The Pomp Podcast
#1235 Carson Block | The King of Short Selling Reveals His Secrets
- Short selling operates on two distinct levels: traditional short sellers betting on declining fundamentals, versus activist short sellers like Muddy Waters who investigate and expose fraud, misleading disclosures, and management manipulation to build public cases.
- ESG has become rife with abuse and greenwashing; companies exploit subsidies through inflated valuations and accounting tricks (notably in solar), while excluding carbon costs in manufacturing and backup systems.
- US-China investment dynamics remain dangerous; China has codified legal barriers to SEC cooperation, frauds rarely face prison time, and the cycle repeats when investors forget past lessons and rush back in for growth narratives.
- AI stocks are experiencing the same narrative inflation seen in prior bubbles; legitimate AI opportunities exist but SPACs and loose valuations create room for future fraud once capital continues flowing into the space.
- Tech companies that went public from private markets at sky-high valuations (WeWork, BuzzFeed, etc.) face structural headwinds; some may stabilize at lower valuations but business models like rent arbitrage struggle to justify premium multiples.
- Activist short selling is not scalable beyond a certain AUM threshold because quality targets are mid-cap and smaller, trades have limited capacity, and maintaining conviction requires meaningful personal investment and tolerance for litigation and threats.