by David Kranzler
Investment Research Dynamics
“Elon Musk has personified the hopes and dreams of this bull market; Tesla burnishes its results through aggressive accounting; it’s a culture of deception because it is selling self-driving, which doesn’t yet exist.” – Jim Chanos from “We Are In The Golden Age Of Fraud” (Financial Times)
Jim Chanos is perhaps the most well-known remaining short-seller in this market. Don’t be fooled by his demure characterization of Elon Musk and Tesla. It’s calculated diplomacy. The numbers are far more than just polished up to look good – the accounting is not just “aggressive,” it’s fraudulent, and Chanos knows that as well as anyone.
Chanos describes the current environment as “a really fertile field for people to play fast and loose with the truth, and for corporate wrongdoers to get away with it for a long time”. He reels off why: a 10-year bull market driven by central bank intervention; a level of retail participation in the markets reminiscent of the end of the dotcom boom; Trumpian “post-truth in politics, where my facts are your fake news”; and Silicon Valley’s “fake it until you make it” culture, which is compounded by Fomo — the fear of missing out. All of this is exacerbated by lax oversight. Financial regulators and law enforcement, he says, “are the financial archaeologists — they will tell you after the company has collapsed what the problem was.” (Financial Times)