From Whitney Tilson’s latest email to investors.
Also see Whitney Tilson On Tesla ” almost daily I’m tempted to short it”
Whitney Tilson – “We hedgies” Deserve “A Lashing …
From: Whitney Tilson
Sent: Thursday, April 13, 2017 10:54:05 AM (UTC-05:00) Eastern Time (US & Canada)
Subject: 2 events I’m hosting at the BRK mtg; Buffett & Lemann; Why We Think We’re Better Investors Than We Are; Book Pins Corporate Greed on a Lust Bred at HBS; Retail Meltdown of 2017; stock scam; WINS soared 4,500%; Charles Murphy; United
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Michael Mauboussin: Here’s what active managers can do
1) Reminder: On May 6th I will be attending my 19th consecutive Berkshire Hathaway annual meeting in Omaha. If you’re going to be there, I’d like to invite you to two events on Friday evening and Saturday afternoon, both at the Omaha Hilton (I’m not sure which rooms; there will be signs):
- a) My friend Chuck Gillman and I are hosting our annual cocktail party from 8pm-midnight on Friday, May 5th. No agenda, no speeches, no dress code – just come, enjoy the drinks and snacks, and meet other value investors.
- b) Chuck and I are also sponsoring a casual get-together immediately following the annual meeting (~3:30) on Saturday, May 6th – just walk across the street or take the skybridge to the Hilton. It will end around 6pm.
To RSVP for either of these events, please email Ram at [email protected] and include:
- Which event(s) you plan to attend
- Your name as you wish it to appear on your nametag
- Your city as you wish it to appear on your nametag
I look forward to seeing you!
2) I wish I’d seen this (please let me know if you find the video of it posted online):
The billionaire investors Warren Buffett and Jorge Paulo Lemann have teamed up to engineer some of the biggest and boldest mergers and acquisitions in recent years, but they have rarely appeared in public together.
On Saturday night, however, the two appeared on a stage in Cambridge, Mass., to be interviewed by the dean of the Harvard Business School, Nitin Nohria. They were speaking at the Brazil Conference 2017, an annual event that Mr. Lemann formed and is organized by Brazilian students at Harvard and the Massachusetts Institute of Technology.
In their comments, the two investors offered a strong defense of open markets, free trade and the United States as a great place to do business.
3) Gary Belsky, author of one of the first and best (and quick) books I’ve read on behavioral finance/investor irrationality, Why Smart People Make Big Money Mistakes and How to Correct Them: Lessons from the Life-Changing Science of Behavioral Economics, with a smart op ed, Why We Think We’re Better Investors Than We Are:
What differentiates the typical lawyer and average investor, however, is their justification for engaging in their activity. Lawyers are trained to do what they do, while the majority of investors are not. Ask a random player in a law firm’s basketball league whether he or she could compete with LeBron James, and the most common response will be laughter. Yet many of those lawyers would willingly compete with the billionaire investor Warren E. Buffett.
Despite the spectacular growth of index funds — passive investment vehicles that track market averages and minimize transaction costs — millions of amateur investors continue to actively buy and sell securities regularly. This despite overwhelming evidence that even professional investors are no more likely to beat the market than monkeys throwing darts at securities listings.
Money managers, at least, are paid to make investment bets. But why do amateurs believe they can outperform the professionals — or even identify those pros who will outperform? (Performance of individual mutual funds cannot be predicted with any greater degree of accuracy than individual stocks or bonds.) Many biases and cognitive errors contribute to this costly behavior, but a few deserve mention.
4) I just ordered this book and look forward to reading and considering the arguments the author makes. My initial reaction is one of skepticism – perhaps not surprisingly, given that I and many of my closest friends went there and we all had great experiences – but I’ll try to read it with an open mind. Yes, our capitalist system is, in many ways, broken, but to argue that HBS is a major CAUSE of this strikes me as a real stretch…
It is hard to overstate the school’s influence on corporate America.
That’s why a new, exhaustive history of the school is causing a stir before it is even out. The book, “The Golden Passport,” by the veteran business journalist Duff McDonald, is a richly reported indictment of the school as a leading reason that corporate America is disdained by much of the country.
“The Harvard Business School became (and remains) so intoxicated with its own importance that it blithely assumed away one of the most important questions it could ask, which was whether the capitalist system it was uniquely positioned to help improve was designed properly for the long term,” Mr. McDonald writes in the book, to be released in two weeks.
His answer? “With economic inequality at a hundred-year high and meaningful progress on climate change and other social and environmental issues embarrassingly paltry, the answer to that question is obvious. It is not.”
Citing a report from the Aspen Institute, Mr. McDonald explains that “when students enter business school, they believe that the purpose of a corporation is to produce goods and services for the benefit of society.”
“When they graduate,” he continues, “they believe that it is to maximize shareholder value.”
5) An insightful article about the meltdown in the retail sector:
From rural strip-malls to Manhattan’s avenues, it has been a disastrous two years for retail.
