Chanos Nice Interview

[randomep]

 

 

I included 120% SPY, -20% cash , which is the best result because some would see 100% SPY 20% Chanos as utilizing leverage rather than reducing market risk. There will be no end to this debate. But I hope this is helpful.

 

How is 100% SPY and 20% Chano's possible, because you have invested 120%.  Did you borrow 20%, if so you didn't include the interest expense.

 

but I appreciate the work, your spreadsheet gave me some ideas.

 

[thepupil]

blast from the past here. and i very well may not have included interest expense in my spreadsheet of 6.5 years ago.

 

Let's say I have a $1 billion family office.

 

I might go to Chanos and say "can you run $50-$100 million of notional short exposure for me"? Here's my account at Pershing. I will give you discretion over this sub-account and to you will maintain 100% short exposure in your alpha generative short ideas. In that same account, please go long 100% SPX futures.

 

Note in a recent interview that Liberty posted, Chanos mentioned he managed some SMA's that require him to maintain a certain exposure. This is a very plausible scenario.

 

This account would be 100% long SPX, 100% short Chanos collection of craptostic companies. It would generate the rebate return + chanos short alpha (as it is market neutral) and provide a differentiated source of return for the wealthy family.

[randomep]

blast from the past here. and i very well may not have included interest expense in my spreadsheet of 6.5 years ago.

 

Let's say I have a $1 billion family office.

 

I might go to Chanos and say "can you run $50-$100 million of notional short exposure for me"? Here's my account at Pershing. I will give you discretion over this sub-account and to you will maintain 100% short exposure in your alpha generative short ideas. In that same account, please go long 100% SPX futures.

 

Note in a recent interview that Liberty posted, Chanos mentioned he managed some SMA's that require him to maintain a certain exposure. This is a very plausible scenario.

 

This account would be 100% long SPX, 100% short Chanos collection of craptostic companies. It would generate the rebate return + chanos short alpha (as it is market neutral) and provide a differentiated source of return for the wealthy family.

 

But what you are talking about is NOT where the data comes from. You are using returns from a short fund as a proxy for a pure short position. 

 

The return on a 100M investing in Chanos short fund cannot be the same as a return on a bunch of short positions with zero investment.

 

I would be shocked if Chano's short positions can achieve a positive return over the 30+ year span of the data.  The market as a whole is up 8-12% / year, there is no way someone can effectively beat the market by 10-14% (assuming his fund returns 2%).  His returns are net positive because he has long positions, even if the long positions are treasuries.

 

In the long run the US market goes up, shorting is a good strategy during select periods when there is obvious overpricing, I have been short sp500 for 2 years!

 

 

[stahleyp]

blast from the past here. and i very well may not have included interest expense in my spreadsheet of 6.5 years ago.

 

Let's say I have a $1 billion family office.

 

I might go to Chanos and say "can you run $50-$100 million of notional short exposure for me"? Here's my account at Pershing. I will give you discretion over this sub-account and to you will maintain 100% short exposure in your alpha generative short ideas. In that same account, please go long 100% SPX futures.

 

Note in a recent interview that Liberty posted, Chanos mentioned he managed some SMA's that require him to maintain a certain exposure. This is a very plausible scenario.

 

This account would be 100% long SPX, 100% short Chanos collection of craptostic companies. It would generate the rebate return + chanos short alpha (as it is market neutral) and provide a differentiated source of return for the wealthy family.

 

But what you are talking about is NOT where the data comes from. You are using returns from a short fund as a proxy for a pure short position. 

 

The return on a 100M investing in Chanos short fund cannot be the same as a return on a bunch of short positions with zero investment.

 

I would be shocked if Chano's short positions can achieve a positive return over the 30+ year span of the data.  The market as a whole is up 8-12% / year, there is no way someone can effectively beat the market by 10-14% (assuming his fund returns 2%).  His returns are net positive because he has long positions, even if the long positions are treasuries.

 

In the long run the US market goes up, shorting is a good strategy during select periods when there is obvious overpricing, I have been short sp500 for 2 years!

 

I believe his fund has returned about 2% per year.

[randomep]

 

 

 

I would be shocked if Chano's short positions can achieve a positive return over the 30+ year span of the data.  The market as a whole is up 8-12% / year, there is no way someone can effectively beat the market by 10-14% (assuming his fund returns 2%). 

 

I believe his fund has returned about 2% per year.

 

That's exactly what I said his fund return 2%.... I did make a nonsensical statement though, which I crossed out above, apologies.

[thepupil]

I’ll never fully understand why people love to hate this guy and/or dismiss his record. We don't have all the data, you're right, but I've yet to see evidence that Ursus is not short only or very short biased.

 

Here we have an updated figure: -0.7% / year for Ursus, which is phenomenal. I hadn't seen this article until now. Looks like Chanos has a 100% long fund that's made a spectacular return (through the end of '17) though I bet his short alpha is heavily front loaded (but may be improving now).

 

https://www.institutionalinvestor.com/article/b1b00ynrgtn05r/How-Jim-Chanos-Uses-Cynicism-Chutzpah-and-a-Secret-Twitter-Account-to-Take-on-Markets-and-Elon-Musk

 

But since 2009, Ursus has lost about 70 percent of its value — 11 percent on an annualized basis — and is now less than $100 million, making it a relatively insignificant portion of the firm’s overall assets. Although Kynikos’s Tesla short may be in the money for the year, Ursus was down 19.3 percent through July, according to a recent report to investors.

 

The secret to Chanos’s longevity as a short-seller is Kynikos’s flagship fund, the vehicle where Kynikos partners invest, which was launched alongside Ursus in 1985. Kynikos Capital Partners is 190 percent long and 90 percent short, making it net long. Unlike most long/short hedge funds, however, the longs are primarily passive, using such instruments as exchange-traded funds, as the intellectual effort goes into the short side.

 

Chanos argues that by protecting the downside with his shorts, an investor can actually double his risk — and over time that has proved a winning strategy. Through the end of 2017, Kynikos Capital Partners has a net annualized gain of 28.6 percent since launch in October 1985, more than double the S&P 500. That has happened even though the short book — as represented by Ursus — has lost 0.7 percent annually during the same time frame, according to a recent Kynikos document Institutional Investor has obtained.

“It’s one of the greatest records ever,” says one fellow hedge fund manager, initially skeptical of the results. “No one has made a 28 percent annual return since 1985.” 

 

The increased gross leverage — offset by virtually breaking even on the short side — helps explain the returns. However, as is the case with most hedge fund managers who’ve been around for decades, the big money was made in the early years.

 

In 1990, Kynikos was one of the top-ten hedge funds in the world, with Ursus running $660 million, according to Chanos. After a few rough years, that fund was down to $150 million before an investment by the Ziff brothers — known for their savvy investments in hedge funds — saved the firm in the mid-’90s when they invested in Kynikos Capital Partners.

[randomep]

I’ll never fully understand why people love to hate this guy and/or dismiss his record. We don't have all the data, you're right, but I've yet to see evidence that Ursus is not short only or very short biased.

 

 

pupil, I think you are implying that I hate this guy. I don't know much about this guy, I don't even know that he has some tesla short. I was a lurker on this thread until you pulled out your spreadsheet.  I was simply critiquing your methodology.  I have tried using spreadsheets and simulations, and I have concluded that being short is a short term strategy (pun intended), but being a short for 30-40yrs is suicide.

 

In the same way I don't recommend you quit your day job and go to Vegas to play poker professionally,... for the simple reason that the odds are against you.  The odds are so much against you when you short the US stockmarket LONG TERM when the US is the world's strongest economy in a time of unprecedented prosperity.

 

[thepupil]

my methodology was a dumb way to try to figure out what apparently actually already exists: the return of Chanos fund when combined with long exposure.

 

It's 28% / year for multiple decades through the end of 2017 according to an article from Institutional Investor. frankly this is so freaking good it's well beyond my expectation. (I'm kind of skeptical honestly)

 

The Ursus fund returned -0.7% / year through the end of 2017.

