Aside from being a successful investor, Jim Chanos is also a big art collector. The founder of hedge fund Kynikos Associates adorns his walls with Gerhard Richter and other top contemporary artists and sits on the board of the Tate Americas Foundation.
But right now, Chanos sees a speculative bubble forming in the art market. And he said the best way to hedge is to short the stock of Sotheby's.
"Anybody who buys art should be looking to hedge it right now," he said Thursday on CNBC's "Squawk Box." "The contemporary market has gone bonkers."
Art has become especially popular in the current wealth boom, as the global rich turn to art as a safer, less volatile store of wealth. Art has also become a refuge for the rich in China and Russia looking to stash their fortunes offshore.
"Art is a socially acceptable form of conspicuous consumption," Chanos said.
Chanos said that the current art bubble is different from previous art booms because the big price gains are largely in living artists—so their paintings will keep coming onto the market.