Fooling Some of the People All of the Time - David Einhorn

[Liberty]

[amazonsearch]Fooling Some of the People All of the Time[/amazonsearch]

 

It's a well-known book, but I had not read it yet. After quite enjoying Confidence Game about Ackman's battle against MBIA, I figured this was the logical next step.

 

I'm about 5 chapters in, and so far it's pretty good. I have a feeling it's just getting started, though.

 

I haven't finished it yet, so I can't recommend it, but I thought this book deserved a thread here.

 

[Guest Hester]

It's a well-known book, but I had not read it yet. After quite enjoying Confidence Game about Ackman's battle against MBIA, I figured this was the logical next step.

 

I'm about 5 chapters in, and so far it's pretty good. I have a feeling it's just getting started, though.

 

I haven't finished it yet, so I can't recommend it, but I thought this book deserved a thread here.

 

Yes I love this book. I've read it cover to cover a couple of times and I've read the first few non-allied chapters probably 6 or 7 times. Although it is a little repetitive after a while, I'd highly recommend just for the amazing due diligence he did. I'm a short seller so I love all of it, but the first part on the beginnings of Greenlight and his path to value investing are fascinating as well.

[claphands22]

Great book, highly recommend it. I did start skipping some pages toward the end because just like Hester said, it becomes really repetitive.

 

Interestingly, he puts Fairfaix Financial on the same level as Allied Capital.  I'd love to read the Fairfax short book instead of the Allied book, but no dice.

 

 

[Liberty]

Hester, have you read Confidence Game? I had a feeling that you'd enjoy it quite a bit. Would love to hear your thoughts on it.

[Guest Dazel]

 

Hester,

 

I would very interested in you starting a thread on short selling....I have looked at several interesting threads you have been involved in but not shorting in it's purest form....meaning pros and cons..puts etc..the mbia short ackman is famous for was from 2002 when his fund Gotham partners went bankrupt...that is a hell  of a longtime and a lot of trouble for the return....which with a straight short is maximum 100 percent return....it makes him famous but was it worth it?

Keep in mind I like ackmans long choices...and made a lot of money on ggp.

 

Thanks in advance

Dazel

[Guest Hester]

Hester, have you read Confidence Game? I had a feeling that you'd enjoy it quite a bit. Would love to hear your thoughts on it.

 

Yes I have, and I enjoyed it quite a bit.

 

I liked Einhorn's book more, probably because it was written as a narrative as opposed to Confidence Game being a reporter writing it. Plus for some reason I love the first 4 chapters of Einhorn's book. It has some great info really for the small investor and/or young kid trying to make it. And I like Einhorn's more humble approach (at least relative to Ackman, which is a low bar to jump).

 

But I would definitely recommend both.

[Guest Hester]

 

Hester,

 

I would very interested in you starting a thread on short selling....I have looked at several interesting threads you have been involved in but not shorting in it's purest form....meaning pros and cons..puts etc..the mbia short ackman is famous for was from 2002 when his fund Gotham partners went bankrupt...that is a hell  of a longtime and a lot of trouble for the return....which with a straight short is maximum 100 percent return....it makes him famous but was it worth it?

Keep in mind I like ackmans long choices...and made a lot of money on ggp.

 

Thanks in advance

Dazel

 

I've thought about starting a thread solely on short selling but didn't because I never thought it would get much interest here.

 

I do have a lot of opinions on how to be successful at short selling, different strategies, etc... I think most people get short selling technique wrong, they take on too much non-business risk (i.e risks not associated with the underlying business behind a stock, like short squeezes) or they misunderstand what kinds of stocks are good shorts, or they structure their strategy poorly etc...

 

So maybe I will...

 

Re Gotham partners; That was a liquidation, mostly because of illiquid investments (bad investment in a golf course) more so than any short or synthetic short position, but I get the point, plenty of short firms blow up.

[Green King]

I would be very interested in reading short value thread. Shorting has unexplored of room for work in terms in value discipline.

[ubuy2wron]

I think there would be a great deal of interest in a short thread perhaps a little controversial given the long bias here but still a lot of interest. Has anyone paid much attention to Einhorns insurance co. I have only glanced at it.

[Guest Dazel]

 

Gotham partners did not specifically blow up from short selling but ackman and Gotham were investigated with regards to short selling and manipulating shares....at the time he had the same thesis of mbia that he did in 2008....so they had run on their assets as clients bailed on the sec investigation...while they illiquid golf course investments...for the record they were exonerated but it was too late.

Anyways that is not the point I believe the board would be extremely interested in a short selling thread and you "Hester" are the one to start it...I will add to it from both sides. Including my thesis on the the fairfax CDs windfall.

 

Thanks in advance

Dazel

[twacowfca]

I think there would be a great deal of interest in a short thread perhaps a little controversial given the long bias here but still a lot of interest. Has anyone paid much attention to Einhorns insurance co. I have only glanced at it.

 

Yes, they concentrate on low risk reinsurance, the type that seems to be mostly somewhat capped for losses.  The kind that should produce  CR of about 100 with low volatility if well executed.  They hope to make money by having a lot of their assets in equities, but returns have disappointing while most equities have not performed well in the last few years.

[Guest Hester]

I think there would be a great deal of interest in a short thread perhaps a little controversial given the long bias here but still a lot of interest. Has anyone paid much attention to Einhorns insurance co. I have only glanced at it.

 

I own some Greenlight Re. Obviously Greenlight is mostly a vehicle so Einhorn can have some permanent hedge fund capital. As twa said they have a lower risk underwriting side and aim to break even (average CR about 99.5 over the last 4 years although higher recently) . They invest the float in Greenlight capital and Einhorn skims some nice management fees. The structure and inherent leverage in the model I think can overcome the fees, and is what makes GLRE so much more attractive than investing in a hedge fund, assuming you can get in at close to BV, which is rare although you can right now. The structural alpha from leverage of the insurance model and my admiration for Einhorn's investing ability, as well as the current valuation are what sells me on the stock.

 

On the investing side, their equities stay very hedged, I think right now they are roughtly 95% gross long and like 65% gross short. So a rapidly rising market will produce bad relative returns, which is why they have underperformed over the last few years. The portfolio only lost 17% in '08 and recently when the market fell 14% the portfolio stayed flat. They are also heavily hedged on the debt side, and they own a bunch of soveriegn CDS's.

 

GLRE in the end really falls way closer to "hedge fund" than "insurance company" on the spectrum. That is, a HF with daily liquidity and free or cheap 3X leverage.

[Liberty]

Still reading this, about 4/5 into it.

 

I got to the part about Pat Byrne's crazy conference call. Do people around here really own Overstock? After that performance (if it really was as described by Einhorn, and he does quote a lot of it verbatim), I'd stay very far away from any business that he's in charge of. I really hope he has other good qualities, because a public conspiracy-theories-paranoid-rant-with-made-up-stuff is enough to put someone off my list of people I would trust with my hard-earned capital...

[Liberty]

All right, I've finished it. Worth reading, IMO.

 

The library version didn't have the extra chapters from the 2010 version. Are those available anywhere online? Can anyone give a brief summary of what they contain? Should I track down a more recent version of the book or they not worth the trouble?

 

Thanks.