How Frothy Markets Have Created a Bull Market in Short Selling

Published on
January 19th, 2021
Duration
49 minutes


How Frothy Markets Have Created a Bull Market in Short Selling

The Interview ·
Featuring Edwin Dorsey

Published on: January 19th, 2021 • Duration: 49 minutes

While markets have continued to melt up cries of bubble and commentary on the onslaught of companies clearly benefiting from these dynamics in spite of ridiculous valuations and questionable business models and practices have exploded. One of the brightest young stars in short selling, Edwin Dorsey, author of “The Bear Cave” newsletter is capitalizing on the amount of quality short seller research being produced by curating others research and producing his own short “leads.” In this interview with Max Wiethe, Dorsey helps viewers make sense of the current market froth, describes his own unique process for generating short ideas, and runs through two recent targets of his newsletter as case studies of what he is looking for in this market. Filmed on January 12, 2021.

Key Learnings: Dorsey highlights that the time has never been better for short sellers but cautions against shorting blindly, especially in overly frothy industries like EVs, and explains why he likes targeting 1$-$10 billion companies flying under most analysts’ radar.

Comments

Transcript

  • JS
    John S.
    21 January 2021 @ 05:21
    Smart interviewee...
  • MO
    Marcus O.
    20 January 2021 @ 18:42
    Which trading platforms allow you to short the smaller cap stocks that are called out in the newsletter?
  • RM
    Russell M.
    19 January 2021 @ 19:51
    My experience with short sellers is with an OTC biotech stock CYDY that has tremendous volume (averaging millions of shares a day) and few institutional investors. It's drug, leronlimab, has already successfully completed a pivotal FDA approved drug trial and will be approved for HIV and is about to announce what is expected to be successful results in a Covid 19 treatment trial in the next 2 or 3 weeks. Since the end of June, the CYDY stock bulletin boards and SA has been besieged with stock bashers and publishers of slanted negative articles Stat News and Citron at time to create FUD with the apparent purpose of creating shorting opportunities. They appear to be working in concert with short sellers who make periodic short attacks (dumping large amounts of borrowed stock in a matter of minutes on the market) after the basher have softened up the retail investors. It's plainly a sheer market manipulation effort. I have heard stories that this is not unusual in the small, development stage biotech world. I have no problem publishing criticism and shorting based on fair analysis of facts. But it appears that a large chunk of the shorting world consists of bad faith market manipulators looking to take advantage of unsophisticated retail investors. The only defense against this is to do your due diligence and don't be influenced by this nonsense. if you do, you will be handsomely rewarded. I wonder if anyone else has had the same experience.
    • MW
      Max W. | Real Vision
      19 January 2021 @ 20:41
      I don't doubt your story but would say the characterization that a large chunk of short sellers being in that business is incorrect. They aren't large enough to move markets in most cases and the amount of capital in activist shorting is staggeringly small. I'd also say the environment of message boards and biotech penny stocks are both notorious for unsavory actors on both sides. In an interview on Real Vision earlier this year, Dan McMurtrie joked that the rest of the market has finally picked up on what has been "legal" in biotech for many years. He was referencing pie in the sky statements, often overly optimistic, but unprovable which the company inevitably doesn't hit but the executive can't be held accountable because that speech is protected. For example "we may just have the cure for cancer" is totally fine or, "It will be ready to hit shelves in 6-months" but it takes 24 months is totally protected and no one bats an eye but negative statements however tied to facts are FUD.
  • MA
    Matthew A.
    19 January 2021 @ 20:00
    This is great, this guy makes me want to get into short trading. As software developer it makes me want to build an automated aggregation system to feed me short ideas. Pretty cool to hear his practices.
  • RC
    Rafael C.
    19 January 2021 @ 16:12
    Quite refreshing watching a short-seller who is a cheerful young dude
  • PG
    Philippe G.
    19 January 2021 @ 16:04
    Very interesting - appreciate the walkthrough of the process and loving the authenticity and energy!! Nice break from the scripted and polished disclaimers and non-answers we get sometimes. Damn - was poking around Tritteras this past Christmas break, was aware of the related parties issue, but not the James Groh connection. At the same time, trade finance is ripe for disruption.....Alas, what to do...
  • JF
    Joshua F.
    19 January 2021 @ 11:46
    Eye opening! A bit creepy in an “ambulance chaser” sort of way but very informative.
  • MS
    Marius S.
    19 January 2021 @ 11:26
    Great stuff guys, so much energy. Very informative, thanks a lot!
  • DD
    Dmitry D.
    19 January 2021 @ 10:00
    Extraordinary, particularly so for such a young guy, hope he becomes a regular! Funny enough, Triterras just announced a $50mn buyback, if that is not a confirmation of a scam underway I do not know what is. Scary to think of the total volume of bezzle out there.