There have been nine retail bankruptcies in 2017—as many as all of 2016. J.C. Penney, RadioShack, Macy’s, and Sears have each announced more than 100 store closures. Sports Authority has liquidated, and Payless has filed for bankruptcy. Last week, several apparel companies’ stocks hit new multi-year lows, including Lululemon, Urban Outfitters, and American Eagle, and Ralph Lauren announced that it is closing its flagship Polo store on Fifth Avenue, one of several brands to abandon that iconic thoroughfare.
A deep recession might explain an extinction-level event for large retailers. But GDP has been growing for eight straight years, gas prices are low, unemployment is under 5 percent, and the last 18 months have been quietly excellent years for wage growth, particularly for middle- and lower-income Americans.
So, what the heck is going on? The reality is that overall retail spending continues to grow steadily, if a little meagerly. But several trends—including the rise of e-commerce, the over-supply of malls, and the surprising effects of a restaurant renaissance—have conspired to change the face of American shopping.
Here are three explanations for the recent demise of America’s storefronts.
6) I don’t often receive emails like this one:
From: Trenton Barber [mailto:[email protected]]
Sent: Thursday, April 13, 2017 2:47 AM
Subject: An imminent event is sending this stock price through the roof.
What if I told you that I know of a company that has actually found a cure for cancer.
They have proven its efficacy in animal tests and have recently just completed their testing on humans.
The results of the tests on the human subjects are not out yet, we are expecting them to become public some time in the next two to three weeks, but a friend of mine who works at the FDA told me that they are life changing.
It seems that in around forty percent of cases, tumors were successfully destroyed. This number is absolutely huge!
It means that more than a third of the people with cancer can be cured with this therapy.
This is going to change the world, and once the announcement becomes public, it is guaranteed that their stock price will go to more than 24 to 30 bucks in a matter of hours.
This is why I highly, highly recommend that you buy QSMG as soon as you can today. Get in ahead of the herd.
Out of idle curiosity (and maybe the prospect of a good short), I looked up QSMG on CapitalIQ and discovered the following:
- Far from discovering “a cure for cancer”, it supposedly “distributes fitness equipment to wholesale markets in the United States. Its product line includes sports equipment, gym equipment, exercise equipment, and bodybuilding equipment”
- It has no revenues
- Despite being an obvious scam, the stock is up 10% today, giving it a market cap of $168 million.
Why such stocks are allowed to trade, even on the OTC bulletin board, is beyond me…
7) Speaking of totally manipulated stocks, here’s an excellent Bloomberg expose of WINS (whose price has fallen by 69% since this article was published two weeks ago, but still has an absurd $1.7 BILLION market cap – alas, I couldn’t find any borrow then or now!):
Investors who put money into U.S. index funds usually aren’t looking for surprises. Those who bought into the Russell 2000 recently got one anyway: a little-known Chinese stock that went crazy for no apparent reason.
Shares of Wins Finance Holdings Inc., a company that guarantees loans for small businesses in China and leases equipment to them, have soared as much as 4,555 percent since debuting on Nasdaq in 2015. The firm’s market value surpassed $9 billion in February, about four times as much as LendingClub Corp., an online lender with 50 times the revenue. Even Wins said in a release that it had no idea what drove the surge in its stock, which boasts the best performance in the Nasdaq Composite Index over the past 12 months.
So how did a tiny Chinese company make it into the portfolios of U.S. retirees? And how did its biggest shareholder, Wang Hong, become a billionaire, at least on paper?
The mystery begins on the 37th floor of a shiny Times Square skyscraper. That’s where Wins’s U.S. headquarters are located, according to Securities and Exchange Commission filings. But there aren’t any signs of the business. Instead, the floor is occupied by Forefront Capital Advisors, a financial-services firm founded by Bradley Reifler, who used to be on the board of Wins.
8) A very sad story:
Charles Murphy used to walk home through New York City’s Central Park to his 19-room townhouse for dinner with his family. Last year, he began voicing worries about money to his boss, hedge-fund billionaire John Paulson, who often joined him along the way.
Mr. Murphy was blessed with a commanding presence and boundless ambition. Yet his concerns over maintaining the life he had created for himself, his wife, Annabella, and their three young sons consumed him. The very qualities that helped him build a fortune were no match for his fear of losing it.
“In his mind, he had worries,” said Belén Hormaeche, a close friend of Mr. Murphy and his wife. “But it was all in his mind.”
Mr. Paulson, who eulogized Mr. Murphy last Monday, sought to explain his apparent suicide to friends and family during a funeral service in New York.
“The mind can play tricks with oneself, distorting reality,” Mr. Paulson said. “No matter how much those close to him tried to help, and no one tried more than Annabella, Charles could not see a path forward…his mind created a trap from which he couldn’t escape.”
This account of Mr. Murphy’s life and death is based on interviews with close friends and colleagues, as well as those familiar with his family.
9) Boy, you know you’ve screwed up when this is what’s circulating the internet – LOL!