Jim Chanos is still short China - video

The video I previously posted has incited a new round of Chinese Empty City Watching.  Jim Chanos, the famous short seller, was recently on CNBC explaining his rationale and hinting at his short positions.



Link to video

How many more times China can continue down this path is unknown.

Jim Chanos' notes from 2012 Vail ValueX Conference

I had the pleasure of attending the 2012 Vail ValueX conference hosted by Vitaliy Katsenelson http://contrarianedge.com/valuex-vail/
While I will write more about my impressions here's a link to Jim Chanos'  notes.

VALUExVail 2012 - James Chanos


The rest of the presentations are available here -  http://www.scribd.com/VitaliyKatsenelson

Linkage roundup

Some reading material for you from my twitter stream:


RT @edwardnh: Why the latest eurozone bail-out is destined to fail within weeks - Telegraph http://t.co/sgj8HQcn
RT @credittrader: GReader: The Global Moral Hazard Dawns: Merkel Says "It Must Be Prevented That Others Come Seeking A Haircut" As... http://t.co/Tjd22kbQ
RT @theanalyst_hk: $$ Jim Chanos: Not Impressed By The Europeans, And Still Shorting #China http://t.co/OvdXeWIr #economy #europe
RT @JackHBarnes: Chart of the Day: North Dakota Annual Oil Production: http://t.co/lUWOqWst -- need to do more research myself on shale oil
Transfer payments over time in US http://t.co/sxiw6sF8
RT @zerohedge: And Now, For Some Semblance Of Sanity, Here Is One Hour Of Hugh Hendry http://t.co/5A5Jwgxu -- separate post on this soon(tm)
CITI: Failure To Trigger Greek CDS Could Cause The Whole Euro Bailout To Fall Apart http://t.co/TLDjUF7L -- be careful what you wish for
Meanwhile in China a swan finally takes flight... http://t.co/Z8w40PKd -- Condo prices are falling hard.
RT @AlephBlog: Fannie Squeezing Banks Makes 4% Mortgage a Mirage, Hinders Housing Rebound http://t.co/BKikceRX Higher lending standards fight lower rates
RT @AlephBlog: Money managers and commodities, the case against http://t.co/ynsn1qT3 Graph shows $$ managers drove commodity prices http://t.co/eNKE3nFA
RT @andrewyorks: *EU LEADERS CALL FOR BANKS TO HAVE 9% CORE CAPITAL LEVEL ok move that dial on the upper left to 9 http://t.co/WHLMk6Dm -- should be interesting when taking haircuts on Greek debt.
Skyscraper taller than any in London or Tokyo opens in Chinese village of 2000. http://t.co/IvHoRw4j #thiswillnotendwell
Underground bank lending in China - NPR - http://t.co/677IPKYK
RT @historysquared: $$ The cash commodity trading firms that account for 1 trillion in annual revenue 50% of all transactions http://t.co/TqTvhHM1
RT @ftasia: Iron ore plummets to 15-month low: As Chinese steel mills cut production, the price of iron ore dropped 7.2 per ... http://t.co/RVfC48zy
Blackberry outage made roads safer. http://t.co/agSNxNGX

Risk: As described by Chanos, Hendry and Gundlach

Some videos new and old which may provide some perspective on the recent downgrade of America by Standard and Poors and the current market thrashing.
I could attempt to write something eloquent but I'm busy right now. Instead I'll refer you to some successful investors voicing their opinions.

Chanos talking about credit ratings versus CDS rates
http://youtu.be/kRxAMM7UU_k

Gundlach on how the US will never not pay its debt, it just may pay its debt back with devalued currency
http://video.cnbc.com/gallery/?video=3000037858

A series by Hugh Hendry from late last year which I don't believe I have published before.  Considering the current market thrashing I think the discussion is important.
part 1: http://youtu.be/zvzKgjaVnlE
part 2: http://youtu.be/MJSO3H4GLqw

ht: HistorySquared

Hedge fund watch - Hugh Hendry and Jim Chanos

Here's some recent news from a few hedge fund managers:

A short video from Hugh Hendry (thanks Creditwritedowns)



Some notes from Jim Chanos' presentation at the Vail value conference. (thanks Katsenelson) Provides more detail on Chanos' bearish position in China.  Note Chanos is a short seller so he is always bearish on something.

Another China data dump

Been a bit busy this last month with various stuff so the posts have been a bit light.

Here's a dump of China information from the last month. Something for you to chew on while I ready the next wave of postings.

I posted some video a while ago about the empty city of Ordos China. Someone recently went there and took some pictures.  Time magazine no less. Go over to Randomroger and get all the details.

Intelligent speculator has some more video on Chanos and how and where to invest in China, both up and down.  Please notice the name of the web site. Be careful investing in China whether bullish or bearish.

In a previous post I mentioned the idea of a property tax had been floated by the local officials in Shanghai.  The Chinese Feds came in and squashed the idea, stating it was a federal matter. Looks like the back and forth will continue.  From Caixin online on 05/18/2010:

(Beijing) - China's tax agency said that the authority to levy property taxes lies in the central government rather than local governments.

