Chanos & Company President Jim Chanos Talks Bull Market, Carvana and Michael Saylor

Scarlet Fu (0:02)

Bloomberg Audio Studios.

Jim Chanos (0:04)

Podcasts, radio, news.

Scarlet Fu (0:06)

Really appreciate you're joining us today, Jim, on set here at Bloomberg World Headquarters. Kayleigh and Joe were talking, of course, about Scott Bessent testifying before the House Ways and Means Committee, and of course, this comes on the heels of two days of China-U.S. trade talks, in which President Trump has declared a done deal. He talks about the US imposing 55% tariffs on China, and China imposing 10% on us. You are a long-time China bear. You've been monitoring the economy's transition from export and investment-led to one that's consumption-led. You also teach at Yale Management School of Business. What kind of grade would you give this trade deal, this so-called trade deal?

Jim Chanos (0:42)

I'd give it a temporary and complete so far, because we don't have all the details yet. It doesn't seem to be a whole lot different from where we were not too long ago, so I think we need to see, as always in these things, the devil's in the details.

And so we'll have to see what goes on, but as I mentioned before we went on the air, it does appear that China ended up holding some cards after all.

Scarlet Fu (1:08)

Yeah, you're referring of course to rare earths and magnets, and it turns out that China does have a lot of leverage over that, in terms of whether it allows licenses for export and how quickly it allows shipments, and this is something that industry had pressed President Trump on. Is this going to be a cudgel that Beijing continues to hold over the US?

Jim Chanos (1:26)

I mean, obviously, we're going to try to diversify and increase our sources of strategic metals and rare earths. I think the administration has been clear about that. But the fact of the matter is, Scarlet, I don't think the market ever really believed that the most onerous of tariffs was ever going to go in. I mean, even though the market was down 20% at one point at its worst day to day, I think at a daily closed 12% in April. Earnings estimates for the S&P never really dropped that much. They flattened out, but they didn't collapse. And so the market has been kind of looking through all this for a while now.

Scarlet Fu (2:05)

Yeah. Well, one stock that did move a lot, of course, is Tesla. And as a long time skeptic of Tesla, I'm curious to get your take on the very public breakup between Elon Musk and President Trump. Musk is now saying that he has some regrets over his comments and he also says that they went too far. Does this drama change Tesla's narrative or prospects in any material way?

Jim Chanos (2:25)

Yeah, it was all at the end of the day, big never mind, right? But look, I think that depending on how this all came about, there's all kinds of stories and who knows? Certainly, certainly everyone is going to tell their side of the story. The fact of the matter is it does look like the legislation with a lot of benefits for EVs and solar is going to change that dynamic dramatically. And that does have a material effect on Tesla's businesses, both in the auto credits for their customers, $7,500 each, the so-called ZEV credits, the emissions credits that they sell for cash, that looks like it may be going away, and then a variety of possible IRA credits and certainly solar credits for their solar city subsidiary.

So there's a lot for them to lose in the House legislation. It may change with the Senate and with compromise, we'll have to see. But when we get past all the personal stuff and kind of all the craziness from last Thursday, there are some real impact in the legislation. And it doesn't appear that the White House is backing down on that.

Scarlet Fu (3:35)

Right, right. I mean, Elon Musk and his executives over at Tesla have also been promoting videos showing a driverless Tesla on the streets of Austin. And of course, that's a hint that their robo taxi launch will move forward, I believe, at the end of this month. Does that remove some of the concern about the legislation that takes away some of those tax credits and tax benefits that Tesla has enjoyed?

Jim Chanos (3:58)

Well, I mean, I think almost everyone at this point agrees that the company is not being valued for just its auto operations. It would be trading at $30 or $40 a share, not 300 and something. So, the two pillars or three pillars that it rests on are autonomous driving, related robotaxies, and then the optimist robot line. And so, everything has to go right for those valuations to play out. We'll see. I mean, you know, robotaxi, yesterday, there were images of a robotaxi in Austin, but what no one talked about was the trailer car right behind it.