Bloomberg Opinion columnist Barry Ritholtz speaks with Carson Block, who is the chief investment officer of Muddy Waters Capital LLC, an activist investment firm with $261 million in assets under management. Block was featured in the book "The Most Dangerous Trade: How Short Sellers Uncover Fraud, Keep Markets Honest, and Make and Lose Billions" and the documentary "The China Hustle," and is the co-author of "Doing Business in China for Dummies."
This is mesters in Business with very renaults on Bluebird Radio. Here this week on the podcast, Oh, I have an extra special guest. His name is Carson Block, and he is a choose a adjective, brilliant, revered, notorious short seller. Uh, say what you will about him. I find him to be an absolutely fascinating guy. I am a big fan of short sellers and have interviewed a number of them. I find they are the ones who uncover fraud in all its guys. Is often when various regulators are missing it. So whether we're talking about Jim Chanos or David Einhorn, or go down the list of all the various short sellers, Carson Block clearly joins that pantheon of greatness. He has uncovered a huge number of frauds. Uh. He talks about how China has allowed all sorts of fraudulent companies to go public, and then the New York Stock Exchange and other US regulators allow these companies that are essentially shells with nothing um really happening going on to be publicly listed in the States where they manage to effectively steal money from investors. And he is absolutely um, blunt and vociferous in his criticism. He has uncovered a number of spectacular frauds that collapsed, often to the point of being delisted publicly or in other words, they just went bankrupt. So I found this to be really a fascinating conversation, and I think you will also, with no further ado, my conversation with Muddy Waters Carson Block. This is mesters in Business with very renults on Bloomberg Radio. My extra special guest this week is Carson Block. He is the famed short seller who is the founder of the research shop Muddy Waters. They have about two hundred and sixty million dollars in assets under management. Some of the firm's research reports have revealed extensive frauds at a number of companies, leading to stock prices collapsing and some companies getting delisted. Carson Block, Welcome to Bloomberg. Yeah, thanks for having me, Barry. I've been looking forward to this, hoping to do it for quite some time. So I'm glad we got the chance to connect. I'm glad we did thanks to her putting us together. Let's start with your background, and and you have like a really intriguing background. You spent the summer of in Japan. Tell us about that, what you learn about Asia from that experien aarens. Well, yeah, that's that's going back pretty far. Um, I don't think i'd be here today if I hadn't gone to Japan um that summer. But every time I say that, the flip side is maybe I'd be running Goldman Sachs instead. So, um, perhaps it wasn't a great thing. Now I I definitely kid on that one, but um, yeah, I Uh. That was summer after my freshman year of high school and I had not yet been to a foreign country. So at the beginning of freshman year and just um history teacher who said that he would lead a group of students um every summer to Japan to do an exchange, and that's just so appealed to me. And people ask me, well, why don't you want to go to Europe for the first time? You go overseason said, and I just make the joke that, yeah, Europe is the same as the US, except they are more bathtubs on legs, and um, yeah, I don't know. Being an Asian culture totally different really appealed to me. So UM went to Japan and it was you know, it was so different, and especially in and the bubble had just burst there. But this was a period in the US where, um, you know, all these a lot of the movies that were made in the late nineteen eighties basically showed Japan's dominating US in you know, every company has uh you know, had a Japanese element to it now, and you know that that's kind of what was um portrayed by the movies, and um there was it seemed like Honda and Toyota, we're putting Detroit out of business. So yeah, it was it was a really interesting time to be there. And I didn't couldn't realize at the time that that was kind of the apex of Japan's economic might, so to speak. But uh, yeah, I really went my appetite for Asia, and when I went to uh school or the university a few years later, Um, I wanted to study I wanted to study Chinese. But my girlfriend, who was a couple of years ahead of me in school, she was at Rutger's, she was studying Japanese. So because of that, and of course studied Japanese for a year but ultimately switched to Chinese. Broke up with my girlfriend, and yeah, kind of set the course for the rest of my career. Yes, so learning a little Mandarin certainly helped to go to law school and end up with Jones Day in their Shanghai office. Did did the language help at all studying the language or is it just so overwhelming for a foreigner that if you're not fluent it doesn't matter. Yeah. That that's actually an interesting question, because the thing is, when I studied Chinese in school, so I took three academic years, including a summer in Beijing studying UM and just also to fill in some of the gaps UM. I didn't go to law school right after undergrad So I graduated in and I've been interviewing for investment banking first year analyst gigs. But I also had this idea to start an a share research firm in China UM and I just couldn't shake that idea. So I've had an offer from one firm and I was still in process with others. But I just said to myself, you know, I probably always kicked myself if I never gave this idea and China chance, so I'd never know what would have been. So graduated, got on a plane, moved to Shanghai. I had no idea what I was just really doing there. And yeah, within six or seven months, I figured out I've met with some companies, I had made contacts in the market. I sat down with a p l A general who was running business is for the p l A and somehow involved in markets, and I just got this picture that I was probably ten years too early, that there was nothing I could say was investable, but there would be nothing I could say was investable for probably a decade or so. So I went back to the States conventional ie banking, worked with my father then in equity research for a few years covering micro caps UM had some embittering experiences visa V markets and that's when I went to law school. So when I entered law school, I didn't think I would practice law. I was just there to get a degree, and um, I ended up really enjoying law school, so I thought, Okay, I'll practice, And coming out of law school I had an offer to join Kirkland and Ellis in Chicago, but I also finagled an offer from Jones DA Shanghai, which the partner in charge of the Jones DA Shanghai office whod given me the offer was advising me on a personal level. He said, you shouldn't come right out here to kinda just go and work for a few years in the States and get good training and then come out. But anyway, I ignored his advice, took the offer, and ended up there. So to your question about language, and sorry for being so circuitous in the sand, this is a very helpful background. So I met some mostly American but you know, non Chinese lawyers in China who had always had a real passion for the language, and so they were near native and they're speaking and they could do documents, draft and read in Chinese. For me, I could never get to that level because I never had a passion for the language. For me, it was always a tool that I wanted to put in my toolbox. And the difference was these people had spent Friday and Saturday nights instead of going out studying Chinese and you know, practicing That was not me. So um it was it was like, it's definitely helpful, but I was never uh, you know, in in practicing law. It was definitely helpful, but I was never somebody who got, you know, who would be able to handle the Chinese portions of a transaction, So you weren't drafting documents in Mandarin now, and a lot of the documents that we dealt with, especially if they involved foreign acquirers or foreign joint venture partners, a lot of those were in English and they would be translated into Mandarin. So that part was that part was fine. But to do the you know, ironically, to do the due diligence and read through the government filings and all these other documents that went to the Chinese UM they often called them legal uh consultants because they didn't have j d s from the States, so they weren't and they weren't, at least at that time, accorded full associate status that UH foreign law firms. Quite interesting, So how do you go from being a lawyer at Jones Day in Shanghai to launching your own love box self storage start up in China? How does something like that come about? Well, like everything else in this days of my life, and in a very circuitous manner. What I actually when I left Jones Day after not quite a year and a half, I actually intended to set up UM a wealth management firm, and it was going to technically or legally be based in Singapore, but I was going to look to manage offshore so non China assets or wealth of Chinese entrepreneurs primarily based in Tier three and Tier four cities. And kind of my thinking along these lines was they that I think with the offshore wealth, they were looking for something that was less volatile, UM safer, and if I stuck to Tier three tier four cities, I wouldn't be competing with the bankers from UBS and Credit Suite so much. And I was going to be working with UBS. I was actually going to be the custodian of the assets. But anyway, UM, I was in the process of setting that up. UM. During that time, I co authored Doing Business in China for Dummies, which was really a foreign direct investment uh primer. You know, I think the four Dummies title really gives a short shrift. But UM, the and I was a project that was in the work since before I had left to move to China at that time. But yeah, I was in the process of setting this firm up and two things were happening, you know. One, a good friend of mine was getting ready to launch a self storage firm in Shanghai, and I introduced him to a family member of mine who had owned self storage in the US, and when we sat down for dinner with that um ex uncle he had divorced out of the family, he said, of all the investments I've made in my life, self storage is by far the best over seventeen years, fifty cash on cash return and that doesn't even include the lands appreciation. So now I'm thinking, like, whoa, you know, and especially if we could be the first in China. Um So, I decided I would be a passive investor, but a few weeks later that flipped to um majority active investor, and eventually that turned into this guy needed me to buy him out. But that was While that was happening, I was also having doubts about whether I really wanted to spend my time hanging out with factory owners in tier three tier four cities, because these are undoubtedly some smart people. But you know, I just had this vision, you know, and I, especially at the time Shanghai, I had a real soft spot for for animals, you know, and you just see them mistreated on the streets all the time, and I just keep telling myself. In addition to the just relentless drinking and karaoke or whatever. I mean, that's kind of a euphemism there, but that I'd have to endure that I would see these guys do some something that you know, would really really bother me. Like I'd see I just kind of pictured, I'd see a guy about to get into the back of his s class and you'd see a straight dog line there and you go up and take it and laugh. And I just had vision of my mind that there I would have to make a choice between sort of playing it off or just being like, man, what are you doing? Like that is so wrong? And I don't know why. That was the image that kept going through my mind. But when I when I started thinking, on the other hand, about how self storage could actually be, because it was going to be know, we were the ones starting in China, how could actually it would actually be a near luxury service. You know, we were going for the Chinese who were buying Cartier jewelry or something, you know, and um as opposed to it being the Joe six pack kind of service in the US. And we we thought that we could actually build a strong near luxury consumer brand in self storage there as opposed to you in the US, like nobody knows can remember the name of their self storage company because it's so fragmented. Um So, on one hand, the self storage thing was exciting, and on the other hand, I was having genuine second or third thoughts about whether I wanted to manage, uh massage wealth of tier three, tier four UM factory owners. So I decided, Hey, this seems like fun and jumped in with both feet to self storage. And that pretty quickly became unfun. But that was all part of the journey. So that leads to the obvious question. From Japan to law school, to Shanghai to sell storage, to writing a book doing business in China for dummies, none of this has anything to do with short selling. How did this early experience color what was to come? Sure? Well, I had grown up in the markets. My father was an institutional salesperson and equity analyst. He focused on high growth micro tap companies. UM I mean earlier in his career. He'd been early on McDonald's and I think even H and R Block. But um, as market caps increased across the board, what he focused on in dollar terms didn't so kind of went from you know, not ridiculously small too almost ridiculously small in terms of the market taps. But um, you know, he's he's an eternal optimistly always and I saw this consistently inside and outside the markets. He would see the best in people, and by the time I was in my early twenties, I was starting to feel at times that there were people in my father's life who took advantage of that, and that he was often, um, you know, beguiled by charisma and what ended up happening. I mean, there were there were an objective ways of of of measuring this in that in the during the period of nine through o two, we were being lied to and used by a number of managements of companies that my father and then my father and I, um you were had had strong vison or speculated based or whatever. I mean. We you know, we thought that we were close with management, and back then I think managements or insiders had forty five days to file their forms for and so we noticed some egregious behavior where we'd take managements on non deal road shows. I mean, some of our clients would come in and just buy the thing up inside. Like I remember, you know, fidelity was just the way my father described it at the time, a bull in a china shop, you know, the way they would buy. But then we'd see these form four or these forms four that, oh, well, the CEO and CEO just sold several million dollars worth of stock right after going on the non deal road show while our clients were buying. And it was one of my father's precepts that he quote put his money where his mouth is. So he was long all of these things personally in size that he was recommending clients by. And so my tiny little nest d egg I I too was And these companies started blowing up. And I think the most egregious example was a company called rent Way, which actually wasn't that small. I think it was about a six million market cap at the time. And I developed a couple of institutional clients, probably twenty four at the time, and so we were taking the CFO Rentway on a non deal road show. We're sitting in this conscience room at this one client I developed a reasonable size money, uh you know, mutual fund manager in l A and the CFO at the time at that time, Rentway, Jeff Conway, looked my clients in the eyes and said to her, pointing at my father in the seventeen quarters bill has been following us. We never missed one of his estimates. That's how good a handle we have on our numbers. But one or two weeks later, when my father was supposed to meet Jeff in New York, he wasn't there and the stock was halted and it turned out that on my god, it was an accounting fraud, and all Jeff pleaded guilty. Um, so did the controller beneath him, and I think one other person and I don't know. I mean, this was just salt in the wounds. But I think Jeff got sentenced a fewer years in prison and the people beneath him. But it was just this really embittering time where, you know, it wasn't only happening to us. This was at the same time that Enron had happened in World Calm and helped South tycho. Um. It just you know, seemed like top to bottom the market was filled with liars. And I don't know, you know, the other thing that my father had noted at the time was I was also quick to sell when my socks had gone up. You know, I said, wow, you know, like we were hoping for a thirty taker and I've gotten fifty nine months, you know, like, hey, I'm out, and yeah, I mean, like some of these things, it was the wrong thing to do UM in retrospect, but I also had that I had that very I'm kind of just abused the English language here, but it's very risk managy type of mindset. So I think if you combine that with the um bitterness that I was starting to feel towards the system UM and our play pecking order, which I as, you know, a quasi sell side equity research, I kind of started to view us at the very bottom. UM. I wanted out of the markets. But my father's kind of one of his partying comments to me was maybe you'd be a good short seller, and I said, well, do you know any I was like, well, not really. I mean there's this guy up in San Francisco named John Gruber who does some but I don't know. You can call him. And I said, now I'm going to law school. So that was you know, that was really the background. And Paul was here, but you know, I I was totally done with markets until you know, by active in two thousand nine. Let's talk a little bit about what you were just saying about, Um, how two thousand and nine and two and ten changed your life. You took a trip to China. Tell us about that? Uh, And I believe Orient Paper was the company involved. Sure. Well, at the time, I was still living in Shanghai. Um, I had the self storage business, and it had had taught me many lessons, but one of them was that as an entrepreneur, you really need to define, at least as a beginning entrepreneur, you really need to define success as not failing. So what that means is I was struggling every day and not go out of business. And my father had gotten really interested in a number of these China based companies that had gone public in the US via reverse merger. And he went to one of the Rock conferences and came back from that really bowled up about it. And um, he was mentioning and we're talking my phone and just mentioning several companies, and I know, I'm I'm sitting there in China struggling to keep this business from folding. You know, my wife and I were just kind of you know, we joke about this period of time in our life, but it's really not a half joke, but it's really not it's not a joke, but you know, we're drinking pretty heavily, like every night. Was just kind of like, yeah, let's go, let's go meet up with some other entrepreneur friends and all numb ourselves too, you know how badly we're getting punched in the face every day. And um my father wanted me to look at or help him diligence um some of these companies, and I don't know, again, I just wasn't enthusiastic about this, but I my expectation at the time, and all pretty much all the dominoes had fallen for me UM in the investing business at that point. I didn't trust managements. I knew better than to trust bankers. I realized. I realized that directors are you know, incompetent um and lawyers are basically just there to serve the managements and they're kind of weapons to be used against curious shareholders. But I thought that auditors, I, like probably of the investing public, thought that auditors were there to perform in anti fraud function. And I'm not being facetious when I say this, but I know now that that is not actually the mandate. But I did not know that when my father brought up Orient Paper. So UM, at this time in China and my life, I was quite skeptical of what went on in China. UM. Not only had I co author the book of Doing Business in China for Dummies, which involved a lot of great research. And not only had I seen a number of joint ventures and UM and other direct investments go bad for foreigners, but I'd also chaired the American Chamber of Commerce in Shanghai's Entrepreneurs Committee, and most of my friends were foreign entrepreneurs. So one thing about me is I'm pretty good at absorbing and internalizing experiences of others. And UM, so I guess I was seeing the matrix at this point in China, but I didn't quite know it yet. UM, and my father wanted me to go look at Orient Paper. So I was thinking, Okay, here's gonna be the problem here. If there's gonna be a problem, which the problem is that Really the question is is the guy stealing an unacceptable amount of money out of the company. I assumed that the business would be real, that the profits would be largely real, but as he, you know, using this too much for his own benefit. Wait, wait, let me interrupt you right here. Unacceptable is the guy stealing an unacceptable amount of money in China? Is there an acceptable amount of money management can steal? Um? Yeah, I mean this. This is a question that I remember my entrepreneur friends and I used to occasionally when we get together to numb ourselves. Um, we used to discuss and so the question was, Okay, what do you think the average amount of money stolen is when the capital is provided by outside financing, whether it's the government, a loan or equity investment. In The consensus, like to a person, was if we're being kind, really probably more like in the case of something that's good and functional. And so we we used to then laugh and apply that multiplier to the Shanghai World Expo. So that was that took place in two thousand and ten, and it was so funny because it's like Shanghai's answer to the Olympics, and Shanghai government brags that it was spending I think eighty billion US to prepare. So we used to just laugh and say, like, yeah, this is why Shanghai wanted this. You know. It's like, if we're being kind, sixteen billion dollars of graft like that is so huge, man, Like foreign bank accounts and you know in apartments in Hong Kong are just gonna be like it's gonna be lit man, Like, these things are gonna the money is gonna be pouring in. So that was our view of what actually works in China is and I used to say at the time also, that's the difference between China and all of these other basket case e m s and FM is. In China, they didn't steal so much that they couldn't build the road, like they understood the right level of corruption there. You know, this is this is the level of draft that works best. Yeah, they had like optimized for draft. So so that was basically the question, you know, was was Chairman Leo going to be on the right side of that line or was he going to be over the top. And the first indicator I had that something could be really wrong was in the first conversation that I had with my father about it. He had just come back from this rock conference I think in Florida, and that's where he'd heard about it and met some of the people around orient paper. Um, you know American you know with promoter types and stuff, and my father is telling me that, yeah, they say, uh, they say, chairman Leo is different from other Chinese company chairman. He doesn't drink, he doesn't smoke. And my father is telling me that. I just I have this memory of being in my apartment in Shanghai. It's late at night, like I just really don't care. But as soon as he said that, I perked up and I said, I was like, look, I'm sure none of that is true. But even if it were, the fact that this is what's propagating at the conference gives me some pause because I told him this. I said, this indicates to me that somebody is trying to gain American investor psychology, Like this is what we want to hear, isn't it. He doesn't drink, he doesn't smoke. You know. My father told me keep an open mind and whatever, and I said I will. But this is already red flag. So so what did you find that orient paper? Well, the first thing was I ended up having launch in l A few weeks later with the CFO and my father. I was back home for Thanksgiving, and you know, like all good China based companies, the CFO sat in the US and you know, maybe flew over there like four times a year, and the company was about to raise money and two reportedly build uh a new new factory building with two new production lines. Remember asking the CFO what I thought were some basic questions, Okay, well, um, what's the what's the cost of the building versus the cost of the machinery? I don't know, Well, what do you anticipate the per square meter construction costs to be? Huh that's a good question. I don't know. Well what about the actual machinery. Uh, that's a good question. I don't know. It was just, you know, it's like this wasn't a real CFO and I could see through it. And then the real red flags came when um I was talking about I was asking about another anticipated investment that the company was supposed to make. They were supposedly going to buy this UH photographic paper UM manufacturing line. And the CFO said, oh, well, actually Chairman Leo already bought it and he's holding it in trust for the company, and then the company is going to buy it from him. And I almost spit my lunch up. And what you he's selling it to the company? I mean the cost of course, right, So that then. Yeah, so that was one of the questions that then you know, that was like maybe the second question was, well, what did he pay for it? I don't know, but um, but you know, we're buying it at a fair price. We're having it appraise by a third party appraiser. Huh okay, Um, but like one of the Big four or American appraisal. Who's the who's the appraiser? Um? I think it's a local Chinese firm in fooding. What why would it be a local firm and not a Big four or American appraisal or for them like that? Um, because they're experts in this type of uh, this type of manufacturing equipment, you know. And I'm just thinking no way, like this is okay, there's this is hyper like this is corrupt. I knew that right then and there. But um, again it goes to this question of its chairman Leo was dealing too much money or is it like, you know, would I still build the road? So? Um? Anyway, I said to him, the CFO at the end of the meal, Um, I said, look, I'm happy to go up in early January. I'm going to bring um consultant with me who really understands manufacturing, and we're going to take a much harder look at this company and your company than anybody else has before. I guarantee you that. So if there is any reason Chairman Leo would have to not want us to look at the company under the microscope, just come up with an excuse. Okay, just tell me, you know, something came up or whatever, all right, and we won't do it. You know, in the CFO like he just didn't know what he was getting into, and he's like, oh, well, no, I'm sure Chairman Leo would really look forward to that it. You know, I'd want to know too. Well. These arrogant idiots, you know, welcomed us to a bow Ding in UM early January of two thousand ten. And what we saw was a Potempkon factory, I mean, a company that was about to report its two tho nine revenue of one three million. The best I was ultimately able to determine was real revenue was only two and a half three million dollars. And it was funny because I brought a consultant up with me. UM and uh, I mean, this trip was just bizarre, but say it had on the balance sheet. UM raw materials of five million dollars. So what what Orient Paper produced is core gating medium. So when you look and if you cut into a box and you see that wavy stuff inside the box layers, that's core gating medium. And that is made with old cardboards. So um, you know, just throwing a thrown away cardboard, you recycle it, you make it in the medium. So they head on the balance sheet I think about five million dollars of raw materials inventory. And with the rest at the facility, they're just like these big trash heaps. They're just you know, like yeah, I don't know, I mean, just a mark abount of trash heaps. And the consultant I was with, he's wearing like a you know, Xenia overcoat, and he climbs to the top of a trash heap, looks around, comes down and says to me, if this is worth five million dollars, the world's a much richer place than I ever knew. And I mean it was just ridiculous statement after ridiculous statement. This equipment was obviously very old. I mean, if we were being generous early nineties, it had you know, I had like the typical state owned enterprise slogans UM painted on it, so it was probably late eighties UM vintage but basically throw away from s O S. And it was being carried on the balance sheet and I think like sixty million UM. They said that they had six lines. They were only able to show us to the second line we suspected was actually not producing paper, but it was just looping around, uh finished paper. I mean we couldn't tell. We were being very much rushed through the workshop at that point. There's water everywhere, like on the folding tables. Okay, water is an athema to paper, like that's you know, they just didn't have the air handling equipment that a suit like a moderately serious paper ma manufacturer would have. I mean, there's so many red flags. And so the company's revenue and purported output had climbed significantly in two thousand nine, and so we asked the chairman. Consultant asked the chairman. He said, uh so, okay, you know output last year was was how many tons? And you know it was pretty big, maybe thirty increased versus two thousand eight. And consultants then asked, uh, okay, did you did you add a production line? How did you how did you do that? And he said, oh, process improvements. So afterwards, when we're when we're downloading this incredible experience that we're having and we're you know, we're talking about it, consultant said to me, He's like, yeah, you remember when I asked him how did you boost production? And he said process implements. It's like, Carson, you were there, you were if you looked around, did you see anything new, like even a new mop or buckets? No, Like, that's total lie. So we we realized, i mean very quickly on on the visit that no, this like this wasn't a question of is the guy stealing? It was a question of it was really just well it was a conclusion of this is a potent in factory. This is not a real business. These numbers that they're reporting are total lies across the board. So so what was the market cap and how large a short were you able to get off on that? So it was it was a hundred million market cap. And when I ended up publishing this report, and it's like I didn't get right into it because here's the thing. I I got into China with pretty decent nest egg for a thirty year old. Um. But I had incinerated it in self storage and I was now beyond that two dollars in debt and climbing I was borrowing from my father, so I had no money to short this thing. And I asked my father, Hey, you know, should we short it and put out a report? My father literally had never sold a stock short in his life, and he said he was not interested. Um, and good luck to me, um. And then I called some other people who I knew uh from nine years earlier, so in the in the markets and to see if they wanted to take a short position and somehow compensate me. And no, nobody was into that. UM. So I really didn't have a model business model. And they just switched auditors to be Deo Limited in Hong Kong. They've been audited by some Utah based accounting firm that it would later turn out did not even have a valid p C A O B registration, But I didn't know that at the time. UM. But I figured, Okay, well, you know, this is like one of these It's probably like Chinese organized crime met up with US organized crime. So it's really thinking about this from the ninety nineties market, you know framework when I started growing up there, so that there's no way they're going to get an unqualified audit opinion wrong. So in early April of two ten, I realized they had gotten an unqualified audit opinion. I've forgotten at the company for a while because I just had, you know, no economic model here, so UM, I decided to produce a report that I don't know would explain that these things are fraud and I didn't There was no template for me to write this report. It just kind of made to template up myself, a combination of what I used to write when I worked with my father and how I learned to write as a lawyer. And we researched it um and disclosed that we were short. Now I was, I owned two thousand dollars worth of puts, and that consultant also in two thousand dollars worth of puts. I've funded them, mind from my credit card. And I think he'd basically done the same thing because he was he owned a Nissan factory in China that was never able to get off the ground, and he was constantly embroiled in you know, the brawls with foul steel courtroom brawls, etcetera. So um, at that point, you know, I didn't really My thinking was, hey, I've got nothing to lose. I mean, the self storage facility like this, things just a liability. What are they gonna do take the liability from me? By all means? You know, you can have it, So it's it's Subsequently, when I looked back on this, I realized there's a real power in having nothing to lose. So I just threw the ball as far down the field as I could. And the one thing that I hoped for, I hoped these guys would think that I had a sizeable short position because I just I knew I was continent. I would win a litigation. But if they knew that I really had no money at all, they would have suited me anyway and just raked me over the cold um in terms of legal fees. So I just it was a leap of faith that I was gonna be able to bluff my way out of getting sued. And um happened. Well, stock went down day after we published a trough of fifty. Company came back said my father and I had tried to extort them and they refused, And you know, and then when it was like, man, you're you know, because I was really nervous about that report to the moment I pushed the button. I mean, I knew everything and there was factual I knew exactly what was going on, but I got checked myself so many times because like this it's a big deal and going out and saying this company is is a zero and they're lying. But that nervousness entirely disappeared when they came back and lied. I don't know that I needed extra conviction. I mean I didn't, but the moment they started making stuff up about my father and me, then it was just like you know, I mean I I was just like, I'm bringing you guys down. Like it changes the dynamics because suddenly they go from minor grifters with the tendency to exaggerate to oh, you guys are just next level criminals. This is a zero, your total frauds and I'm gonna double down. Is am I hearing that right? Well? It went from somewhat, but it went more from fighting scared in a way um to fighting with suriy and so is it tell they revealed that they were scammers and they knew they were scammers, and they knew you knew they were scammers, right and yeah, and then they started like lying about other things, trying to put the toothpaste back in the tube and U but yeah, it was you know, it was