Jim Chanos Doesn’t Trust Accounting in China, Likes Financials [VIDEO]

Jim Chanos was on CNBC this morning. Below we have several videos with their intro line, followed by the computer transcript of the text for all of them.

Jim Chanos Doesn't Trust Accounting in China, Likes Financials [VIDEO]

“I wouldn’t trust any company’s accounts in China,” says James Chanos, Kynikos Associates president & founder, explaining why he is short Chinese companies, despite GDP growth.

James Chanos, Kynikos Associates president & founder, explains why he is concerned about rising health care costs.

James Chanos, Kynikos Associates president & founder, explains why he is short some tech companies but long on banks.

James Chanos, Kynikos Associates president & founder, discusses whether high-frequency traders have an unfair advantage over the individual investor.

James Chanos, Kynikos Associates president & founder, shares his thoughts on why he would consider adding shorts to his European positions.

For video #1

our guest host is one of the world’s largest short sellers but he goes, you go long on certain
things. yes, we have a hedge fund. famed hedge fund manager jim chenos, founder of
kinikos associates. kinikos has greek origin and did it mean anything? well it’s the root of
the word cynic but i’m also half irish so it means you really shouldn’t listen to me at all when
it comes to finance. i’ve got some irish, too. let’s just leave it at that. cynical. we have to
start with china i think, and we’re still in a period where everybody can see that something’s
happening over there, but the consensus is, always has been and still is that it’s not,
nothing really that major, nothing really that big to worry about. if you noticed that, people
finally will concede yeah, okay, but they’re the same people that say china has got it down
pat, know exactly what they’re doing. is this the beginning of the day of reckoning? we get
criticized because china is not lying there in smoke and ruins. we’ve done just fine in china. i
think what we’re seeing is the model, the economic model everybody trumpeted three years
ago, when i first started talking about it here, is under a lot of scrutiny and there’s two
givens in the world financial markets that central banks will ease and china will stimulate and
it’s always around the corner. now, with qe infinity sort of upon us, we know that’s already,
that given is on the table in the west but in the east i’m just not so sure and china is
grappling with this issue and if you overlay that, some clearly new political things which of
course is not, we’re not political scientists but something’s different. the bo xilai thing — if
you pick up on upheavals and tumult, this is going our way, too. but unexpectedly but that is
an added layer of risk, you’ve seen the nationalism come out the spratly islands and the
disputed over the japanese/chinese islets. we’ve covered new positions — if you had to talk
about a net short position you’re not less than you were when you started? no, we’re about
the same, about 20% of our global short fund. staying where you are? yep. this is not,
though, the — i hate to channel jeremiah wright, this is not the chickens coming home to
roost yet, is it, in china? the status policies? people still believe in that, joe and you and i
joked about the fact these wonderful capitalists in the west seem to embrace this central
committee. i think we believe in central banks in the west, as i said before, and central
committee in china and i just don’t think either might — are there empty stadiums, empty
apartment buildings? have they overbuilt? doesn’t sooner or later the bad loans come —
there was a report this morning as i was driving in here that one of the western firms thinks
non-performing loans tripled in the first half from the end of 2011. i’ll know when more i go
back to the office sounds like a lot. it is a lot. gone to almost 500 billion yuan, which would
be $80 billion u.s., these are relatively small numbers in the u.s.27 billion in the u.s., and
that’s using chinese accounting which we could talk about, fill an hour worse. when europe
gets worse or better, that has a lot to do with china, too. european economies depend more
on china than they do the u.s. so the export-driven aspect of china is high, but so are the
imports, so we’ve cautioned people that china’s net exports is a very small part of their
economy, but gross exports is very large, it’s almost 40% of the economy. sort of 40%
exports, 37% imports for net three, but if the 40 drops to 35, you can have problems. the
other interesting thing that’s new in china is that we are beginning to see not the trade
export balance decrease, which has been happening, but now capital is going out of china.
so they’re actually seeing a deficit in terms of investment. well, hot money is leaving. that’s a
big change. it’s a huge, huge change and it’s going to make the policy much harder to
implement from beijing, in order to fix this problem, when money is not coming in, it’s going

out. would you have made more money if you had been a big short in europe three years
ago instead of china? probably not after the las eight weeks. there’s been an enormous
rally. were you active in europe at all if. we were in the banks and still are. you didn’t
overemphasizeo the china short? no, if you would look at our portfolio and say what’s really
sort of overweight, it would be china. can i just ask a little bit more about china? we had jim
cramer on yesterday, we get to talk to him every day toward the end of the show. we
mentioned you were coming on and he says that he completely respects you and your
work, but he disagrees a little bit with the idea that china is falling apart. i think some of the
things he pointed to were electricity numbers that came up. yep. a bunch of different —
maybe he can ask more pointedly but you hear the argument from other people, numbers
like electricity. the electricity power numbers were up 2.6% in august, which was still a bump
in the low numbers and that’s growth of 2.6, year over year. so i’m not clear what jim was
talking about because the power numbers have been weak. he had some others. the baltic
dry but that thing jumps all over the place but again it’s sort of interinterspective. china’s
growth is slowing quickly. that’s stated gdp. you’ll never see a negative gdp out of china for
a year, not under this regime but look at corporate profits, look at what’s happening on the
ground, corporate profits are imploding over there and again — you don’t even believe half
the profits are real. exactly, i have problems with that. this regime, you mean there’s only