“I’ve been on the Street [since] 1980 [and] not one bear market has ever traded above nine times to 14 times the previous peak earnings.”
That was short selling giant Jim Chanos, founder of Kynikos Associates, speaking to CNBC on Monday, warning that investors are not factoring in the bear market impact on corporate profitability.
Chanos is famed for shorting Enron and scoring a $100 million win by shorting Wirecard before its collapse.
Ahead of the Federal Reserve’s decision on Wednesday, he said that in the next 6-7 months, the market is expecting corporate profits to increase by 12% this year, a Fed easing by the end of the year and inflation to come down to 2%.
“That’s pretty much nirvana if you’re a bull,” he said. “They’re wrong all the time but people are pricing in a pretty nice Goldilocks scenario.”
He doubts that the bull’s dream will come true.
“If you think earnings are peaking now at $200, that’s a long way down,” he said. “That’s 1,800 to 2,800 [on the S&P 500]. We are not anywhere near that.”
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In his hedge fund, Chanos said he was until recently net long, but it swings back and forth from net short to net long.
“I think we’ve gone back down to zero, plus or minus, and in our short only funds we’re 60-80%, just depends on the individual names,” he said. “We try not to take a lot of systematic risk.”
Regarding companies and sectors he’s short on, Chanos said that he’s been short on New York offices “for a couple of years now,” specifically SL Green Realty Corp SLG,
“I just don’t get people buying any kind of commercial real estate that doesn’t see good demand at this point,” he added. “I just don’t want to buy New York office buildings right now.”
SL Green was trading 6% higher in the last week but 45% down in the last 12 months,
Chanos also has short positions in AMC AMC,