1 00:00:02,240 --> 00:00:06,439 Speaker 1: This is Masters in Business with Barry Ridholts on Bloomberg 2 00:00:06,519 --> 00:00:12,640 Speaker 1: Radio this week on the podcast What Can I Say? 3 00:00:12,800 --> 00:00:15,760 Speaker 1: Jim Chanos is a legend in the world of shorting 4 00:00:16,000 --> 00:00:21,400 Speaker 1: and hedge funds, UH and institutional investing. And this is 5 00:00:21,440 --> 00:00:23,560 Speaker 1: just a tour to force if if you are at 6 00:00:23,600 --> 00:00:27,400 Speaker 1: all interested in running a two sided book as opposed 7 00:00:27,440 --> 00:00:30,000 Speaker 1: to a long only book, If you want to know 8 00:00:30,200 --> 00:00:33,040 Speaker 1: what it's like to be a short seller, how to 9 00:00:33,159 --> 00:00:38,320 Speaker 1: uncover financial fraud, what it was like to uncover some 10 00:00:38,440 --> 00:00:41,720 Speaker 1: of the biggest frauds of the past fifty years, whether 11 00:00:41,720 --> 00:00:46,080 Speaker 1: it was Enron or Tycho or just go down the list. Uh, 12 00:00:46,120 --> 00:00:49,640 Speaker 1: then you're gonna love this conversation. And rather than have 13 00:00:49,720 --> 00:00:53,800 Speaker 1: me babel incessantly about how much fun it was, I'm 14 00:00:53,840 --> 00:00:57,480 Speaker 1: just gonna say, with no further ado, my conversation with 15 00:00:57,600 --> 00:01:05,039 Speaker 1: Jim Chanos. I'm Barry Ritults. You're listening to Masters in 16 00:01:05,080 --> 00:01:08,960 Speaker 1: Business on Bloomberg Radio. My extra special guest today is 17 00:01:09,040 --> 00:01:12,440 Speaker 1: Jim Chanos. He is the founder and managing partner of 18 00:01:12,520 --> 00:01:18,720 Speaker 1: Kinakos Associates, the largest exclusive short selling investment firm in 19 00:01:18,760 --> 00:01:23,280 Speaker 1: the United States. It was launched in n He is 20 00:01:23,360 --> 00:01:27,440 Speaker 1: a celebrated short seller, who was known perhaps best for 21 00:01:27,560 --> 00:01:32,119 Speaker 1: his short sale on Enron about a year before the 22 00:01:32,120 --> 00:01:36,480 Speaker 1: company collapsed to zero. He is a lecturer at and 23 00:01:36,680 --> 00:01:40,440 Speaker 1: a Beckton Fellow at the Yale School of Management, where 24 00:01:40,480 --> 00:01:45,120 Speaker 1: he teaches graduate students about financial fraud. Jim Chanos, Welcome 25 00:01:45,120 --> 00:01:48,600 Speaker 1: to Bloomberg. It is I've been looking forward to this 26 00:01:48,640 --> 00:01:51,760 Speaker 1: a while, and I have to begin by pointing out 27 00:01:51,880 --> 00:01:53,840 Speaker 1: that I don't know if this is true. You have 28 00:01:53,880 --> 00:01:58,400 Speaker 1: to confirm this. Kinakos is Greek for sync Is this right? Yeah, 29 00:01:58,440 --> 00:02:03,120 Speaker 1: it means literally dog like. But the the Kinkasts were 30 00:02:03,120 --> 00:02:05,520 Speaker 1: a group of philosophers who lived outside of Athens in 31 00:02:05,560 --> 00:02:11,119 Speaker 1: the Golden Age um and they basically, uh were searching 32 00:02:11,760 --> 00:02:16,320 Speaker 1: for the ultimate truth. They believed in an independence of 33 00:02:16,360 --> 00:02:20,480 Speaker 1: thought and self discipline, and Diogenes was their philosophical leader. 34 00:02:20,720 --> 00:02:22,919 Speaker 1: But it's the root of the word cynic in English, 35 00:02:23,200 --> 00:02:27,000 Speaker 1: and and you're obviously referring to the Golden Age of philosophy. 36 00:02:27,120 --> 00:02:31,160 Speaker 1: So let's talk about the philosophy that led to both 37 00:02:31,200 --> 00:02:34,480 Speaker 1: cynicism and short selling. You began your career as a 38 00:02:34,520 --> 00:02:38,280 Speaker 1: financial analyst at Pain Webber and then Guilford Securities and 39 00:02:38,480 --> 00:02:43,360 Speaker 1: Deutsche Bank. These tend to be long only firms or 40 00:02:43,400 --> 00:02:46,880 Speaker 1: their clients are long only. What what was it like 41 00:02:47,120 --> 00:02:50,920 Speaker 1: then when there was a heretic in their midst? Well, 42 00:02:50,960 --> 00:02:54,600 Speaker 1: when I got onto Wall Street, the first gentleman hired 43 00:02:54,600 --> 00:02:58,839 Speaker 1: me um in night was completely puzzled as to why 44 00:02:58,840 --> 00:03:02,959 Speaker 1: anyone would want to work on Street because in it 45 00:03:03,000 --> 00:03:07,440 Speaker 1: was not a lucrative field. It was we were at 46 00:03:07,440 --> 00:03:09,560 Speaker 1: the tail end. We didn't know it of a sixteen 47 00:03:09,600 --> 00:03:12,680 Speaker 1: year bear market and so uh and in fact, from 48 00:03:12,800 --> 00:03:15,680 Speaker 1: nineteen sixty six eighty two in real terms, that Dow 49 00:03:15,800 --> 00:03:19,080 Speaker 1: dropped as much as it did in in two, so 50 00:03:19,240 --> 00:03:23,240 Speaker 1: flat in nominal terms. But it was Yeah, it was 51 00:03:23,280 --> 00:03:26,640 Speaker 1: basically peaked at a thousand in nineteen sixty six and 52 00:03:26,960 --> 00:03:30,280 Speaker 1: bottomed out of seven seven hundred something in in eighty two. 53 00:03:30,320 --> 00:03:32,200 Speaker 1: But as you say, in real terms, it was a 54 00:03:32,240 --> 00:03:35,640 Speaker 1: disaster and so um so I got a job as 55 00:03:35,640 --> 00:03:39,600 Speaker 1: a as a as an analyst doing deal books. Um 56 00:03:39,640 --> 00:03:42,640 Speaker 1: but I was fascinated with the market and uh and 57 00:03:42,800 --> 00:03:46,640 Speaker 1: always had had invested whatever speremoney I had in the 58 00:03:46,680 --> 00:03:49,160 Speaker 1: market in college my dad had pushed me to sort 59 00:03:49,160 --> 00:03:52,760 Speaker 1: of learn about it, and the head of the head 60 00:03:52,760 --> 00:03:55,440 Speaker 1: of retail sales was down the hall, so I used 61 00:03:55,440 --> 00:03:58,120 Speaker 1: to spend my lunch hours and after work talking to him, 62 00:03:58,200 --> 00:04:01,480 Speaker 1: and ultimately he hired me in nine needy two UH 63 00:04:01,600 --> 00:04:04,800 Speaker 1: to come work at a small firm that he was forming, 64 00:04:05,080 --> 00:04:09,120 Speaker 1: UM leaving Blithe Eastman, Pain Webber and and forming Guilford Security. 65 00:04:09,200 --> 00:04:11,520 Speaker 1: So I went there as a securities analyst and that 66 00:04:11,600 --> 00:04:15,600 Speaker 1: was fantastic. UM. He gave me latitude to do whatever 67 00:04:15,680 --> 00:04:20,240 Speaker 1: I wanted to short. My first recommendation was a short sailor, 68 00:04:20,240 --> 00:04:23,120 Speaker 1: Baldwin United. So so let's we'll talk a little more 69 00:04:23,120 --> 00:04:27,080 Speaker 1: about bold when United um in in a few minutes. 70 00:04:27,839 --> 00:04:30,840 Speaker 1: What was the reaction in the community, be it analyst 71 00:04:30,839 --> 00:04:36,839 Speaker 1: community or or typically mostly long only investment community that 72 00:04:36,960 --> 00:04:39,560 Speaker 1: here's this young whipper snapper and their first report is 73 00:04:40,080 --> 00:04:44,839 Speaker 1: not just hold or neutral or sell, but sell short. Yeah. 74 00:04:44,880 --> 00:04:47,760 Speaker 1: It wasn't received very well as you can imagine, uh, 75 00:04:48,000 --> 00:04:51,560 Speaker 1: particularly since the big brokerage firms who were recommending stock 76 00:04:51,640 --> 00:04:55,280 Speaker 1: were also making a fortune selling their annuities, and so 77 00:04:55,600 --> 00:04:59,160 Speaker 1: it was it was a double payer. So not only 78 00:04:59,160 --> 00:05:01,920 Speaker 1: were they placing the stock, they were also placing they 79 00:05:01,920 --> 00:05:04,920 Speaker 1: were Baldwin was an insurance company. They're selling annuities single 80 00:05:04,920 --> 00:05:07,240 Speaker 1: premium deferred and neuis. They were all Baldwin Piano by 81 00:05:07,279 --> 00:05:10,120 Speaker 1: the right, which then more that's sort of like iced 82 00:05:10,120 --> 00:05:14,560 Speaker 1: tea companies morphing into blockchain company. Well, their CEO was 83 00:05:14,920 --> 00:05:18,040 Speaker 1: a charismatic guy, and he made his market the company 84 00:05:18,120 --> 00:05:20,480 Speaker 1: selling pianos door to door. And I've always said, if 85 00:05:20,480 --> 00:05:22,800 Speaker 1: you can sell pianos door to door, you're a pretty 86 00:05:22,839 --> 00:05:26,760 Speaker 1: good salesman. Yeah. So and uh and Baldwin was was 87 00:05:27,600 --> 00:05:31,320 Speaker 1: the the fastest growing financial services company in the United 88 00:05:31,360 --> 00:05:35,080 Speaker 1: States in UM and it was you know, for fortunes, 89 00:05:35,120 --> 00:05:37,839 Speaker 1: most admired, blah blah blah blah blah. A lot of 90 00:05:37,839 --> 00:05:40,280 Speaker 1: things that we would see later twenty years later in 91 00:05:40,320 --> 00:05:45,039 Speaker 1: the end run story were uh, we're basically uh indicative 92 00:05:45,080 --> 00:05:47,680 Speaker 1: of Baldwin back. So, so what alerted you that not 93 00:05:47,880 --> 00:05:51,520 Speaker 1: things were not all kosher at Baldwin Piano slash Insurance? 94 00:05:51,560 --> 00:05:54,920 Speaker 1: As if that alone wasn't enough. So I was. I 95 00:05:54,960 --> 00:05:58,479 Speaker 1: was as a young analyst. I had no insurance analytical experience, 96 00:05:58,480 --> 00:06:00,640 Speaker 1: so I had to sort of start it at ground zero, 97 00:06:00,680 --> 00:06:02,839 Speaker 1: which I think at the end of the day was 98 00:06:02,839 --> 00:06:05,280 Speaker 1: was helpful for me because I had to learn basically, 99 00:06:06,040 --> 00:06:09,400 Speaker 1: um it was from scratch, and it was while I was. 100 00:06:09,520 --> 00:06:12,240 Speaker 1: I was making phone calls and trying to understand how 101 00:06:12,240 --> 00:06:14,960 Speaker 1: it was that Baldwin could use insurance company money to 102 00:06:15,040 --> 00:06:18,640 Speaker 1: do acquisitions. That was sort of the game that they 103 00:06:18,680 --> 00:06:22,080 Speaker 1: were playing. I got a phone call um one night, 104 00:06:22,240 --> 00:06:23,919 Speaker 1: I was working late at the office, and it was 105 00:06:24,440 --> 00:06:26,360 Speaker 1: it was someone who wouldn't give me their name and said, 106 00:06:26,400 --> 00:06:30,560 Speaker 1: I understand you're you're asking questions about Baldwin United and uh. 107 00:06:30,960 --> 00:06:33,640 Speaker 1: I said, yeah, who's this? And he said, it's not 108 00:06:33,680 --> 00:06:36,279 Speaker 1: important who this is, but you should be aware that 109 00:06:36,320 --> 00:06:39,600 Speaker 1: there are insurance files at the State of Arkansas insurance 110 00:06:39,640 --> 00:06:43,520 Speaker 1: Department that are public that you should get and you know, 111 00:06:43,680 --> 00:06:48,200 Speaker 1: click and uh and so in Arkansas. And so the 112 00:06:48,480 --> 00:06:50,800 Speaker 1: next morning I told my boss that and he of 113 00:06:50,839 --> 00:06:53,880 Speaker 1: course asked if I had been drinking and said, I said, 114 00:06:53,920 --> 00:06:55,920 Speaker 1: you know, no, I got an anonymous call and we 115 00:06:55,960 --> 00:06:58,880 Speaker 1: should check it out. We hired a local law firm 116 00:06:58,960 --> 00:07:02,520 Speaker 1: and it was a treasure trove. It was letters going 117 00:07:02,520 --> 00:07:05,320 Speaker 1: back and forth in the state regulators to Baldwin basically 118 00:07:05,320 --> 00:07:08,120 Speaker 1: saying they were insolvent and that they needed to raise 119 00:07:08,200 --> 00:07:11,000 Speaker 1: capital immediately and that they would no longer be allowed 120 00:07:11,000 --> 00:07:14,160 Speaker 1: to use insurance company money to make acquisitions. And blah 121 00:07:14,240 --> 00:07:16,120 Speaker 1: blah blah blah. It was the whole story laid out 122 00:07:16,160 --> 00:07:19,720 Speaker 1: in public documents and and so Yeah. Then years later 123 00:07:19,760 --> 00:07:21,440 Speaker 1: I was at an insurance conference and I heard the 124 00:07:21,480 --> 00:07:25,000 Speaker 1: same voice from behind me, and uh it was It 125 00:07:25,040 --> 00:07:27,000 Speaker 1: was a well known insurance analyst who at the time 126 00:07:27,080 --> 00:07:31,360 Speaker 1: was in Chicago, and um, he could not cover Baldwin. 