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The Catastrophe Capitalist


But some hedge-fund rivals don’t necessarily want Chanos to be carrying the mantle for the industry. In March 2006, Chanos started his own lobbying group, the Coalition of Private Investment Companies, to promote hedge funds in Washington. But recruitment wasn’t easy at first. At one dinner with a group of female hedge-fund executives at the University Club in 2006, the audience pelted Chanos with questions about why he was starting a rival lobby when the industry already had an established lobbying group on Capitol Hill, the Managed Funds Association. “He was practically stuttering,” one person at the dinner remembers. “It was so ego-driven,” another attendee says.

And while tensions between the groups have since eased, Chanos maintains that hedge funds, known for their secretive ways and grotesque displays of wealth, risk starting a class war. “The fact that hedge-fund and private-equity people pay lower taxes than schoolteachers and soldiers is absolutely an abomination,” he says. “It’s a pretty self-absorbed industry. I want to try and change it.”

Chanos’s sense of righteousness has tracked roughly with the size of his returns. “I feel a little bit personally affronted,” he says when I ask him in September about the public criticism. “I’m defending myself. That’s why I’ve been so vociferous in this fight. I’m used to being vilified. I have a tough skin on that, I think many people are never going to love this. I don’t know if it’s from The Godfather or what, but you know that saying: ‘This is the business we’ve chosen.’ ”

On the morning of November 13, Chanos stopped by CNBC’s studios to guest-host Squawk Box. It was a victory lap, of sorts. The debate over short-sellers had eased. The ban on shorting banks had expired and the SEC also lost a fight to force hedge funds to publicly disclose their short positions. After posting some of the highest profits of any trader, Chanos was basking in the limelight that had previously eluded him. Hosts Becky Quick and Joe Kernen fawningly plugged him for investment advice, touting his 50 percent returns (which Chanos declined to confirm). As one of the only guys on Wall Street making serious money, Chanos may have finally earned some cred.

Later that day, he received an e-mail from two Greek-American ladies in Connecticut whose portfolios had been hard hit. “We have a lot of respect for your accomplishments and that you are Greek too!” they wrote. “We both speak fluent Greek and are attractive and even know how to Greek dance. Can we treat you to spanakopita? We hope to hear from you very soon!”

Chanos isn’t dwelling on the attention he’s finally won. He’s already moved on, looking for his next short targets. He’s now investigating the health-care industry and defense companies that will likely see cutbacks and face tighter regulation during an Obama administration. For depressed investors still piecing together their wounded portfolios, it’s not a pleasant thought to contemplate the next wave of failed companies. For Chanos, it’s just playing the game.

“It sounds kind of crass, but I like being right,” he says. “It’s interesting and fun to find these companies that you see gaming the system and pulling one over on their investors. It’s fun to point it out. It’s great to say, ‘No. These guys are bad guys!’ ”


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