Reported by Filip De Mott

The market needs to embrace short sellers if it wants to free itself of fraud, Carson Block told Bloomberg TV.

But being a contrarian right now is a challenge, with short sellers increasingly out of place in the latest bull rally, the Muddy Waters founder said. Where sellers profit by betting against problematic firms, most investors today are chasing narratives and speculation, he said.

“There are more companies playing more games. A lot of them are in the gray zone; you don’t know whether it’s over the line or not,” Block said. “So they’re not gonna get prosecuted in this environment.”

He added: “The market needs short sellers more than ever, given the amount of games that are being played. But if the long side doesn’t care, then, you know, this can continue until it doesn’t.”

Block isn’t alone in making this point.

Last month, legendary investor Jim Chanos told Bloomberg that the market was riding through “the golden age of fraud,” as today’s record-breaking market run is pumping up valuations even for companies that don’t deserve it.

Read full report: https://markets.businessinsider.com/news/stocks/short-selling-speculative-bull-run-passive-einhorn-chanos-block-fraud-2024-7