According to the short-selling investor credited with being one of the first to spot the fraud that sparked the Enron scandal, Jim Chanos called out President Trump’s infrastructure plan as “fake fiscal news” in an interview published Friday.
The White House website explains that in an effort to rebuild America’s infrastructure while at the same time “promote job creation and grow the U.S. economy,” Trump’s plan will “unleash private sector capital” to tackle infrastructure projects across the country.
His plan will also slash regulations, which will “dramatically reduce permitting time for these infrastructure projects from 10 years to 2 years.”
The founder of Kynikos Associates, which is one of the largest short-selling investment firms in the world, is a disbeliever. “That’s just another sort of fake fiscal news, if you will. It’s going to be public-private partnerships,” Chanos told Lynn Parramore of the Institute for New Economic Thinking in an interview. “Because private investors need high rates of return, these deals generally haven’t been good deals for anybody. We’re told that the private sector will be able to do this better. Well, they might be able to do it better and faster, but only for a small number of projects.”
Chanos went on to say that private investors will probably not be willing to take on the bigger projects “without definable cash flow.”
“It’s something that sounds good, but when we actually start looking at projects that make sense for private investors leveraged up with state-backed or federally backed bonds to do a project, we’re going to find that it winnows down the list dramatically,” he told Parramore.
Chanos noted that rural areas may be left out if private contractors think their projects would not be as profitable as those in the cities.
“It’s going to be great for Wall Street investment banks, but I’m skeptical that a lot of people are going to be able to get excited about the economic growth coming from them. Rural people won’t benefit from them. They won’t be happening in the Deep South, where you might need new levees. This is for parking garages at JFK [International Airport],” he explained.
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