AtlCDore

frommi, Just curious why sold out of SEC.TO? Regarding QVAL, do you have a % of your assets in quantitative value funds? Have you looked at other funds? Thanks, AtlCDore

Thanks for posting. Wasn't Drunkenmiller's annualized return in the 30% ballpark?

I'm going to be the one to disagree here. If you put up great numbers in a cave no one will know. Also great numbers only attract investors who want high returns. Marketing is highly underrated. I've learned this myself in my own business. If you have a great story but no one knows the story isn't great. You need to tell others what's happening, why the product is worth purchasing etc. If the storyline proposed above is true then why are there dozens (hundreds?) of startup fund managers who raise a lot of money without a track record? And why are there hundreds of struggling fund managers who have great returns but no funds? If you're competing against everyone else on returns there is no edge. There is no market differentiation. As a manager you need to segment the market, find a niche and sell to those investors in that niche. You want to sell something differentiated to your customers, this is how you get sticky customers. Maybe you have a different investment approach, or look at stocks differently. Sell that process or angle. Maybe you provide exposure to a sector that doesn't get much exposure, sell that. Don't sell returns though. Look at Buffett and Watsa, they are both doing something different. The funds have performed well, but it's the process, how they look at stocks, the connections they have. It's these reasons that investors stick with them even when results are bad. And better investors are defending them in down years. That's what you want, you want customers who will defend you in a down year because they believe in your process and product. I know my opinion probably isn't popular with the ramen-eating fund manager crowd but I think most businesses could really help themselves with more marketing. Tell your story! oddball, I don't think you are in disagreement. Marketing is a very important piece. I agree with you that guys who sit at home generating great numbers are not going to raise much money if no one knows about them. The business breaks down into being able to raise institutional money and money from wealthy people. Two completely different business models. For the vast majority of people who are on this site, they are going to raise money from friends and family. Must build a track record and through marketing, will get friends and others to invest and that grows as you generate returns and get to know more people. It's all important. Can live very well managing $25-$50mm fund. My point is that you need to stay around long enough to get to that inflection point. I think too many think that money flows in the door once you announce you are running a fund. Per the Stanford MBA, he thinks he can open a fund and he'll be flying charter in about 5 years. Maybe the hedge fund model today is the dot.com of the late 90's. Everyone thinks they are going to make a fortune right away. Best, AtlCDore

Menlo, There is a teacher named Jack McDonald that teaches at Stanford who has a following. (http://www.tilsonfunds.com/JackMcDonald.pdf) Has anyone taken a class from Jack McDonald? Best, AtlCDore

My not so short summary on one response to a student question: "How to gather capital base when you are just starting out in the investment business" Guy: Life is hard, you need lots of luck and things to line up... Mohnish: Guy, you are totally wrong. It is actually very easy (class laughter). Let me show you. (To the student) What will your salary be when you graduate? Student: huh.. (class broke out in laughter). Mohnish: OK OK, what is the median salary of a Stanford MBA Professor: 150K Mohnish: Is 150K good enough for you? Student: No, not really. Why are you asking me this hard question and putting me on the spot? Mohnish: Well, you asked the hard question and we need to resolve this now (more laughter). How about 200K? Student: Getting there but not quite Mohnish: How about 300K? Student: Closer but not there yet Mohnish: 350K? Student: OK, I'll take that but need to take off 50% for taxes (He was wrong here, the marginal tax rate is 50% - effective tax rate won't be 50%, but whatever). Mohnish: OK, so you'll end with 175K a year. What will be your living expenses? (Student again squeamish, class in laughter). OK, let's say you live on 100K. Don't spend one more penny than that. Forget the BMWs. Who needs that? That anyway won't make you happy. What makes you happy is another class altogether and we won't go there yet. (I am thinking to myself the student is thinking Mohnish is nuts - all these MBA grads joined Stanford they will be living this fancy life with the BMWs and Teslas). The remaining 75K you just save. Max out your company matching 401K, IRA, Roth IRA and whatever other vehicle you have. Put it all in an index fund. How old are you? Student: 27 Mohnish: Do it till you are 37. How much do you expect to make at 37? Student: $2 - $5 million? (I am thinking wtf. This guy really has his head in the sand). Mohnish: Great. At that point, I let you raise your lifestyle to 200K a year (class laughter). Also, I recommend that you marry up (more laughter). . Your life expectancy is about 50 - 60 years more. If you just do this, you can't help but get super wealthy. Guy: If you compound at 15%, you double every 5 years. If you compound at 11%, you compound every 7 years. Let's say you compound at 11% Mohnish: Guy, can you do the math and tell me how much "capital" (emphasis his) our student here will have gathered (more laughter) Student: No offense, I get the point but that is not the question. I have already taken up so much time, but let me clarify my question (I am thinking this guy is really over his head. The class is super large and there are so many people waiting to get their questions answered). You are assuming I go get another job and save up money like you are saying to invest on the side. But how does one go about into the investment business full-time and gather capital? Mohnish: Very easy. You have a brokerage account? Student: No (wow - this guy does not have a brokerage account, but he has all these ambitious goals. This is what a Stanford MBA does to you? Gives you an entitlement mentality?) Mohnish: TODAY I want you to start an account. Go to www.tdameritrade.com and open an account (more laughter as he spells out the URL). Put it whatever money you have. $10,000, $100,000.. $1,000 whatever. Don't buy groceries from this account and start investing this money. 1.5 years later when you graduate, you will have a track record. Then you approach three kinds of people - Friends, Family and Fools. (very loud laughter). All three should be willing to hand you their hard earned dollars if you have a decent track record and you have this great Stanford MBA grad certificate. Let me give you one more secret from Guy and me. Investing doesn't really take that much time. I suggest you also get a day job. It's free money, take it. Believe me, that's what you want to do. You will have three things going - your day job, your savings, and the investing on the side. Student: OK, I get the point, let's move on to the next question. Mohnish: Have I resolved your concern? .. It showed to me that MBA doesn't really give you wisdom or even prepare you as an investor. In fact, it is quite easy to fall trap into an entitlement mentality. Basis tenets of being frugal can go such a long way that sometimes sophisticated MBA students don't get it. This was super fun imho. Sounds like this particular individual is "special" on a number of levels, but the entitlement mentality is not limited to Stanford MBAs. I've fielded a number of calls from classmates from business school (and random people who find me on the Internet) who seemed utterly convinced that I knew a secret phrase to say to people to raise large amounts of capital (if one exists, which I doubt, I surely don't have it), and that I was merely holding out on them -- maybe if they kept me talking long enough, it would spill out. What you said about raising money is so true. There seems to be a general perception that opening a fund automatically means that money will just flow into the door. What people don't see is that it takes time and a track record to get people interested. I think the key to the whole business is just staying around long enough. I once told a friend that if you put up good numbers over a decade, I can guarantee you that you will make a lot of money. I think I lost him at the decade part.

Have you held an upper management position in your life? CEO? If you think that he only encountered "a handful of business problems that have occurred over the course of his 60 year career", you are deluding yourself. I could make that list quite a lot longer, but what's the point. And even if the list was just "a handful", I want to see a person who would have handled them with little stress. IMHO you are assuming his cheery TV persona is how he feels every day. I seriously doubt this is the case. But we will never know probably (unless someone really close writes a candid story after he dies) Certainly he has stress but I believe what has greatly contributed to his success and a lower stress environment is the vehicle he created in BRK. Unlike the vast majority of CEO's; he's always had control of the entity and never dealt with Wall Street analysts and the quarterly performance game. It's even better than running a fund because he doesn't need to worry about redemptions. It's allowed him to invest the way that works best for him without outside interference.

I have a couple of questions to the board: 1) Do any of you think that there could be a benefit to a country like Italy leaving the Euro? And if Italy were to leave, is that the domino that breaks apart the Euro? 2) Regarding the HK dollar. Do you think it's a foregone conclusion that they not longer peg it to the US$? If so, then do they make it a floating currency or peg it to the Yuan? It would seem to me that China would like to have it pegged to the Yuan. Thanks, AtlCDore

he actually did start a new fund http://blogs.wsj.com/moneybeat/2013/06/20/fund-star-from-crisis-looks-to-raise-money-again/ Looks like he is managing about $175M (2014). However, I could not find any 13Fs. ;) Peter, Where did you find that $175M number? Thanks, AtlCDore

bobzou, Thanks for the response. I thought Fidelity may let someone purchase. I exchanged emails with the company and asked about that statement and the guy emailed back, "No there are quite a few US investors in the fund, in fact 3 of the 5 biggest shareholders are US based. It is listed on the Stock Exchange here in London so anyone can buy it. I think the restrictions are more on marketing in the US, and also there is potentially a problem if a very significant percentage of US investors own shares." Thanks for checking. Maybe IBKR will allow someone to purchase. I'll try with them. Best, AtlCDore

Does anyone currently own this fund? It trades in London and holds Korean Pfds. I was told by Schwab that I was unable to buy the fund as an American. I contacted the company and was told that they have American investors and there are no restrictions for an American to own. Thanks, AtlCDore

It's amazing to think what Michael Burry lived through. Greenblatt sets him up and backs him with the fund. The big short Burry puts on isn't working and Greenblatt is upset and as it plays out gets more upset and wants him to get out of the position. Burry holds the position. Ultimately, it works. I can't imagine what that must have been like. If Burry is starting another fund, I am surprised. Wouldn't think he would want to take in outside investors. I wouldn't think he would need the headache.

I would guess Michael Burry is not too happy about this. I felt Michael Lewis treated the guys at Cornwall Capital almost like a bunch of yahoos. Recognized they made money but almost due to blind luck. Am I the only one who read it that way?

Lance, I went the easy way out and bought some RSX yesterday and some more today. All we need now is Michelle Caruso Cabrera to be reporting from the street of Moscow to signal a bottom. AtlCDore

I have always been a great saver. You don't realize how important this is because everyone goes through good times and bad times and saving during the good times makes the bad times less bad. I also traveled a lot before kids. Have traveled in US with kids but now planning on traveling overseas again. A regret is that when you are in your 20's, you can reach out to just about anyone and there is a good chance they will speak with you. Speak with as many people as you can and learn from their experiences.

The more I see what's happening in Russia, the more I think there is a great opportunity to be had. I know things are scary with Putin and Co. Plus the Ruble is in free-fall but Greece blew up 2+ years ago and a lot of money was made in making investments there. Going back to mid-90's (and I have to look at my notes in my office), Mexico's Peso blew up but yet those who bought the Mexican stock market made multiples. Russia is trading in low single digit P/E levels. At some point doesn't the reward outweigh the risk and have we reached that point in Russia? Is anyone looking at Russia?

It's my personal belief that Saudi Arabia orchestrated the lower oil prices for the following reasons: 1) It's a shot at Iran. Maybe putting pressure on Iran will entice them to give up their nuclear program. 2) ISIS has been selling oil. I believe that is where they have been getting the majority of their profits. Lower oil profits means less money for them and may weaken their base. SA is certainly no friend of ISIS and it must scare the shit out of them to think that Iran is on one side and ISIS is on the other. 3) To a lesser degree, this hurts Russia and shale producers. If this takes out some of the supply then it's icing on the cake. I would be interested in hearing other's thoughts about the above? Does anyone get anything from Stratfor? I would be curious their take on this whole thing. Thanks, AtlCDore I initially thought there was a strong geo-political aspect to the Saudi's decision to maintain production even in the face of falling crude prices. However, the more I read about the Saudi's experience and thought process in the 70's and 80's, the more I think that this is entirely an economic decision on the part of the Saudi's. This is illustrated by the Saudi's experience over the previous three decades. In the past, in the face of falling crude, they cut production to maintain crude pricing. A couple of things happened that negatively impacted Saudi Arabia. First, Certain OPEC members have historically always exceeded their quotas, so the Saudis bear the brunt of the production cuts. Second, by cutting production and maintaining higher crude prices, this has stimulated a higher rate of growth in non-OPEC production. And third, as non -OPEC production has increased, the share of oil supplied by OPEC has declined substantially. Fourth, higher crude prices reduce future crude demand substantially given that higher crude prices stimulate investments in alternative energy sources. Fifth, the Middle East ships a substantial amount of crude to Asia, particularly China. The Chinese have the largest shale deposits in the world, and they are getting ready to exploit them given their reliance on imported crude and imported gas. Lower crude prices make it much less economic to pursue development of Chinese shale, thereby ensuring continued reliance on Middle East crude. (Ultimately I think the Chinese will fail to exploit their vast shale deposits given their severe water issues, but that is a discussion for another day) So I am led to believe that the Saudi's actions are entirely to maintain market share, and by doing so, the low prices will encourage an increase in demand while cutting the legs out from under development of certain crude alternatives. Was it anything specific that you read that made you change your mind?

