This page has been archived and commenting is disabled.
Chanos Shorting Majors, Ford; Discusses Ways To Express Chinese Bearishness
Bloomberg's Erik Schatzker interviews Jim Chanos, in which the cynic notes that while not short BP, he has been short other majors (and likely making a decent profit doing so), for the very simple reason, which as we have been pointing out for almost a year now, namely that ongoing underinvestment in business, read declining maintenance CapEx and zero growth CapEx, will erode all revenue growth (and even stability). "If you look at their cash-flow statements relative to
their income statements, you will see companies that haven’t
replaced reserves in years, and haven’t seen any increase in
revenues in years. They’re borrowing their
dividend. They’re in effect liquidating." As we pointed out previously, one of the drawbacks of soaring cash levels is plunging CapEx: this is happening across all companies in the S&P, not just exploration, although the effect will be drastically magnified in this space, and we completely agree with Chanos that his short is spot on. Chanos also discloses his additional shorting of Ford: "It’s going to be very interesting to see how it is that
the union, which controls the employees -- and I contend these
entities are still run for their employees and retirees more
than the shareholders -- are going to look in an environment
going forward, where the UAW is a major equity holder in some of
the other entities. It adds a new dynamic
to the twist.” Jim Cramer, if you are reading this, you may reconsider your favorite long. Lastly, as expected, Chanos discusses his China shorts and how he puts those on in a country which is not very shorting friendly, to say the least.
»
- 11219 reads
- Printer-friendly version
- Send to friend
- advertisements -
"China's gonna pull us all out of our debt laden morass."
LOL, time to pull the plug and go fishin.
Tyler I guess you didn't see that a report came out today, saw it on CNBC with my own two eyes, that US automakers finally passed foreign automakers in quality.
That is why I drive an Acura......and am long FORD.
Now that I got my sarcasm out American automakers suck, ford is the best of the group but in general relative to the rest of the world they suck. I mean look at Kia they make better quality than all the Americans and haven't been making cars all that long.
Although this is off-topic, I'll respond anyway. As one who fixes both foreign-named and domestic-named vehicles, I can tell you that I agree with the report on quality. Most notable is Toyota. I was Toyota's biggest fan back when it was almost dangerous to drive one in the steel city of Pittsburgh due to the wrath of the unemployed steel workers. Toyota's build quality was second to none, and their powertrains made detroit's junk look pitiful. Today the story is different. I would not buy a Toyota of today. It has been downhill quality-wise since early to mid 90's. Honda/Acura has maintained somewhat of an edge on quality over Toyota, but also has slipped in both quality and bang for the buck. It truly pains me to say this, but Ford has improved by leaps and bounds over the absolute garbage they made from about 1975-2000. GM has been building decent vehicles for about 6-8 years now. Chrysler/Jeep, however, continues to build utter rubbish.
My $.02
+1
Ford learned and implemented the lessons from Japan, and they have honed their products in Europe. We will see a very different Ford in this next vehicle generation. I think the Germans have missed the boat in the more budget conscious market segment (with the exception of VW). M-B and BMW have frugal and high performing 4 bangers in Europe that should have been available here for years. Decontent can be king if the underlying engineering is top-notch.
And Kia is a LOT cheaper.
I almost flamed you before getting to the sarcasm point. (Note to self: Finish reading posts.)
Great post, great observation.
Greece is a joke because they have no GDP, and in a decade they will similarly have no GDP.
GM is a joke because they don't make any money, and in a decade they will similarly not make any money.
We are watching looting in progress. It's not just for banksters. If you can get rich driving your company into a brick wall, do it. Works for Wall Street, works for any S&P500 company that is merely a leveraged hedge fund with employee benefits that pretends to make widgets.
There is no real growth. Everything driving the share price is changes in debt (e.g., leverage). This will all crash when cashflow fails (and it will). The books aren't real, they don't have those assets, and only in liquidation we realize that the only thing found in the (long vacated) vault is a couple dead moths and a dirty sock.
That's exactly what we see every Friday when the FDIC takes over another bank with a "surprise" that the bank has far fewer assets than they reported the week prior.
Yeah, a surprise. Who could have known?
But why the dirty sock?
Its either that or a pair of underware. You know, like when the adulterer is in a hurry to get out before the spouse comes home? Unfortunatly, we the tax payers are the unfortunate spouse working away.
I call dibs on the sock.
Per the annual report, in the case of a liquidation event, the dirty sock will be divided among holders of preferred stock.
In true form. the liquidation lawyers will cut it in half to divy it up. In a sense, taking a perfectly good sock, and making it worthless.
The common stock holders get the dead moths, which they can use a good source of protein.
So that's where the socks go!
Very good until the last 15 seconds when everything about the Austrian school of economics seems to have fled his brain.
Business Insider says their Kynikos sources tell them it's Exxon.
Cramer's other long boyfriend.
exxon spends well in excess of dd&a. generated 45 billion in fcf last year. and is buying the piss out of its stock. The company actually gets long-term shareholder value.
tmftdoyle--Totally agree. It's fine to short the smaller speculative exploration and production companies that have significant debt, but Exxon is the most politically connected and financially savvy firm.