127 00:07:31,440 --> 00:07:33,520 Speaker 1: His firm would not let him because he looked at 128 00:07:33,560 --> 00:07:35,680 Speaker 1: it and saw it was a house of cards and 129 00:07:35,720 --> 00:07:37,640 Speaker 1: the firm had sold annuities, so they told him to 130 00:07:37,680 --> 00:07:41,800 Speaker 1: shut up. And uh, I've always kept him anonymous ever since. 131 00:07:41,840 --> 00:07:44,440 Speaker 1: But it was that that tip that helped that that 132 00:07:44,520 --> 00:07:47,440 Speaker 1: set you off. Let's talk a little bit about some 133 00:07:47,520 --> 00:07:56,480 Speaker 1: of the fascinating fang stocks Facebook, Amazon, Netflix, Apple, Google. Uh. 134 00:07:56,480 --> 00:08:01,000 Speaker 1: What doesn't get mentioned in that list is Tesla. And 135 00:08:01,080 --> 00:08:03,840 Speaker 1: some people have said Tesla may not be worth as 136 00:08:03,920 --> 00:08:07,520 Speaker 1: much as its current market cap. You have a slightly 137 00:08:07,600 --> 00:08:10,960 Speaker 1: different view. What's your perspective on Tesla? Well, I think 138 00:08:11,000 --> 00:08:14,280 Speaker 1: the stock might not be worth anything, um on a 139 00:08:14,320 --> 00:08:18,720 Speaker 1: pure financial analysis basis. It is to us, it's one 140 00:08:18,800 --> 00:08:21,480 Speaker 1: of the bellweathers of this market. It is it is 141 00:08:22,000 --> 00:08:27,239 Speaker 1: a hopes and dream stock that investors have pinned. You know, really, 142 00:08:27,280 --> 00:08:31,440 Speaker 1: whatever their expectations are on a future, a green future globally, 143 00:08:31,600 --> 00:08:33,840 Speaker 1: they have they have put it on this stock and 144 00:08:33,880 --> 00:08:36,920 Speaker 1: on this CEO, who has done a really good job 145 00:08:36,960 --> 00:08:40,480 Speaker 1: in promoting that very vision. The problem, of course, is 146 00:08:40,480 --> 00:08:44,319 Speaker 1: is that it's an automobile company, and it's it's increasingly 147 00:08:44,679 --> 00:08:48,160 Speaker 1: having problems making automobiles, and soon it's going to be 148 00:08:48,240 --> 00:08:51,520 Speaker 1: facing much more competition from people who do know how 149 00:08:51,600 --> 00:08:56,240 Speaker 1: to make automobiles. In fact, every major automobile manufacturer around 150 00:08:56,240 --> 00:08:59,240 Speaker 1: the world, Europe, Japan, the United States has come out 151 00:08:59,280 --> 00:09:02,600 Speaker 1: and said we will have some form of an electric 152 00:09:02,760 --> 00:09:07,240 Speaker 1: or hybrid vehicle either throughout our line or that's what 153 00:09:07,320 --> 00:09:11,000 Speaker 1: our entire line will consist of. So the question is 154 00:09:11,120 --> 00:09:15,439 Speaker 1: Tesla an actual paradigm shift, or they a game changer 155 00:09:15,480 --> 00:09:19,200 Speaker 1: in the world of automotives, or are they a stock 156 00:09:19,320 --> 00:09:22,600 Speaker 1: that simply, you know, came up with an idea that 157 00:09:22,640 --> 00:09:25,720 Speaker 1: everybody else has adopted, but there's nothing unique to the 158 00:09:25,760 --> 00:09:29,319 Speaker 1: company other than a very charismatic leader. I think it's 159 00:09:29,320 --> 00:09:32,360 Speaker 1: a great question. Berry. I think they were a paradigm 160 00:09:32,360 --> 00:09:34,920 Speaker 1: shift six or seven years ago when they introduced the Models, 161 00:09:35,360 --> 00:09:38,240 Speaker 1: and I have always said the Models was an important 162 00:09:38,280 --> 00:09:43,719 Speaker 1: car because Musk made E vs electric vehicle sexy. Right 163 00:09:43,800 --> 00:09:46,800 Speaker 1: Prior to that, any type of green vehicle was a 164 00:09:46,800 --> 00:09:51,040 Speaker 1: compromise the Nile exactly. And I know you're a car guy, 165 00:09:51,080 --> 00:09:53,880 Speaker 1: Berry and and so you know that. And and suddenly 166 00:09:53,920 --> 00:09:56,000 Speaker 1: you had this Models which was a car that was 167 00:09:56,040 --> 00:09:58,800 Speaker 1: aspirational car you wanted to drive up to the country 168 00:09:58,840 --> 00:10:02,760 Speaker 1: club or two, you know, the restaurant valet, and and 169 00:10:02,920 --> 00:10:05,720 Speaker 1: everybody wanted one. And the problem is, of course, the 170 00:10:05,760 --> 00:10:10,320 Speaker 1: model Lesque now is seven years old. And finally, finally 171 00:10:10,920 --> 00:10:15,439 Speaker 1: the Europeans and and Detroit and ultimately Japan are coming 172 00:10:15,440 --> 00:10:18,320 Speaker 1: with their vehicles. We have Audi and Jaguar coming this 173 00:10:18,400 --> 00:10:22,320 Speaker 1: year with very good looking sexy crossover cars. And then 174 00:10:22,520 --> 00:10:24,679 Speaker 1: um near and dear to your heart, we have Porsche 175 00:10:24,720 --> 00:10:28,720 Speaker 1: coming out next year. Miche a handsome car which is 176 00:10:28,880 --> 00:10:31,400 Speaker 1: a gorgeous car and it's coming out next year and 177 00:10:31,400 --> 00:10:33,959 Speaker 1: and is a sports car designed from the bottom up 178 00:10:34,000 --> 00:10:37,000 Speaker 1: from I believe their Lamon's team, and uh, you know. 179 00:10:37,080 --> 00:10:42,199 Speaker 1: And so now Tesla is in is in a scrum. 180 00:10:42,320 --> 00:10:46,160 Speaker 1: They're going to be competing with well financed operations with 181 00:10:46,240 --> 00:10:49,559 Speaker 1: good R and D whose technology is is probably well 182 00:10:49,600 --> 00:10:51,680 Speaker 1: ahead of theirs at this point. They can't fund themselves 183 00:10:51,679 --> 00:10:57,040 Speaker 1: by selling flamethrowers every couple of months. Flamethrowers and hats. Um, yeah, 184 00:10:57,040 --> 00:10:59,360 Speaker 1: I mean and and and but we're laughing. But that's 185 00:10:59,440 --> 00:11:01,360 Speaker 1: kind of problem them, right, because you have a CEO 186 00:11:01,600 --> 00:11:04,000 Speaker 1: is kind of all over the place. Um. We believe 187 00:11:04,040 --> 00:11:07,360 Speaker 1: actually his passion is space X. So I think he's 188 00:11:07,360 --> 00:11:10,600 Speaker 1: going to actually hand over the reins as CEO at 189 00:11:10,640 --> 00:11:13,200 Speaker 1: some point in the next few years. Um, and and 190 00:11:13,200 --> 00:11:16,040 Speaker 1: and move full time over to to space X. Plus 191 00:11:16,080 --> 00:11:19,280 Speaker 1: the hyper loop and the boring. Oh yeah, they forgot 192 00:11:19,280 --> 00:11:21,880 Speaker 1: about the hyper loop. Yeah, that's enough. And supposedly they're 193 00:11:21,960 --> 00:11:26,600 Speaker 1: really exploring doing something with that boring company is testing 194 00:11:26,880 --> 00:11:30,600 Speaker 1: boring equipment and and so there's a lot going on there. 195 00:11:30,640 --> 00:11:32,480 Speaker 1: And and that's part of I think that's part of 196 00:11:32,480 --> 00:11:35,839 Speaker 1: the allure of the of the company. It's valuation is 197 00:11:36,240 --> 00:11:40,760 Speaker 1: the CEO. The problem again is that he's he's up 198 00:11:40,760 --> 00:11:44,640 Speaker 1: against serious competitors in his core business. And and then 199 00:11:44,800 --> 00:11:48,839 Speaker 1: finally on that we track executive departures. We have this 200 00:11:48,880 --> 00:11:53,320 Speaker 1: list we put out and it is stunning as to 201 00:11:53,400 --> 00:11:55,520 Speaker 1: how many senior executives have left this company in the 202 00:11:55,600 --> 00:11:58,720 Speaker 1: last two years. The only two companies that we've seen 203 00:11:58,760 --> 00:12:02,520 Speaker 1: in our history with a similar executive departure pattern, where 204 00:12:02,600 --> 00:12:05,520 Speaker 1: Valiant Pharmaceuticals a couple of years ago and a little 205 00:12:05,520 --> 00:12:09,280 Speaker 1: company in Houston call En Round. And it is never 206 00:12:09,440 --> 00:12:12,679 Speaker 1: a good sign when almost all your senior executives are 207 00:12:12,720 --> 00:12:15,880 Speaker 1: leading at the stock price at at a high. That's 208 00:12:15,920 --> 00:12:18,160 Speaker 1: telling you there's something wrong. And I and I don't 209 00:12:18,160 --> 00:12:21,240 Speaker 1: know what it is. But but almost all the senior 210 00:12:21,240 --> 00:12:23,959 Speaker 1: executives at Test, let's see something and are leaving stock 211 00:12:24,000 --> 00:12:29,040 Speaker 1: option packages on the table. What about the idea that 212 00:12:29,400 --> 00:12:33,040 Speaker 1: some big company, maybe it's a GM, comes along and 213 00:12:33,160 --> 00:12:37,040 Speaker 1: buys them as a rescue package and jump starts their 214 00:12:37,080 --> 00:12:42,760 Speaker 1: own um e V program. Well, the problem with that 215 00:12:42,920 --> 00:12:45,400 Speaker 1: is is the GM, for example, the reason you would 216 00:12:45,400 --> 00:12:48,640 Speaker 1: buy Test ostensibly is because of technology, not because of 217 00:12:48,720 --> 00:12:53,400 Speaker 1: manufacturing process. Right. Their manufacturing process is actually pretty poor. 218 00:12:53,600 --> 00:12:56,560 Speaker 1: It's the model three is their new car appears to 219 00:12:56,600 --> 00:13:00,840 Speaker 1: have lots of issues upon production, so you would be 220 00:13:00,880 --> 00:13:05,360 Speaker 1: buying them for for Elon's vision or their technology. Little 221 00:13:05,360 --> 00:13:07,840 Speaker 1: brand Halo also a little make your little hipper than 222 00:13:07,880 --> 00:13:11,120 Speaker 1: you General Motors might be just using them as an example. 223 00:13:11,280 --> 00:13:13,400 Speaker 1: It might be, but the problem is, of course that 224 00:13:13,520 --> 00:13:17,439 Speaker 1: that GM's cruise software is now better than Tesla's autopilot, 225 00:13:17,559 --> 00:13:21,040 Speaker 1: and their product is out and their manufacturing exactly and 226 00:13:21,040 --> 00:13:24,000 Speaker 1: and so um, and you have to be careful because 227 00:13:24,080 --> 00:13:27,439 Speaker 1: again most of this mystique of Tesla is based on 228 00:13:27,440 --> 00:13:30,439 Speaker 1: one car, the models right, which is still a beautiful 229 00:13:30,720 --> 00:13:34,160 Speaker 1: car seven years old, but it's Yeah, but the Model 230 00:13:34,360 --> 00:13:37,600 Speaker 1: X was was was just was lukewarm. It was too 231 00:13:37,640 --> 00:13:41,680 Speaker 1: expensive for what essentially is a mid size van. And 232 00:13:41,679 --> 00:13:44,840 Speaker 1: and and now the Model three is is maybe problematic 233 00:13:45,040 --> 00:13:47,400 Speaker 1: and and so you've got to got an issue here 234 00:13:47,440 --> 00:13:51,000 Speaker 1: where you've got basically a fifty billion dollar market gap, 235 00:13:51,040 --> 00:13:53,840 Speaker 1: which by the way, is almost the same as GMS, 236 00:13:53,880 --> 00:13:58,200 Speaker 1: and it's and it exceeds forwards. Uh, you'd be buying 237 00:13:58,200 --> 00:14:01,760 Speaker 1: a company just as big as yourself off to basically 238 00:14:01,800 --> 00:14:04,800 Speaker 1: lose money and and have a little cache. I don't 239 00:14:04,800 --> 00:14:10,200 Speaker 1: see it makes perfect sense. Um. So the other side 240 00:14:10,240 --> 00:14:12,439 Speaker 1: of them, let me push back a little bit on Tesla. 