Jim Chanos, the founder and president of Kynikos Associates, one of the biggest short-selling hedge funds worldwide disclosed that he is shorting major oil companies for a couple of years.
During an interview with CNBC on Friday, Chanos believed that the fracking and shale boom, which is propelling the United States to become the largest oil producer, has been “uneconomic” particularly for drillers.
Chanos said days of finding cheap oil is over
Chanos said there would be enough oil supply to really disrupt the markets especially the big oil companies such as Exxon Mobil and Royal Dutch Shell. According to him, the business models of these companies are challenges because the “days of finding cheap oil is over.”
He said oil companies “now have to drill in the middle of the ocean or deal with Russia’s President Vladimir Putin. He also noted the expensive multi-year projects of the companies amid the explosion of supply and relatively cheap energy in North America.
Chanos concerned about Intel’s PC business
Chanos also revealed during the interview that he has been shorting Intel for six months due to his concerns regarding the personal computer (PC) business of the company.
According to Chanos, he perceived continued pressures in PC and components makers. He noted an increasing number of Chinese companies competing in the PC, table and smartphone segments as well as in the network business.
Intel CEO Brian Krzanich responded to Chanos’ short disclosure, and he emphasized that he is “very comfortable from a where-our-customers-are [perspective], where our inventory is, across the supply chain.”
On Thursday, Intel reported financial results that beat the consensus estimate of Wall Street analysts. The company generated $0.74 in earnings per share on $14.7 billion in revenue for the fourth quarter.
“The fourth quarter was a strong finish to a record year,” said Intel CEO Brian Krzanich. “We met or exceeded several important goals: reinvigorated the PC business, grew the Data Center business, established a footprint in tablets, and drove growth and innovation in new areas,” said Krzanich in a statement.
Chanos’ said Caterpillar’s businesses are challenged
During the interview, Chanos also disclosed that he is shorting Caterpillar because he believed that the energy and mining businesses of the company are facing increasing challenges.
According to him, Caterpillar is facing even more pressure because of the declining oil prices. He believed that the company will not be able to meet the earnings expectations of Wall Street.
Chanos says Tesla has bigger problem in China
Chanis also noted that Tesla Motors has a bigger problem in China, an indication that he might also short the stock. He did not confirm that he is shorting the shares of the electric manufacturer, but he said, “I am a potential buyer of the stock.”
According to him, the Tesla’s vehicles are very high-end, and its real problem in China is weak demand for high-end products.
During the interview, Chanos emphasized that Tesla Motors is “not a change-the world company.” It is an auto and manufacturing company and the guts [battery] of its electric vehicles are made by Panasonic.
Chanos emphasized that his problem with Tesla is the fact that its valuation is based on estimated 2025 earnings, but the automaker cannot project its next quarter.