 

The stated strategy on the long side is "mostly passive"

 

I therefore conclude, in order to make the spectacular returns that the flagship fund has, Chanos has done so through VERY high short alpha.

 

All evidence I've seen points to Chanos being spectacular at what he does.

 

You reply with a bunch of truisms about shorting, with which I agree. I personally don't short, but you got to give credit where it's due. Chanos is killing it (through 2017, on a front loaded track record I'm sure, but still super impressive)

[stahleyp]

my methodology was a dumb way to try to figure out what apparently actually already exists: the return of Chanos fund when combined with long exposure.

 

It's 28% / year for multiple decades through the end of 2017 according to an article from Institutional Investor. frankly this is so freaking good it's well beyond my expectation. (I'm kind of skeptical honestly)

 

The Ursus fund returned -0.7% / year through the end of 2017.

 

The stated strategy on the long side is "mostly passive"

 

I therefore conclude, in order to make the spectacular returns that the flagship fund has, Chanos has done so through VERY high short alpha.

 

All evidence I've seen points to Chanos being spectacular at what he does.

 

You reply with a bunch of truisms about shorting, with which I agree. I personally don't short, but you got to give credit where it's due. Chanos is killing it (through 2017, on a front loaded track record I'm sure, but still super impressive)

 

I like him and pay attention. I think a lot of folks on here don't like him due to his fairfax short...but that made a lot of people a lot of money so they should like him even more! :P

[coc]

my methodology was a dumb way to try to figure out what apparently actually already exists: the return of Chanos fund when combined with long exposure.

 

It's 28% / year for multiple decades through the end of 2017 according to an article from Institutional Investor. frankly this is so freaking good it's well beyond my expectation. (I'm kind of skeptical honestly)

 

The Ursus fund returned -0.7% / year through the end of 2017.

 

The stated strategy on the long side is "mostly passive"

 

I therefore conclude, in order to make the spectacular returns that the flagship fund has, Chanos has done so through VERY high short alpha.

 

All evidence I've seen points to Chanos being spectacular at what he does.

 

You reply with a bunch of truisms about shorting, with which I agree. I personally don't short, but you got to give credit where it's due. Chanos is killing it (through 2017, on a front loaded track record I'm sure, but still super impressive)

 

Chanos has done a great job with his main fund. And to the biases on this particular forum, if history had broken slightly differently he would have nailed Fairfax as well. He's been short almost all of the major frauds and even the ones he's been burned on, he's been mostly right in the long run (i.e. AOL).

 

I see no reason not to have total respect and pay total attention when he speaks on specific companies. You're free to disagree but he's usually got a point. I recall Ackman being 100% certain Chanos was dead wrong on Valeant - and Ackman was the one caught dead wrong. Happens to all of us - but it was a good reminder that Chanos' work is usually pretty solid - Ackman works pretty hard and still missed it.

 

Value investors specifically need to pay attention to Chanos because as a group we've missed a lot over the years and he's caught many of them. 

[stahleyp]

 

Value investors specifically need to pay attention to Chanos because as a group we've missed a lot over the years and he's caught many of them.

 

Agree.

[Libs]

Great interview. Made me question a couple of things I may have overlooked in my research. Thanks for posting.

 

 

[DooDiligence]

Chanos talks about the absurdity of bailing out PE firms & he also lays out the case against investing in China before & after COVID.

 

www.bloomberg.com/news/videos/2020-04-09/why-chanos-is-bemused-by-pe-push-for-help-and-still-shorting-tesla-video

 

Re: Live Nation, if the business model didn't make sense before COVID, it definitely doesn't look good after. Ditto, restaurants in general, ride sharing, food delivery & most franchise models. I was trying to find out what new shorts he's put on since the pandemic, in order to have a good list of businesses to avoid, but I guess those are mostly obvious.

 

As an aside, early on in the interview, Joe Weisenthal says he thinks poker players should be bailed out.

[opihiman2]

my methodology was a dumb way to try to figure out what apparently actually already exists: the return of Chanos fund when combined with long exposure.