really And it was right after that that um just you know, I mean, the report went viral, um, and I had a lot of people reach out to me and say, you know, wow, great reports. Somebody's finally exposed this stuff. This is the STEMA, look at this company, look at that company. And I just started cracking open ten K's and it was just obvious, you know, like all of these things that I was looking at these things for frauds. I mean, it was just really obvious from the ten Ks. I mean, I skipped over the part about us reading the orient paper finalings before we went up there. You were in the airport waiting for our flight, and and I mean we just kept laughing out loud at different times. But again, we didn't get that this thing was going to be ninety five plus lie. You know, that wasn't apparent until we actually got on site. How far did this stop ultimately fall? Um? I mean the stock ended up getting down to below a dollar times. I mean there was this back and forth right where you know, they would come out with press release and stock could go back up. It had been eight and a half when we published UM, so there was kind of rains found between four and six. And then when we did our second or did our second report or sorry report on second company, Rhino International, that company had the misfortune of making the mistake of the CEO admitting to the auditor that there were quoth some problems with the contracts, and the soccer was very quickly delisted. So after Rhino went down, UM, I think Orient Paper sold off even more because the people who've been skeptical of us were less skeptical of us and solidly to the prior reports. So now you have Orient Paper and Rhino. When do you say, hey, this is a real business. I need to form a company. Well, I formed a I formed an entity at the outset before publishing my first Remember I was a lord for legal protection, right, you want that shield. But when did you say, I have a finance research business and potential edge fund here that there's money to be made betting against these companies. Well, it was right after Orient Paper that I realized that UM, I came to the States for uh two trips, one of them was about a month, and at that point in time, I was trying to By then I realized this is systemic with these China names, and I was trying to figure out what the business model would be. Um, should we do consulting for investment banks that we're looking to bring companies in China public? No, Pretty quickly those doors slammed in our faces. Um, they didn't diligence guys. Um. Then then yeah, I was thinking, okay, well, um, should I do the US on a subscription basis? And I had there was a company that sells um subscription research that was saying, yeah, look, you know, we'll distribute to research and da da dad and you know. And I was looking at the numbers and like, yeah, maybe I could take this to you know, a million or more in my pocket a year. Maybe um. And then uh, there was also a very large hedge fund that said, yeah, look, we want exclusive access to your ideas and you know, we'll pay you for those. And but I kept coming back to this idea of doing it publicly and trying to have some you know, if I could get capital to short these things and then publish and you know, there's if you you know, this was a This was a decision that took I don't know some time to make because I realized that that was going to be the much more um much more stressful path. I will get food regulators. You know, I should assume that regulators will look at me skeptically every time we publish a report. But I felt like, if I'm just providing subscription research two institutions um identifying various frauds in China, I mean, one issue is how valuable is the research if these things never go down. I mean, a fraud can flourish and the markets until the markets figure out it's not a fraud. So I did question the viability over the long term of that business model. But the other thing was it just I mean, it just seems a little hollow as well, because I felt like, hey, if I'm publishing this openly, I can hold these guys accountable, right, But I'm just sending this to you know, blah blah blah hedge fund um for you know, fifty k year from that fund, I don't know who's going to hold them accountable, Like why would this matter? So based on that I said, all right, you know, like, let me figure out a way to get some capital and then start shorting these publicly. And so I made that decision. You know, I realized there was a business to do and that was the model I wanted to pursue. And I probably made that decision by late August early September of two thousand times. Quite quite interesting. Let's let's talk a little more about what's going on in China. Um after that orient paper experience, you've called for many Chinese firms that are listed in the US to be delisted. Tell us why they literally cannot be held The people behind these companies literally cannot be held accountable. Not only that they can't actually be investigated. I mean, that's PRC law that specifically prohibits any PRC based person or entity from cooperating with an overseas regulatory investigation without the express higher consent of the Chinese Securities Regulatory Commission, which you know, accepting the exceptional cases something like luck In where the auditor already called it a fraud, is just not what we're coming. So you not only can you not hold the individuals to account, you cannot investigate them. And I think Luckin's a great example here because luck In raised think about eight hundred million dollars from the US markets, and then the auditor, after we republished somebody else's research and said that it checked out to US UM, the auditor U E Y confirmed that this thing was a fraud, and so luck In collapse and but the people luck and ultimately settled with the SEC. And the eight hundred million that it raised from US markets, I think it paid to the s. You see, a hundred forty million, and that's like, by far the most the SEC has ever gotten out of one who's trying to frauds. And the best part is luck raised that money with the bond issuance in China. So I think a hundred fifty million US that's a good deal. You you raise a hundred and fifty million in bonds to pay for the fraud you perpetrated rate raising eight million in equity. Yeah, So I mean, like I look, I said, okay, eight hundred that's the biggest big any one of these guys who's had to pay in absolute terms, and the percentage and it's not that bad a big it's sub leaves you with over half a billion dollars. Right, yeah, I mean, considering you hold the money, Um, it's not bad, but um, but no this, you know, these guys are better operators than that. But the issue, I mean, the reality is, um, we just can't hold them accountable. And so when you have that system like it's and so and also look at this. You know, some people say, oh, you know you're China basher this and that. But the reality is China is an emerging market. China has a weak rule of law. China is a country riddled by corruption, both public sector and private sector. And also all of these things are facts. And when the regulators in the US don't even have the ability to investigate, I mean, of course these guys are gonna come over here and lie and steal the money, because why wouldn't they The proposition if you're sitting in China and you know, and you've got a business, and you know, I'm like, you meet the right people who say, hey, you know, we can sex this thing up and you know, bring in public blah blah blah. You're thinking, okay, well heads, I win tails, I don't lose, So why wouldn't you go and lie? And the other thing is that I think is more one of the changes that I've noticed in the eleven years that I've been doing this. UM. Back then, when we first started publishing UM, the Chinese guys were not sophisticated with respect to the market. UM. They didn't really get how things traded. UM and they yeah, I mean they got fraud, but the frauds were very crude, basic frauds where you invent counterparty, you invent customers and invent suppliers. UM. The frauds today mostly more sophisticated. They're usually there's usually more reality to the businesses. UM. Usually G s X is an exception, But UM, they they're But I but I feel like a lot of these stocks are manipulated, and they're manipulated in very sophisticated ways. UM. We're going to circle back to that. I wanted to talk about some manipulation. But before we leave the sec UM, how have they responded to your urging that they dealist firms that can't be monitored or can't even be audited. Well, there was a bill that was enacted and signed into law by President Trump called the Holding Foreign Company's Accountable Act, and it provides that if companies in a country are not subjects. If the auditors are not able to be inspected by the p c A O B, then these companies will be delisted within two years