The rise of income inequality; Rosie the Wonder Dog

Whitney Tilson’s email to investors discussing Lee Cooperman on CNBC at 12:30 today, discussing his tiff with Sen. Elizabeth Warren; My tiff with Sen. Warren; The rise of income inequality; Rosie the Wonder Dog.

1) I’m sending out this edition of Empire Financial Daily a little early today so you can tune into CNBC’s Halftime Report at 12:30 p.m. Eastern time, when two old friends of mine – host Scott Wapner and hedge-fund legend Lee Cooperman – will have what no doubt will be a fascination conversation about his ongoing tussle with Sen. Elizabeth Warren, who is currently favored to be the Democratic presidential nominee.

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Q3 2019 hedge fund letters, conferences and more

I first met Lee exactly 14 years ago when his former analyst and founder of Glenview Capital, Larry Robbins, introduced us. From that day, I've always had tremendous respect and admiration for him as both an investor and overall great guy.

And I have even more respect for him for being willing to stick his neck out and engage in the political process – especially in what may be the most important election in our lifetimes. I do so as well. As the child of parents who met and married in the Peace Corps, I've always been very politically active – and I can tell you from personal experience that there is absolutely no upside in doing so, in particular if you're a prominent person like Lee. Most billionaires lay low and let their money do the talking, but not Lee...

He believes that Warren is misguided in both her rhetoric as well as economic/tax proposals about the wealthiest Americans like him, and has spoken out repeatedly and forcefully about this. Here's a summary of the back-and-forth between them, from this article in the New York Times, Billionaire's Letter to Elizabeth Warren Accuses Her of 'Warping the Facts' on the Wealthy:

In a television interview on October 16, he predicted that stocks would fall 25% if Ms. Warren were elected. On October 23, he told Politico that Ms. Warren was soiling the American dream and used profane language to make his point.

It was then that Ms. Warren issued her own tweet, exhorting Mr. Cooperman, whose estimated net worth is $3.2 billion: "Leon, you were able to succeed because of the opportunities this country gave you. Now why don't you pitch in a bit more so everyone else has a chance at the American dream, too?"

Lee then wrote Warren a five-page letter that has gone viral and then teared when he was asked on CNBC a few days later why he has been so vocal about the 2020 election. "I care," he said.

As you can imagine, standing up to billionaires plays well in the Democratic primaries (one wag even tweeted, "How sure are we that Cooperman isn't on the Warren payroll?"), so Warren is cleverly using this to her political advantage – summarized well in this Washington Post article: Elizabeth Warren stands to benefit from Leon Cooperman's expletive-laced attacks. She's even running a one-minute ad, Elizabeth Warren Stands Up to Billionaires.

My take: no matter your politics, I think what's happening here is healthy for our democracy, so kudos to Cooperman!

2) I also had a very high-profile tiff with Warren. Three years ago, she misunderstood something I said and attacked me on her Facebook page, where she has more than 3 million followers. It was so ridiculous that I initially laughed it off, but my wife was pissed and wrote a letter to Warren – who was her favorite professor at Harvard Law School – asking her to take it down. When she refused, I fed the story to the New York Times and the Boston Globe, which created such a firestorm of bad publicity that Warren was forced her to delete her Facebook post and publicly apologize to me. Here's a 23-page pdf if you're interested in reading the whole story...

3) If you want to understand the anger felt by so many Americans across the political spectrum, rooted in the belief that the system no longer works for them but is instead rigged in favor of the wealthiest folks – which has directly led to the rise of people like Warren and President Donald Trump – look no further than this chart:

Family income

4) No researcher disputes that there has been a significant rise in income inequality, but there's quite a bit of debate about the magnitude. If you want to dive into the weeds of this debate, start with this article: A new study says much of the rise in inequality is an illusion. Should you believe it? Excerpt:

Few economics findings have penetrated the public consciousness in recent years as much as this one: Income inequality has exploded in recent decades, and the top 1% in particular have made out like bandits.

5) I'm a social person... but ironically enough I'm all by myself pretty much all day, every day – as I work from a home office most of the time. Thank goodness Rosie the Wonder Dog (the most beloved member of the family, by far) is here to keep me company!

Rosie the Wonder Dog

Best regards,

Whitney



About the Author

Jacob Wolinsky
Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Prior to ValueWalk, Jacob was VP of Business Development at SumZero. Prior to SumZero, Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver