Jim Chanos shorts the clearest symbol of the rise of China and resultant iron ore gold rush in...


Jim Chanos shorts the clearest symbol of the rise of China and resultant iron ore gold rush in Australia - Fortescue, whose shares have risen more than 560X over the last decade. Against his short, he's long BHP, also heavily exposed to China, but better diversified and a with far less-leveraged balance sheet.
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  • Stone Fox Capital
    , contributor
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    Don't get that trade. So Chanos is afraid he'll make too much money on the Fortescue short that he wants to lose some money with being long BHP? Don't understand making a losing trade.
    27 Apr 2012, 09:49 AM Reply Like
  • threeleaves
    , contributor
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    I wonder how this trade is actually manifested. I've always wondered about kynikos' long positions since the last time I checked I couldn't find any 13f filings for them. But I just checked and they started reporting first quarter of last year. Interesting longs since you can gather that some of them are hedges on unreported short positions. I just always assumed their long positions/hedges were executed via options/derivatives or other off the record sort of activity.

     

    It does seem like an odd pair, BHP against fortescue. But I don't think it's a bullish stance on BHP, it's just an ultra-bearish stance on Fortescue. Reading between the lines of the trade: chanos thinks bhp will survive the china infrastructure implosion, but Fortescue will die. So, weirdly, it's a trade on company fundamentals, not china. . . . Too advanced and potentially risky for me though. I'd rather be short the huge-caps and long indexes. Would have to gather he has some sort of long dated insurance to guard against any huge upside on fortescue.
    30 Apr 2012, 02:23 PM Reply Like
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