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I'm sick of Whitney Tilson


mpauls
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His partner is a good guy...Glenn Tongue.  I don't think Whitney's a bad guy, just very good at marketing himself...perhaps too much, and it rubs people (me included) the wrong way.  Some of his past support for guys like Chanos, Herb Greenberg and Sam Antar also is a discredit to sane and ethical behavior, but I just notch that up to poor judgement of character.  The fact that he appears on CNBC more than Buffett doesn't help either.  The T2 Partner results are quite good though since inception.  Cheers!

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Three things annoy me about Whitney Tilson.

 

1. He seems to have repositioned himself as one of these people that foresaw the housing/credit market crash. Considering his two mutual funds tanked in 2009, I don't think he's in any position to be lecturing others about the subject.

2. He strikes me as another one of these people (and there are many) that think that Warren Buffett is simply infallible. Right before the construction market collapsed, he was touting USG (http://www.gurufocus.com/news.php?id=3752). Now I don't have a problem with someone making a bad call, but I do have a problem with people who simply tout stocks because Warren bought them.

3. He seems to be under the misapprehension that he's a value investor. There's a few stocks in his portfolio that definitely are value stocks (dELiAs*, etc.), but most of his stuff is anything but (nothing wrong with non-value stocks, I just don't think you should be talking about yourself as a value investor unless you have most of your investments in true value stocks).

 

I actually like Whitney Tilson anyway. Right or wrong, he puts himself out there and shares his ideas at least!

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Anyone who puts themselves out there, not everyone is going to like.  Everyone will experience someone differently.  Now someone can be responsible for another persons experience of them but that's a different conversation and one that I'm not sure I'd be able to explain anyway.  Regardless, Whitney puts himself out there, he says what's on his mind.  Some people find him great, some people it rubs off the wrong way, some people are neutral.  

 

He's a very committed individual who really is passionate about what he does.  He's very giving and always willing to help or contribute in anyway he can.  I know he's very involved not just in business but in all different walks of life.  I think he's an amazing human being.

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He's a nice guy and a great salesman. I met him a few years ago, and he was not snooty in any way (during our encounter), though i can see how he sometimes comes across that way. He usually presents his ideas with clarity and they make sense. Whether they play out or not is one matter, yet his thesis always makes sense, if his variables play out. He rightfully so gets a rep for riding the coattails of other well know investors, and I think this lack of originality is what rubs people the wrong way, given that he gets lots of media attention on borrowed ideas. It is okay to borrow ideas though in my book.

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Anyone know what his returns are like?

One of you say his returns are good since inception, another says that it tanked during 2009

 

The mutual funds tanked in 2008, but they've done very well in 2009.  The Dividend Fund run by Zeke Ashton has done better than the Focus Fund run by Whitney since inception. 

 

T2 Fund, the hedge fund, has done very well from inception...handily beating the S&P500 TR by a considerable margin...it operates as a hedge fund and shorts often, thus it did quite well during the turmoil in 2007 and 2008.  Cheers! 

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tanked in 2009? sure about that?

I'm only going by his mutual fund performance as linked to above, but that to me shows that he had no divinity what was coming in 2008/2009. Don't get me wrong, I'm not saying he's a bad investor. But I sure as hell wouldn't be writing a book about a crash that I didn't see coming!

 

I listened to a conference call for the Mutual funds.  He was pretty upfront about this. He said that it was horrible and embarrassing. They did know it was coming, they wrote about it and warned about it and bought fairfax, and yet they still got creamed.  He felt pretty bad about it, but that's what happens when all asset classes become correlated I suppose.  As Nasim Taleb would say, it's one thing to make a call and a very different thing to profit from it.  Ultimately though one year does not a record make, so I'd judge his investing prowess by his long term success.

 

Not offering an opinion one way or the other about Tilson, but at least he was upfront about this on the call.

