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Jim Chanos does a lot of interviews, and when he does, he’s usually talking about things he’s doing — stocks he’s shorting, data he’s looking at, things he’s reading etc.Rarely, though, does he speak about how he does it all.
And that’s a shame, because Chanos made his first massive short (Baldwin United) when he was a very young man, so he’s got tons of wisdom to share.
Lucky for us, Chanos let a little loose in a recent issue of the Columbia Business School newsletter (and we picked it up from Marketfolly). After reading these points, you may want to reevaluate your career choices (briefly, at least).
Here’s Chanos on what it takes to be a great short-seller:
“I’ve learned there’s a big difference between a long-focused value investor and a good short-seller. That difference is psychological and I think it falls into the realm of behavioural finance … if you’re a short-seller, that’s a cacophony of negative reinforcement. You’re basically told that you’re wrong in every way imaginable every day. It takes a certain type of individual to drown that noise and negative reinforcement out and to remind oneself that their work is accurate and what they’re hearing is not.”
And here’s how he does it — the method to his madness, if you will:
“Start first with the SEC filings, then go to press releases, then go to earnings calls and other research. Work your way out. Most people work their way in.”