Marc Cohodes, on his high-stakes take-downs of corrupt CEOs, the importance of focus, and his innovative investment ideas.
Mar 3, 2022
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Marc Cohodes, a renowned investor and short-seller, is known for exposing corporate corruption. In a riveting conversation, he discusses his dramatic takedown of Insys Therapeutics and his unusual start by betting against a pinball machine manufacturer. Cohodes shares insights on the mindset needed for continuous success and the emotional challenges of confronting corporate fraud. He emphasizes the importance of focus in investment strategies and critiques current financial regulations while advocating for increased market accessibility for average investors.
Marc Cohodes has dedicated his career to exposing corporate fraud, emphasizing the critical need for vigilant oversight to protect investors.
The evolution of finance and technology has transformed trading practices, introducing complexities that necessitate thorough research and understanding for successful investing.
Cohodes advocates for enhanced investor education and regulatory changes to combat market fraud and empower individuals to make informed financial decisions.
Deep dives
Mark Cahodes' Relentless Pursuit of Fraud
Mark Cahodes is known for his tenacity in exposing corporate fraud, focusing on companies involved in wrongdoing. His investigative methods are so effective that they have led to the imprisonment of numerous corrupt executives over his 30-year career. A significant motivator for him includes ensuring shareholder value and safeguarding innocent investors from deceptive practices. His determination to reveal the truth in finance exemplifies the necessity for vigilant oversight within the market.
The Evolution of Market Dynamics
The landscape of finance has drastically changed since Cahodes began his career, particularly in regard to technology and trading practices. He describes a time when market information was limited; stock quotes were retrieved from newspapers, and personal interactions were essential for trading. Today, electronic trading has revolutionized the speed and accessibility of the markets, altering the way investments are made. While this evolution has introduced complexities, Cahodes argues that it has led to increased speculation and volatility in modern trading.
The Art and Risk of Short Selling
Cahodes discusses how his entry into short selling stemmed from a unique experience analyzing the pinball industry, which ignited his passion for identifying overvalued companies. He emphasizes that successful short selling involves substantial risk and the need for thorough research to anticipate market movements. This method requires a deep understanding of the companies and industries involved, as the potential for significant losses exists if the market goes against one's position. Cahodes advocates for doing extensive homework prior to shorting stocks, stressing that knowing the basis of an investment is paramount.
The Challenges of Activist Short Selling
Cahodes expresses disdain for what has come to be known as activist short selling, where investors publicly campaign against stocks they have shorted. He believes this practice is often more about generating quick profits for the seller at the expense of unsuspecting investors. His focus remains on combating egregious corporate wrongdoing rather than exploiting market panic for personal gain. By differentiating between responsible financial activism and opportunistic practices, he aims to restore integrity to the short selling practice.
Reflections on Market Misconduct and Financial Literacy
Cahodes argues that a significant portion of market fraud stems from a lack of financial literacy among investors, emphasizing the need for education in understanding investment risks. He highlights the prevalence of scams, particularly in the cryptocurrency space, where inexperienced individuals can easily fall victim to high-risk ventures. His belief is that the financial sector needs regulatory changes and improved educational resources to protect all investors, regardless of their financial status. By advocating for better regulation and investor education, he aims to create an environment where informed decisions lead to better market outcomes.
Marc Cohodes has earned a living and a reputation betting against companies he suspects committing fraud. His high-profile take-downs include Insys Therapeutics founder John Kapoor—the orchestrator of a scheme to bribe doctors to prescribe a fentanyl-based pain medication that caused the deaths of 7,000 people.
During our earthy and entertaining chat, Cohodes' describes how his shorting career began when he bet against a pinball machine manufacturer at the dawn of the video game age. He explains the rationale behind some of his long positions and maintains that it's not what you've done but what you do next that counts.
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