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"Chanos: "China's Treadmill To Hell" Will Break This Year And The Bubble Will Pop, Kynikos Is Shorti


"Chanos: "China's Treadmill To Hell" Will Break This Year And The Bubble Will Pop, Kynikos Is Shorting Chinese Developers And Construction Suppliers

Submitted by Tyler Durden on 04/08/2010 15:24 -0500

Source Zero Hedge

"In a Charlie Rose interview to air later, Jim Chanos repeats his warning about all hell breaking loose once the China bubble bursts and puts a timeline on the event - late 2010 or 2011. "Supply will equal demand at some point. It always does, and then there is this precarious tipping point when suddenly you can't sell a project and then it's just as if everyone from the port side of the cruise ship goes to the starboard side of the cruise ship all at once. You get a tipping point, you get this light-bulb moment - "I've got to get out while I can." And the buyers dry out. It's as old as market itself." Chanos also voices his opinion on the CNY, and ever the contrarian, he, just like Edwards and Zero Hedge, implies that the CNY is actually overvalued, contrary to what the NYT's paywall may want you to believe: "Chinese exports aren't the problem here. And what if it turns out that by having to nationalize lots and lots of real estate bad debts, the RNB is devalued." All spot on, however we disagree with Chanos' conclusion that this is something that nobody is expecting: note here and here.

Some other snippets about the interview from Bloomberg:

The world’s third-biggest economy may need to keep up the pace of property investment because up to 60 percent of its gross domestic product relies on construction, said Chanos. The bubble may begin to “run its course” in late-2010 or 2011.

Chinese state and local governments are among the most leveraged to property-related borrowings and the nation will “ultimately” have to nationalize a lot of the bad loans that will arise from the end of the bubble, Chanos said.

China’s foreign currency reserves will be “one asset” that can be used to fund a cleanup of the banking system, he said. The country has accumulated a record $2.4 trillion of reserves, and $889 billion of U.S. government debt, partly a consequence of its exchange-rate policy.

Chanos was one of the first investors to foresee the 2001 collapse of Houston-based energy company Enron Corp. The investor said he is short-selling Chinese developers as well as companies supplying building-related materials to the country, without identifying any stocks.

We will provide the full Chanos-Rose interview in its entirety once it is available."

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JAP69Comment by JAP69 - April 9, 2010, 12:28 am
Getting to be a lot of scared money out there. From what I read about gold holdings do not look good either. Not enough gold to cover the investments in gold. Non perishable food is the best backup. You gotta eat.
JAP69Comment by JAP69 - April 9, 2010, 12:33 am
Reminds me of a tv movie I seen. Three or four people went into hibernation in a cave with a large amount of gold. Came out of hibernation in the future and thought they had it made with all their gold. They came to find out that gold was not worth squat in the future. Could not purchase anything with it.
konaneComment by konane - April 9, 2010, 9:32 am
Thanks JAP! Looks like things have been one large ponzi scheme to extract as much wealth from regular investors as possible. Yep agree dehydrating and canning food from ones own backyard garden patch is coming into vogue again.

If things get bad enough new tv programs about the many ways to cook varmint fricassee just like early settlers did it.
Rick GComment by Rick G - April 9, 2010, 9:45 am
"the many ways to cook varmint fricassee just like early settlers did it."

lol...reminds me of Granny from the Beverly Hillbillies.
konaneComment by konane - April 9, 2010, 9:58 am
Thanks Rick! If things continue falling in this abyss unimpeded, we can hope to be as resourceful as Granny!

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