Posts Tagged ‘Jim Chanos’

THE POWER OF NEGATIVE THINKING: 4 SHORT SELLING THEMES

THE POWER OF NEGATIVE THINKING: 4 SHORT SELLING THEMES

Profile of man thinking

Courtesy of The Pragmatic Capitalist 

Jim Chanos recently gave an interesting interview on the power of negative thinking and the benefits of short selling.  Most interesting were the 4 major themes Chanos looks for in his short positions.  Much like a long only macro thinker Chanos develops his specific short positions from much larger macro themes.  In the article he detailed the 4 themes he looks for:

Some recurring themes in shorting selling:

  • Booms that go bust – define boom as anything that is fueled by debt in which the cash flows produced by the asset do not cover the cost of the debt.  The internet is not a boom since they didn’t have debt.  The telecom bubble that went along with it was.
  • Consumer fads – Investors like to extrapolate strong growth well further into the future than they should.  It’s also a great source of decoration for your office, he’s got a Cabbage Patch Kid next to a George Forman Grill next to a Nordic Trak.
  • Technological Obsolescence – Everyone thinks the old product will last longer than it actually does.  Examples were Wang Word Processors (replaced by PCs), Record Stores (replaced by digital downloads).  He says the internet is the cheapest way to distribute anything.  However, people are still renting DVDs by mail, which surprises him (hint: likely short Netflix!).  These businesses always look cheap but the cash flow goes down just as fast as the share price (think Kodak film).
  • Structurally flawed accounting – Beware serial acquirers, they often write down the assets of the acquired firm in the stub period that no one sees.  Ask management what the nets assets of the firm were on their latest end of quarter and what they were when they were acquired. Most management won’t tell you this, some will, however.  But by writing down inventory and A/R they can “spring load” results once the company is acquired.  They’re supposed to adjust the purchase price, but more don’t.

Source: Market Folly 


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Chanos: Recurring Themes in Short Selling

Chanos: Recurring Themes in Short Selling

Courtesy of Joshua M Brown, The Reformed Broker 

I linked to this summation of Jim Chanos’s short selling discussion last night, but I loved the post so much I decided to excerpt the most interesting part.  According to Chanos (via My Investing Notebook), these four themes come up in great shorting opportunities fairly regularly:

1. Booms that go bust – define boom as anything fueled by debt in which the cash flows produced by the asset do not cover the cost of the debt. The Internet is not a boom since they didn’t have debt. The Telecom Bubble that went along with it was.

2. Consumer Fads – investors like to extrapolate strong growth well further into the future then they should. It’s also a great source of decoration for your office, he’s got a Cabbage Patch Kid next to a George Forman Grill next to a Nordic Trak.

3. Technological Obsolescence – Everyone thinks the old product will last longer than it actually does. Examples were Wang Word Processors (replaced by PCs), Record Stores (replaced by digital downloads). He says the internet is the cheapest way to distribute anything. However people are still renting DVDs by mail, which surprises him (Hint: likely short Netflix!). These businesses always look cheap but the cash flow goes down just as fast as the share price (think Kodak and film).

4. Structurally-Flawed Accounting – beware serial acquirers, they often write down the assets of the acquired firm in the stub period that no one sees. Ask management what the net assets of the firm were on their latest end of quarter and what they were when they were acquired. Most management won’t tell you this, some will, however. But by writing down inventory and A/R they can “spring load” results once the company is acquired. They’re supposed to adjust the purchase price but most don’t.

Chanos notes that the Enron short story (which made him famous on its way to zero) was like ‘one-stop shopping’ for these red flags, it featured conference calls with foul language, mark-to-model accounting, off-balance sheet stuff, etc.

I highly suggest you click over to read the whole post if you want to learn more about short selling and its place in finance.

Source:

Jim Chanos: The Power of Negative Thinking (CFA annual conference 2010) 

Photo by Vince Veneziani, Clusterstock 


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Chanos On Chinese Overheating And Overindulgence

Chanos On Chinese Overheating And Overindulgence

Courtesy of Tyler Durden at Zero Hedge 

You hear the bull story every day on TV and from the likes of Tom Friedman. Michael Pettis and Chanos take the bear side. Below is a recent must-watch, hour long presentation by Jim Chanos, courtesy of Peter Schiff.

 


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CHANOS: THE CHINA BUBBLE IS ABOUT TO BURST

CHANOS: THE CHINA BUBBLE IS ABOUT TO BURST

Courtesy of The Pragmatic Capitalist

Famed short seller, Jim Chanos, has been vocal in recent weeks about his concerns in China.  He is growing increasingly concerned about the real estate bubble in China where an “unprecedented” and “staggering” bubble is being blown by the government.  Chanos says 30 billion square feet of commercial real estate are under construction – that’s a 5 foot by 5 foot cubicle for every person in China.  Although he isn’t calling for a crash, he is increasingly risk averse: 

 


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Chanos: I warned Brown and Geithner of financial calamity

Chanos: I warned Brown and Geithner of financial calamity

Jim ChanosCourtesy of Edward Harrison at Credit Writedowns

Evidence is now surfacing that Timothy Geithner and Gordon Brown were among policymakers warned in April 2007 of an impending financial crisis. Famed fund manager and shortseller Jim Chanos met with the policy makers at the time, along with several other hedgies during the G-8 Summit in Washington, D.C.

Their worry: an impending financial crisis.  Recalling the events, here’s what Chanos has to say.

