Chanos Is Bearish On China, Ford And Fiat

Jim Chanos, one of the best short sellers on the street has expressed his market views today on CNBC`s Fast Money. He thinks Wells Fargo (WFC) will still face some headwinds:

As most of the banks have raised significant equity capital recently, they have seen their stocks go up "initially, on a relief rally," Chanos says, but he thinks the jury is out on Wells Fargo, citing "reasonably difficult" loan problems ahead of them. Chanos also sees the balance sheets of major banks being "better than they were 6-9 months ago," but he is also hesitant to say that the books are where they should be for the firms, again citing residential and commercial real estate loan problems as well as dramatic security mark-ups resulting from accounting changes. "I wouldn't be a buyer here," he says, "I don't know if I'd be a seller, but I would be pretty ambivalent about the sector." With a few minor exceptions, Chanos says he's staying away from the financials


Jim Chanos basic strategy is to be long the overall stock market and to short specific names. His fund is a dedicated short seller and his firm is always net-short. Right now he sees opportunities for short sellers in individual companies and sub-industries, but not the overall market:

Even with the bankruptcies of GM and Chrysler, we have seen increased global capacities for autos in the last 12 months. He sees the sector as a whole with the lingering problems of overcapacity, as well as legacy costs. He suggests that investors don't go long Ford or Fiat.

In a recent report, Chanos' firm has been very pessimistic about China, and his firm has even gone as far as to speculate that China could be "Dubai times 1000, or worse." He is also skeptical of the country's GDP numbers, calling them "massively inflated by under-depreciating a very, very, very shaky capital asset base." Chanos says that although you can't short China, the short plays are in the first derivative industries: companies which support the raw and imported materials for growth (such as copper, cement and iron ore producers). He also suggests looking into short possibilities in the Hong Kong exchange.