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Speaker 1: This is mesters in Business with very renaults on Bluebird Radio.

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Speaker 1: Here this week on the podcast, Oh, I have an

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Speaker 1: extra special guest. His name is Carson Block, and he

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Speaker 1: is a choose a adjective, brilliant, revered, notorious short seller. Uh,

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Speaker 1: say what you will about him. I find him to

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Speaker 1: be an absolutely fascinating guy. I am a big fan

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Speaker 1: of short sellers and have interviewed a number of them.

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Speaker 1: I find they are the ones who uncover fraud in

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Speaker 1: all its guys. Is often when various regulators are missing it.

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Speaker 1: So whether we're talking about Jim Chanos or David Einhorn,

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Speaker 1: or go down the list of all the various short sellers,

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Speaker 1: Carson Block clearly joins that pantheon of greatness. He has

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Speaker 1: uncovered a huge number of frauds. Uh. He talks about

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Speaker 1: how China has allowed all sorts of fraudulent companies to

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Speaker 1: go public, and then the New York Stock Exchange and

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Speaker 1: other US regulators allow these companies that are essentially shells

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Speaker 1: with nothing um really happening going on to be publicly

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Speaker 1: listed in the States where they manage to effectively steal

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Speaker 1: money from investors. And he is absolutely um, blunt and

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Speaker 1: vociferous in his criticism. He has uncovered a number of

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Speaker 1: spectacular frauds that collapsed, often to the point of being

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Speaker 1: delisted publicly or in other words, they just went bankrupt.

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Speaker 1: So I found this to be really a fascinating conversation,

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Speaker 1: and I think you will also, with no further ado,

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Speaker 1: my conversation with Muddy Waters Carson Block. This is mesters

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Speaker 1: in Business with very renults on Bloomberg Radio. My extra

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Speaker 1: special guest this week is Carson Block. He is the

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Speaker 1: famed short seller who is the founder of the research

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Speaker 1: shop Muddy Waters. They have about two hundred and sixty

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Speaker 1: million dollars in assets under management. Some of the firm's

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Speaker 1: research reports have revealed extensive frauds at a number of companies,

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Speaker 1: leading to stock prices collapsing and some companies getting delisted.

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Speaker 1: Carson Block, Welcome to Bloomberg. Yeah, thanks for having me, Barry.

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Speaker 1: I've been looking forward to this, hoping to do it

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Speaker 1: for quite some time. So I'm glad we got the

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Speaker 1: chance to connect. I'm glad we did thanks to her

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Speaker 1: putting us together. Let's start with your background, and and

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Speaker 1: you have like a really intriguing background. You spent the

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Speaker 1: summer of in Japan. Tell us about that, what you

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Speaker 1: learn about Asia from that experien aarens. Well, yeah, that's

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Speaker 1: that's going back pretty far. Um, I don't think i'd

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Speaker 1: be here today if I hadn't gone to Japan um

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Speaker 1: that summer. But every time I say that, the flip

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Speaker 1: side is maybe I'd be running Goldman Sachs instead. So, um,

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Speaker 1: perhaps it wasn't a great thing. Now I I definitely

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Speaker 1: kid on that one, but um, yeah, I Uh. That

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Speaker 1: was summer after my freshman year of high school and

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Speaker 1: I had not yet been to a foreign country. So

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Speaker 1: at the beginning of freshman year and just um history

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Speaker 1: teacher who said that he would lead a group of

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Speaker 1: students um every summer to Japan to do an exchange,

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Speaker 1: and that's just so appealed to me. And people ask me, well,

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Speaker 1: why don't you want to go to Europe for the

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Speaker 1: first time? You go overseason said, and I just make

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Speaker 1: the joke that, yeah, Europe is the same as the US,

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Speaker 1: except they are more bathtubs on legs, and um, yeah,

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Speaker 1: I don't know. Being an Asian culture totally different really

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Speaker 1: appealed to me. So UM went to Japan and it

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Speaker 1: was you know, it was so different, and especially in

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Speaker 1: and the bubble had just burst there. But this was

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Speaker 1: a period in the US where, um, you know, all

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Speaker 1: these a lot of the movies that were made in

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Speaker 1: the late nineteen eighties basically showed Japan's dominating US in

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Speaker 1: you know, every company has uh you know, had a

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Speaker 1: Japanese element to it now, and you know that that's

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Speaker 1: kind of what was um portrayed by the movies, and

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Speaker 1: um there was it seemed like Honda and Toyota, we're

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Speaker 1: putting Detroit out of business. So yeah, it was it

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Speaker 1: was a really interesting time to be there. And I

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Speaker 1: didn't couldn't realize at the time that that was kind

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Speaker 1: of the apex of Japan's economic might, so to speak.

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Speaker 1: But uh, yeah, I really went my appetite for Asia,

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Speaker 1: and when I went to uh school or the university

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Speaker 1: a few years later, Um, I wanted to study I

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Speaker 1: wanted to study Chinese. But my girlfriend, who was a

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Speaker 1: couple of years ahead of me in school, she was

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Speaker 1: at Rutger's, she was studying Japanese. So because of that,

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Speaker 1: and of course studied Japanese for a year but ultimately

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Speaker 1: switched to Chinese. Broke up with my girlfriend, and yeah,

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Speaker 1: kind of set the course for the rest of my career. Yes,

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Speaker 1: so learning a little Mandarin certainly helped to go to

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Speaker 1: law school and end up with Jones Day in their

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Speaker 1: Shanghai office. Did did the language help at all studying

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Speaker 1: the language or is it just so overwhelming for a

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Speaker 1: foreigner that if you're not fluent it doesn't matter. Yeah.

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Speaker 1: That that's actually an interesting question, because the thing is,

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Speaker 1: when I studied Chinese in school, so I took three

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Speaker 1: academic years, including a summer in Beijing studying UM and

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Speaker 1: just also to fill in some of the gaps UM.

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Speaker 1: I didn't go to law school right after undergrad So

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Speaker 1: I graduated in and I've been interviewing for investment banking

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Speaker 1: first year analyst gigs. But I also had this idea

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Speaker 1: to start an a share research firm in China UM

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Speaker 1: and I just couldn't shake that idea. So I've had

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Speaker 1: an offer from one firm and I was still in

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Speaker 1: process with others. But I just said to myself, you know,

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Speaker 1: I probably always kicked myself if I never gave this

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Speaker 1: idea and China chance, so I'd never know what would

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Speaker 1: have been. So graduated, got on a plane, moved to Shanghai.

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Speaker 1: I had no idea what I was just really doing there.

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Speaker 1: And yeah, within six or seven months, I figured out

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Speaker 1: I've met with some companies, I had made contacts in

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Speaker 1: the market. I sat down with a p l A

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Speaker 1: general who was running business is for the p l

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Speaker 1: A and somehow involved in markets, and I just got

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Speaker 1: this picture that I was probably ten years too early,

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Speaker 1: that there was nothing I could say was investable, but

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Speaker 1: there would be nothing I could say was investable for

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Speaker 1: probably a decade or so. So I went back to

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Speaker 1: the States conventional ie banking, worked with my father then

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Speaker 1: in equity research for a few years covering micro caps

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Speaker 1: UM had some embittering experiences visa V markets and that's

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Speaker 1: when I went to law school. So when I entered

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Speaker 1: law school, I didn't think I would practice law. I

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Speaker 1: was just there to get a degree, and um, I

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Speaker 1: ended up really enjoying law school, so I thought, Okay,

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Speaker 1: I'll practice, And coming out of law school I had

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Speaker 1: an offer to join Kirkland and Ellis in Chicago, but

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Speaker 1: I also finagled an offer from Jones DA Shanghai, which

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Speaker 1: the partner in charge of the Jones DA Shanghai office

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Speaker 1: whod given me the offer was advising me on a

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Speaker 1: personal level. He said, you shouldn't come right out here

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Speaker 1: to kinda just go and work for a few years

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Speaker 1: in the States and get good training and then come out.

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Speaker 1: But anyway, I ignored his advice, took the offer, and

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Speaker 1: ended up there. So to your question about language, and

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Speaker 1: sorry for being so circuitous in the sand, this is

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Speaker 1: a very helpful background. So I met some mostly American

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Speaker 1: but you know, non Chinese lawyers in China who had

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Speaker 1: always had a real passion for the language, and so

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Speaker 1: they were near native and they're speaking and they could

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Speaker 1: do documents, draft and read in Chinese. For me, I

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Speaker 1: could never get to that level because I never had

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Speaker 1: a passion for the language. For me, it was always

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Speaker 1: a tool that I wanted to put in my toolbox.

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Speaker 1: And the difference was these people had spent Friday and

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Speaker 1: Saturday nights instead of going out studying Chinese and you know,

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Speaker 1: practicing That was not me. So um it was it

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Speaker 1: was like, it's definitely helpful, but I was never uh,

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Speaker 1: you know, in in practicing law. It was definitely helpful,

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Speaker 1: but I was never somebody who got, you know, who

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Speaker 1: would be able to handle the Chinese portions of a transaction,

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Speaker 1: So you weren't drafting documents in Mandarin now, and a

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Speaker 1: lot of the documents that we dealt with, especially if

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Speaker 1: they involved foreign acquirers or foreign joint venture partners, a

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Speaker 1: lot of those were in English and they would be

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Speaker 1: translated into Mandarin. So that part was that part was fine.

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Speaker 1: But to do the you know, ironically, to do the

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Speaker 1: due diligence and read through the government filings and all

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Speaker 1: these other documents that went to the Chinese UM they

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Speaker 1: often called them legal uh consultants because they didn't have

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Speaker 1: j d s from the States, so they weren't and

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Speaker 1: they weren't, at least at that time, accorded full associate

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Speaker 1: status that UH foreign law firms. Quite interesting, So how

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Speaker 1: do you go from being a lawyer at Jones Day

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Speaker 1: in Shanghai to launching your own love box self storage

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Speaker 1: start up in China? How does something like that come about? Well,

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Speaker 1: like everything else in this days of my life, and

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Speaker 1: in a very circuitous manner. What I actually when I

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Speaker 1: left Jones Day after not quite a year and a half,

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Speaker 1: I actually intended to set up UM a wealth management firm,

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Speaker 1: and it was going to technically or legally be based

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Speaker 1: in Singapore, but I was going to look to manage

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Speaker 1: offshore so non China assets or wealth of Chinese entrepreneurs

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Speaker 1: primarily based in Tier three and Tier four cities. And

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Speaker 1: kind of my thinking along these lines was they that

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Speaker 1: I think with the offshore wealth, they were looking for

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Speaker 1: something that was less volatile, UM safer, and if I

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Speaker 1: stuck to Tier three tier four cities, I wouldn't be

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Speaker 1: competing with the bankers from UBS and Credit Suite so much.

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Speaker 1: And I was going to be working with UBS. I

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Speaker 1: was actually going to be the custodian of the assets.

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Speaker 1: But anyway, UM, I was in the process of setting

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Speaker 1: that up. UM. During that time, I co authored Doing

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Speaker 1: Business in China for Dummies, which was really a foreign

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Speaker 1: direct investment uh primer. You know, I think the four

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Speaker 1: Dummies title really gives a short shrift. But UM, the

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Speaker 1: and I was a project that was in the work

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Speaker 1: since before I had left to move to China at

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Speaker 1: that time. But yeah, I was in the process of

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Speaker 1: setting this firm up and two things were happening, you know. One,

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Speaker 1: a good friend of mine was getting ready to launch

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Speaker 1: a self storage firm in Shanghai, and I introduced him

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Speaker 1: to a family member of mine who had owned self

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Speaker 1: storage in the US, and when we sat down for

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Speaker 1: dinner with that um ex uncle he had divorced out

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Speaker 1: of the family, he said, of all the investments I've

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Speaker 1: made in my life, self storage is by far the

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Speaker 1: best over seventeen years, fifty cash on cash return and

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Speaker 1: that doesn't even include the lands appreciation. So now I'm thinking, like, whoa,

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Speaker 1: you know, and especially if we could be the first

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Speaker 1: in China. Um So, I decided I would be a

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Speaker 1: passive investor, but a few weeks later that flipped to

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Speaker 1: um majority active investor, and eventually that turned into this

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Speaker 1: guy needed me to buy him out. But that was

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Speaker 1: While that was happening, I was also having doubts about

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Speaker 1: whether I really wanted to spend my time hanging out

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Speaker 1: with factory owners in tier three tier four cities, because

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Speaker 1: these are undoubtedly some smart people. But you know, I

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Speaker 1: just had this vision, you know, and I, especially at

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Speaker 1: the time Shanghai, I had a real soft spot for

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Speaker 1: for animals, you know, and you just see them mistreated

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Speaker 1: on the streets all the time, and I just keep

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Speaker 1: telling myself. In addition to the just relentless drinking and

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Speaker 1: karaoke or whatever. I mean, that's kind of a euphemism there,

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Speaker 1: but that I'd have to endure that I would see

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Speaker 1: these guys do some something that you know, would really

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Speaker 1: really bother me. Like I'd see I just kind of pictured,

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Speaker 1: I'd see a guy about to get into the back

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Speaker 1: of his s class and you'd see a straight dog

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Speaker 1: line there and you go up and take it and laugh.

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Speaker 1: And I just had vision of my mind that there

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Speaker 1: I would have to make a choice between sort of

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Speaker 1: playing it off or just being like, man, what are

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Speaker 1: you doing? Like that is so wrong? And I don't

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Speaker 1: know why. That was the image that kept going through

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Speaker 1: my mind. But when I when I started thinking, on

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Speaker 1: the other hand, about how self storage could actually be,

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Speaker 1: because it was going to be know, we were the

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Speaker 1: ones starting in China, how could actually it would actually

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Speaker 1: be a near luxury service. You know, we were going

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Speaker 1: for the Chinese who were buying Cartier jewelry or something,

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Speaker 1: you know, and um as opposed to it being the

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Speaker 1: Joe six pack kind of service in the US. And

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Speaker 1: we we thought that we could actually build a strong

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Speaker 1: near luxury consumer brand in self storage there as opposed

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Speaker 1: to you in the US, like nobody knows can remember

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Speaker 1: the name of their self storage company because it's so fragmented.

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Speaker 1: Um So, on one hand, the self storage thing was exciting,

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Speaker 1: and on the other hand, I was having genuine second

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Speaker 1: or third thoughts about whether I wanted to manage, uh

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Speaker 1: massage wealth of tier three, tier four UM factory owners.

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Speaker 1: So I decided, Hey, this seems like fun and jumped

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Speaker 1: in with both feet to self storage. And that pretty

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Speaker 1: quickly became unfun. But that was all part of the journey.

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Speaker 1: So that leads to the obvious question. From Japan to

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Speaker 1: law school, to Shanghai to sell storage, to writing a

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Speaker 1: book doing business in China for dummies, none of this

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Speaker 1: has anything to do with short selling. How did this

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Speaker 1: early experience color what was to come? Sure? Well, I

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Speaker 1: had grown up in the markets. My father was an

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Speaker 1: institutional salesperson and equity analyst. He focused on high growth

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Speaker 1: micro tap companies. UM I mean earlier in his career.

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Speaker 1: He'd been early on McDonald's and I think even H

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Speaker 1: and R Block. But um, as market caps increased across

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Speaker 1: the board, what he focused on in dollar terms didn't

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Speaker 1: so kind of went from you know, not ridiculously small

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Speaker 1: too almost ridiculously small in terms of the market taps.

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Speaker 1: But um, you know, he's he's an eternal optimistly always

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Speaker 1: and I saw this consistently inside and outside the markets.

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Speaker 1: He would see the best in people, and by the

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Speaker 1: time I was in my early twenties, I was starting

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Speaker 1: to feel at times that there were people in my

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Speaker 1: father's life who took advantage of that, and that he

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Speaker 1: was often, um, you know, beguiled by charisma and what

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Speaker 1: ended up happening. I mean, there were there were an

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Speaker 1: objective ways of of of measuring this in that in

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Speaker 1: the during the period of nine through o two, we

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Speaker 1: were being lied to and used by a number of

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Speaker 1: managements of companies that my father and then my father

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Speaker 1: and I, um you were had had strong vison or

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Speaker 1: speculated based or whatever. I mean. We you know, we

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Speaker 1: thought that we were close with management, and back then

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Speaker 1: I think managements or insiders had forty five days to

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Speaker 1: file their forms for and so we noticed some egregious

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Speaker 1: behavior where we'd take managements on non deal road shows.

