John Hempton on Greensill, Archegos and What It's Like To Short Right Now

But we've handled a lot of I don't know if like they're like per se frauds, but things going badly blow ups, companies collapsing, hedge funds losing a ton of money. It's kind of been a slightly weird time because things that you don't necessary certily expect at the top, or maybe you do. Basically a lot of things going south generally speaking. Yeah, I mean normally it's like that Warren Buffett quote where when the tide goes out, that's when

you see people swimming naked. But the tide, by no means, has been going out lately. As you mentioned, we have stocks pretty close to all time highs, we have ample liquidity. It's a weird time for stresses in the financial system like this to be coming to light. And yet we've had quite a few. So most recently we had our Chagos losing billions of dollars. Before that, we had Green Sill blowing up, and then earlier we of course had wire card as well. So, um, you know the rule

of three, we have three things happening. So we're going to talk about that today with really a fraud or scandal spotting extraordinaire. Yeah, I'm super excited about this. You know, it's kind of like, you know, the food thing is, we do seem to be like at the verge of what like people think are like people are feeling optimistic, Like growth expectations in the United States are like running

sky high. Like people aren't negative. But what does seem to be clear is that, like after this incredible bill run and whether you want to define it by the last year or the last several years, there's just a lot of like sloppy behavior that's sort of coming up to the surface right now. Yeah, and so yes, I'm very excited about this conversation. Yeah, Well, as I mentioned we have a sloppy behavior expert coming on, so um,

we're gonna be talking to John Hampton. He's the co founder and chief investment officer over at Bronte Capital Management. Also a previous Odd Thoughts guest, and a man who was also early on a bunch of things. Um, but top of mind is probably wire Card, Valiant and Gosh, I remember Pontenegro way back in two thousand nine. That was an interesting one. So um, John, welcome to the show. Thanks so much for coming back on. Glad to be here.

I was going to correct Tracy's Warren Buffett quote. Warrant said it's only when the tide goes out that you see swimming naked, and it was wrong. The tide isn't out at all. I mean, market all time highs and we're already seeing people that are swimming naked. It's kind

of a bizarre market. As a sort of very big picture, It's been an expensive ball market for a long time, but the period from sort of the middle of November to the middle of February was a bizarre retail media where the most retailed stocks possible tech stocks that have no technology, just flat frauds, penny stocks, etcetera, or went vertical. We discovered in the middle of that that some very

big money was also playing in them. So Archigos ber Sex is a company that several people have alleged the fraud. I've not done the work myself, but the arguments put out by both US and Block at Muddy Waters and A Stevenson Yang and J Capital alleging that g X is a fraud looked very, very convincing to me. And despite that, the stock sort of doubled immediately. The good shortcase came out and we now know that there was retail money, just retail money on a different scale and

a different style at Archiegoss chasing that up. That pressure has eased off lately, we're starting to see the nonsense stocks falling and often quite falling quite far. And if you don't look at the red chatboards now, you see that they're full of other warr and Buffett quotes, g

quotes about buying when there's blood in the streets. And it's almost comical at the moment that retail investors could be talking about blood in the streets at exactly at the same time as the market is literally hitting new eyes on a daily basis. Well, that change has changed my life because I short nonsense stocks, and shorting nonsense stocks gave me the worst three or four months of my career in the Leader over the Christmas period, and

it has suddenly become exceedingly nice. We're making money on both sidebook at the moment, we're making money on loans because we're long udernary stocks in the markets making new eyes, and we're making money on shorts that the nonsense stocks are deep lading. And I don't know how long this will last, but it's extremely pleasant having been extremely unpleasant.

We should also talk about our friends at Greenfel, and I don't want to link Greenfill and Archer got other than to say that the symptoms of the extremely difficult market. But I've heard lots of Donson said about green Sill, so I might start here right. What would you say then, is that when you say started green Cell, what is what is your your big picture thought on them? The big picture thought is that old stuff is new again. But without even realizing what is what is radical and

what is new here. Trade finance has been in the nineteenth century was an enormous business and being in Australian. I'll talk about it parochially. You, as a wool farmer in Australia or for that matter, of cotton farmer in America, would be selling your stuff to the looms in the UK, where industrialization meant that they just had last loom fabric factories.