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I'm only going by his mutual fund performance as linked to above, but that to me shows that he had no divinity what was coming in 2008/2009. Don't get me wrong, I'm not saying he's a bad investor. But I sure as hell wouldn't be writing a book about a crash that I didn't see coming!

 

I think quite a few people actually saw it coming.  Problem is that there is an institutional imperative that permeates the investment industry...you have to be fully invested at all times to beat the market long-term, otherwise you will miss the best days.  When an investment manager holds cash, they are criticized for that, so most managers hold very little cash.   

 

Hedges have frictional costs...so you benefit heavily if you are correct, or you suffer death by inches if you are incorrect over a long period of time.  Think about how long Fairfax had to be wrong about the coming correction, until they were proven right.  If the bubble had persisted for two-three more years, they would have lost the whole CDS investment and they would have looked very stupid, instead of brilliant. 

 

Unfortunately, it's alot of the other managers who looked stupid in 2008, as most could not predict exactly when the world was going to come to an end...not easy to do!  Even Francis suffered in 2008, and he knows how Hamblin-Watsa thinks better than anyone.  He was just too late getting approval to use credit default swaps in his funds, so he suffered like everyone else.  It's very easy to be critical of managers in hindsight.  I doubt too many people on this board would have survived intact if they did not hold Fairfax or subscribe to Prem's views.

 

As far as the book is concerned, it's kind of moot.  These days, who isn't writing a book?  It's absolutely insane in the publishing world.  I see young managers who haven't got the sense to run a fund writing books on how to invest!  Crazy!  You've got all these journalists who missed the bubble writing about what happened for millions of dollars.  Like they've got a clue...Joe Nocera comes to mind!  If I ever write a book, somebody please shoot me.  Cheers!       

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When you read carefully their recent annual report, it comes clear that it’s not written by true value investor; rather some kind of top down macro speculator with ever changing strategy.

 

I'm not defending Tilson, since I'm by no means a fan, but what exactly does this statement mean?  I always hear investors saying this, but what exactly are they trying to say.  Was Prem's CDS bet not a macro bet or speculation?  Was Buffett's derivatives investments in the S&P500 not a speculation?  What about Seth Klarman's cash position for the better part of a decade?  These are all bets on an expected outcome...there is no intrinsic value input involved! 

 

There is no such thing as a "true value investor"...since the whole idea of investing is to find something of value and watch it appreciate...then sell it and find something else of value.  How you find them and how you conduct yourself is a personal choice, and there are varied risks to all of them.  So I think the whole Bill Miller isn't a true value investor, or Pabrai, or Tilson, or whoever, is a silly juxtaposition many investors like to apply.  The endgame for all investors is to make money.  Cheers! 

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I believe the CDS bet was a value investment not a macro bet.  The rationale for purchase was that these instruments were the cheapest securities available at the time and had some call option characteristics which protected the downside.  As for Tilson, he has alright performance for his hedge fund given he can short.  His returns for T2 are as follows: 2005 - 4.2%, 2006 - 23.8%, 2007 - (5.3%) and 2008 - (24.1%).  The 2009 numbers are not out yet.  These beat the S&P 500 but are not in the league of Bruce Berkowitz or other well known value investors. 

 

Some of his picks are truly value based, like REXI, but other are speculative growth, like IRDM.  I was surprised in looking at IRDM how dependent upon future growth the investment really is (the return on any future satellite replacement cost is very low given the current level of cash flow and the only reason it appears cheap is that the satellites are at end of life and will require alot of maintenance cap-ex in the next few years) and there are other cheaper less growth dependent satellite firms like Asiasat and APT Satellite.

 

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Anyone wish to explain what justifies Whitney Tilson.  Particularly why people support his Value investing Congress, especially at $3,000 per head (discounted).  Ok, good speakers, but this guy really rubs me the wrong way. 

 

 

People go to the conferences mainly to see other people with similar interests.  Glenn manages their portfolio.  If we all had our mistakes  hanging out visibly for all to see, would we honestly look any better?

