Sunday, July 25, 2010 4 comments ++[ CLICK TO COMMENT ]++

China Debate: Bull vs Bear

Not sure how many others already saw this but I just ran across it recently. It's a debate (appears to be conducted on May 4th of 2010) between a China bull (Stephen Roach) and China bear (Jim Chanos.) Nothing earth-shattering for China-followers but it is still good to get the viewpoints of both sides.

(BTW, does anyone know where I can find the full Jim Chanos interview with Bloomberg that I mentioned in a prior blog post. Apparently the video was supposed to come out on June 25th but I never saw it anywhere. Maybe only available to Bloomberg subscribers? If anyone knows where I can find it, please let me know.)

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4 Response to China Debate: Bull vs Bear

July 26, 2010 at 2:05 AM

Practice makes perfect.............................................................

Parker Bohn
July 29, 2010 at 5:13 AM

Jim & Steve seem to be approaching this from two different timeframes.  Jim believes there is an immediate bubble in China.  Steve admits this is possible, but basically doesn't think that it is relevant to the long-term growth story, which will have bubbles/recessions from time to time.

Interestingly, Steve never claims that China is a good place for long term investment (equity or otherwise).  His claim simply seems to be that based on the demographics, China will grow rapidly.  I wish someone would have asked him what he thought about investing in China.  I also wish someone would have asked Jim Chanos what he thought China would look like in a longer time frame (say 10 or 20 years).

Shorting is very hard because you not only have to get the valuation right, you also have to get the timing right.

If you are long a market with good demographics, you can get both the timing and the valuation wrong, and still do very well if you have a long time horizon.  For instance, buy-and-hold US equity investors have done very well over the past 100 years, even if they invested near the market peaks.

Sivaram Velauthapillai
August 1, 2010 at 4:23 AM

I find it remarkable that Stephen Roach stays bullish on China given how he was one of the first ones to turn bearish on commodities about 5 years ago and was one of the few who was warning about global imbalances. Not sure if his job has anything to do with his position (it would be difficult to publicly talk about a China bubble while Morgan Stanley Asia earns a lot of profit from China.)

I don't see how China gets out of this without facing a recession. Roach seems to suggest that the policymakers are smart enough to solve problems while Chanos has no faith in government management of the economy.

As for investing in the long run, you are right in suggesting that it may work out. But the thing is, you really need a really really long time frame. For instance, if you invested in USA in the late 1920's, you didn't break even for a few decades (assuming you didn't dollar-cost-average.) Even now, I wonder how long it will take for those who invested heavily in the late 1990's to make any sort of money (say more than 2% or 3% per year over the period from 2000 to 2020.)

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