YouSaid · the spoken record

James Chanos

lines on the record: 74
first: 2018-05-11
most recent: 2018-05-11
sittings or episodes: 1
sources: podcast

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“Yeah, pretty much. Exactly. So again, timing is not there for a day. Look, lots of lessons I've learned along the way on managing risk, both in a portfolio, a career. And sadly, however, in our business, you sort of have to learn them yourselves. It's hard to impart them. You can speak all you want, but the market is a cruel mistress. And she tends to impart her lessons on everyone singularly and individually.”
2018-05-11 · Masters in Business · James Chanos Discusses Investment-Driven Models · IDENTIFIED FROM THE TRANSCRIPT · source
“That's it. And on the other hand, if you're 25, 26, and you have a great idea and you have a backer, go for it. If you fail, nobody's going to hold it against you. In fact, they might even admire you for it. And so I always tell people if they're going to go do something with a small group of people, do it when you're youngest, not when you're 20 years or 30 years into it because you're not going to be able to do it as easily then. And if it fails, and by the way, most things do, you just dust yourself off and pick yourself up and dust yourself off. And go do something else. It's not the end of the world for you. Very interesting.”
2018-05-11 · Masters in Business · James Chanos Discusses Investment-Driven Models · IDENTIFIED FROM THE TRANSCRIPT · source
“One of the things I tell my students and young people who come up to me to ask for that kind of advice is I sort of ask them, is this some And if it's the latter, I try to impress upon them that unlike what they might consider conventional wisdom, I tell them that the time to take risks is when they're youngest. Yes, you need certain skills, of course, but it's very, very hard once you're in your 40s and 50s and you've got the obligations of life, financial, family, education, to then up and say, I'm going to go do this on my own. And by the way, if you do, and it doesn't work out, you've kind of”
2018-05-11 · Masters in Business · James Chanos Discusses Investment-Driven Models · IDENTIFIED FROM THE TRANSCRIPT · source
“So I travel a fair amount. I enjoy that. I read a fair amount and I do teach. I mean, the teaching has been over the last eight years. I teach up at Yale, at SOM, and also every other year at the University of Wisconsin, which is my family alma mater. On Wisconsin. And it's been a lot of fun. It's been enjoyable. I enjoy interacting with the students. It's a fun course. We teach starting in the 1690s all the way up to today. And we teach about some of the great episodes of financial market fraud from the Mississippi scheme and South Sea Bubble all the way to Donald Trump's hotel and resorts and some of the more recent things and do so in a thematic and systematic way.”
2018-05-11 · Masters in Business · James Chanos Discusses Investment-Driven Models · IDENTIFIED FROM THE TRANSCRIPT · source
“You know, whether it was paying people out of my own pocket or having to really go and search hard for investors, it was a time we got through it and I got through it with great partners and great employees. But a little adversity sometimes is a good life lesson.”
2018-05-11 · Masters in Business · James Chanos Discusses Investment-Driven Models · IDENTIFIED FROM THE TRANSCRIPT · source
“And then, of course, we got out, and then Time Warner bought them, and we never got back in, which was a really good lesson because it was a lesson not only in humility and timing, but it was a lesson on risk management. In that case, it didn't carry us out because we kept the position very, very small over the course of two, three years. I learned a lot of painful lessons in the 90s as the fantastic years we had in our first five, six years as hedge fund managers became a struggle. And the early 90s to mid-90s were just a terrible time on the short side.”
2018-05-11 · Masters in Business · James Chanos Discusses Investment-Driven Models · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I mean, we've failed in all kinds of things, and whether it's single stock ideas, I mean, like anybody else, we're wrong a lot of times. In the short side, you have to be, of course, mindful of this. So whether it's valiant doubling on you or America Online, which went up eightfold on us from 10 to 80.”
2018-05-11 · Masters in Business · James Chanos Discusses Investment-Driven Models · IDENTIFIED FROM THE TRANSCRIPT · source
“Right. And then in business books, I've always been in my class always loves my history of fraud class. We love the match king by Frank Partner, which was the voted best business book, I think, in 09. And it's just the wonderful story of the greatest fraudster of the 1920s, Ivar Kruger, who built this enormous empire on the back of raising money for European countries monopoly and how he became greater than J.P. Morgan by 1928 and basically dragged down most of the European banking system with his collapse in 1932.”
