Gregmal

This probably applies to most people in the fund management business. Especially during the decades covered in the book.

I think this largely lends itself to the notion that there are many people looking for a combination of an entrepreneurialish gig that provides the most personal freedom and the easiest path to supporting ones lifestyle ambitions. These types of businesses then become overpopulated, ground down, and then are no longer attractive on the original basis. Competition here is very fierce. A few examples personally- I grew up in a wealthy suburb of NYC. The kind of place were not many kids appreciate money because its never been an issue. It was always just a given that one of three things will occur largely revolving around the notion that you just end up where everyone else does(In the suburbs this means an 800k house, a wife and 2-3 kids with 3 vacations a year and a mid life crisis that gets resolved with the purchase of a sports car) 1) You use family/friend connections to get into a respectable job working for someone else 2) You get funded by family/friends to start your own venture (If I had a penny for every kid I grew up with who became a "hedge fund manager" with the help of mom+dad and a few relatives...) 3) You inherit money I've lived on my own since my mid teens and gotten to know the other side of the coin as well during that time period. I've found that the hustle required to really get to that next level seems far more common in lower-middle class raised individuals because it is the norm. When you see family and friends working 2 jobs to put food on the table, that becomes the standard. When you have to chose between a new pair of sneakers, a dinner date with a girl, or paying for a textbook, its far different than shopping with the credit card, then meeting your date at the Cheesecake Factory, and then showing up to class late. But these are two completely normal realities depending on where you are from. Which kind of delves into where some have already pointed. When you, your family, your neighborhood, etc become accustomed to certain ways of life, they become hard to break. If it is easier to secure an 80-100k job with great benefits, that will be your path of least resistance. In America, outside of the big cities, it's not easy finding jobs like that anymore(at least ones that don't require 80 hours a week and 5+ years of university). A lot of that went away with the financial crisis but the evolution of technology has also eliminated many jobs that used to support this. So many people must turn to an entrepreneurial path to provide themselves the life they want. However most traditional routes of entrepreneurship arent there anymore. Growing up(I was born in the 80's), you had family run businesses. The local deli, now replaced by Subway and Panera. The local sporting goods store, now replaced by Dick's. The local mechanic/auto body shop, now a Midas chain. Local clothing store, now a Kohl's. The local grocery store, now replaced by Stop-N-Shop. All of which are being threatened by Walmart and Amazon. So even those seeking to be entrepreneurs are given far fewer opportunities to than ever before. Its the ugly by-product of capitalism in which everything is suctioned to the top. As consolidation occurs the vortex becomes stronger and more and more carnage occurs, in an accelerating manner. Tons of people I know have tried starting their own business. Probably 70% of people I know at some point or another have tried starting a construction/landscaping business. 75% end up taking W2 jobs eventually. 15% struggle along under the constant pressure of never really being secure, and 10% seem to end up getting there through a combination of working harder than everyone else and doing things more efficiently. Although I'd argue that this 10% are the type that would make it regardless. Take 90% of the people I know who are self sufficient with their own businesses, and it's finance and real estate folks. Two industries under attack(automated investing/AI/ Zillow/internet plus massively over-regulated), and likely shrinking rapidly over the next decade as well. Which leaves whom safe? Doctors and lawyers? I personally believe much of this here in the states is because the education system is so screwed up. People are not educated in a way that directs them to areas that they can best be utilized. Canada definitely seems to have things better handled on that front. At least their university grads are not leaving school with a useless 5 year degree, 200k in debt, and the grim reality that you'll need to compete for a 55k a year job. Bottom line it seems, is that Canada has a better handle on "the system". The quality of life in CA is higher. Employment does not seem as challenging, and people seem to be put in position to provide for themselves better. Meanwhile in the grand old US of A, one is taught until their mid 20's that you can be anything you want to be, everyone gets a trophy, and then we wondering why things just dont work.The US may be more entrepreneurial but it is because more people have to be because there is now a greater social disparity between the people who have made it, and those whom haven't. Canada still seems to have a healthy middle class.

