by Karl Denninger
I just saw an utterly amusing “interview” on CNBS with Jim Chanos in which he defended continuing to be short Valeant.
The problem is that his argument doesn’t pass the third grade arithmetic test.
Let’s start with the basics: When you are short your maximum profit, absent leverage, is 100%.
That is, if you short something at $200 a share (as Chanos did in this case) you can at most make $200/share, and for that to happen the stock has to go to zero.
So let’s take Valeant. He started at $200 and now the price is $35, which he’s trying to talk down today.