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Charlie Rose 4/12/2010 - James Chanos / Stephen Green


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FYI

 

Tonight on Charlie Rose:

April 12, 2010

 

Tonight James Chanos, President, Kynikos Associates. He is the man who predicted the Enron downfall and now predicting a housing bubble in China. And then Stephen Green, Group Chairman of HSBC. His book is called, “Good Value: Reflections on Money, Morality, and an Uncertain World.”

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There is a few questions that I would love Charlie to ask:

 

1) "So Jim, can you please explain to our viewership how it came to pass that Elliot Spitzer's (aka Client #9) high priced call girl - Ashley Dupre was your house sitter in the Hamptons? You were a big campaign contributor to Elliot Spitzer too, correct? What's up?

 

http://wallstfolly.typepad.com/wallstfolly/2008/03/spitzers-hooker.html

 

2) Your hedge fund was funded with $ from  Dirk Ziff , at the recommendation of Marty Peretz - Jim Cramer's partner at TheStreet.com. What did you agree to when you accepted those funds and is this why your short positions overlap David Rocker's (one time largest shareholder of TheStreet.com) so much? You guys both playing the same game?

 

3) I understand that Kynikos means Cynicism in Greek? Should we be cynical of you?

 

4) Can you please explain your communications with Morgan Keegan analyst John Gywnn with respect to Fairfax Financial? How is it that you used inside information to profit from a short sale on Fairfax and never got arrested?

 

Source: http://www.deepcapture.com/sac-capital-on-the-outs-over-insider-trading/

 

Excerpt:

 

It all started on December 11, 2002 when Kynikos employee Mark Heiman alerted Chanos that he had just learned from an analyst at Ziff Brothers Investments that a Morgan Keegan analyst was about to publish a negative report on Fairfax.

 

From: Mark Heiman (Kynikos Analyst)

Sent: December 11, 2002 11:06 PM

To: James Chanos (Kynikos President), Douglas Millett (Kynikos COO)

Subject: Fairfax

——————————————————————-

I just got off the phone with ZBI’s insurance analyst, Michael Ting. He just talked to a new insurance analyst at Morgan Keegan, and apparently that analyst is about to initiate FFRX at “Underperform,” with the thesis being that they are extremely under-reserved into the $3-$5 BN area. Also, there may be an article in Forbes or Fortune soon that will be similarly critical.

Ting said he thought that analyst was one of the best P&C analysts he has talked to, and wanted to give us the heads-up, as well as hear how we’re coming at it.

 

The next day, Kynikos employee Matt Cantrell apparently contacted Gwynn, as he sent Ting several documents relating to Fairfax subsidiaries, with the comment, “John Gwynn believes these might be of interest to you.”

 

Four days later, Heiman spoke to Gwynn personally, having a conversation which he summarized in the following report to Chanos:

 

From: Mark Heiman (Kynikos Analyst)

Sent: December 16, 2002 4:46 PM

To: James Chanos (Kynikos President), Douglas Millett (Kynikos COO), Charles Hobbs (Kynikos Managing Partner)

Subject: Fairfax

——————————————————————-

Just spoke to John Gwinn at Morgan Keegan, and he was more critical of FFRX than I’ve ever heard a sell side analyst. It looks like his criticisms of from the top to the bottom–everything from underwriting to accounting to dishonesty. He gave me his basics, as he is somewhat restricted because he hasn’t officially launched. It will be interesting to see how much of this the people who run the research department there will let him publish!

 

On December 18, 2002, Chanos forwarded Heiman’s email to Jeff Perry, then a senior portfolio manager at SAC Capital.

 

The day after Fairfax began trading on the NYSE, Gwynn’s revelations became much more explicit as he shared with Kynikos employee Heiman portions of his forthcoming report on Fairfax.

 

From: Mark Heiman (Kynikos Analyst)

Sent: December 21, 2002 6:03 PM

To: James Chanos (Kynikos President), Douglas Millett (Kynikos COO), Charles Hobbs (Kynikos Managing Partner)

Subject: Fairfax

——————————————————————-

Last night John Gwinn at Morgan Keegan faxed over to me an outline detailing the issues at FFH, basically those he will be publishing on. He has been a huge help and even offered to talk to me from his home today. We can look at these and talk to him next week–I just wanted to come in today and take a look at what he sent to get a head start on what he sent.

 

In the days to follow, Gwynn and SAC Capital Portfolio Manager Forrest Fontana held a face to face meeting where they discussed Fairfax.

 

Fontana followed up on that meeting via email to Gwynn:

 

From: Forrest Fontana (SAC Portfolio Manager)

Sent: January 06, 2003 8:57 AM

To: John Gwynn (Morgan Keegan Analyst)

Subject: RE: hope you had a nice holiday!

——————————————————————-

you available to touch-base on Fairfax sometime this week?

 

Followed by Gwynn’s prompt and eager reply:

 

From: John Gwynn (Morgan Keegan Analyst)

Sent: January 06, 2003 9:01 AM

To: Forrest Fontana (SAC Portfolio Manager)

Subject: RE: hope you had a nice holiday!

——————————————————————-

Name the time.

Fontana proposed a conversation the following day and requested a spreadsheet summarizing Gwynn’s analysis on Fairfax, which Gwynn promised to send.

 

On January 13, 2003 Fontana sent his boss, Steven A. Cohen himself, a summary of his planned activities for the week, which included:

 

Tuesday 1/14: Morgan Keegan expected to launch on Fairfax with sell rating – we will be covering into this.

 

As it turns out, Gwynn’s report was published on the 17th of January, not the 14th as Fontana expected. Still, it’s clear that SAC Capital was formally planning to trade ahead of the information received by Gwynn.

 

Trading records produced by Kynikos and Third Point all tell the same story: heavy short selling in anticipation of Gwynn’s report, and highly profitable short covering in the days that followed.

 

Uncle Jim, Say it ain't so!

 

 

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