2015-08-23

Short Seller Jim Chanos on China: 'It's worse than you think' (video)

Global Selloff in Stocks, Commodities at 16-year Low, Volatility Index Higher than when Bear Stearns Failed (August 24th Update below)--
August 24, 2015, 6 am ET (US) Global Selloff in Stocks
Volatility Index higher than when Bear Stearns failed
source: bloomberg.com
UPDATES August 24, 2015: 

UPDATE August 23, 2015:
Oil is incredibly important right now. If oil falls to around $40 a barrel then I think the yield on ten year treasury note is going to 1%. I hope it does not go to $40 because then something is very, very wrong with the world, not just the economy. The geopolitical consequences could be – to put it bluntly – terrifying. -- Jeff Gundlach, DoubleLine, December 9. 2014
Don't panic, but terrifying just happened.

Q. How about the risk that the drop in oil prices spills over into the financial markets?
Jeff Gundlach: Something between 14 and 19% of the junk bond market are energy related. So when you have oil prices staying where they are for several months – which is likely because that is a policy decision that some oil producers have made – some of these companies will start to really run into financial troubles. Now, some people are saying: 'That is confined to energy, it is a pocket of the economy, everything else is OK and insulated.' But that argument usually does not work. When the housing market started to get weak in the subprime category, even Ben Bernanke said: 'That does not matter, it is just subprime.' But things are linked together. 
"It's always different. The one thing that is constant in the world of investing is change... Things are always changing." -- Jeff Gundlach, 9 Dec 2014,  Business Insider
Caveat Emptor!


Jim Chanos, of Kynikos Associates, appeared on CNBC's "Fast Money: Halftime Report" on Friday, the fourth straight day of losses for major U.S. averages. The Dow Jones industrial average, S&P 500 and Nasdaq had their worst week since 2011.

Kynikos Associates LP domain name: kynikos.com

China's slowdown, among other macroeconomic concerns, has spooked global investors. Beijing's handling of a stock market spike, "panic responses" from investors and recent currency devaluation has "given investors pause," Chanos said. "It's worse than you think. Whatever you might think, it's worse ... People are beginning to realize the Chinese government is not omnipotent and omniscient. In fact, like many of us, sometimes they don't have a clue," said Chanos.

China, one of the world's largest energy consumers, has also added pressure to already sagging commodities. Crude oil fell again on Friday, with West Texas Intermediate breaking below $40 per barrel for the first time since 2009.

Chanos on:
Energy: He dislikes Shell and Chevron.
Solar City:  Chanos unveiled a bet against the stock Friday, outlining its continued losses and what he sees as weakness in its operating model.
HP: "We think it's challenged business. Despite Meg's best efforts, I think they're in businesses that are in secular decline."
Caterpillarheavy equipment companies will have "the wind in their face" for the foreseeable future.

Shanghai Composite Index

Source: CNBC.comCNBC Disclaimer

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