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Speaker 1: I mean, some of our clients would come in and

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Speaker 1: just buy the thing up inside. Like I remember, you know,

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Speaker 1: fidelity was just the way my father described it at

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Speaker 1: the time, a bull in a china shop, you know,

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Speaker 1: the way they would buy. But then we'd see these

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Speaker 1: form four or these forms four that, oh, well, the

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Speaker 1: CEO and CEO just sold several million dollars worth of

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Speaker 1: stock right after going on the non deal road show

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Speaker 1: while our clients were buying. And it was one of

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Speaker 1: my father's precepts that he quote put his money where

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Speaker 1: his mouth is. So he was long all of these

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Speaker 1: things personally in size that he was recommending clients by.

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Speaker 1: And so my tiny little nest d egg I I

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Speaker 1: too was And these companies started blowing up. And I

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Speaker 1: think the most egregious example was a company called rent Way,

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Speaker 1: which actually wasn't that small. I think it was about

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Speaker 1: a six million market cap at the time. And I

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Speaker 1: developed a couple of institutional clients, probably twenty four at

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Speaker 1: the time, and so we were taking the CFO Rentway

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Speaker 1: on a non deal road show. We're sitting in this

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Speaker 1: conscience room at this one client I developed a reasonable

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Speaker 1: size money, uh you know, mutual fund manager in l

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Speaker 1: A and the CFO at the time at that time, Rentway,

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Speaker 1: Jeff Conway, looked my clients in the eyes and said

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Speaker 1: to her, pointing at my father in the seventeen quarters

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Speaker 1: bill has been following us. We never missed one of

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Speaker 1: his estimates. That's how good a handle we have on

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Speaker 1: our numbers. But one or two weeks later, when my

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Speaker 1: father was supposed to meet Jeff in New York, he

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Speaker 1: wasn't there and the stock was halted and it turned

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Speaker 1: out that on my god, it was an accounting fraud,

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Speaker 1: and all Jeff pleaded guilty. Um, so did the controller

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Speaker 1: beneath him, and I think one other person and I

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Speaker 1: don't know. I mean, this was just salt in the wounds.

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Speaker 1: But I think Jeff got sentenced a fewer years in

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Speaker 1: prison and the people beneath him. But it was just

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Speaker 1: this really embittering time where, you know, it wasn't only

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Speaker 1: happening to us. This was at the same time that

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Speaker 1: Enron had happened in World Calm and helped South tycho. Um.

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Speaker 1: It just you know, seemed like top to bottom the

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Speaker 1: market was filled with liars. And I don't know, you know,

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Speaker 1: the other thing that my father had noted at the

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Speaker 1: time was I was also quick to sell when my

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Speaker 1: socks had gone up. You know, I said, wow, you know,

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Speaker 1: like we were hoping for a thirty taker and I've

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Speaker 1: gotten fifty nine months, you know, like, hey, I'm out,

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Speaker 1: and yeah, I mean, like some of these things, it

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Speaker 1: was the wrong thing to do UM in retrospect, but

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Speaker 1: I also had that I had that very I'm kind

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Speaker 1: of just abused the English language here, but it's very

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Speaker 1: risk managy type of mindset. So I think if you

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Speaker 1: combine that with the um bitterness that I was starting

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Speaker 1: to feel towards the system UM and our play pecking order,

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Speaker 1: which I as, you know, a quasi sell side equity research,

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Speaker 1: I kind of started to view us at the very bottom. UM.

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Speaker 1: I wanted out of the markets. But my father's kind

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Speaker 1: of one of his partying comments to me was maybe

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Speaker 1: you'd be a good short seller, and I said, well,

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Speaker 1: do you know any I was like, well, not really.

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Speaker 1: I mean there's this guy up in San Francisco named

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Speaker 1: John Gruber who does some but I don't know. You

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Speaker 1: can call him. And I said, now I'm going to

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Speaker 1: law school. So that was you know, that was really

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Speaker 1: the background. And Paul was here, but you know, I

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Speaker 1: I was totally done with markets until you know, by

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Speaker 1: active in two thousand nine. Let's talk a little bit

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Speaker 1: about what you were just saying about, Um, how two

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Speaker 1: thousand and nine and two and ten changed your life.

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Speaker 1: You took a trip to China. Tell us about that? Uh,

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Speaker 1: And I believe Orient Paper was the company involved. Sure. Well,

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Speaker 1: at the time, I was still living in Shanghai. Um,

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Speaker 1: I had the self storage business, and it had had

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Speaker 1: taught me many lessons, but one of them was that

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Speaker 1: as an entrepreneur, you really need to define, at least

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Speaker 1: as a beginning entrepreneur, you really need to define success

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Speaker 1: as not failing. So what that means is I was

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Speaker 1: struggling every day and not go out of business. And

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Speaker 1: my father had gotten really interested in a number of

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Speaker 1: these China based companies that had gone public in the

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Speaker 1: US via reverse merger. And he went to one of

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Speaker 1: the Rock conferences and came back from that really bowled

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Speaker 1: up about it. And um, he was mentioning and we're

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Speaker 1: talking my phone and just mentioning several companies, and I know,

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Speaker 1: I'm I'm sitting there in China struggling to keep this

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Speaker 1: business from folding. You know, my wife and I were

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Speaker 1: just kind of you know, we joke about this period

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Speaker 1: of time in our life, but it's really not a

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Speaker 1: half joke, but it's really not it's not a joke,

355
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Speaker 1: but you know, we're drinking pretty heavily, like every night.

356
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Speaker 1: Was just kind of like, yeah, let's go, let's go

357
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Speaker 1: meet up with some other entrepreneur friends and all numb

358
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Speaker 1: ourselves too, you know how badly we're getting punched in

359
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Speaker 1: the face every day. And um my father wanted me

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Speaker 1: to look at or help him diligence um some of

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Speaker 1: these companies, and I don't know, again, I just wasn't

362
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Speaker 1: enthusiastic about this, but I my expectation at the time,

363
00:22:59,359 --> 00:23:03,920
Speaker 1: and all pretty much all the dominoes had fallen for

364
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Speaker 1: me UM in the investing business at that point. I

365
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Speaker 1: didn't trust managements. I knew better than to trust bankers.

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Speaker 1: I realized. I realized that directors are you know, incompetent

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Speaker 1: um and lawyers are basically just there to serve the

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Speaker 1: managements and they're kind of weapons to be used against

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Speaker 1: curious shareholders. But I thought that auditors, I, like probably

370
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Speaker 1: of the investing public, thought that auditors were there to

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Speaker 1: perform in anti fraud function. And I'm not being facetious

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Speaker 1: when I say this, but I know now that that

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Speaker 1: is not actually the mandate. But I did not know

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Speaker 1: that when my father brought up Orient Paper. So UM,

375
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Speaker 1: at this time in China and my life, I was

376
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Speaker 1: quite skeptical of what went on in China. UM. Not

377
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Speaker 1: only had I co author the book of Doing Business

378
00:24:01,760 --> 00:24:04,480
Speaker 1: in China for Dummies, which involved a lot of great research.

379
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Speaker 1: And not only had I seen a number of joint

380
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Speaker 1: ventures and UM and other direct investments go bad for foreigners,

381
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Speaker 1: but I'd also chaired the American Chamber of Commerce in

382
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Speaker 1: Shanghai's Entrepreneurs Committee, and most of my friends were foreign entrepreneurs.

383
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Speaker 1: So one thing about me is I'm pretty good at

384
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Speaker 1: absorbing and internalizing experiences of others. And UM, so I

385
00:24:29,600 --> 00:24:32,560
Speaker 1: guess I was seeing the matrix at this point in China,

386
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Speaker 1: but I didn't quite know it yet. UM, and my

387
00:24:36,800 --> 00:24:39,800
Speaker 1: father wanted me to go look at Orient Paper. So

388
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Speaker 1: I was thinking, Okay, here's gonna be the problem here.

389
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Speaker 1: If there's gonna be a problem, which the problem is

390
00:24:46,680 --> 00:24:50,840
Speaker 1: that Really the question is is the guy stealing an

391
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Speaker 1: unacceptable amount of money out of the company. I assumed

392
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Speaker 1: that the business would be real, that the profits would

393
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Speaker 1: be largely real, but as he, you know, using this

394
00:25:01,560 --> 00:25:04,000
Speaker 1: too much for his own benefit. Wait, wait, let me

395
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Speaker 1: interrupt you right here. Unacceptable is the guy stealing an

396
00:25:08,280 --> 00:25:12,800
Speaker 1: unacceptable amount of money in China? Is there an acceptable

397
00:25:12,800 --> 00:25:18,520
Speaker 1: amount of money management can steal? Um? Yeah, I mean this.

398
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Speaker 1: This is a question that I remember my entrepreneur friends

399
00:25:22,480 --> 00:25:25,320
Speaker 1: and I used to occasionally when we get together to

400
00:25:25,560 --> 00:25:30,240
Speaker 1: numb ourselves. Um, we used to discuss and so the

401
00:25:30,320 --> 00:25:34,560
Speaker 1: question was, Okay, what do you think the average amount

402
00:25:34,720 --> 00:25:40,560
Speaker 1: of money stolen is when the capital is provided by

403
00:25:40,680 --> 00:25:45,360
Speaker 1: outside financing, whether it's the government, a loan or equity investment.

404
00:25:46,119 --> 00:25:51,040
Speaker 1: In The consensus, like to a person, was if we're

405
00:25:51,080 --> 00:25:57,840
Speaker 1: being kind, really probably more like in the case of

406
00:25:58,000 --> 00:26:02,199
Speaker 1: something that's good and functional. And so we we used

407
00:26:02,240 --> 00:26:05,680
Speaker 1: to then laugh and apply that multiplier to the Shanghai

408
00:26:05,680 --> 00:26:08,720
Speaker 1: World Expo. So that was that took place in two

409
00:26:08,760 --> 00:26:11,240
Speaker 1: thousand and ten, and it was so funny because it's

410
00:26:11,240 --> 00:26:17,080
Speaker 1: like Shanghai's answer to the Olympics, and Shanghai government brags

411
00:26:17,119 --> 00:26:22,400
Speaker 1: that it was spending I think eighty billion US to prepare.

412
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Speaker 1: So we used to just laugh and say, like, yeah,

413
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Speaker 1: this is why Shanghai wanted this. You know. It's like,

414
00:26:29,200 --> 00:26:34,399
Speaker 1: if we're being kind, sixteen billion dollars of graft like

415
00:26:34,520 --> 00:26:37,879
Speaker 1: that is so huge, man, Like foreign bank accounts and

416
00:26:38,280 --> 00:26:40,760
Speaker 1: you know in apartments in Hong Kong are just gonna

417
00:26:40,760 --> 00:26:43,439
Speaker 1: be like it's gonna be lit man, Like, these things

418
00:26:43,480 --> 00:26:46,320
Speaker 1: are gonna the money is gonna be pouring in. So

419
00:26:46,800 --> 00:26:50,719
Speaker 1: that was our view of what actually works in China

420
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Speaker 1: is and I used to say at the time also,

421
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Speaker 1: that's the difference between China and all of these other

422
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Speaker 1: basket case e m s and FM is. In China,

423
00:27:03,640 --> 00:27:06,720
Speaker 1: they didn't steal so much that they couldn't build the road,

424
00:27:07,080 --> 00:27:10,600
Speaker 1: like they understood the right level of corruption there. You know,

425
00:27:10,640 --> 00:27:15,320
Speaker 1: this is this is the level of draft that works best. Yeah,

426
00:27:15,400 --> 00:27:20,320
Speaker 1: they had like optimized for draft. So so that was

427
00:27:20,400 --> 00:27:23,800
Speaker 1: basically the question, you know, was was Chairman Leo going

428
00:27:23,840 --> 00:27:26,119
Speaker 1: to be on the right side of that line or

429
00:27:26,280 --> 00:27:29,159
Speaker 1: was he going to be over the top. And the

430
00:27:29,240 --> 00:27:32,879
Speaker 1: first indicator I had that something could be really wrong

431
00:27:33,320 --> 00:27:35,399
Speaker 1: was in the first conversation that I had with my

432
00:27:35,480 --> 00:27:38,280
Speaker 1: father about it. He had just come back from this

433
00:27:38,400 --> 00:27:42,280
Speaker 1: rock conference I think in Florida, and that's where he'd

434
00:27:42,280 --> 00:27:45,000
Speaker 1: heard about it and met some of the people around

435
00:27:45,280 --> 00:27:49,440
Speaker 1: orient paper. Um, you know American you know with promoter

436
00:27:49,560 --> 00:27:53,560
Speaker 1: types and stuff, and my father is telling me that, yeah,

437
00:27:53,600 --> 00:27:57,120
Speaker 1: they say, uh, they say, chairman Leo is different from

438
00:27:57,119 --> 00:28:01,000
Speaker 1: other Chinese company chairman. He doesn't drink, he doesn't smoke.

439
00:28:01,560 --> 00:28:04,720
Speaker 1: And my father is telling me that. I just I

440
00:28:04,800 --> 00:28:08,360
Speaker 1: have this memory of being in my apartment in Shanghai.

441
00:28:08,400 --> 00:28:12,560
Speaker 1: It's late at night, like I just really don't care.

442
00:28:13,000 --> 00:28:15,840
Speaker 1: But as soon as he said that, I perked up

443
00:28:16,000 --> 00:28:19,520
Speaker 1: and I said, I was like, look, I'm sure none

444
00:28:19,560 --> 00:28:23,640
Speaker 1: of that is true. But even if it were, the

445
00:28:23,680 --> 00:28:29,240
Speaker 1: fact that this is what's propagating at the conference gives

446
00:28:29,280 --> 00:28:32,120
Speaker 1: me some pause because I told him this. I said,

447
00:28:32,200 --> 00:28:35,680
Speaker 1: this indicates to me that somebody is trying to gain

448
00:28:36,160 --> 00:28:40,240
Speaker 1: American investor psychology, Like this is what we want to hear,

449
00:28:40,400 --> 00:28:42,920
Speaker 1: isn't it. He doesn't drink, he doesn't smoke. You know.

450
00:28:43,080 --> 00:28:46,120
Speaker 1: My father told me keep an open mind and whatever,

451
00:28:46,160 --> 00:28:48,760
Speaker 1: and I said I will. But this is already red flag.

452
00:28:49,040 --> 00:28:52,400
Speaker 1: So so what did you find that orient paper? Well,

453
00:28:52,440 --> 00:28:54,880
Speaker 1: the first thing was I ended up having launch in

454
00:28:55,120 --> 00:28:58,000
Speaker 1: l A few weeks later with the CFO and my father.

455
00:28:58,080 --> 00:29:00,440
Speaker 1: I was back home for Thanksgiving, and you know, like

456
00:29:00,480 --> 00:29:04,080
Speaker 1: all good China based companies, the CFO sat in the

457
00:29:04,200 --> 00:29:07,800
Speaker 1: US and you know, maybe flew over there like four

458
00:29:07,840 --> 00:29:11,720
Speaker 1: times a year, and the company was about to raise

459
00:29:11,800 --> 00:29:17,240
Speaker 1: money and two reportedly build uh a new new factory

460
00:29:17,240 --> 00:29:21,560
Speaker 1: building with two new production lines. Remember asking the CFO

461
00:29:21,640 --> 00:29:25,520
Speaker 1: what I thought were some basic questions, Okay, well, um,

462
00:29:25,560 --> 00:29:27,760
Speaker 1: what's the what's the cost of the building versus the

463
00:29:27,800 --> 00:29:30,720
Speaker 1: cost of the machinery? I don't know, Well, what do

464
00:29:30,760 --> 00:29:33,680
Speaker 1: you anticipate the per square meter construction costs to be?

465
00:29:34,320 --> 00:29:36,640
Speaker 1: Huh that's a good question. I don't know. Well what

466
00:29:36,680 --> 00:29:39,880
Speaker 1: about the actual machinery. Uh, that's a good question. I

467
00:29:39,920 --> 00:29:42,720
Speaker 1: don't know. It was just, you know, it's like this

468
00:29:43,000 --> 00:29:45,200
Speaker 1: wasn't a real CFO and I could see through it.

469
00:29:45,520 --> 00:29:49,200
Speaker 1: And then the real red flags came when um I

470
00:29:49,280 --> 00:29:52,960
Speaker 1: was talking about I was asking about another anticipated investment

471
00:29:53,000 --> 00:29:55,760
Speaker 1: that the company was supposed to make. They were supposedly

472
00:29:55,800 --> 00:30:01,960
Speaker 1: going to buy this UH photographic paper UM manufacturing line.

473
00:30:02,760 --> 00:30:07,880
Speaker 1: And the CFO said, oh, well, actually Chairman Leo already

474
00:30:07,920 --> 00:30:11,760
Speaker 1: bought it and he's holding it in trust for the company,

475
00:30:12,160 --> 00:30:14,520
Speaker 1: and then the company is going to buy it from him.

476
00:30:14,560 --> 00:30:20,080
Speaker 1: And I almost spit my lunch up. And what you

477
00:30:20,600 --> 00:30:24,080
Speaker 1: he's selling it to the company? I mean the cost

478
00:30:24,160 --> 00:30:27,680
Speaker 1: of course, right, So that then. Yeah, so that was

479
00:30:27,760 --> 00:30:29,680
Speaker 1: one of the questions that then you know, that was

480
00:30:29,720 --> 00:30:32,120
Speaker 1: like maybe the second question was, well, what did he

481
00:30:32,200 --> 00:30:35,800
Speaker 1: pay for it? I don't know, but um, but you know,

482
00:30:35,840 --> 00:30:37,800
Speaker 1: we're buying it at a fair price. We're having it

483
00:30:37,840 --> 00:30:43,000
Speaker 1: appraise by a third party appraiser. Huh okay, Um, but

484
00:30:43,360 --> 00:30:46,160
Speaker 1: like one of the Big four or American appraisal. Who's

485
00:30:46,200 --> 00:30:49,719
Speaker 1: the who's the appraiser? Um? I think it's a local

486
00:30:49,920 --> 00:30:55,120
Speaker 1: Chinese firm in fooding. What why would it be a

487
00:30:55,120 --> 00:30:59,680
Speaker 1: local firm and not a Big four or American appraisal

488
00:30:59,800 --> 00:31:02,920
Speaker 1: or for them like that? Um, because they're experts in

489
00:31:02,960 --> 00:31:07,520
Speaker 1: this type of uh, this type of manufacturing equipment, you know.

490
00:31:07,560 --> 00:31:10,959
Speaker 1: And I'm just thinking no way, like this is okay,

491
00:31:11,040 --> 00:31:14,000
Speaker 1: there's this is hyper like this is corrupt. I knew

492
00:31:14,040 --> 00:31:17,360
Speaker 1: that right then and there. But um, again it goes

493
00:31:17,400 --> 00:31:20,239
Speaker 1: to this question of its chairman Leo was dealing too

494
00:31:20,360 --> 00:31:23,560
Speaker 1: much money or is it like, you know, would I

495
00:31:23,600 --> 00:31:27,760
Speaker 1: still build the road? So? Um? Anyway, I said to him,

496
00:31:27,920 --> 00:31:31,480
Speaker 1: the CFO at the end of the meal, Um, I said, look,

497
00:31:32,640 --> 00:31:35,920
Speaker 1: I'm happy to go up in early January. I'm going

498
00:31:36,000 --> 00:31:41,920
Speaker 1: to bring um consultant with me who really understands manufacturing,

499
00:31:42,400 --> 00:31:44,760
Speaker 1: and we're going to take a much harder look at

500
00:31:44,800 --> 00:31:48,960
Speaker 1: this company and your company than anybody else has before.

501
00:31:49,000 --> 00:31:53,360
Speaker 1: I guarantee you that. So if there is any reason

502
00:31:53,560 --> 00:31:58,080
Speaker 1: Chairman Leo would have to not want us to look

503
00:31:58,120 --> 00:32:01,560
Speaker 1: at the company under the microscope, just come up with

504
00:32:01,600 --> 00:32:05,360
Speaker 1: an excuse. Okay, just tell me, you know, something came

505
00:32:05,440 --> 00:32:07,600
Speaker 1: up or whatever, all right, and we won't do it.

506
00:32:08,280 --> 00:32:09,960
Speaker 1: You know, in the CFO like he just didn't know

507
00:32:10,000 --> 00:32:12,800
Speaker 1: what he was getting into, and he's like, oh, well, no,

508
00:32:13,000 --> 00:32:15,880
Speaker 1: I'm sure Chairman Leo would really look forward to that it.

509
00:32:16,160 --> 00:32:22,440
Speaker 1: You know, I'd want to know too. Well. These arrogant idiots,

510
00:32:23,160 --> 00:32:26,160
Speaker 1: you know, welcomed us to a bow Ding in UM

511
00:32:26,160 --> 00:32:30,560
Speaker 1: early January of two thousand ten. And what we saw

512
00:32:30,720 --> 00:32:34,080
Speaker 1: was a Potempkon factory, I mean, a company that was

513
00:32:34,520 --> 00:32:38,000
Speaker 1: about to report its two tho nine revenue of one

514
00:32:38,440 --> 00:32:42,000
Speaker 1: three million. The best I was ultimately able to determine

515
00:32:42,200 --> 00:32:45,000
Speaker 1: was real revenue was only two and a half three

516
00:32:45,040 --> 00:32:49,200
Speaker 1: million dollars. And it was funny because I brought a

517
00:32:49,240 --> 00:32:54,560
Speaker 1: consultant up with me. UM and uh, I mean, this

518
00:32:54,600 --> 00:32:58,080
Speaker 1: trip was just bizarre, but say it had on the

519
00:32:58,080 --> 00:33:03,080
Speaker 1: balance sheet. UM raw materials of five million dollars. So

520
00:33:03,160 --> 00:33:07,320
Speaker 1: what what Orient Paper produced is core gating medium. So

521
00:33:07,360 --> 00:33:09,520
Speaker 1: when you look and if you cut into a box

522
00:33:09,560 --> 00:33:12,520
Speaker 1: and you see that wavy stuff inside the box layers,

523
00:33:12,640 --> 00:33:18,160
Speaker 1: that's core gating medium. And that is made with old cardboards.

524
00:33:18,200 --> 00:33:21,760
Speaker 1: So um, you know, just throwing a thrown away cardboard,

525
00:33:22,120 --> 00:33:24,840
Speaker 1: you recycle it, you make it in the medium. So

526
00:33:24,880 --> 00:33:26,640
Speaker 1: they head on the balance sheet I think about five

527
00:33:26,680 --> 00:33:31,760
Speaker 1: million dollars of raw materials inventory. And with the rest

528
00:33:32,040 --> 00:33:36,040
Speaker 1: at the facility, they're just like these big trash heaps.

529
00:33:36,040 --> 00:33:40,240
Speaker 1: They're just you know, like yeah, I don't know, I mean,

530
00:33:40,280 --> 00:33:43,840
Speaker 1: just a mark abount of trash heaps. And the consultant

531
00:33:43,840 --> 00:33:47,080
Speaker 1: I was with, he's wearing like a you know, Xenia overcoat,

532
00:33:47,120 --> 00:33:49,360
Speaker 1: and he climbs to the top of a trash heap,

533
00:33:49,480 --> 00:33:53,640
Speaker 1: looks around, comes down and says to me, if this

534
00:33:53,680 --> 00:33:57,160
Speaker 1: is worth five million dollars, the world's a much richer

535
00:33:57,200 --> 00:34:01,080
Speaker 1: place than I ever knew. And I mean it was

536
00:34:01,160 --> 00:34:05,680
Speaker 1: just ridiculous statement after ridiculous statement. This equipment was obviously

537
00:34:07,120 --> 00:34:11,320
Speaker 1: very old. I mean, if we were being generous early nineties,

538
00:34:11,360 --> 00:34:13,839
Speaker 1: it had you know, I had like the typical state

539
00:34:13,880 --> 00:34:18,319
Speaker 1: owned enterprise slogans UM painted on it, so it was

540
00:34:18,360 --> 00:34:23,800
Speaker 1: probably late eighties UM vintage but basically throw away from

541
00:34:23,920 --> 00:34:26,400
Speaker 1: s O S. And it was being carried on the

542
00:34:26,440 --> 00:34:30,239
Speaker 1: balance sheet and I think like sixty million UM. They

543
00:34:30,280 --> 00:34:32,279
Speaker 1: said that they had six lines. They were only able

544
00:34:32,320 --> 00:34:35,320
Speaker 1: to show us to the second line we suspected was

545
00:34:35,360 --> 00:34:38,160
Speaker 1: actually not producing paper, but it was just looping around,

546
00:34:38,680 --> 00:34:41,239
Speaker 1: uh finished paper. I mean we couldn't tell. We were

547
00:34:41,239 --> 00:34:45,800
Speaker 1: being very much rushed through the workshop at that point.

548
00:34:46,200 --> 00:34:50,520
Speaker 1: There's water everywhere, like on the folding tables. Okay, water

549
00:34:50,840 --> 00:34:53,799
Speaker 1: is an athema to paper, like that's you know, they

550
00:34:53,840 --> 00:34:57,439
Speaker 1: just didn't have the air handling equipment that a suit

551
00:34:57,680 --> 00:35:01,000
Speaker 1: like a moderately serious paper ma manufacturer would have. I mean,

552
00:35:01,040 --> 00:35:04,200
Speaker 1: there's so many red flags. And so the company's revenue

553
00:35:05,320 --> 00:35:09,040
Speaker 1: and purported output had climbed significantly in two thousand nine,

554
00:35:09,600 --> 00:35:13,360
Speaker 1: and so we asked the chairman. Consultant asked the chairman.

555
00:35:13,960 --> 00:35:17,000
Speaker 1: He said, uh so, okay, you know output last year

556
00:35:17,160 --> 00:35:19,320
Speaker 1: was was how many tons? And you know it was

557
00:35:19,800 --> 00:35:24,200
Speaker 1: pretty big, maybe thirty increased versus two thousand eight. And

558
00:35:24,560 --> 00:35:28,439
Speaker 1: consultants then asked, uh, okay, did you did you add

559
00:35:28,480 --> 00:35:31,399
Speaker 1: a production line? How did you how did you do that?

560
00:35:32,080 --> 00:35:37,160
Speaker 1: And he said, oh, process improvements. So afterwards, when we're

561
00:35:37,160 --> 00:35:40,160
Speaker 1: when we're downloading this incredible experience that we're having and

562
00:35:40,239 --> 00:35:43,440
Speaker 1: we're you know, we're talking about it, consultant said to me,

563
00:35:43,440 --> 00:35:45,680
Speaker 1: He's like, yeah, you remember when I asked him how

564
00:35:45,680 --> 00:35:50,040
Speaker 1: did you boost production? And he said process implements. It's like, Carson,

565
00:35:50,160 --> 00:35:53,439
Speaker 1: you were there, you were if you looked around, did

566
00:35:53,440 --> 00:35:58,759
Speaker 1: you see anything new, like even a new mop or buckets? No, Like,

567
00:35:59,200 --> 00:36:03,040
Speaker 1: that's total lie. So we we realized, i mean very

568
00:36:03,120 --> 00:36:07,839
Speaker 1: quickly on on the visit that no, this like this

569
00:36:08,000 --> 00:36:12,120
Speaker 1: wasn't a question of is the guy stealing? It was

570
00:36:12,160 --> 00:36:15,040
Speaker 1: a question of it was really just well it was

571
00:36:15,040 --> 00:36:17,839
Speaker 1: a conclusion of this is a potent in factory. This

572
00:36:17,920 --> 00:36:20,760
Speaker 1: is not a real business. These numbers that they're reporting

573
00:36:20,760 --> 00:36:25,000
Speaker 1: are total lies across the board. So so what was

574
00:36:25,040 --> 00:36:28,680
Speaker 1: the market cap and how large a short were you

575
00:36:28,719 --> 00:36:32,040
Speaker 1: able to get off on that? So it was it

576
00:36:32,080 --> 00:36:36,200
Speaker 1: was a hundred million market cap. And when I ended

577
00:36:36,280 --> 00:36:39,960
Speaker 1: up publishing this report, and it's like I didn't get

578
00:36:40,040 --> 00:36:43,239
Speaker 1: right into it because here's the thing. I I got

579
00:36:43,280 --> 00:36:47,399
Speaker 1: into China with pretty decent nest egg for a thirty

580
00:36:47,480 --> 00:36:51,480
Speaker 1: year old. Um. But I had incinerated it in self

581
00:36:51,480 --> 00:36:55,680
Speaker 1: storage and I was now beyond that two dollars in

582
00:36:55,719 --> 00:36:59,200
Speaker 1: debt and climbing I was borrowing from my father, so

583
00:36:59,560 --> 00:37:03,360
Speaker 1: I had no money to short this thing. And I

584
00:37:03,400 --> 00:37:06,040
Speaker 1: asked my father, Hey, you know, should we short it

585
00:37:06,040 --> 00:37:08,520
Speaker 1: and put out a report? My father literally had never

586
00:37:08,560 --> 00:37:10,560
Speaker 1: sold a stock short in his life, and he said

587
00:37:10,560 --> 00:37:15,719
Speaker 1: he was not interested. Um, and good luck to me, um.

588
00:37:15,760 --> 00:37:17,759
Speaker 1: And then I called some other people who I knew

589
00:37:17,880 --> 00:37:21,239
Speaker 1: uh from nine years earlier, so in the in the

590
00:37:21,280 --> 00:37:25,000
Speaker 1: markets and to see if they wanted to take a

591
00:37:25,040 --> 00:37:29,040
Speaker 1: short position and somehow compensate me. And no, nobody was

592
00:37:29,080 --> 00:37:34,240
Speaker 1: into that. UM. So I really didn't have a model

593
00:37:34,400 --> 00:37:37,399
Speaker 1: business model. And they just switched auditors to be Deo

594
00:37:37,520 --> 00:37:41,440
Speaker 1: Limited in Hong Kong. They've been audited by some Utah

595
00:37:41,480 --> 00:37:44,160
Speaker 1: based accounting firm that it would later turn out did

596
00:37:44,160 --> 00:37:47,200
Speaker 1: not even have a valid p C A O B registration,

597
00:37:47,360 --> 00:37:49,840
Speaker 1: But I didn't know that at the time. UM. But

598
00:37:49,920 --> 00:37:52,160
Speaker 1: I figured, Okay, well, you know, this is like one

599
00:37:52,200 --> 00:37:55,719
Speaker 1: of these It's probably like Chinese organized crime met up

600
00:37:55,760 --> 00:37:58,600
Speaker 1: with US organized crime. So it's really thinking about this

601
00:37:58,680 --> 00:38:03,080
Speaker 1: from the ninety nineties market, you know framework when I

602
00:38:03,080 --> 00:38:05,839
Speaker 1: started growing up there, so that there's no way they're

603
00:38:05,840 --> 00:38:10,400
Speaker 1: going to get an unqualified audit opinion wrong. So in

604
00:38:10,480 --> 00:38:13,280
Speaker 1: early April of two ten, I realized they had gotten

605
00:38:13,280 --> 00:38:15,920
Speaker 1: an unqualified audit opinion. I've forgotten at the company for

606
00:38:15,920 --> 00:38:19,680
Speaker 1: a while because I just had, you know, no economic

607
00:38:19,760 --> 00:38:27,240
Speaker 1: model here, so UM, I decided to produce a report

608
00:38:27,239 --> 00:38:29,759
Speaker 1: that I don't know would explain that these things are

609
00:38:29,760 --> 00:38:32,799
Speaker 1: fraud and I didn't There was no template for me

610
00:38:32,880 --> 00:38:36,560
Speaker 1: to write this report. It just kind of made to

611
00:38:37,000 --> 00:38:39,480
Speaker 1: template up myself, a combination of what I used to

612
00:38:39,480 --> 00:38:41,840
Speaker 1: write when I worked with my father and how I

613
00:38:41,920 --> 00:38:45,560
Speaker 1: learned to write as a lawyer. And we researched it

614
00:38:46,000 --> 00:38:50,480
Speaker 1: um and disclosed that we were short. Now I was,

615
00:38:51,120 --> 00:38:54,719
Speaker 1: I owned two thousand dollars worth of puts, and that

616
00:38:54,840 --> 00:38:58,200
Speaker 1: consultant also in two thousand dollars worth of puts. I've

617
00:38:58,239 --> 00:39:00,799
Speaker 1: funded them, mind from my credit card. And I think

618
00:39:00,800 --> 00:39:04,040
Speaker 1: he'd basically done the same thing because he was he

619
00:39:04,239 --> 00:39:08,120
Speaker 1: owned a Nissan factory in China that was never able

620
00:39:08,120 --> 00:39:10,360
Speaker 1: to get off the ground, and he was constantly embroiled

621
00:39:10,400 --> 00:39:14,440
Speaker 1: in you know, the brawls with foul steel courtroom brawls, etcetera.

