Jim Chanos on Bloomberg (video)

Jim Chanos, founder of Kynikos Associates Ltd. hedge fund, talks about China's economy, debt and real estate market, and investing in the country. He talks with Carol Massar on Bloomberg Television's "Street Smart."

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Chanos also sat on a panel about China at the Delivering Alpha Conference:

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Dinosaur Feathers Found in Amber Reinforce Evolution Theories

Found via The Big Picture.

Protofeather fossils discovered entombed in amber from the Late Cretaceous era support theories of dinosaur and avian evolution -- and make for one beautiful gallery

Dinosaur and bird feathers preserved in amber from a Late Cretaceous site in Canada reveal new insights into the structure, function, and color of animals that date back to about 78 million years ago.

Researchers led by University of Alberta paleontologist Ryan McKellar say these specimens represent distinct stages of feather evolution, from early-stage, single filament protofeathers to much more complex structures associated with modern diving birds. After analyzing the preserved pigment cells, the authors add that these feathered creatures may have also had a range of transparent, mottled, and diffused colors, similar to birds today. They can't determine which feathers belonged to birds or dinosaurs yet, but they did observe filament structures that are similar to those seen in other non-avian dinosaur fossils. Their findings appear in the current issue of the journal Science.

Lying - by Sam Harris

As it was in Anna Karenina, Madame Bovary, and Othello, so it is in life. Most forms of private vice and public evil are kindled and sustained by lies. Acts of adultery and other personal betrayals, financial fraud, government corruption—even murder and genocide—generally require an additional moral defect: a willingness to lie.

In Lying, bestselling author and neuroscientist Sam Harris argues that we can radically simplify our lives and improve society by merely telling the truth in situations where others often lie. He focuses on “white” lies—those lies we tell for the purpose of sparing people discomfort—for these are the lies that most often tempt us. And they tend to be the only lies that good people tell while imagining that they are being good in the process.

Ricky Sandler of Eminence Capital to Present at the 7th Annual New York Value Investing Congress

Ricky Sandler, the Managing Member and Senior Portfolio Manager of Eminence Capital, has been added to the lineup of speakers to present at the 7th Annual New York Value Investing Congress. In his August 2006 interview with Value Investor Insight, he described his investing philosophy as such:

The philosophy is still very much the same. We called it then and I call it now “quality value.” Morris Mark, for whom both Wayne and I worked at Mark Asset Management, had a big influence because of his emphasis on research and on owning great businesses – great companies in secular growth businesses with excellent industry structures. Morris was more willing to buy a great business with less regard for price, but we believed you could pay too much for even the greatest business. We were also more open to the fact that there was a price at which a mediocre business could be attractive. So our focus was along the spectrum between “reasonable business at a great price” and “great business at a reasonable price”, with the rest being uninvestable. That’s still what I do today.

He also described how he comes up with ideas:

Our best ideas tend to come from what I call “old research, new events”. That’s typically the good company you’ve studied carefully and would love to own at the right price, that gets marked down after it trips or its industry goes out of favor. A great example was Yum Brands a couple years ago. Comp sales at one of their restaurant chains, KFC, were way off one quarter and the stock crashed 35%. It instantly became an idea – I knew it was a good business and now it was on sale at a 35% discount.

We also learn a lot from other investors. I go to idea dinners and regularly talk to a lot of people in the business. I’m not afraid of ideas owned by other people, but you obviously need to do your own work and make sure they fit what you do.

Many of our other ideas just come from having our eyes wide open. You read publications like yours. You talk to contacts you’ve developed in various industries. It’s often just about paying attention to what’s going on in the world.

Readers of Value Investing World are eligible for a $1,000 discount to attend the New York Value Investing Congress on October 17 & 18. To qualify for the discount, please use the link below and the discount code N11VIW10. The discount expires on September 27, 2011. Disclosure: Value Investing World receives a referral fee for registrations generated through the link.

Click to register for the 7th Annual New York Value Investing Congress

TED Talk - Niall Ferguson: The 6 killer apps of prosperity

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Chinese slowdown boosts Hendry’s fund

A hedge fund designed to profit from a slowdown in the Chinese economy, run by the London hedge fund manager Hugh Hendry, has soared in value over the past two months as global markets have plummeted and industry peers have suffered damaging losses.

Mr Hendry – a former Odey Asset Management trader – is one of only a handful of hedge fund managers positioned against Chinese growth and therefore pitted against heavyweight investors such as Anthony Bolton.

Mr Hendry’s Eclectica Credit Fund is constructed from a portfolio of short positions against highly cyclical Japanese corporate credits that have high exposure to Chinese demand.

The fund, which raised a modest $150m from a handful of London investors when it launched late last year, is up 38.65 per cent so far this year, having returned 22.5 per cent in August – the hedge fund industry’s worst month since the collapse of Lehman Brothers three years ago.

