market folly

Kynikos Associates founder and notorious short-seller Jim Chanos appeared on CNBC this morning to share his latest thoughts on the market:


On China: He says to avoid the Chinese property bubble.  While he's been short various plays on this in China, he says he's "broadening out" to plays like construction equipment, etc.


On Dell (DELL):  Chanos notes that he's been short Dell on heels of the buyout proposal.  He was originally short a while ago and covered his position in the single-digits but ended up re-shorting the company recently on the heels of the deal.  We've highlighted how Chanos has been short PC's before.

He points out that the company's cashflow is plummeting and he thinks it's going to drop more.  "The problem with the Dell model is you get paid upfront.  That's a great model when your business is growing... but as your business shrinks, it works the other way."


On Herbalife (HLF):  He was short last year, but is not anymore.  He says, "We were short, at a price.  I'm not crazy on these multi-level marketing businesses." It sounds like he covered as shares were cut in half.


On 'smart guy syndrome' and importance of doing your own work:  "One thing we teach our analysts is when they look at the company, they should be looking at fundamentals, and not the personalities involved because it's easy to stop doing fundamental work when you say 'oh, Mr. XYZ is in it so if he sees something in it, who am I to argue?'  In every corporate disaster over the last 30 years, there's been a handful of smart guys in everyone of them.  We're not all right all the time."


Embedded below are the videos of Chanos' interview with CNBC:


Video 1



Video 2



For more from this investor, head to Jim Chanos on short selling: the power of negative thinking.