Deep Thoughts From Jim Chanos

Good interview here with Wall Street legend Jim Chanos. In the interview he discusses his background on Wall Street, how he got into short selling, his process for short selling, the psychology behind his approach and the asymmetries of the long and short side.

The middle portion of the interview on China is a must see. Chanos makes some really fascinating points on his short China thesis. He also dives into his short China thesis, how he got into this short theme and why he continues to believe the Chinese economy is due for a sizable decline.

The last portion of the interview discusses some of the global macro risks and how he’s been approaching some of the various influential policies and trends (via Market Folly):

 

Cullen Roche

Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.

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Comments

  1. I liked his comment on H shares holding companies and how they are “designed for shorting”. Yup, CDO^2, Enron, … understand what you own.

  2. Cullen,
    It would be nice to see less negatively biased posts about China – something more even handed. The plus’ and the minus’.

      • My friend told me the state he lived along put 30b Yuan into solar projects, not a single one worked out. Now multiply it with other states. And Wen came out and said china needs more investment to keep growing. it is hard not to be negative about Chinese investment future.

    • To be fair, the China story right now is something like the US story 5 years ago, just before the subprime collapse. There are massive bubbles fueled by misallocation of resources, and there’s no way that this scale of overinvestment ends well.

      Having seen the play a few times already, it’s hard to see how it could end differently this time.

    • It’s hard to be positive on a country whose business model is based on: a fixed exchange rate, a financial system that is more opaque and over leveraged than their western counterparts, while constructing cities no one lives in, building bridges and high speed rail systems that take you to empty corn fields, while also constructing 56 new airports that service farmers, and a population that mass hordes commodities because they don’t trust spot prices. The stories coming out of China are bound to be negative because they has forsaken real wealth creation, for their people and the global economy, preferring instead to have a current account surplus and a high GDP number.

      • Yep the western system where there are more futures in play than product,debt is multiplied by derivitives,bank’s bad decisions are bailed out by the taxpayerpaid ,overspending governments get bailed out by bailouts[loans that most likely will not get repaid],lending to people who cannot possible repay and the list goes on. At least they are spending their money on items that might have a future use. Europe and America seem to be just inventing bebt to try and keep the existing bubble inflated with no longterm benifit.

    • Perhaps we could ask the question a different way … can anyone point me to a “good news” story on China that is as well reasoned as the better negative stories? All of them are just puff pieces. TPC is about quality, not giving equal weight to all points of view.

      • Don’t be silly with the ‘equal weight’ & ‘just puff’ comments – plenty of very successful & informed professionals and regular people throughout the world see highly productive stories in China, and some that are not.
        You choose to see through a jaded lens..exclusively!

    • China is doing fine. Sure there are a lot of bad investments, but the bad investments didn’t make Chinese firms less competitive. Export growed 10%, current account surplus increased despite the high inflation for the last two years.

      The only reason China isn’t not doing very well is that the government doesn’t want to increase deficits. If China runs a deficit of 5%, the economy will do very well.

      Chanos is right about chinese firms. The chinese firms are not there to benefit investors. The good bets are agriculture firms outside of China and precious metals.

    • Huh? If you want to read fables turn to the print of the ecb’s. This site doesn’t attempt to mimic central planning providing incentives to those provinces reporting the highest production figures irregardless of the ever increasing number of stockpiling inventory. No wonder bankers and wall street economists still hold shahman like status in our society.

  3. Indian markets broke out of its long term downward trendlines…so are silver and gold showing sign of bottomming out…Treasuries are showing signs of topping…..can this be possible that we have new bull market beginning now and here….i don know how…i don know why….prices are telling….

    Posted some charts http://www.bubbleshort.blogspot.in

  4. http://www.youtube.com/watch?v=0h7V3Twb-Qk

    Youtube video of the empty city. City of Ordos Mongolia in case you missed it. Just ponder what constructing a city of this size did to GDP in that region. Now multiply that many times over and you can basically sum up the great Chinese growth story. I bet another 500- 1 trillion stimulus is in the cards. If not, this bubble will continue to pop.

  5. Chanos is a legend, but I just hope he hasn’t banked so much of his credibility on this “short China” thesis that he won’t know how to back out of it if he is wrong. Not saying he may be wrong, but he has been pounding the media on this call for a few years now.

    • Chanos does such good accounting work that he will pick and choose wisely. He is way too disciplined to make bets on marco issues. I think the marco thought on China lead him to and is leading him to companies that he can pick apart through fundamental analysis.

        • Definitely shorting commodities but through Shanghai listed corporations tied to commodities. Or even Brazilian/ Australian.

  6. Hugh Hendry´s Eclectica is shorting China by shorting Japan. And Eclectica is up 36% for the year.

  7. One can ALWAYS find the positive, it’s everywhere! I like reality and THAT is hard to find anywhere!
    I’m a trader and I like the short side for all the obvious reasons….

  8. Looks like the website http://www.opalesque.tv/ where this Chanos interview was originally filmed, is a treasure trove of interviews related to hedge funds…
    Thanks for another gem, Cullen, this will complement the Hedge Fund Market Wizards book quite well :-)