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Carson Block, the short-selling activist famous for attacking Chinese fraud, acknowledges family behavior in concentrating stocks like GameStop Corp. For him, parabolic movements are less like the product of Reddit-driven retail orders than a small hedge fund taking on other hedge funds.
“I wondered, is there coordination with these hedge funds?” Block said in an interview with Bloomberg Television. “What constitutes coordination? Did they cross the line? It could be interesting. “
At the moment, it is an unproven theory. But if Block is right, what appeared to be a historic retail revolt last week was equally a smokescreen convenient for internal hedge fund warfare.
The list of casualties in this fight is growing from the seriously injured, such as Melvin Capital Management and Maplelane Capital, to including funds managed by companies ranging from David Einhorn Greenlight Capital and Renaissance Technologies. What is still unclear is who took advantage of the other side.
Block said his company, Muddy Waters Capital, was the victim of what he believes was small pressure from GSX Techedu Inc.’s equity hedge funds. in previous weeks Until the frenzy of GameStop. As a result of this and similar situations, he had to hire a full-time trader to monitor stock options markets and adjust positions to manage risk more actively.
“It’s a commercial game, it’s flow-based, it’s technical,” he said. “We will do what we have to do to survive.”
Read more: Carson Block cuts short bets by sticking On line “Mob” hunting bears
Unlike many short sellers, Block is decidedly public with the names of companies he believes are scams and against which he bets. He usually posts the research that supports his short thesis and makes it available on Twitter. Most recently, he started posting videos on zer0es.tv.
SEE: Block CEO Muddy Waters rejects the idea of being part of the financial “establishment” and calls for greater execution by the U.S. Securities and Exchange Commission in the wake of GameStop Corp.
According to him, this effort to expose the faults has a “social utility” and should differentiate it from the short sellers attacked on Reddit. He mocks the suggestion that he is part of a Wall Street establishment. If he was so privileged, he asked, why Goldman Sachs Group Inc. and Credit Suisse Group AG would have rejected their business?
“When they label us as an establishment, it can’t be more inaccurate than that,” he said. “It’s almost curious if it weren’t for the fact that I now have all these people trying to make me a troll.”
Block coincides with the growing sense that financial markets are overvalued and that predominantly small investors will be affected when the bubble finally bursts. It breaches the Federal Reserve by accumulating too much liquidity, allowing for excessive credit extension and excessive leverage.
“We need a combination of monetary and fiscal policies that makes sense or we are stuck in this building to blow up a bigger barrel of dust again,” he said. “It always transfers wealth from many to few.”