Jim Chanos was on CNBC this morning for a lengthy interview. We posted the segment where Jim Chanos confirms he was short Herbalife and believes Ackman’s thesis to be correct. Below we have the other segments of Chanos’ interview. He discusses his favorite country, China in depth, the Dell LBO, equity valuations and more. The videos along with computer generated transcripts below:
Hedge fund titan Jim Chanos told CNBC he’s short on Dell and wonders if the potential deal-makers circling the troubled PC maker are looking at the company’s financials.
Legendary short seller James Chanos, Kynikos Associates, shares his outlook on China, and discusses his short position on Chinese construction.
James Chanos, Kynikos Associates, shares his views on the outlook on China, and why investors should avoid anything having to do with the Chinese property markets.
Stocks are hitting new highs but oil prices are steady at around $90 per barrel. Sean Hyman, Ultimate Wealth Report; and John Brady, R.J. O’Brien, discuss the outlook on oil, the U.S. dollar, and stocks, with James Chanos, Kynikos
Don’t rely solely on strategies used by notable money managers, says James Chanos, Kynikos Associates, explaining why it’s important for investors to do their own homework.
our guest host this morning is legendary short seller jim chanos, founder and president of kineco. he’s a visiting professor at the yale school of management. mr. chanos. you were worried i was going to say mr. shorty. nobody wants to be called mr. shorty. not in this market. well, i was being — you know. sophomoric, again, but anyway. i couldn’t help think of you, and actually i got a heads up, you know, i knew that the china thing was coming on 60 minutes. there’s a time and place for 60 minutes. sometimes i have a problem with some of the business interviews that are done. i think they’re — you know, they could use a little background from us, maybe. but — or from cnbc. but this was a pretty good piece, it was a two-part piece that lesley stahl did on china. the first one i was amazed at the architectural designs they’re putting up. are there businesses filling up those companies in the first part? the corporate companies? i know residential is a problem. but do they have tenants for the beautiful i.m. pei-type buildings? well, good morning. i’m not sure about soho, which was the company that built — the 47-year-old lady that was a water? exactly. i saw her commentary on politics was more interesting than the thing about her company. right. talking about everybody wants democracy which is an amazing thing to say in china. but, there’s just no doubt that the — this thing is getting bigger and bigger and we talk about — let’s talk about the second part of the city, and you know, you think citi, and i was thinking like, you know, when you drive across country and you see some of these towns. that’s not the kind of cities that we’re talking about. there are gleaming, they almost look like manhattan-type cities that dozens that are honestly, all those buildings are empty? pretty much, yeah. and you build them, they’re sold to people that — because there’s billions of people that can’t invest anywhere else, is that it? they can’t invest in outside? well, it’s not billions. that’s the interesting thing. it’s a very small number of people that can afford these apartments. but no one can afford to live in the apartment. they can afford to buy them. remember also they buy them empty. they buy them literally shells in china. so there’s no, you know, internal walls or appliances. so they’re really sold as sort of boxes. and the other interesting thing is, when i talk to my friends in china who actually own some of these things and i ask them, you know, do you know what happens to empty real estate? and in terms of vacant real estate? i sort of get blank stares. the other interesting thing in terms of ownership is that there’s no maintenance fees. there’s no homeowners association. what happens when the elevator goes out? nothing. who pays for that? it doesn’t matter. it’s a tree falling in an empty forest. exactly. there’s literally no thought given to sort of actually living in these things, and dealing with ongoing costs. okay, so — it’s remarkable. how much in residential is it going to be an impossible to question, how much is the government in for in overbuilt residential real estate? years ago, when we started talking about this on squawk, the chinese statistical agency said there was 5.6 billion square meters of both residential and commercial underdevelopment. that’s all been built, by the way. and at the time i said well half of that was commercial, and i did some numbers, and it was 30 billion square feet and that equalled the 5×5 office cubicle for every man, woman and child in china. that was three years ago. what do you think the value to put on a square foot was? residential, we use a value of about $60, $70 a square foot. that’s all? that’s all. you can’t build a house here like that. 300 or $400. does that come to trillions? well, now, my point is now the same statistical agency, and we always have to take numbers with a little bit of a grain of salt. the same agency is saying it’s 10.6 billion square meters