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James Chanos: Private-Equity Deals Propping Up Stocks

Wednesday, 18 Apr 2007 | 3:26 PM ET

One of Wall Street's biggest short sellers, James Chanos, said the recent wave of private-equity deals and speculation about buyouts is helping to prop up stocks prices.

“Investors forget that merger booms are coincident with the market," Chanos told Sue Herera on "Power Lunch." "They don’t happen at market bottoms, they happen at market tops.”

When asked about the abundance of cheap credit fueling the merger boom, Chanos said that equities are long-duration assets and that to look at short-term interest rates alone is “missing the point.”

Bear Among the Bulls
The private equity boom and it's impact on individual stocks and investors, with James Chanos, Kynikos Associates president & founder and CNBC's Sue Herera

Chanos, president and founder of Kynikos Associates, also talked about public and private pension funds investing in hedge funds.

“There’s going to be continual blowups, there’s going to be continuing losses, but there’s also quite a bit of profitability that the hedge fund industry has brought on and people forget that side”, said Chanos. “The hedge fund industry has done a lot for investors, both public and private.”

Chanos believes that there is a middle ground in regulating hedge funds. “I don’t think the hedge fund industry has any issues with providing records and providing more information on a timely basis.”

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  • Sue Herera is a founding member of CNBC, helping to launch the network in 1989. She is co-anchor of "Power Lunch."

  • Tyler Mathisen co-anchors CNBC's "Power Lunch." Mathisen also co-anchors "Nightly Business Report produced by CNBC."

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