Thanks to Dealbook Conference, we could listen to ideas of the most influential leaders in their own area about the theme this year “PLAYING FOR THE LONG TERM”. Guests include Al Gore, Peter Thiel, Reed Hastings, Gary Cohen, Larry Fink & James Gorman, etc. What attracts me the most are the interviews with legendary investors like Stan Drunkenmiller and Carl Icahn.
- About Fed, extended stimulus altered investors’ behavior and other countries policy makers’ behavior, and it will “end badly”. From a value investor perspective, I don’t care about the economic cycle as much as macro guys like Stan, but I agree with his point that it’s unprecedented that the economy is still vulnerable after 6 years of 0 interest rate, and it certainly could lead to an unprecedented outcome which could not be predicted and explained by traditional economic theories.
- “I am flexible“, as a macro investor/trader, having a open mind and agility of changing action is obviously very important traits. You have to able to admit you are wrong as soon as you sense things are not going your direction and even turn to the opposite side of the position. Stan also revealed that the reason why he closed his fund is that he had enough money himself and want to remain FLEXIBLE. Stan referred to flexibility as “One of my Greatest Asset from Last 30 Years”.
- Some tips about his holdings and strategies:
- Not holding a lot of cash
- Long nifty 10 (high beta, high growth), short value stocks (who buys back)
- Market may have entered a bear one from July 2015 (but still very open to that)
- Short EUR
- Can see myself very bearish, cannot see myself very bullish
- About overspending on seniors, “government spends 8k per capita on childern, but 44k per capita on seniors.” With the aging demography, the baby boomers entering their 60s and 70s will take a even bigger piece of the pie in coming years. The social security system is designed to use the current working adults’s output to support the seniors who made their outputs years back, a system almost all countries around world are using. However it’s gonna be problematic if the society is entering a aging stage where you have more seniors who need income than current work force can produce without some reserve built from when the bulge senior population were producing. Cited from Stan: “if you believe that I was going to get my social security payments and everybody else was in their Medicare payments and the government’s no gonna reneging on us, so you present valued that stream of payments it’s been promised to me and looked at the revenues are coming in, the federal debt would not be 19 Trillion, but 205 Trillion with the assumption that the interest rate is 4%.” That’s gonna be a problem, obviously. However I think the government could be more creative and “inject” more working adults by attracting more young & highly skilled workforce from other countries. As a country built by immigrants, United States should have much less problem in culture than its European peers in accepting aggressive immigration policies.
- Carl was still very obsessed with the high yield/junk bond thing, kept bringing up multiple times
- Big money were made on these long term ones. He bought out an paper (not a yellow pad paper though, lol) listing all the long term holdings he ever had and read them out, a very nice gesture for the theme topic this year.
- Always a pleasure to listen to Carl as he reveals a lot of anecdotes
- When Andrew called both Larry Fink and Bill Ackman “good friends”, Carl interrupted “I never said Acman is a good friend”. So Bill is only A Friend.
- To elaborate the incompetence and the inefficiency of the managers, he talked about an example in early days when he got into a St. Louis based company who also had 12 floors at a 3rd Ave building in New York city. After trying to understand himself what these 12 floors people actually do and also hiring a consultant to understand that, he still “can’t figure out what the hell they do”. After flew to St. Louis and talked to the COO, he got rid of all of them and sold the lease for $10M.
- “He’s coming to see me (I don’t go to see him).” referring to the upcoming meeting with AIG’s CEO regarding his split proposal. Carl also shared his meeting with Family Dollar’s CEO who came up from Tennessee to see him. Carl: Have a martini. the CEO: I’d love to have a martini, but I must keep my wits about me in this meeting. Carl: it’s not going to help you.