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Related 2009 video:

Barron's Q&A With Jim Grant: Gold Still Looks Good; Japan Still Doesn't

The editor of Grant's Interest Rate Observer on gold, gold stocks, the gold standard and why he's stopped investing in Japan.

When Jim Grant left Barron's in 1983, after inaugurating the Current Yield column, bonds already had ended their long bear market and begun the great ascent that put 10-year yields around 2% last week. Grant founded Grant's Interest Rate Observer, and in nearly 30 years of publication, his beautifully written musings on the markets have become de rigueur reading among cognoscenti who appreciate big doses of financial history served up with compelling investment ideas. Among Grant's greatest calls: The eye-catching bull market in gold. We caught up with him last week, as gold was fetching $1,800-plus, European banks wobbled, and central banks pumped dollars into the system to avert the crisis.

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You were a great believer in Japanese equities. What happened?

With my friend Alex Porter, I was a general partner in Nippon Partners from 1998 through the end of 2010. We invested in Japanese value stocks. We closed it in December of 2010, because we weren't making money, and it was immensely frustrating. Japanese corporate managers, by and large, don't own equity. They have a platonic interest in the stock price. In the absence of a lively market for corporate control, there is no check on management doing nothing. In 1998, we began investing in companies whose shares were trading well below their pro-rata share of net cash on the balance sheets. In this country, in 1974, 1975, there were a lot of companies like that and they did rather well in the 1970s and the 1980s. But in Japan, many [companies like these] remained at these compelling valuations for year upon year upon year. You get tired. The last straw was when one of our companies was selling at a huge discount to everything, and announced that it would undertake a capital investment larger than its stock-market capitalization.

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Let's have some investment ideas.

We've been looking more and more at blue chips, such as Microsoft [ticker: MSFT], Bank of New York Mellon [BK], CVS Caremark [CVS] and ExxonMobil [XOM]. These big, world-dominating U.S. companies are well-financed and adaptive, they have thrived in different monetary environments. ExxonMobil, in the five years through 2010, had an average return on capital employed of 27%. It has boosted its dividend 5.7% annually since 1983, about double the rate of rise in the CPI since then.

Gold will go up a lot, and that's as finely calibrated as I can get. I like some individual gold stocks, like Yamana Gold [AUY], Agnico-Eagle [AEM] and [ Newmont Mining [NEM]. They are very cheap. But a mutual fund like Tocqueville Gold [TGLDX], which John Hathaway manages, can be a better bet; John has been at this since the late 1990s and done much better than the S&P and the XAU [gold index].

What do you dislike?

China, and China Coal Energy [1898.HongKong], the No. 2 miner in China. Weak margins, spotty disclosure, a convoluted organizational table and burgeoning accounts receivable are just some of the problems.

John Mauldin: Twist and Shout?

What in the wide, wild world of monetary policy is the Fed doing, giving essentially unlimited funds to European banks? What are they seeing that we do not? And is this a precursor to even more monetary easing at this next week’s extraordinary FOMC meeting, expanded to a two-day session by Bernanke? Can we say “Operation Twist?” Or maybe “Twist and Shout?” Not many charts this week, but some things to think about.

Hussman Weekly Market Comment: Preparing for a Greek Default

The yield on 1-year Greek government debt ended last week at 110%, down slightly from a mid-week peak of 130%. Even with the pullback, the Greek yield structure continues to imply default with certainty. All the markets are really quibbling about here is the recovery rate - what percentage of face value investors can expect to obtain post-default. That figure was still hovering near 50% as of Friday, but was a bit higher than we saw a few days earlier.

Despite a Greek 1-year yield that is already over 100%, it is still possible to kick the can down the road for another few months with another bailout, but the costs of that would now be extraordinarily high because of the low expected recovery rate. Much better to provide the funds to a post-default Greece, or to use them to recapitalize the banking system after losses that now appear inevitable.

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As a refresher on how all of this works, the following chart appeared years ago in the Economist, a chronicle of the frantic bail-outs in the months preceding the default of Argentine debt (which amounted to about $81 billion. Needless to say, the numbers involved in a potential Greek default are much larger, but the pattern we are seeing in Greece is identical to the signature of other historical sovereign defaults (see Uruguay, Russia and other countries as well ) - a sustained rise in yields, coupled with official statements about the "impossibility" of default, multiple bailout efforts that quickly fail, culminating in a vertical spike in yields (toward the inverse of the expected recovery rate, minus 1).

The case of Argentina is instructive because it was in a situation much like that of Greece. Argentina's currency was both pegged and officially convertible into the U.S. dollar, and most of Argentina's debt was denominated in U.S. dollars, creating a situation where its debt burden was in the form of a currency that it effectively could not print. The subsequent default was accompanied first by an abrupt devaluation of the peso to a new peg, and eventually to complete abandonment of the pegged exchange rate.

Richard Dawkins on his new book "The Magic of Reality"

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Book: The Magic of Reality

Related link: Growing Up in the Universe