I want to live in a world where

valuations and where price match actual

economic values and where you can go and

find those undiscovered gems and the

price eventually catches up with the

value of the business. But that's not

the world that we live in. So there's

been an adjustment basically say what

are investors excited about? What might

they be excited about next? Let's look

at the companies in that space. Stop

trying to go where nobody has been yet

because they're probably not going to

show up anytime soon either.

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their using AI to enhance international

equity returns later in the show. For

now, let's get into it. Got a very

special interview today. I am joined by

Carson Block, founder of MuddyWaters

Capital. Muddywaters Capital is a

leading activist shorteller hedge fund

and they specialize in activist

shortselling. So selling short the

stocks alongside Deep Research. Carson,

great to see you. Welcome.

>> Yeah, thanks for having me back, Jack.

>> There was fertile ground for shortelling

in 2021 and 2022. And when I look back

at the excesses of that age, it was

electric vehicles, you know, promising

to be the next Tesla. It was green

energy.

When you look right now, whether it was

the past year or the next year, right

now, what where are you seeing promising

fishing? Not talking about names, but in

terms of sectors, industries, themes,

where where might the next frauds be,

the fads, the overpromising, the the

next pockets of excessive speculation?

What what is the fertile ground? the

tech sector obviously and the industries

within it. I mean, anything that can

really start claiming to be AI or AI

adjacent. And there are in many of those

many of those industries, you're going

to have the legitimate players, but

because so much money is flowing there,

you're you have a I'm sure a

proliferation in many of these

industries of pretenders. And so that's

where

you could look. Um, but you have to wait

till the time is right. And I'd say

since second half of last year, it's

been a very difficult time to try to

short anything like that that has strong

momentum.

>> Who are the AI pretenders? Are these

companies that are just promising a lot

and their revenues are flat, not

growing, and they're losing money, or

are they growing a lot? You just think

that they're attaching themselves to to

the theme and they're kind of, you know,

trying to trying to play second fiddle.

Well, the thing about AI, it's actually

pretty broad in terms of where the money

has flowed. So, it's beyond just the

companies that are directly in the AI

model production space. And you've seen

it spill over. Obviously, memory has

ripped and those are real companies.

Although, it's it's interesting with the

semis and uh with the semis, it's that's

actually generally not a great business

model. um it's so cyclical, it's so

capex intensive. So to just see, you

know, software do this and semis do

that, you know, go up into the right is

is odd, but I don't know that there are

pretender companies there. Um I would

think at some point there should be mean

reversion there because I just don't

think that you know the fact that we

have supply chain bottlenecks at this

moment in time really makes these

businesses that much more attractive

from a long-term perspective but um

you've had the spillover from AI

obviously power generation has been a

big beneficiary so there are these

spaces that are AI adjacent so the

breadth of the flows of money here is

it's it's pretty wide and so within that

within those spaces there are industries

where yeah the the companies that are

more recently to the game um are you

know number of those are probably

suspect and sure and we're going to see

IPOs um I'm sure from you know the

pretenders so you know usually the the

real leaders in a space they'll go

public and then you know the wannabes

are going to go public behind them and

so those those are in general the ones

uh that you should watch for. Now in

terms of revenue I mean it depends

exactly what we're talking about and you

know here I also consider things like

quantum computing to be adjacent. I mean

you've seen just some ridiculous price

movements in in those stocks as well. So

and they have I mean on revenue basis

you know some of them have revenue but

it's just like ridiculous valuation. So

um you know those those are and look

there are arguments that you know

substantially all of the quantum

computing stocks that are public are

pretenders or that quantum computing is

just nowhere near um being feasible. But

um you know I' I'd say the the problem

isn't finding the short targets. The

problem is going to be timing this

because again with momentum so strong

and these are these have all become

momentum stocks. I mean you get the

timing wrong you're just going to rip

your get have your face ripped off. So

yeah I I don't see that there's really

you know much to do at this moment in

time. I would much rather if I were

going to be playing this game I would

much rather go in and start shorting

these things when they're clearly on the

back end here. Um and they're and

they're sliding down. I mean, you know,

these things have many billions of

dollars of market cap in certain cases.

You know, is it is it like a bad idea to

wait till that's h haved? No, not

necessar not really because there's

still, you know, there's still probably

massive overvaluation

with these companies at that stage. So,

you know, I I think you're much better

off waiting until you're convinced that,

you know, there's just been this

crushing of demand for speculative

companies by likely an overupp of these

speculative companies. So, that's how

that's how 2021 worked out, right? you

had all of these spaxs and then dispack

transactions, you know, some reae plus,

you know, super dodgy IPOs, some

conventional IPOs, and just the supply

of speculative stocks overwhelms the uh

the demand for it. So, we'll get back to

that point in time. And once we're

there, then it makes sense. But until

then, I think you'd be playing a very,

very dangerous game to try to short some

of these names.

>> Even though you have an inkling that

they might be extremely overhyped, not

likely to generate profit anytime soon,

even though you you have a high con

conviction of those on the fundamentals,

you you're you're waiting it out.

>> Look, in the activist short world, there

was a big report the last week or the

week before on Carvana. I think they

brought a lot of new news to the table.

Uh it's by Gotham City Research and I

don't know the name well, but it was

initially a well-received report. I

think it's rebounded, you know, largely

or almost entirely from from the report

because momentum is so strong right now.

The things we're looking at don't have

don't really have those, you know,

aren't part of those baskets right now

that have had really strong momentum.

So, um, you know, I, you know, and I',

I'd say that that's really from an

activist short selling perspective, I

think that's the way you have to play it

for now. But, you know, last year, uh,

on the activist short side of the

business, I mean, we didn't publish on

any new names the second half of the

year because we just saw what was, you

know, what was happening. And we

published on two new names at the

beginning of the year, uh, or the first

half, FTI and Apploven. But um yeah,

then those things just absolutely ripped

the second half of the year. So it told

us that um it's just not the right time.

>> How do you eval the thesis that you had

when you published uh last year uh in

you know the spring of of 2025? How do

you evaluate your thesis and also who

are your you know potential

counterparties?

>> So it got added to the S&P 500 index. So

there was a lot of buying institutional

and I'm sure retail ahead of that which

created its own momentum. Then you got

the index fund buying once it was

included. Um and yeah I think and there

are institutions that play momentum and

look to be clear that's something that

we're doing at Muddy Waters. you know,

you you introduced us as an activist

shortelling uh firm, but while that is

our core business, I mean, we've really

diversified our business over the past

several years. And so, we have a

quantitative momentum strategy where we

go long 20 names in the S&P 500 index

and we rebalance monthly. And, you know,

last year on a gross basis, I think that

was up about 70% 70. I mean, it's just

it's just stupid, right? Um, but it, you

know, it's it's like it's fantastically

easy money compared to the rest of what,

you know, or compared to activist

shortselling. So, with Apploven, um,

look, you know, our our focus there was

on its, you know, purported, you know,

adtech AI, um, where they were cheating

and it's it's an easily there's no moat

there because it's pretty crude how they

were how they're doing this. They're

violating terms of service of, you know,

the major, you know, of of the major

platforms. They are, you know, and

they're violating probably n, you know,

numerous state laws and, you know, maybe

even federal law and also EU law. So, if

they're allowed to cheat, basically

anybody can do this and erode erode

their edge. But if you know, Facebook,

Google, etc. are serious about enforcing

their toos, then it should become a

problem. So, we weren't attacking the

core business, the gaming business. It

was the blue sky story. And look, since

we've published, there have been

numerous other short reports written on

it. You know, some of the same angle,

others different angles by various

firms. And I don't know, you know, I

guess maybe this is just me telling

myself what I want to hear, but I think

it's one of those things where 50

million Elvis fans can't be wrong. Like

there are so many of us who find that

this company is so messed up. Um

eventually those chickens come home to

roost. But in this super frothy market

where everybody is anestized to risk,

they're not coming home to roost just

now.

>> Carson, what causes cycles to reverse?

What causes bubbles to pop? Generally,

these hype cycles will will end when

there are just too many like speculative

shitty companies that come to market.

You know, that's how that's really my

view of how the internet bubble ended in

2001. It wasn't the Fed raising rates.

it was you had so many IPOs of so many

companies that you know effectively were

trying to you know soak up money from

the same you know the same theme the

same you know pool of money demand for

you know high beta fast growth blue sky

stories and so that's what happened in

21 as well so while there is a lot of

demand for speculative assets right now

eventually the supply will overreact and

it will crush the demand and so that'll

be and that's exactly when we'll be

interested in publishing on names that

are you know that had been in that space

and had been run up um on that over hype

on that huge hype cycle

>> and where do you think we are in that

cycle now in terms of the demand for

speculative assets which is high but

also the supply of speculative assets

that supply exploded in late 2020 and

early 2021 I mean Jim Chenos has this

stat about just the amount of millions

of dollars that were being raised in spa

capital and the amount that was needed

to fund that. It was totally

unsustainable.

My read is that there haven't been, you

know, a huge amount of IPOs or or spaxs

in last year. Do you think the flood is

coming this year?

>> I had expected more IPOs last year. Um,

you know, I think that the liberation

day, um, you know, tariff thing, I

suspect that really disrupted the plans

and created a lot of uncertainty. So,

um, yeah, I don't know what the IPO

calendar is looking like. So, I'm kind

of speaking a bit out of school, but

yes, I would expect 2026 to be a year in

which a lot of companies come to market.

I mean, you know, like this is it's in a

different class than what we're talking

about. But if you look at SpaceX

combining with XAI and the idea that the

like Elon wants to IPO the combined

company um before you know I think in

June or so um part of it driven by his

concern that you're going to have Open

AI and some of the other uh company

large language model companies come to

market with their own IPOs. I think that

speaks to this dynamic that um yeah, you

will have a significant increase in

supply and you know like I think I don't

think anybody's ever played the public

company game better than Elon Musk has

and so if he's concerned about you know

the potential over supply of AI etc

names relative to demand I think that's

telling I would think that by the second

half or by the second half of this here

we're going to see uh a situation in

which uh the demand is being overwhelmed

by supply of codes

>> and and maybe the number of IPOs and and

public listings doesn't compare to 2021

but in terms of the amount of capital

because like you only need one SpaceX or

one OpenAI to go public to match all of

the uh you know XL fleets of 2021 what

one of your famous

okay you think this ends because a

>> the supply of speculative assets exceeds

the demand. I noticed you didn't say

certain fundamental reasons like the

return on invested capital for these

companies with the hyperscalers is not

going to be

sufficient to their cost of capital

which is an interesting academic theory

but can you talk about how sometimes

theory isn't isn't what happens. So, as

you were as you were saying that the as

you were talking about the the return on

invested capital,

the phrase that went through my mind

real quick was who cares?

I don't think, you know, at this point I

don't think fundamentals are are

relevant to these, you know, to to

what's going on. But the the thing I'd

say I I get asked all the time, okay, is

is this like the internet bubble? you

know when you're looking at the

hyperscalers and AI and no because for

most of the hyperscalers they have the

cash flow to carry the debt that they're

raising. I mean these are tremendously

cash flow generative businesses um

underlying them. I mean whether it's

Microsoft meaning even Oracle which is

among you know which has got somewhat of

a higher leverage ratio.