And for an Australian selling well to the UK, it was six months to deliberate and another sort of six months before you've got the message back that it was delivered, and the farmer couldn't wait a year to get paid. In fact, it's completely unreasonable to expect them to wait a year to get paid. If you were a American cotton farmer, was less way less than a year, but

it was still an unreasonable amount of time. And so what you would have is these multinational banks that would effectively, by either cotton in America or the will in Australia, you finance the purchase of it, finance delivery and it would all be settled up over time. And there were three great trade finance banks around the world, and they all came actually unsurprisingly with the British Empire, two of whose names you will know to this day, and one

of the who's name has been consigned to history. The two that you'll knows to this day of Hong Kong and Shanghai Bank and Standard Charted, and they're both big Asian banks, with HSBC being a big global bank headquartered in London, and the idea of the bank whose name is Hong Kong and Shanghai Banks would be headquartered in London. There's its origins to the fact there was a giant

trade finance bank. The one that you won't know was a bank called English Scottish and Australian and English, Scottish and Australian would have once been mentioned in the same breath as HSBC or Standard Charted and up until ninety two it was headquartered in London as well. In two or three, I don't remember the year it moved its headquarters from London to Australia, renamed itself A and Z Bank and is now one of the big four Australian banks.

It also sold its operations in the Middle East in India, so it used to own a giant in the Middle East in India called Greenlands. But when I worked for aand DEAD Bank, and this was in the late nineties and Z banks still had the residual the giant trade finance operation, and ZAID Bank alone amongst the Australian banks had branches in over two hundred countries, which is pretty well every country in the world. And that sort of

thing was the residual of a trade finance operation. Now, with modern communications and but delivery at trade finance has gone from being a very very big and very important business to a small business. And the idea that a SBC was at ore A and z was at a car to trade finance business now looks a little bit absurd, but that's what it once was, and now a typical thing that might be involved in trade finances. I know

a guy who strips down cars for recycling. He has a huge car yard at the outer part of Sydney and one of the businesses is stripping down alternators, which are a sort of electric spinning parts of the car, and they contain about a kilo of copper, maybe a kilo and a half, which is I guess five dollars US worth of copper that somebody has to unwind it. And the process is that the alternators get stripped down.

In Australia then shifts to a low wage country in this case, probably Indonesia, but if it's the United States, almost certainly Mexico. The things have disassembled, some are reconditioned, some are just stripped down to their copper, and then the copper is sent to smelters pro probably in a country that has historically been tolerant of pollution, but these days mostly China, and the process is shipping millions and

millions of dollars of copper around the world. Because the people in the low wage countries can't afford to finance those millions of dollars of copper. There's almost variably a

trade finance company in there. And the typical sort of risk that you might be taking is the ultimately the recycled bits of metal are going to be sent to say thirty or forty different recycling yards in China, and those recycling yards you've got a credit risk against them, and you know the two ways of solving that that they buy the copper upfront, or it's some kind of cash on delivery system, and the alternative way of financing it is that you have some kind of experts in

trade finance who knows that those Chinese that's are good for it. And the idea that you have some experts that knows which hundred and fifty Chinese recycling, Yeah, it's are good for the money in the West is a pretty difficult idea. And I'm not an expert in broad detection in China, but I would have no way of

credit prossessing a hundred and fifty copy yards. Now there are businesses ensuring this, and the classic business insuring this is a French business could Boiler Hermes and I was talking to a Frenchman who pronounced it Euler, so I'll have to go with Youula. But Uler does sort of trade finance ensure the insurance, and it's a pretty reputable player and it's been around for a very long time,

but it's not an enormous business. And then along comes other insurance companies wanting to get in on the act. And I'm thinking of my local one Insurance Australia group who did a joint venture with Tokio with a tide broker in Australia. At they are ensuring this sort of stuff. And the first time I actually came across them was when they were ensuring a whole of copy yards in

China and they devolved simultaneously. So what what what was really going on was that copper was being sold, and it was metal recycling copper sort of alternative stuff being sold to recycling companies in China who were taking delivery and paying a little later. And it might have been fifty million dollars of copper in a shipment, and suddenly these guys ordered sort of three million and they're at thirty of them. And I'm surprised if the scandal has some sort of hit. But it's one of the bits

that sits inside this insurance chain on trade finance. Now that insurance trade on trade finance included i AG, it included Tokeyo and Marine is also included the Australian, the Australian, but London based UM Greenfield. And the kindest way you can say this is that they walked into a shrinking business and they grew it like crazy where all the

counterparties are obscure. Now I'm an old sort of guy, and the most scary thing in the world to invest in is a fast growing financial because anybody can grow a financial fast by just taking more risks. You want to grow a sub fright financial fast, you just stand up on the New York subway and say, does anyone want to borrow a thousand dollars and waigh the money.

You have a very large loan book. Very fast, it won't be very good, right, And essentially the kindest version of this is this with the trade finance version of the same. Now, at some point it went from being the trade finance version of that to an unindoctorated pondsy and I don't know what that point was. But if you're a financial institution that has lost a lot of money, there are two parts. One is to admit it and the other one which has put the foot flap to

the floorboards and hope to grow backfast. And somewhere along the line, Green Sill became that. And then there were a bunch of people who needed money. And one of the interesting things in this world is that the people who really really really need money have the net of finding the people who really really really need to lend it. Right. So you know, if I were sitting down, if I were sitting on the New York subway waving around, anyone

want to borrow a thousand dollars? I get a fair few takers the first day, but by the fifth day, what would be happening would be everybody who is a completely desperate degenerate at my doorstep, right. And so somewhere along the lines they went into they got to that point and attracted the most degenerate gambler in the market. And the most degenerate gambler in the market has blown up. Yes, its name is soft Bank. John, Can I just press you on one thing about soft Bank because I wanted

to ask you about this. So soft Bank's vision fund invested in green Cell. And when you look at something like green Cell, you know it's basically trade finance or cash advance. It doesn't strike me as a company with a particularly strong technology angle or pitch, Like, what exactly do you think the attraction was there? Entirely honest, It had no technology pitch, but it told everybody had had a technology which, right, which is a good way of

raising money. Um, so specialty financed with like a tech valuation? Yes, yeah, The way to get valuation for a bullshit insurer in the US is to call it thinking. Right. There are several fin techs bacts which are just completely bad bullshit traditional insurers, but they are the most highly valued insurance companies in the world. The way that you get a high valuation for a junkie lender is to call it tech.

But that that would be the kind interpretation for soft banks, but not kind interpretation for soft bank was that that capital that was invested by soft bank in Greenfield leave it up and then was invested by green sill in soft bank entity. So there's a company for Viewing being an example. And Viewing is a legitimates attempt at electro

chromatic pimmable windows. You have a skyscraper where when you need a lot of heathen you you have we dont being completely transparent, and when you don't need a lot of heat in you make the windows quite dark because the sun is shining on them. And we see that with with chromatic glasses that you can do it much much better if you make the windows in some sense

electro chromatic. There's a legitimate s g idea. But Viewing was a soft bank company of the good reason I suspect there was a legitimate tech idea, and to be mild with a disaster. And if you go look at glass door on Viewing and you go through the reviews on Viewing in two thousand and eighteen. The reviews are along the lines of, well, you know, on the plus side, there's a lot of room in the cart. And Viewing

was absolutely a death store. It's cumulative revenue fifteen million stumulants, spending hundreds and hundreds and it just didn't seem to get traction. I don't know whether it didn't get traction because the product doesn't work, or the product was badly marketed the genuine or that the cost structures just didn't work. I have no idea, right, but this thing was absolutely clearly on the way out past and then Greenfield lenter

four hundred million dollars and called it trade finance. Now, it can't be trade finance because Viewing hasn't sold anything, so it's receivables to factor. It's just an unsecured lines to a soft banking entity about four millions, which doesn't make any sense. Now, in this case, there's a good chance that soft baker might get the money back because Viewing Viewing looks like it might be a bit better

