James Chanos: Short Auto OEMs and China Dependent Commodity Producers

Today James Chanos, the famous short seller and hedge fund manager, appeared on CNBC’s Fast Money Halftime Report and made the following points:

(1) Despite repaying government funds, Chanos believes that Wells Fargo still has some difficult loan issues to face in the near future.  In general, the large banks have better balance sheets than they did six to nine months ago, but there is significant uncertainty regarding whether these balance sheets are in the state they should be.  Largely, Chanos is ambivalent regarding the future direction of banking sector stock prices.

(2) Due to the continued increases in worldwide auto manufacturing capacity and the continued constrained auto demand, Chanos is shorting both European and American original equipment manufacturers.  Furthermore, he stated that he would not be long Fiat or Ford at this time.

(3)  Regarding China, Chanos does not believe the country’s GDP numbers.  He thinks the numbers are massively inflated through the under depreciation of a “shaky” capital asset base.  The bubble in China will continue to grow as long as China continues to provide credit.  As Chanos pointed out, bubbles are best identified through credit excesses, and not valuation excesses.  Since Chanos cannot short China or its stocks directly, he is shorting the commodity producers that are dependent on a continued boom in China (primarily commodity producers in Australia).

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Tagged with Automotive Industry, China Bubble, China GDP, Commodity Producers, Fiat, Ford, James Chanos, Wells Fargo