Chanos says ‘torches and pitchforks are undervalued’ after allegation that hedge funds were privately briefed by White House about coronavirus early in 2020


Famed short seller Jim Chanos of Kynikos Associates is part of the 1% but even he is miffed about a report from the New York Times that alleges that the White House provided a different, more dire, set of briefings for a select number of hedge funds about the coronavirus, compared with what was said publicly about the illness in the early stages of 2020.

“It obviously gets back to ‘would you rather be right or righteous, or make money?” he said to Hedgeye TV in an interview with Keith McCullough founder & CEO of the platform Hedgeye Risk Management.

“It also gets back to the tail risk, if you really want to be a wiseguy about it, in that torches and pitchforks are undervalued,” Chanos said in the interview which aired Thursday online.

“You continue this type of political animus where the 1% or the elite are brought under the tent, and everybody else is left to fend for themselves—history tells us that is not a tenable position for a long period of time.”

The New York Times reports that members of Donald Trump’s administration held private meetings with board members of the conservative Hoover Institution on Feb. 24, where Larry Kudlow, the White House’s chief economic adviser, told the group that the virus was “contained in the U.S., to date, but now we just don’t know,” hours after saying on CNBC that containment efforts were “pretty close to airtight.”

Chanos said that the article gave the public the impression that well-heeled investors were provided special information about the significance of the novel strain of the coronavirus that causes the illness COVID-19, which they were then possibly able to trade on.

So far the infection, which originated in Wuhan, China, has spread to nearly 40 million people globally and has claimed the lives of more than 200,000 Americans, according to data aggregated by Johns Hopkins University.

A resurgence of the virus in recent weeks is forcing parts of Europe to reimplement social-distancing measures and lockdowns to prevent a potential second wave of infections.

The broader market, the Dow Jones Industrial Average
DJIA,
-0.06%,
the S&P 500 index
SPX,
-0.15%,
and the Nasdaq Composite Index
COMP,
-0.46%,
all put in record highs around mid February this year, but proceeded to slump as the viral outbreak drew greater public attention and resulted in business lockdowns and travel restrictions. U.S. stock index bottomed out in late March and have recovered since.

Many investors lost money but the New York Times article suggests that an elite crew may have profited from knowledge of the enormity of the epidemic, even if they didn’t know exactly how it would play out in the U.S.

“What that [New York Times] story crystallized for me is the political divergence that we have,” Chanos, who runs investment firm Kynikos Associates told Hedgeye.

“The feeling out there among the general public that the game is rigged,” he said.

In an interview on CNBC, U.S. Treasury Secretary Steven Mnuchin played down the accuracy of the story and implied that the newspaper exaggerated its conversations with some of the investment community.

Here’s a link to full Hedgeye interview.



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