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Guest ValueCarl

Parsad writes:

 

<There is no such thing as a "true value investor"...since the whole idea of investing is to find something of value and watch it appreciate...then sell it and find something else of value.  How you find them and how you conduct yourself is a personal choice, and there are varied risks to all of them.  So I think the whole Bill Miller isn't a true value investor, or Pabrai, or Tilson, or whoever, is a silly juxtaposition many investors like to apply.  The endgame for all investors is to make money.  Cheers!>

 

 

How profound, how true, how open to introspection. Even in control positions, it's all a speculation subject to the whims and wants of mens' attention through their fickle desires much of the time. Be like water, my friends. Stay fluid and crystal clear. Try not to take yourself too seriously because life is fragile enough. At the same time, hold your ground amongst and against scoundrels. There are too many of them inside the investment landscape. 

 

As for Whitney, I've witnessed him ask soft ball questions in order to be perceived in his mind more favorably, by Berkshire's Vice Chairman and less suspecting audience participants on two occasions, it seemed. Considering the character of that Vice Chairman, I'll bet he might have enjoyed, even encouraged the much younger Whitney to play some hard ball instead!   

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Sanjeev said it right. I would say even Munger would agree with that. In the almanac and elsewhere, he has said many times that there is nothing wrong in investing in something like google if you can handicap the odds. You invest if the odds are in your favor.

 

As the line goes - "people in glass houses don't throw stones", Whitney Tilson serves a market that exists. He has shared many of Munger's lectures and transcribed them for free in the internet. I learned more by reading those lectures than I did reading the snowball. There were some interesting points in the snowball but I paid for it.

 

cheers!

Shalab

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Do you lose your principal if the position doesn’t plays out that way, how you thought?

If answer is:

      a)  Yes, then you are speculating.

 

      b)  No, this could be something what would called “investing” 

 

If you believe this, I think you fundamentally misunderstand value investing. Value investing (as taught by Graham, Buffett, Klarman, et at) is protecting your portfolio by purchasing assets (individually or in aggregate) with a margin of safety. Margin of safety = gap between price & value or any other method that reduces uncertainty. The true value of an asset is the expected value under many different scenarios. In other words, even if something can be worth zero, it still can be a value investment. From "Security Analysis":

 

"An investment operation is one which, upon thorough analysis, promises safety of principal and a satisfactory return. Operations not meeting these requirements are speculative."

 

If one put their entire portfolio in a security that may go to zero if you're wrong, then yes, that would be speculative. Graham goes on to say, "We speak of an investment operation rather than an issue or a purchase, for several reasons." What does "safety" mean?

 

"The safety sought in investment is not absolute or complete; the word means, rather, protection against loss under all normals or reasonably likely conditions or variations." ... "Furthermore, an investment might be justified in a group of issues, which would not be sufficiently safe if made in any one of them singly."

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I think the CDS in isolation is a speculation to you and me but in the context of FFH's total portfolio it was a value investment to them.  The degree of speculation is dependent upon the price paid.  The price FFH paid made the speculation at a different price more of an investment.  I think Graham points this out in the Intelligent Investor that the price paid is what makes a security an investment or a speculation.  In essence, FFH was purchasing for very little money long-term put options on bonds of firms they knew had questionable underwriting policies.  They knew that these firms were going to blow up the primary risk was when and by purchasing long-term puts from sellers who were motivated they mitigated some of their risk.  Since this was in their circle of competence to them it appeared more like an investment but to others it may appear a speculation because it is outside our circle of competence.

