James Chanos on Charlie Rose talking China

[we_are_toast]

The entire interview is worth listening to, but it's not up on Charlie Rose's website yet. Here's a short clip.



He says 50%-60% of China's GDP is construction related.
Bubble will burst this year or next, maybe.
Short commodity companies that are selling commodities to China, copper, steal ...

I've never heard anything from Chanos before, anyone know anything about him?

[sandwind]

Re: James Chanos on Charlie Rose talking China

[Rajiv]

Re: James Chanos on Charlie Rose talking China

I am embedding the interview

Click on Chanos image to start the video

[ViC78]

Re: James Chanos on Charlie Rose talking China

I've never heard anything from Chanos before, anyone know anything about him?

He is the guy who exposed the Enron accounting fraud. I think he was short the healthcare companies as well (at least in 2008). Not sure if that is working out for him now though or if he has still kept those positions.

[bobola]

Re: James Chanos on Charlie Rose talking China

"If you bought several apartments in Hainan before 2007, you can make a fortune now," said Liu Yuan, a sales manager with IFM Investments Limited's Sanya branch, in a phone interview with the Global Times.

"An apartment in Sanya that sold for 140,000 yuan ($20,507) in 2005 is now worth 480,000 yuan ($70,311) or even higher, and the average [house] price here can equal major cities like Beijing and Shanghai. Although the house price is rising by about 1,000 yuan ($164) per square meter each day, people just come and buy like picking up tomatoes in the supermarket," Liu said.


Hainan may be ground zero for the upcoming China housing bubble pop.

http://business.globaltimes.cn/indus...02/503365.html


"Prices up 30 per cent in a fortnight. Luxury properties costing as much as the priciest Shanghai homes. Property sales at record levels. Developers hoarding flats in the expectation they will fetch more later. Land prices too rich even for Allan Zeman.

Is the latest property bubble in tropical Hainan about to burst? Or will prices for high-end properties keep on rising as the island builds the tourism infrastructure needed to meet Beijing's goal of turning it into a world-class destination?"

http://www.theedgeproperty.com/globa...-to-burst.html

[touchring]

Re: James Chanos on Charlie Rose talking China

I think Chanos argument is not convincing because he failed to explain why the bubble will burst soon. To understand why the bubble will burst, first, you must understand what caused the bubble.

A large part of the bubble can be explained by the fixed exchange rate policy in China and the lax monetary policy in the US.

In order to make Chinese exports super competitive, in order to boost employment when the world is in recession (yes, boost employment when the rest of the world is losing jobs), the Yuan must be suppressed at all costs - including a real estate bubble. To do so will require super low interest rates, huge money printing, low mortgage rates (mortgage rates in China are less than half of those in the US), much of which is channeled into the real estate bubble.

On top of that, huge subsidies in the form of bank loans are given out to state companies so that goods can be sold below costs, which is the easiest way to maintain sales and jobs in recessionary times, but inevitably a big part of these loans will end up in the real estate market as flipping real estate is much more lucrative than selling goods below cost. At the end of the day, even state enterprise officials need to show a pretty balance sheet.

My question, for how much longer can China maintain such a policy, especially when Barack Obama will soon face the prospect of becoming a lame duck president? The Fed will also not maintain a low interest rate forever, not when they realize that a low interest rate will cause imported inflation when other countries are also busy printing money and driving up prices.

This year, China will have a record 6.3 million new college graduates entering the job market. 6 million is an incredible number if you consider that the official figure for unemployed people in the US is 15-16 million people. To create 6 million new jobs when others are losing jobs is an incredible feat and requires an incredible measures from the Chinese government.

http://opinion.globaltimes.cn/editor...03/514271.html

With 6.3 million new college graduates seeking jobs this year, and an estimated total of 225 million migrant workers in the job market, the task of safeguarding job seekers' interests could be even tougher for the Chinese government.

[GRG55]

Re: James Chanos on Charlie Rose talking China

He is the guy who exposed the Enron accounting fraud. I think he was short the healthcare companies as well (at least in 2008). Not sure if that is working out for him now though or if he has still kept those positions.

