Jim Chanos on Having an Edge

This morning I checked out the AAII webinar on options trading, the same presentation given in Troy on debit spreads.  The problem is options is an advanced topic that simply cannot even come close to being covered in one hour, and it wasn't.  Turned out it didn't have to be though since the whole purpose, revealed at the end, was to simply sell us a nearly $500 course on options trading.  It was really quite lousy, and that wasn't the worst of it.  The instructor was very rude to us, kept treating us like we were a bunch of high school kids, threatened a couple of times to pull the plug on the webinar and kick some of us out.  I hated high school the first time and this one was an hour of deja vu.  I will not be doing another one of these webinars.


But as coincidences go, today's posting on Barry Ritholtz's Big Picture blog was on a like topic.  Just as we use options to gain an edge, Ritholtz's guest this weekend on his Masters In Business (MIB) podcast is Jim Chanos, one of Wall Street's most successful short sellers.  So just out of some sense of vengeance for the unpleasantness I was subjected to this morning, I am including the link to today's MIB episode below.  Not to worry, though.  Though the recording is an hour and eleven minutes long, Ritholtz says there will be a transcript provided tomorrow, and I will be sure to share that. And you're going to want to check out his list of favorite books too. 


Sat 5-12-18 BigPic: MIB: Jim Chanos on Having an Edge - The Big Picture

MIB: Jim Chanos on Having an Edge

May 12, 2018 9:30am by Barry Ritholtz

This week, we speak with famed short seller Jim Chanos, founder and president of Kynikos Associates LP, the world’s largest exclusive short-selling investmentfirm.

Chanos has identified — and sold short — many of the past 3 decades best-known corporate disasters. His celebrated short-sale of Enron shares was dubbed by Barron’s as “the market call of the decade, if not the past 50 years.” He also made bets against Baldwin-United, Commodore International, Coleco, Integrated Resources, Boston Chicken, Sunbeam, Conseco, Tyco International, and most recently, Valeant Pharmaceuticals.

He explains why he believes Elon Musk’s first love is SpaceX, and that “Tesla is a zero.”

Chanos said that when he launched Kynikos, there were a few 100 hedge funds, only 20 or 30 of which generating alpha. He presently sits on a number of boards where he helps to allocate capital. Market participants have gotten better, the landscape has become more competitive, and the funds have turned into large 300-person businesses. Despite 11,000 hedge fund choices, today there are even fewer hedge funds outperforming.

He asks, via Julian Robertson, the all important question “What is your edge.” Most managers lack a sustainable edge — trading, research, deviant perception — as reversion to mean is such a powerful process.

His favorite books are referenced here; our conversation transcript will be published here tomorrow.

The show is broadcast on Bloomberg radio all weekend; you can stream/download the full conversation, including the podcast extras on iTunes, Bloomberg, Overcast, and Soundcloud. Our earlier podcasts can all be found on iTunes, Soundcloud, Overcast and Bloomberg.

Next week, we speak Ed Yardeni, Founder and Chief Investment Strategist of Yardeni Research, and former Chief Investment Strategist at Deutsche Bank.