 

It's 28% / year for multiple decades through the end of 2017 according to an article from Institutional Investor. frankly this is so freaking good it's well beyond my expectation. (I'm kind of skeptical honestly)

 

The Ursus fund returned -0.7% / year through the end of 2017.

 

The stated strategy on the long side is "mostly passive"

 

I therefore conclude, in order to make the spectacular returns that the flagship fund has, Chanos has done so through VERY high short alpha.

 

All evidence I've seen points to Chanos being spectacular at what he does.

 

You reply with a bunch of truisms about shorting, with which I agree. I personally don't short, but you got to give credit where it's due. Chanos is killing it (through 2017, on a front loaded track record I'm sure, but still super impressive)

 

Chanos has done a great job with his main fund. And to the biases on this particular forum, if history had broken slightly differently he would have nailed Fairfax as well. He's been short almost all of the major frauds and even the ones he's been burned on, he's been mostly right in the long run (i.e. AOL).

 

I see no reason not to have total respect and pay total attention when he speaks on specific companies. You're free to disagree but he's usually got a point. I recall Ackman being 100% certain Chanos was dead wrong on Valeant - and Ackman was the one caught dead wrong. Happens to all of us - but it was a good reminder that Chanos' work is usually pretty solid - Ackman works pretty hard and still missed it.

 

Value investors specifically need to pay attention to Chanos because as a group we've missed a lot over the years and he's caught many of them.

 

I've been paying attention to Chanos.  I love the guy.  I think he's one of the few short managers that has actually generated alpha from his shorts.  Anyways, what's the deal with Fairfax?  I haven't kept up with FFH for almost a decade now. 

 

As an aside, if I hear about a Chanos short, and it's a company I'm interested in, I don't take that trade.  It's always good to hear about some short thesis from a well known short.  They do way more DD than I ever would on a company.

[Parsad]

my methodology was a dumb way to try to figure out what apparently actually already exists: the return of Chanos fund when combined with long exposure.

 

It's 28% / year for multiple decades through the end of 2017 according to an article from Institutional Investor. frankly this is so freaking good it's well beyond my expectation. (I'm kind of skeptical honestly)

 

The Ursus fund returned -0.7% / year through the end of 2017.

 

The stated strategy on the long side is "mostly passive"

 

I therefore conclude, in order to make the spectacular returns that the flagship fund has, Chanos has done so through VERY high short alpha.

 

All evidence I've seen points to Chanos being spectacular at what he does.

 

You reply with a bunch of truisms about shorting, with which I agree. I personally don't short, but you got to give credit where it's due. Chanos is killing it (through 2017, on a front loaded track record I'm sure, but still super impressive)

 

Chanos has done a great job with his main fund. And to the biases on this particular forum, if history had broken slightly differently he would have nailed Fairfax as well. He's been short almost all of the major frauds and even the ones he's been burned on, he's been mostly right in the long run (i.e. AOL).

 

I see no reason not to have total respect and pay total attention when he speaks on specific companies. You're free to disagree but he's usually got a point. I recall Ackman being 100% certain Chanos was dead wrong on Valeant - and Ackman was the one caught dead wrong. Happens to all of us - but it was a good reminder that Chanos' work is usually pretty solid - Ackman works pretty hard and still missed it.

 

Value investors specifically need to pay attention to Chanos because as a group we've missed a lot over the years and he's caught many of them.

 

I've been paying attention to Chanos.  I love the guy.  I think he's one of the few short managers that has actually generated alpha from his shorts.  Anyways, what's the deal with Fairfax?  I haven't kept up with FFH for almost a decade now. 

 

As an aside, if I hear about a Chanos short, and it's a company I'm interested in, I don't take that trade.  It's always good to hear about some short thesis from a well known short.  They do way more DD than I ever would on a company.

 

I'm probably the only one on this board who has ever actually talked to Chanos.  He's smart, but his ego gets the better of him, as it did with Fairfax 15 years ago.  I asked him point blank if he had done the research on Fairfax and why he was short.  He said, no...he was relying on information from two analysts...and we know who they are for those that were around then.  I asked him if he had ever read a Fairfax annual report or quarterly report, he said "no".  He's made a huge reputation out of a couple of significant shorts, and he's made a bundle offering that service to institutions and investors.  I didn't like the guy then, and I'm certainly no fan today.  Cheers!