Niu Xinwen, the spokesperson for the State Administration of Taxation, said that local governments have no right to interpret property tax policy, either.
The Shanghai government was quoted by Xinhua as saying that it was determined to curb housing prices with "harsh measures." However, the scope of taxable residential properties has yet to be determined.
Individually-owned, non-business real estate is taxed in Provisional Regulations on Property Taxes issued in 1986. In order to curb surging housing prices, local governments are considering a residential property tax in order to tamp down demand.

Then again 4 days earlier a pilot project for property taxes was announced.  From Caixin online (05/14/2010)

(Beijing) - Living a life of ease in an upscale Chongqing villa soon may cost a lot more.In April, the Chongqing municipal government announced a plan to tax high-end apartment owners as part of a nationwide push to curb surging housing prices. Under the municipality's pilot proposal, the owner of a villa worth around 3 million yuan would pay about 10,000 yuan in property taxes every year. Chongqing Mayor Huang Qifan unveiled the plan on a government website just three days after the central government's cabinet, the State Council, announced April 17 new measures designed to cool real estate sales.

The preferred method of stimulus in China appears to be ordering the banks to LEND.  The banks then ask 'how much'  This may not work again if the Chinese deem another boost is needed.  The banks have run out of excess capital.  Don't be suprised if you see some serious secondary offerings from Chinese banks soon. From Caixin online -- 04/29/10

(Beijing) - First quarter reports by five joint-stock banks, the second rung of China's bank industry ladder after the five biggest state-owned banks, have revealed that behind the rapid growth in net profits, capital adequacy ratios have fallen. Some banks have dipped below the regulatory capital requirement.

Just a few days ago Shanghai announced stricter measures to cut down on home 'speculation'  From Chinadaily 05/29/2010

"Shanghai will take more strict measures in line with the central government policy," Chen said, adding that more efforts will be made in building economically affordable houses and cracking down on speculative house purchasing.

The Economist jumps into the fray with their own opinion of the Chinese property market.  They are of the opinion China will survive the upcoming property bust.  From The Economist 05/27/2010

If mortgages did turn sour, how badly would China’s banks suffer? China Merchants Bank’s mortgage book grew by 70% in 2009. But mortgages still amounted to only 23% of its total loans. In China’s other big banks, the share is less than 20%. Loans to property developers account for another 8% or so, according to Mr Rothman.

Local governments may be more exposed. They suffer from a chronic shortfall of tax revenues, which they partly fill by expropriating land from farmers and selling it to developers at a hefty markup. Their dependence on property for income is often overstated, however. They are counting on land sales and property taxes for less than 17% of their revenues this year, according to Vincent Chan of Credit Suisse, once fiscal transfers from the central government are taken into account.

You know it's serious when officials sitting on the equivalent of the Federal Reserve board acknowledges the problem.  From Naked Capitalism 06/01/10

“The housing market problem in China is actually much, much more fundamental, much bigger than the housing market problem in the US and UK before your financial crisis,” he said in an interview. “It is more than [just] a bubble problem.”…

Mr Li said the high cost of housing could hamper future growth by slowing urbanisation. Rising prices were also a potential political flashpoint, especially among younger people who felt locked out of the property market.
“When prices go up, many people, especially young people, become very anxious,” he said. “It is a social problem.”

Jim Chanos on China and Rogoff on Excessive debt

Here's 2 interviews for your digestion.  Jim Chanos last night on Charlie Rose regarding China and Mr. Rogoff on how excessive debt growth eventually gets you into trouble.  I reccommend (again) you read the book "This time is different" by Rogoff & Reinhart

Charlie Rose Interviews Jim Chanos

Charlie Rose Interviews Kenneth Rogoff

The smell of lending bubbles in China. Do you like butter on your popcorn?

One item which is becoming a pet peeve of mine is the practice of writing articles making predictions with no underlying factual data to buttress their conclusions.  If you are going to predict something, at least tell me why! 

A current hot topic is China and whether it is in a bubble.  And if in a bubble, what kind?  Well, here's some juicy data and anecdotal evidence for you to chew on.

If you notice, lending in China skyrocketed last year.  As of November 30, 2009, total loans outstanding are up nearly 35% year over year.  That is a huge increase in the rate of growth.  

I would put to you that all that money sloshing around did not just end up in solidly performing loans made with proper underwriting standards with the full expectation they will be paid back. 

Sharp eyed readers may notice the decline in lending growth from October 07 to the nadir of November 08 coincides with the dramatic decline in the Chinese equity markets almost perfectly.  Once the lending spigots were turned back on the Chinese markets reversed course and charged back up again. 

I have previously mentioned my suspicions that some of that lending deluge has also made its way into the commodity markets as pure speculation, but I'll leave that to a later entry.

The hedge fund manager Jim Chanos has also noticed this excess credit creation.  Around time point 4:15 he starts to discuss China and their excessive lending.


When will this bubble pop? Can't tell you that. Keeping the pace of lending up at 35+% yoy may be a challenge for the Chinese government this year as the banks are running out of spare capital. There's already a lot of talk and some action trying to tamp down the speculative fires in property prices.  Where and when this all goes poof  is subject to speculation.  If it ends in 2010 it will punch a serious hole in the current world-recovery-buy-commodities-and-all-risky-assets theme. Its a dangerous game to play right now as prices can go parabolic before they go splat but I'm watching and waiting. 

Sit back and get your popcorn. The show will be very interesting to watch in 2010.