As ViC78 says, Chanos is properly credited with being among the first to publicly identify the problems at Enron and short the stock. He was widely ridiculed at the time for that call.

At the time I was employed by one of Enron's smaller competitors [all of Enron's competitors were much smaller :p] and Chanos' call got my attention. I was in Houston one block away from Enron headquarters the morning that Jeffrey Skilling abruptly resigned six months into his stint as CEO. Every one of us who dealt with Enron knew some serious shzt must be going on down the street. Chanos saved my azz. Although I didn't have the courage to short my own employer, I sold every share I had in the corporate savings plan.

Now doing forensic accounting on a company isn't quite the same thing as analyzing an entire country...

[touchring]

Re: James Chanos on Charlie Rose talking China

Now doing forensic accounting on a company isn't quite the same thing as analyzing an entire country...

A country can print money, sell land and collect taxes, can a company print money, sell land and collect taxes?

[Ben]

Re: James Chanos on Charlie Rose talking China

thanks, that's a great interview

and, I've finally seen some non-moronic American TV financial reporting

[bobola]

Re: James Chanos on Charlie Rose talking China

"April 14 (Bloomberg) -- China’s property prices rose at a record pace in March, indicating government efforts to stem gains aren’t working and more drastic measures may be needed amid concern of a bubble in the nation’s housing market.

Haikou, the capital city on the southern island of Hainan, had the biggest gain, with a 53.9 percent jump in overall property prices, the statistics bureau data showed. Sanya, also on Hainan and a host of the Miss World beauty pageant, followed with a 52.1 percent increase.

Both cities also led gains in prices of newly built homes: Haikou by 65 percent and Sanya by 58 percent, the report showed.

Property prices on Hainan, located in the South China Sea, have advanced after the Chinese government issued at the start of this year a plan to turn the island into an international tourism destination. The province, China’s southernmost, had a population of 8.5 million in 2008 and exports mostly agricultural products such as rubber."

http://www.bloomberg.com/apps/news?p...d=aUxoV_4Y3aoE

[touchring]

Re: James Chanos on Charlie Rose talking China

Both cities also led gains in prices of newly built homes: Haikou by 65 percent and Sanya by 58 percent, the report showed.

Property prices on Hainan, located in the South China Sea, have advanced after the Chinese government issued at the start of this year a plan to turn the island into an international tourism destination. The province, China’s southernmost, had a population of 8.5 million in 2008 and exports mostly agricultural products such as rubber."

I would like to point out that the announcement was made at the start of the year, so prices actually jumped 50-60% in the 3 months of jan, feb and march, an annual rate of 200% a year. I think this is unprecedented in history, no where in the world, not even since the American independence when home prices can rise so sharply.

[GRG55]

Re: James Chanos on Charlie Rose talking China

The entire interview is worth listening to, but it's not up on Charlie Rose's website yet. Here's a short clip...

...He says 50%-60% of China's GDP is construction related.
Bubble will burst this year or next, maybe.
Short commodity companies that are selling commodities to China, copper, steal ...

I've never heard anything from Chanos before, anyone know anything about him?

The statistics that keep coming out of China are mindboggling...and if there is any truth to them at all there is absolutely no conceivable way that these rates of growth are sustainable...

Chinese Economy Grows 11.9%, Highlighting Threat of Overheating

April 15 (Bloomberg) -- China’s economic growth accelerated to the fastest pace in almost three years in the first quarter, highlighting overheating risks that may prompt the government to scrap the yuan’s peg to the dollar.
Gross domestic product rose 11.9 percent from a year earlier, the statistics bureau said at a briefing in Beijing today...

...After the GDP announcement and this week’s report of a record jump in property prices, the government today announced measures to cool the real-estate market, including requirements for bigger home down payments. The government also said it will study extra taxes, including on individuals’ profits from property sales...

...Industrial production climbed 18.1 percent in March, less than a 20.7 percent gain in the first two months, and retail sales increased 18 percent, today’s data showed. Car sales leapt 76 percent in the first quarter from a year earlier, with Mercedes-Benz (China) Ltd. reporting a doubling...


