Tim Eriksen

Should returns be shown gross of fees or net? As an investor we care about net, but in terms of evaluating the manager, his skill is best represented in gross returns. For example a mutual fund manager with a 12% net AAR is not actually better than a hedge fund manager with 11% AAR that has standard 2 and 20. Or someone with the Buffett partnership averaging 9% is really only 10% gross while someone with 2 and 20 reporting 9% net AAR is really at about 13% AAR gross.

His performance wasn't even very good from 2001 to 2005 when value investors made a killing. Glad I have never wasted time following him.

Old economy was cheap and tech/telecom was ridiculously overpriced. Many old economy stocks had near single digit PE ratios while tech and telecom were 50+ if they were profitable. Many hedge funds did well on both the long and short side, and due to the overall market being weak did well with low net exposure. Today, despite what you hear about FANG and big stocks pushing the indexes higher, prices are higher across the board.

Here are the other years. Year Whitney Tilson's Funds Performance S&P 500 Performance 1999 31.0% 21.0% 2000 -4.5% -9.1% 2001 16.5% -11.9% 2002 -22.2% -22.1% 2003 35.1% 28.6% 2004 20.6% 10.9% 2005 2.6% 4.9% 2006 25.2% 15.8% 2007 -3.2% 5.5% 2008 -18.1% -37.0% 2009 37.1% 26.5%

The other problem, although it is related to shorting, is that it is ridiculous to think you can outperform the index with only 40 to 60% net exposure. Too many funds that succeeded in 2001-2005 failed to understand what an unusual market that was.

my sentiments exactly

The SEC says you cannot receive incentive compensation from anyone who is not a qualified investor. I don't think there is any loophole around that.

It is not referring to ownership, but to share of gains. Completely different.

You are confusing the current P/B with the market's valuation. The market is not saying the company is and will continue to be worth 100x P/B, nor that the high ROE will continue. The market is saying based on a DCF that the company is worth $100, which happens to be 100x P/B. Thus a year from now if everything went as the market predicted the stock would rise by approximately the discount rate. While I don't fully ascribe to the Efficient Market Hypothesis, it is helpful in that whether a stock is valued or high low, it should, if the theory were true, result in the same return a year from now (adjusted for risk) because all information, including a high ROE, is priced in. If the assumption you were making regarding valuation were true, growth would massively outperform value, which it doesn't. The reason is that the growth is priced in, so there is not an excess return. What value investors will argue is that more often than not, more growth than what is likely to occur is already priced in, and for value stocks, that less growth than what will happen is priced in.

The article made no sense to me. It started off talking about fractional reserve banking and then focused that deposits to loans should be equal. That is like talking about apples and then oranges.

Am I the only one who thinks this is an idiotic analysis? It is playing on fears instead of credible analysis. In 2000 certain industries were absurdly high (internet, telecom, and some other mega caps) so the indexes were overvalued but that had nothing to do with the median stock valuation. There were hundreds of dirt cheap "old economy" stocks in 2000. 2007 was different but the crash was not about over valuation but a largely unforeseen housing crash that damaged everything else.

I don't put much weight into the argument about mean reversion. The make up of the economy, and stock market in particular, is shifting. We have moved from primarily industrials (capital intensive) in the 20th century to things like software (non capital intensive). We are also further along in regards to financial wisdom in terms of returns on capital. Obviously profit margins can only go so high, and economic theory tells us high profits bring in competition, but there is no reason they must revert to the historical mean either. They could remain a bit higher.

Yep and probably add to that other costs to be public - board of directors fees and travel, D&O insurance, audit costs, legal costs, SEC filing costs if you are subject, annual meeting costs, transfer agent costs, franchise taxes, more expensive CFO, plus management time and effort.

Wished you had followed your own advice and re-read the exchange. Here is what he wrote. Do you see what I mean? Probably not inside that right wing bubble of denialism. Nope. It says the moment anyone initiates violence you lose the right to civility and the aggrieved party can defend themselves. I think you misunderstand who the "you" is. I'm out.

