Jim Chanos says the notion that the Fed will always bail out the stock market is dangerous

3 months ago

James Chanos and Leon Cooperman astatine the 2019 Delivering Alpa league successful New York connected Sept. 19. 2019.

Adam Jeffery | CNBC

Short-seller Jim Chanos said the content that the Federal Reserve volition ever rescue the banal marketplace from steep losses is reckless for investors.

"The thought of a Fed enactment and that the Fed is ever going to beryllium determination to bail retired my atrocious concern decisions is truly not cogent concern argumentation to clasp onto for a agelong time," Chanos said connected CNBC's "Halftime Report" connected Monday.

"The information that it volition bail retired the banal marketplace astatine immoderate pre-determined level of losses... I deliberation it's a precise unsafe thought to uphold," helium added.

The marketplace sell-off accelerated Monday, with the Dow dropping arsenic overmuch arsenic 1,100 points, arsenic investors braced for a imaginable hawkish tilt from the Federal Reserve this week. The S&P 500 besides dipped into correction territory, falling much than 10% from its grounds high.

The Fed volition wrapper up its argumentation gathering connected Wednesday. Central bankers person indicated that they expect not lone to rise rates and taper plus purchases soon — but besides could beryllium teeing up a equilibrium expanse reduction. The imaginable determination from the Fed would people an assertive argumentation alteration aft astir 2 years of the astir accommodative monetary argumentation successful U.S. history.

The cardinal slope past raised rates in precocious 2018, portion of a "normalization" process that happened successful the waning play of the record-long economical expansion.

Chanos called the 2018 complaint hike "a large error" from the Fed, which caused a important sell-off successful the banal market.

The longtime capitalist said contempt the crisp diminution successful stocks recently, his hedge money is inactive somewhat nett agelong connected the market. He added that investors should debar names with high-flying multiples.

Chanos, the laminitis of Kynikos Associates, is simply a famed abbreviated seller connected Wall Street with a agelong past of identifying fraud.