Wednesday, May 25, 2011

Jim Chanos on China (interview): "We're not bearish enough"

Fast-forward it to 6min20 if you only want to check his view on Chinese real-estate developers.

Chanos doesn't need introductions so I will go straight to the point:

"The bubble is really on the other side of the world. What my team found, they actually came back saying we're not bearish enough. The signs of overcapacity were even much greater than their last visit, which was late last year, and increasingly the executives that they met with were sounding a little bit more uncomfortable about the current situation."
"If you look at the balance sheets of the developers, you'd be hard-pressed to see how healthy they are because they're all loaded up with land just as our developers were at the top of our market," he said. "We've maintained our pretty much dramatic overweight in our Chinese shorts."

When asked about Bloomberg's Adam Johnson who was in China doing research and interviewed a developer who mentioned there's no problem with building since the government pays them ahead:

"You can't pre-sell and use the proceeds for the next development. That's changed."

*Disclaimer: charts and data are presented as I receive/see them. Sources are usually not checked for validation and my own calculations are of 'back of the envelope'-type. I am aware that some math that I do myself might be wrong and/or misleading to some extent. In financial markets the rate of change of economic data is often more important than the actual level and the perception of 'what is priced in' is more important than 'what is actually going to happen'. This is actually the way people pick entry and exit points. So... yes, sometimes you might say 'This guy is an idiot, this is way wrong!' with a high conviction, being right. Not to worry. Markets are made of expectations and the clash of conviction between its participants. Portfolio managers know that being an idiot is sometimes profitable and being smart is often a bad choice. It is all reality, sometimes good, sometimes bad. By the way: corrections to my analysis and intelligent debate is welcome. theintriguedtrader AT gmail do com

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