Episode summary
Why the Last Short Seller Is Preparing Now | Carson Block Explains
The Meb Faber Show
· · 47 min · Hosts: Meb Faber · Guests: Carson Block
Summary
Carson Block argues that short selling has become a harder, less scalable business because markets, politics, and regulation now reward optimism and punish skepticism. He says the post-GFC era reduced the payoff for identifying risk, while the SEC and DOJ have often either overreached on process or been too weak on substance. Even so, he still sees activist shorting as viable when a company is broken, management is misleading investors, and the reporting can force real disclosure.
Block says Muddy Waters has expanded beyond short-selling into systematic momentum investing and junior miners, because he wants the firm to remain a business rather than a crusade. He argues that AI is the most important macro risk, and expects it could displace about 15% of U.S. knowledge workers within three years, weakening 401(k) flows, consumption, and eventually the S&P 500 and Nasdaq 100 through lower demand and higher redemptions. He says he is expressing that view with capped-risk trades such as put spreads and credit positions.
He also discusses SoFi as a current short idea, saying its loan accounting and related financing arrangements look highly aggressive and may require disclosure or restatement. On China, he remains adamant that the market is uninvestable because of poor information, policy caprice, and structural control by insiders. He closes by saying the hardest battles are the ones that matter most, especially when governments resist scrutiny and the truth takes years to emerge.
Key takeaways
- Carson Block says AI could displace roughly 15% of U.S. knowledge workers within 3 years, which he thinks would hit 401(k) flows and large-cap U.S. stocks.
- He prefers capped-risk bearish trades such as put spreads and credit overlays rather than outright short exposure in a market with persistent liquidity support.
- Block says Muddy Waters’ short activism is not scalable, so the firm has added systematic momentum and junior mining longs to diversify.
- He argues SoFi’s accounting and financing structure may be “on the right side of the line” legally, but still looks highly aggressive and potentially restatement-worthy.
- He still calls China uninvestable because of poor information quality, policy caprice, and ownership structures that leave minority investors exposed.
Notable quotes
“The dirty secret of the activist short-selling model is that it's not scalable”
“I think that AI will displace a significant proportion of knowledge workers”
“we think 15% you know, roughly 15% of US knowledge workers within 3 years is possible”
“the whole faster burn than GFC so far hasn't borne out, but think when we stop being distracted by something, like people will focus on this”
How the episode opens
Cynics always sound smarter. Optimists live in bigger houses. The dirty secret of the activist short-selling model is that it's not scalable. We're not as humans going to be able to keep up with the pace of change. — Welcome to the Meb Faber Show, where the focus is on helping you grow and preserve your wealth. Join us as we discuss the craft of investing and uncover new and profitable ideas, all to help you grow wealthier and wiser. Better investing starts here.
Meb Faber is the co-founder and chief investment officer at Cambria Investment Management. Due to industry regulations, he will not discuss any of Cambria's funds on this podcast. All opinions expressed by podcast participants are solely their own opinions and do not reflect the opinion of Cambria Investment Management or its affiliates. For more information, visit cambriainvestments.com.
Welcome back, everybody. Happy summertime. Today, we have an awesome episode. Today's guest is Carson Block, founder of Muddy Waters Research and Muddy Waters Capital. Carson's well-known for being the last short-seller left in the world. Carson, welcome to the show.
Yeah, thanks for having me, Meb. — Do you know any others? I mean, I feel like they've all retired, gone the way of the dodo. Makes me sad. Are there few left? — I mean, there are few, but yeah, it's uh I mean, there've been a number of retirements. The voluntary retirements were right after the GFC. The involuntary retirements are in more recent years, but it's not an easy profession that those of us still in it have chosen.
Well, I joke that all my short-seller friends, they definitely have like a little screw loose, usually in a good way. I'm I'm a long-time defender of short-sellers, as much as I got into it with Elon on Twitter years ago.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- short selling evolution
- ai labor displacement
- credit spreads
- sofi loan accounting short
- china uninvestable
Companies and tickers mentioned
- SOFI
- Muddy Waters Research
- Muddy Waters Capital
- SoFi
Watch the episode
Watch “Why the Last Short Seller Is Preparing Now | Carson Block Explains” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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The Meb Faber Show, this episode and its artwork belong to The Idea Farm. Octagon is not affiliated with the show; this page is an independent summary.