I mean, they would be able to if they if

they decided, hey, these this money has

all been wasted and, you know, we're

going to exit this, you know, they they

could pay down that debt within a

reasonable period of time. I'm not

concerned about uh the creditworthiness

of Oracle. Coreweave is a different

story. But um but the thing that's

different here is that the the

hyperscalers, I mean, these are not

these are not for the most part

startups, you I mean open AI

you know it doesn't have that extremely

cash flow generative business but yeah

look at Google look at Oracle look at

Microsoft look at Facebook Amazon I mean

good god like you know making bad

investments is not going to implode in

into building data center capacity to

support buildout of large language

models or other AI models is not going

to implode these companies. I mean, yes,

you know, the stock prices very well

could take a hit. I'm not saying that

they're correction proof, but this is

not like the internet bubble where, you

know, my ass.com

had really, you know, no, you know, had

had no intrinsic value, you know, went

to a few billion dollars in, you know,

market cap and then collapsed. That's

not what's that's not what's happening

here. And even if these projects are a

machine of C cash incineration, they can

recover like Meta did in 2022. Not an

extinction level event by any means.

>> No. Coreweave potentially different

category. Um Open AI, you know,

potentially Open AI potentially

different, but the other the other

hyperscalers

uh no I I mean they're they have real

they have enormous hugely cash

generative core businesses. So this is

so they are going to they're going to be

okay. Yes, they could take a hit to the

equity prices or to the equity values at

some stage, but not extinction level

events.

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Now back to the show. Earlier when I

asked you about AI pretenders, you

talked about okay the semiconductors

there you they could be quite cyclical,

very capital intensive, but I think

there's a you know you said something

moderately positive about them. But you

said the the players that are trying to

latch on to trade. Maybe you mentioned

power like uh would is is sort of your

questions about some of these companies

would they be would they be located in

the data center but outside of of the

chip?

>> It's funny because um for the Robin Hood

philanthropy last year uh I participated

I'm participating again this year but in

it goes from October to the end of April

beginning of October. So you pick one

stock to be long, one stock to be short.

And I picked Olo as my long. I don't

know the company well, but I have no I

have no basis to to believe that in any

realistic time frame, it's small modular

reactors are going to be a real business

or that those designs are going to be a

real business. And did very well for

most of the contest. April there was

that that correction of the momentum

names and then the contest ended. Then

they started ripping again in May. So um

so Alo's Alo is a great example you know

like whoa data centers need power and

now you know anybody who claims to have

a small module or reactor design like

even though you know that's you know

many many many years off at best in most

their cases like it's never going to

happen um you know those companies

ripped and have real value. So that's an

example of the spillover effects. But um

even though there were a lot of people

who were skeptical of Alo, yeah, it

would have been a really bad idea to

short it and that's why I picked it as

my long, you know, there was no real

money underlying that uh bet. But um you

know just in the cycle in which we're in

right now hyped driven cycle you know

speculative excess right now excess

demand relative you know excess

speculative demand relative to the

supply of speculative assets these

things go up.

>> So Aqua was your long which performed

well what was your short

>> Griffles. So that was a a Gotham City uh

short that they'd already published that

did reasonably well for me as the short,

but I mean it's the long that's going to

make you in that contest. So for a while

I was number two uh behind Bill Aman. So

it's ahead of um like Stan Ducken Miller

and Chase Coleman. I'm like who are

these guys?

>> Nice. Last year you shocked the

investment world when you came out with

a long idea. Is this the first time that

you publicly did it? And what motivated

you to to make this call on Snowline

Gold?

>> As I said, we've diversified our

business at at Muddy Water. So, I think

it would help to explain what we're

doing. Um, so we're looking for we're

looking to plug people in to our firm.

You could say it's kind of like a

multistrat model. Um, but we're not

doing this through one large fund. and

you know we're not trying to you know

get kind of middling returns for nova.

So we're we're bringing in people who

are very talented who have edge in areas

where edge can persist. And so we've

we've been in resources. Um we started

collaborating with somebody back in 2017

who was at another fund. Um his name is

Darren Mlan. And when I say

collaborating,

he was the one who um brought our attent

gave or caused us to pay attention to

this one company called Asenko Gold that

we ended up shorting very preiently,

very successfully. Then he got us into

GT Gold as a long which was acquired by

Pneumont. So like you know I think five

bagger for us relative to our first

money. Um then he got us into a company

called Mayfair Gold where we ended up

running alongside activist campaign and

I'm on the board of Mayfair Gold

presently. It just um uh got a US line

as well. The ticker is mine m i ne.

Um although little sidebar there, I

guess that used to be the uh the ticker

of a really uh dodgy psilocybin uh

blowup. So um on the first day I was

trading in the US, it looked like

somebody came in and probably market

maker, I guess, uh and shorted a bunch

of uh mine stock probably thinking was

silvers psilocybin company. But anyway,

um and then uh also we were long file

gold which is a larger deposit was

acquired by the Lundine family. So

Darren's very very talented and he left

his former firm and came off technically

he's a consultant to us but so we

launched a we launched a resource you

know mining fund in 2024 and Darren is

the chief research provider to us for

that fund. So that fund you know is I

mean done well and um anyway one of its

core holdings is Snowline Gold. So I

spoke at the Iris Owen conference in

London this past November and I spoken

there I think that was my fourth year in

a row speaking there and I previously

spoken there for a few years in a row uh

before taking a little break and I

decided to pitch snowline as a long and

it's one where there's a lot of

asymmetry to it even if the price of the

underlying declines significantly we

think snowline gets taken out um at 2x

plus where it currently trades.

And what is it that's so special about

the deposit uh that that snow line has?

>> So it's located in the Yukon in Canada.

Um now the Canada is a first world

jurisdiction. There's a strong rule of

law and you know not in immediate

vicinity of the deposit but not that far

away you have highways and

infrastructure. Now, the knock on Snow

Line had been that, well, it's it's kind

of remote and therefore uh it's too

expensive to develop, but the with Snow

Line, you've got a lot of near surface

mineralization. It's going to be an open

pit mine, you're going they're going to

be able to cash flow significantly at

the beginning. So, that really um that

really impacts positively the NPV. So,

we believe Snowline will support this

becoming a mining district so that the

that the investment that goes into

Snowline or that it's economic to make

this investment in into Snowline to

create the additional infrastructure

needed and that it will then unlock a

lot of the value in that in that

district. right now it's the we think

the most compelling significant uh green

field deposit that a major can make uh

in the world I mean in gold. So we don't

think it sits around that much longer

especially if you know with the price of

gold you know anywhere close to where it

is right now.

>> Yeah. An all-in sustaining cost of $569

an ounce for gold. That's uh that is

pretty cheap. And so the the minerals

that are going to be taken out in that

initial phase, is that just gold or is

there also like copper and silver and

other other stuff?

>> It's principally gold.

>> It's not planning on producing until

like 2029 or 2030. So it does have a

process. The the thesis is not that

they're going to produce so much gold,

you know, quickly. It's that it's going

to be acquired by a major,

>> right? And yeah, and ma majors have the

capital. They have the patience to

develop these. But you know the thing is

the majors since the GFC have spent very

very little on green field exploration.

Substantially all of their budgets have

been brownfield and the

>> explain that difference Carson.

>> Yeah. So brownfield is a property that's

already been mined. I mean quite you

know many cases a major has already been

mining it and they're exploring adjacent

areas to see if they can if there are

other deposits there that are economic

to exploit. So if there are you know

because they already have infrastructure

in place the you know the economics the

the grade of the of the mineral the

grade of the gold could be lower and

it's still economic for them. So that's

what brownfield exploration is. But

generally speaking, you're not going to

you're not going to have major

additional discovery

um you know that moves the needle from

Brownfield. And the reason that the

majors are stuck in that pattern is that

coming out of the GFC, they had to

repair their balance sheets and so they

had to cash flow and that's when they

slashed their exploration budgets and

then their shareholders got kind of

addicted to the the dividends and don't

give them a lot of latitude uh to you

know to explore green field projects.

they have to acquire them because the

thing is I mean these they're depleting

their existing resources right like

there's no terminal value of of these

resources so as they deplete them it

becomes more and more urgent to acquire

and the other thing is when you have a

relatively small number of you know

majors in a space

I mean at some point they're going to

have to look around and say you know,

we're going to look really bad. Um, or

you know, I as the CEO, I'm going to

look really bad if I, you know, if I

don't get out there and aggressively

start to acquire because my competition

is doing that. So, we think it's just a

matter of time before you really see

that the the transaction velocity of

transactions pick up and and we think

Snow Line gets acquired. um you know I

mean certainly by that stage

>> what are the green flags that you see in

the snow line as opposed to the red

flags that you saw in the precious metal

companies that you shorted

>> the idea that you have to commit fraud

in the mining space is let's see not

entirely accurate because if you just

change assumptions right based on your

based on your test drill and the

intercepts you just change the

assumptions oh in good faith faith. Um,

you can have a block model produced that

shows uh, you know, a significant amount

of mineralization at, you know, whatever

grade you need to you need to show. And

that's where Darren is really good at

going into the block models,

understanding the assumptions, and

picking them apart and, you know,

saying, "Yeah, no, no, this this is this

is not valid." Like, this is not this is

much less economic. In the case with

Snow Line, because there's so much

mineralization so close to the surface,

it's not a question of, you know, can

you trust the block models? I mean,

Darren's actually been to the property

and he can see like literally see gold

on the surface, uh, you know, on, you

know, of the land. So that's that's what

makes snow line so so unique is that

it's that you have so much at or near

surface mineralization. Um so from

Darren's perspective it's not you know

we're not worried that the assumptions

that have gone into the block model are

aggressive. You know again the knock is

the infrastructure. Um now there are

other mining properties you know not for

not for gold um that are not far away

and you know in our view again is that

the the capex needed to develop these

projects is more than justified by their

economics.

>> Is your uh minerals materials fund is

that long only or is it long short?

>> It's long short. We run it net long. Um

but uh but yeah there are you know there

are some names where you know when we

short something generally it's going to

be it's going to be a producing minor.

The idea of shorting a minor that's not

in production can be very dangerous

because you know they can continue to

hype and you know and and mislead um for

years. But once they're in production

and we feel they're going to be unable

to meet the expectations that they've

set for the market uh or they've set for

themselves in the market, that's what

you would short.

>> Can you just share your overall broad

thesis of mining zoomed out?

>> The reason that we were drawn to mining,

we have had no view on the underlying

metals, but there's tremendous edge

available there. So number one in junior

mining you can get venture capital type

returns but you have much more data upon

which to base your decisions than you do

with venture. Now the other thing is

that there's been a significant

underallocation of human capital human

and financial capital to mining since

you know 2000ish.

your smart university graduates, you

know, have gone into tech, have gone

into finance, they have not gone into

mining and even on the capital

allocation side. So the, you know, we've

seen a lot of people in the space or,

you know, I know Darren especially has

seen a lot of people in the space who

they have good deposits, but they're

just bad operators. They're not good

business people. Um and you know that

when when you when the bar is low

basically in terms of the people against

whom you're competing and this isn't to

say that everybody in you know mining is

is not right. That's far from the truth.

But when you consider you know how much

talent you know you're you're competing

against if you're doing if you're

investing in software um there's so much

more edge available in mining especially

junior mining. So that's been our macro

thesis. It's really been about an

underallocation of human capital and the

complexity of going through the data,

but again the rewards for those who do

who do the work and know how to

interpret the data.

>> How do you differentiate sort of the

precious metals beta versus the alpha in

stock selection on the long and the

short side? So I I imagine that you know

almost every precious metals fund um has

has had a a positive performance you

know S&P beating performance and you

know that's that gold and silver going

up uh so much has has helped them

immensely. How do you think about the

value ad throughout a different cycle?

Are you trying to outperform the most

when the metal goes up or you trying to

outperform uh the most when the when the

metal goes down?

>> So, we don't think about it that way.

We're very long-term focused here. So,

um our fund has a three-year hard lock.

