Monday, June 27, 2011

Thursday, June 9, 2011

Hedge-fun titan John Paulson got burned by a China company

Have you heard of Muddy Water Research? A so called equity research firm specialized in shorting Chinese companies listed overseas via reverse takeover. Muddy Water has attacked 4 companies since last summer and the first three ones were small- and micro-cap Chinese companies traded in the U.S. The company now goes after the big fish and its last prey was a Chinese company called Sino-Forest traded in the Canadian Stock Exchange.

Sino-Forest had over $6B market cap before the attack and John Paulson, the renowned hedge-fund manager, owns about 14% of the company. Since the short attack on June 2nd, the company's stock has plunged from 20 to 5, or over 75%. At one point of time, Paulson had more than $300MM paper loss.

Read more about the story.
Big Funds See Red in China    by WSJ 6/9/11
Sino-Forest clobbered by short-seller's report   By Reuters 6/3/11
Sino-Forest Plunges as Short Seller Block Targets Stock Owned by Paulson  by Bloomberg 6/3/11

Sunday, June 5, 2011

Stephen Roach is bullish on China

Nowadays, it is not so easy to hear a positive voice about China. But here comes one from Stephen Roach, who is a Yale faculty and the Non-Executive Chairman of Morgan Stanley Asia. More importantly, Roach is a well-known long-time bear.

Here is his recent bullish view about China

Ten Reasons Why China is Different    May 2011

Friday, June 3, 2011

Will China have a debt problem?

We all know that the Chinese government has shoveled 4 trillions Yuan since 2008. But how much debts do central and local governments carry? A few recent articles may give us a clue...

The Trillion Dollar Question: China’s Local Government Debts Mystery Revealed    06/2/2011
China always has more debts than you think        06/02/2011
China Economy: Clean-up Of Local Government’s Debts    06/01/2011
China to clean up billions worth of local debt   5/31/2011

Friday, May 20, 2011

Richard Duncan's new article, "China: Every Boom Busts"

Richard Duncan, the former global head of investment strategy at ABN AMRO Asset Management in London, wrote an article about China recently.He argues that the growth of China's economy is largely depends on the debt-fuelled consumption from the U.S. consumers. Once people in the U.S. slow down consuming goods imported from China, the boom will bust.

But have U.S. consumers ever learned the lessons of stopping buy stuffs that they do not really need? There is an old Chinese saying, "It is easy to step from thrifty to sumptuous, but it is hard to do so in an opposite way"

China: Every Boom Busts  by Richard Duncan on May 3, 2011

Monday, May 16, 2011

"The Future of Chinese Growth" by David Beim

David Beim, a former banker and now a professor at Columbia Business School, published an article in March 2011 analyzing the growth models of China in the past 30 years as well as the bumpy road the country is facing ahead for its further development.

The author summarizes the past 30 year's development of China into three growth phases, the 80s, the 90s and the first decade of this new century. Based on the composition of GDP, he analyzes China's past/future growth under different models, which includes investment-driven, export-driven, and domestic consumption-driven growth.

He concludes that the golden age of Chinese super-growth is likely near to an end. In the meantime, the country holds bright future but has come to a crossroad where a new growth model is needed badly to replace the old one.  The only question remains is that whether China can stimulate domestic consumption fast enough to fill the gap left by investment- and export-driven growth.

The link of David Beim's full article
The Future of Chinese Growth  March 2011

Wednesday, May 11, 2011

Bloomberg: Poll: China’s Yuan Convertible by 2016

Take a look of what Bloomberg' survey about the future of China's Yuan.  I personally do not believe it will happen so soon.


Poll: China’s Yuan Convertible by 2016

Monday, May 9, 2011

Greg Zuckerman says "a lot of people are betting against China..."

Greg Zuckerman, a senior writer at the WSJ, is interviewed by Yahoo Breakout. He also wrote the book of "The Greatest Trade Ever", a story about how John Paulson made his big fortune by betting against the US housing market in 2006 and 2007.

Smart Money Betting Against China: Zuckerman

Sunday, May 8, 2011

More bear cases about China from prominent names such as Goldman's Jim O'Neill

As Roubini expressed his bearish view of China recently, a renowned long time China bull, Goldman's Jim O' Neill who invented the BRICs, is also concerned about China's shift of its growth strategy, from investment- and export- driven growth to consumer driven growth.

George Magnus, an economist from UBS, also worries about the over-extended credits by Chinese banks may collapse.

Articles on 5/3/2011

Why One Of The World's Biggest China Bulls Is Getting Worried  by Joe Weisenthal

China risks credit-fuelled Minsky moment  by George Magnus

Monday, May 2, 2011

A collection of Jim Chanos' bearish view of China

Jim Chanos, a short selling hedge fund manager, made his fortunate and fame by spotting Enron's problem early. Now he returns under the spotlight by betting against China, especially the real estate market. Using his own word, "China's property bubble is Dubai x 1000". We will see how much he will be right or wrong this time.

Some of his arguments
1. China's fix asset investment is at 70% of GDP and it is not sustainable. The transition between a infrastructure investment driven to a consumer based growth will be painful and the consumer can't pick up fast enough.
2. He is not all bearish about China and some of his China related long positions include casino operators such as LVS and WYNN. His argues that corruptions in China are hard to control and some of the money are ended on black jack tables in Macau.

From Business Insider
The Fundamental Difference Between The Soviet Union And China  Apr 2011
Jim Chanos Just Announced The One China Long Bet He's Making  Feb 2011
Jim Chanos Explains Why There Won't Be Gentle Landing In China  Feb 2011
A Year After Calling Chanos An "Ignorant Slut", Stephen Roach Is Getting Nervous About Chinese Inflation  Jan 2011
Jim Chanos: Adam Smith Will Get His Revenge In China  Dec 2010
Jim Chanos Ratchets Up The China Rhetoric, Says It's On A Treadmill To Hell  Apr 2010
UBS' Jonathan Anderson Slams Chanos: China Is Nothing Like Dubai   Feb 2010

Sunday, April 24, 2011

Business Insider's onsite investigation

Dec, 14 2010.  Amazing Satellite Images Of The Ghost Cities Of China
March, 2011 follow on video post, A Stunning Look At China's Ghost Cities

A recent bearish bet of China from Dr. Doom, Nouriel Roubini

April, 2011.  Financial Times: Boom vs Doom: is Nouriel Roubini right on China?

China’s Bad Growth Bet, Nouriel Roubini on Project Syndicate
Why Roubini is wrong on China, Shaun Rein on CNBC.com

Forbes Blog

Since China is running a market-oriented economy based on a totalitarian political system, it will be difficult to analyze China's real estate market using classic economic theories without understanding the role of the Chinese government .

April 2011,
why-chinas-property-bubble-is-different  by Kenneth Rapoza
China’s Property Bubble?  by Jack Perkowski

Jack referred a very interesting report from Economist Intelligence Unit (EIU), “Building Rome in a day: the sustainability of China’s housing boom”. And I kind of agree with what Jack pointed out that "outside observers like Chanos underestimate the efforts of the Chinese government to avoid a bubble..."

Other old blogs from forbes 2010

Here’s Why Andy Xie’s Latest Claim About Chinese Real Estate Is A Bombshell
Real Estate Curbs Dampen Chinese Billionaires’ Wealth
China Real Estate Needs ‘Cap’ To Avert Full-Blown Bubble: Executive
Reality Check For China’s Real Estate
Chinese Real Estate Bubble Is Bursting
Ghost Towns In China Due to Property Bubble