[JRM]

I like Chanos, but he's kinda like the Motley Fool.  He is short a lot of companies at any given time, even though you only hear about Tesla and the other popular names.  When you're short 50-80 companies and one hits, you can say, "see, I totally nailed it!"

 

I do listen to what he says, and mostly agree with him.

[opihiman2]

my methodology was a dumb way to try to figure out what apparently actually already exists: the return of Chanos fund when combined with long exposure.

 

It's 28% / year for multiple decades through the end of 2017 according to an article from Institutional Investor. frankly this is so freaking good it's well beyond my expectation. (I'm kind of skeptical honestly)

 

The Ursus fund returned -0.7% / year through the end of 2017.

 

The stated strategy on the long side is "mostly passive"

 

I therefore conclude, in order to make the spectacular returns that the flagship fund has, Chanos has done so through VERY high short alpha.

 

All evidence I've seen points to Chanos being spectacular at what he does.

 

You reply with a bunch of truisms about shorting, with which I agree. I personally don't short, but you got to give credit where it's due. Chanos is killing it (through 2017, on a front loaded track record I'm sure, but still super impressive)

 

Chanos has done a great job with his main fund. And to the biases on this particular forum, if history had broken slightly differently he would have nailed Fairfax as well. He's been short almost all of the major frauds and even the ones he's been burned on, he's been mostly right in the long run (i.e. AOL).

 

I see no reason not to have total respect and pay total attention when he speaks on specific companies. You're free to disagree but he's usually got a point. I recall Ackman being 100% certain Chanos was dead wrong on Valeant - and Ackman was the one caught dead wrong. Happens to all of us - but it was a good reminder that Chanos' work is usually pretty solid - Ackman works pretty hard and still missed it.

 

Value investors specifically need to pay attention to Chanos because as a group we've missed a lot over the years and he's caught many of them.

 

I've been paying attention to Chanos.  I love the guy.  I think he's one of the few short managers that has actually generated alpha from his shorts.  Anyways, what's the deal with Fairfax?  I haven't kept up with FFH for almost a decade now. 

 

As an aside, if I hear about a Chanos short, and it's a company I'm interested in, I don't take that trade.  It's always good to hear about some short thesis from a well known short.  They do way more DD than I ever would on a company.

 

I'm probably the only one on this board who has ever actually talked to Chanos.  He's smart, but his ego gets the better of him, as it did with Fairfax 15 years ago.  I asked him point blank if he had done the research on Fairfax and why he was short.  He said, no...he was relying on information from two analysts...and we know who they are for those that were around then.  I asked him if he had ever read a Fairfax annual report or quarterly report, he said "no".  He's made a huge reputation out of a couple of significant shorts, and he's made a bundle offering that service to institutions and investors.  I didn't like the guy then, and I'm certainly no fan today.  Cheers!

 

Ah, much thanks for the response, Sanj.  Ok, I do remember the short attack on Fairfax, but I vaguely recall the details.  I did not know Chanos was part of the short attack.  To be honest, I didn't really follow it until after the fact.  But, I do remember a few board members made out like bandits by going long calls.

 

[stahleyp]

my methodology was a dumb way to try to figure out what apparently actually already exists: the return of Chanos fund when combined with long exposure.

 

It's 28% / year for multiple decades through the end of 2017 according to an article from Institutional Investor. frankly this is so freaking good it's well beyond my expectation. (I'm kind of skeptical honestly)

 

The Ursus fund returned -0.7% / year through the end of 2017.

 

The stated strategy on the long side is "mostly passive"

 

I therefore conclude, in order to make the spectacular returns that the flagship fund has, Chanos has done so through VERY high short alpha.

 

All evidence I've seen points to Chanos being spectacular at what he does.