So, we're basically telling investors,

look, it's going to be volatile. It's

going we're going to make highly, you

know, a lot of the positions will be

highly concentrated. You could see

because we own I think 16% of Mayfair

gold. Now we own it across a few funds

but that's obviously a highly

concentrated position for us in the

resource fund. Um so you know we're I

mean when we when we go along I mean

we're generally especially for something

concentrated I mean we're generally

looking at something that you know we

believe can be a multi-bagger and you

know that's even using conservative

assumptions on the metal price and we're

not you know we don't we don't do only

gold and silver um you know also you

know we've done we've done decent amount

of copper I mean GT Gold despite the

name uh was really a copper producer or

a copper miner wasn't producing. It's

not a short-term project for us. Now,

you know, we ran last year on a delta

adjusted basis. And I say delta adjusted

because we did a decent amount of

hedging using derivatives, but we ran

only I'd say 50 60 uh net long on

average throughout the year. Um, and you

know, uh, I mean, we're, you know, the I

mean, like I I think legally I can

discuss the returns, but I don't want to

be too specific because I don't want us

like having to do it every month. But, I

mean, on a net basis, we returned to

investors like a little over 100% last

year. Again, on a delta adjusted basis

running, you know, 50 60 net long

throughout the year. you know, beta

certainly helped, but you know, there

was there was alpha too there.

>> What's most interesting to you and to

Darren right now?

>> We have been spending most of our time

recently in the gold space, but I think

that's just, you know, that's because

you've had such a large move in the

metals. So things that were, you know,

that were not economic before are

economic. Um, and you're seeing more

financing, seeing just more activity

among, you know, issuers in the space.

So there's there's more to look at

there. But um you know look if you if

you think long term um you know and that

we're going to increase the

electrification of our economy um or you

know the many you know the developed

economies are going to do that you

obviously that's going to require a lot

of copper and a lot of other base metals

to be pulled from the ground. So you

know we're you know you know we're

agnostic um in in that regard. You

mentioned when I asked you about red

flags, you you talked about how people

could just change assumptions ever so

slightly and that leads to uh financial

implications that could look very good

on an investor presentation. When it

comes to other forms of red flags about

communicating with investors and

presentations, you're you're a tried and

trueue veteran of seeing this in you the

non-mining space. What are some of those

things? I mean, one thing that comes to

to to mind for me kind of drives me

crazy, and maybe I'm wrong about this,

but it's just uh commodity intensive,

it's not commodity businesses that

require tons of investment like oil and

gas or mining that quote free cash flow

multiples when investment is extremely

important to the business. So, it's

completely misleading. I I don't know

maybe you disagree with that with me on

that but but what else is something that

it if you see it it's just kind of like

an aha moment like hm this is likely not

going to be something that I want to

participate on the long side in the same

way you know if in 2021 you saw an

investor deck of a spa company and

within the first four slides it had the

word TAM total addressable market you

knew that it was not going to be you

know it was a prime target on the short

side and

>> the thing that we see is that there are

these junior miners out there that are

pushing these these timelines to get

approval and get into production that we

just think are way too aggressive. Like

it's it's like yeah okay even if even if

we say that okay your resource is

everything that you know you say it is

more or less which there is a lot of

exaggeration not fraud but just a lot of

bad assumptions that lead to

exaggerations but even if you put that

to the side the there are companies out

there that are making these you know

making these pronouncements these

predictions about how quickly they can

get into production where you know we're

like no way like that's just No, no,

you're years off the mark based on where

you are. So, that's something that is

jumping out to us early on. Now, there's

nothing for us to do with that because

again, I go back to how we generally as

a rule are not going to short a

non-producing minor. Um, and you know,

we're not going to go long that. So,

that's that goes in the pile of nothing

to do unfortunately. So when you look at

geopolitics,

what are the thoughts you're having,

what is the work you're doing in

Southeast Asia?

>> Well, I guess taking a step back. So

yes, we're in Cold War 2.0. We've been

in that for a while. You've got China on

one end or you know, China Russia on one

end, although Russia is from an economic

perspective obviously much less

important than China than the US on the

other end. And the countries that I

think are best positioned from a

geopolitical standpoint are the ones

that are generally have been non-aligned

um and are in the middle and can play

the US and China off one another. So

that's been like Vietnam and also India

is is a similar country. So um I mean

and we're also talking about countries

that have their own you know I mean have

something more than just you know we're

not leaning too much one way or another

um that they're you know that their

economic you know value add in their

economies. So those are two countries

that we're excited about um from a from

a long-term perspective.

>> I haven't seen a ton of short reports

from you about China. Do you think that

they have improved in terms of their

reporting quality or is there some other

reason that you have not shorted that

many Chinese companies? I mean I think

in 2021 or 2022 you shorted a Chinese

real estate company but um yeah what you

know where's are there is there luck and

for luck and coffee forests are there

still those lurking in China? Look, you

have to also differentiate between a

Luckan and a Signo force, right? Like

Luckin had a real business,

strangely enough. Like it's, you know, I

think it's, you know, I think it's

actually, if it hasn't already relisted

on a US exchange, it's about to. Um,

but, um, Soph didn't have a real

business. Um, how many major market cap

companies from China are there trading

in the US or Hong Kong that uh don't

have real businesses? I don't know. I

mean, it's, you know, they generally the

businesses have been realish from what I

can tell. Now, are the financials

honest? No. I I mean I I'm said for

years that I think you should assume

that some portion of a China based

company's public China based company's

financials are fraudulent and if you

want to be kind about it it's hey

they're competing for capital against

guys who are cheating so you know if you

know cheat or die basically cheat or

don't get the capital

>> percentage of Chinese listed companies

would you say have fraudulent

parts of their financials

I'm going to exclude mainland China

listed companies because the you know

there's there's an asymmetry of uh you

know ripping off foreign investors. I

mean especially you know American

investors um where you never get in

trouble in China for doing that right

like literally you do not there's only

been one person who was ever materially

punished um for listing a company in the

US that was based in China that was a

total fraud. That guy's name was Dixon

Lee and he did prison time in the US

because he's Taiwanese.

So the Chinese dudes, they rode off into

the sunset. Um, and you know, laughing,

I'm sure. So, China is not ever going to

cooperate. So, you know, the heads I

win, tales I don't lose dynamic. I mean,

it's just, you know, as it like Charlie

Mer used to say, show me the incentive,

I'll show you the outcome. like what do

you think the outcome of that's going to

be if you don't if you have nothing to

lose and everything to gain by

attempting to defraud American

investors. Now Hong Kong it's a little

different. You know Hong Kong in theory

you know now that it's I mean it's part

of China and it's become more

mainlandified by you know significant

factor since 2019. In theory, defrauding

uh investors through the Hong Kong

exchange could lead to significant

adverse consequences in mainland China.

But I just feel like the Hong Kong

market is such a cess pit with so many

frauds and scams. I mean it it's it's

funny like every now and then if you

look you know in Hong Kong and pay some

attention you'll see some stock go up

you know really short order go up like

five 10 times you know get that market

cap north of a billion where the you

know stupid foreign index funds have to

come in and buy because it's been added

to the index and then it just you know

one day like the chairman will stop

manipulating the stock and it gets

halted down like 87%

within minutes, right? Like you just

find these stocks that fall out of the

sky all the time in Hong Kong. Like this

is not a real market with, you know, I

mean with, you know, by by the standards

of like western market. So um you know

so yeah I so I think that Hong Kong even

though in theory it's not as

asymmetrical from a riskreward

perspective for fraud you know for

fraudsters and scammers there's just so

much safety and numbers there that you

know a lot of guys get away with it and

almost everything you should assume you

know has got at least a little bit of a

problem there and then of course you've

had here in the US like the the Chinese

micro for cap scams, the pump and dumps

here, which I don't know, man. I mean,

if you're falling for that today, like I

don't know. Don't tell me that you got

fooled, right? Like, you knew it was a

pump and dump. You just hope that you

were early enough that, you know, you

wouldn't be left holding the bag, you

know? It's kind of Yeah, it's it's like

I can't, you know, should they be

allowed to do that in America? Of course

not. You know, are our exchanges such

you know, to allow it? Yes, of

course they are. What else is new? They

are complete and so are all the

lawyers that facilitate it and the PR

firms that facilitate it. Like it is

what it is. Um so yeah, if you want to

play that game as an investor, you know,

caveat emptor, there's a very good

chance that you know your your like

WhatsApp group or whatever it is that

they're using to pump it is is not like

the inside circle of the pumpers and you

know you're eventually going to be left

holding the bag. So, um, you know, um, I

think it was was it Trump who said no

crying in the casino, you know, just

that's that's the game you play, you

know, be be prepared.

>> So, you have three sort of tiers. You

actually think that the fraud is the

least in the A shares listed in mainland

China and then in the middle is kind of

that the Hong Kong shares and the worst,

the most fraudulent, most junkier

actually the American listed Chinese

companies. So, I've not taken a

comprehensive look at ashare listings,

but my my assumptions have long been

like number one, a lot of these

businesses are fairly basic industrial

manufacturing businesses. So, you know,

you're not reinventing the wheel. The

other also when you look at, you know,

in the US, especially in the China fraud

caps 1.0, We know a lot of the

businesses that were total frauds were

you know basic manufacturing businesses

like paper company. However, what

allowed those to flourish as frauds were

the language barriers, the cultural

barriers, the lack of understanding of

the Chinese legal system and accounting

system and you know and and how to get

information on those companies you know

such as through government agencies in

China. All right. Well, in China, those

those information the those

understandings or misunderstandings

don't exist, right? So, and also look, I

think the time change, the time zone

difference also, you know, was somewhat

helpful for those those fraud caps. So,

in mainland China, a lot of the

businesses are much more basic, harder

to, you know, totally lie about, number

one. Number two, much more easily

diligent and better understood by the

investors there. Number three, um you

know, if the wrong people lose money

there, uh the consequences are quite

severe. So, you have real punishment

there. So, you know, is it that there's

no fraud in the mainland markets? No.

I'm sure that that would is not an

accurate statement. But um I've always

assumed that the mainland market would

be the cleanest place to buy um you know

to invest in a Chinese company.

>> And the reason for you not playing on

the short side in in Chinese American

listed ADRs is just you're not you're

not seeing opportunity there.

>> The issue isn't you know oh we can't

find anything that's you know like

totally misrepresented and you know and

therefore misunderstood. Um, but China,

it's there's so much more macro that is

behind those names. You know, the chi

Chinese TMT names are in favor. Nobody

cares that it's a fraud. They're out of

favor. You know, maybe, you know, maybe

you caught it right before they fell out

of favor and you look like a genius. But

you have just a lot of macro, you know,

flows that really determine what's going

to happen there. Number one. Number two,

the SEC cannot investigate those

companies. generally cannot erase those

companies because the Chinese side does

not cooperate.

>> So you really have to like luck and

coffee rely on the auditor doing a you

know doing somewhat of a thorough job

and that's usually not in the auditor's

interest to do that especially in China

where you know if the auditor doesn't

like turn up the fraud, you know, turn

up evidence of the fraud, you know,

probably nothing happens to anybody

ever. Um and yeah then the you know then

the final thing is it's it's a lot

harder to do that work in China now you

know the government is generally not

um permissive of that and you know

they'll they've taken extreme measures

including putting people in prison

who've done just low-level investigative

work you know taking videos and photos

you know not having any share of the

economics in the short just you know

being paid by their investigation firm

employer

or you know a contractor just go you

know here a few hundred dollars go snap

some photos and you know I know one case

where the dude went to prison for I

think a couple of years

>> and so you have a Southeast Asian fund

now is it only invested in Vietnam or

it's Vietnam and India

>> the fund has been uh Vietnam only and

you know we are going to be launching an

India product um India is a much larger

market there are a lot more names there

um it's a lot more dynamic and benefits

from some of the same trends uh macro

trends that Vietnam benefits from. It

has some of its you know but it also has

its own different story as well. Uh very

strong consumer growth story. So um but

you know similar you similar point there

that there's edge in doing deep research

there because not a lot of people are

are doing that there. So um we are we

will go places or add strategies where

you know where there's edge. I mean if

somebody came to came to me and said hey

I do XYZ and you know I I do well in it

and here's why you know it's niche and

here's why there's edge we're very

interested in having conversation with

that person about plugging uh him or her

into our platform. So India, we think

you can have edge there just like we do

with Vietnam.

>> And I believe it says that India has a

ton of companies, maybe even more listed

companies than in America. Yes.

>> Whereas I've heard that Vietnam does not

have that many listings.

>> Vietnam, you know, its economy is much

smaller than that of India. The public

market is that is much smaller than that

of India. So um yeah, so we're able to

take advantage of the infrastructure we

have in Vietnam to do the India

expansion because you know at this point

I mean we know pretty much all the

companies that are in the universe that

we would consider investable in Vietnam

whereas you know in India I mean it

would take a whole lifetime to get to

that stage I think. So you mentioned a

broad macro thesis of with the US and

China having us, you know, a little bit

of a cold war. Companies that are in the

middle like Vietnam and India are going

to benefit. So I I imagine that is a

thesis that could be a a a tide that

could lift many boats. What was it

specifically about Vietnam that made was

it was it the opportunity in ter I guess

were you still bullish on Vietnam beta

or were you bullish on Vietnam alpha of

like okay let's be honest there are a

lot of funds that uh you know invest in

Japanese equities and some of those

funds are actually very smart people and

so we want to compete in a world where

we you know we we can really

differentiate ourselves.

>> I'd say the the principal thesis was

Vietnam beta. I mean, the way that I saw

it six years ago was that coming out of

COVID, there would be, you know, Vietnam

would be the single largest beneficiary

of FDI flows being redirected from China

to Vietnam or to to other countries. I

think that has played out and will

continue to play out. Um, Liberation Day

was a massive volatility event when it

came to that. I think initially the

tariff that was announced on um imports

from Vietnam was like 90%ish

which was insane. Um but you know not

withstanding that Vietnam is a premier

destination for export oriented

manufacturers and it is also working its

way up the value chain. Now it's never

going to be China. it just doesn't have

cannot have that scale but it also has

very favorable demographics. India is

somewhat of a different story and look

one thing that we are having to watch

closely of course is what impact

I don't call this AI because you know I

I'm like these are large language models

but one impact large language models

will have on the tech sector in India

and um you know specifically you know

software outsource software development

and business process outsourcing and

what that will do to uh consumer demand

um in India. So that's something that

we're watching. Um but you know for the

moment we're very positive on India

although the valuations in India are

pretty crazy but you know I've I've come

to kind of feel like you know and in

today's world there's so much liquidity

that you know

you know valuation doesn't really

determine whether something goes you

know up uh you know or down in the near

term. It's you know there are other

factors there are flows that drive these

that drive these things uh that are can

be completely divorced from fundamentals

and valuation

>> and what is your process specifically

for the the ongoing Vietnam fund.

>> It's great to troll this to troll the

ocean for the undiscovered gems but the

problem is if you're really the only one

doing that you know who's your marginal

buyer? Who's going to buy after you buy?

So, um, it's kind of a depressing

state of affairs when I think about how

I view investing on the long side now

because, um, look, I I want to I I want

to live in a world where where

valuations and where price where prices

match actual economic values and where

it is, you know, where you can go and

find those undiscovered gems and, you

know, and the price eventually catches

up with the value uh you know with the

value of the business, but that's not

the world that we live in. And so

there's you know so there's been an

adjustment basically say look you know

what are investors excited about you

know what might they be excited about

next? Um let's look at the companies in

that space. You know let's look at who

we like the best and you know do some

real deep uh research on it. you know,

maybe it's one that's not, you know,

that's not at the top of the list in

terms of what investors are paying

attention to, but what we think can move

up that list. Um, you know, maybe it is

at the top of the list and we'll look at

it and say, but it's so richly valued

right now, we just, you know, we we

can't like, you know, we can't buy it

right now, but we'll be patient and wait

for something to happen and then buy it.

But that's that's the adjustment that

um, you know, that I've made. I mean so

when we started this journey and you

know focusing on Vietnam and you know

also had in mind the India theme uh 6

years ago uh the idea was to be was to

be bottom up but you know what we've

seen as short sellers here what we have

seen in Vietnam what we observe of India

and also just you know I've done

personally very well in our momentum

strategy here for S&P 500 names

All of this has just convinced me that

think about themes. It's not reinventing

the wheel. Um just, you know, like top

down and and stop trying to go where

nobody has been yet because they're

probably not going to show up anytime

soon either.

>> I'm just looking at the M MCI Vietnam

index. So yeah, last year it had

incredible performance 2025, but it has

definitely been a lagger over the past

many years. to what do you attribute

that and do you think that your thesis

of Vietnam is going to be a recipient of

foreign direct investment flows that

otherwise would have gone into China

that thesis was correct but is it

propelling investment performance and

and capital returns

>> yeah we think it's been a lagard because

under the under the prior government

there was a lot of there were a lot of

decisions that were just there was total

decision paralysis you know from the

municipal provincial levels on up to the

central level and so I'd say that the

wounds were somewhat self-inflicted and

by having that decision paralysis I mean

it's not just about stateowned

enterprises there's this entire you it's

about private companies getting approval

to expand um and you know and then look

the they came out of co as well so they

had to like many economies they had to

start from you know standing start

basically we did see an acceleration in

what we're interested in in terms of the

decision-m process

projects being unlocked that you know we

think will unlock value and you know

increase demand within uh within

Vietnam. So I think on the macro level

um you know we've in just in terms of

the FDI flows we've been correct. I mean

90% tariff would have you know would

have really put that you thesis at risk

but of course that was pretty quickly

dialed back. Um but um so we've the

macro thesis has been correct. I think

it'll continue to be correct. Um the the

political environment uh needed to

change. I think we underappreciated that

um at the beginning. Um we think the

political environment is where it really

needs to be for the private sector. I

think we underappreciated the, you know,

the thematic nature here and that we've

been going after too many of those, you

know, looking looking for the

undiscovered gems, which just not really

the right way to play it.

>> And those undiscovered gems, some a lot

of them, as you say, stay undiscovered.

Tell us about the momentum strategy in

the US for the S&P 500.

And what does it say about the

investment landscape right now that that

is kind of the the hottest strategy you

have right now is just kind of no

fundamental analysis chasing the hottest

stocks?

>> It's not the hottest. Uh resources did

did outperform it last year.

>> Okay, thank you for correcting.

>> I think momentum was up gross 70ish%.

Um I'm soft on that number because it um

you know it uh I' I'd have to go back

and look exactly but we um yeah but

basically I mean what we're doing every

month so we have the way that we measure

momentum it's only on within S&P 500

constituents and we're rebalancing

monthly uh highly concentrated in the

names that score the highest. So there

you know there can be a lot of

volatility uh to the downside. Now, I

mean, we've well, and the upside, but we

also have a version of this we could run

that would have roughly 100 names and

less concentration, but um but in any

event, that's that's how we that's how

we have approached this. We started

running it in October of 24 in real life

um in very small size in one of our uh

vehicles. Before October of 24, we had

back tests. So what we've observed and

also we've seen um in back tests is that

you know it was interesting like the

number one name in left curve from

October of 24 until September of 25 was

Palunteer

and then in starting in September of 25

it became Western Digital and after it

became Western Digital and you know and

both Micron and Seagate at different

times made it into uh made it into the

list as Well, um after that is when

maybe two months after that's when got

that headline about the the the memory

shortage and the squeeze. And so looking

at that, you know, looking at the back

test, what you can see at times from

from this, you know, from the strategy

is that it's showing rotations that like

it's a leading indicator of some of the

rotations that are underway. um you know

to energy away from energy you know in

the back tests. So uh to AI and then AI

gets you know then it goes from like the

AI software to the hardware. Uh we

started to see some resources creep in

but um you know the last trading day of

last month uh you know zeroed zeroed out

this one resource name that had been

really strong. Um so yeah so it's um

it's a very interesting strategy like

that and it and it's definitely the vast

majority of the time it has not been it

has not had a major um concentration in

mag seven names so it's not a mag seven

name and that's uh I mean at times like

U has been in there and uh what have

you. So um so yeah it's you know look

it's much easier way to make money I say

than active short selling. So that's

that's what I like about it. you've done

it during a a quite a a big strong bull

market. What do you think this is going

to do during a bare market? Obviously,

not, you know, not asking for

projections, but just in terms of a back

test in your, you know, your personal

opinion.

>> So, these are all S&P uh S&P 500

constituents. So, really, none of these

should ever be totally fake companies. I

mean, they're they're real businesses.

um back test in 2022

on a gross basis. So the the S&P 500

closed down 18% for the year and on a

gross basis on a back test um you know

at least back test of a version you know

it was maybe a couple versions ago um

this finished up for the year uh I think

maybe 10 to 12%

>> in 2022.

>> Yeah in 22. So again, that's

hypothetical. That's back test. Um, and

we've we've tweaked the model some since

then. Um, I, you know, obviously I think

for the better, but yeah, it's not to

say that this can't lose money. I mean,

of course it can lose money, but you

know, what what I also think is

interesting is because, you know, we're,

you know, our core business has been

activist shortelling. you know, I think

it could be really interesting to pair

longside exposure, you know, to

something, you know, momentum, you know,

like like left curve with, you know,

some version of our short of our short

book. So, you know, that's that's a

that's a strategy that we're testing out

as well right now. I mean such a uh

accomplished fundamental research and

investing shop on the short side as

yourself and Muddy Waters that you are,

you know, so interested in quantitative

momentum investing. I just think that

speaks to the time that we're in right

now.

>> It does definitely speak to the time

that we're in. Yeah. And and look, I

mean, I think it also, you know, it also

speaks to our our pragmatism as a firm,

right? Like I mean the you know on the

short side I think the one of the

problems is that so often and I' I've

been guilty of this many times over the

years I think less so now but you know

we view the world the way we want it to

be not the way that it actually is and

so we made a decision several years ago

we're business right like we're we're an

asset manager and we want and we want to

broaden broaden out what we do core for

business is activist shortelling. But

yeah, if if something is in niche that

looks like it can make real money, you

know, and I'm I'm not interested in, you

know, oh, we can produce nine to 10%

with no, you know, with very little

vault, like that's uninteresting. But if

we if we have stuff that can, you know,

can really generate significant returns,

we're excited about possibly adding

those strategies and and people who can

manage them. Carson, your last report

from Muddy Waters Research was in May of

2025, so many, many months ago. Can you

give our listeners reassurance that your

days of activist shortselling are not

over and that you will be back?

>> It's early February right now. I mean, I

think by the end of February, we're out

on something. Certainly by the end of

March, we're probably out on a few

things. So, yeah,

>> you got a few things cooking. You got a

few things cooking.

>> Yeah. Yeah. I mean, I'm yeah, I'm

actually I've like started, you know,

almost nervously tapping my foot here

because I know I've got to get back and

write something, right? You know, work

on my writing on something right now

that's an activist short, uh, you know,

piece. So, um, so yeah, uh, not not to

mean that it comes out this month, but

there's something that I that is

timesensitive here with it. So, so yeah,

we're, you know, we're fully engaged. Um

but you know just the idea of

short shorting something that has really

strong momentum right now um bad idea.

>> That is a good conclusion to draw from

this conversation. Carson, thanks so

much for joining. People can find Muddy

Waters Research on X at muddywaters re

uh the website muddywaters research.com.

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