James Chanos
Encyclopedia
James S. Chanos is an American hedge fund
manager, and is president and founder of Kynikos Associates, a New York City
investment company that is focused on short selling
.
, where he graduated in 1980. In business, he developed an investment strategy based on what he describes as intensive research into stocks looking for fundamental and large market failures in valuation, typically based on underestimated or previously unreported failings in the business or market of a stock. Followed by committing to a (usually large) short-position which he is willing to hold for long period of time—almost the mirror image of Warren Buffett
's reputed "fundamentals+long stay" investment strategy . Because of this model, his investments function more like those of a whistle-blower than most typical investments. Examples of this include short-selling companies such as Baldwin-United, and more recently Enron Corporation.
He rose to fame in the 1980s as a short seller. After working as an analyst in several firms, he founded Kynikos (Greek for "cynic") in 1985 as a firm specializing in short selling. A critical position taken at Kynikos was his shorting of Enron.
In October 2000, Chanos started research into the valuation of Enron Corporation. He examined their use of mark-to-model (opposed to mark-to-market) accounting,
which, in Chanos' view, results in management overstating earnings, as well as what appeared to be a worryingly low (6-7%) return on capital investment. Enron stock declined from $90 in August 2000 to a low of $1 near the end of 2001.
Over this period, Chanos was a short seller of Enron during 2001, increasing his short position as more information surfaced. Kynikos profited greatly and Chanos himself became something of a celebrity
as a consequence of his early awareness of Enron
's problems.
More recently, James Chanos has warned that China’s hyperstimulated economy is headed for a crash, rather than the sustained boom that some economists predict. He reiterated his concerns about the stability of Chinese economy, stating that historically analogous evidence points especially to a housing bubble, having mentioned commercial real estate in particular.
Hedge fund
A hedge fund is a private pool of capital actively managed by an investment adviser. Hedge funds are only open for investment to a limited number of accredited or qualified investors who meet criteria set by regulators. These investors can be institutions, such as pension funds, university...
manager, and is president and founder of Kynikos Associates, a New York City
New York City
New York is the most populous city in the United States and the center of the New York Metropolitan Area, one of the most populous metropolitan areas in the world. New York exerts a significant impact upon global commerce, finance, media, art, fashion, research, technology, education, and...
investment company that is focused on short selling
Short selling
In finance, short selling is the practice of selling assets, usually securities, that have been borrowed from a third party with the intention of buying identical assets back at a later date to return to that third party...
.
Life and career
Born in 1957 in Milwaukee, of Greek origins, he was schooled at Wylie E. Groves High School and YaleYALE
RapidMiner, formerly YALE , is an environment for machine learning, data mining, text mining, predictive analytics, and business analytics. It is used for research, education, training, rapid prototyping, application development, and industrial applications...
, where he graduated in 1980. In business, he developed an investment strategy based on what he describes as intensive research into stocks looking for fundamental and large market failures in valuation, typically based on underestimated or previously unreported failings in the business or market of a stock. Followed by committing to a (usually large) short-position which he is willing to hold for long period of time—almost the mirror image of Warren Buffett
Warren Buffett
Warren Edward Buffett is an American business magnate, investor, and philanthropist. He is widely regarded as one of the most successful investors in the world. Often introduced as "legendary investor, Warren Buffett", he is the primary shareholder, chairman and CEO of Berkshire Hathaway. He is...
's reputed "fundamentals+long stay" investment strategy . Because of this model, his investments function more like those of a whistle-blower than most typical investments. Examples of this include short-selling companies such as Baldwin-United, and more recently Enron Corporation.
He rose to fame in the 1980s as a short seller. After working as an analyst in several firms, he founded Kynikos (Greek for "cynic") in 1985 as a firm specializing in short selling. A critical position taken at Kynikos was his shorting of Enron.
In October 2000, Chanos started research into the valuation of Enron Corporation. He examined their use of mark-to-model (opposed to mark-to-market) accounting,
which, in Chanos' view, results in management overstating earnings, as well as what appeared to be a worryingly low (6-7%) return on capital investment. Enron stock declined from $90 in August 2000 to a low of $1 near the end of 2001.
Over this period, Chanos was a short seller of Enron during 2001, increasing his short position as more information surfaced. Kynikos profited greatly and Chanos himself became something of a celebrity
Celebrity
A celebrity, also referred to as a celeb in popular culture, is a person who has a prominent profile and commands a great degree of public fascination and influence in day-to-day media...
as a consequence of his early awareness of Enron
Enron
Enron Corporation was an American energy, commodities, and services company based in Houston, Texas. Before its bankruptcy on December 2, 2001, Enron employed approximately 22,000 staff and was one of the world's leading electricity, natural gas, communications, and pulp and paper companies, with...
's problems.
More recently, James Chanos has warned that China’s hyperstimulated economy is headed for a crash, rather than the sustained boom that some economists predict. He reiterated his concerns about the stability of Chinese economy, stating that historically analogous evidence points especially to a housing bubble, having mentioned commercial real estate in particular.
Resume
- Analyst with Blyth Eastman Webber.
- Analyst with Gilford Securities - where he exposed Baldwin-United, which filed for bankruptcy thereafter.
- Analyst and Vice President at Deutsche BankDeutsche BankDeutsche Bank AG is a global financial service company with its headquarters in Frankfurt, Germany. It employs more than 100,000 people in over 70 countries, and has a large presence in Europe, the Americas, Asia Pacific and the emerging markets...
Capital Corp. - Founder and President of Kynikos Associates Ltd (current).
External links
- Chanos' statement to the SEC regarding hedge funds
- Remarks by Chanos to US House (2002)
- Chanos' Wall Street Journal article on the financial crisis and short selling
- Charlie Rose Interview (flash video). April 12, 2010. About the China housing bubbleChinese property bubbleThe Chinese property bubble is an alleged ongoing real estate bubble in residential and/or commercial real estate in the People's Republic of China...