Whitney Tilson email discussing China; activism’s long road; hedge funds struggle; 2015: the year in charts; worst ideas for 2016; tax sleuth who took down a drug lord; George Hotz is taking on Tesla by himself; sued over old debt; Brazil’s fall; KBIO; 1975-15 data; 2015 was a good year.

Whitney Tilson on China’s balancing act

I’m sending you this email from the Beijing airport, about to catch a flight home. Note that I haven’t included the full text of three of the articles I comment on below because they’re from the NYT and Bloomberg – both of which are blocked here (along with the WSJ, Google, YouTube and Facebook) – in short, about 80% of my news sources and web usage (the articles below are ones I’d already copied and pasted into this email before I arrived here).

What a disgrace. This country is so modern and so regressive at the same time. I don’t envy the many balancing acts that that Chinese leaders are dealing with now re. the economy, the internet, battling corruption, increasing demands by the populace for freedom, etc.

Whitney Tilson on China Animal Healthcare

2) Speaking of China, this has to be the press release of the year, by China Animal Healthcare Ltd., whose stock has been halted since October. It’s the old “truck-was-stolen-during-lunch-break” excuse – LOL!

Whitney Tilson on activism

3) I’ve long maintained that the rise of activism is a huge trend that is here to stay – and, overall, is very healthy for our markets and economy:

After decades of being treated as boorish gate-crashers, activist investors are infiltrating the boardrooms of large companies like never before. This year activists launched more campaigns in the U.S.—360 through Dec. 17—than any other year on record, according to FactSet. They secured corporate board seats in 127 of those campaigns, blowing past last year’s record of 107. Activists now manage more than $120 billion in investor capital, double what they had just three years ago, according to researcher HFR.

The industry has come a long way since the 1980s, when Carl Icahn, Saul Steinberg, T. Boone Pickens and other mavericks would amass large stakes in companies and demand a sale of the entire company. They were called “corporate raiders” and “greenmailers” and were widely criticized.

These days activists, while not exactly welcomed in corporate boardrooms, are rarely treated as ill-mannered outsiders. “These activist funds are just a different asset class who have the same pensions and endowments investing in them as other funds,” says Rob Kindler, head of mergers and acquisitions at Morgan Stanley. “The demonization of activists, when really what they are doing is providing returns to the same pension and endowment plans, just seems overdone.”

Several factors contributed to this shift, according to corporate executives, activists, bankers and lawyers. The financial crisis fanned dissatisfaction with corporate executives and brought low interest rates that helped activists thrive. Activists got more sophisticated about analyzing target companies and built alliances with other big shareholders, including mutual funds. And broad shifts in corporate governance gave more power to all shareholders, including activists.

Whitney Tilson on hedge funds struggle

4) It’s been a tough year for a lot of the smartest guys I know:

Hedge Funds Struggle With Steep Losses and High Expectations http://www.nytimes.com/2015/12/29/business/dealbook/hedge-funds-struggle-with-steep-losses-and-high-expectations.html

Kudos to anyone in positive territory this year. Flat is the new +20% I hear! ;-)

Whitney Tilson on 2015: the year in charts

5) Some really interesting data here. Very troubling data on declining workforce participation, productivity, wages and rising inequality in the US. And who knew that there were more deaths from terrorism in Nigeria than Afghanistan and Pakistan combined in 2014. And our insanity around guns continues to boggle my mind…

By the end of 2015, the economy — still leaving too many Americans behind — has regrettably almost disappeared from the news, overshadowed by the twin evils of Donald J. Trump and the Islamic State. Meanwhile, Congress continued to burnish its record of doing little that was constructive, and progress on a long list of serious policy challenges seemed stalled, at least until after the next presidential election. Here, for better or worse, is the state of the union in 10 charts.

Whitney Tilson on worst ideas for 2016

6) I enjoyed this column by Chris DeMuth:


What potential rewards are least worth the risk?

What are your worst investment ideas for 2016?

Here are mine….

Long. Levered long.

Cash is for wimps. So before you waste another moment with research, get every penny you have into the equity market. Then keep going. If you can borrow money, then borrow all you can and shovel it into market exposure on top of more market exposure in the S&P 500 (NYSEARCA:SPY).

If you are concerned about risk, then put in stops on all of your positions in order to pre-plan to sell what you are buying but at lower prices. Once you’re back in cash, then wait to re-acquire the same positions after their prices recover.

…Do whatever looks good

If you have to decide to do either what makes the most sense or what looks the smartest, just do what looks smart. Before the end of the month, quarter, and especially year, just sell anything that is embarrassing. That way, your investors will never know! The lower the price, the more important it is to get rid of it. This is a situation that may call for market orders in size.


Those are my (worst) ideas. As an investor, I consider it a mark of manhood that I am supremely confident in ideas because they are mine. I place consistency above all other virtues, so I will not revisit them regardless of subsequent data. A year from now, I will duck my failures and exaggerate my successes. Please comment below with your worst ideas (but insightful reactions will be overlooked).

Whitney Tilson on tax sleuth who took down a drug lord

7) I loved this story – this guy would be a great value investor!

The Tax Sleuth Who Took Down a Drug Lord


Gary Alford, a tax investigator, was the first to identify the mastermind behind Silk Road, an online drug bazaar…

George Hotz is taking on Tesla by himself

8) A fascinating profile of a brilliant entrepreneur:

Whitney Tilson on George Hotz Is Taking on Tesla


I am REALLY fired up about self-driving cars, a technology that I think will change the world – and be here a lot sooner than people think.

Whitney Tilson on the predatory financial system

9) Yet another example of our predatory financial system:

Encore and rival debt buyers are using the courts to sue consumers and collect debt, then preventing those same consumers from using the courts to challenge the companies’ tactics. Consumer lawyers said this strategy was the legal equivalent of debt collectors having their cake and eating it, too.

The use of arbitration by the companies is the latest frontier in a legal strategy orchestrated by corporations in recent years. By inserting arbitration clauses into the fine print of consumer contracts, they have found a way to block access to the courts and ban class-action lawsuits, the only realistic way to bring a case against a deep-pocketed corporation.

Whitney Tilson on Brazil’s Fall

10) An insightful summary by The Economist of what a mess Brazil is:

AT THE start of 2016 Brazil should be in an exuberant mood.

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