Whitney Tilson’s email to investors sharing his presentation on ‘The Art of Short Selling’; Nathan Anderson, the Hindenburg founder taking on SPACs; bubble stocks have deflated just like 2000; Boaz and Tali Weinstein’s taxes; Remy: Dogecoin Rap; Dogecoin down 61% since he called the top.
Presentation On 'The Art of Short Selling'
1) I've posted my presentation on "The Art of Short Selling" that I gave on Friday at the Ben Graham VIII Annual Conference here.
Concentration in hedge fund portfolios has been rising throughout the year and approached a record high during the third quarter. In fact, the only time concentration was higher was during the fourth quarter of 2018. Hedge Funds Are Highly Convicted But With Minimal Crowding According to Goldman Sachs' Hedge Fund Trend Monitor for the third Read More
In it, I give an overview of shorting (including the 12 reasons not to short and the 10 reasons to do so), share all the lessons I learned doing it for 15 years and the advice Charlie Munger gave me (which I ignored – idiot that I am!), highlight the three types of shorts I've had little success with and the one type I've done well with, and reveal 11 current short ideas – including my favorite, AMC Entertainment (AMC).
Nathan Anderson, The Hindenburg Founder Taking On SPACs
2) Speaking of shorting, the Financial Times did a nice profile of Nate Anderson of Hindenburg Research, who has been absolutely prolific – and generally spot-on – with his activism. Ignore him at your peril! Nathan Anderson, the Hindenburg founder taking on SPACs. Excerpt:
Anderson has made a name for himself taking on some of the most popular businesses to go public in the recent blank-cheque company bonanza, including electric truck start-ups Nikola (NKLA) and Lordstown Motors (RIDE).
This week he dropped a bombshell on the already struggling market for special purpose acquisition companies ["SPACs"] by targeting DraftKings (DKNG), the sports betting business widely regarded as the catalyst of the boom. Shares initially fell more than 11% but have since largely recovered.
SPACs are having a record-breaking year with more than $100bn raised so far, according to Refinitiv, but for Anderson the repeated targeting of the sector is unintentional. "We don't really set out and say, 'hey we're going to look at SPACs today,'" he says, adding that his team "kind of just follow" apparent fraud.
The article had this new tidbit of information:
His first big break came as he sought to hone his investigative skills. Anderson contacted Harry Markopolos, the investigator known for flagging Bernard Madoff's Ponzi scheme, and they teamed up on a case against Platinum Partners, the hedge fund eventually charged over a $1bn fraud.
Anderson and Markopolos have not previously been identified as sounding the alarm on the case, in which seven top executives were indicted criminally and several pleaded guilty.
Tesla And Other Bubble Stocks Have Deflated Just Like 2000
3) James Mackintosh of the Wall Street Journal highlights some very interesting parallels between today's market and the months shortly after the Internet bubble peaked in 2000: Tesla and Other Bubble Stocks Have Deflated Just Like 2000. Excerpt:
Is the dot-com bust happening again right under our noses? It might seem an odd claim, but there is a remarkable resemblance between the speculative boom-to-bust of late 1999 and the first half of 2000 and what's happened over the past nine months in the fashionable areas of clean energy, electric cars, cannabis stocks, and SPACs.
If the parallel continues it bodes ill for investors who joined the excess late. The trendy stocks – led by Tesla (TSLA) – are already down a quarter to a third from this year's highs. But there are reasons to hope that, unlike at the turn of the century, the malaise won't spread to the rest of the market.
The similarities are in both performance and investor behavior. The late-1999 fear of missing out on Internet stocks inflated the Nasdaq Composite 83% from the end of September to its March 2000 top. From September last year to this year's highs, Invesco's solar exchange-traded fund jumped 88%, Blackrock's global clean energy ETF [exchange-traded fund] jumped 81%, and Ark's innovation ETF 70%.
Boaz And Tali Weinstein's Taxes
4) Following up on my June 9 e-mail, in which I highlighted "this extraordinary piece of investigative journalism by ProPublica: The Secret IRS Files: Trove of Never-Before-Seen Records Reveal How the Wealthiest Avoid Income Tax," Andrew Ross Sorkin of the New York Times asked my friend Boaz Weinstein of hedge fund Saba Capital Management for his tax returns.
To Sorkin's surprise, Weinstein shared them – and it turns out that he falls into a different category than people like Amazon (AMZN) CEO Jeff Bezos and Berkshire Hathaway (BRK-B) CEO Warren Buffett, who paid little or no taxes despite their wealth soaring.
In contrast, in the years in which Weinstein paid few or no taxes, it's because his fund – where he has 95% of his net worth – declined in value. And overall, he paid $124 million in federal, state, and city taxes since 2010 – so it would be massively stupid for our political leaders to demonize such people. They can easily move to Florida – and, sadly, many are!
Here's Sorkin's article: If rich people lose money, should they pay tax? Excerpt:
According to the tax returns, from 2010 to present, the Weinsteins paid $86.3 million in federal taxes and $37.7 million in New York State and city taxes, for a total of $124 million. The couple's adjusted gross income during the same period was $288.9 million; their taxable income was $246 million, lowered in part by $29.5 million in philanthropic gifts.
Mr. Weinstein appeared to come by his tax bill in a straightforward way: He lost money. Unlike many of the individuals ProPublica highlighted whose net worth went up but they reported no taxable income – like Jeff Bezos and Elon Musk – Mr. Weinstein's wealth was falling in the years he paid little or no tax. He also used a mark-to-market method for tax filing purposes known as a Section 475 election, which meant he paid taxes on both realized and unrealized gains.
- Mr. Weinstein's flagship fund was down 3.87% in 2012, 6.75% in 2013 and 10.81% in 2014. It eked out a 3.37%
- gain in 2015 and then a 22% increase in 2016. In 2017, his fund lost 8.9%, before posting an 11% gain in 2
- 018. He lost 12.8% in 2019 and posted a whopping gain of 73% in 2020.
P.S. Boaz's wife, Tali Farhadian Weinstein, is running for Manhattan District Attorney. She's amazing and I'll be voting for her tomorrow!
Remy: Dogecoin Rap
5) This is hilarious: Remy: Dogecoin Rap (2:22).
I will make my usual prediction related to absurd bubbles that my "spidey sense" tells me are at a top: from $0.5853 (the price of dogecoin when I wrote this), it will be down 30% within a month, 50% within three months, and 80% within a year.