Legendary short-seller Jim Chanos on the appetite for risk in this market: It’s ‘a little bit disconcerting’

President Trump’s chief economic adviser Larry Kudlow on Sunday painted the rosiest of pictures in an interview on Fox News, projecting that the U.S. economy next year could see “one of the greatest economic growth rates” ever despite the damage done by the coronavirus pandemic.

Famed short seller Jim Chanos of Kynikos Associates doesn’t sound nearly as bullish…

That’s his view of what lies ahead for the U.S. economy and the stock market, which he shared with Barry Ritholtz on Bloomberg Radio over the weekend.

“For 2020, it’s anyone’s guess, and I think we’ll see a lot of the kitchen sink phenomenon that management teams will realize that Wall Street is giving them a pass for this year,” Chanos added. “So, they’re going to load whatever costs they can in the rest of this year.”

Needless to say, it’s been a rough stretch of earnings so far this year. In fact, while everybody knew that the first-quarter numbers would be bad, the results have been even worse than expected as companies are beating forecasts by the lowest rate in at least 10 years.

JPMorgan equity strategist Mislav Matejka said that only about 65% of the companies that have already reported results are beating estimates, the lowest beat ratio since the 2008 financial crisis.

“Amid the escalation of the COVID-19 crisis, and the sharp fall in activity, the S&P 500 is facing its worst quarter in a decade in terms of earnings delivery,” Matejka wrote in a note to clients.

In the view of Chanos, who teaches a class on financial fraud at Yale University, the climate will improve as the U.S. slowly gets back to business, but he’s much more cautious about what lies ahead than what we seem to be hearing from the Trump administration.

In terms of investor appetite for risk and the fierce rebound in the stock market after the depths of the March lows, Chanos admits…

Continue reading at MARKETWATCH.com

 

 

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