241 00:14:13,000 --> 00:14:18,000 Speaker 1: They've completely changed the game. They've forced everybody else in 242 00:14:18,760 --> 00:14:23,360 Speaker 1: that somebody, maybe Toyota does a joint venture with them, 243 00:14:23,360 --> 00:14:27,400 Speaker 1: maybe some other Chinese or Korean manufacturer comes along and says, 244 00:14:27,800 --> 00:14:30,200 Speaker 1: we want a toe hold in the US and elsewhere. 245 00:14:31,720 --> 00:14:34,160 Speaker 1: What what is the company worth in a takeover or 246 00:14:34,200 --> 00:14:37,040 Speaker 1: do you end up in a take under situation? Well, 247 00:14:37,120 --> 00:14:39,440 Speaker 1: you're you're a little late, because Toad and Diameler did 248 00:14:39,440 --> 00:14:42,360 Speaker 1: do joint ventures with Tesla ten years ago and sold 249 00:14:42,400 --> 00:14:45,800 Speaker 1: all their stock. They did, yes, and they did in 250 00:14:45,840 --> 00:14:49,880 Speaker 1: fact both Interestingly, both of those both those companies sent 251 00:14:49,960 --> 00:14:53,400 Speaker 1: teams of engineers to help Ellen get the models out. 252 00:14:53,960 --> 00:14:56,720 Speaker 1: And so I think that that we've already seen this, 253 00:14:57,160 --> 00:15:01,720 Speaker 1: and and the problem is is we we just discussed, 254 00:15:01,840 --> 00:15:04,440 Speaker 1: is that the valuation of the company, which is a 255 00:15:04,880 --> 00:15:08,440 Speaker 1: fifty billion, fifty billion dollars in equity cap and then 256 00:15:08,560 --> 00:15:11,960 Speaker 1: by the time West plus debt, you're talking about a 257 00:15:12,000 --> 00:15:16,000 Speaker 1: sixty plus billion dollar total enterprise value. This would sink 258 00:15:16,720 --> 00:15:20,400 Speaker 1: almost anybody but the very largest companies who would have 259 00:15:20,440 --> 00:15:23,160 Speaker 1: to finance not only the sixty billion costs but the 260 00:15:23,200 --> 00:15:26,960 Speaker 1: operating losses. So you you would destroy the earnings of 261 00:15:27,000 --> 00:15:30,560 Speaker 1: almost any auto O E M by buying Tesla. Fascinating. 262 00:15:30,960 --> 00:15:33,440 Speaker 1: Let's talk a little bit about hedge funds and how 263 00:15:33,440 --> 00:15:38,000 Speaker 1: they've changed over the years. The last time you and 264 00:15:38,040 --> 00:15:42,040 Speaker 1: I sat down for a conversation was about three years ago, 265 00:15:42,400 --> 00:15:45,880 Speaker 1: or a recorded conversation. I should say you mentioned that 266 00:15:45,920 --> 00:15:49,160 Speaker 1: back in the day, uh, there were a few hundred 267 00:15:49,160 --> 00:15:52,360 Speaker 1: hedge funds and and out of those, twenty or thirty 268 00:15:52,400 --> 00:15:58,360 Speaker 1: were reliable alpha generators. Today there's eleven thousand or so 269 00:15:58,560 --> 00:16:03,760 Speaker 1: hedge funds. How many? And probably is it that? Is 270 00:16:03,800 --> 00:16:08,920 Speaker 1: it still that smaller percentage of regular You know, it's 271 00:16:09,720 --> 00:16:13,280 Speaker 1: I have a little bit of advantage UM advantage point 272 00:16:14,160 --> 00:16:16,440 Speaker 1: because not only am I a manager, but I also 273 00:16:16,520 --> 00:16:19,800 Speaker 1: sit on some investment committees, so reasonably large investment committees. 274 00:16:20,160 --> 00:16:22,680 Speaker 1: So I get to see the pitches. I get to 275 00:16:22,720 --> 00:16:24,440 Speaker 1: see the pitches, and I get to see the results 276 00:16:24,800 --> 00:16:26,760 Speaker 1: from a lot of people in the industry as as 277 00:16:26,880 --> 00:16:30,560 Speaker 1: as someone who allocates capital. And I have to tell you, 278 00:16:30,600 --> 00:16:35,600 Speaker 1: I mean, the industry is wanting UM, and it's wanting 279 00:16:35,720 --> 00:16:39,320 Speaker 1: across the board, and alpha's have dropped, including our own 280 00:16:40,040 --> 00:16:45,240 Speaker 1: UM over time UM, whether they've been competed away UM. Now, 281 00:16:45,360 --> 00:16:47,840 Speaker 1: another theory I have, of course, being on the short side, 282 00:16:48,280 --> 00:16:51,600 Speaker 1: is that lower interest rates, particularly for short sellers, have 283 00:16:51,760 --> 00:16:57,280 Speaker 1: reduced rebate income. And so when I started, UM, if 284 00:16:57,320 --> 00:17:00,720 Speaker 1: we saw the stock short before anything happened, we are 285 00:17:00,720 --> 00:17:03,960 Speaker 1: in six or seven percent annually on the cash proceeds 286 00:17:04,680 --> 00:17:07,360 Speaker 1: and we split that with the prime broker, and now 287 00:17:07,400 --> 00:17:10,800 Speaker 1: that number more recently was zero, and that's that was 288 00:17:10,840 --> 00:17:16,800 Speaker 1: a significant source of returns. UM. So I think that 289 00:17:16,800 --> 00:17:21,360 Speaker 1: that um that's one aspect, particularly for fundamental short sellers. 290 00:17:21,400 --> 00:17:24,360 Speaker 1: But look, I mean, markets have gotten more and more efficient. 291 00:17:24,440 --> 00:17:27,720 Speaker 1: The more you have smart people pursuing something, the tougher 292 00:17:27,800 --> 00:17:29,560 Speaker 1: it's going to be to beat the market. That's just 293 00:17:29,640 --> 00:17:32,879 Speaker 1: a given. I think paradox of skill is what And 294 00:17:32,920 --> 00:17:35,800 Speaker 1: then and of course the size, right, I mean, you know, 295 00:17:35,840 --> 00:17:38,080 Speaker 1: it's a lot easier to to beat the market if 296 00:17:38,080 --> 00:17:42,440 Speaker 1: you're running fifteen million than than a few billion, even 297 00:17:42,440 --> 00:17:46,040 Speaker 1: a few hundred million, there's still some some opportunity. But 298 00:17:46,160 --> 00:17:48,280 Speaker 1: some of these funds are five and ten and twenty 299 00:17:48,280 --> 00:17:51,199 Speaker 1: billion dollars. That's tough to move. Swing that around. Well. 300 00:17:51,240 --> 00:17:54,240 Speaker 1: The other thing is that, of course, you stop managing 301 00:17:54,280 --> 00:17:56,680 Speaker 1: a portfolio and you start managing a business as well. 302 00:17:56,720 --> 00:18:00,199 Speaker 1: And I'm always mystified by my peers who who been 303 00:18:00,280 --> 00:18:03,000 Speaker 1: very successful and they're now running you know, as you say, 304 00:18:03,000 --> 00:18:05,239 Speaker 1: ten or twenty billion dollars but have two hundred three 305 00:18:05,320 --> 00:18:09,680 Speaker 1: hundred employees, and I just I mean, that just blows 306 00:18:09,720 --> 00:18:12,880 Speaker 1: my mind. That's reasonably large business. How big is can 307 00:18:12,880 --> 00:18:15,119 Speaker 1: a coast these days? We're probably we're the same as 308 00:18:15,160 --> 00:18:17,120 Speaker 1: we've been for years and years and years basically about 309 00:18:17,119 --> 00:18:20,280 Speaker 1: thirty people, um, which is still work to manage. But 310 00:18:20,359 --> 00:18:24,000 Speaker 1: it's not a full time just not it's not it's 311 00:18:24,040 --> 00:18:26,600 Speaker 1: it's that's it's a it's a magnitude of difference. So, 312 00:18:27,320 --> 00:18:31,040 Speaker 1: given your perspective as both a fund manager and an 313 00:18:31,080 --> 00:18:35,840 Speaker 1: asset allocator, when you're reviewing a hedge fund and deciding 314 00:18:35,840 --> 00:18:39,199 Speaker 1: whether or not you're gonna give them capital, what are 315 00:18:39,200 --> 00:18:42,639 Speaker 1: you actually looking for? What? What would make you say 316 00:18:43,119 --> 00:18:45,160 Speaker 1: this is a place I could park some money. So 317 00:18:45,600 --> 00:18:49,240 Speaker 1: some you know, Julian Robertson said it best, Um, and 318 00:18:49,600 --> 00:18:51,760 Speaker 1: I think to some extents why the Tiger cubs have 319 00:18:51,840 --> 00:18:55,440 Speaker 1: been so successful is what is your edge? And he always, 320 00:18:55,520 --> 00:18:59,320 Speaker 1: he always, when when having a bear and a bull 321 00:18:59,359 --> 00:19:02,879 Speaker 1: discuss debate a stock at his shop, Um, we ran 322 00:19:02,960 --> 00:19:04,479 Speaker 1: money for him, and he would have us come in 323 00:19:04,520 --> 00:19:07,399 Speaker 1: and talk about one of his shorts are shorts because 324 00:19:07,400 --> 00:19:09,480 Speaker 1: someone in the shop may have liked it on alongside, 325 00:19:10,160 --> 00:19:12,600 Speaker 1: and he would constantly say, what is your edge? What 326 00:19:12,640 --> 00:19:14,959 Speaker 1: do you know that the market doesn't and and and 327 00:19:14,960 --> 00:19:17,800 Speaker 1: that applies I think the fund managers generally, what is 328 00:19:17,840 --> 00:19:21,040 Speaker 1: in your process that gives you an edge, whether it's 329 00:19:21,280 --> 00:19:25,760 Speaker 1: trading wise, whether it's research wise, that that basically sets 330 00:19:25,760 --> 00:19:28,680 Speaker 1: you aside, that that you see things differently, and you 331 00:19:28,720 --> 00:19:32,360 Speaker 1: see you see the reality versus the perception of reality. 332 00:19:32,520 --> 00:19:36,480 Speaker 1: And and so what I found is that numbers can 333 00:19:36,520 --> 00:19:41,200 Speaker 1: be very misleading because um, very smart people can struggle, um, 334 00:19:41,280 --> 00:19:45,080 Speaker 1: and very very uh uh mediocre people can excel for 335 00:19:45,160 --> 00:19:48,400 Speaker 1: periods of time. Um. It's just not where you want 336 00:19:48,400 --> 00:19:52,160 Speaker 1: to place your bets. And so if if as an allocator, 337 00:19:52,200 --> 00:19:55,000 Speaker 1: if we see someone who we think is not only 338 00:19:55,000 --> 00:19:58,240 Speaker 1: smart and hard working, but has a define herble and 339 00:19:58,359 --> 00:20:02,840 Speaker 1: sustainable edge, um, that's someone that you might want to consider, 340 00:20:02,880 --> 00:20:06,240 Speaker 1: particularly if they're struggling, um to be allocating capital. Because 341 00:20:06,280 --> 00:20:08,960 Speaker 1: reversion to the mean is also a pretty powerful process. 