Daniel Loeb


At the end of the day we all have the basic analytical skills  Anyone who has taken accounting can look at the humbers and do the monkey math.  The ahrd part is understanding the subtelties.  Understanding yourself and your fears and the things that excite you and the middle path of your judgments where you can do the right thing.


Now you are mo re capable of doing that, did you make mistakes along thew ay and awhat adjustments?


2008 good example we got ahead of ourselves in 2007 and didn’t have the risk discipliens that we have today.  We also didn’t have the operational platofmr we have today.  I Realied by creating that biz platform and having the discipline it frred me up to to dhe creative stuff and focus on investing and not get cauht up in extraneous stuff.


Where are we in 2035 where do you see Third Pt?


The good news or bad news is I will likely be doing this in 20 years.  If a young guy thinkin will dothis for 10 years make my numbers and go tto the beach or ski rest of your life.  One you will get broed and we have these things called brains.  You are going to get bored.  I’m gonna keep doing it maybe in a slightly different way.


Macro environment now?  View on rates?


2 rules for an investor it paid to adhere to since I’ve been in biz.  1 don’t fight the fed.  Tepper was at sohn last week he said there are 4 feds and mini feds that are in QE mode of some kind or loosening.  US Europe Japan China.  More importantly, don’t fight the godfather, that’s David Tepper.


Are mkts higher a year from now?


More likely to be higher than not.  Over next 2-3 years odds go way up.


Japan and strufutral reform – third arrow of Abe initiative.  Been credited by the prime minister as a person helping on the corporate side.  Where do you see Japan?


Been surreal for me as an investor.  To go and not know anything about the culuture or environment and immersed ourselves.  WE had the naiive idea in 2013 that we could affect corporate change there.  Told by everyone it was a non starter.  Look what happened tot the other guys who tried and got chased out of town.  With that understanding, if we do the same thing with US style activism attacking mgmt. and shaming them, it was very ineffective.    Our timing for going there was #1 the sea change with Abe administration and economic policies.  HE articulated the three arrows – monetary, fiscal, and corporate was the third arrow.  They weakend the yen, lowered corporate tax rates, and reform – talking about trade reforms and bringing women into the work force.  That was important for ac ountry without a robust integration policy.  Women labor force participation was lowest in the world.  Its increasing but they have room to go.


One thing that caused the pivot or a gradual change?


The third thing they did, I like to think it was in response to convos we had and a paper on the AEI website I co-wrote, with a subsequent editorial.  I conceived the idea of the editorial.  2 hours later he’s got footnotes and data and facts but I got credit for it.  This set the stage for introducing the idea of the linkages between corporate goernance and getting better practices around boards.  Listening to shareholders.  Focusing on return on investment.  PREviously, they got fat and happy and were run for stakeholders for stable employment environment.  Laudable things, but you end up like GM pre restructuring or a stagnant company that doesn’t grow or innovate and eventually die.  Abe administration got that thte reform aspect f this was important.  Encouraging of us with Sony.  Unfortunately we got impatient and didn’t stick around.


Meeting with Fanuc… itself a big deal… later they announced the things we wanted.  The stock increased in value by.. 10B? dollars, nobody thought this would get done.  CEO told me we aren’t doing this bc you told us to, we are doing it bc the govt policy is this and we are adhering to it.


Seismic statmenet that the govt is in the structural reform biz.  Will there be more activist oppys?


May or may not be, but they will be their own activists.


You had the opportunity to speak with ABE in japan, you think this will stay in place?


Another surreal experience getting to meet with him.  Inviting as the only investor on a panel.


Broadly on activism in general – view on activist today and new position in YUM?


Activism has changed a lot in this shift from old school… two big things… targets are much bigger.  Instead of getting 9.9% andl launching a proxy contest and forcing a specific action like sale of co. or turnover of board, now as investors we see something the board oesn’t see.  In historical corporate governance strucutures, mgmts. Works for board, board elected by shareholders, we’re removed from the process of holding mgmt. accountable except by replacing boards.  As we’ve replaced more and more boards – yhoo, bid, etc. the companies see they don’t want to go in that direction.  Even lipton say good activista dn bad activists.  Now we’re offering our views in broad areas.  The easy stuffis capital allocation and operations that lead to margins and earnings and strategy.  YUMM is not an activist investment from our standpoint.  We saw an opportunity to invest in a company that hit the skids b/c of couple scares in china.  It’s realy two businesses:  China and RoW biz.  YUM had been an emerging mkts play that after food safety issues had declined sharply.  Our view was the issues were addressed and turnaround potential not appreciated by the mkt.  #2 is oingoing opportunities to lower costs in US and increase franchising.  We wrote about what the other activist talked about – splitting off China from the US.  Very different financial characteristiics… China is’nt’ a franchise mkt it’s more capital intensive and growing a lot faster.  US could stand some debt.  We think there is enormous potential.  No price target but we put a billion dollars to work.


Macro stmt on China?


Seeing massive turn in pessimism.  Mkt in A shares… the mkt got ahead of economic turnaround between fiscal and loose monetary policy.  Nobody has made money despite the Chanos gloom and doom scenarios.  Nobody has gotten rich betting against China yet and don’t expect that to happen.


Process in China?


Inspired as a little guy by PTJ or Harlem Children’s Zone.  I call them roll upy our sleeves philanthropists.  By the way I’m not the only guy up here engaed philantrpically.  I appreciate all the things you do in XXX and YYY.  I had 60 guys protestin gin front of my house from the teacher’s union b/c we wanted to help poor children of color get an education.  Whose moms are lining up for spots in the lottery.  It’s about being in a position of relative value… the mgmt. team and board how do we take that power and give it to shareholders wher it belongs.  Was interested in the education aspect but fascinated by the power struggles.  How is it that the teachers union

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