Jim Chanos Quotes
105 Jim Chanos Quotes (James Chanos, Kynikos Associates, Short-selling quotes)
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Short sellers are the professional skeptics who look past the hype to gauge the true value of a stock.
Jim Chanos
There’s nothing better than analysing the company’s numbers themselves to find the anomalies because modern GAAP is as much an art as a science, as any good accountant will tell you.
Jim Chanos
When it comes to investigating corporate fraud, it's the short sellers who are the detectives, while all too often our regulators practice archaeology.
Jim Chanos
Financial history has a way of repeating itself…
Jim Chanos
A market without bears would be like a nation without a free press.
Jim Chanos
Short sellers ask the tough questions and dig out the discrepancies in the financial statements…
Jim Chanos
[In April 2013] I know banking is complex, but so are $700 billion bailouts.
Jim Chanos
In mysteries, the clues aren’t there for you to find. In puzzles, they are.
Jim Chanos
At the end of the day, the language of business is numbers… If you’re not very comfortable with understanding how companies can play games with their financial statements using GAAP accounting, you’re never going to be a good short-seller. That’s just the bottom line.
Jim Chanos
[In September 2008 on short-selling] As Warren Buffett has acknowledged… ‘it's a tough way to make a living,’ because over time stock markets rise more than they fall, the transaction costs are high, and the risks great.
Jim Chanos
Too big to fail = Too big to exist.
Jim Chanos
[In May 2003] Short selling is an inherently risky proposition. Profits are limited to a maximum of 100% of the proceeds on the date of sale; losses, however, can be infinite, depending on how high the stock price moves after the sale.
Jim Chanos
We’re trying to find cases where the economic reality is significantly divorced from the accounting presentation of the business.
Jim Chanos
Good short-sellers have something in the DNA. Or maybe we were dropped on our heads as babies.
Jim Chanos
[In April 2013] Investors do have to have a healthy skepticism even when it comes to reasonably well-regulated markets like the U.S. and the U.K., because there are incentives, given the stock option-type compensation or the bonuses based on profitability.
Jim Chanos
[In April 2013] Journalists are human beings and organizations are filled with human beings and when the bull market gets going, you know, no one wants to be the one who says the emperor has no clothes, unless you can actually point to a smoking gun and say, well, look at this.
Jim Chanos
[In April 2010] What we define as a bubble is any kind of debt fuelled asset inflation. Where people are borrowing money to buy the asset. Where cash flow generation from the asset itself… does not cover the debt service… And you depend on a greater fool if you will.
Jim Chanos
We tend to focus on the numbers. We’re not big on hiring detective agencies or talking to ex-employees.
Jim Chanos
One common short-coming is to rely on management or Wall Street analysts. When they both get blindsided, you’re left holding the bag… We’d rather not rely.
Jim Chanos
When the accounting gets murky, people tend to shy away from rigorous analysis and rely on management and just take earnings at face value. Therein lies the opportunity.
Jim Chanos
[In May 2003] My name is James Chanos and I am the President of Kynikos Associates, a New York private investment management company that I founded in 1985.
Jim Chanos
[In May 2003] To enjoy the advantages of a free market, one must have both buyers and sellers, both bulls and bears.
Jim Chanos
[In May 2003] Contrary to the allegations of some, short selling is one of the most heavily regulated market strategies around.
Jim Chanos
[In May 2003] It is mechanically impossible for short sellers to drive down the price of the stock.
Jim Chanos
[In May 2003] Many of the major corporate frauds and bankruptcies of the past quarter century were first exposed by short sellers doing fundamental research: Enron, Tyco, Sunbeam, Boston Chicken, Baldwin United, MicroStrategies, Conseco, ZZZZBest and Crazy Eddie are but a few examples of this phenomenon.
Jim Chanos
[In May 2003] Short sellers ask the tough questions and dig out the discrepancies in the financial statements and other regulatory filings made by publicly traded companies.
Jim Chanos
[In May 2003] For an investor seeking warning signs in the market, corporate conflicts with short sellers may be just the canary in the mineshaft…
Jim Chanos
[In May 2003] Short sellers also help stabilize falling markets by buying shares to close out their short positions. This results in market support and can reduce volatility and market declines caused by a lack of buyers.
Jim Chanos
[In May 2003] Enron's return on capital, a widely used measure of profitability, was a paltry 7 percent before taxes. That is, for every dollar in outside capital that Enron employed, it earned about seven cents… It was our view that Enron's cost of capital was likely in excess of 7 percent and probably closer to 9 percent, which meant from an economic point of view, that Enron wasn't really earning any money at all, despite reporting ‘profits’ to its shareholders. This mismatch of Enron's cost of capital and its return on investment became the cornerstone for our bearish view on Enron and we began shorting Enron common stock in November of 2000 for our clients.
Jim Chanos
[In May 2003] In January 2001, we spoke with a number of analysts at various Wall Street firms to discuss Enron and its valuation. We were struck by how many of them conceded that there was no way to analyze Enron, but that investing in Enron was instead a ‘trust me’ story. One analyst, while admitting that Enron was a ‘black box’ regarding profits, said that, as long as Enron delivered, who was he to argue.
Jim Chanos
[In May 2003] Strong capital markets in the U.S. require a robust short side; restrictions on short selling impede the market's efficiency and decrease the amount of independent research necessary to mitigate against irrational exuberance and outright fraud.
Jim Chanos
[In May 2003] Short selling represents only a very small fraction of market activity. It is very costly and full of risk for the short seller to execute and maintain a position, waiting for the rest of the market to realize the stock is overvalued.
Jim Chanos
There really is a situation in the corporate reporting right now where there is a very good likelihood that the numbers are not reflecting reality.
Jim Chanos
[On Enron] The more I looked, the more things didn’t make sense. How could they be producing 7 percent return on capital while the cost of that capital exceeded 10 percent?
Jim Chanos
[On Enron] One partner suggested then that Enron was ‘a hedge fund in disguise’ – and not a very good one. Investors were crazy to pay six times book value to own the stock.
Jim Chanos
[On Enron’s ‘special purpose entities.’] We read the footnotes in Enron’s financial statements about these transactions over and over again but could not decipher what impact they were having on Enron’s overall financial condition. They seemed to be selling parts of themselves to themselves.
Jim Chanos
[In 2006 on GAAP (Generally accepted accounting principles) allowing tremedmous leeway to dishonest management to mislead investors rather than inform.] I can think of no major financial fraud that did not have audited financials that confirmed to GAAP!
Jim Chanos
[On Tyco] Tyco had many more moving parts than Enron. The accounting games were much more ingenious and much more creative.
Jim Chanos
In the case of both Enron and Tyco, there was missing information. The smoking gun with Enron was the stock issuance scheme. With Tyco, you could see that the balance shee was going crazy and the footnotes held all the interesting information. Tyco wasn’t showing the financial statements for the target companies in the months prior to acquisition and the consolidated balance sheets on the day of acquisition. But still, there was no smoking gun until Kozlowski left and the acquisition strategy backfired. Then the whole company imploded.
Jim Chanos
[On company balance sheets] It’s still far and away the best predictor of future corporate performance.
Jim Chanos
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