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Gray Fox

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Everything posted by Gray Fox

  1. Utilities get bond like multiples, respond to changes in rates just like bonds, etc. Look at what happens to XLU when the 10 yr jumps. Buffett is doing so much with utilities/green energy because he gets the tax credits, long term contracts, and a venue to deploy tens of billions of dollars at close to a double digit IRR. The report was thorough. No real idea why they decided to initiate. WB has always loved Dimon and owns JPM personally. WFC has come under a lot of fire, maybe JPM wants to be Warren's new favorite. They probably feel a little left out given BRK is the largest shareholder of WFC/BAC and top 5 for USB/GS
  2. I had an economics professor explain leverage in a great way. "Leverage is like the dark side of the force, it is very powerful but ultimately leads to fear and failure." Unless you're the Emperor, then it makes you rule the galaxy (ie John Malone).
  3. VOYA: 26% BRK: 16% GOOGL: 8% ADS: 7% MCO: 7% KR: 5.8% SAVE: 5.7% CABO: 4.2% DVA: 2.9% ST: 2.9% Short CMG and KO and have a roughly 10% special situation bucket
  4. The SPTR index is up 14.1% annualized from 12/31/2009 - 12/31/2015. Appaloosa I'm guessing is 20%+ over the time frame.
  5. I apologize for furthering the tangent away from JOE, but here is an example of L/S vs. a concentrated best ideas type fund. SEQUX has a 40 year track record, a great research staff, and puts money into the very best ideas. They get a 1% flat fee. This is one of the most respected research-intensive funds in the world. RCG has AUM roughly 3x Sequoia and I don't know what they fee on their SMA business (or even if its long only), so caveat emptor. Contrast this with all of the Tiger funds that run high gross, low-medium net exposure funds that get 2/20. Mandel, Halvorsen, Ainslie etc are all billionaires because they add alpha on the long and the short side.
  6. I'd like to see that math. Making 20% a year it would take you 52 years to turn 100,000 into a billion. Making 8% a year it would take 121 year or so. Good luck! -you aren't including the returns from a long book. Very few hedge funds run with less than 100% gross (i.e. a short position does not crowd out a long position). So the rate of compounding would be much higher. build a spreadsheet. for any given time period, take the s&p, put in 100% long exposure and then add a 50% short book that makes 8% / year (you would obviously need to make it have some sort of negative correlation to the s&p to approach reality, but making 8% a year from shorting is certainly not anywhere close to recent reality so this is kind of a useless hypothetical). rebalance to 100% by 50% monthly quarterly, whatever. the compounding will be very high and it will have lower drawdowns and vol, the track record would be great. -you aren't including management fees and incentive fees, 8% / year from a decently diversified and scalable short book would make my fund incredibly attractive as a high return, high alpha strategy. If I couldn't raise money from institutions, I'd walk into Izzy Englander or Steve Cohen's office and be running a big book in no time. -you're starting value is too low ;D If you can make 8% a year shorting over the next 20 years, you'll be billionaire too. But it's not happening. That's really really really really hard. What was Einhorn's short book return from 2000 to 2015? That's not quite 20 years, but would you not say pretty close to 20 years. But Einhorn's already a billionaire, so he doesn't need 8% a year. When you build an investment portfolio, you shouldn't be thinking about 15 decent long positions and 6-7 decent short positions, so that you can avoid drawdowns while maximizing exposure in the porftolio. That along with the liberal use of the word "alpha" is modern portfolio bullshit! You should be looking for 8-10 of your absolutely best ideas...or less...and it shouldn't matter whether they are long or short. That being said, remember that the downside to shorting is unlimited, while the upside is limited. A great long position will always make you more money than a great short position. If your primary concern when running a fund is drawdowns, then you probably should not be running a fund. The primary concern should always be finding the best ideas you can and maximizing results for your partners with the least amount of permanent capital loss. Cheers! Running an institutional long/short fund is very different than running a concentrated investment partnership. Institutional money doesn't like volatility. Institutional money pays 1.5/20 for a return that is largely uncorrelated to the market. Whether or not that is the right way to do things is debatable, but it is reality. I personally believe that having a concentrated portfolio of 8-10 high conviction ideas is the best way to generate high absolute returns. I don't have to allocate billions for an endowment or pension fund to different managers though. Most of the time big multi-manager shops require their PMs to run market neutral. P72/Millenium/Citadel/etc have gross exposure that is multiples of of their actual capital. If you run a $500mm book for them you are getting 20% of the PnL which sounds amazing, but all of the PnL has to be generated on a spread between a long and a short book. And the characteristics of the short book have to be relatively similar to your long book. You can't be long a bunch of hospitals and short a bunch of oil stocks. A short book that can do 8% absolute annualized returns in a normalized equity environment (6-8% returns) would be absolutely incredible. Zero alpha on the long side would still result in a 15 percentage point difference in longs vs. shorts. A market neutral fund with these characteristics would be a star in house at any big multi-manager or could go raise a lot of money on its own. It absolutely would be a solid ticket to being a billionaire. It may not be the best way to generate the highest overall returns, but people will pay out the wazoo for that kind of short book. If you go to an allocator and say "I run a concentrated value with a catalyst fund that looks for special situations" there are hundreds, if not thousands of other alternatives. If you can tell an allocator "I'm market neutral and have a 5 year track record of 15% returns" the money will break down your door.
  7. Ummm what about the taxes on those operating earnings? That takes the 26.5bn down to 20.5bn. I think BRK is cheapish at these levels but 15.8x is different than 12.2x
  8. Wow, the Bill Miller part was kind of depressing. Gets divorced, wife takes half his money, his funds blow up, loses 80%+ of his remaining money, puts on 40 pounds eating cheeseburgers and Chinese.
  9. How many people would call their cable provider or switch if they lost Comedy Central/BET/Nickoldeon/MTV? What percent of advertising dollars will continue to flock to internet/mobile vs. television? How much does Colbert leaving hurt Comedy Central? What has been the last big VIAB original content hit since Spongebob? The distribution channels are consolidating, how does VIAB negotiate without sports or a premium channel? I wanted to love VIAB given the 8% annualized share repuchases and dividends. Cash to shareholders > FCF > NI. Todd/Ted own it. All of that being said I just couldn't get comfortable with the questions above. I think revenue is probably materially lower in five years and if they can't hold a flat topline there won't be multiple expansion.
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