Jim Chanos is the founder and president of the hedge fund Kynikos. Jim Chanos was on Charlie Rose recently and discussed in detail his thoughts on the Chinese real estate bubble.
He sees many similarities between China’s housing bubbles and America and Dubai’s housing bubble. Chanos has recently been joined by George Soros, and prominent economist Kenneth Rogoff for calling the current situation in China a bubble.
Jim Chanos become widely famous many years ago for calling Enron a fraud and shorting the stock.
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My favorite part of the segment I will quote below
CHARLIE ROSE: He(Thomas Friedman) said “Never short a country with $2 trillion in
foreign currency reserves.”
JAMES CHANOS: Yes. The last two economies that had similar foreign
currency reserves relative to the size of their economy was Japan in 1989
and the U.S. in 1929. I’ll let that be the end of that discussion. It
just — it has no bearing on whether there’s a domestic credit bubble or
I pointed out in a previous article of mine http://valuewalk.com/china/this-time-is-different-syndrome-in-china/ how Friedman’s argument makes no sense, and shows how little he knows about economics.
“The first argument is that China has huge foreign currency reserves and this will prevent a bubble. Thomas Friedman cited China’s two trillion dollar foreign currency reserves as a reason not to short the country. This argument makes little sense; Russia has one of the largest foreign currency reserves in the world, and has been severly affected by the global financial crisi. Russia’s GDP contracted 9.87% in the first three quarters 2009, and its stock market declined over 85% from peak to trough. ”
Below is the link to the interview. There was no embed code so I was unable to put the video below but you can find it at the following link. The video is about half an hour long, it is worth watching whether your a China bear or bull
Link to Charlie Rose and Jim Chanos on China