This was going to be a story about one of those rare individuals you should listen to when it comes to the markets. There is Warren Buffet and, well, there is Warren Buffet. (And note, Warren Buffet pretty much says you can’t predict markets, you can only select companies you really want to own for the long run.) It is impossible to avoid the folly of the many “experts” who continually espouse their great theories in the financials’ media. You just needed to have seen this group a couple weeks ago when the volatility in the markets spiked.
With the precipitous drop, they spoke of how much worse it would get until….until the market reversed and suddenly they became bulls until…until the market dropped again. I get that these guys have to say something to justify their existence. But so much of it turns out to be noise. And that is why I started to become more impressed with Jim Chanos. He’s the guy who predicted the implosions of Enron and Tyco and made a fortune because of it.
He has somewhat of a dour personality, which I guess is appropriate for a guy who’s consistently calling out how bad some companies, and their stocks, are. Over the recent past he has made appearances on CNBC harshly assessing the prospects of the Chinese economy and there are others in that camp. It all seemed to make so much sense, thus adding to his mystique of being one of those aforementioned rare individuals who actually gets it right.
But before writing about him I did a search and came across this article. And here was Mr. Chanos sounding the alarm bells over China….five years ago. I’m sure he would make the argument that this story’s not over yet. And he may be right. It is difficult to imagine how a strong economy can possibly coexist with China’s backward approach to freedom and liberty. One or the other has to go and when’s the last time anyone freely gave up power? Still, for five long years Chanos has been on the wrong side of the China bet. Likewise, all economies are cyclical. Even if China’s economy has a rough landing, all economies sooner or later have downturns. I’m not sure that this fact should anoint someone predicting as such some prescient genius.
If you are considering my words as criticism of Jim Chanos, you would be wrong. I think he’s brilliant. He has the ability to escape a lot of the clutter which obscures the reality of how strong or weak a business is. In order to make your fortune you don’t always have to be right. But at some point you do need to be right and have the conviction to put your money up even when most disagree with you. Mr. Chanos has done this consistently. The cautionary tale, however, is that there is no such thing as a sure thing, even if Mr. Chanos might be telling you differently.