Tidbits

[Sweet]

18 hours ago, ValueArb said:

https://www.bloomberg.com/news/articles/2023-11-02/billionaire-targeted-by-hindenburg-emerges-more-rich-and-unbowed

 

 

Object lesson how you don't target a company with a tiny float for a short. Turlov "only" owned 71% of Freedom, but when the stock price dropped after Hindenburg's report it looks like a bunch of friendly clients bought in to create a short squeeze.  It doesn't say he orchestrated it, but one could assume...

Lol, payback.

[ValueArb]

2 hours ago, Sweet said:

Lol, payback.

I’m a big believer in short sellers because they make the market much more liquid and efficient and reduce fraud. But this is yet another example of why I never do it. 
 

Everyone knows the risk/reward equation is flipped for short sellers, unlevered long positions have infinite upside with capped downsides while unlevered short positions have caped upsides with unlimited downsides. And then you have to pay borrow fees instead making dividends while waiting for the market to agree with you, That’s bad enough. But you can be 100% right about a position being massively overvalued but you also better be sure the float is big enough, and that short coverage doesn’t get too large or you will get squeezed into a massive loss.

 

A great short may be easier to identify than a great long, but it’s absolutely torture until it pays off. While a great growing business just keeps compounding while you sleep and even if Mr market disagrees with you for a while you have increasing profits/net asset value and dividends keeping you warm. 

[Spekulatius]

The risk management part of shorting makes it unsuitable for most investors, imo.

[Sweet]

Thread on some interesting REITs

 

[UK]

20 hours ago, Sweet said:

Lol, payback.

 

Hindenburg’s biggest oversight, according to Turlov, was in “underestimating our shareholder structure and the level of trust our clients have in us.”

 

Does this mean he does not dispute other accusations by Hindenburg:)?

[Spekulatius]

6 hours ago, Sweet said:

Thread on some interesting REITs

 

I know these mortgage rates can work, but to me, it almost seems like picking up pennies in front of a steamroller.

[Sweet]

7 hours ago, Spekulatius said:

I know these mortgage rates can work, but to me, it almost seems like picking up pennies in front of a steamroller.

I think there is going to be a decent opportunity here at some point, and I would like to own some REITs, just don’t understand the area well enough yet to make an informed decision.

[ValueArb]

from matt Levine. Looks like the sign of a top.   PIK loans

Elsewhere in private credit products that work best with long-term locked-up capital, PIK is back:

Private equity titans are dusting off an old gambit to cope with the rising cost of interest on their leveraged buyout loans: Don’t pay cash.

Instead, they’re making payments with more debt, preserving liquidity for now with the promise of a bigger payoff later when the debts mature. Those “payment-in-kind” loans don’t always come cheap — the annual interest runs as high as 16% — but lenders and borrowers are wagering that they’ll refinance when rates come down long before the due date.

[Sweet]

Will have to go through some of these names:

Many I don’t recognise

[LC]

I guess Berkshire didn't make the cut (nor Fairfax). 

Sanjeev- time to rename this website  

[ValueArb]

Matt Levine: Rob Copeland’s book about Bridgewater, The Fund, is out today, and oh man does it have a point of view! Copeland’s thesis is essentially that the “radical transparency” stuff is fake and Bridgewater is a pure cult of personality around Dalio, that all of the scorecards and iPad apps were just overcomplicated ways to measure who agreed with Dalio the most. (They have been scaled back a bit since Dalio stepped down.) In the introduction, Copeland tells the story of Paul McDowell, who built a Bridgewater app for ranking employee “believability”:

He asked top employees to rank one another on the notion of who was most trusted to make decisions in a given subject matter, starting from the top. The system began to work a bit dynamically. If a slew of Bridgewater executives gave an underling overall positive believability ratings, the subordinate’s own opinion would begin to carry more weight. McDowell began to see how believability could be a way to identify talent across the hedge fund.

