Jim Chanos, the famous manager of Kynikos Associates, a short biased hedge fund, recently sat down for an interview with OpalesqueTV. In this new interview, Jim Chanos talks about his background, first short, and common mistakes make. He talks about many long only investors who try to short and do not succeed. Too many investors look at investors differently at the short side than the do of the long side.
Chanos mentions that common fears about short selling are misplaced. Some investors are afraid to short because they can only make 100% gain but lose infinity. However, Chanos mentions that he has seen many more stocks go to zero than to infinity.
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Chanos says he is not a macro guy, as some people commonly believe. The reason he found China’s economy to be a bubble, was first looking at demand from miner companies. His research team in 2009, saw that the demand for commodities was boosting up real estate. Chanos did math on the amount of high rise construction, and the numbers were ‘staggering.’ China started as iron ore research, and now includes real estate companies, Chinese Banks, and commodity companies in Australia.
China will have whatever GDP growth number the Government wants even if the numbers do not add up.
China makes Greece and Spain look like Childs’ play, due to bad credit. The companies have bad accounting, negative cash flow, do not earn their cost of capital. The Hong Kong market is ‘almost designed for shorting.’ Many companies on the Hong Kong Exchange do not even have financial statements. Many investors would be surprised by what they are looking at.
One of the new risks is the large amount of short selling. Policy makers always fight the last wars, and go after short sellers. Chanos told European regulators that they would make the situation worse, and that is exactly what happened in Europe.
Full video below: