Renowned short seller Jim Chanos sees an alarming trend in the market.
“I’ve been on the Road [since] 1980 [and] no bear market has ever traded above 9x to 14x its previous peak earnings,” the founder of Chanos and Company told CNBC’s “Fast Money” on Friday.
The latest warning comes in the middle of earnings season, two days before the Federal Reserve’s decision on interest rates and four days before the January jobs report. According to Chanos, the market will not be able to cope with the increase in rates and declining corporate profits.
“Things are not cheap,” said Chanos, who acknowledged stocks are still cheaper than they were 18 months ago. “But people put a price on the Goldilocks scenario that’s so good.”
So far this year, the S&P 500 up almost 5%, with media, technology and airlines lead results. On Tuesday, the index fell one percent to close at 4,017.77.
Chanos noted that the market expects corporate profits to rise 12 percent this year, inflation of two percent and Fed rate cuts over the next six to seven months.
“It’s pretty much nirvana when you’re a bull,” he said.
Chanos, who said he did not try to time the market, doubted the bullish scenario would unfold.
“If you think that the current income is up to $200, it’s going to take a long time,” Chanos said. “It’s 1,800 to 2,800 [on the S&P 500]. We’re nowhere.”
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