But Dalio objected:

One of his subordinates had just flagged for him a suspicious finding: two people inside Bridgewater — one in investment research, the other a lowly information technology grunt — had higher believability scores than Dalio himself. People were beginning to whisper about it.

McDowell explained to Dalio that this was a sign the system was working, that Bridgewater was fishing out pockets of talent in its ranks — exactly as Dalio had asked him to do.

Dalio’s voice made no secret of his irritation. Why doesn’t believability cascade from me?

And so McDowell “assigned an underling to go into the software and program a new rule”1:

Dalio himself would be the new baseline for believability in virtually all important categories. As the original, top-most believable person at Bridgewater, Dalio’s rating was now numerically bulletproof to negative feedback.

The book is full of stuff like this: Dalio would call a big meeting, some underling would say something to the effect of “buddy this is a cult and the Principles are nonsense,” Dalio would turn to other underlings and say “do you agree,” the other underlings would say “oh no boss definitely not” in unison, and the objector would get shamed and fired. (One of these stories is excerpted in New York magazine today. And Vanity Fair has an excerpt about some of Bridgewater’s show trials, conducted by James Comey.) A system of radical transparency in the service of making the boss feel good.

Copeland also reports that this applied to investing decisions. From an excerpt that ran in the New York Times this weekend:

With the hope of turning around the firm’s investment performance, members of the Circle of Trust put together a study of Mr. Dalio’s trades. They trawled deep into the Bridgewater archives for a history of Mr. Dalio’s individual investment ideas. The team ran the numbers once, then again, and again. The data had to be perfect. Then they sat down with Mr. Dalio, according to current and former employees who were present. (Lawyers for Mr. Dalio and Bridgewater said that no study was commissioned of Mr. Dalio’s trades and that no meeting took place to discuss them.)

One young employee, hands shaking, handed over the results: The study showed that Mr. Dalio had been wrong as much as he had been right.

Trading on his ideas lately was often akin to a coin flip.

The group sat quietly, nervously waiting for the Bridgewater founder’s response.

Mr. Dalio picked up the piece of paper, crumpled it into a ball and tossed it.

Edited November 7, 2023 by ValueArb

[Sweet]

2 hours ago, LC said:

I guess Berkshire didn't make the cut (nor Fairfax). 

Sanjeev- time to rename this website  

Yeh wonder why they aren’t there?  Perhaps because they are conglomerates, or known as investment companies.

[Sweet]

56 minutes ago, ValueArb said:

Matt Levine: Rob Copeland’s book about Bridgewater, The Fund, is out today, and oh man does it have a point of view! Copeland’s thesis is essentially that the “radical transparency” stuff is fake and Bridgewater is a pure cult of personality around Dalio, that all of the scorecards and iPad apps were just overcomplicated ways to measure who agreed with Dalio the most. (They have been scaled back a bit since Dalio stepped down.) In the introduction, Copeland tells the story of Paul McDowell, who built a Bridgewater app for ranking employee “believability”:

He asked top employees to rank one another on the notion of who was most trusted to make decisions in a given subject matter, starting from the top. The system began to work a bit dynamically. If a slew of Bridgewater executives gave an underling overall positive believability ratings, the subordinate’s own opinion would begin to carry more weight. McDowell began to see how believability could be a way to identify talent across the hedge fund.

But Dalio objected:

One of his subordinates had just flagged for him a suspicious finding: two people inside Bridgewater — one in investment research, the other a lowly information technology grunt — had higher believability scores than Dalio himself. People were beginning to whisper about it.

McDowell explained to Dalio that this was a sign the system was working, that Bridgewater was fishing out pockets of talent in its ranks — exactly as Dalio had asked him to do.

Dalio’s voice made no secret of his irritation. Why doesn’t believability cascade from me?

And so McDowell “assigned an underling to go into the software and program a new rule”1:

Dalio himself would be the new baseline for believability in virtually all important categories. As the original, top-most believable person at Bridgewater, Dalio’s rating was now numerically bulletproof to negative feedback.

