Nick Zieminski/Reuters
- Short-seller Marc Cohodes defended the strategy’s role in rooting out fraud and protecting ordinary investors.
- The investor blasted GameStop short-sellers for overleveraging themselves.
- Here are Cohodes’ 12 best quotes from the RealVision interview this week.
- Visit Business Insider’s homepage for more stories.
Famed short-seller Marc Cohodes defended his discipline’s role in unearthing fraud and protecting unwitting investors in a RealVision interview this week.
The Alder Lane Farm chief underscored the importance of understanding one’s investments, and warned that a short squeeze isn’t a compelling reason on its own to buy a stock.
The former Rocker Partners boss also slammed Melvin Capital for recklessly shorting GameStop and bemoaned the fact it was bailed out.
Cohodes is best known for exposing fraud at mortgage lender Novastar Financial. He also sniffed out major problems at software groups Lernout & Hauspie and AremisSoft, as well as drugmaker AaiPharma.
Here are Cohodes’ 12 best quotes from the interview, lightly edited and condensed for clarity:
1. “I go after bad people, bad companies, frauds, criminals, things like that. People have ended up in prison because of real, diligent work by members of the short community who do their work. And those people right now are out of business or very close to being out of business.”
2. "The people who do the real work - no one is short these kind of names. No one's stupid enough to be short GameStop at a very low level with a huge short interest, or AMC."
3. "The use of leverage by these punks who have more money than brains is the problem. It's not the Robinhood guys, it's not the Reddit guys, it's the excessive leverage by hedge funds that have caused significant problems for others and for the system."
4. "These guys made so much money on the GameStop trade. They should have just covered the thing and moved on. The thing was bombed into the ground, and the market's high, and the market's speculative. So they sort of dug their own grave with that."
5. "The worst thing that happened to the market was SAC and Citadel bailed out Melvin. They should have let them go out of business, and they should let all those guys go out of business. That way, everyone will learn the lesson that you're not too big to fail."
6. "This whole concept that you're squeezing, or harming the man, or the suit, or whatever is very, very, very misplaced. The guys who own baseball teams are these leveraged long-only funds, not the short-seller."
7. "The brothers here are going to get laid away. People should never, ever buy a name because of a short squeeze. That's the absolute worst reason to do anything."
8. "You should know what you own. You should be able to tell a seventh grader what you own or what you're short in a paragraph or less. Understand the process before going hog wild into these things, because it's a dangerous game if you lose."
9. "You don't want to put Little League batters up against Bob Gibson pitching, because that will not work out well. It can work out OK for a batter or two, but it's not going to work out well over time. And I want to stick a big-ass stake in the ground to say, this is very wrong."
10. "It's like giving a 16-year-old a brand new Ferrari and saying, 'Here we go, mash the gas.' God bless the guy who made a bunch of money in his GameStop calls. He's going to pay a fair amount of taxes on that, which is good, which will help society. But when you put that example in front of people, they say, 'I can do that too.'"
11. "There should be something called a 'too big to fail' tax. Everyone who's viewed as financially significant should pay a huge tax up front so that you, and I, and fellow taxpayers don't have to pay extra taxes, or run a bigger deficit to bail these guys out."
12. "When I talked to a couple of pals of mine, we said if we would have done that to GameStop on the other side - put out a bunch of stuff on Reddit, shorted a bunch of the stock, bought a bunch of puts into oblivion, and the stock would have collapsed - we wouldn't have been investigated, we would have been arrested within seven minutes."