and founder of Kynikos Associates, a New York City investment company
that is focused on short selling.
Chanos is famous for his short sale of Enron and more recently his
pessimistic view on China.
Born in 1958 in Milwaukee, of Greek origins, he was schooled at Wylie
E. Groves High School and Yale, where he graduated in 1980. In
business, he developed an investment strategy based on intensive
research into stocks searching for fundamental and large market
failures in valuation: typically under-estimated or previously
un-reported 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, the
notorious Enron Corporation.
He rose to fame in the 1980s as a short seller who had a knack of
spotting stocks that he thought to be overvalued. 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' experience, 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 somewhat 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.
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