The Psychology of Short Selling

Carson Block, the activist short seller, founder of Muddy Waters Capital, and host of Zer0es TV and the Zero F**ks Given podcast, joins Julia La Roche on episode 34.

Block rose to prominence over a decade ago by exposing Chinese companies listed in the U.S. that were frauds. He’s best known for his 2011 takedown of Sino-Forest, which overstated its timber holdings and ended up filing for bankruptcy, causing big-name investors to lose hundreds of millions.

Block is often referred to as an activist short seller because he conducts in-depth research, takes a position, and publicly releases a report explaining his thesis. In the episode, he explained why he prefers the title “investor journalist.” 

In the episode, Block details his two latest short targets — DLocal, a payments company in Uruguay, and Sunrun, a solar panel company. He also shares why ESG is the 2nd "mass investing delusion" he's witnessed.

0:00 Intro

0:31 Origin story as an activist short-selling

1:45 We were getting lied to all the time

2:35 Law School 

3:29 Shorting Chinese stocks

5:45 Conflicts of interest, laziness, and ineptitude in the capital markets

6:55 The Sino-Forest short

9:55 Grifting in the ESG space

13:20 The Sunrun short thesis

19:50 Impact of rising rates

21:18 DLocal short thesis

26:28 DLocal’s response

29:40 Block’s process for building a short thesis

35:05 “Investor Journalist”

38:20 Why short selling exists

42:45 How short selling is perceived

45:02 The “Tick The Box Apocalypse”