It's my personal belief that Saudi Arabia orchestrated the lower oil prices for the following reasons: 1) It's a shot at Iran. Maybe putting pressure on Iran will entice them to give up their nuclear program. 2) ISIS has been selling oil. I believe that is where they have been getting the majority of their profits. Lower oil profits means less money for them and may weaken their base. SA is certainly no friend of ISIS and it must scare the shit out of them to think that Iran is on one side and ISIS is on the other. 3) To a lesser degree, this hurts Russia and shale producers. If this takes out some of the supply then it's icing on the cake. I would be interested in hearing other's thoughts about the above? Does anyone get anything from Stratfor? I would be curious their take on this whole thing. Thanks, AtlCDore

Closer to home for many board members here, your point #4 played out really ugly with FFH between 2002-05. The short sellers got a little ahead of themselves with the thinly traded stock and got caught w their pants short. They tried everything they could, shill analysis to message board trolling to threatening phone calls...they lost more than an argument. There are millionaires on this board thanks to that mistake made by the shorts. If I'm not mistaken didn't Watsa sue that whole hedge fund cabal? Did anything ever come of that lawsuit? Really a travesty what Watsa had to go through from what I remember.

NBL, Having read some of your posts recently, you come across as an intelligent and thoughtful poster and I look forward to reading your posts going forward. Since your title contains "ethics", I don't believe there is any ethical issue with discussing a short idea. However (and this may not be of interest to you) as a word of caution, know thyself before posting a short idea. I have found being short an overvalued stock is very different mentally than being long a cheap stock. At least to me. Over time I have learned that it is best for me to play a short idea via long puts or not being short at all. Maybe being long a put I know my max loss and therefore can deal with it better. My issues with shorting: 1) I can be long a stock for years and the volatility doesn't bother me. Once I am short, I seem attracted to watching that stock like a moth to a flame. And the fluctuations drive me crazy. 2) I believe that a short idea is more of a trade and the timing of initiating that short is vital whereas with a long idea, time is on your side. 3) Being short seems to take an inordinate amount of energy as opposed to a long idea. 4) Once you announce you are short stock X, you will find that there is someone who is long that stock. And chances are good you will find yourself in a ongoing discussion with that person discussing why it is/isn't a good idea. Takes up a lot of your time. Hopefully, none of this is relevant to you but since you said you have not shorted an idea, I just thought I would list some of the pitfalls I found with being short. I would not worry about the ethics of being short or even discussing it in any sort of forum. I would tell you to think long and hard before announcing it publicly. Best, AtlCDore

Thanks for posting. AtlCDore

BG, I think the problem with coal is that it is being demonized in the US (and Europe) and China's pollution issues are so overwhelming that they need to get away from coal. The opportunities overseas seem better to me than in the US and the last time I felt this way was in 2008. Outside of Russia, Greece, SK pfd shares, uranium and maybe HK real estate companies; there doesn't appear to be very many cheap sectors. There certainly hasn't been an asset class that has blown up in a while (outside of Russia). A friend was telling me he thinks that drillers are expensive and stock prices will go lower. He said day rates are too high and when rates fall further, stock prices need to go lower.

BG, Are you looking for short ideas? Is that the reason for asking? I've had success with structural themes on the long side but can't say I've had success with this on the short side. That being said, maybe Class B or C types of malls? I'm still uncertain if everyone is going to be buying everything on Amazon in 5-10 years but when I drive past the strip malls, I do see a lot of vacant space. If the US was ever to become a investor based society as opposed to a consumer based society (God forbid), then I can see where the strip malls would get decimated.

Malone has done a great job in putting in place Maffei at Liberty Media and Mike Fries at Liberty Global. When Malone passes (which hopefully won't be for a while) both companies will be in fine shape with those two guys at the helm because I believe both will stay. I think Fries will have an easier time running Global than Maffei will have running Media as I view Media as more of a Malone vision. Malone has said that Maffei was the architect for acquiring Sirius. If he did that,, then he can do other great deals as well. That being said, Malone is The Maestro (no offense, Alan Greenspan) and can't lose a guy like Malone without missing a beat or two. I would say that I believe the transition post-Malone at Liberty will be easier than post-Buffett at Berkshire.

merkhet, I sent you a response. Please let me know if you don't receive it. Still new to this board and figuring out how things work. Best, AtlCDore

I would recommend Brent Gillett at Investment Law Group. http://www.investmentlawgroup.com/