Wednesday, September 2, 2015

Shorting China

The only supervision a stock market needs is the shortsellers, who sniff out fraud and nonsense then trade on it at their own risk. That is how free markets work.  James Chanos is the best of these and he has some views on China:
What it can tell you, Chanos said, is that China isn’t really reforming its economy. It is not transitioning from an investment-based economy to a consumption-based economy as leaders have promised. Fixed-asset investment was 48% in 2010 when Chanos started looking at the economy. It’s now down to 46%.
From marxism to markets is a tough shift, and Chanos in essence finishes with advice parallel to what I've always said, in essence, don't trade with China direct.
Instead of shorting Shanghai and Shenzen, Chanos looks at industries and asset classes that will be affected by a Chinese slowdown — like the mining sector and commodities. He also looks at the country’s neighbors and trading partners.
China is unique and complicated, you need a front man to get things done right.  You get your price and conditions, and then stay away.  China is for the Chinese, don't set up a business or invest there.  But certainly trade, through an agent, with China.

Feel free to forward this by email to three of your friends.


Anonymous said...

"You need a front man..." In essence you need someone that is well connected with the political establishment and business leaders. You need someone that can pay the right amount of bribes to the right people so that you won't be swindled.
It's just the way business gets done in this part of the world.

John Wiley Spiers said...

Nothing like the USA?