The book is full of stuff like this: Dalio would call a big meeting, some underling would say something to the effect of “buddy this is a cult and the Principles are nonsense,” Dalio would turn to other underlings and say “do you agree,” the other underlings would say “oh no boss definitely not” in unison, and the objector would get shamed and fired. (One of these stories is excerpted in New York magazine today. And Vanity Fair has an excerpt about some of Bridgewater’s show trials, conducted by James Comey.) A system of radical transparency in the service of making the boss feel good.

Copeland also reports that this applied to investing decisions. From an excerpt that ran in the New York Times this weekend:

With the hope of turning around the firm’s investment performance, members of the Circle of Trust put together a study of Mr. Dalio’s trades. They trawled deep into the Bridgewater archives for a history of Mr. Dalio’s individual investment ideas. The team ran the numbers once, then again, and again. The data had to be perfect. Then they sat down with Mr. Dalio, according to current and former employees who were present. (Lawyers for Mr. Dalio and Bridgewater said that no study was commissioned of Mr. Dalio’s trades and that no meeting took place to discuss them.)

One young employee, hands shaking, handed over the results: The study showed that Mr. Dalio had been wrong as much as he had been right.

Trading on his ideas lately was often akin to a coin flip.

The group sat quietly, nervously waiting for the Bridgewater founder’s response.

Mr. Dalio picked up the piece of paper, crumpled it into a ball and tossed it.

No idea if any of this is true, wouldn’t surprise me, but I do think he is full of shit.

[Ulti]

https://www.latimes.com/business/story/2023-11-07/gary-winnick-global-crossing-founder-and-once-la-s-richest-man-dies-at-76
 

Those were the days…. And I was an investor 

[ValueArb]

More on Ray Dalio from Matt Levine/Bloomberg. 

 

Quote

A reader who used to work at Bridgewater emailed that these points are more related than I thought:

You wrote that “the computer's main problem is keeping the 1,500 human employees busy so that they don’t interfere with its perfect rationality.” You missed that the story right above that comment – confronting Ray about his trading performance – was a rather elegant attempt at doing just that. ...

Of course Bridgewater is systematic – not “quant” in the Rennaissance Technologies sense, but systematic in the sense of “trades are determined by computers running complicated calculations across a thousand different rulesets.”

95% of the trades are made by the system. But also of course Ray could do whatever he wanted to, he owned the place (at the time). The analysis Copeland heard about had nothing to do with Ray’s pure ability as a trader – they were looking at the times that Ray overruled the computer. The point wasn’t “Ray is a bad investor,” it was “Ray shouldn’t overrule the computer.”

The computer called Dalio’s underlings into its little computer office and was like “oh boy do I have a task for you, you have to tell that Dalio guy to stop messing with my trades.” And they were like “thank you, computer, this is an incredible opportunity for radical transparency and ideas meritocracy,” I guess.

 

[Spekulatius]

Full disclosure

https://www.wsj.com/tech/cybersecurity/a-ransomware-gang-wanted-its-victim-to-pay-up-so-it-went-to-the-sec-803cf786?mod=tech_lead_story

[Saluki]

There's a company I have a small position in that has a lot of cash on the balance sheet.  When I spoke to the IR person he said that they don't have any specific plans for it, but he didn't think that they would ever issue a dividend.  When I looked on Yahoo Finance today, I saw this and I think he's right about that: 

 

Ex-Dividend Date Dec 4, 1989

[ValueArb]

34 years ago? Sounds like they are due for a new one!

[rkbabang]

Netflix gives this guy millions to produce a series and he loses it trading options with it.  Oops.

 

The Strange $55 Million Saga of a Netflix Series You’ll Never See

https://www.nytimes.com/2023/11/22/business/carl-rinsch-netflix-conquest.html

 

or ( https://archive.ph/uZMPN#selection-1037.145-1041.197 )

 

"Mr. Rinsch transferred $10.5 million of the $11 million to his personal brokerage account at Charles Schwab and, using options, placed risky bets on the stock market, according to copies of his bank and brokerage statements included in the divorce case. One of his wagers was that shares of the biotech firm Gilead Sciences, which had announced that it was testing an antiviral drug on Covid patients, would soar. Another was that the S&P 500 index, which had already declined more than 30 percent, would fall further. Mr. Rinsch lost $5.9 million in a matter of weeks."

