Investors dangerously ignoring bear market impact on earnings

Investors dangerously ignoring bear market impact on earnings

Famed short seller: Jim Chanos: "Things are not cheap"

Famed quick vendor Jim Chanos sees an alarming development within the market.

“I’ve been on the Street [since] 1980 [and] not one bear market has ever traded above 9 occasions to 14 occasions the earlier peak earnings,” the Chanos & Co. founder instructed CNBC’s “Fast Money” on Monday.

His newest warning comes within the midst of earnings season, two days earlier than the Federal Reserve choice on rates of interest and 4 days earlier than the important thing January employment report. According to Chanos, the market won’t be able to beat rising charges and falling company profitability.

“Things will not be low cost,” stated Chanos, who acknowledges shares are nonetheless cheaper than 18 months in the past. “But individuals are pricing in a fairly good Goldilocks state of affairs.”

So far this 12 months, the S&P 500 is up nearly 5%, with media, expertise and airways main the positive factors. On Tuesday, the index fell 1.3% to shut at 4,017.77.

Chanos notes the market is anticipating company income rising 12% this 12 months, 2% inflation and a Fed fee reduce inside the subsequent six to seven months.

“That’s just about nirvana in the event you’re a bull,” he stated.

Chanos, who said he doesn’t try to time the market, doubts the bullish state of affairs will unfold.

“If you assume earnings are peaking now at $200, that is a good distance down,” Chanos stated. “That’s 1,800 to 2,800 [on the S&P 500]. We will not be wherever close to that.”