Chanos Shorting Fewest Financial Stocks in Four Years (Update1)
2008-10-13 14:22:11.920 GMT
(Adds Chanos’s steel industry, infrastructure bets starting
in third paragraph.)
By Eric Martin and Betty Liu
Oct. 13 (Bloomberg) — James Chanos, president of hedge-fund
firm Kynikos Associates Ltd., said he’s selling short the fewest
financial shares in four years after they lost half their value
and government support made it more likely the stocks will rally.
“We have the least amount of financials short in our
portfolio that we’ve had in four years,” Chanos said in an
interview with Bloomberg Television. “They’re down quite a bit,
and clearly with these kinds of rescue packages our view is the
risk-reward is not great on the short side, probably selectively
on the long side. We’re looking elsewhere.”
Chanos, who manages $5 billion, also said he is reducing
short-selling of the steel industry. The Standard and Poor’s 500
Steel Index fell 61 percent this year, led by a 76 percent
decline in AK Steel Holding Corp., the third-largest U.S.-based
producer of the metal.
The hedge-fund manager said he is betting against some areas
abroad that have been rapidly increasing infrastructure growth.
“All you need to do is look at Dubai’s travails all of a
sudden, which we’ve been talking about for a while, as a
microcosm of projects that were pie in the sky, built with easy
credit,” he said. “A lot of those projects will find difficult
financing. That’s where we’re going to see some problems.”
Short Sale Ban
Chanos, whose New York-based firm specializes in short
selling, told CNBC on Sept. 19 that short sellers weren’t behind
stock-market declines as U.S. and U.K. regulators banned shorting
the shares of many financial firms.
In a short sale, investors sell borrowed stock in hopes of
repurchasing it later at a lower price and pocketing the
The S&P 500 Financials Index tumbled 50 percent this year as
banks worldwide reported more than $635 billion in losses from
the collapse of the subprime mortgage market.
Central banks last week executed emergency interest-rate
cuts and pumped more cash into their banking systems, the Fed
said it would buy commercial paper, and European governments
bailed out lenders in an effort to unfreeze credit markets.
For Related News:
Top Hedge fund news: TNI HEDGE WWTOP
For Hedge fund people in the news: TNI HEDGE WNEWS
–With reporting by Anne Torres in New York. Editors: Michael
Regan, Kara Wetzel