4 min read

2018-09-03 Links

Been awhile here folks, but we are back in business with a mondo link post.

Wise John Malone

“DBJ: What did that teach you?

Malone: Well, a lot. To not expose yourself to one financial source, diversification of every kind, isolation of financial risk, and how to bootstrap. It taught us a lot of things. It taught us survival skills, I think that is the No. 1 thing. We were able to keep TCI independent and viable despite the fact there was no external financing available for an extended period of time. It certainly toughened up the financial team and made us all battlefield buddies, you might say."

Singer and Cohn Go Activist

“In a 2017 interview, Singer was asked to describe what he wanted the ‘headline’ of his life to be. He paused for several moments before saying, ‘He tried to make a difference. He protected a lot of people’s capital over a long period of time. He was steady, reliable.’”

A Physicist and an Economist

“First, I’ll just mention that energy growth has far outstripped population growth, so that per-capita energy use has surged dramatically over time—our energy lives today are far richer than those of our great-great-grandparents a century ago [economist nods]. So even if population stabilizes, we are accustomed to per-capita energy growth: total energy would have to continue growing to maintain such a trend”

What to expect when what you were expecting hasn’t happened

“The rule of three gives a quick and dirty way to estimate these kinds of probabilities. It says that if you’ve tested N cases and haven’t found what you’re looking for, a reasonable estimate is that the probability is less than 3/N. So in our proofreading example, if you haven’t found any typos in 20 pages, you could estimate that the probability of a page having a typo is less than 15%.”

Biotechnic Investing

“‘A good chunk of their assets are in very small companies where they represent a huge amount of the float if they tried to trade out quickly,’ the person says. ‘And they had private investments, which they were holding directly in the fund. If you’re 5 percent in privates, it doesn’t seem like a big deal, but if 25 percent of your assets redeem, now you’re 7.5 percent in privates, and then another 25 percent comes out, then you’re 12 percent in privates. We prefer those to be sidepocketed.’”

Burkle-ing under pressure

“To ferret out new steals and deals, he counts on rainmaker Clinton. The ex-President stands to do pretty well from the arrangement. Burkle won’t reveal the details, but it appears that Clinton gets a cut of any profits the company makes on two funds so long as their returns exceed 8% a year. The former leader of the free world also is believed to get a slice of Yucaipa’s profits when the international fund (the last of the four) is finished liquidating five years from now or later. It is plausible that, in a decade, Clinton could walk away with tens of millions of dollars.”

Decision making on Farnam Street

“If you’re outside your circle of competence and still have to make a decision, ask experts HOW they would make the same decision not WHAT they would decide.”

Fred Wilson goes blacksmith

“That night when I got home I told the Gotham Gal ‘I met Danny Meyer today and he gave me his card and said I could call him whenever I need a table.’ To which she replied ‘go there for lunch tomorrow.’ And I told her ‘I don’t have a lunch tomorrow.’ She said ‘Get one. He will remember who you are tomorrow but won’t next month.’”

Finkle is Einhorn?

“Many hedge funds like to emphasise their low ‘net exposure’ to the market (for instance, Einhorn is about 95% long and about 75% short, for a net market exposure of only 20%). However, this low ‘net’ exposure radically understates the level of risk involved for the fund’s investors, because in certain market environments, it is entirely possible to lose on both your longs and your shorts at the same time. In Einhorn’s case, the reality is that the fund actually has gross active exposure of 170%, and so is therefore more akin to a fund leveraged 1.7x, which will magnify errors of judgement (or simply inopportune macro/style/factor positioning) profoundly.”

The disaster of mineral exploration

“I would look for extensions of existing high-margin deposits (e.g. keep following a deposit and see how far it goes). This might sound glib because this exploration strategy is extremely obvious- it is clearly high-reward and low-risk. However, there is no economic force that will punish you for doing something that is obviously a good idea.”