Dec 16, 2009

China the next Dubai 1000 times or worse


Malaysian politicians (mostly Barisan National) are always narrow and short sighted and likes to engross in bad propaganda belittling the people's mental intellect and that is what they enjoyed doing most. They think that we are fools and they goes about with their falsehood in pretense of what is ethical, fair and just. There are greater things to do but they goes around like clowns talking about ethics when they themselves are the most unethical.

We will leave this ethical story for now and to return another time as my present concern are as written here below.

Can Malaysia sustain another economic crisis and do they have a contingency plan in the event of it happening, China has become a major market for Malaysian goods and produce, and if anything were to happen to China it will definitely hamper growth and generate an economic crisis of the proportion that equates to a catastrophe.

James Chanos, the American billionaire and founder of Kynikos Associates, an investment company in the USA is renown for his intensive strategy in seeking out overvaluation in stocks and fundamental market failures. He is the "guru" of short selling and rose to fame for his research into the overvaluation of Enron Corporation that highlighted the failures of this mega corporation through accounting fraud that resulted in the "Enron Scandal" that saw the closure of Arthur Andersen, the leading accounting firm of its time.

James short sold Enron shares that saw the stock price collapse from over US$90 to US$1 in just over a few months. James is the opposite of Warren Buffet in terms of strategic approach where Warren look for fundamental underlying value and long term investments, James search for fundamental flaws and short selling.

And James have this to say in a recent exclusive with a special edition of the Halftime Report of Fast Money from CNBC:

China: Powering the Global Economy, or the Next Bubble to Burst?

In a recent report, Chanos' firm has been very pessimistic about China, and his firm has even gone as far as to speculate that China could be "Dubai times 1000, or worse."

Chanos points out a stark irony that investors who decry government involvement in US companies are bullish on the Chinese markets, despite the fact that the country's government (China) can "fine tune" the economy to their liking. He is also skeptical of the country's GDP numbers, calling them "massively inflated by under-depreciating a very, very, very shaky capital asset base."

He points out that "bubbles are best identified by credit excesses, not valuations... there is no bigger credit excess right now than China." But how do you play this?

Chanos says that although you can't short China, the short plays are in the first derivative industries: companies which support the raw and imported materials for growth (such as copper, cement and iron ore producers). He also suggests looking into short possibilities in the Hong Kong exchange.

Chanos himself is actively shorting this area, and is "looking for plays on the China investment pool, which we think will burst at some point... Demand in China is over-inflated, that is clear."

Guy Adami, an author, financial analyst and a professional investor and a member of CNBC's Fast Money agrees that the visibility in the Chinese markets is a serious issue, speculating that they could be simply hording commodities instead of using them.


Read Earlier Article on "The Chinese Bubble"
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