The Greatest Trades of All Time: Top Traders Making Big Profits from the Crash of 1929 to Today

CHAPTER 2

James Chanos: The Real King of Enron

Jim Chanos loves Girl Scout Cookies. Thin Mints, to be exact. He struts into the conference room of his hedge fund, Kynikos Associates, with a box of them in tow. He sits down and offers me one before we begin our long talk about how one man became a billionaire off Enron while Enron burned to the ground. It plays out a bit like the fall of Rome, except with higher stakes.

Chanos, a Yale-educated short seller, is without a doubt the most famous trader in this book. He started his fund, Kynikos Associates, in 1985 with an adequate amount of capital, an amount that easily made it so he could short distressed firms to his heart's content. And no company would be safe. From Drexel Burnham Lambert to Tyco to Boston Market, Chanos shorted them all and took with him a princely reward. His talent was for spotting companies that were bound for failure.

ENTER ENRON

Enron came to prominence in the 1990s. Because of its demise, Chanos would ultimately end up making the greatest trade of his life. Shorting Enron was incredibly lucrative due to the longtime extent of corruption within the company. The company would go on to become the largest bankruptcy the United States has ever witnessed, and Chanos was along for the entire ride.

Before examining the trades associated with the collapse of Enron, we must first examine what exactly Enron was. Enron Corporation was an energy company. However, it was not an energy company in the sense that Enron ...