any position — in and of itself is not huge. so one of the things we’re doing, pete, is always constantly reevaluating daily. where we’re allocating capital. and if a stock or group has gone down, maybe just because of sentiment or whatever, we might actually cover a little bit and add positions like iron ore if they have gone up or the pc sector, i think, whatever — you know, that have rallied and we’re constantly redeploying capital and that’s part of the game. and i think there is a tendency, and scott and i have talked about this. there is a tendency to discreetly look at short positions but on the long side more on a portfolio process. people tend to on a behavioral basis look at the short side differently. and i think that that can be a mistake. because for us, it’s part of a large portfolio that’s institutional. and, you know, we’re always going to have 100 names, 10 or 20 driving us crazy. 10 or 20 probably working. and, you know, 60 to 80 monkeying around with the market and i think that allocating capital is much my job as staying on top of the names. i think what’s interesting that people may not realize as well, for every name like a valay that you may have short, there’s a name on the other side that you would be long. in our hedge fund. yeah, in the hedge fund. i would be looking at a recent 13f, for example. you’re long deere, at least you were the last filing. so looking at both sides of this. this isn’t a situation where jim is only short every name he has ever mentioned. and it also underscores a concern i would raise for your viewers, when it comes to hedge fund investors, be very, very careful about following them into trades based on their disclosures, because you don’t necessarily see the other side of the trade. and that is — you may not see the short position against that. so the hedge fund manager may not have a view on an industry by being in deere but in our case, we’re short construction machineries elsewhere. coming up, apple closely.
Segment two:
s it harder to be short? is your job more difficult when the tide is going in seemingly one direction? well, it’s not hard to get uptick, scott. when the market is going up — look, it’s — it’s problematic, because it’s more frustrating. but on the other hand, you’re just given opportunities that i think in all — when the tide lifts all boats, it lifts even the leaky boats for a little bit. but ultimately, usually the fundamentals roll out and when the market begins to discriminate a little bit, that’s when generally the shorts begin to behave better. we mentioned china. you just gave a presentation a week or so ago. reiterating, really, how negative that you are. ou’ve been for several years. so nothing has changed in your mind on your opinion what’s happening there. i actually think it’s gotten worse. what’s happened more recently after the new party leaders took in, was another burst of investment. but more importantly, another burst of credit expansion. and what really has us concerned now, you have credit actually accelerating in china. but gdp growth still slowing. in the last quarter, china pronounceded some staggering numbers a couple weeks ago. new credit outstanding jumped by $1 trillion u.s. now this is an $8 trillion u.s. economy. so on an annualized rate, that’s 50% gdp. new credit creation. and to put that also in perspective, total new credit globally went up by $1.5 trillion in the first quarter. china is $1 trillion of that, yet only 10% of the world economy. so there is a credit bubble that’s actually not only huge, but getting bigger. how do you trade? what do you look for? what are your positions to take advantage of that? well, one of the things we have talked about historically is being short booms that go bust. and i’ve always defined that very strictly in that you look for asset inflation where the asset being inflated by credit does not serve — does not generate cash to service the debt. so you get the so-called ponzi finance moment. and that would be almost anything related to real estate or construction in china. so property companies, cement companies, steel. and then, of course, companies selling into that, that bubble. iron ore and mining. that sort of thing. so inexorably, you can’t keep growing your credit at 50% of gdp. something is going to give. when, i don’t know. but it has been a pretty good place to be short as we were talking about before the show. yeah. and don’t you think that it’s a
Transcript #4
into, and you wonder at what do they have too much exposure. and when they have the misstep you see it selling. the boeing news is the most shocking likely because of the rapid move to the upside. we have seen some of the bounce and the continuation of a bounce after the selloff, after the battery issues, very impressive. let’s talk about nat gas for a moment, down today, but continuing to hover, up 25%. let’s go to jackie de angeles and the futures crew. very true. but even more impressive, i think, that nat gas has soared even as oil and gasoline have been crushed. so how long can the rally last. that’s the question. let’s start talking futures now. anthony grizz anti, what’s behind this, and has the rally surprised you. definitely surprised me. my hat is off to my partner jim in chicago, he saw this two months ago. you have a count that’s less than last year at this time, overlanging supply that’s completely eliminated at this point. a winter that just won’t let go of the market. and for the last four weeks, the supply numbers show less of a supply than we anticipate, making the market more bullish. jim, is nat gas do you think going to follow crude and gasoline lower at some point? no, i don’t. i think that they disconnected several years ago when we were pricing in global warming and a huge abundant supply. the tail wind is still behind natural gas, bouncing off a trend line. if you want to know how high, you have to look at how low it went in the last three years. natural gas clearly has room on the up side. jim and grizz, back to the pits. back to you. thank you so much, see you at the top of the hour on cnbc.com. give us your read on nat gas, how would you play it. we are not commodity gurus. we bought nat gas and a couple positions in the nat gas space, completely as a hedge against our shorts. so our view is company-specific in that space. but i wanted to hedge out the commodity, because i have no idea, unlike the guys in the pits do a much better job than i do or people in the field. i have no idea where the commodity is going. there are those who sort of look at your style and look at the kind of companies you may be interested in. and there’s sort of this glaring thing about chesapeake. what does chanos think about what’s going on with that company. what can you — what can you say? chesapeake energy. well, i’m not going to comment on chesapeake energy, but i would point out that we often looked at companies to put their name on arenas and sports teams. hmmm. i have to check — i have to check the facade of that building down in oklahoma city. oklahoma city. i think — i think chesapeake is in oklahoma city. look, not to be glib. but i think that you could look at any of the players in the space, the nat gas domestic space, that are leveraged, that were buyers of properties when gas was 6 to $10, they couldn’t get enough. and now do their capital structures and ongoing commitments to keep drinking and we talked about this. are being forced to sell properties. and i think that’s actually having an impact on the commodity, as well. so you were buyers at 6 to 8, sellers at 2 to 4. and the debt isn’t going down. that’s a really lethal combination. in addition, there are companies like chesapeake and others that have gotten a lot less for their acreage sales than analysts thought. and part of the reason for that, and, again, you know this, is that a lot of these sales have commitments on them to keep drilling. to