342 00:20:09,119 --> 00:20:12,960 Speaker 1: So when you say struggling, you mean struggling running the fund, 343 00:20:13,160 --> 00:20:16,040 Speaker 1: or struggling in terms of their performance. You know, maybe 344 00:20:16,040 --> 00:20:18,679 Speaker 1: they're not generating the alpha they're they're they're matching the 345 00:20:18,760 --> 00:20:22,160 Speaker 1: market and or slightly behind the market. But but yet 346 00:20:22,440 --> 00:20:24,520 Speaker 1: you know, have a have a pretty superior long term 347 00:20:24,560 --> 00:20:29,320 Speaker 1: track record. Same people doing it, same process, um and 348 00:20:29,320 --> 00:20:33,200 Speaker 1: and so sometimes you see sometimes you see an opportunity 349 00:20:33,240 --> 00:20:35,520 Speaker 1: to do that. What most people do, of course, is 350 00:20:35,560 --> 00:20:39,120 Speaker 1: they just simply look at performance and and it's it's 351 00:20:39,800 --> 00:20:42,640 Speaker 1: that alone will not do it for you, because you're 352 00:20:42,640 --> 00:20:45,119 Speaker 1: always going to chase that which has been hot. And 353 00:20:45,840 --> 00:20:48,080 Speaker 1: it's so hard to to say, well, this guy is 354 00:20:48,080 --> 00:20:51,119 Speaker 1: not doing well, we should be allocating some capital because 355 00:20:51,160 --> 00:20:54,240 Speaker 1: they're gonna come back into favor and and by the way, 356 00:20:54,240 --> 00:20:57,880 Speaker 1: they're still doing what they've always done well. Um, very 357 00:20:57,960 --> 00:20:59,720 Speaker 1: very tough. And then of course you have to you 358 00:20:59,760 --> 00:21:05,080 Speaker 1: have to disaggregate the beta from managers, and that's that's essential. Um. 359 00:21:05,320 --> 00:21:07,439 Speaker 1: You have to take out the market because we can 360 00:21:07,480 --> 00:21:10,800 Speaker 1: buy the market for ten basis points, right, So paying 361 00:21:11,080 --> 00:21:14,600 Speaker 1: big fees to people who are who are either matching 362 00:21:14,600 --> 00:21:19,199 Speaker 1: the market with no no edge or or leveraging the 363 00:21:19,280 --> 00:21:22,560 Speaker 1: market to get out performance is the fools earned. You know. 364 00:21:22,640 --> 00:21:27,080 Speaker 1: I read somewhere that past performance is no guarantee of 365 00:21:27,160 --> 00:21:30,760 Speaker 1: future returns. I think I saw that on some documents somewhere. 366 00:21:32,000 --> 00:21:37,840 Speaker 1: Let's talk about some of those Conseco, Tycho, Commodore, coll 367 00:21:37,920 --> 00:21:40,399 Speaker 1: Eco Integrated. I think I don't think your listeners were 368 00:21:40,400 --> 00:21:42,800 Speaker 1: alive when most of those who were done there were 369 00:21:42,800 --> 00:21:46,280 Speaker 1: more recent more recent there were more recent ones. So 370 00:21:46,280 --> 00:21:50,000 Speaker 1: so so let me ask a different question. Then, tell 371 00:21:50,080 --> 00:21:53,480 Speaker 1: us about something that in hindsight you looked at and said, 372 00:21:53,880 --> 00:21:57,240 Speaker 1: why don't we short that? That's right in our strike zone? 373 00:21:57,320 --> 00:22:00,680 Speaker 1: Any anything that you looked at and didn't I think 374 00:22:00,680 --> 00:22:05,600 Speaker 1: the biggest, the biggest, the biggest whiff uh that that 375 00:22:05,840 --> 00:22:08,200 Speaker 1: we had done work on and took a pass on 376 00:22:09,000 --> 00:22:12,040 Speaker 1: was Japan in the late eighties. No, I was sure 377 00:22:12,119 --> 00:22:14,200 Speaker 1: a lot of commercial real estate stocks in the US 378 00:22:14,280 --> 00:22:17,359 Speaker 1: in the late eighties, the tax law had changed. Everyone 379 00:22:17,400 --> 00:22:19,280 Speaker 1: had levered up in the commercial real estate to sell 380 00:22:19,320 --> 00:22:22,720 Speaker 1: it to the Japanese um. The tax shelter business was 381 00:22:22,720 --> 00:22:25,280 Speaker 1: was kneecapped by the tough by the a Tax Act 382 00:22:25,320 --> 00:22:28,960 Speaker 1: of eight six And when we looked at what the 383 00:22:29,040 --> 00:22:31,080 Speaker 1: Japanese were doing, we saw them doing all kinds of 384 00:22:31,160 --> 00:22:34,720 Speaker 1: dumb things. And I began looking at the Japanese banks, 385 00:22:34,720 --> 00:22:36,600 Speaker 1: which at the time were the largest in the world, 386 00:22:36,960 --> 00:22:40,200 Speaker 1: and some of the Japanese conglomerates which were the largest 387 00:22:40,240 --> 00:22:42,520 Speaker 1: in the world, and the numbers didn't make any sense. 388 00:22:43,040 --> 00:22:44,480 Speaker 1: But I felt that I had my hands full in 389 00:22:44,520 --> 00:22:47,240 Speaker 1: the US, and what I really missed was a twenty 390 00:22:47,320 --> 00:22:50,960 Speaker 1: year bear market in in these heavily leveraged Japanese companies, 391 00:22:51,000 --> 00:22:55,639 Speaker 1: and compared to even the dot com NASDAC, the Japanese 392 00:22:55,680 --> 00:23:00,520 Speaker 1: market was far more expensive, far more overstretched. And then 393 00:23:00,640 --> 00:23:03,399 Speaker 1: NASDAK even got at the peak and two things right, 394 00:23:03,480 --> 00:23:05,879 Speaker 1: it was and and and of course it got to 395 00:23:06,400 --> 00:23:08,919 Speaker 1: it got to just insane heights that it's still not 396 00:23:09,080 --> 00:23:13,080 Speaker 1: scaled um. And and so I think that that that was, 397 00:23:13,359 --> 00:23:16,360 Speaker 1: you know, one of our greatest our greatest missus um 398 00:23:16,440 --> 00:23:20,800 Speaker 1: fundamentally so from Japan. Let's just hop across the China 399 00:23:20,840 --> 00:23:24,040 Speaker 1: Sea and talk about China. You were very negative on 400 00:23:24,200 --> 00:23:27,440 Speaker 1: China for a long time before they had a little 401 00:23:27,480 --> 00:23:30,840 Speaker 1: bit of a hiccup. Tell us about the China trade 402 00:23:30,960 --> 00:23:33,800 Speaker 1: and what do you think of the Chinese economy here 403 00:23:34,240 --> 00:23:37,320 Speaker 1: and that region as a area to invest in. Well, 404 00:23:37,320 --> 00:23:40,440 Speaker 1: it's funny that we talked about Japan, because the analog 405 00:23:40,600 --> 00:23:43,919 Speaker 1: that China eight years ago, when we started talking about it, 406 00:23:44,040 --> 00:23:48,480 Speaker 1: most most resembled was actually actually Japan of the late eighties. 407 00:23:48,680 --> 00:23:51,399 Speaker 1: If you think about it, it was a state driven 408 00:23:51,640 --> 00:23:55,640 Speaker 1: capitalist model that was a better model, some thought than 409 00:23:55,840 --> 00:23:58,760 Speaker 1: the US of the Western model. It was heavily relied 410 00:23:58,800 --> 00:24:01,680 Speaker 1: on debt, it was heavily relied on a domestic real 411 00:24:01,800 --> 00:24:06,600 Speaker 1: estate bubble. It was very trade oriented, export oriented. Um. 412 00:24:07,080 --> 00:24:10,520 Speaker 1: It had a protected currency, it had its own culture. 413 00:24:10,840 --> 00:24:14,920 Speaker 1: I mean, the similarities between Japan in in oh nine 414 00:24:14,920 --> 00:24:18,880 Speaker 1: two tho ten and China and nine two thousand ten 415 00:24:18,920 --> 00:24:25,280 Speaker 1: in Japan were actually somewhat significant that, of course everything 416 00:24:25,359 --> 00:24:29,480 Speaker 1: is different and and um. But when we started looking 417 00:24:29,560 --> 00:24:32,680 Speaker 1: at China, the f x I, which is the eighth 418 00:24:32,680 --> 00:24:36,520 Speaker 1: share you know, et F was trading around forty one dollars. 419 00:24:36,560 --> 00:24:40,400 Speaker 1: It's just forty six now, so it's up about it's 420 00:24:40,440 --> 00:24:42,840 Speaker 1: up a little bit more than ten percent in eight years. 421 00:24:43,520 --> 00:24:46,680 Speaker 1: The rest of the markets that we were looking at, 422 00:24:46,760 --> 00:24:50,080 Speaker 1: you know, have doubled and tripled um. So China has 423 00:24:50,119 --> 00:24:52,760 Speaker 1: been one of the better places to be short for 424 00:24:52,840 --> 00:24:56,280 Speaker 1: the past eight years if you're a short seller. I 425 00:24:56,320 --> 00:24:59,440 Speaker 1: think that what's really interesting about China is how little 426 00:24:59,480 --> 00:25:03,440 Speaker 1: has changed in the eight years. Shishingping is basically now 427 00:25:03,480 --> 00:25:07,359 Speaker 1: the emperor, but the whole concept of all the stuff 428 00:25:07,400 --> 00:25:10,040 Speaker 1: you've heard in the last eight years, Oh, they're going 429 00:25:10,080 --> 00:25:13,360 Speaker 1: to become a consumer driven economy that hasn't happened. They're 430 00:25:13,400 --> 00:25:16,240 Speaker 1: going to reduce investment as a percent of GDP. That 431 00:25:16,280 --> 00:25:19,399 Speaker 1: hasn't happened. Uh, you know, the currency is going to 432 00:25:19,440 --> 00:25:21,320 Speaker 1: either go up a lot or down a lot. That 433 00:25:21,400 --> 00:25:25,199 Speaker 1: hasn't happened. Um. What's really interesting about China is that 434 00:25:25,240 --> 00:25:29,520 Speaker 1: it's pretty much status quo and the model, the the 435 00:25:29,560 --> 00:25:32,280 Speaker 1: economic model that is China is still the same. It 436 00:25:32,359 --> 00:25:36,880 Speaker 1: relies heavily on debt, and so debt is still growing. Uh, 437 00:25:36,880 --> 00:25:39,360 Speaker 1: it's not growing as fast as it was eight years ago, 438 00:25:39,400 --> 00:25:41,960 Speaker 1: when it was growing twenty percent a year. It's now 439 00:25:42,080 --> 00:25:44,960 Speaker 1: growing ten to fifteen percent a year. But it's still 440 00:25:44,960 --> 00:25:48,920 Speaker 1: growing at twice GDP growth. And they can't get off 441 00:25:49,160 --> 00:25:53,760 Speaker 1: the the stimulus or the steroids, if you will, of 442 00:25:53,840 --> 00:25:58,960 Speaker 1: just constant debt injections to build new airports, roads, high rises. 443 00:25:59,480 --> 00:26:01,879 Speaker 1: It's still what's driving the economy. So what's the end 444 00:26:01,960 --> 00:26:05,320 Speaker 1: game for China? I wish I knew. Um, it's it's 445 00:26:05,440 --> 00:26:09,200 Speaker 1: it's fascinating to watch because everybody sees it now. When 446 00:26:09,200 --> 00:26:11,960 Speaker 1: we started talking about eight years ago, it's a controversial viewpoint. 447 00:26:12,400 --> 00:26:15,200 Speaker 1: You know now now it's not right. It's hard to 448 00:26:15,240 --> 00:26:17,800 Speaker 1: the debt levels have doubled and tripled since then. That's 449 00:26:17,840 --> 00:26:21,520 Speaker 1: sixty minutes um segment on the ghost Cities of China. 450 00:26:22,119 --> 00:26:25,159 Speaker 1: I as I was watching that, I'm thinking Jim Chanos 451 00:26:25,160 --> 00:26:28,080 Speaker 1: has to be turning cart wheels over this. What's fascinating 452 00:26:28,080 --> 00:26:30,359 Speaker 1: about that, of course, is is that the cities that 453 00:26:30,440 --> 00:26:34,400 Speaker 1: they showed have, as the bulls have said, mostly filled up. 454 00:26:34,720 --> 00:26:37,280 Speaker 1: The problem, of course is is there's new empty cities. 455 00:26:38,240 --> 00:26:40,920 Speaker 1: And then this is the inherent problem, right and so 456 00:26:41,320 --> 00:26:45,600 Speaker 1: I think that that that any any time you've got 457 00:26:45,600 --> 00:26:50,000 Speaker 1: a model that's credit driven based on a property bubble 458 00:26:50,320 --> 00:26:53,280 Speaker 1: and and and investment, now that that is not needed. 459 00:26:53,320 --> 00:26:56,280 Speaker 1: I always joked that Hainan, the island of Hainan, their 460 00:26:56,320 --> 00:26:59,080 Speaker 1: tropical island in the South China Sea, when when we 461 00:26:59,119 --> 00:27:03,800 Speaker 1: started looking at China, it had one international airport. Um 462 00:27:03,840 --> 00:27:06,400 Speaker 1: about three or four years later they completed the second 463 00:27:06,920 --> 00:27:10,680 Speaker 1: international airport, which is not fully utilized today. And now 464 00:27:10,720 --> 00:27:14,639 Speaker 1: they've begun work on a third international airport which is 465 00:27:14,680 --> 00:27:17,359 Speaker 1: just folly on that little island in the little island. 466 00:27:17,440 --> 00:27:20,120 Speaker 1: So so this is the problem with an investment driven model. 