To quote WEB, Mary Barra is "like a concert pianist arriving at Carnegie Hall - only to be handed a violin." The CEOs most important job is capital allocation and on that, she gets a solid F. Maybe she's a great operator (i.e., a concert pianist), although anyone who thinks they know enough based on publicly available information to claim she is a "great" operator is fooling themselves; she's been operating the biggest auto company on the planet fresh out of bankruptcy with no legacy liabilities and a strong position in trucks during a huge cyclical recovery with a fortuitous mix shift towards trucks. As with most of my investments, I have about a 5-10 year expected holding period, if not longer. I think the Cruze/Lyft investments could turn out to be Ebay/Paypal type home runs that perhaps one day get spun out at massive multiples to the price paid by GM. When you think about all that people are hyping into crap like Tesla, GM has many of those same call options, except you are essentially getting them for free. As I said, I like what MB has done here. Her handling of the recall was admirable as well. Buick has been revitalized, and Cadillac seems to be making some nice progress. No complaints. But a CEO is limited typically to running the business(whether through their interpretation of their job description, or in their capacity as a capital allocator). There is a reason companies have management teams, and then boards. The Board is supposed to look out for shareholders while the CEO/CFO run the business. I've seen too many companies of late, excuse/blame poor performance on their shareholders, analysts, etc. The one thing all these companies have in common? A refusal to be aggressive with buybacks, aggressive executive compensation, and lousy(in terms of accountability) directors at the board level. Just the past week I have GM, CTO, BX. Bottom line, if your stock is cheap, and you have done as good a job with the business as you are telling everyone, call the bluff, and buyback stock until the situation changes. Otherwise you are just a schemer who is full of shit. Eric Langan at RICK should be a case study for CEOs who successfully tackled this issue. Dump money into what produces the best ROI for shareholders, rather than pissing it away on whatever industry asset you think you are supposed to be buying to *grow* the size of the company.

Mary Barra is the best CEO ever though, a world class capital allocator. ;) Certainly better than her peers, but they set a pretty low bar (ie. see Ford). Shocking that no stock was bought back in Q1. Shocking? what is shocking is you believe she is on your side and einhorn isn't. She is a ceo. her main concern is keeping her job. Getting her salary, and getting her options. She is probably already thinking about what she will do with her millions when she retires. Nobody at gm has the stock price as a top priority. Make no mistake about it, the only guy who has the same interest as you here is einhorn. He wants to stock price to go up so shareholders get paid after watching the stock trade at $33 for 200 years.... Not in this. I totally agree with you. And I am a huge fan of what Mary Barra has done and is doing here. It amazes me how one sides with a CEO (with little at risk in terms of stock and a lot at risk in terms of the benefits of the status quo) over an investor or fund manager who's livelihood depends on producing positive returns. I do not exactly have an issue with GM's status quo, but it's time they start listening to shareholders because they obviously don't have a clue how to get their stock price to where many think it should be. You trade at 5x earnings? Good, then cut the bullshit and wager that over the next 5 years you can at least maintain current earnings and in the process retire every share outstanding if the market wants to continue to rate this as it has...

I've looked at various models and everyone always seems to use the 4% rule but realistically if your primary residence is paid off, how much really do you need. Taxes on my home are 16k. Healthcare probably another 15k. 60-75k should be enough for any prudent and fiscally responsible adult. I also question what most consider retirement. Retirement to me is doing what you want on your terms and enjoying life. Running around stressed and under a constant gun is what we strive to free ourselves from. But retirement? Many imply that this is where one officially does nothing and sits on the front porch reading all day. To do this the parameters are far different from a situation I'd more closely associate with retirement where maybe you work by choice doing something you enjoy for a supplemental income. I've also occasionally screwed around with various models that branch off the 4% withdrawal plan. I'm no where near needing to tap into my investment funds but I've always been intrigued with the idea of refining the 4% strategy to something variable. Say, you live off of 50% of the previous years returns, with a cap at 7% and anything after getting thrown into a side account that rests mainly in short terms interest bearing vehicle. This side account then acts as a draw account to live on in years of negative returns. It can also be used to add fresh funds after market corrections. It essentially forces you to cash out a small piece after outperformance. It would look something like this. Say you have $3m and return 20%. You "gain" $600k. Your primary account increases to $3.3m after you withdraw $300k. You live on $210k(I'd still probably spend nowhere near this), and $90k goes to the sub account. Next year you gain 16%. $528k gain, $210k to live on, $54k to sub account. $3.564m in main account. I like something like this because in lean years it forces you to be nimble, and in solid years you are rewarded for great investment returns while still growing your money. Also, provided you can generate a positive return, your safety net account grows and will cushion your down years while also allowing you to have dry powder most who are "fully invested" don't have. As long as your returns are positive, you're never really in bad shape, and honestly, while everyone debates the practicallity of "beating the index", simply generating a return greater than zero is easier than easy.

lax lending standards? Check out their DQ and NCO rates.. lowest in the industry by a country mile. if anything they could be accused of being too narrowly focused on being ultra-premium to the point where they are overly dependent on MDRs and acceptance became an issue. hence the OptBlue initiative but that lost revenue needs to come from somewhere - ergo more lending. Don't know. Maybe they are super strict and this is just a result of the tiny sample size I am referring to. I've just been surprised because Amex used to be a card people wanted but not everyone could get. Now I know more than a handful of younger folks whom probably couldn't get auto loans carrying around Amex charge cards and yes, carrying monthly balances.

IDK, I'll preface this by saying I am long these as well, however something I've struggled with is the basis for these claims. It all seems outrageously rife with hind site thinking and Monday morning quarterback mentality. Essentially investors hearing the winning lottery numbers and then claiming they had the tickets before it was announced. On the one hand, I agree with pretty much everything the bulls here are saying(fundamentally in terms of what's legally right and wrong), hence I own the securities. However the other side of things, one that isn't so compelling, is the simple fact that these companies, along with many others were in dire situations. Maybe they weren't insolvent, but they were shut out of the capital markets and the lender of last resorts did so on rather onerous terms. This lender, essentially held the fate of these companies in their hands. Just because they acted differently with AIG or C, doesn't mean they had to do so with Fannie and Freddie. That lender, then down the line changed the rules, but if you think about it, any majority owner would seemingly have similar ability to do so if they owned equivalent amounts of a given company, and the rest of the shareholders would just kind of be screwed without any recourse. More troubling if I am playing devil's advocate, is that it seems like every long here, got long well after the doomsday events that shaped the reconfiguration of these entities. IMO the argument that "yea these companies were stolen and obviously they were healthy" doesnt really hold as much water if you werent previously invested in them during the time period in question. Your argument essentially is what? That it was so obvious they were healthy but I didn't make an investment until 2012? If it was such a no brainer that these entities were healthy at the time, why weren't they able to access the capital markets? Specifically in relation to the preferreds, look at a lot of the O&G companies that have recently been thru chapter 11. This IMO was just a messier(not surprising bc the government was involved) re-org. I hope it all works out. But a lot of the arguments, while fundamentally pretty damn sound and legally compelling, are all hind site based and IMO wishful hoping.

I think a trend we are already starting to see, but one that will become more prevalent is focusing on higher education in earlier years rather than blowing a load on colleges and universities. My parents always stressed the importance of a good education and my siblings and I all had the opportunity to go to private schools. The logic was that the mind and the individual develops far more during the early-mid teenage years and thus those years and the education received is more crucial towards development as a person than going to a "brand" school for $50,000 a year. So for $10,000-$20,000 a year for 4 high school years, you supposedly get much more than you would for 4 years at $40,000-$50,000/year. Maybe I'm an outlier, but the first two years of college are gen-ed which is the same everywhere, and personally I found being adventurous far more enlightening than mundane tasks that largely revolved around things like being able to do what you are told and memorization(tasks I knew I could do if I wanted and thus felt no need to do if the content did not compel me). Additionally, having gotten a real education in high school, I was already at a huge advantage having taken calc+stats classes and advanced sciences and then showing up to college and seeing people spend 2+ years and tens of thousands of dollars learning Earth Sciences and Algebra. This was over a decade ago. My youngest brother went the same high school route however went into college knowing he wanted to be a biomedical engineer. I had a vague idea that either law or finance interested me, but otherwise not a clue. My brother seems to be in the same boat as a lot of kids these days, whereas I was in the same boat as many in my day. So I think there is becoming a naturally tendency for kids to develop their interests earlier, and then pursue them more efficiently. I think universities will soon be forced to evolve and as a result of both the lack of demand and well as the insane costs, I think we are not too far off from seeing the typical 4 year degree cut down to 2-3.

