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- Leading short-seller Jim Chanos issued warnings about day trading, corporate fraud, and both ride-hailing and food-delivery companies in a RealVision interview this week.
- The president of Kynikos Associates, who successfully shorted Enron nearly 20 years ago, also discussed Wirecard and IBM.
- Scroll down to read his 12 best quotes from the interview.
- Visit Business Insider’s homepage for more stories.
Veteran short-seller Jim Chanos sounded the alarm on day trading, fraud, and gig-economy companies in a RealVision interview published this week and filmed on November 11.
The president of Kynikos Associates — who famously shorted Enron before it filed for bankruptcy in 2001 — also discussed IBM, Wirecard, and heady market valuations.
Here are Chanos’ 12 best quotes from the interview, condensed and lightly edited for clarity:
1. “They are going to trade themselves into oblivion” — on the risks to day traders of placing leveraged bets and mindlessly speculating.
2. “We are at prices now where the crowd that is betting on margin and betting through options had better be right. Anything that corrects and reverts to the mean, or to real valuation metrics, is going to destroy a whole generation of investors.”
3. “Valuations are set up to basically have no margin of error. The losses will be severe in some areas where the silliness is the worst.”
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4. “We will look back and say, ‘Were people smoking? What were they thinking?'” — on the irrational exuberance in markets currently.
5. “The longer the bull market and expansion goes on, the more people begin to drop their sense of disbelief and begin to believe things that are too good to be true” — on the rising threat of corporate fraud.
6. “We had a wave of fraud right after the dotcom era, but I think this one is going to put that one to shame.”
7. “The evidence of fraud was piling up in plain sight and all you had to do was a little bit of digging to realize that something was very, very wrong there” — on spotting red flags at Wirecard, the German payments company that collapsed into insolvency in June.
8. “The greatest defense attorney and the harshest prosecutor for a company is its stock price” — on people’s tendency to disregard accounting concerns or outright fraud until they stop making money.
9. “People were like, ‘Why would you joke about something like that?’ I am sorry, you are an idiot” — recalling his facetious comment at a conference in October. Chanos said he was bullish on space companies because their total addressable market (TAM) was infinity, which briefly sent Virgin Galactic’s stock higher.
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10. “I could have an enormous TAM handing out $20 bills for $15 on the street corner” — arguing that ride-hailing and food-delivery companies can grow their customer bases quickly by pricing their products below the market rate, but that approach isn’t profitable or sustainable in the long run.
11. “This is the inherent insanity of the TAM-type stories because we have gone from network effects to negative transaction economics” — drawing a contrast between social networks, where users and advertisers garner more value from their platforms as their user bases grow, and food-delivery companies, which connect restaurants with customers but rely on a cut of restaurants’ already slim profits to pay for both the platform and delivery workers.
12. “It is now a very rapidly melting ice cube, and I think that the stock should be trading at about half of where it is trading today” — highlighting IBM’s tepid growth, weakening profitability, and the mounting competition it faces from cloud-computing specialists.
