The following is an excerpt from ValueWalk’s interview with the CEO of Grizzly Research, an activist short selling firm. In this part of the interview, the CEO discusses companies trying to take advantage of the COVID situation and if the shutdown was the right move. The CEO whose identity is still anonymous will be revealing it shortly exclusively to ValueWalk. Please stay tuned for the full video interview with transcript or hear his top idea it our upcoming conference.
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Pros And Cons Of Tail Risk Funds
Editor’s note: This article is part of a series ValueWalk is doing on tail risk hedge funds. The series is based on over a month of research and discussions with over a dozen experts in the field. All the content will be first available to our premium subscribers and some will be released at a Read More
And so during crisis situation crisis events, like now, does that provide a better opportunity to find shorts?
I think it's it's very interesting and not as clear cut. So, I think there's a certain type of opportunity that just emerges, you know, naturally, which is companies trying to take advantage of the COVID situation with, you know, press releases, you know, where they know, they know that if we talked about, you know, being involved in research on COVID, then, you know, the market is going to get us a whole lot more attention and the stock will go up. So there's a lot of, I think, predatory PR campaigns going on right now. And the SEC has already made an effort to you know, protect investors here from that. One, you know, there's a couple of ideas I think that are interesting, that we at least consider in the current environment. (unintelligible) you know, the Warren Buffett saying you know, when the tide goes out, you see who's swimming naked. So, you know, in the current economic, bad economic situation, you know, a lot of companies that maybe didn’t address their financials and didn't have proper reserves, should get punished severely. Now. There's counterbalancing factors to them. For example, the government stepping in now and bailing so many people out, it's not only enabling maybe bad guys to cover up past misbehaviour under the excuse of COVID-19 I think it's also a terrible incentive for the future. But everybody who just didn't save enough and is now going bust Well, in bailing out the rich guys, and, you know, I don't think that they will build balance reserves for the next crises. Well, why would you, you're getting bailed out, though, right? I think I think it's a it's a terrible situation specifically. And I think so. It seems to me that the overall market is way more like the same. Stocks seem to be more correlated to the overall market. So everything kind of trades together. And, you know, it's hard to bet against the Fed or impossible, you know, so good short reports that have been published recently might have not worked out as well as I think they would have in a normal environment, just because you have a lot of buyers in the market that don't care about fraud, or what is really going on fundamentally with the company.
I just want to know, your general thoughts on the COVID situation and the shutdown, and was the shutdown the right move, and also the bailout? It seems that do you like the bailout?
No, not. I'm not big on it. I don’t think the right thing to do now is to make sure that the rich people who blew it stay rich. Yes. (inaudible) Talking about the COVID situation in general I think it seems to me the measures are warranted. You know, I'm thinking about it more from maybe the risk perspective that Nassim Taleb describes. It's just one of those things that we can't get wrong. And there's a lot of dynamics at play that make this virus very, very dangerous. And you won't realize before it's too late, so you kind of got to do what seems like an overreaction in the beginning. But yeah, I for myself, would love to understand more about the virus itself and how it works. And yeah, I'm not an expert in this regards so I don't think that I can get you great insights here. Im just afraid that you know, maybe in the future, I think this all increases the chances of invisible enemies in the future. And the government telling us what to do over these invisible enemies, you know?