under development. almost twice as much three years later. oh, my gosh. so if you thought it was bad three years ago. they’re building twice as much as of right now. is it safe to say the government’s in for trillions of dollars of bad loans? absolutely. construction is half gdp, and gdp is about $8 billion u.s. so investment in china right now is annually about $4 trillio the government says they’re going to get growth of 7.5% this year. how do they do that? because the government says that they’re going to get 7.5%. at some point does it catch up? well, again, it’s the nature of the growth. if it’s all — if it’s all sticking a the ground, you get whatever you want. but at the end of the day, what’s sustainable? because as i keep pointing out, every time you finish a building under this model you’ve got to put up another one. it’s not as if it’s consumers buying goods and services. everything in china is hard for westerners to understand. it’s inscrutable. but, how does this, if it’s trillions of dollars, it’s really probably money that government’s not going to get back, bad loans, how does that finally — can they — can a state-owned enterprise manage — manage that situation, or does it — it sounds like bigger than our housing — could eventually be bigger than our housing? here’s an interesting point. a lot of the bulls will say well it’s not so bad b the average buyer is not as leveraged as our buyers were in the u.s. they’re saying cash or they’re only putting half down. the problem with that is, is there is some minority of buyers who are using generational wealth to sort of stretch to buy these apartments. and that can go to money heaven, can’t it? well, exactly. unlike our buyers who walked away and left it to the banking system and the fed to sort of bail out, these people are going to lose their life savings. and that could be a big issue in china. wow. well i just wonder, we’re doing well over here now. housing is coming back. and we’re a much bigger economy than china, and we don’t need them for everything. i mean it’s nice that we have them. we’re twice as big. but could it — i mean it seems like this could impact the entire world, if it were to implode. maybe it doesn’t — things like that don’t happen in china. they don’t implode all at once. china is about a point, maybe a little bit less, in global growth. so, you know, if china were to really seriously — keep in mind, last year we had 7.8% growth, and corporate profitability over there imploded. so the question is, how profitable is this growth? and i think that you have to understand that the people that sell into china commodity makers and iron ore and that sort of thing, they’re going to feel it. that’s also companies like the equipmentmakers, and caterpillar and anybody down the road. yeah. — what you’re doing? and look at anybody selling heavy construction or construction related — are you short those stocks? we’re short pretty much anything — you are? that’s what you’re doing for — for, is that a large part — in terms of looking at short ideas right now in the globe, i mean, basically, we’ve made a lot of money in the past, almost 30 years now, in being short anything that was leveraged using a lot of credit, where the asset did not drop enough cash to support the debt. there’s one place where that’s at right now in the globe, and that’s china. i mean, this — none of these assets can support the debt being taken. so all the knockown effects construction equipment, cement, steel, iron ore are going to have a rough go of it, i think, when this all — you’ve been skeptical about china for a long time. this is a new short position where you’ve extrapolated it out to everybody that’s selling into china kshs? we’ve been short construction guys for a little bit so we’ve been public on these companies. i think that — that this is not sustainable. and we’ve sort of updated our recent presentation, and basically said, you know, bigger treadmill, same destination. and that’s really where it’s going. it’s problematic. there are test patterns all across china now in cnbc asia. everybody’s watching it, they’re like adjusting their set and it’s like, this is getting interesting. what — started shaking their televisions. really. that’s terrible stuff that you’re saying. all right we got to talk eventually about this market. obviously. sure. and i — earlier i was saying i don’t care if it’s the fed. the fed, everybody’s doing it. all the central banks are doing it. you can’t just say it’s not justified because it’s all steroidal from the fed. it’s reality. yeah, it’s happening. and it’s helping the economy, which helps justify the underpinnings of the stock market. so i don’t care if it’s the fed. don’t tell me that the fed so it doesn’t count. i didn’t tell you that. all right. we’ll get back to you, to whether it is real and whether it can keep going. it’s going to go for awhile because everybody’s expecting i to — can’t set a new high every day. sure it can. and then the more you don’t want it to. the more you’d like to have a pullback to get in the more it doesn’t let you do it. right? i have no idea where this market’s going. nor does anyone else by the way. all right. it’s great to have you here.