Strong Chinese GDP growth backs tightening case

BEIJING
Thu Apr 15, 2010 8:13am EDT

Reuters) - China chalked up unexpectedly strong annual growth of 11.9 percent in the first quarter, prompting renewed calls for tighter policies to prevent the economy from overheating and stoking speculation of when Beijing will loosen its grip on the yuan...

...The Commerce Ministry promptly reaffirmed its opposition to a stronger yuan. A spokesman said Washington was wrong to argue that, by holding down the currency, Beijing was giving Chinese exporters an unfair competitive edge and thereby contributing to near double-digit U.S. unemployment...

...Mark Williams with Capital Economics in London said the mildness of price pressures in China meant there was no pressing economic reason for Beijing to let the yuan rise after keeping it pegged near 6.83 per dollar for the past 21 months.
The consumer price index rose just 2.4 percent in the year to March, below market expectations of a 2.6 percent increase...

...The State Council, China's cabinet, promised on Wednesday after a preview of the data to stick to the "appropriately loose" monetary stance and active fiscal policy first adopted at the height of the global financial crisis in late 2008...

...In addition to quarterly GDP, China released a batch of figures for March that were strong and close to expectations.

Retail sales rose 18.0 percent from a year earlier, factory output grew 18.1 percent, and urban investment in fixed assets like roads and factories rose 26.4 percent in the first quarter...

[touchring]

Re: James Chanos on Charlie Rose talking China

The statistics that keep coming out of China are mindboggling...and if there is any truth to them at all there is absolutely no conceivable way that these rates of growth are sustainable...

Firstly, china's growth is not a mirage. they don't just build castles in the air like they do in Dubai.

You already know the Modus operandi. they can and will provide everything - the capital, the cheap labor, the free land, and the skilled labor. This is every businessman's dream come true. The sugar daddy that gives you not only money, but also does the work.

[jpatter666]

Re: James Chanos on Charlie Rose talking China

Firstly, china's growth is not a mirage. they don't just build castles in the air like they do in Dubai.

You already know the Modus operandi. they can and will provide everything - the capital, the cheap labor, the free land, and the skilled labor. This is every businessman's dream come true. The sugar daddy that gives you not only money, but also does the work.

No, they build entire cities, airports and malls in the air. :rolleyes:

I'm reminded of the massive "investment" in high-speed fiber during the dot-com boom. No way it was needed then, but there was a "build it and they will come" mentality.

And yes, *in time* China will grow into needing the infrastructure, just as we grew into the network capacity. But there was one hell of a bust before it happened.

[touchring]

Re: James Chanos on Charlie Rose talking China

http://www.marketwatch.com/story/chi...k=MW_news_stmp

HONG KONG (MarketWatch) -- China raised down-payment requirements and lifted the lending rates on some types of mortgages Thursday, a day after official data showed property prices in its major cities increasing at the fastest pace in nearly five years. The required down payment on purchases of second homes will rise to 50% from 40%, the state-run Xinhua news agency reported, citing a statement issued late Thursday by the State Council following the conclusion of an executive meeting chaired by Premier Wen Jiabao.

Other changes will see down-payment requirements on homes of more than 90 square meters rise to 30% from 20%, and the minimum mortgage rate on second-home purchases will be set at a minimum 110% of the central bank's benchmark lending rate, according the State Council statement.

Housing prices in China's 70 top cities climbed 11.7% last month from March 2009, accelerating from February's 10.7% comparable growth rate, the National Bureau of Statistics said Wednesday. The gain was the quickest since July 2005.

Analysts at RBC Capital said the tighter lending and deposit requirements announced Thursday were part of a group of measures introduced this year that, to date, seem to have had little success is slowing rapid gains in asset prices.

"Policymakers remain reluctant to use the blunt instrument of higher interest rates, but it is unlikely that extra fine-tuning will be enough to slow down the property market and reduce overheating risks," wrote Brian Jackson, RBC's senior strategist in Hong Kong.

Chris Oliver is MarketWatch's Asia bureau chief, based in Hong Kong