The Most Dangerous Trade

Chapter 3Chanos: Connoisseur of Chaos

Under a blue sky in Connecticut on an April afternoon, James Chanos eases his lean six-foot-two-inch frame out of his chauffeured Volvo sedan and strides past the hedges of 56 Hillhouse Avenue at the Yale School of Management. He wears thick rimless glasses, a casual blazer, jeans, and a tan wool sweater—the template of a hip, approachable Ivy League professor. Via the maze-like staircases and corridors that wind through the stately 19th-century building, Chanos arrives at room A60, where dozens of students are soon crowding into the lecture hall, taking their seats for the eight-class course he teaches—Financial Fraud throughout History: A Forensic Approach.

Academia is an unusual sideline for a hedge fund manager with a net worth in the hundreds of millions of dollars—and one whose name on Wall Street is synonymous with short-selling. Even aside from teaching, Chanos keeps a schedule best described as full throttle. When not running his short-selling focused firm, Kynikos Associates, which manages some $3 billion in assets, he can be found testifying before Congress. Chanos is a regular at political fundraisers. He makes the rounds on CNBC and Bloomberg TV, where his erudite analyses of overvalued companies, regulations, and macroeconomics make him a coveted guest. One recent theme: China's real estate bubble—a phenomenon that has led him to short such stocks as Agricultural Bank of China and a bevy of other Chinese finance companies and ...