467 00:27:20,280 --> 00:27:25,639 Speaker 1: All three of those have contributed to GDP construction. You know, 468 00:27:25,680 --> 00:27:29,440 Speaker 1: dollars go right into GDP. But of course the economic 469 00:27:29,440 --> 00:27:32,159 Speaker 1: returns and each one will have dropped. I'm going to 470 00:27:32,320 --> 00:27:34,880 Speaker 1: mangle this data point. I believe it was you who 471 00:27:35,400 --> 00:27:39,120 Speaker 1: had either said or written China over the past three 472 00:27:39,240 --> 00:27:42,840 Speaker 1: years used as much cement as United States used in 473 00:27:42,880 --> 00:27:45,159 Speaker 1: the entire twentieth century. I think it was. It was 474 00:27:45,200 --> 00:27:47,280 Speaker 1: not us, it was it was somebody else at Bill Gates, 475 00:27:47,280 --> 00:27:49,520 Speaker 1: I know, pointed out I don't know who the originator 476 00:27:49,520 --> 00:27:51,320 Speaker 1: of the data point was, but I think it was. 477 00:27:51,400 --> 00:27:54,200 Speaker 1: China in the last ten years has has used uh 478 00:27:54,240 --> 00:27:57,440 Speaker 1: as much concrete as the US did in the last 479 00:27:57,560 --> 00:28:02,880 Speaker 1: hundred plus UM. And they is true. Um, it's remarkable 480 00:28:02,920 --> 00:28:05,040 Speaker 1: to look at what China since it entered the w 481 00:28:05,160 --> 00:28:08,760 Speaker 1: t O in two thousand one has done. UM. And 482 00:28:08,800 --> 00:28:11,040 Speaker 1: it is done so. It has done so, and it 483 00:28:11,119 --> 00:28:13,760 Speaker 1: is and it is literally transformed a country in less 484 00:28:13,800 --> 00:28:17,359 Speaker 1: than twenty years. The problem again, of course, that that 485 00:28:17,640 --> 00:28:20,560 Speaker 1: the bears will keep pointing to, is you've pulled a 486 00:28:20,560 --> 00:28:23,440 Speaker 1: lot of it forward. Anytime you use debt to fuel 487 00:28:23,840 --> 00:28:27,280 Speaker 1: to fuel your growth, you're basically pulling forward consumption and 488 00:28:27,280 --> 00:28:31,720 Speaker 1: and that's just in the economic identity, and so there 489 00:28:31,760 --> 00:28:33,960 Speaker 1: will be a reckoning at some point. The deaths do 490 00:28:34,040 --> 00:28:37,160 Speaker 1: have to be serviced or inflated away and and one 491 00:28:37,160 --> 00:28:40,000 Speaker 1: of the two will happen. So let's let's talk about 492 00:28:40,040 --> 00:28:43,880 Speaker 1: a few other UM topics that I really enjoy your 493 00:28:43,920 --> 00:28:48,240 Speaker 1: perspective on. We talked about hedge funds earlier. I've been 494 00:28:48,320 --> 00:28:52,960 Speaker 1: reading a decent amount about private equity, and they're being 495 00:28:53,040 --> 00:28:56,800 Speaker 1: challenged in terms of are they really generating the sort 496 00:28:56,840 --> 00:29:00,400 Speaker 1: of above market returns they claim they're They're doing a 497 00:29:00,440 --> 00:29:04,640 Speaker 1: little bit of um, let's just call it creativity. So 498 00:29:04,720 --> 00:29:06,640 Speaker 1: when you for those who are unfamiliar, when you make 499 00:29:06,640 --> 00:29:10,240 Speaker 1: an investment in private equity, you're committing capital, but you're 500 00:29:10,280 --> 00:29:12,720 Speaker 1: not actually giving them capital, so you have more or 501 00:29:12,800 --> 00:29:18,000 Speaker 1: less after sequester that they calculate their performance based on 502 00:29:18,200 --> 00:29:21,400 Speaker 1: literally when the money hits, which could be two, three 503 00:29:21,480 --> 00:29:24,720 Speaker 1: or four years later. That you're sitting with capital tied 504 00:29:24,800 --> 00:29:27,880 Speaker 1: up that's not yet working theoretically, it's in a short 505 00:29:28,000 --> 00:29:31,600 Speaker 1: term fixed income fund. What what's your perspective on what's 506 00:29:31,600 --> 00:29:34,520 Speaker 1: going on with private equity. I assume you allocate on 507 00:29:34,560 --> 00:29:37,440 Speaker 1: some of the boards you sit UM money instil We do, 508 00:29:37,680 --> 00:29:39,800 Speaker 1: and some of my best friends and clients are in 509 00:29:39,840 --> 00:29:42,959 Speaker 1: private equity. So you know, look, I I always tell 510 00:29:43,000 --> 00:29:46,080 Speaker 1: them I'm jealous of them. You know, they have a 511 00:29:46,080 --> 00:29:50,120 Speaker 1: great business model, um and and and they're one of 512 00:29:50,200 --> 00:29:54,960 Speaker 1: the two areas in in investment management where nobody's questioning 513 00:29:55,680 --> 00:29:58,719 Speaker 1: fees and or returns or venture capital and private equity. 514 00:29:58,960 --> 00:30:01,360 Speaker 1: And remember bain Ca Capital and Mitt Romney. There was 515 00:30:01,400 --> 00:30:06,440 Speaker 1: a lot of reports about have did Bayne exaggerate its returns? 516 00:30:06,520 --> 00:30:09,160 Speaker 1: And that's sort of what started this whole cascade over 517 00:30:09,200 --> 00:30:12,920 Speaker 1: the PAIL. I think that the issue is a broader one, 518 00:30:12,960 --> 00:30:16,760 Speaker 1: which is if you're investing in venture capital in private equity, 519 00:30:16,800 --> 00:30:20,440 Speaker 1: I would just tell investors understand that in the case 520 00:30:20,480 --> 00:30:25,240 Speaker 1: of venture capital, you are investing in high beta, high beta, 521 00:30:25,560 --> 00:30:29,520 Speaker 1: high risk, high return situations. So a venture capital fund 522 00:30:29,560 --> 00:30:33,840 Speaker 1: should be measured not against the SMP but against some 523 00:30:33,840 --> 00:30:38,880 Speaker 1: some high beta you know whatever. Yeah, and a small cap, 524 00:30:39,280 --> 00:30:42,200 Speaker 1: high high beta fund. Private equity is a little bit different, right, 525 00:30:42,240 --> 00:30:46,000 Speaker 1: because all the private equity funds are are different, but 526 00:30:46,160 --> 00:30:50,320 Speaker 1: they do lever, and so at the end of the day, 527 00:30:50,360 --> 00:30:53,960 Speaker 1: a private equity fund should have multiples of return of 528 00:30:53,960 --> 00:30:58,240 Speaker 1: the SMP if you're using leverage. UM, I believe they don't. 529 00:30:58,800 --> 00:31:02,920 Speaker 1: And and so that's that examination and hedge funds began 530 00:31:03,000 --> 00:31:06,440 Speaker 1: this You and I both know, people began kind of 531 00:31:07,280 --> 00:31:10,440 Speaker 1: wondering about hedge funds after oh eight. The golden age 532 00:31:10,440 --> 00:31:13,640 Speaker 1: of hedge funds was two thousand to O two. That's 533 00:31:13,680 --> 00:31:17,280 Speaker 1: when the markets went down. And let's let's not forget 534 00:31:17,480 --> 00:31:20,280 Speaker 1: the two thousand oh two was worse than oh eight 535 00:31:20,320 --> 00:31:24,040 Speaker 1: for the stock market. The SMP went down, the NASTAC 536 00:31:24,120 --> 00:31:29,360 Speaker 1: went down where forty it was basically forty for everything, 537 00:31:29,480 --> 00:31:32,520 Speaker 1: and peaked to trot. The SMP was down about fifty seven. 538 00:31:33,000 --> 00:31:35,680 Speaker 1: But NASTAC didn't get nearly as she lacked in O 539 00:31:35,800 --> 00:31:38,960 Speaker 1: eight as it did. Yeah, that was a concentrated and 540 00:31:41,160 --> 00:31:43,520 Speaker 1: like collapse. Yeah, I was. And that's where retail investors were. 541 00:31:43,960 --> 00:31:47,160 Speaker 1: And and hedge funds missed that, right. They in fact, 542 00:31:47,320 --> 00:31:49,120 Speaker 1: some a lot of them made money in that period. 543 00:31:49,120 --> 00:31:52,120 Speaker 1: They were short the garbage and long value and value 544 00:31:52,120 --> 00:31:58,640 Speaker 1: actually and and and that that performance ushered in the 545 00:31:58,680 --> 00:32:01,520 Speaker 1: golden era of lows from oh three to oh eight. 546 00:32:02,320 --> 00:32:07,240 Speaker 1: And and then hedge funds didn't. They didn't basically hedge 547 00:32:07,520 --> 00:32:10,240 Speaker 1: they didn't protect you in oh seven oh eight, And 548 00:32:10,560 --> 00:32:12,520 Speaker 1: from there on end people began to look at them 549 00:32:12,520 --> 00:32:15,480 Speaker 1: differently and scrutinize them and look at the alpha's and 550 00:32:15,560 --> 00:32:19,000 Speaker 1: kind of disaggregate the results. And and you know, hedge 551 00:32:19,000 --> 00:32:20,960 Speaker 1: funds have had a basically rough goal of it ever 552 00:32:21,000 --> 00:32:26,160 Speaker 1: since of justifying their existence. Private equity has not had that. So, 553 00:32:26,680 --> 00:32:29,320 Speaker 1: to be fair to hedge funds, I think the pizza 554 00:32:29,400 --> 00:32:33,480 Speaker 1: troth returns according to some of some of the pizza 555 00:32:33,480 --> 00:32:37,720 Speaker 1: troth returns for some of the UM indices or something 556 00:32:37,760 --> 00:32:41,000 Speaker 1: like down twenty in a year when the markets were 557 00:32:41,040 --> 00:32:44,920 Speaker 1: down thirty, which is good on a relative basis, but 558 00:32:45,040 --> 00:32:47,080 Speaker 1: sure as hell is an absolute retire well, and then 559 00:32:47,080 --> 00:32:49,320 Speaker 1: they underperformed on their way back up. That's the problem. 560 00:32:49,480 --> 00:32:51,880 Speaker 1: That was the giant up six percent and when the 561 00:32:51,920 --> 00:32:54,640 Speaker 1: markets and so you know, stay for the you know, 562 00:32:55,080 --> 00:32:57,840 Speaker 1: you know, come for the come for the ips and losses, 563 00:32:57,920 --> 00:32:59,920 Speaker 1: and then stay for the under performance on the snappack. 564 00:33:01,080 --> 00:33:03,160 Speaker 1: You know, I get a nickel every time somebody says that, 565 00:33:03,200 --> 00:33:06,560 Speaker 1: which is fascinating. But but but you get my point. 566 00:33:06,600 --> 00:33:09,760 Speaker 1: And I think private equity, which has seen these short, 567 00:33:10,160 --> 00:33:13,960 Speaker 1: sharp recessions, you know, and and and then and easing 568 00:33:14,000 --> 00:33:17,240 Speaker 1: by the way of monetary policy over their life, private 569 00:33:17,280 --> 00:33:19,840 Speaker 1: equity really see nothing but lower rates over over its 570 00:33:20,000 --> 00:33:24,000 Speaker 1: golden era. Here, Um, what happens if if asset prices 571 00:33:24,000 --> 00:33:26,920 Speaker 1: don't go anywhere and rates go higher for the next generation. 572 00:33:27,160 --> 00:33:29,400 Speaker 1: I'm going to guess they're in trouble. I would guess that, well, 573 00:33:29,440 --> 00:33:32,640 Speaker 1: I guess that they may not be in trouble. Will 574 00:33:32,680 --> 00:33:35,440 Speaker 1: be the hope for returns that the pension funds and 575 00:33:35,520 --> 00:33:38,960 Speaker 1: endowments and sovereign wealth funds who just constantly just assume 576 00:33:39,000 --> 00:33:41,040 Speaker 1: private equity is going to earn them ten to twelve 577 00:33:41,120 --> 00:33:46,920 Speaker 1: percent um somewhat uncorrelated sort of boggles my mind. It's 578 00:33:46,960 --> 00:33:50,080 Speaker 1: the ultimate correlated asset theoretically. Can you stick around a 579 00:33:50,080 --> 00:33:51,720 Speaker 1: little bit, I have a bunch more questions for you. 580 00:33:51,800 --> 00:33:54,120 Speaker 1: I can stick around as long as you'd like. We 581 00:33:54,200 --> 00:33:58,240 Speaker 1: have been speaking to kinda Coast associates Jim Chainos. If 582 00:33:58,280 --> 00:34:01,320 Speaker 1: you enjoy this conversation, sure and check out our podcast 583 00:34:01,400 --> 00:34:04,120 Speaker 1: Extra is where we keep the tape rolling and continued 584 00:34:04,160 --> 00:34:08,160 Speaker 1: to discuss all things short selling. We love your comments, 585 00:34:08,320 --> 00:34:12,640 Speaker 1: feedback and suggestions right to us at m IB podcast 586 00:34:13,080 --> 00:34:16,200 Speaker 1: at Bloomberg dot net. You can check out my daily 587 00:34:16,280 --> 00:34:19,320 Speaker 1: column on Bloomberg View dot com. Follow me on Twitter 588 00:34:19,520 --> 00:34:22,640 Speaker 1: at rid Holts. I'm Barry Riholts. You're listening to my 589 00:34:22,719 --> 00:34:40,080 Speaker 1: master's in Business on Bloomberg Radio. Welcome to the podcast, Jim, 590 00:34:40,120 --> 00:34:41,840 Speaker 1: Thank you so much for doing this. I've been looking 591 00:34:41,880 --> 00:34:45,479 Speaker 1: forward to this for a while. I have so many 592 00:34:45,760 --> 00:34:49,480 Speaker 1: questions we didn't get to, and I have only a 593 00:34:49,520 --> 00:34:51,120 Speaker 1: finite amount of time, and I want to get to 594 00:34:51,200 --> 00:34:55,600 Speaker 1: my favorite questions. I asked all of my guests. UM, 595 00:34:55,600 --> 00:34:57,880 Speaker 1: but let me just go through one or two questions 596 00:34:57,920 --> 00:35:01,279 Speaker 1: that I have to ask. So you're a fundamental guy. 597 00:35:01,440 --> 00:35:05,279 Speaker 1: You you do not engage in technical shorting. You're not 598 00:35:05,320 --> 00:35:09,040 Speaker 1: looking at trend breaks or support failures or any of 599 00:35:09,080 --> 00:35:12,320 Speaker 1: that sort of chart chart reading. I've never been able 600 00:35:12,360 --> 00:35:15,560 Speaker 1: to to to make any money by looking at charts, 601 00:35:15,719 --> 00:35:18,160 Speaker 1: and so I don't think it's I don't think it's 602 00:35:18,160 --> 00:35:20,200 Speaker 1: a strength. I don't think I have any edge. No 603 00:35:20,440 --> 00:35:22,799 Speaker 1: edge it comes back, so I I you know, and 604 00:35:22,840 --> 00:35:26,040 Speaker 1: what about the quantitative side? Um. I know you've talked 605 00:35:26,120 --> 00:35:28,399 Speaker 1: about a lot of data, but do you guys use 606 00:35:28,560 --> 00:35:31,319 Speaker 1: data At Can of Coast, we we let everybody you 607 00:35:31,360 --> 00:35:36,440 Speaker 1: know are looking at factor based uh investing and what 608 00:35:36,560 --> 00:35:39,920 Speaker 1: factors are driving our stocks when we or another UM. 609 00:35:39,960 --> 00:35:44,719 Speaker 1: The problem of course with with using using factor based 610 00:35:44,800 --> 00:35:47,839 Speaker 1: data on price performance and not on research. We'll get 611 00:35:47,880 --> 00:35:50,960 Speaker 1: to that in a second is that, of course, by 612 00:35:51,000 --> 00:35:54,000 Speaker 1: the time you analyze the factors, they become self defeating. 613 00:35:54,040 --> 00:35:57,480 Speaker 1: And we had a quantitative um hedged version of our 614 00:35:57,520 --> 00:36:00,000 Speaker 1: short fund back in the mid nineties, and we really 615 00:36:00,040 --> 00:36:03,120 Speaker 1: license even back then that all the factors we were 616 00:36:03,120 --> 00:36:06,520 Speaker 1: extracting from the portfolio, they didn't last that long. And 617 00:36:06,560 --> 00:36:09,680 Speaker 1: I bet you now, I don't know for a fact, 618 00:36:09,680 --> 00:36:14,400 Speaker 1: but I think that that these factor based observations canceled 619 00:36:14,880 --> 00:36:18,080 Speaker 1: canceled themselves out even faster. And if we look at 620 00:36:18,120 --> 00:36:21,200 Speaker 1: the returns for some of the algorithmic funds in the 621 00:36:21,320 --> 00:36:24,080 Speaker 1: last few years, I think that bears it out. So 622 00:36:24,280 --> 00:36:27,960 Speaker 1: we mentioned earlier and ron Um you have had a 623 00:36:28,080 --> 00:36:33,000 Speaker 1: very good relationship with reporters and media. Have to mention 624 00:36:33,040 --> 00:36:36,239 Speaker 1: Bethany McClain, who whose work I've always loved and who 625 00:36:36,320 --> 00:36:40,120 Speaker 1: was right there in the middle of enron How has 626 00:36:40,200 --> 00:36:42,680 Speaker 1: the media worked with you over the years. How have 627 00:36:42,880 --> 00:36:46,360 Speaker 1: have people reached out to you, whether it's an analyst 628 00:36:46,640 --> 00:36:50,080 Speaker 1: um sort of calling late at night. What is your 629 00:36:50,080 --> 00:36:52,680 Speaker 1: relationship with the press? Well, I mean I think that 630 00:36:52,680 --> 00:36:56,839 Speaker 1: that reporters generally like talking to short sellers because they're 631 00:36:56,840 --> 00:36:59,399 Speaker 1: going to get they're going to get the opposing point 632 00:36:59,400 --> 00:37:03,200 Speaker 1: of view, typic be on a situation. Um, well, look, 633 00:37:03,239 --> 00:37:06,879 Speaker 1: there's there's thousands of people gainfully employed, making a lot 634 00:37:06,880 --> 00:37:10,120 Speaker 1: of money who are there to promote promote stories, right, 635 00:37:10,400 --> 00:37:13,759 Speaker 1: whether whether it's pr firms, whether it's analysts, whether it's 636 00:37:13,800 --> 00:37:16,399 Speaker 1: bankers who are always going to tell you why why 637 00:37:16,480 --> 00:37:20,680 Speaker 1: something is fantastic. Um, there's only a handful of people 638 00:37:20,680 --> 00:37:25,640 Speaker 1: who are economically motivated to say, you know, wait a minute, hey, 639 00:37:25,719 --> 00:37:28,480 Speaker 1: but um, you know this class might be half empty, 640 00:37:28,480 --> 00:37:32,200 Speaker 1: not half full. And so you know, most journalists I 641 00:37:32,239 --> 00:37:34,799 Speaker 1: know that, um that we talked to, have been talking 642 00:37:34,800 --> 00:37:37,759 Speaker 1: to short sellers for years and and just understand they're 643 00:37:37,760 --> 00:37:39,440 Speaker 1: going to get the other side of the story. It 644 00:37:39,560 --> 00:37:42,120 Speaker 1: might not be right, by the way, but at least 645 00:37:42,160 --> 00:37:45,600 Speaker 1: they will hear a reasoned opinion as to why maybe 646 00:37:45,800 --> 00:37:49,280 Speaker 1: the stock is overpriced not underpriced. And and a couple 647 00:37:49,280 --> 00:37:51,680 Speaker 1: of quotes of yours. I would be remiss if I 648 00:37:51,719 --> 00:37:55,240 Speaker 1: did not mention quote in investing, you can be really 649 00:37:55,360 --> 00:37:59,160 Speaker 1: right or and but temporarily quite wrong. What does that 650 00:37:59,239 --> 00:38:05,799 Speaker 1: experience can't be fun? It's it's it's not only not fun, 651 00:38:05,840 --> 00:38:08,839 Speaker 1: it's constant. I mean, we'll keep in mind, I mean 652 00:38:08,840 --> 00:38:12,920 Speaker 1: We started our fund when the DOT was are original 653 00:38:12,960 --> 00:38:17,200 Speaker 1: short only fund. So um this has been basically thirty 654 00:38:17,280 --> 00:38:20,840 Speaker 1: years of not only up equity markets, but lower interest rates. 655 00:38:21,320 --> 00:38:24,759 Speaker 1: And I don't think people kind of appreciate just what 656 00:38:24,800 --> 00:38:29,080 Speaker 1: an amazing tailwind most investors have had for the past 657 00:38:29,080 --> 00:38:32,320 Speaker 1: thirty or forty years. It is. It is unlike almost 658 00:38:32,320 --> 00:38:36,279 Speaker 1: anything we've seen in American financial history. And so this 659 00:38:36,360 --> 00:38:38,520 Speaker 1: is people have gotten very very used to this. If 660 00:38:38,520 --> 00:38:41,520 Speaker 1: you're a short seller, you've gotten very very used to 661 00:38:41,680 --> 00:38:44,960 Speaker 1: basically coming in every day and struggling. I mean just 662 00:38:45,040 --> 00:38:48,319 Speaker 1: that that that before anything happens, more likely than not 663 00:38:49,120 --> 00:38:51,839 Speaker 1: the stocks you're short are going to be up, and 664 00:38:51,920 --> 00:38:53,840 Speaker 1: so you had better be right. You had better be 665 00:38:53,920 --> 00:38:56,840 Speaker 1: right in your fundamentals, and you can often be early. 666 00:38:57,000 --> 00:39:00,520 Speaker 1: And often the things that the short sellers see that 667 00:39:00,520 --> 00:39:04,440 Speaker 1: that become really important nobody cares about until the company 668 00:39:04,480 --> 00:39:07,759 Speaker 1: acknowledges itself that it's a problem. So take a look 669 00:39:07,800 --> 00:39:10,600 Speaker 1: at Valley and Pharmaceuticals, one of our celebrated shorts from 670 00:39:10,640 --> 00:39:13,080 Speaker 1: a few years ago. We started shorting that at a 671 00:39:13,120 --> 00:39:18,120 Speaker 1: hundred and thirty dollars before it doubled to two sixty, 672 00:39:18,360 --> 00:39:20,560 Speaker 1: and then it went down a lot, and it went 673 00:39:20,600 --> 00:39:24,960 Speaker 1: down fast. But but the things we saw back in 674 00:39:27,480 --> 00:39:32,200 Speaker 1: didn't come to the fort and and and late and 675 00:39:32,320 --> 00:39:35,600 Speaker 1: uh and then the company finally had to realize admit 676 00:39:35,680 --> 00:39:40,200 Speaker 1: that it had had some real issues. Um, that's that 677 00:39:40,200 --> 00:39:44,920 Speaker 1: could be pretty maddening and painful. I remember the Enron peaking. 678 00:39:45,000 --> 00:39:47,680 Speaker 1: I'm doing this from memory, so six or somewhere in 679 00:39:47,680 --> 00:39:52,280 Speaker 1: that range on it might have been the Bethanie McClain article. 680 00:39:52,680 --> 00:39:56,839 Speaker 1: It took a year for the stock to collapse. It 681 00:39:56,840 --> 00:40:01,560 Speaker 1: it fell so slowly. It's it looks like a binary outcome. Hey, 682 00:40:01,640 --> 00:40:04,400 Speaker 1: either this company is a fraud or it's not. That 683 00:40:04,480 --> 00:40:06,880 Speaker 1: doesn't mean it goes from eighty six to seventy five 684 00:40:06,960 --> 00:40:10,279 Speaker 1: to sixty. It should be zero or eighty six, not 685 00:40:10,400 --> 00:40:13,960 Speaker 1: anything in between. It was a full year to collapse. 686 00:40:14,040 --> 00:40:16,400 Speaker 1: I hate to burst your bulpa. Barry and Round was 687 00:40:16,440 --> 00:40:18,719 Speaker 1: one of the easiest shorts we ever had. Really, Yeah, 688 00:40:18,800 --> 00:40:21,000 Speaker 1: we started shorting it in in the sixties. It did run 689 00:40:21,000 --> 00:40:24,160 Speaker 1: to eighty in January of oh one, on the Blockbuster 690 00:40:24,200 --> 00:40:28,160 Speaker 1: announcement that that the Blockbuster they were getting into business 691 00:40:28,239 --> 00:40:31,080 Speaker 1: with Blockbuster video to stream video. No, it was a 692 00:40:31,080 --> 00:40:35,000 Speaker 1: wonderful announcement. The problem was they booked profits instantly on 693 00:40:35,040 --> 00:40:38,080 Speaker 1: the announcement. I mean they kind of got the technology right. 694 00:40:38,160 --> 00:40:41,440 Speaker 1: It's now of course Netflix, but well there, but there 695 00:40:41,480 --> 00:40:44,520 Speaker 1: wasn't streaming Netflix for another dozen years, so it looked 696 00:40:44,520 --> 00:40:47,919 Speaker 1: a little bit like a like a fun announcement. Um 697 00:40:48,280 --> 00:40:50,839 Speaker 1: there was no real technology that it didn't exist yet, 698 00:40:50,880 --> 00:40:53,880 Speaker 1: and and so it was still on the drawing boards, 699 00:40:53,960 --> 00:40:57,360 Speaker 1: and and and then Bethany's story came out in February 700 00:40:57,360 --> 00:41:00,759 Speaker 1: about one um at the stock basedly kind of went 701 00:41:00,880 --> 00:41:05,040 Speaker 1: eighty to zero in the next nine months. But but 702 00:41:05,160 --> 00:41:07,520 Speaker 1: it but it there were some of course, gut wrenching 703 00:41:07,640 --> 00:41:09,839 Speaker 1: rallies along the way. Along the way. Alright, so let's 704 00:41:09,920 --> 00:41:13,400 Speaker 1: jump into some of our favorite questions that we ask 705 00:41:13,520 --> 00:41:16,719 Speaker 1: all of our guests. Tell us the most important thing 706 00:41:16,880 --> 00:41:22,560 Speaker 1: people don't know about your background? Um, well I was. 707 00:41:22,880 --> 00:41:26,960 Speaker 1: I was pre med in college for about three days. Um, 708 00:41:27,440 --> 00:41:30,880 Speaker 1: and so that got me, got me moving towards the 709 00:41:31,280 --> 00:41:34,160 Speaker 1: world of finance. Who were some of your early mentors? 