NEW YORK, Feb 7 (Reuters) - Veteran short-seller Jim Chanos said on Thursday that current market turmoil is throwing up a raft of new investment ideas beside some well-publicized shorts in the mortgage credit markets.
Speaking at a New York investor gathering, Chanos said his $4 billion-plus investment firm sees rich opportunities in leveraged buyout debt, cable entertainment companies threatened by the Internet and construction companies in overheated developing countries.
Chanos, who has survived in the combative world of short- selling since the early 1980s, forecast a “huge spike in defaults” over the next two years in companies taken private through leveraged buyouts by deal-hungry private equity firms.
“I don’t know what crack pipes these guys were smoking, but some of the valuations were absolute madness,” said Chanos, speaking to hundreds of investors, referring to private equity firms and their portfolio companies.
Chanos, famed for shorting Enron Corp a year before its bankruptcy in 2001, also said satellite and cable communications companies such as Comcast Corp CMCSA.O and Cablevision Systems Corp CVC.N face a big threat from the Internet in coming years.
Unless they adapt to market changes, these companies will find that more people, particularly the young, will view television shows when they want on their personal computers over the Internet, circumventing cable companies.
“There are an awful lot of leveraged players in the sights of the Internet,” said Chanos, who declined to specify which companies he is short at an Argyle Executive Forum conference.
He said the threat to cable providers is similar to what video rental companies such as Blockbuster Inc BBI.N and Movie Gallery Inc MOVIQ.PK faced with the advent of video-on- demand, which hammered their businesses.
Chanos, whose Kynikos Associates firm invests globally, also forecast the so-called sovereign wealth funds controlled by Dubai, China and elsewhere will not be “the panacea and savior” many think they are.
“I think you will find out very quickly that they will have their own problems,” said Chanos, pointing out that such funds are heavy financiers of “aggressive” infrastructure projects in China and the Middle East that may fail to find market demand when completed.
“Forty percent of China’s GDP is construction,” Chanos said. “Some of these markets are very dependent on construction.”
Chanos declined to say if his firm continues to short Australian investment bank Macquarie Group Ltd MQG.AX, a heavy investor in infrastructure projects, as he did last year. But he said he is "watching developments at Macquarie," whose CEO Allan Moss announced his resignation this week.
Kynikos, which has 40 to 60 short investments at any one time, said he continues to see a big threat to government backed student lenders such as SLM Corp SLM.N, better known as Sallie Mae.
Some of the student lenders have issued large quantities of private, unsecured loans to students, leaving them with tens of thousands of dollars of debt at graduation.
While federal bankruptcy laws do not allow student loans to be expunged through bankruptcy filings, Chanos said Congress, particularly if controlled by Democrats, would not allow legions of recent graduates to face economic calamity, a situation that could cause serious problems for lenders. (Reporting by Dane Hamilton; Editing by Andre Grenon)
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