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Jim Chanos says the notion that the Fed will always bail out the stock market is dangerous

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Leon Cooperman and James Chanos at Delivering Alpa 2019, New York, Sept. 19 2019.

CNBC| CNBC

Jim Chanos, a short-seller, stated that investors should not believe the Federal Reserve can always save the stock market’s steep losses.

Chanos stated that “The idea of Fed Put” and the Fed being there to help me out with bad investments is not a cogent investment strategy to keep on for long,” on CNBC’s Monday “Halftime Report”.

The fact that the government will rescue the stock market from certain losses is a good thing. He said that he thought it was a dangerous idea to hold on to.

As investors feared a Federal Reserve hawkish swing this week, the market sold-off intensified Monday. The S&P 500 also dipped into correction territory, falling more than 10% from its record high.

On Wednesday, the Fed will conclude its policy meeting. Central bankers indicated in their December minutes that they expect not only to raise rates and taper asset purchases soon — but also could be teeing up a balance sheet reduction. This would be an aggressive move by the central banks after almost two years of most flexible monetary policies in U.S history.

Chanos claimed that his hedge fund remains slightly long on the stock market, despite the recent sharp drop in stocks. Long-time investor Chanos advised investors to avoid high-flying names.

Kynikos Associates founder, Chanos is an infamous Wall Street short-seller with a history of identifying fraudulent transactions.

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