622
00:39:14,560 --> 00:39:19,959
Speaker 1: So um, at that point, you know, I didn't really

623
00:39:21,160 --> 00:39:24,560
Speaker 1: My thinking was, hey, I've got nothing to lose. I mean,

624
00:39:24,560 --> 00:39:27,759
Speaker 1: the self storage facility like this, things just a liability.

625
00:39:27,800 --> 00:39:30,000
Speaker 1: What are they gonna do take the liability from me?

626
00:39:30,480 --> 00:39:33,319
Speaker 1: By all means? You know, you can have it, So

627
00:39:34,840 --> 00:39:37,239
Speaker 1: it's it's Subsequently, when I looked back on this, I

628
00:39:37,320 --> 00:39:41,280
Speaker 1: realized there's a real power in having nothing to lose.

629
00:39:41,760 --> 00:39:43,480
Speaker 1: So I just threw the ball as far down the

630
00:39:43,480 --> 00:39:45,560
Speaker 1: field as I could. And the one thing that I

631
00:39:45,800 --> 00:39:49,040
Speaker 1: hoped for, I hoped these guys would think that I

632
00:39:49,120 --> 00:39:53,040
Speaker 1: had a sizeable short position because I just I knew

633
00:39:53,080 --> 00:39:56,120
Speaker 1: I was continent. I would win a litigation. But if

634
00:39:56,120 --> 00:39:58,160
Speaker 1: they knew that I really had no money at all,

635
00:39:58,719 --> 00:40:01,000
Speaker 1: they would have suited me anyway and just raked me

636
00:40:01,040 --> 00:40:04,480
Speaker 1: over the cold um in terms of legal fees. So

637
00:40:04,600 --> 00:40:06,840
Speaker 1: I just it was a leap of faith that I

638
00:40:06,880 --> 00:40:09,279
Speaker 1: was gonna be able to bluff my way out of

639
00:40:09,320 --> 00:40:16,719
Speaker 1: getting sued. And um happened. Well, stock went down day

640
00:40:16,760 --> 00:40:22,520
Speaker 1: after we published a trough of fifty. Company came back

641
00:40:22,600 --> 00:40:24,919
Speaker 1: said my father and I had tried to extort them

642
00:40:24,960 --> 00:40:27,680
Speaker 1: and they refused, And you know, and then when it

643
00:40:27,760 --> 00:40:30,720
Speaker 1: was like, man, you're you know, because I was really

644
00:40:30,800 --> 00:40:34,160
Speaker 1: nervous about that report to the moment I pushed the button.

645
00:40:34,200 --> 00:40:37,200
Speaker 1: I mean, I knew everything and there was factual I

646
00:40:37,280 --> 00:40:39,720
Speaker 1: knew exactly what was going on, but I got checked

647
00:40:39,800 --> 00:40:43,440
Speaker 1: myself so many times because like this it's a big

648
00:40:43,480 --> 00:40:46,880
Speaker 1: deal and going out and saying this company is is

649
00:40:46,920 --> 00:40:52,560
Speaker 1: a zero and they're lying. But that nervousness entirely disappeared

650
00:40:52,560 --> 00:40:55,440
Speaker 1: when they came back and lied. I don't know that

651
00:40:55,520 --> 00:41:01,080
Speaker 1: I needed extra conviction. I mean I didn't, but the

652
00:41:01,239 --> 00:41:04,440
Speaker 1: moment they started making stuff up about my father and me,

653
00:41:05,200 --> 00:41:08,200
Speaker 1: then it was just like you know, I mean I

654
00:41:08,480 --> 00:41:10,520
Speaker 1: I was just like, I'm bringing you guys down. Like

655
00:41:10,840 --> 00:41:15,720
Speaker 1: it changes the dynamics because suddenly they go from minor

656
00:41:15,960 --> 00:41:20,319
Speaker 1: grifters with the tendency to exaggerate to oh, you guys

657
00:41:20,400 --> 00:41:23,960
Speaker 1: are just next level criminals. This is a zero, your

658
00:41:24,000 --> 00:41:27,160
Speaker 1: total frauds and I'm gonna double down. Is am I

659
00:41:27,239 --> 00:41:31,600
Speaker 1: hearing that right? Well? It went from somewhat, but it

660
00:41:31,920 --> 00:41:36,520
Speaker 1: went more from fighting scared in a way um to

661
00:41:37,200 --> 00:41:42,200
Speaker 1: fighting with suriy and so is it tell they revealed

662
00:41:42,800 --> 00:41:45,480
Speaker 1: that they were scammers and they knew they were scammers,

663
00:41:45,480 --> 00:41:50,480
Speaker 1: and they knew you knew they were scammers, right and yeah,

664
00:41:50,520 --> 00:41:53,200
Speaker 1: and then they started like lying about other things, trying

665
00:41:53,239 --> 00:41:56,520
Speaker 1: to put the toothpaste back in the tube and U

666
00:41:57,200 --> 00:42:00,200
Speaker 1: but yeah, it was you know, it was really And

667
00:42:00,239 --> 00:42:04,120
Speaker 1: it was right after that that um just you know,

668
00:42:04,320 --> 00:42:08,120
Speaker 1: I mean, the report went viral, um, and I had

669
00:42:08,120 --> 00:42:10,839
Speaker 1: a lot of people reach out to me and say,

670
00:42:11,400 --> 00:42:14,880
Speaker 1: you know, wow, great reports. Somebody's finally exposed this stuff.

671
00:42:14,920 --> 00:42:17,359
Speaker 1: This is the STEMA, look at this company, look at

672
00:42:17,400 --> 00:42:20,880
Speaker 1: that company. And I just started cracking open ten K's

673
00:42:21,000 --> 00:42:24,239
Speaker 1: and it was just obvious, you know, like all of

674
00:42:24,280 --> 00:42:26,640
Speaker 1: these things that I was looking at these things for frauds.

675
00:42:26,680 --> 00:42:29,240
Speaker 1: I mean, it was just really obvious from the ten Ks.

676
00:42:29,480 --> 00:42:32,240
Speaker 1: I mean, I skipped over the part about us reading

677
00:42:32,239 --> 00:42:34,960
Speaker 1: the orient paper finalings before we went up there. You

678
00:42:35,000 --> 00:42:37,479
Speaker 1: were in the airport waiting for our flight, and and

679
00:42:37,680 --> 00:42:41,320
Speaker 1: I mean we just kept laughing out loud at different times.

680
00:42:41,440 --> 00:42:43,879
Speaker 1: But again, we didn't get that this thing was going

681
00:42:43,920 --> 00:42:49,480
Speaker 1: to be ninety five plus lie. You know, that wasn't

682
00:42:49,600 --> 00:42:52,560
Speaker 1: apparent until we actually got on site. How far did

683
00:42:52,560 --> 00:42:57,480
Speaker 1: this stop ultimately fall? Um? I mean the stock ended

684
00:42:57,560 --> 00:43:00,839
Speaker 1: up getting down to below a dollar times. I mean

685
00:43:01,400 --> 00:43:04,719
Speaker 1: there was this back and forth right where you know,

686
00:43:04,800 --> 00:43:07,600
Speaker 1: they would come out with press release and stock could

687
00:43:07,640 --> 00:43:10,440
Speaker 1: go back up. It had been eight and a half

688
00:43:10,440 --> 00:43:13,360
Speaker 1: when we published UM, so there was kind of rains

689
00:43:13,360 --> 00:43:17,839
Speaker 1: found between four and six. And then when we did

690
00:43:17,840 --> 00:43:21,120
Speaker 1: our second or did our second report or sorry report

691
00:43:21,200 --> 00:43:26,839
Speaker 1: on second company, Rhino International, that company had the misfortune

692
00:43:26,840 --> 00:43:29,759
Speaker 1: of making the mistake of the CEO admitting to the

693
00:43:29,840 --> 00:43:33,560
Speaker 1: auditor that there were quoth some problems with the contracts,

694
00:43:34,120 --> 00:43:38,520
Speaker 1: and the soccer was very quickly delisted. So after Rhino

695
00:43:38,600 --> 00:43:42,879
Speaker 1: went down, UM, I think Orient Paper sold off even

696
00:43:42,880 --> 00:43:46,919
Speaker 1: more because the people who've been skeptical of us were

697
00:43:47,520 --> 00:43:50,920
Speaker 1: less skeptical of us and solidly to the prior reports.

698
00:43:50,960 --> 00:43:55,600
Speaker 1: So now you have Orient Paper and Rhino. When do

699
00:43:55,840 --> 00:43:59,120
Speaker 1: you say, hey, this is a real business. I need

700
00:43:59,160 --> 00:44:03,280
Speaker 1: to form a company. Well, I formed a I formed

701
00:44:03,280 --> 00:44:06,400
Speaker 1: an entity at the outset before publishing my first Remember

702
00:44:06,440 --> 00:44:09,000
Speaker 1: I was a lord for legal protection, right, you want

703
00:44:09,040 --> 00:44:12,160
Speaker 1: that shield. But when did you say, I have a

704
00:44:12,280 --> 00:44:17,600
Speaker 1: finance research business and potential edge fund here that there's

705
00:44:17,680 --> 00:44:21,799
Speaker 1: money to be made betting against these companies. Well, it

706
00:44:21,920 --> 00:44:24,839
Speaker 1: was right after Orient Paper that I realized that UM,

707
00:44:24,840 --> 00:44:28,759
Speaker 1: I came to the States for uh two trips, one

708
00:44:28,800 --> 00:44:30,919
Speaker 1: of them was about a month, and at that point

709
00:44:30,960 --> 00:44:33,400
Speaker 1: in time, I was trying to By then I realized

710
00:44:33,440 --> 00:44:37,320
Speaker 1: this is systemic with these China names, and I was

711
00:44:37,360 --> 00:44:40,840
Speaker 1: trying to figure out what the business model would be. Um,

712
00:44:40,920 --> 00:44:44,800
Speaker 1: should we do consulting for investment banks that we're looking

713
00:44:44,840 --> 00:44:49,080
Speaker 1: to bring companies in China public? No, Pretty quickly those

714
00:44:49,120 --> 00:44:55,240
Speaker 1: doors slammed in our faces. Um, they didn't diligence guys. Um.

715
00:44:55,400 --> 00:44:59,640
Speaker 1: Then then yeah, I was thinking, okay, well, um, should

716
00:44:59,680 --> 00:45:02,640
Speaker 1: I do the US on a subscription basis? And I

717
00:45:02,680 --> 00:45:07,720
Speaker 1: had there was a company that sells um subscription research

718
00:45:07,840 --> 00:45:10,239
Speaker 1: that was saying, yeah, look, you know, we'll distribute to

719
00:45:10,280 --> 00:45:12,840
Speaker 1: research and da da dad and you know. And I

720
00:45:12,920 --> 00:45:15,279
Speaker 1: was looking at the numbers and like, yeah, maybe I

721
00:45:15,320 --> 00:45:17,759
Speaker 1: could take this to you know, a million or more

722
00:45:17,760 --> 00:45:21,800
Speaker 1: in my pocket a year. Maybe um. And then uh,

723
00:45:21,880 --> 00:45:25,000
Speaker 1: there was also a very large hedge fund that said, yeah, look,

724
00:45:25,080 --> 00:45:27,840
Speaker 1: we want exclusive access to your ideas and you know,

725
00:45:27,880 --> 00:45:32,080
Speaker 1: we'll pay you for those. And but I kept coming

726
00:45:32,080 --> 00:45:36,440
Speaker 1: back to this idea of doing it publicly and trying

727
00:45:36,480 --> 00:45:39,400
Speaker 1: to have some you know, if I could get capital

728
00:45:39,880 --> 00:45:43,719
Speaker 1: to short these things and then publish and you know,

729
00:45:43,760 --> 00:45:46,520
Speaker 1: there's if you you know, this was a This was

730
00:45:46,560 --> 00:45:49,160
Speaker 1: a decision that took I don't know some time to

731
00:45:49,239 --> 00:45:53,839
Speaker 1: make because I realized that that was going to be

732
00:45:53,920 --> 00:45:59,680
Speaker 1: the much more um much more stressful path. I will

733
00:45:59,719 --> 00:46:03,200
Speaker 1: get food regulators. You know, I should assume that regulators

734
00:46:03,200 --> 00:46:06,760
Speaker 1: will look at me skeptically every time we publish a report.

735
00:46:07,320 --> 00:46:13,040
Speaker 1: But I felt like, if I'm just providing subscription research

736
00:46:13,760 --> 00:46:19,719
Speaker 1: two institutions um identifying various frauds in China, I mean,

737
00:46:19,800 --> 00:46:22,960
Speaker 1: one issue is how valuable is the research if these

738
00:46:23,000 --> 00:46:26,560
Speaker 1: things never go down. I mean, a fraud can flourish

739
00:46:26,880 --> 00:46:29,640
Speaker 1: and the markets until the markets figure out it's not

740
00:46:29,680 --> 00:46:34,160
Speaker 1: a fraud. So I did question the viability over the

741
00:46:34,239 --> 00:46:36,680
Speaker 1: long term of that business model. But the other thing

742
00:46:36,840 --> 00:46:40,000
Speaker 1: was it just I mean, it just seems a little

743
00:46:40,280 --> 00:46:43,080
Speaker 1: hollow as well, because I felt like, hey, if I'm

744
00:46:43,080 --> 00:46:47,080
Speaker 1: publishing this openly, I can hold these guys accountable, right,

745
00:46:47,160 --> 00:46:50,200
Speaker 1: But I'm just sending this to you know, blah blah

746
00:46:50,239 --> 00:46:53,759
Speaker 1: blah hedge fund um for you know, fifty k year

747
00:46:54,600 --> 00:46:57,200
Speaker 1: from that fund, I don't know who's going to hold

748
00:46:57,200 --> 00:47:01,279
Speaker 1: them accountable, Like why would this matter? So based on

749
00:47:01,360 --> 00:47:04,640
Speaker 1: that I said, all right, you know, like, let me

750
00:47:04,680 --> 00:47:06,440
Speaker 1: figure out a way to get some capital and then

751
00:47:06,440 --> 00:47:10,160
Speaker 1: start shorting these publicly. And so I made that decision.

752
00:47:10,719 --> 00:47:12,480
Speaker 1: You know, I realized there was a business to do

753
00:47:12,920 --> 00:47:15,200
Speaker 1: and that was the model I wanted to pursue. And

754
00:47:15,239 --> 00:47:20,160
Speaker 1: I probably made that decision by late August early September

755
00:47:20,280 --> 00:47:24,400
Speaker 1: of two thousand times. Quite quite interesting. Let's let's talk

756
00:47:24,760 --> 00:47:28,600
Speaker 1: a little more about what's going on in China. Um

757
00:47:28,680 --> 00:47:34,440
Speaker 1: after that orient paper experience, you've called for many Chinese

758
00:47:34,440 --> 00:47:38,360
Speaker 1: firms that are listed in the US to be delisted.

759
00:47:39,000 --> 00:47:44,720
Speaker 1: Tell us why they literally cannot be held The people

760
00:47:45,680 --> 00:47:49,279
Speaker 1: behind these companies literally cannot be held accountable. Not only

761
00:47:49,360 --> 00:47:53,000
Speaker 1: that they can't actually be investigated. I mean, that's PRC

762
00:47:53,320 --> 00:48:00,280
Speaker 1: law that specifically prohibits any PRC based person or entity

763
00:48:00,480 --> 00:48:05,960
Speaker 1: from cooperating with an overseas regulatory investigation without the express

764
00:48:06,080 --> 00:48:10,160
Speaker 1: higher consent of the Chinese Securities Regulatory Commission, which you know,

765
00:48:10,200 --> 00:48:13,400
Speaker 1: accepting the exceptional cases something like luck In where the

766
00:48:13,440 --> 00:48:16,719
Speaker 1: auditor already called it a fraud, is just not what

767
00:48:16,840 --> 00:48:19,279
Speaker 1: we're coming. So you not only can you not hold

768
00:48:19,280 --> 00:48:23,600
Speaker 1: the individuals to account, you cannot investigate them. And I

769
00:48:23,640 --> 00:48:27,360
Speaker 1: think Luckin's a great example here because luck In raised

770
00:48:27,760 --> 00:48:31,320
Speaker 1: think about eight hundred million dollars from the US markets,

771
00:48:31,440 --> 00:48:36,480
Speaker 1: and then the auditor, after we republished somebody else's research

772
00:48:36,560 --> 00:48:39,279
Speaker 1: and said that it checked out to US UM, the

773
00:48:39,360 --> 00:48:44,400
Speaker 1: auditor U E Y confirmed that this thing was a fraud,

774
00:48:44,760 --> 00:48:51,600
Speaker 1: and so luck In collapse and but the people luck

775
00:48:51,680 --> 00:48:56,000
Speaker 1: and ultimately settled with the SEC. And the eight hundred

776
00:48:56,000 --> 00:48:58,880
Speaker 1: million that it raised from US markets, I think it

777
00:48:58,960 --> 00:49:01,440
Speaker 1: paid to the s. You see, a hundred forty million,

778
00:49:01,880 --> 00:49:05,400
Speaker 1: and that's like, by far the most the SEC has

779
00:49:05,440 --> 00:49:08,279
Speaker 1: ever gotten out of one who's trying to frauds. And

780
00:49:08,320 --> 00:49:11,080
Speaker 1: the best part is luck raised that money with the

781
00:49:11,120 --> 00:49:13,800
Speaker 1: bond issuance in China. So I think a hundred fifty

782
00:49:13,840 --> 00:49:17,279
Speaker 1: million US that's a good deal. You you raise a

783
00:49:17,320 --> 00:49:20,000
Speaker 1: hundred and fifty million in bonds to pay for the

784
00:49:20,120 --> 00:49:25,160
Speaker 1: fraud you perpetrated rate raising eight million in equity. Yeah,

785
00:49:25,239 --> 00:49:28,239
Speaker 1: So I mean, like I look, I said, okay, eight

786
00:49:28,360 --> 00:49:31,160
Speaker 1: hundred that's the biggest big any one of these guys

787
00:49:31,200 --> 00:49:34,200
Speaker 1: who's had to pay in absolute terms, and the percentage

788
00:49:34,560 --> 00:49:38,319
Speaker 1: and it's not that bad a big it's sub leaves

789
00:49:38,320 --> 00:49:41,719
Speaker 1: you with over half a billion dollars. Right, yeah, I mean,

790
00:49:41,760 --> 00:49:45,640
Speaker 1: considering you hold the money, Um, it's not bad, but um,

791
00:49:45,680 --> 00:49:47,960
Speaker 1: but no this, you know, these guys are better operators

792
00:49:48,000 --> 00:49:54,160
Speaker 1: than that. But the issue, I mean, the reality is, um,

793
00:49:54,360 --> 00:49:57,680
Speaker 1: we just can't hold them accountable. And so when you

794
00:49:57,760 --> 00:50:00,799
Speaker 1: have that system like it's and so and also look

795
00:50:00,840 --> 00:50:04,040
Speaker 1: at this. You know, some people say, oh, you know

796
00:50:04,120 --> 00:50:08,640
Speaker 1: you're China basher this and that. But the reality is

797
00:50:08,760 --> 00:50:11,560
Speaker 1: China is an emerging market. China has a weak rule

798
00:50:11,560 --> 00:50:15,760
Speaker 1: of law. China is a country riddled by corruption, both

799
00:50:16,040 --> 00:50:20,520
Speaker 1: public sector and private sector. And also all of these

800
00:50:20,520 --> 00:50:24,120
Speaker 1: things are facts. And when the regulators in the US

801
00:50:24,200 --> 00:50:28,160
Speaker 1: don't even have the ability to investigate, I mean, of

802
00:50:28,200 --> 00:50:32,680
Speaker 1: course these guys are gonna come over here and lie

803
00:50:32,920 --> 00:50:38,040
Speaker 1: and steal the money, because why wouldn't they The proposition

804
00:50:38,080 --> 00:50:40,680
Speaker 1: if you're sitting in China and you know, and you've

805
00:50:40,680 --> 00:50:43,359
Speaker 1: got a business, and you know, I'm like, you meet

806
00:50:43,400 --> 00:50:45,239
Speaker 1: the right people who say, hey, you know, we can

807
00:50:45,280 --> 00:50:47,919
Speaker 1: sex this thing up and you know, bring in public

808
00:50:48,000 --> 00:50:53,440
Speaker 1: blah blah blah. You're thinking, okay, well heads, I win tails,

809
00:50:54,280 --> 00:50:58,360
Speaker 1: I don't lose, So why wouldn't you go and lie?

810
00:50:58,520 --> 00:51:02,680
Speaker 1: And the other thing is that I think is more

811
00:51:02,680 --> 00:51:06,200
Speaker 1: one of the changes that I've noticed in the eleven

812
00:51:06,280 --> 00:51:10,839
Speaker 1: years that I've been doing this. UM. Back then, when

813
00:51:10,840 --> 00:51:15,239
Speaker 1: we first started publishing UM, the Chinese guys were not

814
00:51:15,360 --> 00:51:19,840
Speaker 1: sophisticated with respect to the market. UM. They didn't really

815
00:51:20,000 --> 00:51:25,080
Speaker 1: get how things traded. UM and they yeah, I mean

816
00:51:25,080 --> 00:51:28,560
Speaker 1: they got fraud, but the frauds were very crude, basic

817
00:51:28,680 --> 00:51:33,680
Speaker 1: frauds where you invent counterparty, you invent customers and invent suppliers. UM.

818
00:51:33,760 --> 00:51:39,520
Speaker 1: The frauds today mostly more sophisticated. They're usually there's usually

819
00:51:39,680 --> 00:51:44,120
Speaker 1: more reality to the businesses. UM. Usually G s X

820
00:51:44,280 --> 00:51:49,880
Speaker 1: is an exception, But UM, they they're But I but

821
00:51:49,920 --> 00:51:53,160
Speaker 1: I feel like a lot of these stocks are manipulated,

822
00:51:53,719 --> 00:51:58,359
Speaker 1: and they're manipulated in very sophisticated ways. UM. We're going

823
00:51:58,400 --> 00:52:00,719
Speaker 1: to circle back to that. I wanted to talk about

824
00:52:00,840 --> 00:52:05,520
Speaker 1: some manipulation. But before we leave the sec UM, how

825
00:52:05,560 --> 00:52:10,280
Speaker 1: have they responded to your urging that they dealist firms

826
00:52:10,360 --> 00:52:15,399
Speaker 1: that can't be monitored or can't even be audited. Well,

827
00:52:15,480 --> 00:52:18,160
Speaker 1: there was a bill that was enacted and signed into

828
00:52:18,239 --> 00:52:22,919
Speaker 1: law by President Trump called the Holding Foreign Company's Accountable Act,

829
00:52:23,000 --> 00:52:27,960
Speaker 1: and it provides that if companies in a country are

830
00:52:28,080 --> 00:52:31,600
Speaker 1: not subjects. If the auditors are not able to be

831
00:52:31,640 --> 00:52:35,160
Speaker 1: inspected by the p c A O B, then these

832
00:52:35,200 --> 00:52:40,040
Speaker 1: companies will be delisted within two years there, you know,

833
00:52:40,160 --> 00:52:42,600
Speaker 1: two or three years after the enactment of the bill.

834
00:52:43,320 --> 00:52:47,319
Speaker 1: And it was obviously targeted to China, but that's the

835
00:52:47,400 --> 00:52:51,400
Speaker 1: wrong issue to focus on, and China might I've long

836
00:52:51,520 --> 00:52:54,680
Speaker 1: held the theory that China would give on the pc

837
00:52:54,840 --> 00:52:58,080
Speaker 1: A B inspections because that's not really going to be

838
00:52:58,080 --> 00:53:02,000
Speaker 1: an effective anti fraud tool. Um just inspecting these auditors, Like,

839
00:53:02,200 --> 00:53:04,640
Speaker 1: who cares that the PCOB is going to be messed

840
00:53:04,640 --> 00:53:07,919
Speaker 1: with during these inspections the same way everybody who's messed

841
00:53:07,960 --> 00:53:10,600
Speaker 1: with whoever goes over to check out a Chinese company.

842
00:53:10,680 --> 00:53:14,239
Speaker 1: But um, so, well, well, how do they mess with you?

843
00:53:14,360 --> 00:53:17,239
Speaker 1: That's that's interesting you say that, let's let's digress here.

844
00:53:17,719 --> 00:53:20,439
Speaker 1: Did were you harassed where you followed? Did you ever

845
00:53:20,520 --> 00:53:23,319
Speaker 1: feel that you were in danger? When I say when

846
00:53:23,320 --> 00:53:27,040
Speaker 1: I say messed with, I just mean fools and in

847
00:53:27,200 --> 00:53:30,719
Speaker 1: steinis in stone walls, I mean that that's co operation.

848
00:53:31,840 --> 00:53:35,480
Speaker 1: Well it's fake cooperation, right like that? That was the

849
00:53:35,680 --> 00:53:38,200
Speaker 1: that was the thing that was beautiful about most of

850
00:53:38,239 --> 00:53:41,440
Speaker 1: these companies and still is. It's it's the fake transparency

851
00:53:41,800 --> 00:53:45,799
Speaker 1: because one of the fundamental problems the SEC has in

852
00:53:45,800 --> 00:53:50,680
Speaker 1: one of these investigations and anybody has, is, first of all,

853
00:53:50,719 --> 00:53:54,480
Speaker 1: everything's in Chinese. So the vast majority of us in

854
00:53:54,520 --> 00:53:56,279
Speaker 1: the US and who worked at the p C A

855
00:53:56,360 --> 00:53:59,920
Speaker 1: O B don't understand Chinese, and you need things translate.

856
00:54:00,320 --> 00:54:03,880
Speaker 1: Translation is incredibly resource intensive. So it's one thing. I mean,

857
00:54:03,920 --> 00:54:06,120
Speaker 1: when you look at it from the SEC perspective, the

858
00:54:06,200 --> 00:54:09,440
Speaker 1: costs of these investigations are super high for them, and

859
00:54:09,480 --> 00:54:13,280
Speaker 1: again the recoveries and probabilities of recoveries are so low.

860
00:54:13,560 --> 00:54:15,760
Speaker 1: So that's one reason. I mean, like genuinely the SEC

861
00:54:15,920 --> 00:54:21,520
Speaker 1: Enforcement Division hates investigating these China based companies. Um, but

862
00:54:21,960 --> 00:54:23,920
Speaker 1: you you have the same problems p C O B.

863
00:54:24,120 --> 00:54:26,839
Speaker 1: Very few of the people would speak Chinese. Um, they'd

864
00:54:26,840 --> 00:54:29,920
Speaker 1: be jet lagged. They would have the Chinese Ministry of

865
00:54:29,960 --> 00:54:33,400
Speaker 1: Finance people because it's clear like that's the only framework

866
00:54:33,480 --> 00:54:36,560
Speaker 1: China would ever allow this to happen, shadowing them being there.

867
00:54:37,000 --> 00:54:39,560
Speaker 1: Documents will be switched out, would be missing, there would

868
00:54:39,560 --> 00:54:41,359
Speaker 1: be all kinds of excuses like, oh, well, you don't

869
00:54:41,440 --> 00:54:43,520
Speaker 1: understand how it is in China like this you know,

870
00:54:43,560 --> 00:54:45,799
Speaker 1: we have to give this document over here. Let's, you know,

871
00:54:45,880 --> 00:54:47,840
Speaker 1: take these guys, you know, to the other side of

872
00:54:47,880 --> 00:54:49,719
Speaker 1: town and see if we can find this document at

873
00:54:49,719 --> 00:54:52,480
Speaker 1: the Ministry of Finance. Oh no, it's not here. Gee, guys,

874
00:54:52,480 --> 00:54:54,080
Speaker 1: I'm sorry. Hey, how about we go and you know,

875
00:54:54,160 --> 00:54:56,480
Speaker 1: go to lunch and get drunk. I mean it's like,

876
00:54:56,600 --> 00:55:00,279
Speaker 1: this is what I envisioned happening, is that the their

877
00:55:00,320 --> 00:55:05,279
Speaker 1: time would be wasted and they wouldn't understand what's going on,

878
00:55:05,920 --> 00:55:08,080
Speaker 1: and like at the end of the trip, they would

879
00:55:08,120 --> 00:55:11,239
Speaker 1: get back to Washington and just say, like, I don't

880
00:55:11,239 --> 00:55:13,880
Speaker 1: know what the f happened? Man, Like I don't know

881
00:55:13,960 --> 00:55:17,920
Speaker 1: we were there. But wouldn't it be more effective to say,

882
00:55:17,960 --> 00:55:20,960
Speaker 1: these are the minimum listing requirements in the United States,

883
00:55:21,360 --> 00:55:23,439
Speaker 1: and if you don't jump through these hoops, you can't

884
00:55:23,440 --> 00:55:27,440
Speaker 1: be listed here. As opposed to going through that process.

885
00:55:27,480 --> 00:55:30,040
Speaker 1: I mean, it's a privilege to be listed here and

886
00:55:30,120 --> 00:55:32,080
Speaker 1: you have to do xcell y and Z. Why why

887
00:55:32,120 --> 00:55:36,080
Speaker 1: not take that approach? Well, I think you know the

888
00:55:36,239 --> 00:55:39,240
Speaker 1: problem that we faced. Look, let's be real here, okay.

889
00:55:39,360 --> 00:55:43,719
Speaker 1: I mean my my view is that almost all of

890
00:55:43,719 --> 00:55:46,360
Speaker 1: the companies, if not all the companies listed in the

891
00:55:46,480 --> 00:55:49,319
Speaker 1: US from China are committing some level of fraud, they

892
00:55:49,320 --> 00:55:51,800
Speaker 1: cannot be held accountable. Now I think we could instead

893
00:55:51,960 --> 00:55:57,640
Speaker 1: focus on this this Article one seventy seven of the

894
00:55:57,680 --> 00:56:01,239
Speaker 1: Amended Securities Law of the d r C that went

895
00:56:01,280 --> 00:56:03,680
Speaker 1: into effect in March of last year, and that is

896
00:56:04,200 --> 00:56:09,960
Speaker 1: the article that expressly prohibits cooperation with foreign regulatory investigations

897
00:56:09,960 --> 00:56:13,680
Speaker 1: into publicly traded companies that did not exist. That was

898
00:56:13,719 --> 00:56:19,520
Speaker 1: not codified formally until the adoption of that of that revision.

899
00:56:19,840 --> 00:56:22,799
Speaker 1: So before then it was kind of hard to to

900
00:56:22,960 --> 00:56:25,240
Speaker 1: say that, well, we you know, we need to formulate

901
00:56:25,280 --> 00:56:28,520
Speaker 1: a policy that says companies from China may not list here,

902
00:56:29,480 --> 00:56:32,719
Speaker 1: because we would you know, it's like, well, you know,

903
00:56:32,800 --> 00:56:36,000
Speaker 1: aside from the fact that these things are committing fraud

904
00:56:36,000 --> 00:56:38,000
Speaker 1: on a widespread basis, like what can you point to

905
00:56:38,080 --> 00:56:39,839
Speaker 1: in law, because like in the US, you know, we're

906
00:56:39,880 --> 00:56:42,120
Speaker 1: really focused on like, you know, what's the you know,

907
00:56:42,360 --> 00:56:44,440
Speaker 1: like give me a bright line definition of what may

908
00:56:44,440 --> 00:56:46,600
Speaker 1: and what may not be listed. But now you have

909
00:56:46,680 --> 00:56:49,200
Speaker 1: article one seventy seven. So I think that any country

910
00:56:49,560 --> 00:56:53,040
Speaker 1: that codifies a middle finger to US in you know,

911
00:56:53,080 --> 00:56:56,920
Speaker 1: regulatory bodies in its law de facto should not be

912
00:56:57,000 --> 00:56:59,839
Speaker 1: allowed to have its. You know, companies whose operations are

913
00:57:00,040 --> 00:57:03,520
Speaker 1: stancill be based there listed in the US. That makes

914
00:57:03,560 --> 00:57:07,600
Speaker 1: perfect sense, But but I have to point out that

915
00:57:07,680 --> 00:57:12,520
Speaker 1: it's created an environment that has allowed you and your

916
00:57:12,600 --> 00:57:17,680
Speaker 1: firm to come up with some spectacular short So so

917
00:57:17,760 --> 00:57:20,920
Speaker 1: let's quickly go over some of your greatest hits. Sino

918
00:57:21,040 --> 00:57:27,840
Speaker 1: Forest down after your report. We mentioned Rhino Drop before

919
00:57:27,840 --> 00:57:33,600
Speaker 1: it was delisted, tell us about to they were have. Yeah,

920
00:57:33,640 --> 00:57:36,440
Speaker 1: we have eight D listings globally, seven in which are

921
00:57:36,480 --> 00:57:39,000
Speaker 1: from China and I'm not including luck in. We might

922
00:57:39,000 --> 00:57:41,120
Speaker 1: be about to get our ninth D listing in France,

923
00:57:41,160 --> 00:57:43,520
Speaker 1: by the way, So what happens when you own a

924
00:57:43,600 --> 00:57:46,000
Speaker 1: put and a company is delisted? What is that put

925
00:57:46,040 --> 00:57:49,160
Speaker 1: worth at that point? Yeah? Well that was that was

926
00:57:49,240 --> 00:57:52,800
Speaker 1: interesting in the early days because these stocks can be

927
00:57:52,800 --> 00:57:57,640
Speaker 1: halted for multiple months, and you know, we had puts

928
00:57:57,640 --> 00:58:00,919
Speaker 1: going into put experty and so yees to decide whether

929
00:58:00,920 --> 00:58:04,600
Speaker 1: you want exercise or not, and um we ended up.

930
00:58:04,720 --> 00:58:06,680
Speaker 1: I mean that the one time this really happened to

931
00:58:06,760 --> 00:58:10,520
Speaker 1: us was on China Media Express, which was the third

932
00:58:10,560 --> 00:58:13,680
Speaker 1: company on which we wrote would become the second D listing,

933
00:58:14,360 --> 00:58:18,440
Speaker 1: and we had we had puts UM that expired during

934
00:58:18,440 --> 00:58:21,880
Speaker 1: the halt, so we exercised the puts. But then and

935
00:58:21,960 --> 00:58:24,400
Speaker 1: this happened to a lot of at that's at the

936
00:58:24,440 --> 00:58:27,200
Speaker 1: time I was using you know, like retail investor account.

937
00:58:27,560 --> 00:58:29,240
Speaker 1: This has been a lot of retail guys at this

938
00:58:29,360 --> 00:58:34,760
Speaker 1: time went um. So we're effectively short. And the broker

939
00:58:34,800 --> 00:58:36,520
Speaker 1: came back to us and said, oh, listen, you know

940
00:58:36,600 --> 00:58:39,360
Speaker 1: we need uh, we need you to deposit more margins.

941
00:58:39,360 --> 00:58:42,200
Speaker 1: So based on the last print of the stock, when

942
00:58:42,200 --> 00:58:45,000
Speaker 1: this thing starts trading again, you know, you're now short,

943
00:58:45,440 --> 00:58:48,320
Speaker 1: you know, like blond number shares that's you know, five

944
00:58:48,400 --> 00:58:53,680
Speaker 1: hundred thousand dollars worth of stock. Um, we want two margins,

945
00:58:53,680 --> 00:58:56,640
Speaker 1: So we need you to pump your account up. UM,

946
00:58:56,680 --> 00:59:00,240
Speaker 1: you know, store another five thousand in there. And you know,

947
00:59:00,320 --> 00:59:03,400
Speaker 1: like if that actually, I mean, that actually screwed me up.

948
00:59:03,440 --> 00:59:06,400
Speaker 1: I was very fortunate that I got UM. I got

949
00:59:06,400 --> 00:59:08,920
Speaker 1: a loan from somebody who uh you know it was

950
00:59:09,000 --> 00:59:11,000
Speaker 1: I mean, I mean offered it to me just when

951
00:59:11,000 --> 00:59:13,840
Speaker 1: I was lamenting. I wasn't asking for the loan and UM,

952
00:59:13,880 --> 00:59:15,920
Speaker 1: and so I was able to make money that way.

953
00:59:15,920 --> 00:59:18,440
Speaker 1: But I think a lot of retail got shafted on

954
00:59:18,480 --> 00:59:20,880
Speaker 1: those things. And the other thing that was problematic was

955
00:59:22,200 --> 00:59:25,360
Speaker 1: because when the stock the brokers realized that once the

956
00:59:25,360 --> 00:59:27,880
Speaker 1: stock started trading, because there were all of these put

957
00:59:27,880 --> 00:59:30,600
Speaker 1: options that have been exercised, everybody was going to be

958
00:59:30,680 --> 00:59:33,439
Speaker 1: naked short and so unlike when you're dealing with an

959
00:59:33,440 --> 00:59:36,960
Speaker 1: institutional counterparty, you know, who would say like, all right, man,

960
00:59:37,000 --> 00:59:38,760
Speaker 1: look I get it, the stock is going to go down,

961
00:59:39,040 --> 00:59:42,520
Speaker 1: maybe after some initial volatility, once it's unholted, you know,

962
00:59:42,600 --> 00:59:45,080
Speaker 1: we'll you know, we'll be chill and we're not going

963
00:59:45,120 --> 00:59:47,240
Speaker 1: to buy you in right away. We'll wait till the

964
00:59:47,240 --> 00:59:49,240
Speaker 1: afternoon to figure it out. I think that's how an

965
00:59:49,280 --> 00:59:53,200
Speaker 1: institutional counterparty works. The retail counterparties were like, you will

966
00:59:53,240 --> 00:59:56,080
Speaker 1: be bought in as soon as it resumes trading. So

967
00:59:56,920 --> 00:59:59,120
Speaker 1: what I want to mention the broker who who was

968
00:59:59,200 --> 01:00:03,400
Speaker 1: so nice to their alliance? Oh, I mean, I can't

969
01:00:03,400 --> 01:00:07,520
Speaker 1: even remember. I mean, we weren't dealing with Fidelity, but

970
01:00:07,560 --> 01:00:09,880
Speaker 1: I heard. I mean, Fidelity was a nightmare. Fidelity was

971
01:00:10,000 --> 01:00:15,080
Speaker 1: increasing the borrow cost, stirring halts on all these things.

972
01:00:15,120 --> 01:00:19,280
Speaker 1: I mean I think they jacked them, you know, from annually.

973
01:00:19,320 --> 01:00:23,040
Speaker 1: So Fido was sucking people dry, Um, I'm on a

974
01:00:23,160 --> 01:00:26,080
Speaker 1: halt for a company about to be delisted, seems sort

975
01:00:26,120 --> 01:00:30,360
Speaker 1: of doesn't really make a lot of sense to me. Um,

976
01:00:30,400 --> 01:00:34,800
Speaker 1: And you mentioned manipulation. Are you implying that for targets

977
01:00:34,800 --> 01:00:38,400
Speaker 1: of yours like G s X or T A L education,

978
01:00:38,960 --> 01:00:45,560
Speaker 1: do you think the Chinese government are propping up those stuffs? Well? God,

979
01:00:45,760 --> 01:00:47,920
Speaker 1: you know, what goes on behind the curtain in China

980
01:00:48,800 --> 01:00:52,840
Speaker 1: is very difficult to say. And there's also um, the

981
01:00:52,920 --> 01:00:57,640
Speaker 1: lines between government and government actors and private sector actors

982
01:00:57,960 --> 01:01:02,560
Speaker 1: are very blurry at times. So but there's just funky,

983
01:01:02,640 --> 01:01:04,640
Speaker 1: funky trading and a lot of these things. And it

984
01:01:04,680 --> 01:01:07,959
Speaker 1: wasn't only gsx UM a lot of other China names.

985
01:01:08,000 --> 01:01:10,240
Speaker 1: And then the final thing that I'll say on this,

986
01:01:10,760 --> 01:01:15,840
Speaker 1: Nobody else I know talks about this, but I suspect

987
01:01:15,920 --> 01:01:20,400
Speaker 1: that these companies water their stock all day long. And

988
01:01:20,520 --> 01:01:25,880
Speaker 1: here when you say water to explain that, well, that's,

989
01:01:25,920 --> 01:01:30,200
Speaker 1: you know, in the conventional sense, watering stock is issuing

990
01:01:30,280 --> 01:01:34,280
Speaker 1: shares to you know, people insiders in their proxies, but

991
01:01:34,360 --> 01:01:39,080
Speaker 1: without without recording those shares as having been issued. But

992
01:01:39,360 --> 01:01:43,160
Speaker 1: what happens, what I think happens here that makes it

993
01:01:43,720 --> 01:01:46,920
Speaker 1: so easy is you have to keep in mind that

994
01:01:46,960 --> 01:01:51,240
Speaker 1: these companies are all domiciled in Cayman or some are

995
01:01:51,320 --> 01:01:53,920
Speaker 1: b v I, but they're you know, they're legally domiciled

996
01:01:54,000 --> 01:01:57,360
Speaker 1: in Cayman or b B I, and their shares don't

997
01:01:57,440 --> 01:02:02,560
Speaker 1: trade on the US exchanges. It's their American Depository receipts

998
01:02:02,680 --> 01:02:06,360
Speaker 1: or American Depository shares. So what basically happens is if

999
01:02:06,400 --> 01:02:08,480
Speaker 1: you have a in share, you take it to the

1000
01:02:08,520 --> 01:02:14,520
Speaker 1: depository agent and it's you know, funged exchange into an

1001
01:02:14,520 --> 01:02:16,800
Speaker 1: A d R A d S that may be traded

1002
01:02:16,840 --> 01:02:21,240
Speaker 1: on the exchanges. But the question I've had is who

1003
01:02:21,280 --> 01:02:24,440
Speaker 1: the hell is keeping track of these Cayman schairs that

1004
01:02:24,480 --> 01:02:27,080
Speaker 1: are coming to the that that are that are being

1005
01:02:27,080 --> 01:02:30,720
Speaker 1: given to the depository agents. And look, I don't know

1006
01:02:30,880 --> 01:02:34,720
Speaker 1: the answer because this is really our ten aspects of

1007
01:02:35,680 --> 01:02:39,200
Speaker 1: of plumbing. But I suspect nobody. I mean, who's these

1008
01:02:39,240 --> 01:02:42,080
Speaker 1: are Caman share registries? Okay, That's That's the whole point

1009
01:02:42,080 --> 01:02:45,920
Speaker 1: of Cayman is that everything about ten in domiciles companies

1010
01:02:46,000 --> 01:02:50,200
Speaker 1: is secret, especially the share registries. What is there? I've

1011
01:02:50,280 --> 01:02:53,960
Speaker 1: asked some people and nobody's ever been able to answer me.

1012
01:02:54,160 --> 01:02:57,440
Speaker 1: What safeguards are in place that would prevent these companies

1013
01:02:57,480 --> 01:02:59,840
Speaker 1: from doing that or prevent the insiders from doing that.

1014
01:03:00,160 --> 01:03:04,040
Speaker 1: And so I am of this view that our entrepreneurial

1015
01:03:04,080 --> 01:03:09,200
Speaker 1: friends in China are so entrepreneurial that in many cases,

1016
01:03:09,560 --> 01:03:12,080
Speaker 1: not only are they completely lying about the financials of

1017
01:03:12,080 --> 01:03:15,360
Speaker 1: the company, but they're also manipulating the stock, and they're

1018
01:03:15,360 --> 01:03:18,440
Speaker 1: also watering the stock. The share A count is much

1019
01:03:18,560 --> 01:03:24,480
Speaker 1: higher than officially recorded yes, or that the yes that

1020
01:03:24,600 --> 01:03:28,080
Speaker 1: the the shares outstanding are because I've seen in the past.

1021
01:03:28,120 --> 01:03:31,240
Speaker 1: I first started asking this question in two thousand eleven

1022
01:03:31,280 --> 01:03:33,680
Speaker 1: or twelve because I could see that the A d

1023
01:03:33,920 --> 01:03:38,640
Speaker 1: S counts were rising a lot faster than these shares outstanding,

1024
01:03:38,720 --> 01:03:40,840
Speaker 1: meaning they come to the shares that the company is issued.

1025
01:03:40,880 --> 01:03:44,880
Speaker 1: And now that's not unexplainable that that doesn't in and

1026
01:03:44,880 --> 01:03:48,000
Speaker 1: of itself mean that there's watering, because as you have

1027
01:03:48,640 --> 01:03:53,040
Speaker 1: more legit team and shareholders funds their stock into a

1028
01:03:53,120 --> 01:03:54,720
Speaker 1: d r S and a d S is to sell it,

1029
01:03:54,960 --> 01:03:57,520
Speaker 1: you'll see that. But I just remember noting that some

1030
01:03:57,600 --> 01:04:03,240
Speaker 1: of these increases the deltas the ADS accounts were growing exponentially,

1031
01:04:03,800 --> 01:04:06,440
Speaker 1: and you know, and the and the shares outstanding, the

1032
01:04:06,520 --> 01:04:09,080
Speaker 1: Cayman shares weren't growing that that much. And that's when

1033
01:04:09,120 --> 01:04:11,320
Speaker 1: it dawned on me. It's like, look, I've been I've

1034
01:04:11,360 --> 01:04:14,360
Speaker 1: lived in that country six years, total ton of business.

1035
01:04:14,400 --> 01:04:18,320
Speaker 1: They're they're not going to stop at just like just

1036
01:04:19,240 --> 01:04:22,360
Speaker 1: committing fraud with respect to the financials like that would

1037
01:04:22,400 --> 01:04:24,240
Speaker 1: be stupid, That would be leaving money on the table.

1038
01:04:24,280 --> 01:04:26,440
Speaker 1: I mean quite frankly, if this was the life you've

1039
01:04:26,520 --> 01:04:30,080
Speaker 1: chosen to be a crook of this sort, you would

1040
01:04:30,120 --> 01:04:33,520
Speaker 1: not stop at that alone. You would manipulate the stocks.

1041
01:04:33,760 --> 01:04:35,600
Speaker 1: You look, you would water the stock, you would do

1042
01:04:35,720 --> 01:04:38,600
Speaker 1: every single thing you could do. And I just don't

1043
01:04:38,640 --> 01:04:41,960
Speaker 1: think that that you could get away with and the mechanisms. Look,

1044
01:04:42,000 --> 01:04:44,280
Speaker 1: one of the problems that we have with stock manipulation

1045
01:04:44,320 --> 01:04:47,160
Speaker 1: in the US is that it's so much stop trading

1046
01:04:47,200 --> 01:04:50,640
Speaker 1: has done algorithmically. Okay, the SEC is staffed by lawyers

1047
01:04:50,760 --> 01:04:54,840
Speaker 1: and accountants n s A. We need people who have

1048
01:04:55,000 --> 01:04:58,000
Speaker 1: n s A type skills to be inside the SEC

1049
01:04:58,240 --> 01:05:01,880
Speaker 1: to monitor trading, whether it's kind of based manipulation or

1050
01:05:02,360 --> 01:05:06,200
Speaker 1: or give somewhere else. That's how manipulation occurs. And we

1051
01:05:06,520 --> 01:05:09,080
Speaker 1: I mean, who's who with those skills? You know, Stanford

1052
01:05:09,120 --> 01:05:11,840
Speaker 1: computer science graduate is gonna go work for the SEC. No,

1053
01:05:11,880 --> 01:05:14,320
Speaker 1: I'm not gonna happen nobody at this point. I never

1054
01:05:14,400 --> 01:05:18,720
Speaker 1: heard accounting fraud described as a gateway drug. It's just

1055
01:05:19,000 --> 01:05:23,360
Speaker 1: the the entry to to more fraud. One of the

1056
01:05:23,440 --> 01:05:27,880
Speaker 1: things I found interesting about your background is your relationship

1057
01:05:28,040 --> 01:05:32,920
Speaker 1: with Jefferies Financial Group. UM CEO Rich Handler, tell us

1058
01:05:32,960 --> 01:05:38,360
Speaker 1: a little bit about how Rich Handler affected your career.