now and it might get specked. But to pretend that this was trade finance at the end, and that they were provided and softmak must have known that this was not technologically driven trade finances. They were lending the softmare controlled entities. At the end, this was just a ponzi that was taking money from any books end with whether that anybody included somethingly or unknowingly, some bank would clearly

a beneficiary. So your contention is that you know what, what was ostensibly some form of trade factoring just sorry, trade finance just became sort of completely reckless lending to anyone. Well, what did you like? This was Greenstell was a private company, so what. But but you were early on along with others and sort of I don't know, blowing the whistle is the right term, but sort of calling out their practices. What were the hints from the outside early on that

something was a mess. In this case, the idea that trade finance could be ten x is because it used to be. It is just an idea that flies in the face of history. There's a very very good reason why trade finances are shrinking business on d and fifty year basis right, and the very very good reason is better communications, better finance, and better transport. Right, all of those and the bits that are left are the bits that are by definition a little risky. Financing stuff sold

to retailers is risky. We know that because retailers default. And if you look at oilers oilers results, oilers results go up and down with retell, right, But the other things, this whole sort of mental commodities change chain, where you're financing to an unidentifiable company in China. The idea that this could be a ten times bigger business was sort of an asthma. I have to say that I'm completely

reliant here on. I became very reliant here on certain journalists, the ft journalists, Twitter Handles, Bonde, Robert Smith, and more importantly the Austry journalist, journalist Duncan Mayven and Don't even sent me some questions about Insurance Australia Group, and I put two and two together and realized that Insurance Australia Group might be ensuring vast amounts of stuff on which it was likely to default. And I sent a quick about a page and a half letter to the local regulators.

And in this case, the local regulator is somebody who used to sit five chairs away from me in the Federal Treasury when I was a very junior employee in the Federal treasure and he's now the sort of head insurance regulator in Australia. So we sort of knew each other, and I always I put an editor adversion letter on my block. But to say that I called the whisk

and learn any real sense overstates my role. The real the real whistle calls here were Duncan Duncan Maven Robert Smith, who were both who were both fantastic journalists and certainly worth subscribing to their papers for I looked at it and knew they were right. And I knew they were right because the idea of a very fast trade by trade,

fast growing trade finance company just didn't make any logical sense. Now, the second one of these blow ups, um I didn't mention Credit Swiss here, but Duncan Maven had certainly asked several questions of Credit Swiss because Credit Swiss had this fund that was buying all the green silk paper, and it was selling the green silk paper to its clients on the basis that it was double A rated and insured and either it is insured or it's not and

it is ensure it. Then Insurance Australia Group and Copy of Marine in some order are going to take billions of dollars of losses, and if it's not ensured, then at first glance, the clients that swiss are going to

take billions of dollars at losses. But we know from the last cycle that if you miss self wrapped clients, just straight out miss sell, then those losses will slip back to you and you can pull out any of the marketing documents to this fun It was absolutely clear it was pitched to the investors as double A rated insure it and as far as I can tell, there was no due diligence done by credits with around those statements.

And it's absolutely clear to me the credits with if it can't collect from the insurers, is going having to pay the clients out there at the moment saying well that the problems our clients problem, which is, you know, a pretty self destructive thing to do, because you know, if your credits with your pitch to the world is that you know, we're a good home to say high networth people too have as the sort of generalized financial advisor, and then when the ship hits the band, okay, high

networth people were going to screw you. You know, Screwing your clients is not a good business model anyway, and that's probably enough to think that credits With his long term structurally challenged. But they must know that those losses are going to wind up with them. The second part of that is, you know, there's never only one cop roach,

and we didn't know about Archie Goods. But I'm actually chasing down and I'm not going to name it, another very big European fraud where we think that Credits With is going to have ten blow tend fig at the loss is something and that bill your range and you know, this multiple pop roach they had credit Swiss is kind of amusing. I knew who built bang was because I followed him before he had blown up, because he actually owned some Chinese fluds that I was sure, and the

guy was always very aggressive there. But if you had a diversified portfolio, some of which were frauds, but all of which were in China, and you did this over to since two thousand and eleven, he did all right until you know, you doubled down and then doubled down again, and then doubled down again on G S X. But when he no longer took public money the sort of strengths are taking public money, which is one of which is that's pretty hard to be certain times leader, because

your planets don't trust you. Disappear and the guy turned into a revealed himself to be a complete degenerate gambler. But I knew none of that, and the complete degenerate gambler took likely diversified positions in controversial stock. Sleep at six or seven comes Now. The problem is that if you take if you buy controversial stock, can you're right, you tend to make a lot of money. But it's more than once that the crowd is going to be

right about a controversial stock. And the one that allegedly did him in was Viacom. Via com at one level is just a giant global old media business, like news corps for that matter, like Disney, But it's probably a more controversial one than the others because when you look at Via Comms businesses, they scream out yesterday, right. The

movie studio doesn't, but CPSTV certainly does. My son is twenty one and I haven't seen him watch Free to Wear TV at all, and the last five years he watches a lot of video, right, But it's almost all nonlinear video. The second thing that they own is MTV Kelodeon, and both of those look pretty challenged. Nickelodeon because our friends at Netflix are spending billions of dollars on children's TV. Children's TV is one of particularly young children's TV is

one of the ways that you guarantee loyalty. But you know, music channels no longer seemed particularly constrained, and even their biggest part of the movie Branchise, which is I think James Bond, James Bond, feels a little bit tappy these days. You know, I kind of like a James Bond film that there's a dose sort of twenty century sexual cringe about James Bond. Right, The jokes that were acceptable in

just aren't acceptable now. So that feels a little yesterday too, And so sort of when I think of yesterday, I think of via Com and buying massive stakes in what should be a declining business doesn't look particularly sensible. Yeah, just to jump in for a second, I mean, one of the things that's actually really struck me is that if you look at viacom chart, you obviously have the big you're raised during the blow up, but it hasn't

bound back at all. In fact, it's it's it's sold off further, even after everybody is sort of aware of the block trades. But before we go on further, I just want to ask to be clear, just for listeners. I think you said you're are you short credit swis or were you or are you still? I am a short credit Swiss but I was short credit Swissing fairly big quantity in the past, and I'm now short credit Swissing very small quantity. So you can probably think of me as a credit buyer. But bye bye to Kama.

Now even then you say Viacom, Viacom year to date it's flat, right, Well, it's actually up. If I go back to one January it was thirty six dollars sixty it's currently right. The idea that you can you can blow yourself up buying a stock that is flat year to date on leverage is pretty astonishing. And the only reason this was possible as that went from thirty six to nine via the princely sum of about a hundred. So he must have every time it went up, he

must have bought more. Now there's an old scam in funds management, which is to buy a bunch of their liquid stocks and walk them up by more of them, and your performance is great. And so because your performance is great, you buy more, and then you buy more and they walk up a bit further and you're suddenly the best performed manager in the world. And retail investors are often not very sophisticated. Some money flows in and eventually you're as a giant bag holder full of illiquid stocks.

And and that can be done elier, it can be done accidentally by a deluded fund manager. And if I think of the accidentally by a deluded fund manager, I probably think of the great Woodford scandal in the UK,

where a lot of what was happening was there. And if I actually think accidentally by a deluded fund manager, I would think that ar Genetics Fund was an awful lot like that to me, right, But the idea that somebody that comes out of the Tiger Complex, you know it was a protege of Julian Robertson, was you know, this guy had he degree and he was doing the scale that he was deluding himself on Viacom is a

pretty astonishing thing. It didn't surprise me that the lender that lost the money here was Credit Swiss, but I didn't know about it in advance. And part of the reason why I am a cover of Credit Swist is that when you get lucky, and I did get lucky here, you've got to take some off the table. Now. We got lucky because we didn't know that GOS was going

to happen. But we didn't know that. We looked in several places and we found ship needed credits with and if we can find it crunches, there are probably a few more. So, just going back to the start of this conversation, what is it about the current environment? We were talking about it earlier. You know, you have stocks at very high valuations, you have ample liquidity, the economy is recovering. By most accounts, things should be going pretty

well for a lot of businesses. But like, what is it in the environment that is making some of these scandals come to fruition or that's showing up these latent stresses in financial business models. I don't know. That's the short end, the long end through. If I knew what it was that turned the environment from unbridled uphoria back to slight realism, I'd be the richest catch fund manager in the world. I genuinely don't know. But while we we have been through a period of complete unbridled mania

right the period November to February was complete Maine. And at the end of such a period you can expect a bunch of me We've had a ball market of pretty enormous proportions with a little two months in direct. If I look back, two thousand left stocks were objectively cheap and people were scared as there are a bit. By two thousand and fifteen, stocked ceased to being objectively cheap as you could make a case for, and then

they continued going. The period over Glass Christmas was a period where the Reddit crowd took complete nonsense to the moon, and that Reddit crowd taking complete nonsense to the moon turned out not just a bit the Reddit crowd, but certain aggressive funds like Archegos who decided to play along with it. That's always seeing at the moment, in some sense, is a few little blow ups at the edge of there's going to be fifteen or twenty archegos out there.

There's going to be a bunch of really stupid stuff out there that blows up, and we're going to think, how the hell were we that stupid? But to be honest, I don't think it. I mean, it's barely started, and I don't think there's any particular reason why January was so good for nonsense and March was so add the nonsense. Right, it's just what happens. I genuinely have no idea. But you think stuff like Archie goes more is coming, not

necessarily that scalpers say, but more blow ups are coming. Yeah, it's not possible to have a ballmarket of the scale that we've had and not have some some people running around with no clothes. Who thinks they're they're wearing God's finery? Right, it's just the emperors are going to get exposed. I wish I knew who that all they, who they all were? I know who a few are, right, and surprising number of times when I know who the emperor wearing no

closes the lended to their emperor's credits with um. There's probably a good reason why it's credit switched too. And the last time you had me on the podcast that about European banking margins and how the banking marches are terrible. But the Swiss banks have had another big problem, which is that once upon a time they had a very large competitive advantage, and the very large competitive advantage with

syncresy and secrecy got taken away from them. They're almost definitionally the Swiss banks are just not just a shadow of what they used to right there is much smaller business and their core business has compressed margins too, and the Swiss establishment. They want to blame the previous CEO who clearly wasn't of the Swiss establishment, but in fact I think that's just missing the point. The real problem is that this bank is a shadow of its former self.

Its revenue opportunities have disappeared, and it's a very large organization. And the very large organization financial revenue opportunities disappeared will solved for the lack of revenue by taking more risks. And that's why they wound up sidling up to an

obvious Ponti artists like lex S Greenfield. Why they decided that lending money to somebody who had previously run a criminal funds management organization and lending it not on small scale but billions and billions and billions of dollars, it was worth it because they had a need. They had a need to lend just like lex S Greenfield had a need to put his foot flat to the floorboard

when when his business wasn't doing very well. So you know you asked why, now, well you know why in general, which is the credits with his less of the business and so at length. And that's going to be a particular European problem and the frauds that I'm following in Germany which show not going to name has been an extremely big borrower from thanks that feel they have a

neat to lend and make aspect um. I should just mention here that when we first wrote about your short position in credits, we did ask the bank for comment and they declined to do so. Um, but we'll follow up with them again. John, you also mentioned our investment very briefly. What's your take there because you were sort of talking about them in the context of this idea that you could be buying a liquid stocks and pushing the price up and sort of generating your own momentum.

Is that what you think is going on with some work funds. It's most obvious with the auction if you have a look at the auction fund, A very very large number of the companies in as a reverse mergence of moderate liquidity, about eight or nine of which we

would regard as natural shows. And when it started getting out closed, it started selling or reduced in the size of its position in REGENERAAL and Regenera On is a biopic of the highest quality in the world, but it's highly liquid to buy more of these companies are under pressure. And if you look at the way that the ARC Main Fund has behaved, it's done the same thing but with Tesla, but not on the same scape. So they have sold relatively good fans like Google to buy controversial

names like Tesla as Tesla got weaker. Now the Genetics Fund looks to me like a mass exercise in marking the Main Fund much much lesser. Right, the Main Fund makes some sense to me. The Genetics Fund makes no sense to me. And the Genetics Stund is an area over which we have considerable expertise. And I should disclose here that we both we own end like Regenera, and we're short a few names. So it was sort of amusing to us what watching them sell Regenera On to

buy the names were short. But yeah, the Genetics Fund is The Genetics Fund is a very large punt holding love to be liquid position and it's head flood. John. I'm sure Tracy is going to be really annoyed with me because I bring this up every once in a while.

But you know when you you mentioned that period like kind of like from December through the middle of February where things just went absolutely ballistic, And that's when I noticed that, like the fuel cell companies we actually talked about when we talked when we had our ARC episode, they went absolutely nuts. And for me, like I remember them because those all went nuts in the late ninety and then collapsed. Do you fit like you know all the all of these like electric vehicle battery SPACs, fuel

cell companies, charging companies, and so forth. Do you see much there or as as in your view as most of this joke. I'm not going to name I'm not going to name names, but we're short about a dozen different names that looked a little like that. Now, the only one I will name is Nicola, and Nicola had an extremely competent shortcase written on it, whereupon the stock doubled. Now, as of today, the stock is trading twenties below the

extremely competent shortcase. But that's a sort of extreme version of the retail mania. As far as anyone can tell, Nicola has none nothing worth happening except billions of mark cap and a good bid in their stock. You were talking about the fuel cell companies that will once big, and the obvious name there is plug Power, and plug plug Power is a very hot stock in the dot com era. Here was going to be the future, and I guess you know it's still the future. Maybe it

always will be right. But the thing that amazes me about plug Power is the share a count. I've just pulled up the numbers, so I'm going to read you share accounts going back to two thousand dishes, and it's

a remarkable series. Four point three million, five million, five point one seven point to seven point three eight point five, eight point six, eight point seven, twelve point seven, twelve point nine point two, twenty two point seven, thirty eight point to a hundred and six point one hundred and seventies three hundred hundred and eighty one million, eight billion, three hundred and three million, four hundred billions. That share account is the sort of share account pattern that you

see with a multiple reverse merger, dilusive penny stuff. It's not the sort of thing that you see in it's been a company that had relatively recently sixty billion of market cabin was raising money in billion dollars, right, So yes, you you your name is plug Power is to me astonishing. It's certainly a technology of the future that may always be one right, But it's astonishing to me that a company with six d and twenty nine employees has has both needed to and managed to raise money on that

sort of escape. Just in general, what is the environment like right now for identifying shorts and also monetizing them plus six or eight months, I would have said that the ideal the environment of identifying shorts was like shooting fish in a barrel. It was so easy to find a piece of overpriced nonsense. The only problems are until mid devery the fish shot that right, you know you would you would short the most obvious fraught and it would double or triple in your face. The fishes stop

shooting back. So the environment has been distinctly better from my perspective. I'm well aware that retailer forty millions accounts in the period post pandemic, and you know, some people have got a taste for gambling on the fish might shoot back again. But the identification thing is dead easy. The managing the book is incredibly hard. And almost all of my fellow short sellers have had an extremely rough

year because they were very good at the identification. They thought this money for jam and then they lost a lot of money. So, just on this notion of retail getting more interested in stocks and maybe participating in them in a very speculative way, has that changed the way you invest at all? Or do you think it's going

to change the way the hedge fund industry operates. Well, there are certain things that I've done that I didn't even imagine, one of which, for instance, is we have had to calculate an estimate of the game in every stock in the stock market. The reason is that we became there in January, but then very very intensely, every

of the risk of gam e squated. And the idea that a small number of options could drive a stop to the moon and that retails could be persuaded to game, and the idea that the most active option contract in America one day, I think, was an eight hundred dollars short dated game stock coll is so absurd. But we had to live in a world that looked like that. So the amount that we needed to tighten up our

risk management was remarkable. Now that it's that much tighter, my guess is that it's not going to get loosened doctor very much once and twice shy. We didn't lose meaningfully large amounts of money, but it was still an extremely unpleasant period. We were underforming like crazy, and the best thing I could say is that all my competitors were going out of business and we were right. But that should make life easier for us in the future. But a lot of the risks that we thought were

theoretical turned out to not be just theoretical. They turned out the absolute thing effects and the idea of a Portfoli elio that looks like four and a half times leave it long short all the same trade are and the particular trade I'm thinking of that case is the blot Can trade, which was long the future short parts. So you're long booking dot Com and Google and Apple,

and your short BlackBerry and research most BlackBerry. You're short retailers like game Stock at Billard's, your short that landlords like Massteri and there. I said, you're short by part of the problem because Bacom looks like the past as well. That trade, which you know I would normally associate with geniuses like Druck and Miller, the trade the great trade. Just don't leave it five times, right, because if you leave it five times and the retail crowd cap cotton

on your debt. Alright, I actually like the trade. I just don't like it on the scale of stuff. Do you feel like the retail from the whole reddit everything the insane, aggressive, almost weaponized. Some people put it called buying. Do you feel comfortable that there was that peaked some point in Q one? I think it peaked. I don't feel comfortable that that peak is permanent, and we're not going to manage the book on the basis that that peak is permanent. Right. You asked how it's changed his

stunt management. Well, you know, it's scared, right, and I'm going to stay scared because they always do. But yeah, it has peaked. Whether it's a peak is permanent, I have no idea whatsoever. Gambling was stunt, right, So it's always a possibility that people decide that gambling is done again. Do it only even grant the scale? I tried. I tried not to get try to work out how to manage my risks. But you know, I've got to be aware that there are non rational actors there who's whose

goal isn't to make money. Their goal is well maybe they tell you that to make money and the big goal is just the gamble. Well, John, it's always great having you on. Thank you so much for for coming on another episode. That was great, John, Thank you so much for coming up. Good pleasure. Thank you. So it's

always a pleasure talking to John. I mean, he has such a great track record when it comes to spotting inconsistencies in financial models, and I always find it really interesting listening um to the way he thinks about taking

on short positions and how he comes to those conclusions. Um. But one of the things that's that struck me there is just this idea that I mean, it was kind of amazing to listen to him say that he had to you Gamma squeeze analysis on all their short positions because of what happened to game Stop in January, and in that way, game Stop and retail participation really is kind of changing the way the market and the hedge

fund industry is working. Yeah, it might end up be that the Game stop story was like just like some sort of like true peak of the mania, Like if you look at um on the terminal, like if you look at like call option volume, other market volume measures things like that, it basically is like right around when game stop happened, and a bunch of other things, and so you know, like you know, the market still at all time highs and people are still gambling on all

kinds of things. But it could end up being that a lot of the charts that's sort of like really captured that moment, like we're really right around the game stop. Yeah, but it's opened the door right to this kind of behavior, Like it's created of a possibility that I don't think people thought was actually there before, which is that you could force a squeeze with tactical call buyings and things like that that would be massively painful for anyone out

there with a short position. That was pretty wild just in general, though, Like I love like hearing how John thinks about everything, and just like the degree to which he sort of like understand the sort of the basic of like business models, or hearing him talk about like the history of trading finance and why it emerged when you when you go talk about green Sill and he says, well, we have to look back to trade finance over a hundred years ago. Like that's such a great beginning to

your conversation. Yeah, it makes sense, like this idea that like essentially it's solved a sort of like information gap, and that in a world in which like you sort of know your counterparties and you have good information and everything, like, it shouldn't be like a rapidly like super you know, super big business. It's like a pretty good uh, an interesting sign or an interesting tell. Yeah, for sure. Shall we leave it there? Yeah, let's leave it there. All right.

This has been another episode of the Odd Thoughts podcast. I'm Tracy Alloway. You can follow me on Twitter at Tracy Alloway and I'm Joe wi Isn't All. You can follow me on Twitter at the Stalwart. And you can follow our guests John Hampton on Twitter. He's at John Underscore Hampton. Follow our producer Laura Carlson, She's at Laura M. Carlson. Follow the Bloomberg head of podcast, Francesca Levi at Francesca Today, and check out all of our podcasts at Bloomberg under

the handle at Podcasts. Thanks for listening to