710 00:41:34,600 --> 00:41:37,560 Speaker 1: So I was lucky when I when I when I 711 00:41:37,600 --> 00:41:40,520 Speaker 1: got into the business. The fellow that that hired me 712 00:41:40,560 --> 00:41:43,120 Speaker 1: away from Blathe Eastman pain Weber, guy named Bob Holmes, 713 00:41:43,800 --> 00:41:47,319 Speaker 1: was was not only a mentor, but he stood behind me. 714 00:41:47,560 --> 00:41:49,880 Speaker 1: It kind of the darkest days of bald when the 715 00:41:49,880 --> 00:41:52,920 Speaker 1: stock had doubled, the New York partner was it was 716 00:41:52,920 --> 00:41:55,560 Speaker 1: was screaming from my head on a plate. I was 717 00:41:56,080 --> 00:41:59,640 Speaker 1: all of h I was all of twenty five years old, 718 00:41:59,840 --> 00:42:02,920 Speaker 1: and um, and he stood behind me. Had seen the work, 719 00:42:02,960 --> 00:42:06,439 Speaker 1: he'd seen the documents. Um, he said, you know, kid, 720 00:42:06,480 --> 00:42:08,680 Speaker 1: you're right, You're right, go ahead and publish again. We 721 00:42:08,680 --> 00:42:12,399 Speaker 1: put a second report out after after it doubled, and 722 00:42:12,400 --> 00:42:16,040 Speaker 1: and just reaffirming everything we had, laying out all the 723 00:42:16,080 --> 00:42:18,640 Speaker 1: documents we had, all the case we had, and and 724 00:42:18,719 --> 00:42:20,640 Speaker 1: he was a guy who kind of taught me about 725 00:42:20,800 --> 00:42:24,439 Speaker 1: courage and and you know, courage your convictions. But he 726 00:42:24,600 --> 00:42:26,600 Speaker 1: was my boss as well, So it was an important 727 00:42:26,640 --> 00:42:29,200 Speaker 1: kind of lesson. When I moved to New York in 728 00:42:29,680 --> 00:42:32,920 Speaker 1: three I had I had a number of wonderful, wonderful 729 00:42:33,080 --> 00:42:37,160 Speaker 1: mentors who sort of introduced this Midwestern kid to New 730 00:42:37,200 --> 00:42:41,000 Speaker 1: York City and Low Street itself. You know, people like 731 00:42:41,000 --> 00:42:44,840 Speaker 1: like Stephen Peck um Wiss Peck and Career who was 732 00:42:44,880 --> 00:42:48,200 Speaker 1: passed on a few years ago, and and just kind 733 00:42:48,200 --> 00:42:49,759 Speaker 1: of took me under his wing, and you know, a 734 00:42:49,880 --> 00:42:52,399 Speaker 1: right kid, were going to Rio's on Tuesday night and 735 00:42:52,760 --> 00:42:55,359 Speaker 1: I'm going to do set to everybody in town. And 736 00:42:55,360 --> 00:42:59,799 Speaker 1: and um, he was. He was tremendously tremendously important man 737 00:43:00,320 --> 00:43:03,200 Speaker 1: in in my growth on Wall Street, you know. And 738 00:43:03,200 --> 00:43:08,280 Speaker 1: then they were sort of my contemporaries. An old friend, uh, 739 00:43:08,640 --> 00:43:12,240 Speaker 1: Jim Grant who was on the journalistic side, who who 740 00:43:12,280 --> 00:43:15,040 Speaker 1: of course his ancient. He's much much older than I am, 741 00:43:15,040 --> 00:43:16,960 Speaker 1: like thirty or forty year or something like that. Right, 742 00:43:17,160 --> 00:43:20,439 Speaker 1: he's gonna he's gonna kill me. He's about he's about 743 00:43:20,480 --> 00:43:23,360 Speaker 1: he's about ten years older than uh. But but he 744 00:43:23,440 --> 00:43:27,080 Speaker 1: started his his his firm in eighty four. I started 745 00:43:27,080 --> 00:43:30,040 Speaker 1: mining eighty five. So we both were kind of struggling, 746 00:43:30,400 --> 00:43:33,160 Speaker 1: you know, entrepreneurs trying to get our businesses off the 747 00:43:33,200 --> 00:43:35,480 Speaker 1: ground in the mid eighties. Both of us as sort 748 00:43:35,480 --> 00:43:37,960 Speaker 1: of skeptics. You know. He had a pen in his 749 00:43:38,040 --> 00:43:41,319 Speaker 1: hand and I had had clients money. And um, I 750 00:43:41,320 --> 00:43:43,680 Speaker 1: think we commiserated a lot and learned a lot from 751 00:43:43,680 --> 00:43:45,719 Speaker 1: each other way back way back then. So I think 752 00:43:45,719 --> 00:43:48,600 Speaker 1: bow ties age people. Um, a lot of folks don't know. 753 00:43:48,680 --> 00:43:51,480 Speaker 1: Tom Keene is twenty nine. That's uh, that's what a 754 00:43:51,560 --> 00:43:54,760 Speaker 1: bow tie will do to you, UM, tell us about 755 00:43:54,840 --> 00:43:59,319 Speaker 1: the investors who influenced your approach to investing too short. Yeah, 756 00:43:59,480 --> 00:44:05,000 Speaker 1: so probably the the investors to stand out. Again, both 757 00:44:05,120 --> 00:44:08,799 Speaker 1: both people I met early in my career. UM one 758 00:44:08,880 --> 00:44:12,520 Speaker 1: of course was the legendary Julian Robertson Who's Who's Who's 759 00:44:12,600 --> 00:44:17,000 Speaker 1: of course still around, still investing, and his approach was 760 00:44:17,080 --> 00:44:19,839 Speaker 1: something that sort of really galvanized me. You know when 761 00:44:19,880 --> 00:44:22,560 Speaker 1: I when I ran money for him and and he 762 00:44:22,719 --> 00:44:25,400 Speaker 1: called me up and he say, Jim, see we're short 763 00:44:26,280 --> 00:44:28,239 Speaker 1: x y Z corps. You know some guys in my 764 00:44:28,320 --> 00:44:30,719 Speaker 1: shop like that. Why don't you come over for lunch 765 00:44:30,800 --> 00:44:33,520 Speaker 1: we'll talk about it. And so it was always like 766 00:44:33,560 --> 00:44:37,960 Speaker 1: going into the lions Den, right, because that Julian would 767 00:44:37,960 --> 00:44:40,120 Speaker 1: be a one end of the table, and and there'd 768 00:44:40,120 --> 00:44:43,040 Speaker 1: be a bunch of of his investors, his his analysts, 769 00:44:43,040 --> 00:44:45,440 Speaker 1: many of whom are now legendary investors in their own right, 770 00:44:45,960 --> 00:44:48,640 Speaker 1: sitting around the table, and we'd argue back and forth 771 00:44:48,719 --> 00:44:52,120 Speaker 1: over whatever whatever stock it was, and and you know, 772 00:44:52,160 --> 00:44:54,719 Speaker 1: what about this? What about this? And you had better 773 00:44:54,800 --> 00:44:58,640 Speaker 1: know your story because they they they knew their story. 774 00:44:59,200 --> 00:45:01,440 Speaker 1: Often they agreed with me, by the way, but sometimes 775 00:45:01,440 --> 00:45:04,200 Speaker 1: they didn't. But but you had to hone your craft 776 00:45:04,239 --> 00:45:07,120 Speaker 1: pretty well to understand again, what is your edge? What 777 00:45:07,239 --> 00:45:10,560 Speaker 1: didn't investors know? And then another one who is no 778 00:45:10,640 --> 00:45:12,920 Speaker 1: longer with us, who was also a bit of a 779 00:45:12,960 --> 00:45:15,800 Speaker 1: mentor about New York as well, was was the legendary 780 00:45:15,800 --> 00:45:18,440 Speaker 1: short seller Bob Wilson. Bob and I would have lunch 781 00:45:18,680 --> 00:45:21,120 Speaker 1: from time to time every few months, and then he 782 00:45:21,200 --> 00:45:24,279 Speaker 1: had these wonderful dinners with Dick gilder Um, you know, 783 00:45:24,320 --> 00:45:26,440 Speaker 1: sort of every few months as well, and I was 784 00:45:26,480 --> 00:45:30,239 Speaker 1: privileged to attend those. But Bob, Bob also had one 785 00:45:30,280 --> 00:45:32,680 Speaker 1: of the greatest quotes of all time that I never 786 00:45:32,719 --> 00:45:37,440 Speaker 1: forget um about about investing. And I was grumbling about 787 00:45:37,480 --> 00:45:40,520 Speaker 1: someone who I worked with at Deutsche Bank at the time, 788 00:45:40,600 --> 00:45:43,440 Speaker 1: and this guy was one of the world's worst investors. 789 00:45:44,080 --> 00:45:48,240 Speaker 1: Everything he touched went down, and he was a long investor. 790 00:45:49,120 --> 00:45:51,840 Speaker 1: And I was always grumbling because the guy was always 791 00:45:51,840 --> 00:45:54,600 Speaker 1: just making a complete fool of himself at research meetings 792 00:45:54,600 --> 00:45:57,600 Speaker 1: and internal meetings. And Bob looked up at me over 793 00:45:57,719 --> 00:46:01,640 Speaker 1: over his his cup of coffee or tea and just smiled. 794 00:46:01,719 --> 00:46:04,040 Speaker 1: He has great, little sort of devilish smile, he said. 795 00:46:04,400 --> 00:46:07,960 Speaker 1: Jim just Remember, someone who is always wrong is just 796 00:46:08,000 --> 00:46:11,400 Speaker 1: as valuable as someone who's always right. Just take the 797 00:46:11,400 --> 00:46:15,200 Speaker 1: other side of the trade. That's fantastic. Let's talk. Let's 798 00:46:15,239 --> 00:46:17,880 Speaker 1: talk a little about books. This is everybody's favorite question. 799 00:46:18,000 --> 00:46:21,680 Speaker 1: Tell us about some of your favorite books. What fiction, nonfiction? 800 00:46:21,760 --> 00:46:24,879 Speaker 1: Market related not so, I read a lot. I read 801 00:46:24,880 --> 00:46:29,480 Speaker 1: a lot of history. Um. It's it's my thing. Um, 802 00:46:29,640 --> 00:46:32,160 Speaker 1: not just financial history, but but broad history. So there's 803 00:46:32,160 --> 00:46:35,360 Speaker 1: always there's a handful of books. UM. I always recommend 804 00:46:35,360 --> 00:46:37,880 Speaker 1: to people if they haven't read them. Um. One of 805 00:46:37,920 --> 00:46:41,920 Speaker 1: my favorites, and one of my favorite historians is William Manchester. 806 00:46:42,680 --> 00:46:47,400 Speaker 1: And everybody remembers his his MacArthur biography and his his Churchill, 807 00:46:47,880 --> 00:46:51,359 Speaker 1: his unfinished Churchill uh trilogy. I think his daughter may 808 00:46:51,400 --> 00:46:54,000 Speaker 1: have finished it for him. But the book that that 809 00:46:54,640 --> 00:46:57,560 Speaker 1: is utterly one of those game changer books. If you 810 00:46:57,600 --> 00:47:00,200 Speaker 1: read history is a world lit only by five here, 811 00:47:00,600 --> 00:47:03,320 Speaker 1: which is the story of the late Late Middle Ages 812 00:47:03,360 --> 00:47:07,680 Speaker 1: and the early Renaissance and Reformation, um, and written through 813 00:47:07,719 --> 00:47:11,640 Speaker 1: this prism of great people like Magellan and Martin Luther 814 00:47:12,480 --> 00:47:16,120 Speaker 1: and the Borgia popes and and and Guttenberg and and 815 00:47:16,200 --> 00:47:20,040 Speaker 1: basically it just sort of sets the stage for modernity 816 00:47:20,160 --> 00:47:22,040 Speaker 1: and and he and he tells the tale in a 817 00:47:22,080 --> 00:47:24,520 Speaker 1: way as only he can. And it's just wonderful history. 