Just my observation but I've kind of observed something different than the "Amex means you're rich" stereotype. No one that I know, that would be considered financially responsible uses an Amex as their primary card. Why? Because there are almost always cards out there with better rewards programs for specific categories. Most of the people I know now rotate cards. Doing this properly you can almost always be getting at least 3%, usually 5% back, on pretty much everything you buy. If anything, I've noticed over the years that Amex has gotten very lax with their lending standards and if anything, is taking on just about anyone who will sign up. I know people who can't get a department store card who have Amex charge cards with nearly unlimited spending ability.

JW MAYS in a nutshell. Well said. I used to view this as an asset I could buy with the outlook that hey, I've got 20+ years to wait and a small allocation will benefit simply from outlasting the short term nonsense. I'm begin to think 20+ years isnt long term enough for these guys.

A lot of interesting things much to the tune of what I mentioned here some time ago, starting to come to light as the proxy fight wages on. https://www.sec.gov/Archives/edgar/data/23795/000091957417003397/d7461149_dfan14-a.htm "In 2015, Mr. Albright informed Wintergreen that CTO intended to pursue a hostile takeover of Forestar, a Texas real estate company of approximately equivalent size to CTO and sought Wintergreen's support. Under this plan he could return to his home state and live in Dallas" "In phone conversations Wintergreen had with Deutsche Bank after the strategic review, we learned that Deutsche Bank described the process as merely an accommodation to a client with whom they had an existing relationship. This was not the strategic review envisioned by our shareholder proposal." A half assed strategic review after Albright's plan to buy Forestar so he could work from home gets thwarted... Yuck.

I am by no means an expert, but several people I know have spoken very positively about some of the Mutual Series Funds as a buy and hold forever. *Edit, noticed you mentioned ETF's, not mutual funds.

PepsiCo is a name I'd be comfortable owning into a melt down. I think the junk food/soda crackdown is exaggerated. There's been nothing known to man to be worse for you than cigarettes for decades and those companies are still cash machines. Soda and potato chips will survive.

Site was down/scrambled/no content at various points between 5-9:30 EST.

Tepper is different animal (much more diversified) compared to those other folks. He is, but from time to time he really loads up when he sees something and doesn't often miss. The financials were his big one, but even now, AGN is a pretty concentrated position. GM a couple years ago was about 20% if I remember correctly. Cooperman on the other hand is the definition of diversified and had one of the worst runs of "blow ups" I've seen from 2014-2016. SD, MONIF, S, where all fairly big and well promoted positions that all had spectacular declines. Another name I'd mention in the not blowing up camp is Nelson Peltz.

After reading through a few threads, particularly the SHLD and VRX ones, it got me thinking. Obviously we all take major beatings from time to time, the trick is to managing the impact of such events. This is something that wasn't really done with Ackman's VRX investment, or Berkowitz's SHLD position. The effects for both guys have been pretty devastating by any measure, but especially in terms of publicity. I can think of major positions blowing up for many guys. Watsa, Cooperman w/ SD, Pabrai ZINC, Baker Street, etc. But what about guys who haven't really had this problem? What sort of investing style have they used to avoid these pitfalls. How do they manage their positions. Obviously a major market downturn is going to have a predictable effect on performance, but the big killer is having prominent positions go bust for reasons specific to the investment rather than the broader market. First name that kind of pops out for me is Tepper. He does seem like more of a trader, but he isn't afraid to be concentrated in a big idea. What managers do people follow whom don't seem to get beat big? Lastly, more so out of curiosity in regards to others here, how do you personally look to avoid this. Diversification seems to help, but one look at Cooperman the last few years will show it doesn't spare you entirely. As a trader, it seems obviously a bit easier as you typically have a set of rules. But as a value investor, what rules do people use to avoid major blow ups? Do you just size it and let it ride? Do you only add under "x" scenario? Personally I've found avoiding companies with high debt loads/complicated capital structures and unpredictable earnings/consistent history of losses helps. I tend to concentrate in companies with hard assets. The downside is I miss out on a lot of tech, biotech, and even energy names. Apologize in advance if this thread has already been covered somewhere. Still somewhat new here but thought it was an interesting subject given the popularity of threads relating to SHLD, VRX, and FNMA which could be another big blow up for many managers(not surprisingly both Ackman and Berkowitz as well).

To me at least, this seems like a clever way to cut costs.

I have a similar outlook but chalk it up more to its value for marketing & the fact that he's playing a different game than we are, rather than him being a clown. My suspicion is that Bill Ackman is a very clever businessman, and that sometimes gets in the way of the investment side of the job. I think this is pretty accurate. He's a brilliant guy, but IMO clearly a gambler. The issue is that the business promotes risk taking. He's at the point where he's financially secure. He probably always has been from my understanding of his situation. So the "win big you get obscenely wealthy/lose big you still get 2% and can always start another fund" mentality makes sense. But larger than all that, is that yes, there's an ugly side of the financial world in which more important than making money is marketing and self promotion. Some would even call it lying. Some are very, very good at it. Watch an interview where Berkowitz talks about SHLD. You'd have no clue this guy was down 75% after a decade long hold. You'd think he was a genius if you didn't know the background on it.

Zacks is trash. No value to it. Their analyst work is an automated script.

If your business model relies on being a market darling and having continuous access to capital markets then your model is broken. If your model cannot take scrutiny and negative publicity then your model is broken. I guess the debate is then on the word reliant. Any public company, even many private rely on the capital markets to varying degrees. VRX used the markets to grow, vs dumping money into R&D. Debt was cheap, so why not. I'm sure at some point, like the guy above mentions, they planned to scale down and delever. Similar to what ClubCorp does with golf courses. Like I said, Actavis, now AGN, did the same thing just not as aggressively. They're fine.

Hmm I still wouldn't even argue against that. The environment drastically changed, more or less overnight and his company became a scapegoat for industry wise practices. Mainly because, they were the best/more egregious and perfected a model that while unethical, was legal. Pearson IMO was right about most of those things That's a little bit like saying Bernie Madoff was an Outsider but then the environment drastically changed in the financial crisis and ruined his strategy. Except running a Ponzi scheme has never been legal or legitimate. Pearson saw that wasting loads of money on R&D was not efficient. Especially if you could simply purchase established products with those resources and then raise prices. Raising prices is something a company should be able to do. Unfortunately for Pearson this subject became a platform for the populist campaigns, and that was the end of him and presumably VRX, ENDP, etc. Philidor wasn't the downfall. It was the business model which was completely legal, becoming inoperable within a matter of months. If something can't go forever, it won't. A business model dependent on levering up to buy drugs/companies to raise the prices so you can lever up more to buy more drugs and companies to continue to grow your EPS even as the underlying businesses decay from being deprived of growth capital is not a trend that can continue forever. It continues until capital markets dry up OR you've raised prices to the highest level the market can bear OR the cost of refinancing the debt exceeds the marginal benefit from EPS growth OR you're too large for an acquisition to make a marginal impact etc. It was a model that worked well until it was broken - but it could have, and would have, been broken by any number of those things listed above had it continued. Maybe you would have been smart enough to get out at the top? Maybe not? The point is, it was basically a ponzi scheme - It was totally reliant on the next acquisition or major price hike to make up for the deteriorating portfolio of drugs. New money had to come in faster than old value was decaying and when the music stops and no new money comes in...you're f*cked. Just like a ponzi scheme. Fair enough. Perhaps it was destined to fail. Perhaps they could have made adjustments. Woulda, shoulda, coulda. I think there are examples of other companies whom weren't as aggressive that used the model that will be ok. Actavis grew predominantly by acquisition. The killer IMO was the negative publicity, which then led to scrutiny, that ultimately led to the company being shut out of the capital markets. Something that could theoretically happen to anyone. What if TSLA gets shut out of the capital markets? They're done too. I wouldn't go as far as to say you could pin the beginning of the end of VRX on a certain fund manager everyone loves to hate, but it definitely didn't help.

