Photo: Bloomberg TV
Billionaire short-seller Jim Chanos shared his thoughts on the deficit deal failure, regulation, the eurozone crisis and his value traps during an interview Wednesday on Bloomberg Television.After the super committee failed to reach an agreement, the founder of hedge fund Kynikos Associates said businesses will always try to point to something outside of the boardroom.
“I don’t think anyone expected a deficit deal,” he said.
“The system is broken. That’s why people are so frustrated.”
Chanos, who has been a supporter of President Barack Obama, said he has been making his policies and is “actually showing some resolve.”
There’s been a great deal of ire directed at Wall Street, which has been hit with a spate of financial regulations.
Chanos thinks the hedge fund are being treated fairly.
“I think broadly about the hedge fund industry is we were not the culprit in ’08. I think Washington realises that. I think hedge funds were treated fairly in Dodd-Frank. Our industry did not take taxpayer money.”
In Europe, the issue is more problematic where hedge funds and private equity firms are seen as speculators, Chanos said.
Chanos, a noted short-seller, said he couldn’t short the European banks because of the ban on short-selling.
“I think the ban itself has made the funding crisis worse.”
For-Profit Education Business Flawed
Chanos sees a variety of value traps such as for-profit education, digital distribution and the China bubble.
He thinks the for-profit education’s business model is flawed.
“I think the business model is flawed because it all depends on the taxpayer,” Chanos told Bloomberg’s Betty Liu. “None of the companies can exist without federal loan guarantees.”
“If this is such a great business, then why don’t you lend money yourselves than depend on a federal handout,” he added.
“I don’t want to have to pay for their failing as a taxpayer.”
Short Game Stop
He told Bloomberg he is short video game retailer Game Stop.
“The Internet is the most efficient distribution network ever devised. Anybody in the business of selling you a physical product that is digitized is seeing their margin collapse overtime.”
Chanos recently returned from a trip to Asia and he told Bloomberg he is more bearish than ever upon returning.
One reason, he explained, is the fragile banking system.
“The banking system is extremely fragile,” he said. “The Chinese banking system was not recapitalized. It was papered over.”
“The Chinese banking system is built on quick sand.”
Another indicator Chanos pointed to for shorting China is this growing sense that the Chinese government will ease.
“We point out that credit will grow 30-40% of GDP,” he said indicating that’s too high.