2018-05-11 · Masters in Business · James Chanos Discusses Investment-Driven Models · IDENTIFIED FROM THE TRANSCRIPT · source
“Through this prism of great people like Magellan and Martin Luther and the Borgia popes and Gutenberg, and basically it just sort of sets the stage for modernity. And he tells the tale in a way is only he can. It's just wonderful history, but I recommend it highly to the world.”
2018-05-11 · Masters in Business · James Chanos Discusses Investment-Driven Models · IDENTIFIED FROM THE TRANSCRIPT · source
“So, I read a lot of history. It's my thing, not just financial history, but broad history. So there's a handful of books I always recommend to people if they haven't read them. One of my favorites is William Manchester. And everybody remembers his MacArthur biography and his Churchill, his unfinished Churchill trilogy, I think his daughter may have finished it for him. But the book that is utterly one of those game changer books, if you read history, is A World Lit Only by Fire, which is the story of the late Middle Ages and the early Renaissance and Reformation and written.”
2018-05-11 · Masters in Business · James Chanos Discusses Investment-Driven Models · IDENTIFIED FROM THE TRANSCRIPT · source
“I was always just making a complete fool of himself at a research meetings and internal meetings. And Bob looked up at me over his cup of coffee or tea and just smiled. He has great little sort of devilish smile. He said, Jim, just remember, someone who is always wrong is just as valuable as someone who is always right.”
2018-05-11 · Masters in Business · James Chanos Discusses Investment-Driven Models · IDENTIFIED FROM THE TRANSCRIPT · source
“Because they knew their story. Often they agreed with me, by the way, but sometimes they didn't. But you had to hone your craft pretty well to understand, again, what is your edge? What didn't investors know? And then another one who's no longer with us, who was also a bit of a mentor about New York as well, was the legendary shortseller Bob Wilson. Bob and I would have lunch from time to time every few months. And then he had these wonderful dinners with Dick Gilder, you know, sort of every few months as well. And I was privileged to attend those. But Bob also had one of the greatest quotes of all time that I never forget about investing. And I was grumbling about someone who I worked with at Deutsche Bank at the time. And this guy was one of the world's worst investors. Everything he touched went down. And he was a long investor. And I was always grumbling because the guy...”
2018-05-11 · Masters in Business · James Chanos Discusses Investment-Driven Models · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah. So probably the investors do stand out. Again, both people I met early in my career. One, of course, was the legendary Julian Robertson, who's, of course, still around, still investing. And his approach was something that sort of really galvanized me when I ran money for him and he called me up and he said, Jim, I see we're short. XYZ Corp. You know, some guys in my shop like that. Why don't you come over for lunch? We'll talk about it. And so it was always like going into the lion's den, right? Julian would be at one end of the table, and there'd be a bunch of his analysts, many of whom are now legendary investors in their own right, sitting around the table. And we'd argue back and forth over whatever stock it was. And what about this? What about this? And you'd better know your story.”
2018-05-11 · Masters in Business · James Chanos Discusses Investment-Driven Models · IDENTIFIED FROM THE TRANSCRIPT · source
“His firm in 84, I started mine in 85. Right. So we both were kind of struggling, you know, entrepreneurs trying to get our businesses off the ground in the mid 80s, both of us are sort of skeptics. He had a pen in his hand and I had clients' money. And I think we commiserated a lot and learned a lot from each other way back way back”
2018-05-11 · Masters in Business · James Chanos Discusses Investment-Driven Models · IDENTIFIED FROM THE TRANSCRIPT · source
“Sort of my contemporaries, an old friend Jim Grant, who's on the journalistic side, who who, of course, is ancient. He's much, much older than I am.”
2018-05-11 · Masters in Business · James Chanos Discusses Investment-Driven Models · IDENTIFIED FROM THE TRANSCRIPT · source
“After it had doubled. After it doubled, and just reaffirming everything we had, laying out all the documents we had, all the case we had. And he was a guy who kind of taught me about courage and, you know, courage, your convictions, but he was my boss as well. So it was an important kind of lesson. When I moved to New York in 83, I had a number of wonderful, wonderful mentors who sort of introduced this Midwestern kid to New York City and Wall Street itself, people like Stephen Peck, Viseck and Greer, who's passed on a few years ago and just kind of took me under his wing. And all right, kid, we're going to Rayo's on Tuesday night. And I'm going to introduce you to everybody in town. Still there. He was tremendously, tremendously important man in my growth on Wall Street. You know, and then there were...”
2018-05-11 · Masters in Business · James Chanos Discusses Investment-Driven Models · IDENTIFIED FROM THE TRANSCRIPT · source
“So, I was lucky when I got into the business, the fellow that hired me away from Blythe Eastman, Payne Weber, a guy named Bob Holmes, was not only a mentor, but he stood behind me in kind of the darkest days of Baldwin. The stock had doubled. The New York partner was screaming from my head on a plate. I was all of 25 years old. And he stood behind me, he'd seen the work. He'd seen the documents. He said, you know, kid, you're right, you're right. Go ahead and publish again. We put a second report out.”
2018-05-11 · Masters in Business · James Chanos Discusses Investment-Driven Models · IDENTIFIED FROM THE TRANSCRIPT · source
“There was no real technology. It didn't exist yet. And so it was still on the drawing boards. And then Bethany's story came out in February of 2001. The stock basically kind of went 80 to zero. In the next nine months, but there were some, of course, gut wrenching rallies along the way.”
2018-05-11 · Masters in Business · James Chanos Discusses Investment-Driven Models · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, we started Schrodinger in the 60s. It did run to 80 in January of 01 on the blockbuster announcement that the Blockbuster, they were getting into business with Blockbuster Video to stream video. Now, it was a wonderful announcement. The problem was they booked profits instantly on the announcement. I mean, they kind of got the technology right. It's now, of course, Netflix.”
2018-05-11 · Masters in Business · James Chanos Discusses Investment-Driven Models · IDENTIFIED FROM THE TRANSCRIPT · source
“To 260, then it went down a lot. And it went down fast. But the things we saw back in 2013 and 2014 didn't come to the fore until 2015 and late 2015. And then the company finally had to realize, admit that it had some real issues. That can be pretty maddening and painful.”
2018-05-11 · Masters in Business · James Chanos Discusses Investment-Driven Models · IDENTIFIED FROM THE TRANSCRIPT · source
“Most investors have had for the past 30 to 40 years. It is unlike almost anything we've seen in American financial history. And so This is, people have gotten very, very used to this. If you're a short seller, you've gotten very, very used to basically coming in every day and struggling. That before anything happens, more likely than not, the stocks you're short are going to be up. And so you had better be right. You had better be right in your fundamentals. And you can often be early. And often the things that the short sellers see that become really important, nobody cares about until the company acknowledges itself that it's a problem. So take a look at Valiant Pharmaceuticals, one of our celebrated shorts from a few years ago. We started shorting that at $130 before it doubled.”
2018-05-11 · Masters in Business · James Chanos Discusses Investment-Driven Models · IDENTIFIED FROM THE TRANSCRIPT · source
“That can't be fun. Hey, we're right, but this really is. It's not only not fun, it's constant. I mean, is it? Well, keep in mind, I mean, we started our fund when the Dow was 1,300, our original short-only fund. So this has been basically 30 years of not only up equity markets, but lower interest rates. And I don't think people kind of appreciate just what an amazing tailwind.”
2018-05-11 · Masters in Business · James Chanos Discusses Investment-Driven Models · IDENTIFIED FROM THE TRANSCRIPT · source
“Economically motivated to say, you know, wait a minute. Hey, but this class might be half empty, not half full. And so most journalists, I know that we talk to have been talking to short sellers for years and just understand they're going to get the other side of the story. It might not be right, by the way, but at least they will hear a reasoned opinion as to why maybe the stock is overpriced, not underpriced.”
2018-05-11 · Masters in Business · James Chanos Discusses Investment-Driven Models · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, I mean, I think that reporters generally like talking to short sellers because they're going to get the opposing point of view typically on a situation. No cheer ratings, so to speak. Well, look, there's thousands of people gainfully employed making a lot of money who are there to promote stories, right? Whether it's PR firms, whether it's analysts, whether it's bankers who are always going to tell you why something is fantastic. There's only a handful of people who are...”
2018-05-11 · Masters in Business · James Chanos Discusses Investment-Driven Models · IDENTIFIED FROM THE TRANSCRIPT · source
“We like everybody are looking at factor based investing and what factors are driving our stocks one way or another. The problem, of course, with using factor-based data on price performance and not on research. We'll get to that in a second is that, of course, by the time you analyze the factors, they become self-defeating. And we had a quantitative hedged version of our short phone back in the mid-90s, and we realized this even back then, that all the factors we were extracting from the portfolio, they didn't last that long. And I bet you now. I don't know for a fact, but I think that these factor-based observations cancel this. Funds in the last few years. I think that bears it out.”
2018-05-11 · Masters in Business · James Chanos Discusses Investment-Driven Models · IDENTIFIED FROM THE TRANSCRIPT · source
“I've never been able to make any money by looking at charts. And so I don't think it's a strength. I don't think I have any edge.”
2018-05-11 · Masters in Business · James Chanos Discusses Investment-Driven Models · IDENTIFIED FROM THE TRANSCRIPT · source
“The hope for returns that the pension funds and endowments and sovereign wealth funds who just constantly just assume private equity is going to earn them 10 to 12 percent somewhat uncorrelated sort of boggles my mind. It's the ultimate correlated asset theoretically.”
2018-05-11 · Masters in Business · James Chanos Discusses Investment-Driven Models · IDENTIFIED FROM THE TRANSCRIPT · source
“Which is fascinating. But you get my point. And I think private equity, which has seen these short, sharp recessions, and then easing, by the way, of monetary policy over their life, private equity really has seen nothing but lower rates over its golden era hair. What happens if asset prices don't go anywhere and rates go higher for the next generation?”
2018-05-11 · Masters in Business · James Chanos Discusses Investment-Driven Models · IDENTIFIED FROM THE TRANSCRIPT · source
“And so stay for the, you know, come for the high feast. Come for the high fees and losses and then stay for the underperformance on the snapback. You know, I get a nickel every time.”
2018-05-11 · Masters in Business · James Chanos Discusses Investment-Driven Models · IDENTIFIED FROM THE TRANSCRIPT · source
“And that performance ushered in the golden era of inflows from 03 to 08. And then hedge funds didn't. They didn't basically hedge. They didn't protect you in 0708. And from there on in, people began to look at them differently and scrutinize them and look at the alphas and kind of disaggregate the results and hedge funds have had a basically rough go of it ever since of justifying their existence. Private equity has not had that”
2018-05-11 · Masters in Business · James Chanos Discusses Investment-Driven Models · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, it was. And that's where retail investors were. And hedge funds missed that, right? In fact, a lot of them made money in that period. They were short the garbage and long value. And value actually cut up.”
2018-05-11 · Masters in Business · James Chanos Discusses Investment-Driven Models · IDENTIFIED FROM THE TRANSCRIPT · source
“At the end of the day, a private equity fund should have multiples of return of the S&P if you're using leverage. I believe they don't. And so that examination and hedge funds began this. You and I both know people began kind of wondering about hedge funds after 08. The golden age of hedge funds was 2000 to 02. That's when the markets went down. And let's not forget the 2002 was worse than 08 for the stock market. The S&P went down 40%. The Nasdaq went down 80%. Yes.”
2018-05-11 · Masters in Business · James Chanos Discusses Investment-Driven Models · IDENTIFIED FROM THE TRANSCRIPT · source
“I think that the issue is a broader one, which is If you are investing in venture capital and private equity, I would just tell investors understand that in the case of venture capital, you are investing in high beta, high risk, high return situations. So a venture capital fund should be measured not against the S&P, but against some high beta micro, whatever, yeah, a small capa fund. Private equity is a little bit different, right? Because all the private equity funds are different, but they do lever. And so...”
2018-05-11 · Masters in Business · James Chanos Discusses Investment-Driven Models · IDENTIFIED FROM THE TRANSCRIPT · source
“Money into that space. We do. And some of them, my best friends and clients are in private equity. So, you know, look, I always tell them I'm jealous of them. You know, they have a great business model. And they're one of the two areas in investment management where”
2018-05-11 · Masters in Business · James Chanos Discusses Investment-Driven Models · IDENTIFIED FROM THE TRANSCRIPT · source
“The problem, again, of course, that the bears will keep pointing to is you've pulled a lot of it forward. Anytime you use debt. To fuel your growth, you're basically pulling forward consumption. And that's just an economic identity. And so There will be a reckoning at some point. The debts do have to be serviced or inflated away, and one of the two will happen.”
2018-05-11 · Masters in Business · James Chanos Discusses Investment-Driven Models · IDENTIFIED FROM THE TRANSCRIPT · source
“I think it was not us. It was somebody else. Bill Gates, I know, pointed it out. I don't know who the originator of the data point was, but I think it was China in the last 10 years has used as much concrete as the US did in the last 100 plus. It's astonishing. That is true. It's remarkable to look at what China since it entered the WTO in 2001 has done. And it has done so and is literally transformed a country in less than 20 years.”
2018-05-11 · Masters in Business · James Chanos Discusses Investment-Driven Models · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, the little island. So, this is the problem with an investment driven model. All three of those have contributed to GDP. Construction dollars go right into GDP. But of course, the economic returns in each one will have dropped.”
2018-05-11 · Masters in Business · James Chanos Discusses Investment-Driven Models · IDENTIFIED FROM THE TRANSCRIPT · source
“Anytime you've got a model that's credit driven based on a property bubble and investment now that is not needed. I always joke that Hainan, the island of Hainan, they're tropical island in the South China Sea, when we started looking at China, it had one international airport. About three, four years later, they completed the second international airport, which is not fully utilized today. And now they've begun work on a third international airport, which is just folly.”
2018-05-11 · Masters in Business · James Chanos Discusses Investment-Driven Models · IDENTIFIED FROM THE TRANSCRIPT · source
“What's fascinating about that, of course, is that the cities that they have as the bulls have said mostly filled up. The problem, of course, is there's new empty cities. There's another 50 cities. Yeah, and this is the inherent problem, right? And so I think that...”
2018-05-11 · Masters in Business · James Chanos Discusses Investment-Driven Models · IDENTIFIED FROM THE TRANSCRIPT · source
“I wish I knew. It's fascinating to watch because everybody sees it. Now, when we started talking about eight years ago as a controversial viewpoint, now it's not, right? It's hard to, the debt levels have doubled and tripled since then.”
2018-05-11 · Masters in Business · James Chanos Discusses Investment-Driven Models · IDENTIFIED FROM THE TRANSCRIPT · source
“But the whole concept of all the stuff you've heard in the last eight years, oh, they're going to become a consumer driven economy, that hasn't happened. They're going to reduce investment as a percent of GDP. That hasn't happened. The currency is going to either go up a lot or down a lot. That hasn't happened. What's really interesting about China is that it's pretty much status quo. The model, the economic model that is China is still the same. It relies heavily on debt. And so debt is still growing. It's not growing as fast as it was eight years ago when it was growing 20 to 30 percent a year. It's now growing 10 to 15 percent a year, but it's still growing at twice GDP growth. And they can't get off the stimulus or the steroids, if you will, of just constant debt injections to build new airports, roads, high rises.”
2018-05-11 · Masters in Business · James Chanos Discusses Investment-Driven Models · IDENTIFIED FROM THE TRANSCRIPT · source
“It was very trade oriented, export oriented. It had a protected currency. It had its own culture. I mean, the similarities between Japan in 09, 2010, China in 2009, 2010, and Japan in 1989-90 were actually somewhat significant. Of course, everything is different. But when we started looking at China, The FXI, which is the H-share ETF, was trading around $41. It's $46 now. So it's up about a little bit more than 10% in eight years. The rest of the markets that we were looking at have doubled and tripled. So China has been one of the better places to be short for the past eight years if you're a short seller. I think that what's really interesting about China is how little has changed in the eight years. Xi Jinping is basically now the emperor.”
2018-05-11 · Masters in Business · James Chanos Discusses Investment-Driven Models · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, it's funny that we talked about Japan because the analog that China eight years ago when we started talking about it most resembled was actually Japan of the late 80s. If you think about it, it was a state-driven capitalist model that was a better model of some thought than the US or the Western model. It was heavily relied on debt. It was heavily relied on domestic real estate bubble.”
2018-05-11 · Masters in Business · James Chanos Discusses Investment-Driven Models · IDENTIFIED FROM THE TRANSCRIPT · source
“And of course it got to just insane heights that it's still not scaled. And so I think that that was one of our greatest misses fundamentally.”
2018-05-11 · Masters in Business · James Chanos Discusses Investment-Driven Models · IDENTIFIED FROM THE TRANSCRIPT · source
“I think the biggest whiff that we had done work on and took a pass on was Japan in the late 80s. I was sure a lot of commercial real estate stocks in the US in the late 80s, the tax law had changed. Everyone had levered up into commercial real estate to sell it to the Japanese. The tax shelter business was kneecapped. And when we looked at what the Japanese were doing, we saw them doing all kinds of dumb things. And I began looking at the Japanese banks, which at the time were the largest in the world. And some of the Japanese conglomerates, which were the largest in the world. And the numbers didn't make any sense. But I felt that I had my hands full in the U.S. And what I really missed was a 20-year bear market in these heavily leveraged Japanese companies.”
2018-05-11 · Masters in Business · James Chanos Discusses Investment-Driven Models · IDENTIFIED FROM THE TRANSCRIPT · source
“And that alone will not do it for you because you're always going to chase that which has been hot. And it's so hard to say, well, this guy is not doing well. We should be allocating some capital because they're going to come back into favor. And by the way, they're still doing what they've always done well. Very, very tough. And then, of course, you have to disaggregate the beta from managers. And that's essential. You have to take out the market because we can buy the market for 10 basis points. So paying big fees to people who are either matching the market with no edge or leveraging the market to get outperform is a fool's errand.”
2018-05-11 · Masters in Business · James Chanos Discusses Investment-Driven Models · IDENTIFIED FROM THE TRANSCRIPT · source
“Outperformance. They're not generating the alpha. They're matching the market or slightly behind the market, but yet have a pretty superior long-term track record. Same people doing it, same process. And so sometimes you see an opportunity to do that. What most people do, of course, is they just simply look at performance.”
2018-05-11 · Masters in Business · James Chanos Discusses Investment-Driven Models · IDENTIFIED FROM THE TRANSCRIPT · source
“And very, very mediocre people can excel for periods of time. It's just not where you want to place your bets. And so if as an allocator, if we see someone who we think is not only smart and hardworking, but has a definable and sustainable edge, that's someone that you might want to consider, particularly if they're struggling, to be allocating capital, because reversion to the mean is also a pretty powerful process.”
2018-05-11 · Masters in Business · James Chanos Discusses Investment-Driven Models · IDENTIFIED FROM THE TRANSCRIPT · source
“So, Julian Robertson said it best, and I think to some extent the Tiger Cubs have been so successful, is what is your edge? And he always, when having a bear in a bull debate a stock at his shop, we ran money for him and he would have us come in and talk about one of his shorts, our shorts, because someone in the shop may have liked it on the long side. He would constantly say, what is your edge? What do you know that the market doesn't? And that applies, I think, to fund managers generally. What is in your process that gives you an edge, whether it's trading-wise, whether it's research-wise, that basically sets you aside that you see things differently and you see the reality versus the perception of reality. And so what I found is that numbers can be very misleading because very smart people”
2018-05-11 · Masters in Business · James Chanos Discusses Investment-Driven Models · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, the other thing is that, of course, you stop managing a portfolio and you start managing a business as well. And I'm always mystified by my peers who have been very successful and are now running, as you say, $10 or $20 billion, but have $200, $300 employees. And I just, I mean, that just blows my mind. That's a reasonably large business.”
2018-05-11 · Masters in Business · James Chanos Discusses Investment-Driven Models · IDENTIFIED FROM THE TRANSCRIPT · source