Potential $1 Billion Ponzi Scam Exposed in China

The story of the brazen loanshark in Inner Mongolia who fleeced up to $1 billion from 5 local Chinese banks.

Read the full post on Forbes

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China's Low-Income Housing Shortage

By Eric Jackson, Senior Contributor02/09/11 - 06:00 AM EST

NEW YORK (TheStreet) - We often read in Western media about "the Chinese real estate market" as if it was monolithic. But that's as absurd as talking about the U.S. housing market that way.

There are obviously differences between the price of an Upper East Side townhouse and a condo in Miami. Besides geography, there's a huge distinction between the low- and high-end of the market in America today. Just a week ago, Barron's profiled how Florida -- with thousands of foreclosed low-end properties continuing to be dumped onto the market -- was seeing high-end housing in places like Naples and Palm Beach firm and even move up in for some properties.

Business School market segmentation principles apply equally to China as they do here. China's real estate market has as many permutations -- from coastal cities to Tier 3 interior cities, and high-income to low-income -- as we do in America.

All the bluster from the China bears over the past year pointing to a real estate bubble has -- more precisely -- been focused on the upper-middle and high-end of the Chinese residential market in the Tier 1 cities of Beijing, Shanghai, Shenzhen and Guangzhou. Those markets were white hot last year and caused the Chinese government to take swift and draconian action, which almost immediately took effect on slowing things down.

Although I still don't believe that end of the market is expensive by major Western city standards (like New York, London, Moscow or Hong Kong), the bigger opportunity in the Chinese real estate at the moment is in low-income housing (LIH).

Looking at the bigger picture, China's government is motivated by the goal of social harmony in the Chinese society. It knows that if it does not achieve this goal, there will be social unrest and protests. This is the goal behind the "protect 8" policy of maintaining at least an 8% growth rate in the annual GDP.

When housing started to rise at the higher end of the residential market last year, it was a concern not just for being a bubble, which might burst down the road but for causing resentment from people at the low-end of the market who found housing less and less affordable.

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[** This post is an excerpt of the full article, which is available on TheStreet.com by clicking here. Free Site.**]

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My 2011 Predictions: A View Inside a Cloudy Crystal Ball

By Eric Jackson
RealMoney Contributor
12/30/2010 1:00 PM EST
Click here for more stories by Eric Jackson

This time of year requires anyone who has market views to predict what will happen in the year ahead. The cynics typically deride such attempts as destined for failure.

Earlier this week, RealMoney guru Doug Kass came out with his "15 Surprises for 2011." Doug has been making these predictions for eight years now, and one of the brave things he did in this year's edition is review his success rate for each of the eight past years. (The cynics say the market prognosticators never go back and hold themselves accountable.)

In all his years of making these guesses, Doug's best result was getting 50% right. That number might seem low, but as a hedge-fund manager friend once told me, "In this business, if you're consistently right 51% of the time, you're a genius."

But if 50% right in a given year is the best year, it's clear that looking into your personal glass ball is tough. Yet, let's try.

Doug's article also correctly points out how often conventional wisdom is wrong. Remember this year when the euro was at $1.19 and everyone was convinced it was heading to parity? Remember when it went back over $1.41 and everyone was convinced that the dollar was going to be debased?

The biggest wrong piece of conventional wisdom this year was that QE2 would fail. David Tepper was clearly on the winning side of that trade. (I think I just heard him say "Everything!" like he did on CNBC in September.)

At the moment, the conventional wisdom is that everything is great. Stocks will keep moving up. Europe will be contained (if people even remember there are problems in Europe). Reflation will work. All currencies will be fine. Unemployment will start coming down, because ... after all, it's been four years now. Commodities will keep going up. It's all good.

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[*** This post is an excerpt of the full article, available by clicking here to go to RealMoney.com. Note: subscription required. ***]

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Jim Chanos Is Wrong on China

By Eric Jackson, Senior Contributor

03/31/10 - 06:02 AM EDT

Stock quotes in this article: BACHY.PK , CICHY.PK

BEIJING (TheStreet) -- Short-seller Jim Chanos correctly saw Enron'sproblems before they engulfed the company. He's now making media appearances identifying China as his next short idea, specifically the Chinese commercial and residential property markets.

Chanos famously referred to these markets as "Dubai times 1,000," foreseeing a cascading effect of property developers defaults, non-performing bank loans, bank losses and reduced lending, a pullback in further development and jobs, and a sharp drop in demand for commodities.

Jim Chanos, founder and managing partner of Kynikos Associates.

In short, according to Chanos, China's property market -- supporting the Chinese economy, which is the last engine powering the global economy -- is about to melt down.

He's put his money where his investment thesis is by shorting internationally traded commodity and infrastructure companies and Hong Kong property developers with exposure to China.

According to a New York Times article from January, Chanos only started studying the China market last summer. He has apparently never visited the country and has joked on TV appearances that he will never be able to visit the country now that he's made such bearish pronouncements.

Instead, Chanos -- like a lot of other Western commentators -- bases his views on statistics and the opinions of other Western talking heads, many of whom also haven't been to China lately, if ever.

There's a Chinese saying: "If you visit my village in three months, you'll notice small changes; if you visit my village in six months, you'll notice big changes; if you visit my village in a year, you won't recognize my village." Chanos and other bears haven't even visited the village yet to kick the tires.

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[This post is an excerpt of the full article, which is available on TheStreet.com by clicking here. Free Site.]

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