Chanos is back! His short China thesis is very long in the tooth but
as it goes with most ego maniacs he cannot accept failure or that fact
that he might be wrong. Being wrong on an entire country where you have
never visited and don’t speak the language…who could have seen that coming?
Chanos was back presenting his latest short China thesis that he has been
pitching for 5 years now.
His presentation is so poor without much fact and looks to be some stuff
one of his analysts has just pulled off the net but allow me to dismantle
a few of his arguments that are reasonable.
(1) Chanos: The Chinese economy has quadrupled in nominal terms in the last
10 years,” he says. “Western investors in the Chinese stock market have
basically made nothing in that 10-year period. That’s a staggering indictment
of the form of capitalism that exists in China.
CMR: Western Investors have made nothing? Has he not been reading of major
Wall Street firms with gains of hundreds of percent in shares of Chinese banks
and real estate companies? Has no one else made money? How about the wages
of the Chinese workers which are up 5 times in the last ten years? How much
are American wages are up in that time period? How much is the American stock
market up over the last ten years? The people involved in the
“real economy” in China have done well. Anyone moving or producing real
goods has done very well. Its only the paper speculators who have not had an
avenue to come in a pillage the real economy as China’s financial system is
cordoned off to the hot money speculators. I guess this is what disappoints him
(2) The Real Estate Bubble –
He uses another chart which is very old showing the price of property in China
on an affordability index. Anyone with real experience in China will tell you
this chart is non-sense as their is so much unreported income in China.
The chart is meaningless in the same way that the U.S unemployment rate is
China for several years now has draconian policies to STOP people from buying
properties WITH CASH. Normally properly bubbles are created by easy lending
standards as found in the U.S. where people with no income or jobs were getting
loans. The amount of home equity in China is MASSIVE, Easily in the trillions
of dollars. No one is under pressure or even wants to sell their homes. So much
for a real estate crash. And by the way Jim, home prices and transactions are
up again this year.