there, you know, two or three years after the enactment of the bill. And it was obviously targeted to China, but that's the wrong issue to focus on, and China might I've long held the theory that China would give on the pc A B inspections because that's not really going to be an effective anti fraud tool. Um just inspecting these auditors, Like, who cares that the PCOB is going to be messed with during these inspections the same way everybody who's messed with whoever goes over to check out a Chinese company. But um, so, well, well, how do they mess with you? That's that's interesting you say that, let's let's digress here. Did were you harassed where you followed? Did you ever feel that you were in danger? When I say when I say messed with, I just mean fools and in steinis in stone walls, I mean that that's co operation. Well it's fake cooperation, right like that? That was the that was the thing that was beautiful about most of these companies and still is. It's it's the fake transparency because one of the fundamental problems the SEC has in one of these investigations and anybody has, is, first of all, everything's in Chinese. So the vast majority of us in the US and who worked at the p C A O B don't understand Chinese, and you need things translate. Translation is incredibly resource intensive. So it's one thing. I mean, when you look at it from the SEC perspective, the costs of these investigations are super high for them, and again the recoveries and probabilities of recoveries are so low. So that's one reason. I mean, like genuinely the SEC Enforcement Division hates investigating these China based companies. Um, but you you have the same problems p C O B. Very few of the people would speak Chinese. Um, they'd be jet lagged. They would have the Chinese Ministry of Finance people because it's clear like that's the only framework China would ever allow this to happen, shadowing them being there. Documents will be switched out, would be missing, there would be all kinds of excuses like, oh, well, you don't understand how it is in China like this you know, we have to give this document over here. Let's, you know, take these guys, you know, to the other side of town and see if we can find this document at the Ministry of Finance. Oh no, it's not here. Gee, guys, I'm sorry. Hey, how about we go and you know, go to lunch and get drunk. I mean it's like, this is what I envisioned happening, is that the their time would be wasted and they wouldn't understand what's going on, and like at the end of the trip, they would get back to Washington and just say, like, I don't know what the f happened? Man, Like I don't know we were there. But wouldn't it be more effective to say, these are the minimum listing requirements in the United States, and if you don't jump through these hoops, you can't be listed here. As opposed to going through that process. I mean, it's a privilege to be listed here and you have to do xcell y and Z. Why why not take that approach? Well, I think you know the problem that we faced. Look, let's be real here, okay. I mean my my view is that almost all of the companies, if not all the companies listed in the US from China are committing some level of fraud, they cannot be held accountable. Now I think we could instead focus on this this Article one seventy seven of the Amended Securities Law of the d r C that went into effect in March of last year, and that is the article that expressly prohibits cooperation with foreign regulatory investigations into publicly traded companies that did not exist. That was not codified formally until the adoption of that of that revision. So before then it was kind of hard to to say that, well, we you know, we need to formulate a policy that says companies from China may not list here, because we would you know, it's like, well, you know, aside from the fact that these things are committing fraud on a widespread basis, like what can you point to in law, because like in the US, you know, we're really focused on like, you know, what's the you know, like give me a bright line definition of what may and what may not be listed. But now you have article one seventy seven. So I think that any country that codifies a middle finger to US in you know, regulatory bodies in its law de facto should not be allowed to have its. You know, companies whose operations are stancill be based there listed in the US. That makes perfect sense, But but I have to point out that it's created an environment that has allowed you and your firm to come up with some spectacular short So so let's quickly go over some of your greatest hits. Sino Forest down after your report. We mentioned Rhino Drop before it was delisted, tell us about to they were have. Yeah, we have eight D listings globally, seven in which are from China and I'm not including luck in. We might be about to get our ninth D listing in France, by the way, So what happens when you own a put and a company is delisted? What is that put worth at that point? Yeah? Well that was that was interesting in the early days because these stocks can be halted for multiple months, and you know, we had puts going into put experty and so yees to decide whether you want exercise or not, and um we ended up. I mean that the one time this really happened to us was on China Media Express, which was the third company on which we wrote would become the second D listing, and we had we had puts UM that expired during the halt, so we exercised the puts. But then and this happened to a lot of at that's at the time I was using you know, like retail investor account. This has been a lot of retail guys at this time went um. So we're effectively short. And the broker came back to us and said, oh, listen, you know we need uh, we need you to deposit more margins. So based on the last print of the stock, when this thing starts trading again, you know, you're now short, you know, like blond number shares that's you know, five hundred thousand dollars worth of stock. Um, we want two margins, So we need you to pump your account up. UM, you know, store another five thousand in there. And you know, like if that actually, I mean, that actually screwed me up. I was very fortunate that I got UM. I got a loan from somebody who uh you know it was I mean, I mean offered it to me just when I was lamenting. I wasn't asking for the loan and UM, and so I was able to make money that way. But I think a lot of retail got shafted on those things. And the other thing that was problematic was because when the stock the brokers realized that once the stock started trading, because there were all of these put options that have been exercised, everybody was going to be naked short and so unlike when you're dealing with an institutional counterparty, you know, who would say like, all right, man, look I get it, the stock is going to go down, maybe after some initial volatility, once it's unholted, you know, we'll you know, we'll be chill and we're not going to buy you in right away. We'll wait till the afternoon to figure it out. I think that's how an institutional counterparty works. The retail counterparties were like, you will be bought in as soon as it resumes trading. So what I want to mention the broker who who was so nice to their alliance? Oh, I mean, I can't even remember. I mean, we weren't dealing with Fidelity, but I heard. I mean, Fidelity was a nightmare. Fidelity was increasing the borrow cost, stirring halts on all these things. I mean I think they jacked them, you know, from annually. So Fido was sucking people dry, Um, I'm on a halt for a company about to be delisted, seems sort of doesn't really make a lot of sense to me. Um, And you mentioned manipulation. Are you implying that for targets of yours like G s X or T A L education, do you think the Chinese government are propping up those stuffs? Well? God, you know, what goes on behind the curtain in China is very difficult to say. And there's also um, the lines between government and government actors and private sector actors are very blurry at times. So but there's just funky, funky trading and a lot of these things. And it wasn't only gsx UM a lot of other China names. And then the final thing that I'll say on this, Nobody else I know talks about this, but I suspect that these companies water their stock all day long. And here when you say water to explain that, well, that's, you know, in the conventional sense, watering stock is issuing shares to you know, people insiders in their proxies, but without without recording those shares as having been issued. But what happens, what I think happens here that makes it so easy is you have to keep in mind that these companies are all domiciled in Cayman or some are b v I, but they're you know, they're legally domiciled in Cayman or b B I, and their shares don't trade on the US exchanges. It's their American Depository receipts or American Depository shares. So what basically happens is if you have a in share, you take it to the depository agent and it's you know, funged exchange into an A d R A d S that may be traded on the exchanges. But the question I've had is who the hell is keeping track of these Cayman schairs that are coming to the that that are that are being given to the depository agents. And look, I don't know the answer because this is really our ten aspects of of plumbing. But I suspect nobody. I mean, who's these are Caman share registries? Okay, That's That's the whole point of Cayman is that everything about ten in domiciles companies is secret, especially the share registries. What is there? I've asked some people and nobody's ever been able to answer me. What safeguards are in place that would prevent these companies from doing that or prevent the insiders from doing that. And so I am of this view that our entrepreneurial friends in China are so entrepreneurial that in many cases, not only are they completely lying about the financials of the company, but they're also manipulating the stock, and they're also watering the stock. The share A count is much higher than officially recorded yes, or that the yes that the the shares outstanding are because I've seen in the past. I first started asking this question in two thousand eleven or twelve because I could see that the A d S counts were rising a lot faster than these shares outstanding, meaning they come to the shares that the company is issued. And now that's not unexplainable that that doesn't in and of itself mean that there's watering, because as you have more legit team and shareholders funds their stock into a d r S and a d S is to sell it, you'll see that. But I just remember noting that some of these increases the deltas the ADS accounts were growing exponentially, and you know, and the and the shares outstanding, the Cayman shares weren't growing that that much. And that's when it dawned on me. It's like, look, I've been I've lived in that country six years, total ton of business. They're they're not going to stop at just like just committing fraud with respect to the financials like that would be stupid, That would be leaving money on the table. I mean quite frankly, if this was the life you've chosen to be a crook of this sort, you would not stop at that alone. You would manipulate the stocks. You look, you would water the stock, you would do every single thing you could do. And I just don't think that that you could get away with and the mechanisms. Look, one of the problems that we have with stock manipulation in the US is that it's so much stop trading has done algorithmically. Okay, the SEC is staffed by lawyers and accountants n s A. We need people who have n s A type skills to be inside the SEC to monitor trading, whether it's kind of based manipulation or or give somewhere else. That's how manipulation occurs. And we I mean, who's who with those skills? You know, Stanford computer science graduate is gonna go work for the SEC. No, I'm not gonna happen nobody at this point. I never heard accounting fraud described as a gateway drug. It's just the the entry to to more fraud. One of the things I found interesting about your background is your relationship with Jefferies Financial Group. UM CEO Rich Handler, tell us a little bit about how Rich Handler affected your career. UM so yeah, I uh, all right. UM, back in it was clear to me that we were going to go into the fund management business at some point, and um, we were having a problem. Uh, I need institutional counterparties. And because you know, we were so controversial. So at that time and for a while after that, it was an annual ritual where Goldman would tell us like no and uh. And in late when my I was in the delivery room, my son was about to be born, UM, got the call from a prime BROKERAG sales guy at CS telling me that, well, the Reputation Risk Committee, something I never even heard of before, has met and said no, we're we can't do business with you, so we're gonna go with this guy Bill Huang instead, exactly Like, well, I mean, look I even one time said to um, you know, I had an account at a private bank that I had opened um with full knowledge, you know, the bank having full knowledge that I would be looking to do short selling short sales in it in advance of reports. And they said, oh, yeah, that's great, you know, and get same access to borrow as you get on the institutional side of the house. I mean, yeah, it's gonna cost a little more, but you know, it's otherwise the same thing. And then they decided after a little while that they were gonna, you know, somebody in compliance. It was like, no, no, we have to get rid of this account. And um, you know, and I said to my um private banker at the time, I was like, you know she because she was talking about how well, you know, we're really focused on compliance now and then post GFC. And I said yeah, but we both know, right and if I had a couple of hundred million dollars, you guys let me do anything I wanted. But whatever, So that's the reality, right, So what was the advice handler gave you? So I went, so I set up a meeting with him, and you know, I really didn't I didn't know whether Jeffries would be interested in doing the business because they had a big they were building their investment banking franchise in Asia. But I figured, you know, look, why not. He took the meeting, so you know, that's cool, and um, you know, he knew a little bit of it. He knew me by reputation. But um, he just started asking very you know, direct questions like okay, well, I mean this is a stressful business, right, like you know, I mean besides lawsuits, I mean, don't you get that threats? Yeah, I do, you do. I mean you're married, and you've got a kid at home. Yeah, and you know, and he's just and and and he's just you know, And I told him how, you know, like Goldman, you know, hated us and these other guys you know who hated us, and and he just said to me, he's like, he said, why do you do this? Man? You're you're crazy. And I don't mean that in the ha ha you know, funny way. I mean, really, why are you doing this? I think you're addicted to the attention. So you've got all these guys that Goldman Sacks and others with their knives out waiting to stab you in the back. The moment that they can you get death threats when you've got a young family at home, you know, you you get lawsuits. You're telling me you don't sleep well? Ever, why are you doing seriously? I mean, is this gonna at this point in your life? The kind of money you're making, how much are you making? Is that? Does that change your life? No? That doesn't change my life. Why do you do that? And so you know he and then again he repeated his assertion that he thought I was addicted to the attention. So I walked out of there. Um, yeah, look, I mean I don't know. Maybe a lot of people say this, but I think I really mean it. I very much appreciate when people speak to me directly and don't be asked me, I mean, assuming they have something valuable to say. And I recognized that I just had one of those moments where um, a very smart, sophisticated person who understands um to a reasonable degree, what I do, was telling me that this was a bad life decision to continue, uh, continuing this business. And I really had to pause and consider that, and I did. I mean, maybe I told myself what I wanted to tell myself at the end of the day. Um, I disagreed with his assessment, but I took it very seriously and I even talked about it internally with UM because at that time, my team consisted of some people who I considered close friends. I mean, it still does, but UM, these are people who were friends first and then became team members, and so I also felt like they were good people to help me evaluate what Rich had said. And UM, how did you how did you apply that? Did you go from pure short to long short? What what did you do to follow his advice? I didn't really change anything I was doing, but it wasn't that I followed the advice. It's just that I felt I'm somebody who's very focused on process and especially when it comes to making difficult decisions. And UM, you know, even if I don't change my mind, I always want to get more information and I want to get contrary perspective because I understand my decision better and I understand the tradeoffs better. And I just felt while Rich's advice didn't alter the outcomes and improved the process, and it's helped me better understand why it is that I've chosen this as as as my path makes a lot of sense. So I know, I only have you for a few minutes. Let's let's look at one and see what's made this past couple of years so so challenging. Clearly there was a brief collapse and then straight up the rest of the year. How challenging of a year was it? On the short side, In yeah, I really I really hated. I mean, part of it is, UM. You know, I definitely have hard time separating my my feelings about the external environment from my feelings about what was happening business wise. UM. You know, I going back to commony me earlier about UM, how I'm very good at absorbing other people's experience. UM, I think I'm I think I'm very sensitive to the environment around me, especially very very sensitive to risk and UM and in trouble. And so was just a year of I mean, it was emotionally overwhelming for me, UM, just based on all the misery. You know, I felt like my heart was breaking some you know, more and more every day. And on top of that, business was like really really hard. So we I you know, we were early. I was personally very early in the toilet paper trade in um COVID, and I think it was like mid January, sorry as late Anuary, when just stocked up on toilet paper and you know, canned food, and you know, basically got ready to live in a bunker. And it was at the end of February UM and markets in the US hadn't yet reacted. And also there's an interesting point here because by late February, Hong Kong and mainland markets had largely recovered from their COVID dips. And we talked about the manipulation of the markets from China. China developed the i P to manipulate its markets. Back in UM. It tried to the government had tried to novate the housing bubble, of the real estate bubble into an equity bubble and pump up the equity bubble. But they didn't understand that those bubbles are harder to keep going because you've got daily marked to markets and um our marks to market and anyway. But they, you know, at that time, they started throwing short sellers in prison or in jay ill temporarily, and they got the brokerage firms to go out and buy stocks. And I think they were pumping money into the government was pumping money directing the market to keep it propped up. To send to avoid the loss of wealth. But I felt like the same thing must have happened in February in China and Hong Kong because the government was trying to downplay um They were trying to cover up any signal as to how serious COVID really was. So the rest of the world was kind in this meleeis at the end of ten where we've been innesthetized by eleven years of ridiculously low you know rates, so itnesthetized the risk. And we're looking at the China Hong Kong markets going n things so bad? Right, Like, those markets aren't off. And I knew at the end of February when I saw the results of an ever Core survey institutional clients that they didn't think that COVID would have UM I think it was only a relatively small minority that expected COVID to have a material impact on the economy and markets. UM as like this is complacency. And so at the end of February, I said, guys, like, all these names we've looked at throughout the years that didn't make the cut for activist short selling, but we know our crap companies. Let's short these things, Let's get CDs on cruise lines, Let's do this, let's do that. And so we had this great March. We didn't even have to publish anything. And by the end of March, I think we were up net eleven and I'm you know, and I'm thinking, man, this is gonna be a record year for us. And we were so smug, right at least I was. I'm sitting there going, yeah, you know, I've been doing all these interviews for all these years saying if you lever up your balance sheet to buy back stock, you are creating fragility. And now ha ha, all this fragility is coming home to route. You know, the chickens are coming home to roost. Look at you private equity guys having you know, destroyed corpses have come Pennie for you know, a couple of decades. Ha ha. Jokes on you. Now, it wasn't jokes on me. Um. I think we're the last to get the memo. It was like early August when when I'm saying, like, okay, all of these trades we put on at the end of February, beginning of March, our genius trades because we're so smart, dude, we got to get these out of the book, like they were hanging there till August. So we were so we were getting you know, we've given back almost all our teams on that wet markets got back to break even in August from the pre March collapse, right, And then we were also now writing losses from GSX, which we short in early June. Now we've done well shorting e Health in early April. So that was that was actually that was and is a great short, both in absolute terms and in alpha um. But there's g SX. And then we went into i think September with this really scammy company that you know, normal times that have no business having a market camp anywhere near a billion but called NanoX, and so we went short that with this expose a as to how like this whole thing is just a promotion and you know, there's no reality there and nothing closed up on us on the day and it kept ripping and so we're you know, we're getting bled out on NanoX, We're getting bled out on gsx UM. You know our genius trades had Yeah, and it was tough. I mean, we we really had to rally and we were getting ready to launch another funds. You know I was in in January. I was I was just marketing this new fund we intended to launch and you know, early to mid jan are so early to mid and we sidelined it because of COVID. But by the time we're bleeding everywhere. In the summer of last year, I was just like, man, do not talk to me about this new fund launch. I do not care. We are in a nose dive. We need to pull out of it. So so let's talk about. Yeah, we did, I mean, we finished. Look, we finished with a decent print for the year. Our clients were happy, but I just got really no. I got very little satisfaction from from that year. So so I wanna jump to our favorite questions we ask all our guests and Charlie will record the outros later. That's easy enough to do. So let me uh, let me plow through my speed round and we have like three minutes for these, um tell us what you're streaming these days? You know what, I'm gonna hold off on this. I'm gonna ask in the last two minutes we have what do you make of some of the craziness that took place in the US. I was reading this morning that Michael Burry of the Big short fame is short Tesla. What what do you make of some of those crazy uh stocks UM things like game Stop and and any thoughts on bitcoin um. Okay, so I mean the memes thoughts just show that the market is broken. May are a symptom, not a cause of the market being broken. UM. The factors that have broken the market are the predominance of passive investing, because that actually has a convex effect on price behavior and increases fragility. It's the monitors ridiculously um, low interest rates and excess liquidity UM. And it's also the UM the erosion of the rule of law, and the lack of accountability in you know, in the markets and in society. So these are factors that have combined to create this broken market. And plus there were a lot of retail UM you know, retail market participants who came into the market last year who didn't do it out of boarding. Didn't do it because they're punting their stimulus check. They did it because they were trying to gamble their way out from underneath um financial hardships that had been created by covid UM. So yeah, bitcoin what do you think. I've got a friend who you know, is kind of in this space, very smart guy, and he said that the the real value of any of these UM blockchain based cryptocurrencies is the present value of the transaction fees or the thing he calls him, the gas fees for using it UM. Beyond that, he admitted, and he's you know, he's got a real bitcoin position. Beyond that, he admitted, it's just a tool. So I don't touch it. I don't care. I've seen I've seen fads and the next thing to come and go like a bunch of times during my career, and I've seen a lot of people who can't tell the difference between luck and skill because they happen to be in the right place at the right time. And crypto bitcoin smell that way to me. Thanks Carson for being so generous with your time. We have been speaking with themed short seller Carson Block of the research farm Muddy Waters UH. Carson's hedge fund has about two hundred and sixty million dollars in assets under management. If you enjoy this conversation, well please check out any of the other nearly four hundred prior discussions we've had over the past seven years. UH you can find those at iTunes or Spotify or wherever you get your podcasts. We love your comments, feedback and suggestions right to us at m I be podcast at Bloomberg dot net. Sign up from my daily reads at rid Halts dot com. Check out my weekly column on Bloomberg dot com slash Opinion. Follow me on Twitter at rit Halts. I would be remiss if I did not thank the crack staff that helps put these conversations together every week. Tim Harrow is my audio engineer, Michael Boyle is my producer. A Teaka Val Bron is our project manager. Michael Batnick is my head of research. I'm Barry Rid Halts. You're listening to Masters in Business on Bloomberg Radio.