 

 

[Sweet]

This should probably go into the cannibals thread but what the heck:

 

 

Too performers by share price appreciation in 10 years 

No 1 - Murphy USA

No 2 - Avis

No 3 - Dillards

No 4 - RH

No 5 - Autonation

No 6 - Allison transmission 

No 7 - Voya financial

No 8 - eBay

No 9 - Jack in a box

No 10 - DaVita

 

Only the top few outperforming the SP-500 sadly.

 

Edited November 24, 2023 by Sweet

[Spekulatius]

16 minutes ago, Sweet said:

This should probably go into the cannibals thread but what the heck:

 

 

Too performers by share price appreciation in 10 years 

No 1 - Murphy USA

No 2 - Avis

No 3 - Dillards

No 4 - RH

No 5 - Autonation

No 6 - Allison transmission 

No 7 - Voya financial

No 8 - eBay

No 9 - Jack in a box

No 10 - DaVita

 

Only the top few outperforming the SP-500 sadly.

 

From the above $JACK looks interesting when I looked at them recently. I had no idea before checking them out that they were buying back that much shares. I found them when I ran variations of my cannibal screen in Tikr.

[Saluki]

https://www.investopedia.com/top-25-stocks-in-the-s-and-p-500-for-november-2023-8380010

 

If you count GOOG and GOOGL as one company, the top 6 companies, all tech companies, in the SP500 index are currently 26.6% of the market.  The next two are BRK and Tesla (also tech). 

 

Since I have a work sponsored retirement plan that invests in the index, I wonder if that means that I should just focus on much smaller stocks since I already have exposure to tech stocks via the index.  Or maybe since the concentration is so high at the top, avoiding them completely means that I am betting against them, in which case why own the index at all?  Or maybe the right answer is just to buy what is cheap relative to the others, whether I have exposure or not.  

[ValueArb]

3 hours ago, Saluki said:

https://www.investopedia.com/top-25-stocks-in-the-s-and-p-500-for-november-2023-8380010

 

If you count GOOG and GOOGL as one company, the top 6 companies, all tech companies, in the SP500 index are currently 26.6% of the market.  The next two are BRK and Tesla (also tech). 

 

Since I have a work sponsored retirement plan that invests in the index, I wonder if that means that I should just focus on much smaller stocks since I already have exposure to tech stocks via the index.  Or maybe since the concentration is so high at the top, avoiding them completely means that I am betting against them, in which case why own the index at all?  Or maybe the right answer is just to buy what is cheap relative to the others, whether I have exposure or not.  

 

I always recommended owning a total stock market index, even before the magnificent 7 took over the SP 500. Smaller less liquid stocks tend to offer higher returns over long periods. Of course you have to go back to 2000 before you get a significant benefit to owning VTSAX over the SP 500, and the last 5 years or so its trailed. But it just think it offers more diversification, esp as the SP 500 gets more concentrated.

[UK]

https://www.reuters.com/business/finance/activist-investor-ubben-shutting-down-inclusive-capital-wsj-2023-11-29/

 

Despite Ubben's strong reputation, people familiar with InCap's fund raising efforts said it has been tough to raise cash and noted that investor tastes, especially when it came to environmental, social and governance issues (ESG), have shifted. With markets tumbling last year, many investors simply wanted to see returns instead of focusing on ESG issues.

 

What a surprise...

[Gregmal]

ESG was just a sign that investing had periodically gotten way too easy. Focusing on the BS ESG stuff was a smug institutional game, much like Goldman employees trying to score exactly a 70 on their series 7s, or a baseball player deciding he was going to hit from now on with one hand behind his back.