Hmm I still wouldn't even argue against that. The environment drastically changed, more or less overnight and his company became a scapegoat for industry wise practices. Mainly because, they were the best/more egregious and perfected a model that while unethical, was legal. Pearson IMO was right about most of those things That's a little bit like saying Bernie Madoff was an Outsider but then the environment drastically changed in the financial crisis and ruined his strategy. Except running a Ponzi scheme has never been legal or legitimate. Pearson saw that wasting loads of money on R&D was not efficient. Especially if you could simply purchase established products with those resources and then raise prices. Raising prices is something a company should be able to do. Unfortunately for Pearson this subject became a platform for the populist campaigns, and that was the end of him and presumably VRX, ENDP, etc. Philidor wasn't the downfall. It was the business model which was completely legal, becoming inoperable within a matter of months. Hence the SEC and DOJ investigations. GM had DOJ/SEC investigations. What about WFC or pretty much every single financial firm. So has pretty much every major pharma company. When the magnifying glass shined on a sector is as intense as it currently is on pharma, dirt always comes out. Confusing that with the business model though seems silly to me. Pearson's model of slashing R&D and spending on existing products and then raising prices wasn't illegal. In hind site everyone claims to have seen it coming, sure. That's always how it works. Hopefully all you folks made a fortune shorting this. I never bought it because of an aversion to companies with large amounts of debt and a skepticism of non-GAAP financial reporting, but that's besides the point.

Hmm I still wouldn't even argue against that. The environment drastically changed, more or less overnight and his company became a scapegoat for industry wise practices. Mainly because, they were the best/more egregious and perfected a model that while unethical, was legal. Pearson IMO was right about most of those things That's a little bit like saying Bernie Madoff was an Outsider but then the environment drastically changed in the financial crisis and ruined his strategy. Except running a Ponzi scheme has never been legal or legitimate. Pearson saw that wasting loads of money on R&D was not efficient. Especially if you could simply purchase established products with those resources and then raise prices. Raising prices is something a company should be able to do. Unfortunately for Pearson this subject became a platform for the populist campaigns, and that was the end of him and presumably VRX, ENDP, etc. Philidor wasn't the downfall. It was the business model which was completely legal, becoming inoperable within a matter of months.

Hmm I still wouldn't even argue against that. The environment drastically changed, more or less overnight and his company became a scapegoat for industry wise practices. Mainly because, they were the best/more egregious and perfected a model that while unethical, was legal. Pearson IMO was right about most of those things

Pretty cool stuff and great reddit discussion. Always find this kind of stuff fascinating. How one attains their freedom. The pursuit of money is often falsely associated with people who are driven. Personally I think the freedom from hard work is the primary driver and accumulating wealth is generally just the bi-product. David Siegel from time to time has had somewhat interesting commentary on the ease with which hard work alone can propel one to great heights simply because this type of work ethic itself has become a scarce commodity. Especially when you are young. Wouldn't necessarily call him a role model but I always find it neat how you hear the same type of things. "In my mid twenties I was at my office working on Friday at 10 pm while my friends were out getting drunk and chasing tail at the bars" was one of his better lines. It is quite true. The earlier you can stand compounding the better. Not only can you compound wealth but experience too. Both become immensely valuable over time.