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Muddy Waters founder Carson Block thinks that short sellers play a vital role in curbing market fraud, noting that the ongoing bull run is posing significant challenges for them. This comes when Tesla Inc. TSLA CEO Elon Musk has warned he will "obliterate" those betting against his EV company.
What Happened : Block believes the market needs short sellers now more than ever due to the increasing number of companies manipulating their financials. Yet, the current speculative frenzy makes it difficult for short sellers to operate effectively, he said in an interview with Bloomberg. “There are more companies playing more games.
A lot of them are in the gray zone; you don’t know whether it’s over the line or not,” Block said. “So they’re not gonna get prosecuted in this environment.” “The market needs short sellers more than ever, given the amount of games that are being played.
But if the long side doesn’t care, then, you know, this can continue until it doesn’t.” Block’s views are in line with those of renowned investor Jim Chanos who, in the previous month, described the current market scenario as “the golden age of fraud.” Chanos, famed for foreseeing Enron’s collapse, shut down his hedge funds last year, attributing it to a transformed marketplace that is unfavorable for short sellers.
Another notable investor, David Einhorn , has also voiced his dissatisfaction with the current market trends, observing that investors are in.