 

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I think the CDS in isolation is a speculation to you and me but in the context of FFH's total portfolio it was a value investment to them.  The degree of speculation is dependent upon the price paid.  The price FFH paid made the speculation at a different price more of an investment.  I think Graham points this out in the Intelligent Investor that the price paid is what makes a security an investment or a speculation.  In essence, FFH was purchasing for very little money long-term put options on bonds of firms they knew had questionable underwriting policies.  They knew that these firms were going to blow up the primary risk was when and by purchasing long-term puts from sellers who were motivated they mitigated some of their risk.  Since this was in their circle of competence to them it appeared more like an investment but to others it may appear a speculation because it is outside our circle of competence.

 

Nope, the CDS was a speculative bet...pure and simple.  It was a smart bet, because the swaps were priced cheaply, but there was a definite time arbitrage involved and that makes it speculative.  Ironically, their investments in Canwest and Torstar were deep-discount, margin of safety investments...what most "value investors" would call "Ben Graham investments"...yet there remains the likely possibility of full impairment of capital. 

 

Every investment we make is a speculation to a certain degree.  What Graham tries to point out is that we want the odds in our favor on every bet...increasing our long-term batting average on these investments.  Whether it is Prem, Buffett, Graham or Seth Klarman...they are handicapping...we are all handicapping with our investments.  Cheers!   

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This is interesting that you pointed out. I see huge cash balance as true manifestation or sign that you are absolute value investor.  You are putting your cash on work only when investments presented a compelling opportunity and you are able to archieve margin of safety. If this is true, you are not charlatan who is playing on market just to keep up with the crowd.

 

Well I agree with this sentiment, since it is exactly what we do.  We have more cash in our funds today than at any time since inception.  By your definition, we would qualify as a "true value investor".  I just don't think that definition actually exists or is applicable, since all investors should be looking for values.  Whether you are successful at it or not is another matter entirely.  Cheers!

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FFH's CDS purchases were brilliant -- not because they worked out well, but for the reason that they greatly increased their margin of safety while they were in place , purchased at bargain prices, offering protection to  some degree from possible stress on their counterparties and offering huge, leveraged protection from a credit bubble related market meltdown.

 

I don't think the members of this board realize how dicey things were for FFH only a few years ago: massive    reserve increases, a horrible series of hurricanes, SEC investigation, a massive short attack.  A market meltdown that zapped their portfolio or serious counterparty default after another Katrina size storm could have been fatal without substantial downside protection.  Their choice of using very cheap CDS killed two birds with one stone : protection against a potentially fatal loss of capital and a very levered upside once the credit bubble eventually popped. :)

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I think a way to look at speculation is a negative expected or at most a break even expected value for an idea or in a situation where you cannot determine the odds.  I think it useful to think of this factor as a spectrum from an investment (high odds of success) to a speculation (either low odds of success or not determinable odds of success).  With this framework to one person a security could an speculation (CDS to most of us) or an investment (to FFH).

 

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Guest ValueCarl

Wiser and wiser this Parsad bets, and the more he applies such principles, the smarter at speculating he gets.

 

Speculating is not for the faint of heart, it requires the right temperament along with being well capitalized to endure the inevitable hiccups which book makers or handicappers will always experience. The key remains managing the odds. No man, woman or child wins all of the time, not even Buffett! Sometimes even he loses his marbles!

 

In the final analysis, since this game is all about money, ain't a damn thing funny, best to entrust ones hard earned capital with proven, more gifted, more seasoned and veteran handicappers, these book makers who know how to manage the odds.

 

Successful speculating is a life long journey requiring more skill, intellect, losses, and God given, raw talent, than professional book makers would like to admit. You see, to a great extent, a man's losses are his greatest gifts.

 

From there, he gains more knowledge, wisdom and understanding, ultimately leading to more compounding if he managed his odds correctly and didn't blow up.           

 

<Every investment we make is a speculation to a certain degree.  What Graham tries to point out is that we want the odds in our favor on every bet...increasing our long-term batting average on these investments.  Whether it is Prem, Buffett, Graham or Seth Klarman...they are handicapping...we are all handicapping with our investments.  Cheers!>   

 

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