Jim Chanos'

10 Brilliant Quotes

Jim Chanos first burst on to the scene when he shorted Baldwin United back in the 1980s. Since then he formed his own hedge fund Kynikos Associates and famously shorted Enron before its collapse.  

More recently, the all-star hedge fund manager has been making the bear case on China. And the calls have earned him flak from investors like Jim Rogers, who argue that he hasn't even stepped foot in China.

We've put together some of Chanos' sharpest comments on China, the U.S. financial meltdown and the European debt crisis.

"'Mr. Chanos has never been to mainland China.' Well hell, I didn't work at Enron either."

Chanos' response to continued criticism that he has bearish views on China without ever having visited the country. He had famously shorted Enron before its collapse.

"Go to Dubai and see what happened. It was…what I call it the 'Edifice complex'."

Dubai was a property bubble according to Chanos, a market that suffered from excess building. "it's just, we can grow by putting up lots and lots of buildings and trying to attract people to come here, stay here, and put up offices here and sooner or later, you put up too many."

"The Chinese banking system is built on quicksand."

"When they talk about the foreign reserves of $3 trillion, what everybody forgets is that there's liabilities against those, and everybody seems to think its a free and open check book, but its not. That's what we've been trying to tell people. Focus on the lending system there, because everything occurs through the banking system."

“They’re not interested in truth or what’s best for the client, but in making the sale with the least amount of work.”

When Chanos began his career as a junior analyst at brokerage firm Blyth Eastman Paine Webber he told his boss McDonald's could make more money buying back its own shares, than it could issuing bonds at 12%, which is what the firm was pushing McDonald's to do. His boss told him to drop the matter and that's when Chanos realized he couldn't be a banker.

"It's our long corruption, short property play"

Chanos who is short Chinese real estate is long Macau. He explains that this is because Macau has "American management, American accounting, and subsidiaries of American companies," and is growing at a faster rate than property developers.

"Beware of the law of unintended consequences"

Chanos disagreed with the regulators' decision to ban short selling on American financial companies after the Lehman collapse. The confidence crisis meant banks and other institutions weren't dealing with one another. Short sellers he said help stabilize markets during sell-offs because they have to buy to cover their sale positions.

“Here they were trying to co-opt a short seller to tell the market everything was fine. Talk about misdirection.”

Chanos who wasn't short Bear Stearns, was stunned to get a phone call from CEO Alan Schwartz asking him to go on television, just to say he wasn't short Bear Stearns. Chanos refused.

"I'm not the only guy crying in the wilderness about the data coming out of China."

Chanos who has long been a China bear said he is finally seeing more China critics. Chanos doesn't trust the data coming out of the country: 

"…The last command economy that saw this kind of growth was the old Soviet Union and what happened was there was a lot of mis-allocation of resources… China's heading the same way. ...There's just a wholesale fudge factor."

"If everyone knows you're going to print money, you know, welcome to Zimbabwe."

Chanos argued that no country can print its way to wealth. Here he expounds on moral hazard, bailouts and quantitative easing:

"It definitely is an issue with compounding of interest. By kicking this stuff down the road it grows faster than our ability to grow out of it. That's the real problem. That's what we're facing in Greece, we're facing that in the U.S. states, in municipalities, which are facing real budget issues and demographic issues. All these things compound at rates faster than at which depressed economies can grow out of it. ...You can fool people for a while, but after a while people don't want to hold your paper.

"We keep kicking the can down the road. But maybe now we're at the point where the can is kicking back"

Chanos dismissed band-aid approaches to fix Europe's and America's economic problems:

"And i think that people don't want to see these cosmetic solutions or a monetizing the debt solution, they want to see a real change and they're not getting that change in Europe or in the U.S."