Jim Chanos is Optimistic for Short Investors in 2014. Jim Chanos, current president and founder of Kynikos Associates, thinks that 2014 will treat short investors better than in pastyears. Chanos, who famously foresaw past struggles at companies such as Enron, Worldcom, and Hewlett Packard, predicts another beneficial year for him and his peers. “We’re back to a glass half-full environment as opposed to a glass half-empty environment,” Chanos claims in an interview with Reuters. “If you’re the typical investor, it’s probably time to be a little bit more cautious.”
He claims that those looking to play the short market should look back on 2007 as an indicator of what to expect this year, with a few notable differences. The first, as Chanos points out, is a rapid increase of stock issuance. “We see three-four-five spot secondaries every night beyond the IPO market. You’re seeing hedge funds scrap the short side- and in some cases, bring out long-only funds.” Chanos addressed concerns about raising capital in the current market, stating, “The time to be doing this is when you feel like the village idiot and not an evil genius.”
Investors looking to Chanos for guidance can take confort with the fact that he recently found success with trades on both Caterpillar and the coal industry: deals which were largely prosperous due to issues with Federal regulations and the EPA. He also advises short investors to keep an eye on the current surge in modern art company Sotheby’s, one which he accredits to the industry’s status as a “socially acceptable conspicuous consumption.” He claims the recent surge is another in the cycle of share prices the company has experienced since the ’80s. “every time we seem to see some sort of excess somewhere in the marketplace, Sotheby’s runs to 50 and then collapses to 10 and then runs right back to 50 and collapses to 10. It’s done that four times since the late 80s.”Chanos also mentions: “we should take comfort in the maturity of today’s investors […] Ten years ago, if you were dealing with a pension fund you really dealt with a consultant, by and large. And they were the gate keepers and if they liked you, then you get put on a list. Nowadays you really deal directly with the clients.” The market may have changed since Chanos started, but this change is in favor of the client. So ask yourself: what is your view on the market for 2014?