Tags: jim | chanos | short | hero

Chanos: Short Sellers Are Heroes, Not Villians

Monday, 29 Sep 2008 05:20 PM

Short sellers aren't the cause of the current Wall Street debacle, says Kynikos Associates CEO Jim Chanos.

In fact, they are the heroes, not the villains, says Chanos, himself a professional short seller.

Short sellers, Chanos says, acted ahead of the curve by trying to warn investors and governments of problems in the markets long before those problems became readily apparent.

“If finance ministers and central bankers had listened a year and a half ago, maybe some of the firms we no longer have with us would be raising capital or changing policies,” Chanos told the Financial Times.

“I tell my friends who are CEOs of major corporations, ‘If you don’t like short selling, so be it. But if the government decides it doesn’t like the price you’re charging for a widget, you might be next.’ We can run down a slippery slope very quickly.”

The bailout plan and the Securities and Exchange Commission (SEC) ban on short selling on hundreds of mostly financial companies “seems to be capitalism on the upside but is actually socialism on the downside," Chanos says.

"What we're seeing here is in effect price-keeping operations, and that should be troubling to anybody, not just short sellers."

Chanos sees a much higher probability of a populist backlash in the legislative and regulatory framework now than existed a year ago, but says that once regulators get inside some financial firms they will see that short sellers did not cause their collapse.

“We’re not going to find criminality in market manipulators and the search for rumor-mongers, but in the quite public statements of people who managed these firms,” Chanos says.

“Some of the statements senior people (made) were materially misleading, if not criminal.”

Meanwhile, experts find little evidence of short selling’s effects on the markets over time.

“In recent years, when academic researchers have looked for bear raids -- even in those areas in which investors suspected that they existed -- they haven’t found them,” Adam Reed, a finance professor at the University of North Carolina at Chapel Hill, told The New York Times.

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Short sellers aren't the cause of the current Wall Street debacle, says Kynikos Associates CEO Jim Chanos.In fact, they are the heroes, not the villains, says Chanos, himself a professional short seller.Short sellers, Chanos says, acted ahead of the curve by trying to warn...
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2008-20-29
Monday, 29 Sep 2008 05:20 PM
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