My politics is somewhere in the middle so I could care less for left or right. I was merely stating my opinion about this alt-right scumbag. And this idiot pitched in accusing me of inciting violence(which I clearly didn't) and threatening violence in the same line. I see this alt-right trash as no different than a radical Islamic preacher which right wingers like you accused Obama of catering to. We have already seen the results of this hate speech in Canada. You know it appears you went ballistic because you did not understand what was written. Please go back and re-read the exchange without the emotions. I am pretty sure this quote was sarcasm: "I don't agree with what you say, but I will fight to the death to protect your right to say it shut you up" He took what true believers in freedom of speech often quote and believe and rephrased it based on how the protestors were acting to show that the protestors don't actually believe in freedom of speech. And he did not threaten violence, he said those who are attacked have a right to defend themselves. You do realize that your merely stated opinion sounds striking similar to the kind of hate speech you condemn a few sentences later? Probably not.

Civility should only be shown to a reasonable decent person. Scumbags like this guy should be treated with contempt and disgust. This is the bottom of the barrel trash who is not fit to speak in a street corner let alone at an institution of higher learning.Civilized societies always set up certain standards of decency. BTW this piece of crap isn't even a US citizen. He is some greek trash imported from Britain. Why can't he be thrown out of this country? I really want to know what kind of visa this lowlife is on. This is a big part of what is wrong in our country. When people on either end of the political spectrum come to this conclusion. Sad.

What?? 2000 was not even referenced in the post. The post started with Bush in office. If you don't think the weaker economy in the rust belt had any effect then you need to do more reading. It doesn't take a national issue like 2008. Regional can matter too. Against my better judgement, I am going to try to shift this political discussion to something that is more relevant to investing. Tim, I have seen some of your investing commentary and I respect that you are thoughtful in that regard. I have also seen some of your political commentary and would say that I am generally in disagreement with respect to Trump. To be clear, I am certainly no "Liberal" as it pertains to economic policy. Given that I haven't read everything you have written on all things Trump, I am going to make some assumptions here about your support for his economic agenda generally and as it pertains to trade. If I am wrong about this, I apologize. That being said, I am curious as to why you think the Trump economic policies that we can make reasonable predictions about at this point are going to actually help, rather than hurt, the rust belt areas. Specifically, I think it is pretty clear at this point that there will be some sort of anti-free trade legislation passed in some form. Given the EOs so far, the Trump trade rhetoric during the campaign, and the commentary from Navarro, I believe that is a near certainty that either (1) the corporate tax reform bill will include some sort of border adjustment tax or other measure that will be a de facto tariff on imports or (2) direct tariffs or border taxes (the same thing) will be implemented against China, Mexico, etc. I am in agreement that things like lower tax rates (individual and corporate) and deregulatory measures will be of some help to the rust belt areas. However, it seems to me that there is a very high likelihood that border adjustment taxes or tariffs are going to ultimately be a net negative. I am EXTREMELY skeptical that such anti-free trade measures will ultimately result in any significant increases in jobs for low skilled labor and that the nearly certain rise in consumer prices will be a net negative for these individuals. Further, the second order effects from ad hoc economic policy (e.g. border tax on Mexico to pay for the wall) are very likely in my view to have very negative unintended consequences. So, I am just curious if you have any specific empirical data that would support the notion that a border adjustment tax or some similar measure will yield a significant net positive benefit to low skilled labor in the rust belt. I don't and I don't even know if that will be the end result. Brief summary of my views: 1. Republican policies (social and economic) are generally closer to my views. I am Sasse or Rubio Republican although I dislike NeoCon interventionism (I am a realist not idealist in terms of foreign policy). 2. I don't like Trump at all in terms of demeanor and how he treats others. Would have preferred Rubio or Kasich. 3. I felt voting third party wasn't meaningful and voted for Trump in spite of how much I dislike him because his policies in general were closer to mine than Hillary's. Hillary's ethics sucked too. 4. I have always been pro free trade and still am although I am seeing some softening in my view. I still reject Buffett's alarmism on a negative trade balance. 5. I support the President using his bully pulpit to keep companies in the US. Trump has done well on this so far. Inversions need to be stopped. 6. In general the US under both parties has been soft in most deals. They need to push harder for what is in our interest. That inversions were legal reflects this let alone trade deals or deals with Iran. 7. I don't support tariffs. The preferred solution is in taxation - if the profits are made in the US then taxes should be paid here. Even then, this is a complex issue - e.g. Where should Apple be taxed (corporate HQ, where they manufacture, where they sell ?? certainly not some little country where they transfer IP rights to for a below market price). 8. Lower corporate taxes will help keep companies in the US improving employment and economic growth. 9. I am not anti immigrant but I believe our immigration policies hurt the poor and even middle class with by keeping wages down. For years I was probably against most minimum wage laws based on Thomas Sowell's arguments. I am moving away from that view based on a better understanding of what I believe my responsibilities are as a person of faith. 9. Sensible regulations should be in place but we have way too many and agencies are going beyond their authority. Reducing regulations will not harm our air or water (nobody wants that) and can be done, which will help economic growth. Thus even though there are aspects of Trump's economic policies that I do not favor I think on the whole it will be better for overall growth and for blue collar Rust belt workers. He may screw that up but I hope not.

