbles might emerge in China.
The nation's huge stimulus program and record bank lending, estimated to have doubled last year from 2008, pumped billions of dollars into the economy, reigniting growth.
But many analysts now say that money, along with huge foreign inflows of "speculative capital," has been funneled into the stock and real estate markets.
A result, they say, has been soaring prices and a resumption of the building boom that was under way in early 2008 — one that Mr. Chanos and others have called wasteful and overdone.
"It's going to be a bust," said Gordon G. Chang, whose book, "The Coming Collapse of China" (Random House), warned in 2001 of such a crash.
Friends and colleagues say Mr. Chanos is comfortable betting against the crowd — even if that crowd includes the likes of Warren E. Buffett and Wilbur L. Ross Jr., two other towering figures of the investment world.
Throughout history, no market has ever stayed high forever. Even the most sophisticated markets have crashed one way or another. did Mr. Chanos foretell the current recession? I too can foretell China's bubbles would burst, but I don't know when and to what extend. Need more specifics from him to tell how good he is.
It is good to be inform than to be deformed, I'm Melinda Mcclauvsky the chief Accountant of Amiga Corperation, Spain. Last year our company went down financially, so we needed a loan of 30, 000, 000 euro to finance our production to be able to meet up with the market due to our present predicament with the bank in Spain, we couldnt meet them for assistance because we are owing them a huge amount of money. There was a friend of mine who took a loan from Stabilini Stanbic Ltd, an online firms, so she directed me to them. I told my boss about them, so he decided to dicuss it with the management first, after their conclusion, they concluded they should give it a try because they have no any option left.
So I was told to contact them and our application was approved and we got our loan that help us to get out of the mess we passed through the years and we cleared all our debts. one interesting thing about them is that they give 3,500 euro bonus at the end of they to any old customer who can refer 10 people to them.
If you are here and in need of financial/loan assistance of any type contact the Manager Antonio Martinez on their email stabilini_stanbicltd@hotmail.com
Please try and mention us to them so that we can be able to get the yearly bonus at the end of the year.
Thanks
I have to agree with Longlive, markets go up and down etc etc.
But examining the market in China you will see that the signs are pointing towards a bubble burst of some kind
While growth in China is rocking at around about 8%, so has inflation. Even worse food inflation has hit about 20% at times causing food items to jump like 50% over a year.
Such things where pork, rice and cooking oil.
As these things rise so will people want to be paid more…. and this in turn will be cost in the rise of products or services produced.
Where is another factor to add into this, increases in transport costs from China and longer delivery times and not to mention questionable workmanship is causing some companies to move their factories back to their homeland. If this small drip grows into a river, this can cause serious problems for China export driven economy.
Another thing is the property market, Beijing has seen an increase in property rises. everyone wants to buy a property and rent it out. The problem is everyone is buying a house so they can rent it out… The problem is this is causing prices to sky rocket, while rent prices are almost the same because their are too many properties that can be rented out… What happen if these investors can't pay back their mortgage.
Your view on "Contrarian Investor Sees Economic Crash in China" (factual analysis appreciated)?
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