Jim Chanos: Well, there was a lot of sort of – you have to keep in mind this was Sunday afternoon. You’re at the end of the conference. But I think we were seen probably as much as an annoyance as anything else from people who wanted to catch a plane or get home.

But there was some uncomfortable paper shuffling. There was sort of, you know, that looking at the ceiling across the table. There was a bit of eye rolling. There’s no doubt about that.

And at the end of my talk the fellow running the meeting asked if there was any questions. There were literally no questions and at that point the Chair of the meeting said, “Well, that’s all very interesting and now what do you think about insurance.”

And it was just that complete realization that we’ve got – it just didn’t sink in, the import was not grasped, certainly by the Chair, that they were gonna move on to the next item on the agenda with nary a bit of discussion.

And then shortly after the meeting ended, a few hours later, there were two central bankers, both EU central bankers who came up to me and with their assistants and we exchanged contact information, and both said they thought that my presentation was very interesting and if I had anything additional please send it to them, and to keep in touch and blah, blah, blah.

And that was sort of it. I was thanked by the U.S. delegation and we went on our way. And both Paul Singer and I left the room sort of incredulous that the presentation…really elicited no official questions or comments.

It sort of reminds one of the famous intelligence memo declaring “Bin Laden Determined to Strike in U.S.

More here. If you’re really interested in this story, the …
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Brexit: wisdom of crowds proves effective predictor of Britain's chaotic EU departure

 

Brexit: wisdom of crowds proves effective predictor of Britain's chaotic EU departure

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Zero Hedge

Facebook Won't Say Whether Banned Individuals Can Use Libra Despite Claiming To Be 'Politically Neutral' 

Courtesy of ZeroHedge. View original post here.

Facebook's second day of Congressional hearings over Libra was by most accounts a total debacle - between Rep. Carolyn Maloney (D-CA) suggesting that the social media giant 'shouldn't launch' the cryptocurrency - as new currencies should be 'left to democratically accountable institutions,' and another lawmaker accusing the company of 'winging it.' 

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Kimble Charting Solutions

Aussie Dollar About To Send Bullish Message To Precious Metals?

Courtesy of Chris Kimble.

The Australian Dollar and its ETF (NYSEARCA: FXA) have traded sideways for much of the past 4 years (see blue shaded area on chart above).

And since the Aussie Dollar and precious metals are highly correlated, this hasn’t helped gold and silver.

But this setup may be changing soon as a big test comes into play for the AU$.

It is currently testing falling resistance on a bullish falling wedge pattern.

If it succeeds in breaking out at (1), it will send metals and commodities a short-term bullish message. Stay tuned!

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Cannabis Stocks Gainers And Losers From July 17, 2019

Courtesy of Benzinga.

Read more about our latest Cannabis News! CANNABIS HOME Gainers
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Digital Currencies

Bitcoin Breaks Back Below $10k, Crypto-Crash Accelerates As Asia Opens

Courtesy of ZeroHedge. View original post here.

Update 2010ET: Having briefly stabilized after this morning's weakness, cryptos are tumbling once again as Asian markets open.

Bitcoin has broken below $10,000 again...

*  *  *

While all eyes are on Bitcoin as it slides back towards $10,000, the real mover in the last 12 hours has been Ethereum after...



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Biotech

DNA testing companies offer telomere testing - but what does it tell you about aging and disease risk?

Reminder: We're is available to chat with Members, comments are found below each post.

 

DNA testing companies offer telomere testing – but what does it tell you about aging and disease risk?

A telomere age test kit from Telomere Diagnostics Inc. and saliva. collection kit from 23andMe. Anna Hoychuk/Shutterstock.com

Courtesy of Patricia Opresko, University of Pittsburgh and Elise Fouquerel, ...



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ValueWalk

Professor Shubha Ghosh On The Current State Of Gene Editing

 

Professor Shubha Ghosh On The Current State Of Gene Editing

Courtesy of Jacob Wolinsky, ValueWalk

ValueWalk’s Q&A session with Professor Shubha Ghosh, a professor of law and the director of the Syracuse Intellectual Property Law Institute. In this interview, Professor Ghosh discusses his background, the Human Genome Project, the current state of gene editing, 3D printing for organ operations, and gene editing regulation.

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Chart School

Gold Gann Angle Update

Courtesy of Read the Ticker.

Charts show us the golden brick road to high prices.

GLD Gann Angle has been working since 2016. Higher prices are expected. Who would say anything different, and why and how?

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The GLD very wide channel shows us the way.
- Conservative: Tag the 10 year rally starting in 2001 to 2019 and it forecasts $750 GLD (or $7500 USD Gold Futures) in 10 years.
- Aggressive: Tag the 5 year rally starting in 1976 to 2019  and it forecasts $750 GLD (or $7500 USD Gold Futures) in 5 years.

Click for popup. Clear your browser cache if ima...



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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

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It's Not Capitalism, it's Crony Capitalism

A good start from :

It's Not Capitalism, it's Crony Capitalism

Excerpt:

The threat to America is this: we have abandoned our core philosophy. Our first principle of this nation as a meritocracy, a free-market economy, where competition drives economic decision-making. In its place, we have allowed a malignancy to fester, a virulent pus-filled bastardized form of economics so corrosive in nature, so dangerously pestilent, that it presents an extinction-level threat to America – both the actual nation and the “idea” of America.

This all-encompassing mutant corruption saps men’s souls, crushes opportunities, and destroys economic mobility. Its a Smash & Grab system of ill-gotten re...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

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Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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