What?? 2000 was not even referenced in the post. The post started with Bush in office. If you don't think the weaker economy in the rust belt had any effect then you need to do more reading. It doesn't take a national issue like 2008. Regional can matter too.

Your ignorance of US politics is astounding. Sure there is a pendelum aspect with "cycles" of 8-12 years since Carter, but you would have been way closer to quote Carville "it's the economy stupid" as the reasons for each swing.

Do you have legal training? I took a Con Law class many years ago and your application of original intent is ridiculously far off. Original intent refers to the intent (or meaning) of the law when drafted. It has nothing to do with the intent of the person doing the act today. Trump's reasoning is not relevant. There is law (Sec. 1182) that gives the President the authority to do what he did. Sure the Courts may determine that the law is in conflict with the Immigration Act of 1965, or may not. But it would be improper for them to try to ascertain why the President did what he did.

I don't think we are discussing with reason and intelligence anymore. I don't think you ever were

How many people were hurt, had their rights infringed, or were killed in 2015 or 2016 by these illegals? Compare that number to how many were hurt, had their rights infringed, or were killed in 2015 or 2016 by guns? Restricting illegals or firearms...which would have more impact on the safety, livelihood and freedoms of Americans? I'm also guessing restrictions on firearms would be far cheaper than the $25B that is going to be spent on a wall! Cheers! Chicago and DC heavily restrict firearms. How is that working out?

I'm no fan of China and I agree with much of what you say, but the US is not much better in a lot of ways. Why do we have ships over there? Does China have carrier groups in the Gulf of Mexico? Would that be OK with us? It is the US that projects power all over the world's oceans like no other country on Earth. There is a huge difference between having a presence to keep international waters open and to protect other countries than trying to claim them and control them. If the US did not have a presence, it is almost certain that China would move aggressively toward its neighbors.

what censorship? A former employee at a national park posted things that the national park later removed. I have seen no evidence that the Trump administration was involved. Trump implemented a temporary gag order at the EPA. Like it or not he is now the one who directs the EPA. He is going to make significant changes that as part of the executive branch they are to comply with, assuming the changes are legal. It seems clear to many that the EPA went far beyond their authority. Trump wants to reverse that. Did you complain about "censorship" when Obama said climate change is settled and any skeptics were treated harshly?

Yes, the US would never threaten a state with force if it wanted to become independent. That would never happen/has never happened. Lol - that pretty much describes our foreign policy strategy... Please notice he cut off the first part of the quote making the comment about Taiwan when it was about what preceded it. By the way Taiwan is independent. It is not about becoming independent. China wants to absorb them. One China policy is the dumbest policy and it is embarrassing that administrations in both parties have supported it.