1059
01:05:41,160 --> 01:05:47,400
Speaker 1: UM so yeah, I uh, all right. UM, back in

1060
01:05:49,440 --> 01:05:52,080
Speaker 1: it was clear to me that we were going to

1061
01:05:52,200 --> 01:05:56,120
Speaker 1: go into the fund management business at some point, and um,

1062
01:05:57,360 --> 01:06:02,400
Speaker 1: we were having a problem. Uh, I need institutional counterparties.

1063
01:06:03,080 --> 01:06:06,280
Speaker 1: And because you know, we were so controversial. So at

1064
01:06:06,360 --> 01:06:09,880
Speaker 1: that time and for a while after that, it was

1065
01:06:09,920 --> 01:06:13,520
Speaker 1: an annual ritual where Goldman would tell us like no

1066
01:06:14,600 --> 01:06:18,400
Speaker 1: and uh. And in late when my I was in

1067
01:06:18,440 --> 01:06:21,160
Speaker 1: the delivery room, my son was about to be born, UM,

1068
01:06:21,640 --> 01:06:24,680
Speaker 1: got the call from a prime BROKERAG sales guy at

1069
01:06:24,920 --> 01:06:28,720
Speaker 1: CS telling me that, well, the Reputation Risk Committee, something

1070
01:06:28,800 --> 01:06:31,760
Speaker 1: I never even heard of before, has met and said no,

1071
01:06:31,960 --> 01:06:35,080
Speaker 1: we're we can't do business with you, so we're gonna

1072
01:06:35,080 --> 01:06:40,840
Speaker 1: go with this guy Bill Huang instead, exactly Like, well,

1073
01:06:41,040 --> 01:06:43,400
Speaker 1: I mean, look I even one time said to um,

1074
01:06:44,560 --> 01:06:47,800
Speaker 1: you know, I had an account at a private bank

1075
01:06:47,920 --> 01:06:51,280
Speaker 1: that I had opened um with full knowledge, you know,

1076
01:06:51,480 --> 01:06:53,560
Speaker 1: the bank having full knowledge that I would be looking

1077
01:06:53,640 --> 01:06:57,280
Speaker 1: to do short selling short sales in it in advance

1078
01:06:57,360 --> 01:06:59,720
Speaker 1: of reports. And they said, oh, yeah, that's great, you know,

1079
01:06:59,760 --> 01:07:01,720
Speaker 1: and get same access to borrow as you get on

1080
01:07:01,760 --> 01:07:03,440
Speaker 1: the institutional side of the house. I mean, yeah, it's

1081
01:07:03,480 --> 01:07:05,720
Speaker 1: gonna cost a little more, but you know, it's otherwise

1082
01:07:05,800 --> 01:07:09,280
Speaker 1: the same thing. And then they decided after a little

1083
01:07:09,320 --> 01:07:12,040
Speaker 1: while that they were gonna, you know, somebody in compliance.

1084
01:07:12,080 --> 01:07:13,280
Speaker 1: It was like, no, no, we have to get rid

1085
01:07:13,320 --> 01:07:16,600
Speaker 1: of this account. And um, you know, and I said

1086
01:07:16,680 --> 01:07:19,360
Speaker 1: to my um private banker at the time, I was like,

1087
01:07:20,760 --> 01:07:22,440
Speaker 1: you know she because she was talking about how well,

1088
01:07:22,520 --> 01:07:25,240
Speaker 1: you know, we're really focused on compliance now and then

1089
01:07:25,440 --> 01:07:28,080
Speaker 1: post GFC. And I said yeah, but we both know,

1090
01:07:28,360 --> 01:07:30,840
Speaker 1: right and if I had a couple of hundred million dollars,

1091
01:07:31,600 --> 01:07:34,560
Speaker 1: you guys let me do anything I wanted. But whatever,

1092
01:07:34,840 --> 01:07:37,680
Speaker 1: So that's the reality, right, So what was the advice

1093
01:07:37,760 --> 01:07:41,560
Speaker 1: handler gave you? So I went, so I set up

1094
01:07:41,600 --> 01:07:44,720
Speaker 1: a meeting with him, and you know, I really didn't

1095
01:07:45,480 --> 01:07:47,560
Speaker 1: I didn't know whether Jeffries would be interested in doing

1096
01:07:47,600 --> 01:07:49,840
Speaker 1: the business because they had a big they were building

1097
01:07:49,880 --> 01:07:53,080
Speaker 1: their investment banking franchise in Asia. But I figured, you know, look,

1098
01:07:53,120 --> 01:07:57,040
Speaker 1: why not. He took the meeting, so you know, that's cool,

1099
01:07:57,560 --> 01:08:00,520
Speaker 1: and um, you know, he knew a little bit of it.

1100
01:08:00,640 --> 01:08:04,640
Speaker 1: He knew me by reputation. But um, he just started

1101
01:08:04,680 --> 01:08:09,840
Speaker 1: asking very you know, direct questions like okay, well, I

1102
01:08:09,920 --> 01:08:12,680
Speaker 1: mean this is a stressful business, right, like you know,

1103
01:08:12,800 --> 01:08:15,480
Speaker 1: I mean besides lawsuits, I mean, don't you get that threats? Yeah,

1104
01:08:15,480 --> 01:08:17,840
Speaker 1: I do, you do. I mean you're married, and you've

1105
01:08:17,840 --> 01:08:21,240
Speaker 1: got a kid at home. Yeah, and you know, and

1106
01:08:21,320 --> 01:08:23,160
Speaker 1: he's just and and and he's just you know, And

1107
01:08:23,240 --> 01:08:26,040
Speaker 1: I told him how, you know, like Goldman, you know,

1108
01:08:26,160 --> 01:08:29,320
Speaker 1: hated us and these other guys you know who hated us,

1109
01:08:29,400 --> 01:08:33,320
Speaker 1: and and he just said to me, he's like, he said,

1110
01:08:33,600 --> 01:08:35,760
Speaker 1: why do you do this? Man? You're you're crazy. And

1111
01:08:36,040 --> 01:08:38,400
Speaker 1: I don't mean that in the ha ha you know,

1112
01:08:38,560 --> 01:08:41,600
Speaker 1: funny way. I mean, really, why are you doing this?

1113
01:08:41,880 --> 01:08:44,519
Speaker 1: I think you're addicted to the attention. So you've got

1114
01:08:44,760 --> 01:08:47,400
Speaker 1: all these guys that Goldman Sacks and others with their

1115
01:08:47,439 --> 01:08:49,560
Speaker 1: knives out waiting to stab you in the back. The

1116
01:08:49,640 --> 01:08:52,639
Speaker 1: moment that they can you get death threats when you've

1117
01:08:52,680 --> 01:08:55,200
Speaker 1: got a young family at home, you know, you you

1118
01:08:55,320 --> 01:08:58,280
Speaker 1: get lawsuits. You're telling me you don't sleep well? Ever,

1119
01:08:58,960 --> 01:09:01,679
Speaker 1: why are you doing seriously? I mean, is this gonna

1120
01:09:01,840 --> 01:09:03,639
Speaker 1: at this point in your life? The kind of money

1121
01:09:03,680 --> 01:09:05,840
Speaker 1: you're making, how much are you making? Is that? Does

1122
01:09:05,920 --> 01:09:08,080
Speaker 1: that change your life? No? That doesn't change my life.

1123
01:09:08,240 --> 01:09:12,000
Speaker 1: Why do you do that? And so you know he

1124
01:09:12,240 --> 01:09:15,240
Speaker 1: and then again he repeated his assertion that he thought

1125
01:09:15,280 --> 01:09:18,200
Speaker 1: I was addicted to the attention. So I walked out

1126
01:09:18,240 --> 01:09:22,280
Speaker 1: of there. Um, yeah, look, I mean I don't know.

1127
01:09:22,320 --> 01:09:24,360
Speaker 1: Maybe a lot of people say this, but I think

1128
01:09:24,439 --> 01:09:27,759
Speaker 1: I really mean it. I very much appreciate when people

1129
01:09:28,080 --> 01:09:31,680
Speaker 1: speak to me directly and don't be asked me, I mean,

1130
01:09:31,760 --> 01:09:36,640
Speaker 1: assuming they have something valuable to say. And I recognized

1131
01:09:36,680 --> 01:09:39,120
Speaker 1: that I just had one of those moments where um,

1132
01:09:39,280 --> 01:09:45,720
Speaker 1: a very smart, sophisticated person who understands um to a

1133
01:09:45,800 --> 01:09:49,600
Speaker 1: reasonable degree, what I do, was telling me that this

1134
01:09:49,800 --> 01:09:54,519
Speaker 1: was a bad life decision to continue, uh, continuing this business.

1135
01:09:55,280 --> 01:10:02,439
Speaker 1: And I really had to pause and consider that, and

1136
01:10:02,560 --> 01:10:05,200
Speaker 1: I did. I mean, maybe I told myself what I

1137
01:10:05,320 --> 01:10:08,160
Speaker 1: wanted to tell myself at the end of the day. Um,

1138
01:10:09,120 --> 01:10:12,360
Speaker 1: I disagreed with his assessment, but I took it very

1139
01:10:12,400 --> 01:10:15,800
Speaker 1: seriously and I even talked about it internally with UM

1140
01:10:16,080 --> 01:10:20,439
Speaker 1: because at that time, my team consisted of some people

1141
01:10:20,479 --> 01:10:23,040
Speaker 1: who I considered close friends. I mean, it still does,

1142
01:10:23,280 --> 01:10:26,439
Speaker 1: but UM, these are people who were friends first and

1143
01:10:26,479 --> 01:10:30,080
Speaker 1: then became team members, and so I also felt like

1144
01:10:30,160 --> 01:10:33,880
Speaker 1: they were good people to help me evaluate what Rich

1145
01:10:33,960 --> 01:10:36,560
Speaker 1: had said. And UM, how did you how did you

1146
01:10:36,600 --> 01:10:39,719
Speaker 1: apply that? Did you go from pure short to long short?

1147
01:10:39,840 --> 01:10:43,360
Speaker 1: What what did you do to follow his advice? I

1148
01:10:43,400 --> 01:10:46,880
Speaker 1: didn't really change anything I was doing, but it wasn't

1149
01:10:46,920 --> 01:10:50,200
Speaker 1: that I followed the advice. It's just that I felt

1150
01:10:51,360 --> 01:10:55,439
Speaker 1: I'm somebody who's very focused on process and especially when

1151
01:10:55,439 --> 01:10:59,360
Speaker 1: it comes to making difficult decisions. And UM, you know,

1152
01:10:59,520 --> 01:11:04,080
Speaker 1: even if I don't change my mind, I always want

1153
01:11:04,120 --> 01:11:06,360
Speaker 1: to get more information and I want to get contrary

1154
01:11:06,439 --> 01:11:10,160
Speaker 1: perspective because I understand my decision better and I understand

1155
01:11:10,200 --> 01:11:13,400
Speaker 1: the tradeoffs better. And I just felt while Rich's advice

1156
01:11:13,520 --> 01:11:17,599
Speaker 1: didn't alter the outcomes and improved the process, and it's

1157
01:11:17,640 --> 01:11:21,920
Speaker 1: helped me better understand why it is that I've chosen

1158
01:11:22,000 --> 01:11:25,759
Speaker 1: this as as as my path makes a lot of sense.

1159
01:11:26,320 --> 01:11:28,320
Speaker 1: So I know, I only have you for a few minutes.

1160
01:11:28,439 --> 01:11:34,880
Speaker 1: Let's let's look at one and see what's made this

1161
01:11:35,240 --> 01:11:41,160
Speaker 1: past couple of years so so challenging. Clearly there was

1162
01:11:41,240 --> 01:11:44,080
Speaker 1: a brief collapse and then straight up the rest of

1163
01:11:44,120 --> 01:11:47,640
Speaker 1: the year. How challenging of a year was it? On

1164
01:11:47,720 --> 01:11:53,719
Speaker 1: the short side, In yeah, I really I really hated.

1165
01:11:56,160 --> 01:11:59,120
Speaker 1: I mean, part of it is, UM. You know, I

1166
01:11:59,400 --> 01:12:03,360
Speaker 1: definitely have hard time separating my my feelings about the

1167
01:12:04,000 --> 01:12:08,760
Speaker 1: external environment from my feelings about what was happening business wise. UM.

1168
01:12:09,920 --> 01:12:13,800
Speaker 1: You know, I going back to commony me earlier about UM,

1169
01:12:14,160 --> 01:12:18,479
Speaker 1: how I'm very good at absorbing other people's experience. UM,

1170
01:12:18,840 --> 01:12:21,400
Speaker 1: I think I'm I think I'm very sensitive to the

1171
01:12:21,520 --> 01:12:25,760
Speaker 1: environment around me, especially very very sensitive to risk and

1172
01:12:26,520 --> 01:12:31,800
Speaker 1: UM and in trouble. And so was just a year

1173
01:12:31,920 --> 01:12:36,120
Speaker 1: of I mean, it was emotionally overwhelming for me, UM,

1174
01:12:37,040 --> 01:12:39,040
Speaker 1: just based on all the misery. You know, I felt

1175
01:12:39,040 --> 01:12:41,680
Speaker 1: like my heart was breaking some you know, more and

1176
01:12:41,800 --> 01:12:44,920
Speaker 1: more every day. And on top of that, business was

1177
01:12:45,720 --> 01:12:50,680
Speaker 1: like really really hard. So we I you know, we

1178
01:12:50,760 --> 01:12:53,280
Speaker 1: were early. I was personally very early in the toilet

1179
01:12:53,320 --> 01:12:56,080
Speaker 1: paper trade in um COVID, and I think it was

1180
01:12:56,160 --> 01:13:02,439
Speaker 1: like mid January, sorry as late Anuary, when just stocked

1181
01:13:02,520 --> 01:13:05,800
Speaker 1: up on toilet paper and you know, canned food, and

1182
01:13:06,400 --> 01:13:08,880
Speaker 1: you know, basically got ready to live in a bunker.

1183
01:13:09,280 --> 01:13:13,800
Speaker 1: And it was at the end of February UM and

1184
01:13:14,400 --> 01:13:17,800
Speaker 1: markets in the US hadn't yet reacted. And also there's

1185
01:13:17,800 --> 01:13:21,960
Speaker 1: an interesting point here because by late February, Hong Kong

1186
01:13:22,120 --> 01:13:26,160
Speaker 1: and mainland markets had largely recovered from their COVID dips.

1187
01:13:26,960 --> 01:13:31,160
Speaker 1: And we talked about the manipulation of the markets from China.

