Business

Jim Chanos – Worse Than 99 Or 07, The ‘Craziest Juncture’ in Finance

Jim Chanos interviewed by Jim Grant

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[00:00:09] What do you say about that.

[00:00:10] Fact. Investigative journalist who wants to set the world right. Are you Are you a money maker. Which one.

[00:00:17] Well I I hope a little of both and more the latter than the former but I will say that I think some of the very best analysts that have worked at our firm in fact were investigative journalists. So there is there is a bit of a bit overlap of that.

[00:00:34] So they took a pay cut in good grace as to whether we're money makers.

[00:00:40] I leave it for my clients to decide. But you know we've done OK and we've done OK in a in a very different corner of the markets. And in IT environment basically as you well know of 35 years of declining interest rates rising price earnings multiples rise in corporate profits of course. But the tailwinds to the financial markets have been nothing short of spectacular over the past 35 years.

[00:01:12] And is it a change. I mean know I wonder if something isn't fundamentally off in the world. And I think that the thing that might be off in fact quite sort of thing that is off is credit is the pricing of credit. The manipulation of interest rates by the central banks and they have given us such things as junk bond yields Stahmann and euros beginning these yields do with numbers zero. Some of these things yield less than 1 percent to call margin. I mean this is this is nothing new in the world these rates and the monetary regime is relatively new in the world. Do you think about things like the monetary backdrop you think about things like the other cosmic questions or do you focus single mindedly on discrete situations.

[00:01:57] Well again remember broadly speaking we're in effect long the equity markets of any place where we're shorting stocks.

[00:02:03] So I think about them and I think about what it offers us in the portfolio of choice of what to be short.

[00:02:11] So the the incredibly low interest rate environment has given rise to behavior that is worse in some areas than others and worse in some specific companies than others.

[00:02:23] I can't do a whole lot about you know railing at the sky of the central bank got to me but I would be remiss if I didn't say I agree with you that that as you so aptly put it.

[00:02:37] You know when you've got your fingers or your whole fist on the scale it alters things that alters behavior.

[00:02:43] It alters what people expect and perceptions of what is and perception what is it.

[00:02:48] And so you begin to see people do kind of dumb things.

[00:02:52] And that's that's our value this moment with considering all things as this moment the craziest juncture in finance that you have seen.

[00:03:03] I would say broadly yes only because in other times that we have sort of deemed the market to be crazy off that it was a narrow area or it was some specific large group of businesses or stocks and now in 2018 we're looking at kind of global craziness and we're looking at it broadly that there's there's debt buildup there's speculation in a variety of areas. You've got low returns and lots of businesses that are being financially engineered by share buybacks and variety of other things to to prop up the businesses.

[00:03:45] And so yeah I think that this is much broader than 1999 or 87 or other or 2007 even.

 

Jim Chanos