Great article by Steven Drobny about Jim Chanos, the well known short seller.
Chanos recommends his fund as an insurance, for all investors who have a sizeable "long" portfolio in shares. Chanos will do well when shares tank, and bad if shares rise. But from time to time there is an industry (for instance property developers) that is badly hit while the overall market rises, in those times both Chanos' fund (shorting that industry) and the overall index can rise.
I normally don't short particular shares (I do from time to time short an index, but only rarely), but even then Chanos' observations are interesting. The way to discover candidates to short is basically the same as the way to discover which shares to avoid like the plague.
Also, observations about China's economy and it's huge property bubble.
"But we are certainly looking at the RMB right now. If there is a homerun trade like short subprime on leverage, it is probably being short the RMB on a leveraged basis. If we are right, the Chinese government is going to have to print a lot of RMB to re-inject liquidity into the banking system."
ReplyDeleteAs long as the US keeps on printing money, China can get away with it. And it seems as if QE will indeed stay there forever, but the day the interest rate does go up, my goodness! The biggest question: WHEN?