Plus, just like the investment banks, the integrated oils (Exxon/Shell/Conoco/Chevron) have engineering students, from around the world, who beg to work there.
There is a reason that Buffett has his personal , non-Berkshire wealth in Exxon, UPS and Coca-Cola. These companies will earn money globally for years to come.
They are LIQUIDATING. Get it? They spent more to find oil last year than what they found is worth. They are no longer able to replace what they sell. They are doing shareholders a BIG favor by buying their shares. So do yourself a favor and sell to them or get short.
They have finger's in many biotech pies, watch for positive Black Swans in that space ;)
Apparently demand for GM vehicles are so high that plants across the US will be "humming" through the shut down period. I don't understand who's buying even with the incentives.
http://news.yahoo.com/s/ap/20100617/ap_on_bi_ge/us_gm_factories
The government. Of course there wasn't any congressional outcry about the recent recall because of their vehicles catching on fire, no that would be to detrimental to government motors. My wife and I had to car shop because some dipshit ran a red light and totaled her vehicle, we looked at new Tahoes despite my begging to buy an Acura MDX, same build sticker on the Tahoe 55k Acura 45k. Hmmmmm, then we looked at some others but holy shit why is a Chevy 55k? I can buy a Lexus GX for 51k sticker. What's wrong with this picture??????????? Besides the fact that I am pissed that I am buying a new vehicle guess I am glad her company pays for it.
Was the Tahoe a Z71, what state? I own a 2002 Tahoe Z71 that I bought used for $12,000.00 and it's great, but I will never feed the Union/Gov't beast ever in the future.
an actual discussion about CASH FLOWS - the real measure of what a compnay is worth.
Just wow!
Need more metal.
"Scotty, more metal in 5 minutes or my over-acting will kill Spock."
(well shit the whole world knows that Scotty is in Bones' pocket and how Bones feels about old pointy ears. So long inscrutable, eh?)
The Secret Engine Behind China’s Housing Bubble- The Ponzi Shark Loan Finance
My hometown is zhejiang, now I live in shanghai, my sister pledged her home to bank, she lived in hangzhou, she bought her home around 500,0000rmb five years ago, now her home worth 2million rmb, so she can get huge loan from bank, she gave this loan to a shark loan company with 30% return every year, she has been doing and living on this for 4 years, she is a middle school teacher, she earned 4000rmb per month, but with this lending arrangement, she has been able to buy a car, the interest income is 6 times of her salary, One of my cousin's father lost all his principle of 4 million since one scheme blow up in 2008. That is my personal experience. 2 months ago I went back to my hometown in new year, this is 3 tier city, but many so investment companies shop in the street, and in 2009, I saw the so called investment companies( shark loan) opened in the town level, I visited four small towns, I saw there is shark loan shop in every town. China media is controlled, so you can’t find many negative exposure, but if you dig a little bit deep, by doing some search for shark loan in Chinese, you will find out how serious the problem is. In my home town a 150 million ponzi scheme blow up in 2008, the leader turned himself in after he paid all the local official leader in full, and he felt safe enough knowing he will be protected, but my cousin's father was not so lucky for his 4 million, since he do not get his money back. Some people compare this bubble to Japan, to be fair, what happened in China real estate, the madness, the greedy, the loan shark with 100 % interest rate, it is much, much worse. “
Source:
http://israelfinancialexpert.blogspot.com/2010/06/special-report-secret-engine-behind.htmlInteresting. Thanks for the post. There is a lot of conflicting data on China right now. I don't know what to believe.
Thanks - yeah lending TO the loan shark is great when asset prices are going up and he's getting paid.... the other side of the coin is - how you gonna handle that kinda debt-service when the cracks start appearing? 100% interest?
Thanks for the insight
Shark loan? The Chinese are lending sharks from the ocean? Put them back now or else the food chain will is disrupted.
They also have starving lyin loan. So be careful where you lay down to rest.
XOM = depleting assets. It is pumping out cheaper oil and failing to replace production, even with more expensive oil. Engineering students want to work there... quick get long XOM?
XOM pumps out cheaper oil? than whom? what does that mean anyway? as to depleting reserves, yes, that is a fact and they will be competing with national oil companies but isn't that why they bought XTO as well as doubled down on natgas pipeline distribution from Alaska? what i don't get about Chanos is everything he does publicly is done big and it's done in a way that makes you really wonder what the end game is. He basically admits that his short on China wasn't China at all - it was miners. that makes sense. so what's he after with the majors? not the majors is my guess. probably the drillers and services b/c they'll feel the heat before XOM does is folks get leery about the majors. all in all, it's good to see shorts making waves b/c when they squeel, you know they are nervous.....
"If you look at their cash-flow statements..."
Jim Chanos, I worship the ground you walk on. Now I understand why the lowly employee is pure sheet. Who else could of thought of "look at their cash-flow statements"...Genius.
One of Chanos' short China derivatives is definitely Australia where the credit and house bubbles are still hugely inflated:
Australia's huge foreign debt: http://www.businessspectator.com.au/bs.nsf/Article/Australia-net-foreign...
Australia's hockey stick house bubble: http://www.debtdeflation.com/blogs/2010/05/21/excellent-presentation-on-...
Seriously, Chanos is a knob!