Famed short-seller Jim Chanos once attracted assets under management of $6 billion in 2008. Times have changed for the stock market. At that time, the marketplace changed, as Chanos told The Wall Street Journal.
Chanos rose to prominence when he bet against Enron before it filed for bankruptcy. However, his bet against Tesla (TSLA) was a significant failure. Tesla became the biggest automotive firm by market capitalization. Its electric vehicle business is too dominant. Luxury brands like BMW, Mercedes-Benz, and Audi cannot compare their EV offering to that of Tesla.
This year, fund holders holding Chanos & Co. investment lost 4% YTD. The S&P 500 (SPY) has a double-digit percentage return by comparison.
Quantitative easing on and after 2008 and through the decade changed the short-selling game. The excess liquidity punished investors taking short positions.
The Chanos era ends just as QT continues. The central bank’s efforts to tighten lending and credit conditions will reward short-sellers. Firms that are approaching illiquid conditions will fail. Investors who bet against them will profit. For example, EV firms like Fisker (FSR) or clean energy firms like Plug Power (PLUG) and Fuelcell Energy (FCEL) are heavily shorted.
Chanos has shorts against data storage companies and REITs. Those are expensive bets that are unlikely to pay off. Rates may fall, increasing their value.
