Home > News & Commentary > Is China in a Bubble? Chanos and Friedman are Probably Both Right

Is China in a Bubble? Chanos and Friedman are Probably Both Right

The New York Times reported a few days ago that James Chanos – the short-seller famous for predicting and profiting from the collapse of Enron – recently said on CNBC that China is in a bubble similar to “Dubai times 1,000 — or worse,” and that it was soon due for a crash. He brought up familiar points that the market is very familiar with but the article was somewhat troubling because the charts may be proving Chanos right at the moment. Both the Shenzhen and Hang Seng markets have broken their uptrends and are in the process of establishing downtrends.

Then I saw Thomas Friedman’s article today and although he took a contrary opinion of Mr. Chanos’, they are likely both correct. There are so many headwinds facing China right now from Government censorship and corruption to climate destruction that investing there can seem daunting, but most of China’s problems are well known to the market. I think I am still bullish on China for the long term but the charts don’t look pretty in the shorter term so why not be patient and hope to pick up more at lower prices?

It still feels easier to be bearish than bullish and the market has a tendency to do whatever will embarrass the most people…

-MJB

Disclosure: Long GXC, CHU and many other American companies with exposure to China

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