Carson Block Quotes
101 Carson Block Quotes
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[In May 2013.] We believe that the domestic Chinese banking system is a mess, with an enormous amount of bad loans, or loans waiting to go bad.
Carson Block
[In May 2013.] The problems of China’s lenders are greater than those of the Western banks on the eve of the financial crisis, but because they are state-owned, the government will most likely print money and prop them up. This will of course have dire consequences for China’s economy though.
Carson Block
[In May 2013.] A China unwind will have significant knock-on effects in other developed markets… likely implicating liquidity and asset prices. The severity of the effects in the rest of the developed world of course partly depend on the timing of the unwind.
Carson Block
[In May 2013.] When we take a short position, we also got the sense that investors and analysts weren’t asking hard enough questions of management.
Carson Block
[In July 2013.] It is astounding how little risk the markets are currently pricing into public companies that have poured shareholder money into emerging markets over the last several years through acquisitions and start-up projects. Artificially low interest rates in the United States have driven many management teams to make investments abroad based on higher expected returns without incorporating the local risks.
Carson Block
[In July 2013.] In the United States, too many analysts price growth at high multiples without thinking about where that growth is coming from. Many companies have made acquisitions that we think will ultimately generate returns lower than those of local market bond yields.
Carson Block
[In July 2013.] You do not have to look far to find American companies that underestimated the risks of investing in emerging markets.
Carson Block
[In July 2013.] Calculating the risks of making an acquisition in an emerging market is often more art than science. Still, many American companies seem to plug overzealous growth assumptions into their models, and then assume a dangerously low weighted-average cost of capital that does not reflect the myriad emerging market risks, which not only put their growth projections at risk, but also can lead to total loss.
Carson Block
[In July 2013.] As Warren E. Buffett has famously said: ‘Only when the tide goes out do you discover who’s been swimming naked.’
Carson Block
[In September 2013.] When a company pays such a high price for an acquisition, we always think about possible ulterior motivations. We have observed that when some companies see organic growth starting to decelerate, they make significant acquisitions (in number, size, or both) because this tends to obscure the organic growth picture.
Carson Block
[In September 2013.] Western companies that go into emerging and frontier markets often have very poorly managed operations, and investors are not really clear on the impact of these operations.
Carson Block
[In November 2013.] If you believe in Yidatong (NQ Mobile’s Largest Purported Revenue Source), you’ll believe in Santa Claus.
Carson Block
[In November 2013.] It is normal practice in China for virtual offices to only exist virtually.
Carson Block
[In February 2014 on emerging markets.] Maybe people start drinking the kool-aid again but our view is that the fundamentals in the emerging and frontier markets are pretty poor and don't support the valuations even at these levels.
Carson Block
[In February 2014.] I know many people don't understand our business model. I don't have to speak to investors because it's our money. A lot of this is my money. If we don't do a good job with it, I have to look at America - look in the mirror and give myself a hard time.
Carson Block
[In February 2014.] When we are publishing and identifying fraud publicly, it's a little bit tricky to take outside money.
Carson Block
[In April 2014.] Audits are generally performed from pre-constructed checklists that are used in thousands of public company audits throughout the world. These checklists incorporate the standard presumption of honesty. As a result, auditors are not visiting a company’s customers to make sure revenue is accurate nor are they visiting suppliers to confirm whether the company’s volumes match up with the financials they are reporting. Auditors also do not review government files to confirm that a company’s filings with the government are the same as what they report on their financial statements.
Carson Block
[In April 2014.] The only anti-fraud measure in an auditor’s checklist is the cash confirmation procedure. Unfortunately, investors are never told whether an auditor confirmed cash merely by looking at the static balance as of December 31st, or whether it checked the balance on other dates and reviewed inflow and outflow transactions.
Carson Block
[In April 2014.] Some types of revenue are easier to fake than others. Our observation is that advertising revenue-based frauds in China are among the easiest to commit.
Carson Block
[In September 2014.] If Alibaba wanted to defraud investors, it absolutely could… China is to stock fraud as Silicon Valley is to technology.
Carson Block
[In September 2014.] I’ve gotten death threats. [But] I often joke with my wife that it’s one of my key performance indicators
Carson Block
Bonus
[On Carson Block] It's not that people concluded he's right about these companies. It's that they realised they don't know whether he's right or not.
Patrick Chovanec (Tsinghua University)
[On Carson Block] Block is in the intelligence business where you gather tidbits of information, you fuse them together, connect the dots and then you draw a conclusion. The SEC is much more like cops. First the crime is committed, and then they go to solve the crime. But Block is looking at the crime in progress.
James Rickards (Tangent Capital Partners)
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