market folly

At the Reuters Investment Summit, Kynikos Associates founder Jim Chanos talked about his short positions and market outlook.

The hedge fund manager and prominent short seller noted he's betting against coal miners as a proxy for his bet against China.  He thinks we're at the end of a commodities supercycle.  This is not a new view as we've highlighted Chanos' negative view on China before.

Chanos is also short Exxon Mobil (XOM), which he labels a value trap.  He believes the business of integrated oil companies has deteriorated over time.  Chanos also points out that return on capital has dropped from 30% down to 20% at the company.

Turning to technology, the Kynikos founder says that a lot of these companies are in slow decline but are masking it via financial engineering and buybacks.  Last year, Chanos highlighted he was short Hewlett Packard (HPQ).

In general, he feels now is a time for investors to be more cautious as the market's have become more "ebullient."

In terms of best new ideas, Chanos said that in the US he's shorting "conceptual companies, companies playing accounting games." He also said to focus on how the internet's changing business models from payment processors to retailers.


Embedded below is the video of Chanos' interview: