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He describes his investment strategy as being based on "intensive research into stocks" looking for fundamental and large market failures in valuation, typically based on underestimated or previously unreported failings in the business or market of a stock. He follows this research by committing to a (usually large) short-position which he is willing to hold for long period of time—almost the mirror image of Warren Buffett's reputed "fundamentals+long stay" investment strategy. Because of this model, his investments function more like those of a whistle-blower than most typical investments. Examples of this include short-selling companies such as Baldwin-United, and more recently Enron Corporation.
He began his career in the 1980s as a short seller. After working as an analyst in several firms, he founded Kynikos (Greek for "cynic") in 1985 as a firm specializing in short selling. A critical position taken at Kynikos was his shorting of Enron.
In October 2000, Chanos started research into the valuation of Enron Corporation.[dubious ] He examined their use of mark-to-model (opposed to mark-to-market) accounting, which, in Chanos' view, results in management overstating earnings, as well as what appeared to be a worryingly low (6-7%) return on capital investment.[dubious ] Chanos was a short seller of Enron throughout 2001, increasing his short position as more information surfaced. Kynikos profited greatly and Chanos became well known as a consequence of his early awareness of Enron's problems.[dubious ]
In 2010, James Chanos warned that China’s hyperstimulated economy was headed for a crash, not a sustained boom. He questioned the stability of the Chinese economy, stating that historically analogous evidence points especially to a property bubble, mentioning commercial real estate in particular.