Thoughtful Money with Adam Taggart The Next Black Swan? | Carson Block
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Jan 18, 2026 Carson Block, founder of Muddy Waters Research and a prominent activist short-seller, shares his insights on the current market landscape. He discusses the dangers of traditional shorting strategies in a context of high valuations, cautioning investors about the risks. Block emphasizes the fragility of passive inflows and explores potential triggers for market reversals, like labor withdrawal trends. He also highlights systemic risks in the insurance sector and the geopolitical shifts benefiting countries like Vietnam and India, shedding light on the evolving economic narrative.
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Passive Flows Create Momentum Loop
- Passive, market-cap weighted flows create a momentum loop that can decouple prices from fundamentals for large index constituents.
- Carson Block says that so long as index inflows persist, overvalued large names can keep rising despite weak fundamentals.
Policy Backstops Shorten Corrections
- Traditional short selling no longer reliably hedges because policymakers quickly prop markets during corrections.
- Carson notes COVID showed how rapid and powerful the policy backstop can be, shortening downturns dramatically.
Short Mediocre Stocks, Not Mega-Caps
- Avoid shorting the obvious mega-cap winners simply because they seem overvalued; flows can keep them elevated for long periods.
- Instead, short mediocre, sleepwalking companies near the index mean to act as a pragmatic hedge rather than hunting home runs.