 

You reply with a bunch of truisms about shorting, with which I agree. I personally don't short, but you got to give credit where it's due. Chanos is killing it (through 2017, on a front loaded track record I'm sure, but still super impressive)

 

Chanos has done a great job with his main fund. And to the biases on this particular forum, if history had broken slightly differently he would have nailed Fairfax as well. He's been short almost all of the major frauds and even the ones he's been burned on, he's been mostly right in the long run (i.e. AOL).

 

I see no reason not to have total respect and pay total attention when he speaks on specific companies. You're free to disagree but he's usually got a point. I recall Ackman being 100% certain Chanos was dead wrong on Valeant - and Ackman was the one caught dead wrong. Happens to all of us - but it was a good reminder that Chanos' work is usually pretty solid - Ackman works pretty hard and still missed it.

 

Value investors specifically need to pay attention to Chanos because as a group we've missed a lot over the years and he's caught many of them.

 

I've been paying attention to Chanos.  I love the guy.  I think he's one of the few short managers that has actually generated alpha from his shorts.  Anyways, what's the deal with Fairfax?  I haven't kept up with FFH for almost a decade now. 

 

As an aside, if I hear about a Chanos short, and it's a company I'm interested in, I don't take that trade.  It's always good to hear about some short thesis from a well known short.  They do way more DD than I ever would on a company.

 

I'm probably the only one on this board who has ever actually talked to Chanos.  He's smart, but his ego gets the better of him, as it did with Fairfax 15 years ago.  I asked him point blank if he had done the research on Fairfax and why he was short.  He said, no...he was relying on information from two analysts...and we know who they are for those that were around then.  I asked him if he had ever read a Fairfax annual report or quarterly report, he said "no".  He's made a huge reputation out of a couple of significant shorts, and he's made a bundle offering that service to institutions and investors.  I didn't like the guy then, and I'm certainly no fan today.  Cheers!

 

Dang, I'll admit that makes me lose some respect for the guy.

[ukvalueinvestment]

I like Chanos, but he's kinda like the Motley Fool.  He is short a lot of companies at any given time, even though you only hear about Tesla and the other popular names.  When you're short 50-80 companies and one hits, you can say, "see, I totally nailed it!"

 

I do listen to what he says, and mostly agree with him.

 

 

I had been under the impression that he has generated sizeable alpha for his clients over many years.  I also like what he says when he's on TV, makes a lot of sense to me.  I don't know anything about the "Fairfax affair"

[thepupil]

I like Chanos, but he's kinda like the Motley Fool.  He is short a lot of companies at any given time, even though you only hear about Tesla and the other popular names.  When you're short 50-80 companies and one hits, you can say, "see, I totally nailed it!"

 

I do listen to what he says, and mostly agree with him.

 

 

I had been under the impression that he has generated sizeable alpha for his clients over many years.  I also like what he says when he's on TV, makes a lot of sense to me.  I don't know anything about the "Fairfax affair"

 

As discussed above, Institutional Investor claims to have seen fund documents which state his fund that combines "mostly passive" long exposure and a highly alpha generative short book has made 28% / year up until 2017 (the time of the article) for decades. The same article claimed the short biased (maybe short only) Ursus Fund has only lost 0.7% / year for decades. Both track records are ludicrously good.

 

Anyone is free to dislike Chanos for the above anecdote about Fairfax or whatever.

 

But all evidence and data that I've seen (which is generally years apart and a fact sheet or two or the II article) indicate he's a spectacular investor.

 

To the extent that he has 50-80 positions AND generates the alpha that the II article claimed and the original fact sheet provided at the beginning of this thread also corroborates, I would argue that makes his track record even more impressive; he isn't a one-hit wonder and has arguably taken lower risk by diversifying. this may also explain his longevity relative to other L/S managers. Passive longs (sticking to what one is good at) and a humbly diversified alpha generative short book appears to be a formula that has worked very well for him.

 

#teamchanos (can one be on #teamchanos and #teamackman at the same time?)

 

I am repeating what i have posted before because there still seems to be some murkiness about his track record. The II article is the best data we have, unless someone else has other data.

[JRM]

There was a really good interview with Chanos on the Inifinite Loops podcast hosted by Jim O'Shoughnessy.  I think he makes a lot of sense, and come across well.