Jim Chanos: The Art of Shorting

James ChanosJim Chanos is one investor I truly enjoy listening to. He is the only big investor, which I know of that is devoted to short selling. Chanos founded Kynikos (Greek for “cynic”) in 1985 as a firm specializing purely in short selling.When you read Bill Ackman and David Einhorn’s accounts’ of their respective shorts of MBIA and Allied Capital, you realize how intense the research is that investors conduct when shorting.

Chanos is famous for several shorts. He was one of the first investors to call Enron a fraud, questioning its mark to market accounting, and shorting the company before its collapse. He also performed another “great short” with Worldcom.

Recently, Chanos announced that he was bearish on the “green energy” sector.

According to Chanos’s presentation at the Ira Sohn Conference (which I covered on Guru Focus).

Costs for solar energy are not changing dramatically any time soon. Capacity is increasing more than depend. Spain in ’08 represented over 40% of demand, Italy 25% in ’09. Western Europe is increasingly questioning subsidies to solar companies.

Wind is 50% and solar is four times more expensive than natural gas.

However, his most famous bearish call was on China. Chanos thought that the Government stimulus was creating a massive housing bubble in the country. Chanos made the call over two years ago and was derided by many at the time. However, over time it has become almost the unanimous consensus that the Chinese economy was over heating. Price to income is 10x nationwide in China, versus 9x in Japan at the peak of its bubble in 1989, just for one statistic. Now the Chinese Government has practically admitted this, and started to implement various policies to try and navigate a “soft landing”.

Below are two good recent videos of Chanos on China:

Jim Chanos is the latest speaker to be confirmed for the Value Investing Congress in NY, which will take place October 17th and 18th at the Marriott Marquis . I attended the last conference, and it was not only great for investment ideas, but one of the best networking venues for analysts, HNWIs, people in business development, financial media etc. I am going to be attending this year and covering the conference again.

Jim Chanos’ speech will likely be the highlight of the next Value Investing Congress.

There is a special deal; Value Walk readers will receive a discount of $2,100 off the regular price, however it expires on June 29th So act quickly, this will be the largest discount offered for the conference. As the conference gets closer the discounts decrease significantly.

Discount Code: N11VW2. Just follow the link below and use the discount. Buy a holiday gift (or rather an investment that will likely yield rewards) for a loved one, friend neighbor or even yourself. But act soon before the huge discount expires: Value Investing CongressDiscount Code: N11VW2

The full line-up as of today includes:

Bill Ackman
Joel Greenblatt
Whitney  Tilson
Glenn Tongue
Jim Chanos
Leon G. Cooperman
Michael Kao
Guy Gottfried

 

 

 

 

 

 

 

 

 

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2 Comments on "Jim Chanos: The Art of Shorting"

  1. Thanks, I do not follow Jim Cramer; but Chanos was the firsto to call the Chinese bubble.

  2. Curious Camper | Jul 3, 2011, 8:20 am at 8:20 am |

    Sorry for my inexperience and lack of knowledge in the matter, but where would one want to invest if Jim is correct about the china bubble? I would know to stay away from oil and other commodities like that (seeing as the demand would plumit if the real estate build up crashed), but what would be a good place to try to “short” china?

    I’m 17 and have been trying to follow events in the Chinese economy for the last 6ish months now, but I still have yet to think of where one could benefit from a Chinese bible burst.

    Great article :)

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