Tuesday, January 3, 2012

Singled out

Jim Chanos is certain about what's going to happen in China... See this video.
Economics needs to be balanced with psychology and it's important to be independent and contrarian; oddly, being independent is equivalent to being contrarian.
Chanos is being singled out, well there's Pettis and some others too, for being short on China's future. Towards the middle of the video he points out how the much touted 9% growth can just plummet to a 0% number. I have spoken about this earlier too.
In times like this when it is rather certain that Chinese companies are venturing abroad on the back of cheap loans and a crazy amount of forex reserves against sharp drops in home sales, slowing construction activity and slowing exports - mind you, Jim points out that net exports are only 5% of China's GDP, a large chunk is investments in fixed assets - one has to wonder whether one can depend on the sustenance of a value-oriented investment strategy. One also has to wonder whether staying in cash isn't that bad an idea.
It is integral to think independently and be wrong at times. Increasing rationality is a moral duty?

Going on... this is another video (1 of 2 parts) with Stephen Roach v/s Chanos (Roach playfully calls Chanos an 'ignorant slut' - love that!). One thing Roach talks about is a rural to urban migration of 10-15 million per year... Now, how does one sustain migration without ingenuity, creation of new companies and new ideas? Also, who owns the places these guys decide to live in? Is it the banks or the shadow banks?
Chanos talks of an impeding reverse-migration.
Jim Chanos has also spoken of how China's housing market is only 12 years old because that is when people were (supposedly) allowed to own homes. So, the market has not yet seen a bust and the growth has been too sudden and stupendous.
The official rural population in China is 800 million; how does this number sustain a USD 6-7 Tn economy? Then again, is there an appropriate way of assigning a number to the size of an economy?
Jim goes on to speak about how the US is still the best place in the world to innovate and create new enterprises and products, how a country without trade rights and legal protections cannot go on for too long.
I am horrible at penning notes down from a video for my blog. Apologies to myself (me being the only reader here).

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