- Jim Chanos took aim at Tesla and the cryptocurrency industry in a recent interview.
- The short-seller noted the current market boom is far more expansive than the dot-com bubble.
- Chanos warned rising interest rates are bad news for stocks and low-quality businesses.
Jim Chanos tore into cryptocurrencies, explained why he's betting against Tesla stock, and warned the current asset-price boom dwarfs the dot-com bubble during a recent episode of Bloomberg's "Odd Lots" podcast.
The famed short-seller and Kynikos Associates boss also called out heady valuations in several market sectors, and predicted higher interest rates would send stocks tumbling and spell trouble for bad businesses.
Here are Chanos' 14 best quotes, lightly edited for length and clarity:
1. "A lot of the concepts behind crypto's early adoption have proven to basically be not there or wanting. 'It's going to be a replacement currency.' Well, no, it's not. 'It's going to be a diversifying asset.' Well, no, it hasn't been, and we can check down the list."
2. "It's Ponzinomics. When you boil down a lot of these structures, that's what they are. I've called it a predatory junkyard, and I stand by that." (Chanos was referring to crypto platforms that charge hefty fees and invite users to stake their coins and earn a yield on their holdings.)
3. "All the ecosystem built around crypto is clearly just rent-seeking, and that's been my criticism of the whole space. This vast ecosystem sprung up overnight around it to basically extract fees from unsuspecting, primarily retail, investors."
4. "You want to have the fact that if you have $250,000 in the bank, no matter what happens, you still have $250,000 in the bank. That's a really important concept that we forget every time everything's going to the moon and we're all making lots of money speculating on things." (Chanos was flagging the risk of fraud, breach of contract, and uninsured deposits for crypto investors.)
5. "Tesla is the bellwether stock in the stock market, and it's dramatically overearning right now. It's sort of like Cisco was in 1999, where people were just putting their hopes and dreams on Cisco dominating any hardware having to do with the internet. Whether it's EVs or solar, Tesla is seen as the one-stop shop for that."
6. "Tesla is trading at just a monster multiple on a profit stream that is going to get competed. That is the risk of Tesla — that it becomes just an established EV company amongst a whole bunch of established EV companies."
7. "Unlike the dot-com era, where those kinds of pie-in-the-sky stories had $2, $3, $4, sometimes $5 billion valuations, in this case they had $20, $30, $40, sometimes even $80 billion valuations. And that's why we called it the dot-com era on steroids." (Chanos was referring to the wave of IPOs and SPACs in 2020 and 2021.)
8. "You had this one pocket of insanity based on a narrative — the internet — and everything else was reasonably priced, given where rates were and the economy. This go around, it's almost everything. And that's what's so interesting." (Chanos was comparing the dot-com bubble to the current market boom.)
9. "If you're a food-delivery company, and you're not making money when people are throwing money at you, when everybody's at home, maybe you have an issue and maybe the model just doesn't work." (Chanos was arguing that if food-delivery companies struggled during the pandemic, they're likely to get into serious trouble when the market backdrop worsens.)
10. "Almost the whole cross-section of REITs just seems absurd to us." (Chanos noted some investors are earning a meager 3% return, before tax and capital spending, on office buildings, warehouses, data centers, and other types of real estate.)
11. "Things like electric utilities and consumer packaged-goods companies are all still trading at 25, 30 times earnings. They've been seen as defensive because they're not technology. But at this point, they may have as much risk as the tech stocks."
12. "I suspect the private equity industry is about to have the same reality check that hedge funds had after the global financial crisis. The returns, net of fees and adjusted for leverage, have gotten a lot more pedestrian in the last handful of years. If we're going to revalue interest rates structurally higher, where you're not going to get easy exits and the IPO market closes down, then private equity's going to have some heavy weather of it."
13. "Is there hidden leverage in the banking system? My guess is there is, but we'll find out probably shortly. Fintech, which I've been joking is just simply subprime lending done on an app — we'll find bodies floating to the surface probably there."
14. "The one thing that people are not prepared for still is interest rates resetting meaningfully higher, because it hasn't happened in most investors' lifetimes. We've gotten so used to feasting on these ultra-low interest rates, that I don't think people realize where equities will trade in a resetting market where risk-free rates are 4% or 5%."
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