1188
01:13:32,720 --> 01:13:35,240
Speaker 1: China developed the i P to manipulate its markets. Back

1189
01:13:35,280 --> 01:13:38,600
Speaker 1: in UM. It tried to the government had tried to

1190
01:13:38,720 --> 01:13:41,720
Speaker 1: novate the housing bubble, of the real estate bubble into

1191
01:13:41,760 --> 01:13:44,400
Speaker 1: an equity bubble and pump up the equity bubble. But

1192
01:13:44,520 --> 01:13:48,840
Speaker 1: they didn't understand that those bubbles are harder to keep

1193
01:13:48,880 --> 01:13:52,160
Speaker 1: going because you've got daily marked to markets and um

1194
01:13:52,640 --> 01:13:55,720
Speaker 1: our marks to market and anyway. But they, you know,

1195
01:13:55,800 --> 01:13:59,400
Speaker 1: at that time, they started throwing short sellers in prison

1196
01:13:59,560 --> 01:14:02,439
Speaker 1: or in jay ill temporarily, and they got the brokerage

1197
01:14:02,520 --> 01:14:04,840
Speaker 1: firms to go out and buy stocks. And I think

1198
01:14:04,840 --> 01:14:08,400
Speaker 1: they were pumping money into the government was pumping money

1199
01:14:08,479 --> 01:14:11,240
Speaker 1: directing the market to keep it propped up. To send

1200
01:14:11,880 --> 01:14:14,080
Speaker 1: to avoid the loss of wealth. But I felt like

1201
01:14:14,160 --> 01:14:17,759
Speaker 1: the same thing must have happened in February in China

1202
01:14:17,800 --> 01:14:21,200
Speaker 1: and Hong Kong because the government was trying to downplay

1203
01:14:21,960 --> 01:14:24,840
Speaker 1: um They were trying to cover up any signal as

1204
01:14:24,880 --> 01:14:27,560
Speaker 1: to how serious COVID really was. So the rest of

1205
01:14:27,640 --> 01:14:30,920
Speaker 1: the world was kind in this meleeis at the end

1206
01:14:30,960 --> 01:14:36,200
Speaker 1: of ten where we've been innesthetized by eleven years of

1207
01:14:36,400 --> 01:14:40,320
Speaker 1: ridiculously low you know rates, so itnesthetized the risk. And

1208
01:14:40,400 --> 01:14:43,000
Speaker 1: we're looking at the China Hong Kong markets going n

1209
01:14:43,320 --> 01:14:46,800
Speaker 1: things so bad? Right, Like, those markets aren't off. And

1210
01:14:47,840 --> 01:14:49,840
Speaker 1: I knew at the end of February when I saw

1211
01:14:49,920 --> 01:14:54,000
Speaker 1: the results of an ever Core survey institutional clients that

1212
01:14:54,920 --> 01:14:57,680
Speaker 1: they didn't think that COVID would have UM I think

1213
01:14:57,720 --> 01:15:01,880
Speaker 1: it was only a relatively small minority that expected COVID

1214
01:15:01,920 --> 01:15:04,839
Speaker 1: to have a material impact on the economy and markets.

1215
01:15:05,439 --> 01:15:08,560
Speaker 1: UM as like this is complacency. And so at the

1216
01:15:08,600 --> 01:15:11,679
Speaker 1: end of February, I said, guys, like, all these names

1217
01:15:11,760 --> 01:15:14,840
Speaker 1: we've looked at throughout the years that didn't make the

1218
01:15:14,920 --> 01:15:18,440
Speaker 1: cut for activist short selling, but we know our crap companies.

1219
01:15:18,680 --> 01:15:21,679
Speaker 1: Let's short these things, Let's get CDs on cruise lines,

1220
01:15:21,760 --> 01:15:24,439
Speaker 1: Let's do this, let's do that. And so we had

1221
01:15:24,560 --> 01:15:29,000
Speaker 1: this great March. We didn't even have to publish anything.

1222
01:15:29,560 --> 01:15:31,320
Speaker 1: And by the end of March, I think we were

1223
01:15:31,400 --> 01:15:35,000
Speaker 1: up net eleven and I'm you know, and I'm thinking, man,

1224
01:15:35,080 --> 01:15:36,560
Speaker 1: this is gonna be a record year for us. And

1225
01:15:36,920 --> 01:15:39,360
Speaker 1: we were so smug, right at least I was. I'm

1226
01:15:39,400 --> 01:15:42,439
Speaker 1: sitting there going, yeah, you know, I've been doing all

1227
01:15:42,520 --> 01:15:45,559
Speaker 1: these interviews for all these years saying if you lever

1228
01:15:45,760 --> 01:15:48,400
Speaker 1: up your balance sheet to buy back stock, you are

1229
01:15:48,520 --> 01:15:52,160
Speaker 1: creating fragility. And now ha ha, all this fragility is

1230
01:15:52,240 --> 01:15:54,400
Speaker 1: coming home to route. You know, the chickens are coming

1231
01:15:54,439 --> 01:15:57,639
Speaker 1: home to roost. Look at you private equity guys having

1232
01:15:57,920 --> 01:16:01,040
Speaker 1: you know, destroyed corpses have come Pennie for you know,

1233
01:16:01,160 --> 01:16:04,840
Speaker 1: a couple of decades. Ha ha. Jokes on you. Now,

1234
01:16:05,400 --> 01:16:09,560
Speaker 1: it wasn't jokes on me. Um. I think we're the

1235
01:16:09,640 --> 01:16:12,200
Speaker 1: last to get the memo. It was like early August

1236
01:16:12,560 --> 01:16:16,320
Speaker 1: when when I'm saying, like, okay, all of these trades

1237
01:16:16,439 --> 01:16:18,880
Speaker 1: we put on at the end of February, beginning of March,

1238
01:16:19,160 --> 01:16:23,160
Speaker 1: our genius trades because we're so smart, dude, we got

1239
01:16:23,240 --> 01:16:24,960
Speaker 1: to get these out of the book, like they were

1240
01:16:25,040 --> 01:16:28,960
Speaker 1: hanging there till August. So we were so we were

1241
01:16:29,040 --> 01:16:32,200
Speaker 1: getting you know, we've given back almost all our teams

1242
01:16:32,200 --> 01:16:34,439
Speaker 1: on that wet markets got back to break even in

1243
01:16:34,560 --> 01:16:38,960
Speaker 1: August from the pre March collapse, right, And then we

1244
01:16:39,040 --> 01:16:42,040
Speaker 1: were also now writing losses from GSX, which we short

1245
01:16:42,120 --> 01:16:45,800
Speaker 1: in early June. Now we've done well shorting e Health

1246
01:16:46,520 --> 01:16:49,040
Speaker 1: in early April. So that was that was actually that

1247
01:16:49,280 --> 01:16:52,080
Speaker 1: was and is a great short, both in absolute terms

1248
01:16:52,120 --> 01:16:55,920
Speaker 1: and in alpha um. But there's g SX. And then

1249
01:16:56,000 --> 01:17:00,879
Speaker 1: we went into i think September with this really scammy

1250
01:17:01,600 --> 01:17:04,439
Speaker 1: company that you know, normal times that have no business

1251
01:17:04,479 --> 01:17:07,920
Speaker 1: having a market camp anywhere near a billion but called NanoX,

1252
01:17:08,520 --> 01:17:11,280
Speaker 1: and so we went short that with this expose a

1253
01:17:11,439 --> 01:17:13,800
Speaker 1: as to how like this whole thing is just a

1254
01:17:13,840 --> 01:17:17,920
Speaker 1: promotion and you know, there's no reality there and nothing

1255
01:17:18,080 --> 01:17:20,160
Speaker 1: closed up on us on the day and it kept

1256
01:17:20,320 --> 01:17:23,559
Speaker 1: ripping and so we're you know, we're getting bled out

1257
01:17:23,600 --> 01:17:27,600
Speaker 1: on NanoX, We're getting bled out on gsx UM. You

1258
01:17:27,680 --> 01:17:32,360
Speaker 1: know our genius trades had Yeah, and it was tough.

1259
01:17:32,520 --> 01:17:35,240
Speaker 1: I mean, we we really had to rally and we

1260
01:17:35,360 --> 01:17:37,680
Speaker 1: were getting ready to launch another funds. You know I

1261
01:17:37,800 --> 01:17:40,240
Speaker 1: was in in January. I was I was just marketing

1262
01:17:40,320 --> 01:17:42,720
Speaker 1: this new fund we intended to launch and you know,

1263
01:17:42,920 --> 01:17:46,560
Speaker 1: early to mid jan are so early to mid and

1264
01:17:46,800 --> 01:17:49,920
Speaker 1: we sidelined it because of COVID. But by the time

1265
01:17:50,000 --> 01:17:53,840
Speaker 1: we're bleeding everywhere. In the summer of last year, I

1266
01:17:53,920 --> 01:17:55,759
Speaker 1: was just like, man, do not talk to me about

1267
01:17:55,800 --> 01:17:58,320
Speaker 1: this new fund launch. I do not care. We are

1268
01:17:58,400 --> 01:18:00,640
Speaker 1: in a nose dive. We need to pull out of it.

1269
01:18:01,920 --> 01:18:06,519
Speaker 1: So so let's talk about. Yeah, we did, I mean,

1270
01:18:06,600 --> 01:18:08,880
Speaker 1: we finished. Look, we finished with a decent print for

1271
01:18:08,920 --> 01:18:12,559
Speaker 1: the year. Our clients were happy, but I just got

1272
01:18:13,040 --> 01:18:18,120
Speaker 1: really no. I got very little satisfaction from from that year.

1273
01:18:18,720 --> 01:18:22,600
Speaker 1: So so I wanna jump to our favorite questions we

1274
01:18:22,760 --> 01:18:26,760
Speaker 1: ask all our guests and Charlie will record the outros later.

1275
01:18:26,880 --> 01:18:29,720
Speaker 1: That's easy enough to do. So let me uh, let

1276
01:18:29,800 --> 01:18:32,439
Speaker 1: me plow through my speed round and we have like

1277
01:18:32,600 --> 01:18:35,759
Speaker 1: three minutes for these, um tell us what you're streaming

1278
01:18:35,800 --> 01:18:37,600
Speaker 1: these days? You know what, I'm gonna hold off on this.

1279
01:18:37,680 --> 01:18:40,720
Speaker 1: I'm gonna ask in the last two minutes we have

1280
01:18:42,320 --> 01:18:44,240
Speaker 1: what do you make of some of the craziness that

1281
01:18:44,360 --> 01:18:47,360
Speaker 1: took place in the US. I was reading this morning

1282
01:18:47,439 --> 01:18:51,040
Speaker 1: that Michael Burry of the Big short fame is short Tesla.

1283
01:18:51,840 --> 01:18:53,679
Speaker 1: What what do you make of some of those crazy

1284
01:18:53,960 --> 01:18:57,880
Speaker 1: uh stocks UM things like game Stop and and any

1285
01:18:57,920 --> 01:19:03,760
Speaker 1: thoughts on bitcoin um. Okay, so I mean the memes

1286
01:19:03,800 --> 01:19:06,760
Speaker 1: thoughts just show that the market is broken. May are

1287
01:19:06,840 --> 01:19:10,320
Speaker 1: a symptom, not a cause of the market being broken. UM.

1288
01:19:10,800 --> 01:19:14,080
Speaker 1: The factors that have broken the market are the predominance

1289
01:19:14,120 --> 01:19:18,000
Speaker 1: of passive investing, because that actually has a convex effect

1290
01:19:18,040 --> 01:19:24,160
Speaker 1: on price behavior and increases fragility. It's the monitors ridiculously um,

1291
01:19:24,320 --> 01:19:28,479
Speaker 1: low interest rates and excess liquidity UM. And it's also

1292
01:19:28,600 --> 01:19:31,080
Speaker 1: the UM the erosion of the rule of law, and

1293
01:19:31,120 --> 01:19:34,479
Speaker 1: the lack of accountability in you know, in the markets

1294
01:19:34,479 --> 01:19:38,200
Speaker 1: and in society. So these are factors that have combined

1295
01:19:38,560 --> 01:19:41,560
Speaker 1: to create this broken market. And plus there were a

1296
01:19:41,600 --> 01:19:45,080
Speaker 1: lot of retail UM you know, retail market participants who

1297
01:19:45,160 --> 01:19:47,439
Speaker 1: came into the market last year who didn't do it

1298
01:19:47,479 --> 01:19:49,680
Speaker 1: out of boarding. Didn't do it because they're punting their

1299
01:19:49,720 --> 01:19:51,800
Speaker 1: stimulus check. They did it because they were trying to

1300
01:19:51,840 --> 01:19:56,720
Speaker 1: gamble their way out from underneath um financial hardships that

1301
01:19:57,040 --> 01:20:01,479
Speaker 1: had been created by covid UM. So yeah, bitcoin what

1302
01:20:01,560 --> 01:20:07,160
Speaker 1: do you think. I've got a friend who you know,

1303
01:20:07,479 --> 01:20:10,240
Speaker 1: is kind of in this space, very smart guy, and

1304
01:20:10,280 --> 01:20:13,160
Speaker 1: he said that the the real value of any of

1305
01:20:13,240 --> 01:20:18,439
Speaker 1: these UM blockchain based cryptocurrencies is the present value of

1306
01:20:18,520 --> 01:20:20,880
Speaker 1: the transaction fees or the thing he calls him, the

1307
01:20:20,960 --> 01:20:24,439
Speaker 1: gas fees for using it UM. Beyond that, he admitted,

1308
01:20:24,600 --> 01:20:27,080
Speaker 1: and he's you know, he's got a real bitcoin position.

1309
01:20:27,680 --> 01:20:31,479
Speaker 1: Beyond that, he admitted, it's just a tool. So I

1310
01:20:31,560 --> 01:20:34,120
Speaker 1: don't touch it. I don't care. I've seen I've seen

1311
01:20:34,240 --> 01:20:36,560
Speaker 1: fads and the next thing to come and go like

1312
01:20:36,640 --> 01:20:38,840
Speaker 1: a bunch of times during my career, and I've seen

1313
01:20:38,840 --> 01:20:40,679
Speaker 1: a lot of people who can't tell the difference between

1314
01:20:40,760 --> 01:20:42,320
Speaker 1: luck and skill because they happen to be in the

1315
01:20:42,400 --> 01:20:45,800
Speaker 1: right place at the right time. And crypto bitcoin smell

1316
01:20:45,920 --> 01:20:48,439
Speaker 1: that way to me. Thanks Carson for being so generous

1317
01:20:48,479 --> 01:20:51,960
Speaker 1: with your time. We have been speaking with themed short

1318
01:20:52,000 --> 01:20:56,680
Speaker 1: seller Carson Block of the research farm Muddy Waters UH.

1319
01:20:57,080 --> 01:21:00,240
Speaker 1: Carson's hedge fund has about two hundred and sixty million

1320
01:21:00,320 --> 01:21:05,760
Speaker 1: dollars in assets under management. If you enjoy this conversation,

1321
01:21:05,880 --> 01:21:08,400
Speaker 1: well please check out any of the other nearly four

1322
01:21:08,520 --> 01:21:12,759
Speaker 1: hundred prior discussions we've had over the past seven years.

1323
01:21:13,479 --> 01:21:16,400
Speaker 1: UH you can find those at iTunes or Spotify or

1324
01:21:16,520 --> 01:21:20,759
Speaker 1: wherever you get your podcasts. We love your comments, feedback

1325
01:21:20,800 --> 01:21:24,440
Speaker 1: and suggestions right to us at m I be podcast

1326
01:21:24,640 --> 01:21:28,040
Speaker 1: at Bloomberg dot net. Sign up from my daily reads

1327
01:21:28,120 --> 01:21:31,080
Speaker 1: at rid Halts dot com. Check out my weekly column

1328
01:21:31,680 --> 01:21:35,439
Speaker 1: on Bloomberg dot com slash Opinion. Follow me on Twitter

1329
01:21:35,720 --> 01:21:38,439
Speaker 1: at rit Halts. I would be remiss if I did

1330
01:21:38,479 --> 01:21:41,240
Speaker 1: not thank the crack staff that helps put these conversations

1331
01:21:41,320 --> 01:21:46,200
Speaker 1: together every week. Tim Harrow is my audio engineer, Michael

1332
01:21:46,280 --> 01:21:50,040
Speaker 1: Boyle is my producer. A Teaka Val Bron is our

1333
01:21:50,080 --> 01:21:54,479
Speaker 1: project manager. Michael Batnick is my head of research. I'm

1334
01:21:54,560 --> 01:21:58,160
Speaker 1: Barry Rid Halts. You're listening to Masters in Business on

1335
01:21:58,280 --> 01:21:59,240
Speaker 1: Bloomberg Radio.