China bear Chanos warned of 'value trap'
The short sellers' favourite short seller, Jim Chanos packs more punch than the $US6 billion in funds he oversees.
The market veteran first came to prominence in Australia for raising doubts over the Macquarie model - precisely as the investment bank's share price was marching steadily towards $100.
At the time, Chanos told a gathering of New York hedge funds that his Kynikos Associates had sold off its Macquarie holdings, declaring the investment bank had "an inherently unstable platform" and saying it "doesn't care what it pays" for the infrastructure assets it acquires on behalf of its unlisted and listed funds. His sharpest criticism was apparently saved for Macquarie's accounting approach when it buys and sells assets, and flicks them into off-balance sheet funds, something he regarded as unsustainable.
Chanos's remarks had some gravity given he was one of the first Enron sceptics, querying the sustainability of the energy giant even though it had been delivering high rates of earnings growth.
But Chanos was 14 months too early in his attack on Macquarie and the investment bank's shares continued to rise. The onset of the global financial crisis triggered an eventual crash in Macquarie's shares to a low of $15.75 and forced it to exit many unlisted funds.
Chanos is known for his attention to accounting principles in picking holes in business models.
More recently he has staked a claim as a China bear, warning of a property market slump there.
This outlook on China stoked his views on Fortescue, and last year he singled out the iron ore miner as a global example of a "value trap" in the "iron ore rush".
Elsewhere, Chanos says he's shorting heavy equipment maker Caterpillar over concerns about the extent of the recovery in the US construction market.