Chanos Shorts the Rumor Mill

Have you had enough of the endless gossip and unsubstantiated rumors?

The most heated debate on the Street has been over the brokers balance sheets, perhaps the most complicated puzzle analysts have to tackle, and one suited more for a well researched First Call Note than off-the-cuff blog post. But unless the accounting treatment gets an sudden overhaul, making it all decipherable, the debate over brokers balance sheets is likely to continue. Erin Callan famously claimed to open the kimono but transparency really has not meaningfully improved, and trust will continue to be in short supply, given the fudge factor inherent:

Companies are allowed to decide for themselves which of their outstanding bonds, loans and other liabilities will get mark-to- market treatment. That’s an unprecedented degree of leeway, said Robert Willens, who is also an adjunct professor at Columbia University in New York.

``It’s kind of a dumb rule,’’ Willens said. ``In the entire panoply of accounting, this is the most flexible and elective and optional rule that we have.’’ Bloomberg

I cannot see the acrimony ending any time soon, but Jim Chanos of Kynikos Associates, who is certainly worth piggybacking, has intently watched the debacle unfold in real time, and is incredulous over some of the comments and theories that are running in the media and on the blogs.......

Chanos is taking aim at another train wreck: the financial media. In a speech yesterday, Chanos trashed the broadcast and on-line media for breathlessly reporting rumor as legitimate news and called for more regulatory investigations into whose who feed the gullible or nefarious media rabble.

Chanos cited recent travails at a well-known New York investment bank that’s still around (yes, that one) that was the subject of repeated unsourced reports on a certain well-known business television channel (guess). The reports hammered the bank’s share price.

Chanos said he happened to be on his firm’s trading desk on that particular day, right in the thick of trader-land, where rumors are as rife as market positions.

“I run the world’s largest short-selling fund,” Chanos told the SIFMA conference. “We hear everything. That day we didn’t hear any rumors (about the bank).”

“Some of our financial journalists are MAKING the news,” said Chanos. “And blogs are saying things and reporters are reporting it as news.” Reuters

With blogs and MSM’s sites competing for eyeballs, Wall Street is starting to look like 1999, at least on the web.

Regulators seem content to watch from a distance, although it is possible this cycle will produce a character similar to Tokyo Joe, who was the poster boy for the late 90’s pump and dump.

Yes, its like the Wild West out there, but I am not sure Chanos will be able to do much about it. The traditional investment community was late to follow the blogs, stuck in their closed off world of Bloomberg machines, First Call and Cap IQ.

But I can tell Jim that Techcrunch broke an accurate news story last week that gave traders a half an hour to short Yahoo!’s stock in the $26’s before it caved, which is an eternity on Wall Street, and I would suggest he hire a twenty year old to keep an eye on “the internets”, although his traders might have that base covered.

But he might as well accept the fact that being plugged in on Wall Street does not necessarily mean what it used to, and some bloggers have even run more money than him, at least compared to his AUM 12-24 months ago.

But its not all bad, and you would think he would even be pleased to know that, in several respects, several hedge fund managers and select short sellers have more credibility than pretty much anyone on the Street, a remarkable turn of events that Chanos probably never expected to see in his lifetime.

Spend some time on the internets, Jim, you might be surprised at what you find.

And, to borrow a phrase, I am not making that up.
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Chanos is calling for more government investigations into where journalists are getting phony tips that they foist on the market as news. “There are IM messages, email records, taped phone calls. This is not hard. Inspector Clouseau could do it.”

I am not sure Jim understands that on the internet, you are as dumb as your smartest Buddy, but you have to pick them carefully, as you raise your collective IQ. There is no hope for this guy, however.

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Chanos to financial media: quit making stuff up
Reuters

Wall Street Says -2 + -2 = 4 as Liabilities Get New Bond Math
Bloomberg
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The content contained represent the opinions of 1440 Wall Street. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author. No Positions

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