The 'Craziest Juncture' In Finance | Jim Grant | Real Vision™

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Jim Grant, the editor of Grant's Interest Rate Observer, sits down with famed fund manager and master short seller Jim Chanos of Kynikos Associates. They discuss the philosophy of shorting stocks, the best way to perform research, and the preferred methods for managing risk within a portfolio. They also discuss Mr. Chanos’s successful shorts on Enron, Valeant and others – as well as his current bets against Tesla and China.

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The 'Craziest Juncture' In Finance | Jim Grant | Real Vision™
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Transcript:
What do you say about that? Are you in fact a closet investigative journalist who wants to set the world right or are you are you a money maker? Which one? Well I hope a little of both, and more the latter than the former. But I will say that I think some of the very best analysts that have worked at our firm in fact were investigative journalists. So there is a bit of overlap on that. So they took the pay cut in good grace? As to whether we're money makers, I'll leave it for my client to decide. But we've done OK. And we've done OK in a very different corner of the markets and in an environment basically, as you well know, of 35 years of declining interest rates, rising price to earnings multiples, rising corporate profits of course. But the tailwinds to the financial markets have been nothing short of spectacular over the past 35 years. Is that going to change? I mean, I wonder if something isn't fundamentally off in the world. And I think that the thing that might be off-- in fact I'm quite sure the thing that is off is credit, is the pricing of credit, is the manipulation of interest rates by the central banks. And they have given us such things as junk bond yields denominated in euros beginning, these yields do, with the number zero. Some of these things yield less than 1% to call. I mean this is something new in the world, these rates. And the monetary regime is relatively new in the world. Do you think about things like the monetary backdrop? Do you think about things like the cosmic questions, or do you focus single-mindedly on discrete situations? Well again remember, broadly speaking, we're in effect long the equity markets of any place where we're shorting stocks. So I think about them and I think about what it offers us in the portfolio of choice of what to be short. So the incredibly low interest rate environment has given rise to behavior that is worse in some areas than others, and worse in some specific companies than others. I can't do a whole lot about railing at the sky of the central bankers. Leave that to me. But, I'd be remiss if I didn't say I agree with you that as you so aptly put it, when you've got your fingers or your whole fist on the scale, it alters things. It alters behavior. It alters what people expect-- And perceptions of what is. --and perceptions of what is. And so you begin to see people do kind of dumb things. And that's our bailiwick.