Personal Finance. Money. Investing.

The Top 10 Greatest Stock Market Trades Ever

Posted: 17th October 2017 by James Gardner
Share this article

Top 10 Greatest Stock Market Trades Ever - Jim Chanos

6. Jim Chanos - Enron's Worst Enemy

Result: $500 Million Profit

Jim Chanos is perhaps one of the most notorious ‘short sellers’ around once stating “I have seen more stocks go to zero than infinity”, but it was his Enron trade that gains him a place in our Top 10.

Chanos began working as a short seller and analyst in the 1980s. He moved between a handful of firms and secured perhaps his first big win while working for Gilford Securities, when he shorted a US insurance company by the name of Baldwin United. Chanos discovered that Baldwin had been selling insurance policies and then making up their books, based on assumed income from potential sales and revenue that did not exist. Something that would later be replicated with Enron. Following a successful short and the bankruptcy of Baldwin, Chanos set up his own hedge fund, Kynikos (Cynic in Greek) in 1985 with $16 million.

It was the fall of energy goliath Enron that would give Chanos his biggest win and guarantee his fame on Wall Street. Chanos’s involvelment began with a relatively innocuous phone call from a friend telling him to take a look at an article in the Texas Wall Street Journal by Jonathan Weil, detailing the celebrations of the energy companies in successfully lobbying the SEC to allow Mark to Model and Mark to Mark accounting to be used in their businesses. Mark to Model essentially permitted these companies to take the current value of their future profits and add them into their accounts.

Following this, Chanos and his associates at Kynikos began looking at Enron and noticed several red flags, like the fact they were using Mark to Mark accounting to massage the books and bolster income while essentially hiding the losses in their discounted operations. As Chanos positioned himself, he then made his move when then CEO of Jeff Skilling stepped down citing ‘family reasons’. It was clear at that point to Chanos that Enron were in trouble. So in November 2000, as Enrons stock hit $90 (with a predicted target price of $130), Kynikos initiated a short. What followed was perhaps the most stunning company collapse and financial fraud case Wall Street has seen. What seems so obvious now was, at the time, ignored by almost everyone else. Chanos didn’t mind, he’d made around $500 million profit on his shorts for Kynikos and his notoriety and fame grew exponentially as a result.

Chanos is still a major player on Wall Street and he’s now a noted skeptic of the markets in China and has recently taken aim at AliBaBa, stating that “the accounting is some of the most questionable I have ever seen.”  With Kynikos taking up short positions against them Chanos may be thinking he’s spotted the next Enron, and if he’s correct, he may well win big again.

Next: $1 Billion Bet Against the Pound


About Finance Monthly

Universal Media logo
Finance Monthly is a comprehensive website tailored for individuals seeking insights into the world of consumer finance and money management. It offers news, commentary, and in-depth analysis on topics crucial to personal financial management and decision-making. Whether you're interested in budgeting, investing, or understanding market trends, Finance Monthly provides valuable information to help you navigate the financial aspects of everyday life.
© 2024 Finance Monthly - All Rights Reserved.
News Illustration

Get our free monthly FM email

Subscribe to Finance Monthly and Get the Latest Finance News, Opinion and Insight Direct to you every month.
chevron-right-circle linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram