Whitney Tilson Done With Hertz, Pitches

Whitney Tilson’s email discussing Munger meeting this coming Wed in LA; happy hour after; Becoming Buffett; A Quiet Giant of Investing Weighs In on Trump; Dan Loeb: Trump will make hedge funds great again; P/S of S&P 500; Inside Sears’ death spiral;

Also Tilson Family Happy With Hertz After Doing ‘Channel  Checks’… –

Whitney Tilson
Whitney Tilson

Whitney Tilson – Munger Meeting

1) The Wesco annual meeting was always a must-attend for hard-core value junkies because it was an opportunity to hear Charlie Munger, a genius in his own right, answering questions for ~3 hours in a much smaller setting than the Berkshire meeting (where Buffett did most of the talking anyway) (my notes from the 1999-2007 Wesco annual meetings are posted here:

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But when Wesco was fully acquired by Berkshire five years ago, that meeting ended, so now the only opportunity to hear Munger (who just turned 93 a few days ago) is at the Daily Journal (DJCO) annual meeting, which will take place this coming Wed., Feb. 15th at 10am at 949 E. 2nd Street, Los Angeles. You do NOT need to be a DJCO or BRK shareholder to attend. I hope to see you there!

It generally ends ~1pm, so it’s possible to do a non-redeye day trip from NYC – the earliest flights (6am departure) land a bit after 9am, and there are many flights back from 2:30-4:00pm (I’m coming in from SF that morning, and taking the 2:30pm Delta flight to JFK).

For those of you staying later that day, my friends and fellow investors Chuck Gillman, Ben Large and Alex Rubalcava are hosting a happy hour with beer and pretzels from 3-7pm at Chuck’s house at 704 15th Street in Santa Monica. You can either RSVP to [email protected] or just show up. There is plenty of free parking on the streets two or three blocks north of 15th Street.

Whitney Tilson - Becoming Buffett

2) I really enjoyed the new documentary on HBO, Becoming Buffett. Here’s the one-minute trailer: and here’s an excerpt from the NYT’s review below:

Warren E. Buffett isn’t exactly an unknown quantity.

As America’s most famous investor and the possessor of what Forbes estimates is a $74 billion fortune, he has been the subject of endless scrutiny across print and film, most without his participation. But to Mr. Buffett, one of the appeals of agreeing to let the cameras into his life for “Becoming Warren Buffett,” an HBO documentary debuting on Monday, was to tell his story in a relatively new way.

Nowhere are there in-depth discussions about balance sheets and cash flow, though there are flashy animations illustrating basic investing principles. Instead, the film focuses on how Warren Edward Buffett grew from the Nebraskan son of a congressman to become the Oracle of Omaha, the avuncular mascot of American capitalism who built Berkshire Hathaway into a $406 billion empire, and shows some of his warts along the way.

“People watching it expecting to learn how to buy cheap stocks will be disappointed,” Mr. Buffett said with a chuckle during a telephone interview. “When I think about getting beyond a financial audience, this becomes really prominent.”

The film, directed by Peter Kunhardt, is indisputably positive toward its subject, showcasing hallmarks of the Buffett legend like his regular chats with students, his poring through thick corporate financial statements and his almost daily visits to a McDonald’s drive-through.

But the movie doesn’t shy away from portraying Mr. Buffett, now 86, as something of a remarkable human computer, gifted with numbers and less so with interpersonal relationships. He is the kind of man who straightforwardly says that he can’t remember the colors of his bedroom walls, and the kind of husband who when his wife had the flu and asked for a pot to keep by her bedside, instead fetched a colander.

Whitney Tilson - A Quiet Giant of Investing Weighs In on Trump

3) Kudos to Klarman for speaking his mind:

In his letter, Mr. Klarman sets forth a countervailing view to the euphoria that has buoyed the stock market since Mr. Trump took office, describing “perilously high valuations.”

“Exuberant investors have focused on the potential benefits of stimulative tax cuts, while mostly ignoring the risks from America-first protectionism and the erection of new trade barriers,” he wrote.

“President Trump may be able to temporarily hold off the sweep of automation and globalization by cajoling companies to keep jobs at home, but bolstering inefficient and uncompetitive enterprises is likely to only temporarily stave off market forces,” he continued. “While they might be popular, the reason the U.S. long ago abandoned protectionist trade policies is because they not only don’t work, they actually leave society worse off.”

In particular, Mr. Klarman appears to believe that investors have become hypnotized by all the talk of pro-growth policies, without considering the full ramifications. He worries, for example, that Mr. Trump’s stimulus efforts “could prove quite inflationary, which would likely shock investors.”

And he appears deeply concerned about a swelling national debt that he suggests could undermine the economy’s growth over the long term.

“The Trump tax cuts could drive government deficits considerably higher,” Mr. Klarman wrote. “The large 2001 Bush tax cuts, for example, fueled income inequality while triggering huge federal budget deficits. Rising interest rates alone would balloon the federal deficit, because interest payments on the massive outstanding government debt would skyrocket from today’s artificially low levels.”

Much of Mr. Klarman’s anxiety seems to emanate from Mr. Trump’s leadership style. He described it this way: “The erratic tendencies and overconfidence in his own wisdom and judgment that Donald Trump has demonstrated to date are inconsistent with strong leadership and sound decision-making.”

Dan Loeb: Trump will make hedge funds great again

4) Dan Loeb has a different perspective – that’s what makes markets!

U.S. hedge fund manager Dan Loeb is betting President Donald Trump will be good for investments thanks to his planned mix of tax cuts, reduced regulation and infrastructure spending.

"This environment is undoubtedly better for active investing – just as active investing was considered to be on its deathbed," Loeb wrote in a letter to clients of his $15 billion Third Point LLC Wednesday.

A shift from government monetary stimulus to measures that will increase personal and corporate spending will create lower correlations between various types of securities and greater dispersion of results within them, such as stocks, Loeb said.

Higher interest rates will also create investment opportunities, Loeb added.

…Loeb did urge some caution on investment during the Trump presidency, noting hedges on Third Point's portfolio. But he said that even volatility could be a boon.

"While America may or may not be made great again, there is no question that the rules are literally being rewritten," Loeb wrote. "We do not plan to trade the tweets but we expect an increasing number of real and, even better, fake dislocations to create some extremely rewarding investing opportunities."

P/S of S&P 500

5) Trying to value the market on a P/E basis is tricky because companies distort their earnings in all sorts of ways, but it’s harder to fudge revenues, so looking at market valuations on a price/sales basis is interesting. Here’s a chart showing that the S&P 500 is now trading at more than 2x sales, an all-time high (at the bottom in 2009, it was nearly 0.7x):

Whitney Tilson

Inside Sears' death spiral

6) With Sears up more than 30% today, I’m reminded of a wise friend’s rule of thumb, The Rule of Doubles and Triples: every stock, on its way to zero, doubles at least three times and triples at least twice.

Though I’ve never had any position in SHLD, it’s hard to imagine that the company avoids bankruptcy this year, Lampert’s best efforts notwithstanding. Doug Kass has written smartly on this, and I enjoyed this in-depth look by Business Insider as well. It concludes:

Sears' suppliers, meanwhile, are getting nervous and canceling orders, according to current and former corporate employees, as well as representatives of the manufacturers.

An employee who worked out of Sears' former New York City design office, which the company shut down in July, said vendors have started canceling orders because they can't get insurance on their shipments.

"It started happening about a year ago, and then it started happening more and more," this person said.

A mid-level manager at headquarters also told Business Insider that suppliers have been canceling contracts.

"It's getting really hard to do my job," this employee, who works directly with Sears vendors, wrote in an email. "A lot of vendors are discreetly cutting ties with Sears."

The employee declined to provide names for the companies involved because they feared retribution if they were discovered as the source of the information.

All of this, industry watchers say, means chances for Sears' survival have dwindled.

"They are going out of business," said Van Conway, an expert in bankruptcy and debt restructuring and CEO of Van Conway & Partners. "This snowball is 90% of the way to the bottom of the hill."

That's one reason those executives look so nervous in that videoconference room at headquarters, while Lampert, sitting at home in Florida, keeps finding ways to plug holes with cash infusions.

One day, Sears' assets will likely run dry. And right now, there's no sign of a strategy that would cure the underlying business by restoring brand loyalty and sales, Conway said.

"The game's over," he said.

7) I LOVE this service ( for booking rental cars! When I make a booking through them, it keeps checking for a better price and, if it finds one, automatically rebooks me. It usually saves me 25-40%. For example, for a two-day rental in Charlotte at the end of this month, the original rate was $111, then it found a better deal for $99, and it just rebooked me last night for $68 – 39% less than what I was originally going to pay. Sweet! (This cannot be good for the car rental companies…)