818 00:47:24,560 --> 00:47:27,600 Speaker 1: But I recommended highly up to the world only by 819 00:47:27,640 --> 00:47:31,840 Speaker 1: fire right. And then in business books, Um, I've always 820 00:47:31,880 --> 00:47:35,560 Speaker 1: been in my class, always loves um my fraud history 821 00:47:35,560 --> 00:47:39,160 Speaker 1: of fraud class. We love The Match King by Frank Partner, 822 00:47:39,680 --> 00:47:42,560 Speaker 1: which was the voted best business book I think in 823 00:47:42,600 --> 00:47:46,080 Speaker 1: oh nine. Um. And it's just the wonderful story of 824 00:47:46,320 --> 00:47:49,960 Speaker 1: the greatest fraud stir of the nineteen twenties, Ivar Krueger 825 00:47:50,520 --> 00:47:54,280 Speaker 1: Um who built this enormous empire on the back of 826 00:47:54,960 --> 00:47:57,840 Speaker 1: raising money for European countries on the back of a 827 00:47:57,840 --> 00:48:01,479 Speaker 1: match monopoly, and and how he became greater than JP 828 00:48:01,600 --> 00:48:05,360 Speaker 1: Morgan by and basically dragged down most of the European 829 00:48:05,360 --> 00:48:10,400 Speaker 1: banking system with his collapse in two Huh, that's fascinating. 830 00:48:10,440 --> 00:48:14,359 Speaker 1: I love partners work he did. Uh, infectious screens he did. 831 00:48:14,520 --> 00:48:18,960 Speaker 1: And then he did wait, which is a fascinating psychological study. Uh. 832 00:48:19,080 --> 00:48:21,640 Speaker 1: Tell us about a time you failed and what you 833 00:48:21,760 --> 00:48:25,160 Speaker 1: learned from the experience. Well, I mean we we we've 834 00:48:25,440 --> 00:48:29,280 Speaker 1: failed in all kinds of things. Um. And and whether 835 00:48:29,320 --> 00:48:33,239 Speaker 1: it's whether it's single stock ideas. I mean, like anybody else, 836 00:48:33,280 --> 00:48:35,680 Speaker 1: we're wrong. We're wrong a lot of times in the 837 00:48:35,719 --> 00:48:38,799 Speaker 1: short side. You have to be, of course mindful of this. 838 00:48:39,400 --> 00:48:42,720 Speaker 1: So whether it's Valiant doubling on you or or America 839 00:48:42,800 --> 00:48:45,480 Speaker 1: Online which which went up eight fold on us from 840 00:48:45,520 --> 00:48:48,040 Speaker 1: ten to eighty. And then of course we got out 841 00:48:48,760 --> 00:48:51,600 Speaker 1: and uh and then Time Warner bought them, and uh 842 00:48:51,680 --> 00:48:54,720 Speaker 1: we never got back in UM, which was a really 843 00:48:54,800 --> 00:48:57,360 Speaker 1: good lesson because it was lesson not only in humility 844 00:48:57,640 --> 00:48:59,920 Speaker 1: and timing, but it was a lesson on risk. Man 845 00:49:00,640 --> 00:49:03,560 Speaker 1: In that case, it didn't carry us out because we 846 00:49:03,640 --> 00:49:06,000 Speaker 1: kept the position very very small over the course of 847 00:49:06,080 --> 00:49:10,680 Speaker 1: to three years. UM. So you know, I learned a lot. Uh, 848 00:49:10,840 --> 00:49:13,000 Speaker 1: I learned a lot, a lot of painful lessons in 849 00:49:13,000 --> 00:49:18,279 Speaker 1: the nineties as uh as as the fantastic years we 850 00:49:18,320 --> 00:49:20,680 Speaker 1: had in our first five six years, as as hedgehope 851 00:49:20,680 --> 00:49:25,120 Speaker 1: managers became a struggle and it just the early nineties 852 00:49:25,160 --> 00:49:26,960 Speaker 1: to mid nineties were just a terrible time on the 853 00:49:27,000 --> 00:49:30,680 Speaker 1: short side, and and and just you know, whether it 854 00:49:30,719 --> 00:49:33,319 Speaker 1: was paying people out of my own pocket or or 855 00:49:33,440 --> 00:49:36,640 Speaker 1: or having to know to really go and search hard 856 00:49:36,680 --> 00:49:38,680 Speaker 1: for investors you know, it was it was. It was 857 00:49:38,719 --> 00:49:41,239 Speaker 1: a time. Uh. We got through it, and I got 858 00:49:41,239 --> 00:49:44,960 Speaker 1: through it with great partners and great employees. But you know, 859 00:49:45,000 --> 00:49:48,399 Speaker 1: a little adversity sometimes is a good life lesson. That's 860 00:49:48,400 --> 00:49:51,400 Speaker 1: how you hard and steal. UM tell us what you 861 00:49:51,480 --> 00:49:53,160 Speaker 1: do for fun? What do you do to relax when 862 00:49:53,160 --> 00:49:57,000 Speaker 1: you're out of the office. So I travel a fair amount. UM. 863 00:49:57,280 --> 00:50:00,279 Speaker 1: I enjoy that. UM, I read fair amount. And I 864 00:50:00,320 --> 00:50:02,960 Speaker 1: do teach. I mean the teaching has been over the 865 00:50:03,040 --> 00:50:06,799 Speaker 1: last eight years. I teach up at Yale at s O. 866 00:50:07,040 --> 00:50:10,680 Speaker 1: M and also every other year at the University Wisconsin, 867 00:50:10,719 --> 00:50:14,759 Speaker 1: which is my family alma mater on Wisconsin. And UH 868 00:50:14,880 --> 00:50:17,880 Speaker 1: and UH it's been a lot of fun. It's been enjoyable. 869 00:50:18,400 --> 00:50:22,640 Speaker 1: I enjoy interacting with the students. UM. It's a fun course. 870 00:50:22,880 --> 00:50:25,920 Speaker 1: We teach starting in the sixteen nineties all the way 871 00:50:26,000 --> 00:50:30,960 Speaker 1: up to today. UM. And we teach teach about some 872 00:50:31,000 --> 00:50:33,960 Speaker 1: of the great episodes of of financial market fraud, from 873 00:50:33,960 --> 00:50:37,399 Speaker 1: the Mississippi Scheme and South Sea Bubble all the way 874 00:50:37,440 --> 00:50:42,200 Speaker 1: to UH to Donald Trump's hotel and resorts and uh 875 00:50:42,239 --> 00:50:44,960 Speaker 1: and some of the more recent things. UM and and 876 00:50:44,960 --> 00:50:49,160 Speaker 1: and and do so in a thematic and systematic way. So, 877 00:50:49,239 --> 00:50:52,480 Speaker 1: speaking of of students in in college, a grad student, 878 00:50:52,600 --> 00:50:54,680 Speaker 1: if one of them, or a millennial came up to 879 00:50:54,719 --> 00:50:58,440 Speaker 1: you and said, I'm looking um for some career guards 880 00:50:58,480 --> 00:51:02,279 Speaker 1: and I'm considering a job and finance, what what sort 881 00:51:02,320 --> 00:51:04,160 Speaker 1: of advice would you give them. One of the things 882 00:51:04,200 --> 00:51:08,080 Speaker 1: I tell my students and and and young people who 883 00:51:08,200 --> 00:51:09,520 Speaker 1: come up to me to ask for that kind of 884 00:51:09,560 --> 00:51:13,879 Speaker 1: advice is I sort of asked them, you know, are 885 00:51:13,920 --> 00:51:16,160 Speaker 1: you this is something you you feel you want to 886 00:51:16,200 --> 00:51:18,880 Speaker 1: do as a career in a big institution, do you 887 00:51:18,920 --> 00:51:20,520 Speaker 1: want to do you feel you want to go out 888 00:51:20,560 --> 00:51:23,600 Speaker 1: and do something on your own? Entrepreneurial and if it's 889 00:51:23,640 --> 00:51:28,280 Speaker 1: the latter, I try to impress upon them that, unlike 890 00:51:28,680 --> 00:51:32,120 Speaker 1: what they might consider conventional wisdom, I tell them that 891 00:51:32,160 --> 00:51:35,960 Speaker 1: the time to take risks is when their youngest. Yes, 892 00:51:36,000 --> 00:51:39,160 Speaker 1: you need certain skills, of course, but it's very very 893 00:51:39,239 --> 00:51:42,680 Speaker 1: hard once you're in your forties and fifties and you've 894 00:51:42,680 --> 00:51:47,320 Speaker 1: got the obligations of life, financial, family, you know, education, 895 00:51:47,520 --> 00:51:50,400 Speaker 1: call it too then up and say I'm gonna go 896 00:51:50,480 --> 00:51:53,279 Speaker 1: do this on my own and and and by the way, 897 00:51:53,360 --> 00:51:56,160 Speaker 1: if you do and it doesn't work out, you've kind 898 00:51:56,160 --> 00:52:00,799 Speaker 1: of that's it, right And and and on the other hand, 899 00:52:00,840 --> 00:52:03,400 Speaker 1: if you're twenty five, twenty six and you have a 900 00:52:03,440 --> 00:52:06,759 Speaker 1: great idea and you have a backer, go for it. 901 00:52:07,440 --> 00:52:10,600 Speaker 1: If you fail, nobody's going to hold it against you. 902 00:52:10,600 --> 00:52:12,919 Speaker 1: You you know you you you you were. In fact, 903 00:52:12,960 --> 00:52:16,560 Speaker 1: they might even admire you for it. And and so 904 00:52:16,600 --> 00:52:18,160 Speaker 1: I always tell people if they're going to go do 905 00:52:18,280 --> 00:52:20,719 Speaker 1: something with with with a small group of people, or 906 00:52:21,320 --> 00:52:23,680 Speaker 1: do it when you're youngest, not when you're not when 907 00:52:23,719 --> 00:52:26,879 Speaker 1: you're twenty years or thirty years into it, because you're 908 00:52:26,880 --> 00:52:29,600 Speaker 1: not going to be able to do it as easily then. 909 00:52:29,880 --> 00:52:32,520 Speaker 1: And if if it fails, and by the way most 910 00:52:32,520 --> 00:52:36,239 Speaker 1: things do, um, you just dust yourself off and pick 911 00:52:36,239 --> 00:52:38,839 Speaker 1: yourself help and dust yourself off, and you know, go 912 00:52:38,920 --> 00:52:41,319 Speaker 1: do something else. It's not the end of the world 913 00:52:41,400 --> 00:52:45,800 Speaker 1: for you. Very interesting, very interesting advice. Our final question, 914 00:52:46,080 --> 00:52:49,200 Speaker 1: what is it that you know about short selling today 915 00:52:49,239 --> 00:52:51,880 Speaker 1: that you wish you knew thirty years ago when you 916 00:52:51,920 --> 00:52:56,759 Speaker 1: first launched Kinnicus not to do it? Is that true? No? 917 00:52:57,320 --> 00:53:02,360 Speaker 1: But I say again, my sense of timing isn't exactly fantastic, right. Um, 918 00:53:02,400 --> 00:53:06,040 Speaker 1: So you launched the launched a short fund just as 919 00:53:06,080 --> 00:53:09,440 Speaker 1: a thirty year bullmarket was Yeah, pretty much exactly. So again, 920 00:53:09,520 --> 00:53:12,800 Speaker 1: timing is not there for a day. Uh. Look, it's 921 00:53:13,400 --> 00:53:16,560 Speaker 1: lots of lessons I've learned along the way, UM on 922 00:53:16,960 --> 00:53:21,919 Speaker 1: managing risk both in a portfolio career um and and 923 00:53:22,040 --> 00:53:24,520 Speaker 1: uh sadly, however, in our business you sort of have 924 00:53:24,560 --> 00:53:26,759 Speaker 1: to learn them yourselves. It's it's hard to impart them. 925 00:53:26,800 --> 00:53:29,799 Speaker 1: You can, you can speak all you want, but the 926 00:53:29,880 --> 00:53:33,680 Speaker 1: market is is is a cruel mistress, and uh, she 927 00:53:33,840 --> 00:53:36,600 Speaker 1: tends to uh, she tends to impart her lessons on 928 00:53:36,680 --> 00:53:41,000 Speaker 1: everyone singularly and individually. We have been speaking with Cana 929 00:53:41,000 --> 00:53:45,239 Speaker 1: Coast Associates Jim Chainos. If you enjoy this conversation, be 930 00:53:45,280 --> 00:53:46,960 Speaker 1: sure and look up an inch or down an inch. 931 00:53:47,000 --> 00:53:50,200 Speaker 1: You can see any of our other two hundred or 932 00:53:50,239 --> 00:53:55,320 Speaker 1: so conversations on Apple iTunes, Bloomberg Overcast, wherever your final 933 00:53:55,400 --> 00:53:58,680 Speaker 1: podcasts are sold. Check out my daily column on Bloomberg 934 00:53:58,760 --> 00:54:01,600 Speaker 1: View dot com. You can follow me on Twitter at Ridholts. 935 00:54:02,120 --> 00:54:05,160 Speaker 1: I would be remiss if I did not thank our 936 00:54:05,239 --> 00:54:10,720 Speaker 1: crack staff who helps put together, uh these conversations. Medina 937 00:54:10,800 --> 00:54:14,880 Speaker 1: Parwana is our producer slash audio engineer. Taylor Riggs is 938 00:54:14,880 --> 00:54:17,640 Speaker 1: our booker. Mike bat Nick is our head of research. 939 00:54:18,120 --> 00:54:21,440 Speaker 1: I'm Barry Risholts. You've been listening to Masters in Business 940 00:54:21,880 --> 00:54:23,000 Speaker 1: on Bloomberg Radio.