Wednesday, February 2, 2011

Why Jim Chanos is Short China

It's well known that Jim Chanos, president of the hedge fund, Kynikos Associates, is bearish on Chinese real estate. In a recent interview with FT, he explains why.

What is curious about Chanos' view is that he doesn't seem to take any business cycle view as to a bubble in China. He just looks at the huge amount of money flow into real estate, and is apparently then only considering the supply and demand factors. That's one way to do it, but it is going to cause terrible problems on the timing for you, since the bubble will burst only once China stops the money printing that is supporting the bubble.

Fortunately for Chanos, China appears to be slowing money growth. They are not stopping their money printing, just slowing it, which means stagflation is the likely outcome. It will be inflation at the consumer level but a crash of the Chinese stock market and real estate. 

The FT interview  with Chanos is here.

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