How Jim Chanos Uses Cynicism, Chutzpah — As Well As A Undercover Twitter Draw Of Piece Of Job Organization Human Relationship — To Accept On Markets (And Elon Musk)

From Institutional Investor, September 17, 2018:

The LeBron James of short-selling talks Ponzinomics.

It’s a sweltering, 95-degree August hateful solar daytime inward Manhattan, but Jim Chanos — fresh off a two-week holiday, rocking a sharkskin conform — is pumped: Elon Musk had ane time once to a greater extent than called a hero of the Thai cave rescue a pedophile.It’s 1:30 inward the afternoon. Chanos bolts through the door to his role edifice on West 55th Street, grabs the journalist waiting for him, and, on the get upward ride to his eighth-floor office, fills her inward on the latest news.

“Musk is at it again. He’s doubling downward on his pedophile comment,” Chanos says, entertainment noticeable inward his voice. Minutes before the CEO of Tesla Motors — who is already nether investigation yesteryear the Securities as well as Exchange Commission for a tweet almost taking the fellowship private — had returned to an before tweetstorm inward which he defendant the British cave diver of existence a “pedo guy”.

“You don't intend it’s foreign he hasn’t sued me?" Musk tweeted at 12:30 p.m. on August 28. Tesla shares straight off began to slide, as well as inside hours the diver’s lawyer reportedly informed Musk that he would, indeed, survive sued.

Recent months receive got seen ane bizarre trial afterwards only about other inward the saga of the electric-automaker as well as its iconic boss, as well as Chanos has been watching it all. The 61-year-old founder of hedge fund Kynikos Associates announced his curt against Tesla inward the autumn of 2015 as well as has been nursing losses e'er since — for despite a raft of bad tidings as well as the increasingly controversial, as well as potentially illegal, deportment of Musk, Tesla’s stock, spell off significantly from its highs, has stubbornly refused to crash.

The Tesla curt made for a tense working opor-garai for Chanos, who had left New York for his annual trek to the Greek isle of Mykonos on August 9. That was only 2 days afterwards Musk tweeted that he was considering taking Tesla private — amongst the now-infamous “funding secured” describe — as well as Wall Street went into a frenzy trying to regard if it could happen.

Chanos was skeptical.

“I thought straight off it was non true, because I know Elon Musk at this point,” he said during a two-hour interview that touched on everything from hedge funds as well as short-selling to politics as well as the history of fraud, then, eventually, got dorsum to social media as well as Musk. “The agency it came out during marketplace seat hours, correct afterwards the Saudi passive investment statement [the Saudi sovereign wealth fund has reportedly taken a v pct stake inward Tesla] — it was hence irresponsible, issue one, as well as was non clearly vetted, because no ane who vetted that would’ve permit him pose that out.”

Although Kynikos’s 2 senior portfolio partners, Chuck Hobbs as well as David Glaymon, were monitoring the stock from New York, Chanos couldn’t remain away from the news, fifty-fifty inward Mykonos. “It was breaking hence fast,” Chanos says. As the stock rallied, he sold to a greater extent than shares short.
Finally, at 11:00 p.m. on Friday, August 24, Musk ended the suspense amongst a disputation on Tesla’s blog. He had decided against going private.

Tesla has been the biggest curt inward the marketplace seat for much of this yesteryear year, amongst nearly $10 billion wagered that its stock volition fall. Chanos is hardly the only ane who takes that view. Kynikos at nowadays runs less than $2 billion, as well as amongst private curt positions capped at v pct each for take away chances management purposes, Tesla represents at most almost $100 ane one m thousand of the firm’s full curt bets, which it currently has on 65 companies.

Win or lose, the Tesla curt won’t brand much of a divergence to Kynikos’s bottom line. But for Chanos — who claims he’s besides advising much larger “pools of capital” on their Tesla shorts — there’s to a greater extent than than coin at stake.

---

Kynikos is the lone short-selling hedge fund of whatever size — as well as the only ane that that has been inward describe organisation since 1985.

That’s no hateful feat, equally the stock marketplace seat has risen almost 1,500 pct since Kynikos’s debut. Chanos has lived through at to the lowest degree iii acquit markets — the 1987 crash, the bursting of the dot-com bubble inward 2000, as well as the global fiscal crisis of 2008 — as well as he’s waiting patiently for the adjacent one.
“I’m non maxim it’s the top of the market, but on the other hand, acquit markets haven’t been outlawed,” he quips.

Chanos, of course, is already a legend. He volition become downward inward Wall Street history for predicting the demise of Enron Corp., whose collapse resulted inward a moving ridge of prosecutions as well as the imprisonment of top executives — the form of harsh penalties that receive got non been seen since.
But that was inward 2001 — 17 years ago.

Since the fiscal crisis twelvemonth of 2008, Kynikos’s shorts overall receive got been haemorrhage ruby-red ink, as well as investors receive got bailed. Kynikos has lost almost iii quarters of its assets since the halt of 2008. This twelvemonth alone, its funds had fallen betwixt ix pct as well as nineteen pct through July (net of fees), depending on the fund, according to a study to investors Institutional Investor has seen that has non been previously reported on.

“It has been ane giant short-squeeze market,” he moans.

Take Tesla. To Chanos it represents a marketplace seat euphoria final witnessed during the dot-com craze. Although Tesla is unprofitable as well as loaded amongst debt, its marketplace seat cap rivals that of General Motors. Influenza A virus subtype H5N1 rush to run across production targets on its midprice Model 3 sedan this twelvemonth has been accompanied yesteryear defective cars, unhappy employees-turned-whistleblowers, as well as a flow of exiting executives — non to yell ever-stranger outbursts yesteryear a CEO nether enormous pressure level to run across the projections he promised shareholders. The electrical flow stock cost of almost $299 per portion (above Chanos’s average cost of $250) is based on ambitious plans for the future. But what most people are missing, says Chanos, is that Tesla has quit making the working capital alphabetic character investments required to realize those ambitions. It tin no longer afford to practise so.

But facts don’t seem to matter. As Chanos reminds us, referring to President Trump as well as his supporters, nosotros are living inward “a post-truth environment.” That translates, he argues, into a mood inward which investors are besides willing to suspend disbelief.

“If nosotros don’t agree our leaders to that standard,” muses Chanos, “then why should nosotros agree managements to that standard? I intend that’s component of where nosotros are now.”
Chanos, who jokes that he is considered an anarchist on Wall Street for his liberal political views, is non prone to proselytizing. He doesn’t write letters to the Securities as well as Exchange Commission or release long treatises on his curt theses. Though he believes the political surroundings has an touching on on the market, he never counts on the SEC to accept downward the bad guys. “They’re archaeologists, non detectives,” he scoffs.

Chanos tin look world-weary as well as somewhat guarded — but, equally the maxim goes, inward every cynic beats the haemorrhage midpoint of an idealist. “There’s to a greater extent than than a piffling of the crusader inward him,” says longtime friend Jim Grant, founder as well as editor of Grant’s Interest Rate Observer. “He would similar to build clean upward Wall Street. He would similar to amend the character of corporate reporting. He would similar to rid Wall Street of the scoundrels as well as build clean upward corporate management.”

That mightiness explicate what happened before this summer....

...MUCH MORE

HT: Barry Ritholtz but nosotros don't receive got a specific post. So here's The Big Picture.