Someone Rich Has An Opinion About China

2010-01-10

I was recently informed that I've been crankier than usual. Fair enough, and it's probably because the graphics card I bought six months ago isn't working, and the copy of Wolfenstein (2009) that I finally procured is suffering from some sort of memory error, and the game keeps crashing on me. I've uninstalled-reinstalled everything I can think of, including my underwear, to no avail.

So yeah, I'm a little testy lately. My wife is out of town, and I had visions of sitting in the living room shooting Nazi zombies for hours on end. Crap.

On the other hand, there are certainly plenty of things in my Inbox to fuel the cranky.

We need go no further than David Barboza's piece in the New York Times on James Chanos. Barboza usually does yeoman's work on the China beat for the Times, but this is a silly puff/gossip piece that fails to inform anyone of anything of significance.

James S. Chanos built one of the largest fortunes on Wall Street by foreseeing the collapse of Enron and other highflying companies whose stories were too good to be true.

Now Mr. Chanos, a wealthy hedge fund investor, is working to bust the myth of the biggest conglomerate of all: China Inc.

As most of the world bets on China to help lift the global economy out of recession, Mr. Chanos is warning that China’s hyperstimulated economy is headed for a crash, rather than the sustained boom that most economists predict.

Wow. A professional pessimist (I admire that, by the way) says that China's economy is weaker than everyone says! Stop the presses!

This fascination the media, and the financial community, has on allowing anyone with money to comment on pretty much any subject they want has always amazed me in its stupidity.

At least Barboza points out in the piece that Chanos actually knows nothing about China and has only been looking into the market for a short period of time.

“I find it interesting that people who couldn’t spell China 10 years ago are now experts on China,” said Jim Rogers[.]

Heh heh. Given this, why do we care what his opinion is in the first place?

Oh, right. Because he's rich. If Bill Gates were to write a cookbook on proper techniques for making jiaozi, we should all listen to him. He wouldn't give bad advice, 'cause he's really smart. And we know this because . . . he's rich!

Smartest guy I've ever met in my life is currently practicing general litigation in Western Massachusetts. Since he's not rich, I suppose I should discount anything he ever tells me. On the other hand, that douche investment banker guy I was chatting with at the bar the other day, the 25-year-old who made USD 1 million last year, he should be my new guru on everything from personal hygiene to pet care.

(Confession: I never talked to an investment banker at a bar the other day. Heaven forbid. Allow me some poetic license, and let's assume that there were indeed many investment banker types who fit the bill that were having a drink somewhere in Beijing last week. Probably most of them were at Centro.)

Where were we? Oh right, the rich = smart fallacy.

In addition to this problem, somehow Barboza is allowing this guy Chanos to come across as brilliant for questioning the solidity of China's economy. Granted, a heck of a lot of folks have been incessantly cheerleading about the economy here for a while now, so the pessimism is well warranted. But let's face it, pessimists are not exactly a tiny minority.

Barboza attempts a disclaimer on this point:

Mr. Chanos, 51, whose hedge fund, Kynikos Associates, based in New York, has $6 billion under management, is hardly the only skeptic on China. But he is certainly the most prominent and vocal.

Bullshit. Perhaps he is the most prominent and vocal on Wall Street, or among short sellers or something. But his visibility outside of the financial community is limited, and he certainly is not a China guy. For what it's worth, I've never heard of him, and the comments that Barboza includes in his article make the guy sound like a doofus:

“The Chinese,” he warned in an interview in November with Politico.com, “are in danger of producing huge quantities of goods and products that they will be unable to sell.”

Overcapacity? That's your revelation? Nice going, Sherlock. And yet, I'm supposed to be in awe of this wisdom because he manages $6 billion. Sorry, but I could give a shit. He might be a genius or a moron, but the size of his fund doesn't impress me. And don't for a minute think that "They wouldn't give an idiot that much responsibility." In response to that, two words: 1) George, 2) Bush. (Alternatively: 1) Bernie, 2) Madoff.)

Anyway, Chanos has a lot of company out there as far as criticism is concerned. If any of Chanos' opinions startle or surprise you, then you haven't been paying attention. Shit, at least read Michael Pettis' blog, or something by Jonathan Anderson or Stephen Roach.

Finally, Barboza lost me completely when he felt the need to get another filler quote from "an expert" on the state of China's economy. I'm not sure whether this is tongue-in-cheek or serious:

“It’s going to be a bust,” said Gordon G. Chang, whose book, “The Coming Collapse of China”, warned in 2001 of such a crash.

Holy shit, Batman!

I think it's now 2010; we're still waiting on that collapse, Gordo. If it comes within the next ten years, will you still claim credit for having called it correctly?

Tags: China Business & Economy