Jim” Chanos is an investment manager as the president and founder of Kynikos Associates, a New York City registered investment advisor focused on short selling. Chanos is a famous short seller and one of the most impressive positions taken at Kynikos was the shorting of Enron before its collapse along with many other great short trades. He currently has a personal net worth of approximately $1.5 billion.
Here are ten of the best price action trading quotes from Jim Chanos that are about short selling.
“Bubbles are best identified by credit excesses, not valuation excesses. And there’s no bigger credit excess than in China.”
“If you’re a short-seller, that’s a cacophony of negative reinforcement. You’re basically told that you’re wrong in every way imaginable every day. It takes a certain type of individual to drown that noise and negative reinforcement out and to remind oneself that their work is accurate and what they’re hearing is not.”
“I’ve learned there’s a big difference between a long-focused value investor and a good short-seller. That difference is psychological and I think it falls into the realm of behavioral finance.”
“And so it can be very much in the interest of bank A to sell-short bank B shares, or buy CDSes on bank B, because they have exposure to bank B. It’s the responsible thing to do as a fiduciary, and yet if everyone does it at the same time, it’s destabilizing because everyone is selling.”
“It’s almost sickening now that the regulators ‘on the beat’ while the biggest credit collapse in modern financial history unfolded are now patting themselves on the back for their ‘brave’ stance on short-selling!”
“I’ll always understand the Schadenfreude aspect to short-selling. I get that no one will always like it. I’m also convinced to the deepest part of my bones that short-selling plays the role of real-time financial watchdog. It’s one of the few checks and balances in the market.”
“What we define as a bubble is any kind of debt-fueled asset inflation where the cash flow generated by the asset itself – a rental property, office building, condo – does not cover the debt incurred to buy the asset. So you depend on a greater fool, if you will, to come in and buy at a higher price.”
“Derivatives in and of themselves are not evil. There’s nothing evil about how they’re traded, how they’re accounted for, and how they’re financed, like any other financial instrument, if done properly.”
“Short sellers are the professional skeptics who look past the hype to gauge the true value of a stock.”
“While short sellers probably will never be popular on Wall Street, they often are the ones wearing the white hats when it comes to looking for and identifying the bad guys!”