Jim Chanos may have stepped away from managing a hedge fund, but make no mistake—he’s still in the fight.
During his recent interview with CNBC he said “We’re still slinging research. Still looking at companies.” He added, “We’re still recommending, shorting stocks personally and recommending clients do it. But again, on a hedge basis as insurance.”
That word—insurance—is important. Chanos isn’t out to blow up anyone’s portfolio. He’s using shorts to protect capital, especially in what he sees as a market increasingly driven by hype over substance.
“As I’ve told people. In bull markets, investors tend to put a premium on promises. In a bear market, they put a discount on reality,” he explains. “And right now we’re getting back to that end of the dial. Where at least in certain areas, certain companies, investors are really putting a premium on promises.”
Take Bitcoin, for example. Chanos isn’t necessarily bearish on the cryptocurrency itself. “I don’t know where Bitcoin’s going—100,000, 1,000,000, 10,000—I don’t know. I don’t think anybody else knows,” he says.
What Chanos does know is how to spot a flawed structure. Enter MicroStrategy.
“If you look at where MicroStrategy, and now more ominously some of its copycat companies that are now raising lots of money are doing, is they are basically selling retail investors the idea that we are going to buy Bitcoin in a corporate structure, because of what MicroStrategy has done you should value us at a similar premium. And therefore earnings are created by the difference between what new investors are paying and what the net asset value is. But it’s ridiculous.”
Chanos is crystal clear on his approach. “What we’re doing is we’re doing exactly what MicroStrategy and Michael Saylor are doing. We’re selling MicroStrategy stock and buying Bitcoin and basically buying something for a dollar, selling it for two and a half dollars.”
That spread? That’s the opportunity. “It’s generally profitable to short $1 for two and a half dollars or $3.”
And it’s not just a clever arbitrage play—it’s a window into sentiment. “The premium is a really good barometer of speculation in the market.”
As for his transition away from managing outside capital? “It’s a different business model Scott… People still want to get research and hear what we have to say, but don’t have the day to day, week to week, month to month pressure.”
You can watch the interview here:
For all the latest news and podcasts, join our free newsletter here.
Don’t forget to check out our FREE Large Cap 1000 – Stock Screener, here at The Acquirer’s Multiple:
