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Speaker 1: This is Masters in Business with Barry Ridholds on Bloomberg Radio.

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Speaker 1: This week on the podcast, we have a very special guest.

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Speaker 1: And I know you folks are tired of hearing me

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Speaker 1: say that, but we do. We have a very special guest,

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Speaker 1: Leon Cooperman. He is the founder and chief investment officer

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Speaker 1: of Omega Advisors. They are a hedge fund that runs

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Speaker 1: about nine point three billion dollars. His track record is

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Speaker 1: actually quite fantastic. He's outperformed the S and P five

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Speaker 1: hundred on an annualized basis of about four hundred and

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Speaker 1: fifty basis points. His tax advantage fund has outperformed the

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Speaker 1: Broad Index a thousand basis points. Uh. He is a

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Speaker 1: legend on Wall Street. He began his career at Goldman Sachs,

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Speaker 1: where he ran eventually ran the research department. I I

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Speaker 1: rated just number one. There are a few people who

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Speaker 1: are more fascinating and more knowledgeable about what it's like

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Speaker 1: to run money, to do research, to execute a portfolio

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Speaker 1: then Lee Cooperman. Very accessible, very humble, a tremendous, tremendous

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Speaker 1: um philanthropist, has committed to giving away a lot of

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Speaker 1: his money. I can't begin to tell you enough of

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Speaker 1: of how enjoyable our conversation was and what a pleasure

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Speaker 1: it was to sit down with him for for nearly

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Speaker 1: two hours. He he was scheduled to leave at one thirty,

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Speaker 1: and he waved me off. He just you know, kept

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Speaker 1: going and understood that this was really a deep dive

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Speaker 1: and didn't want to cut it short because he had

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Speaker 1: to be somewhere else. So, with no further ado from me,

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Speaker 1: here is my conversation with Leon Cooperman. This is Masters

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Speaker 1: in Business with Barry Ridholts on Bloomberg Radio. My very

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Speaker 1: special guest today, Lee Cooperman. You may or may not

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Speaker 1: have heard of him. Lee was born in the bronx

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Speaker 1: of immigrant parents. Your your whole curriculum vitae is gonna

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Speaker 1: take me ten minutes to read, so I'm just gonna

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Speaker 1: do the short version. Columbia Business School, nineteen sixty nine.

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Speaker 1: You've got an m b A straight to Goldman Sachs,

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Speaker 1: where you spent twenty two years in the Investment Research department,

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Speaker 1: eventually becoming co chairman of the Investment Policy Committee and

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Speaker 1: chairman of the Stock Selection Committee. You were voted onto

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Speaker 1: Institutional Investors All America Research team for Portfolio Strategy. You

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Speaker 1: ranked first in portfolio strategy from nineteen seventy seven to five.

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Speaker 1: You eventually set up Goldman Sachs is Asset Management division

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Speaker 1: and then leave to launch Omega Advisors, where your flagship

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Speaker 1: overseas fund has averaged fourteen point six percent from two

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Speaker 1: to and that's about fift better than the benchmark SMP

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Speaker 1: five hundred. Lee Cooperman, welcome to Bloomberg NICs to be

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Speaker 1: with you. And for those of you folks who may

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Speaker 1: not be familiar with either Guldman Sachs or Omega Advisors,

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Speaker 1: you're probably listening to the wrong radio station. So let's

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Speaker 1: jump right into your a little bit of your background.

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Speaker 1: What did you do before you found your way to

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Speaker 1: Wall Street. Well, I'm kind of like in a Ratio

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Speaker 1: Alger story, and I say this with great humility. I've

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Speaker 1: been very lucky in life. Basically, I was born in

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Speaker 1: the South Bronx, first generation of my family to get

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Speaker 1: a born in America, first generation my family get a

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Speaker 1: college degree. I went to public school in the Bronx

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Speaker 1: PS seventy five. I went to high school in the

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Speaker 1: Bronx and Morris High School. I went to college in

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Speaker 1: the Bronx Uh, West Bronx. My both of my grade

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Speaker 1: school and my high school was in the East Bronx.

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Speaker 1: I went west, follow the device of horst Reeley and

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Speaker 1: I went to the West young Man, go West, young Man.

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Speaker 1: I went to a Hunter College, part of the City

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Speaker 1: University of New York. UM, graduated in nineteen sixty four.

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Speaker 1: Went to work for Xerox Corporation up in Rochester. Well,

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Speaker 1: let me stop you right there. From Hunter to Xerox.

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Speaker 1: What did you do on at Xerox? Well, it was

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Speaker 1: very interesting. I don't know how much time we have.

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Speaker 1: I tend to be I have all day. You're the

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Speaker 1: one with Well, basically, um, it's very interesting. You know.

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Speaker 1: Part of my success in life I attribute to luck. Uh,

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Speaker 1: certain part of education hard work. By the way, that's

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Speaker 1: a theme that every person who's done an interview with

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Speaker 1: me has more or less said, Well, you know, I

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Speaker 1: worked hard, but I also got really lucky. Well, I

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Speaker 1: would say that you're not realistic if you don't think

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Speaker 1: luck plays a part in the one success. And I

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Speaker 1: like to think I'm above all. I'm realistic and self

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Speaker 1: effacing and have humility. Uh. But basically it's a little

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Speaker 1: bit of a story to get to answer your question

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Speaker 1: back in the sixty and still maybe the case of

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Speaker 1: day that if you finished your major and minor in

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Speaker 1: three years, you could count in your first year of

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Speaker 1: dental or medical school towards your fourth year of college

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Speaker 1: you get a separate degree. I actually did something similar

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Speaker 1: with law school. I applied part of law school towards

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Speaker 1: my undergraduate So you know, basically, in the summer of

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Speaker 1: nineteen sixty three, I toiled very hard in the University

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Speaker 1: of Pennsylvania laboratories. I took a course in physical chemistry

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Speaker 1: to finish you off my major. My major was chemistry,

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Speaker 1: my mind was math and physics. And I enrolled in

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Speaker 1: the University of Pennsylvania Dental School. And after eight days

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Speaker 1: I wondered if I was making the right decision. And

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Speaker 1: so you know, part of your life, not only his luck,

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Speaker 1: is intuition and making the right decision. That that was

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Speaker 1: a good instinct. I cannot picture you as all you know,

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Speaker 1: instead of my hand in their mouths and I have

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Speaker 1: my hand in their pockets, I guess you could say

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Speaker 1: that basically I went. It was a very traumatic period

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Speaker 1: of my life. I went to the dean of the

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Speaker 1: dental school and I said, I would like to return

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Speaker 1: to my undergraduate school, finish you off my fourth year,

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Speaker 1: unencumbered by any decision, and then in the fullness of time,

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Speaker 1: making decision to either return to dental school or whatever.

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Speaker 1: And he put me on a real guilt trip, uh,

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Speaker 1: in the sense that he said, you deprived the hundred

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Speaker 1: first applicant of a dental school education. How can you

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Speaker 1: decide after eight days? And so I returned to undergraduate school.

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Speaker 1: The only person that really understood the import of my

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Speaker 1: decision and difficulty was a dean of Hunter College at

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Speaker 1: the time. His name was Glen T. Nigrin. I just

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Speaker 1: noticed an obituary of several years ago where he passed away,

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Speaker 1: and he said, boy, this must have been a tough decision.

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Speaker 1: Of course, you could matriculate back into a Hunter. And

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Speaker 1: I went back to Hunter, at which point I had

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Speaker 1: all elective is my major minor was completed. So I

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Speaker 1: took ten courses in economics, got ten a's, and I

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Speaker 1: had the unusual situation of graduating as a major in chemistry,

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Speaker 1: monor math and physics, but honors in economics. And I

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Speaker 1: was interviewing in the ninth seen hundred and I guess

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Speaker 1: sixty three yearly sixty four for a job. Xerox Corporation

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Speaker 1: came to the campus and I was lucky enough to

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Speaker 1: get an invite back to Rochester to meet with other

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Speaker 1: people for a second, you know, interview, and I went

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Speaker 1: up getting the best job warfer if anyone that cite

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Speaker 1: the university. They offered me, I think was seventy five

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Speaker 1: hundred or seven thousand dollars a year, which I accepted,

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Speaker 1: and I started working there in August of nineteen four,

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Speaker 1: and they really, an effect, did not make a full

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Speaker 1: disclosure to me about the job. It's what they didn't

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Speaker 1: tell me when I started, when they offered me the job.

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Speaker 1: Is a month later they were going to a twenty

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Speaker 1: four hour work week, meaning one week I'd have to

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Speaker 1: work eight in the morning to four in the afternoon,

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Speaker 1: the next week four in the afternoon to midnight, three

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Speaker 1: three shifts a day um. And so I was enrolled

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Speaker 1: in the University of Rochester Graduate School of Business at night,

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Speaker 1: working towards an m b A. But the weeks that

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Speaker 1: I was in the four in the afternoon to midnight shift,

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Speaker 1: I'd have to find somebody else to shift off with

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Speaker 1: work sixteen hours go to school, work sixteen hours, go

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Speaker 1: to school. And I had had a lovely life a

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Speaker 1: wife at that time, and he was still a lovely wife.

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Speaker 1: She's married fifty one years. And she said, look, I'm

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Speaker 1: happy to work if you want to go to school

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Speaker 1: full time. And I took leave of absence and I

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Speaker 1: went to Columbia University Graduate School of Business in New

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Speaker 1: York on a trimester basis sixty months, got my m

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Speaker 1: b A interviewed, and I was lucky enough to get

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Speaker 1: a job off of Goldman Sachs and who entered Wall Street.

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Speaker 1: Uh via my MBA from Columbia to Goldman Sax. I'm

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Speaker 1: Barry Ritults. You're listening to Masters in Business on Bloomberg

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Speaker 1: Radio and my very special guest today, Lee Cooperman. He

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Speaker 1: is the founder of Omega Advisors. Prior to that, he

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Speaker 1: spent twenty three years in in the investment research department

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Speaker 1: at Goldman Sacks. Let's let's talk a little bit about

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Speaker 1: um Goldman Sacks. You went right out of Columbia where

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Speaker 1: you got your m b A into not the sexier

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Speaker 1: investment banking half that I think Goldman at the time

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Speaker 1: was better owned for, but into research. What was your

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Speaker 1: thought process. What attracted you to that? I basically had

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Speaker 1: a strong interest in investing through investment research would be

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Speaker 1: a good foundation for pursuing career in investing, and Columbia

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Speaker 1: was known as a deep value school. That was the

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Speaker 1: training you had. The professor had the greatest influence to

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Speaker 1: me was Professor Roger Murray, who was an adjunct professor

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Speaker 1: of business at Columbia. His day job was being the

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Speaker 1: chief investment officer of College Retirement Equities Fund, and he

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Speaker 1: taught at Columbia. He also was an author of one

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Speaker 1: of the follow up editions of security analysis, the original

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Speaker 1: publication four by Graham and Dodd, and he honed my interest.

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Speaker 1: He was a fabulous professor, a real practitioner of his profession,

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Speaker 1: and one that was a great inspiration. But you know, um,

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Speaker 1: it was a great experience. I never I like. I

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Speaker 1: like to say I like the higher PhDs in my business. Uh,

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Speaker 1: but my PhDs are poor, hungry and driven. Uh. Isn't that?

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Speaker 1: Isn't that something that Mario Gabelli used to say all

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Speaker 1: the time. He says it all the time. We're great friends.

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Speaker 1: You know. One of the great things that came out

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Speaker 1: of Columbia Business school, was married when I met, and

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Speaker 1: we remained close friends for fifty years. You know, it

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Speaker 1: was the Columbia experience that got me the entry card

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Speaker 1: into Wall Street. I wouldn't say it's right, but the

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Speaker 1: odds or I could not have gotten into Wall Street

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Speaker 1: directly from Hunter College into an investment position at Goldman,

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Speaker 1: But part of this, like I said earlier, horatial outer story.

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Speaker 1: You know, I um, when I went to Columbia Business School,

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Speaker 1: I had a six month old child, I had National

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Speaker 1: Defense Education Act student loan to repay, had no money

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Speaker 1: in the bank, and had to get onto making a living.

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Speaker 1: So I got my degree on January thirty one of

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Speaker 1: nineteen sixty seven, and the very next day, February one

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Speaker 1: to sixty seven, I started my close to year career

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Speaker 1: at Goldman Sex. So you were in the research department.

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Speaker 1: Let me let me go over some of the stats

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Speaker 1: from that, because they're really so impressive. You voted on

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Speaker 1: to the All American Research team. You were the number

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Speaker 1: one portfolio strategist according to Investor Institutional Investor from nineteen

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Speaker 1: seventy seven to ninety five. That that's a heck of

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Speaker 1: a good run. And then after all those years in

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Speaker 1: the research department you helped build Goman Sacks Asset Manager.

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Speaker 1: I actually started it, but i'd say first in the

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Speaker 1: research department. Uh, not not being self serving. I had

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Speaker 1: two roles, and I started at as an analyst in

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Speaker 1: the retail business, and then the mid seventies I became

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Speaker 1: co directive Research. In nineteen seventies six, I was named

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Speaker 1: partner in charge of Research. I essentially had two roles

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Speaker 1: in Goldman Research. One I would call an orchestra leader,

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Speaker 1: I ran the research department, and the other, call a solo,

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Speaker 1: was to my role as chairman of the Investment Policy Committee,

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Speaker 1: helping set investment policy and marketing that investment policy at

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Speaker 1: investing clients. And uh, please used to say again, not

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Speaker 1: big self serving, because it was a real team effort.

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Speaker 1: But when I took over the research department at Goldman,

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Speaker 1: we were basically unranked. And when I left, it's a

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Speaker 1: polite way to say dead last, No, not that last,

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Speaker 1: but we were We were not ranked in the top

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Speaker 1: we were not reviewed as a research firm. And when

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Speaker 1: I left the research department in nine to start Goldman

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Speaker 1: Sacks Asset Management, Goldman Sacks Research was number one institutional

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Speaker 1: investor America team number one in Charlie Yellis's Greenwich Research

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Speaker 1: survey and number one in financial world, which doesn't exist anymore.

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Speaker 1: The first to still exists in terms of measuring people's effecting.

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Speaker 1: This now to show you how a little influence I say,

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Speaker 1: this is not this is that video They had a

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Speaker 1: little influence I had at Goldman and I said this

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Speaker 1: had a big smile. I was well regarded. Uh. For

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Speaker 1: a decade, I was telling Goldman Sacks, you're making a

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Speaker 1: mistake by not being in the asset managing business. I was.

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Speaker 1: I was shocked when I was reading your background and

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Speaker 1: I'm like, wait, Goldman Sacks didn't have an asset management

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Speaker 1: division before. Something it made it's hard to imagine teen

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Speaker 1: ninety one. Actually, and for deckcarese telling the firm you're

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Speaker 1: making a mistake by not being an asset management and

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Speaker 1: for decade they said, Lee, you don't get it that

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Speaker 1: we are of the belief that brokers should do brokerage,

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Speaker 1: money manage and do money management. Don't compete with your customer,

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Speaker 1: Goldman Sachs typical customer at that time was an institutional investor.

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Speaker 1: And so I said, well, look look around your Mary

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Speaker 1: Lynchest Management, uh CSFPST Management, the Kid I Be Buddies

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Speaker 1: division is called Webster att Management. Everybody was getting into

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Speaker 1: the business set. One firm who was Goldman's art trading rival,

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Speaker 1: that was Solomon Brothers. And then one morning Solomon comes

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Speaker 1: out and says, we're pleased to announce that Bob Solomon Jr.

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Speaker 1: Will be leaving the research department to start Salmon Brothers

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Speaker 1: asset Management. And Bob Rubin and Steve Friedman, who were

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Speaker 1: then co heads of the firm, came to me and said,

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Speaker 1: you know, we made a mistake. You were right. You

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Speaker 1: were right when you leave research and do for us

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Speaker 1: to invest in management what you did for us in research.

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Speaker 1: And so after about a year or so doing this,

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Speaker 1: because aim very clear that you know, I had to

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Speaker 1: be on the road constantly to innovate new products to generally,

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Speaker 1: you know, capture new assets. And I really wanted to

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Speaker 1: visit companies and find outstanding managements make out standing investments.

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Speaker 1: And I have great respect for Goldman. I owe a

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Speaker 1: lot to my success at Goldmen. I started with nothing.

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Speaker 1: I left Goldman very wealthy. Man. I told him I

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Speaker 1: really wanted to retire ephemistically, I worked hard and now

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Speaker 1: that I worked at Goldman, I worked very hard at Goldman,

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Speaker 1: and I wanted to basically start a hedge fund. And

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Speaker 1: I believe in no blessed Oblieg and I told him,

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Speaker 1: you know, we were still a private partnership UM at

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Speaker 1: the time. And uh, I said, you know, if you

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Speaker 1: think my having a hedge funds of violation might noncompete,

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Speaker 1: you know, I wouldn't do it. And they said, no,

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Speaker 1: we we can't possibly say that because you know, we

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Speaker 1: don't want to have a hedge fund. And so I

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Speaker 1: started Omega, and uh it became something I didn't plan.

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Speaker 1: To be honest with you, Uh, this is not a

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Speaker 1: TV but I'm I'm you have a big smile on

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Speaker 1: your face. But I basically also a larger than average guy.

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Speaker 1: And I said, you know, I'm gonna have a small business. Uh,

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Speaker 1: and succeed at the only thing that's alluded me all

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Speaker 1: my life. Let's get to a normal size is and

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Speaker 1: lose some weight. And I have a gym in the

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Speaker 1: office and work out and you know, manage a few

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Speaker 1: hundred million dollars and down to a normal size. Take

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Speaker 1: it easy a way, well, no work, but basically get

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Speaker 1: to a normal size, have a more balanced life. And uh,

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Speaker 1: what happened is you to my first year, we're up

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Speaker 1: about twenty three or twice with the market, and in

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Speaker 1: ninety three had about a year I was up like

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Speaker 1: sevent because we correctly called a big decline interest rates globally,

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Speaker 1: and the firm really starts to grow quite dramatically in size.

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Speaker 1: Uh so, Um, we've gone from the start up with

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Speaker 1: a few hundred million to nine and a half billion.

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Speaker 1: But it's been a great run. And uh, I love

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Speaker 1: what I do, and I do a lot of talks

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Speaker 1: to meetings with youngsters. They try to give them career guidance.

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Speaker 1: I tell him, you know, follow the advice of Henry Ford.

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Speaker 1: The best way to make money is not to think

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Speaker 1: about making money. Another theme is Warren Buffers is going

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Speaker 1: to work with somebody you respected admire, tap dance to

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Speaker 1: work and everything will take care of itself. And what

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Speaker 1: I say basically is do what you love, love what

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Speaker 1: you do. If you do what you love me you

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Speaker 1: love what you do. With a little bit of luck,

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Speaker 1: you're a bound to be successful. And that's kind of

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Speaker 1: where I'm at. I mean, I love what I do.

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Speaker 1: I'm Barry rid Hults. You're listening to Masters in Business

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Speaker 1: on Bloomberg Radio. My special guest today is Lee Cooperman.

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Speaker 1: He is the founder of Omega Advisors and basically spent

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Speaker 1: the first twenty five or so years of his career

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Speaker 1: at Goldman Sachs as the UH director of the Investment Department,

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Speaker 1: and he created and helped build the asset Management Department.

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Speaker 1: Let's talk a little bit about philanthropy. League you Um,

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Speaker 1: you said earlier, you're the son of immigrants from the

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Speaker 1: South Bronx. Um, did you ever imagine when you were

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Speaker 1: going to school and in the Bronx you would grow

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Speaker 1: up to become a philanthropist? Never? Never, never, never? What

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Speaker 1: what is that like? Coming and from from self described

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Speaker 1: very humble roots. There's there's a question. We have a

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Speaker 1: mutual friend, Doug Cass and Doug said to ask you

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Speaker 1: about the plumbers wrench that you sometimes carry around. Uh.

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Speaker 1: Doug's very kind towards me, very complimentary, and I appreciate Doug,

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Speaker 1: and Doug's a bright fellow. Look, if you step back

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Speaker 1: and think about it, there's only four things you could

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Speaker 1: do with money. You could consume it on personal expenditures

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Speaker 1: and thankf I've been in a business that generates a

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Speaker 1: lot of income, and if you if I don't collect art,

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Speaker 1: I can't consume my wealth. And I've never seen the

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Speaker 1: value proposition art and I really obviously missed a huge

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Speaker 1: opportunity well the past a couple of decades. Yeah, okay,

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Speaker 1: but so you could consume your well the second as

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Speaker 1: you can give it to your children. Okay, And I'll

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Speaker 1: take these one of the time after I mentioned all four.

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Speaker 1: The third is you can give it to the government

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Speaker 1: the form of taxation, or the fourth as you can

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Speaker 1: recycle it back into society. Okay. So on the first one,

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Speaker 1: I'm not a consumer. I tend to basically work very hard,

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Speaker 1: work very long hours. I have a very purposeful wife,

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Speaker 1: married fifty one year. She has been an educator for

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Speaker 1: thirty five years, working with learning to say ablell neurologically

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Speaker 1: impaired children. And so she's not a consumer because she's

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Speaker 1: was working most of her adult life. Um, so I

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Speaker 1: can't consume it. You know, you could go out and

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Speaker 1: if you if you if you're not collector you don't

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Speaker 1: have enough money no matter you know what you make,

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Speaker 1: because you could buy a Picasso with the other day

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Speaker 1: for a hundred nine million or whatever. So I'm not

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Speaker 1: a consumer. Second, I believe in leaving my kids a

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Speaker 1: rational or sum of money. Do not want to take

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Speaker 1: away from them the incentive to self achieve. Okay. The

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Speaker 1: third is who wants to give it the government? If

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Speaker 1: you don't have to give it the government. Fourth, I've

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Speaker 1: made the determination. My family is going along with the

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Speaker 1: determination to take the vest bulk of my money and

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Speaker 1: return into society to try and create equal opportunity for

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Speaker 1: these splendid youngsters that don't have the opportunities today that

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Speaker 1: I enjoyed. You know. So let's let's start with the pledge.

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Speaker 1: You had a dinner with um a number of people,

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Speaker 1: and you saw in the pledge where you essentially committed

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Speaker 1: to giving away the majority. I think that the pledge

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Speaker 1: says you're a get away at least half, and I

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Speaker 1: intend to give away all my money. Was I given

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Speaker 1: my children their inheritance about three or four years ago

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Speaker 1: in advance in events. Here's the money. Trying not to

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Speaker 1: do it well. I have two kids. One's a fabulous

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Speaker 1: money manager. I'm very proud of his accomplishments. Also runs

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Speaker 1: run a hedge fund, and he's very very smart. And

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Speaker 1: then I have another son who was equally smart up

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Speaker 1: in a different field. He has a PhD degree and

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Speaker 1: environmental scientist work for conservation to national on environmental issues. Uh.

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Speaker 1: And so I gave them their inheritance and what's left over. Basically,

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Speaker 1: my game plan is to give away half during my

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Speaker 1: lifetime to organizations that have made a difference to my

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Speaker 1: family in our lifetime, and the other half on to

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Speaker 1: give to a foundation where my children, grandchildren, daughter in

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Speaker 1: laws could periodically get together and give away the money

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Speaker 1: to worthy organization. So let's talk about some of the organizations. Well,

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Speaker 1: let me first, you know say this that you know

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Speaker 1: the I said this to warm buffet. If you're speaking

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Speaker 1: to people of great wealth, asking for half is not

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Speaker 1: asking for enough. But nor is that request original hundred

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Speaker 1: Andrew Carnegie said, he who dies rich dies disgraced. In

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Speaker 1: ninety Winston Churchill said you make a living by what

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Speaker 1: you get, you make a life by what you give.

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Speaker 1: In sixty one, when President Kennedy was inaugurated, he said,

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Speaker 1: if I we call it, Craig, that's not what your

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Speaker 1: country can do for you. Ask what you can do

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Speaker 1: for your country or something alone and then I told Warren,

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Speaker 1: I said, I'm Jewish, and he said that Thomas your

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Speaker 1: measurement not by what he has, but what he gives. So, um,

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Speaker 1: you know, I buy into the idea of philanthropic activity.

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Speaker 1: And you know, the large bulk of my giving thus

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Speaker 1: far has been to organizations that have made a difference

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Speaker 1: to me in my lifetime. So you know, a Hunter College.

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Speaker 1: I got a first class education from the University of

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Speaker 1: New York for twenty four dollars a semester. I know,

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Speaker 1: did I get a first class education? But I got

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Speaker 1: a terrific wife. So we've given them a very large

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Speaker 1: amount of money, both for a scholarship and uh and

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Speaker 1: financial aid for when I went to school. I mentioned

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Speaker 1: twenty four hour semester. I think the kids today like

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Speaker 1: six thousand dollars semester. That's cheap compared to the private school.

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Speaker 1: It is, but these kids have trouble coming up with

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Speaker 1: that kind of money. So providing financial aid to help

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Speaker 1: giving them equal opportunity. Then, um, I have a deader

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Speaker 1: gratitude to Columbia of opening the door to my career

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Speaker 1: in Wall Street. And I've given them a doubt a chair.

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Speaker 1: You've set up some scholarships and you've given some unconstricted

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Speaker 1: funds to them as well. Yeah, yeah, well there's a

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Speaker 1: large number. I'm embarrassed to mention in numbers. And I'm

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Speaker 1: not the most generous guy you're gonna meet. I've done

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Speaker 1: what I felt I want to do, so I think

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Speaker 1: our industry is popularly with a lot of very generous

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Speaker 1: people that have have a good soul and want to

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Speaker 1: give back to society. Then third, I was a trustee

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Speaker 1: for many years of St. Bonabus Medical Center, where the

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Speaker 1: largest hospitals and stay in New Jersey, and they were

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Speaker 1: endowed a new wing that's on the construction right as

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Speaker 1: we speak. I'm Barry ri Heults. You're listening to Masters

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Speaker 1: in Business on Bloomberg Radio. My special guest to day

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Speaker 1: is Lee Cooperman of Goldman Sachs and now he runs

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Speaker 1: the hedge fund Omega Advisors, and I want to talk

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Speaker 1: a little bit Lee about value investing, because really you're

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Speaker 1: one of the great value investors. Your your track record

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Speaker 1: has been outstanding. You've outperformed the market by almost fifty percent.

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Speaker 1: Your your long term track record is fourteen percent and

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Speaker 1: change per annum, significantly better than than the benchmark at

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Speaker 1: least that's the most recent data. I saw about four

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Speaker 1: and fifty basis points neative wolf fees and nexus to

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Speaker 1: the SMP, which is fine. We don't want a leverage portfolio,

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Speaker 1: so for non leverage, non leverage, that's fantastic. Your percent

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Speaker 1: always room for improvement. But we're OK. So so let

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Speaker 1: me throw one of my favorite quotes of yours at

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Speaker 1: you and get some comments you. You have been known

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Speaker 1: to say your favorite question is what is ridiculously priced? Now?

429
00:22:56,560 --> 00:22:59,080
Speaker 1: So is it fair to say that you're not a

430
00:22:59,119 --> 00:23:03,400
Speaker 1: believer that markets are perfectly efficient? H? Yeah, I would

431
00:23:03,440 --> 00:23:07,480
Speaker 1: say that. I don't think Warren Buffett got going from

432
00:23:07,600 --> 00:23:11,840
Speaker 1: flipping newspapers to orre seventy five billion dollars if the

433
00:23:11,880 --> 00:23:15,600
Speaker 1: market was totally efficient. Whether it's Mary Gabilly, whether it

434
00:23:15,640 --> 00:23:20,640
Speaker 1: stand Drucomo, or there's Lee Cooperman. I think that everyone

435
00:23:20,720 --> 00:23:23,200
Speaker 1: seems to think that it's hard to beat the SMP. Well,

436
00:23:23,640 --> 00:23:26,600
Speaker 1: if it's so easy to underperform, the ability must exist

437
00:23:26,640 --> 00:23:28,919
Speaker 1: to outperform, And I think there's enough people that have

438
00:23:28,960 --> 00:23:33,000
Speaker 1: outperformed over number years to suggest that with patients and

439
00:23:33,119 --> 00:23:36,040
Speaker 1: some brains and a little bit of luck, that you

440
00:23:36,080 --> 00:23:39,800
Speaker 1: can outperform. So I'm committed to that proposition. I try

441
00:23:39,800 --> 00:23:42,760
Speaker 1: to make money for my investors a number of ways,

442
00:23:42,800 --> 00:23:44,920
Speaker 1: but number one, I do spend a lot of time

443
00:23:44,960 --> 00:23:48,200
Speaker 1: on the macro picture, you know, as the stock market overvalued,

444
00:23:48,320 --> 00:23:49,800
Speaker 1: is it under valued? Is it going up? Is it

445
00:23:49,840 --> 00:23:52,639
Speaker 1: going down? Because at the end of the day, stocks

446
00:23:52,640 --> 00:23:55,040
Speaker 1: are high risk financial assets to turn bonds and casual

447
00:23:55,080 --> 00:23:58,240
Speaker 1: low rist financial assets. And if it's an environment that's

448
00:23:58,320 --> 00:24:01,399
Speaker 1: negative for stocks, I want to be exposed. On the

449
00:24:01,480 --> 00:24:03,520
Speaker 1: other hand, of his environment part of the stocks positive

450
00:24:03,560 --> 00:24:05,639
Speaker 1: the stocks, I want to be heavily exposed. So let

451
00:24:05,640 --> 00:24:09,160
Speaker 1: me ask you right now, what is ridiculously priced today.

452
00:24:09,640 --> 00:24:11,920
Speaker 1: I think the only place that there's a bubble, in

453
00:24:12,040 --> 00:24:15,040
Speaker 1: my opinion is fixed income. I think in any kind

454
00:24:15,080 --> 00:24:18,320
Speaker 1: of longer term context, the Fed funds rate doesn't belong

455
00:24:18,320 --> 00:24:22,119
Speaker 1: at zero and higher. Yeah, I would say so. I

456
00:24:22,119 --> 00:24:27,159
Speaker 1: mean I think that uh, if interest rates deserve to

457
00:24:27,240 --> 00:24:30,000
Speaker 1: belong where they are, the stock market is not going

458
00:24:30,040 --> 00:24:33,720
Speaker 1: to go up because over time, whatever the market is,

459
00:24:33,720 --> 00:24:36,080
Speaker 1: whether the United States, whether it's Europe, whether it's Japan,

460
00:24:36,200 --> 00:24:39,680
Speaker 1: whether it's uh China, that you would think that the

461
00:24:39,880 --> 00:24:42,439
Speaker 1: long term return in the stock market would be a

462
00:24:42,520 --> 00:24:45,919
Speaker 1: function of the growth of the economy, the rate of

463
00:24:46,000 --> 00:24:49,320
Speaker 1: change in corporate profits, the consumer price index, and what

464
00:24:49,440 --> 00:24:51,800
Speaker 1: you can earn in alternative instruments, whether it be bonds

465
00:24:51,880 --> 00:24:53,520
Speaker 1: or cash. So if you take a look at the

466
00:24:53,560 --> 00:24:57,880
Speaker 1: United States and take thirteen and fourteen, take those three

467
00:24:57,960 --> 00:25:01,240
Speaker 1: years and average them, the ray of growth and ECONI

468
00:25:01,280 --> 00:25:04,200
Speaker 1: has been about two point three percent per annum, so

469
00:25:04,240 --> 00:25:07,040
Speaker 1: we're way lower on rates. Well, well, let me go through.

470
00:25:07,080 --> 00:25:09,640
Speaker 1: So two point three was the real GDP growth. Profits

471
00:25:09,680 --> 00:25:12,600
Speaker 1: rose a little over six percent, the freight of inflation

472
00:25:12,680 --> 00:25:15,600
Speaker 1: was about one eight percent. If you were conservative and

473
00:25:15,600 --> 00:25:18,520
Speaker 1: sat on cash, earned zero for the three years, and

474
00:25:18,600 --> 00:25:21,240
Speaker 1: the tenure government to current coupon was about two point

475
00:25:21,240 --> 00:25:25,280
Speaker 1: to two point three. Notwithstanding those very modest numbers, the

476
00:25:25,320 --> 00:25:28,240
Speaker 1: stock market returned over per annum for each of the

477
00:25:28,280 --> 00:25:31,960
Speaker 1: three years thirteen and fourteen. I think that game is over.

478
00:25:32,119 --> 00:25:34,280
Speaker 1: I think that the markets caught up. The markets about

479
00:25:34,320 --> 00:25:37,040
Speaker 1: sixty and a half seventeen times earnings. I think very

480
00:25:37,040 --> 00:25:40,320
Speaker 1: fully valued any kind of historical context. Uh, some would

481
00:25:40,400 --> 00:25:43,240
Speaker 1: argue is maybe modestly overvalued rowth of the history, but

482
00:25:43,280 --> 00:25:46,160
Speaker 1: if you look at fixed income, it's very overvalued. Roads

483
00:25:46,240 --> 00:25:48,080
Speaker 1: the history. I always tell people. I don't want to

484
00:25:48,119 --> 00:25:51,400
Speaker 1: sound like a statistician, but from nineteen hundred and sixty

485
00:25:51,440 --> 00:25:54,800
Speaker 1: to the present, the multiple in the SMP five average

486
00:25:54,800 --> 00:25:57,840
Speaker 1: to touch under fifteen when the rate of inflation range

487
00:25:57,880 --> 00:25:59,919
Speaker 1: between one and three percent where it is now, the

488
00:26:00,040 --> 00:26:03,480
Speaker 1: multiple was about sixteen point seven sixteen point eight where

489
00:26:03,480 --> 00:26:05,560
Speaker 1: we are right now. We are now. However, that same

490
00:26:05,880 --> 00:26:09,280
Speaker 1: fifty idea period when the multiple the market was fifteen,

491
00:26:09,560 --> 00:26:12,560
Speaker 1: the tenure US government average six point six seven currently

492
00:26:12,560 --> 00:26:14,440
Speaker 1: two point three, so you're a better third of the

493
00:26:14,480 --> 00:26:17,560
Speaker 1: long term average, and T bills average a touch under

494
00:26:17,600 --> 00:26:21,439
Speaker 1: five currently zero. Okay, so relative to fixed income, the

495
00:26:21,480 --> 00:26:24,160
Speaker 1: market is very attractively priced. I think the only place

496
00:26:24,240 --> 00:26:28,160
Speaker 1: I see a bubble is because of the extraordinarily accommodative

497
00:26:28,200 --> 00:26:31,520
Speaker 1: monetary policies globally that interest rates are well below where

498
00:26:31,520 --> 00:26:33,640
Speaker 1: you ought to be. And if interest rates belong where

499
00:26:33,640 --> 00:26:35,720
Speaker 1: they are, that means growth in the economy, growth and

500
00:26:35,760 --> 00:26:38,680
Speaker 1: profits are not what people expecting. So it's one of

501
00:26:38,720 --> 00:26:43,200
Speaker 1: the other. Either we're in a very overextended bond market

502
00:26:43,359 --> 00:26:48,040
Speaker 1: rally and and rates have to go higher, or stocks

503
00:26:48,040 --> 00:26:50,199
Speaker 1: are very pricy. It's one or the other, and it

504
00:26:50,280 --> 00:26:54,520
Speaker 1: sounds like you're betting that stocks are reasonably priced relative

505
00:26:54,560 --> 00:26:57,600
Speaker 1: to all these other metrics versus bonds. I think the

506
00:26:57,680 --> 00:27:01,320
Speaker 1: stock market already allows for some rise in rates, and

507
00:27:01,400 --> 00:27:03,360
Speaker 1: I think the issue for the stock market deal with

508
00:27:04,040 --> 00:27:07,120
Speaker 1: is a slope of the rise. I mean, I'm somewhat quizzical.

509
00:27:07,119 --> 00:27:08,719
Speaker 1: A matter of fact, I just saw Gary Cohen as

510
00:27:08,720 --> 00:27:11,080
Speaker 1: a very bright man in a comment that the market

511
00:27:11,080 --> 00:27:14,240
Speaker 1: is not prepared for a FED rate rise, and I

512
00:27:14,240 --> 00:27:17,080
Speaker 1: don't get it. I honestly don't get it. Everybody's talking

513
00:27:17,080 --> 00:27:20,040
Speaker 1: about it almost every day, okay, And I'll give you

514
00:27:20,040 --> 00:27:23,720
Speaker 1: the statistics. There's been eight rate cycles since the mid fifties,

515
00:27:24,080 --> 00:27:27,000
Speaker 1: and on average from the first FED rate hike to

516
00:27:27,080 --> 00:27:30,520
Speaker 1: the market peak was thirty months. It took thirty months

517
00:27:30,640 --> 00:27:32,720
Speaker 1: on average the market the peak after the first FED

518
00:27:32,800 --> 00:27:35,159
Speaker 1: rate hike, and the hour of the shortest period of

519
00:27:35,160 --> 00:27:38,240
Speaker 1: time was ten months. And those rate rises, those eight

520
00:27:38,280 --> 00:27:41,880
Speaker 1: periods in the mid fifties did not start from zero, okay.

521
00:27:41,960 --> 00:27:45,159
Speaker 1: And on average, from the first FED rate hike to

522
00:27:45,760 --> 00:27:47,919
Speaker 1: a year after the first FED rate hike, the market

523
00:27:47,920 --> 00:27:50,520
Speaker 1: was hired by almost ten percent. And so you know,

524
00:27:51,040 --> 00:27:56,679
Speaker 1: rising interest rates are indicative of improving economy, and so

525
00:27:56,800 --> 00:27:58,320
Speaker 1: I think it's only when the rates get to a

526
00:27:58,400 --> 00:28:00,760
Speaker 1: level that's competitive with returns and docks and the stock

527
00:28:00,800 --> 00:28:02,919
Speaker 1: market start to decline. But you know, we have a

528
00:28:02,960 --> 00:28:06,119
Speaker 1: central bank that's cheering on for more growth, more inflation,

529
00:28:06,680 --> 00:28:09,520
Speaker 1: and they're gonna be as a comminative as they can be,

530
00:28:09,640 --> 00:28:12,800
Speaker 1: and I think it's gonna be it's gonna require inflation

531
00:28:12,880 --> 00:28:15,639
Speaker 1: over two percent for the FED to become more restrictive,

532
00:28:16,080 --> 00:28:19,280
Speaker 1: and that would probably require wage growth of about three

533
00:28:19,320 --> 00:28:21,720
Speaker 1: and a a half percent, which probably won't happen until probably

534
00:28:21,800 --> 00:28:26,760
Speaker 1: late maybe. You know, we ran similar numbers that you

535
00:28:26,880 --> 00:28:29,679
Speaker 1: just described in terms of how the market performs in

536
00:28:29,680 --> 00:28:32,480
Speaker 1: a rising rate environment, and the one thing that was

537
00:28:32,600 --> 00:28:36,800
Speaker 1: really clear was when you start from relatively high interest

538
00:28:36,880 --> 00:28:41,120
Speaker 1: rates in a period of high inflation, that's the sort

539
00:28:41,160 --> 00:28:44,000
Speaker 1: of rate rise that's not great for equities. But when

540
00:28:44,040 --> 00:28:46,440
Speaker 1: you're starting from a very low level and what's lower

541
00:28:46,440 --> 00:28:50,200
Speaker 1: than zero and inflation is modest, you tend to see

542
00:28:50,200 --> 00:28:53,600
Speaker 1: smart stocks rise even as rates go higher. That would

543
00:28:53,600 --> 00:28:57,080
Speaker 1: be my view. It's only you know, it's it's it's

544
00:28:57,120 --> 00:28:59,960
Speaker 1: not a complex concept, but it's very very important point

545
00:29:00,280 --> 00:29:04,320
Speaker 1: gonna make, and that is, over time, the only way

546
00:29:04,440 --> 00:29:07,760
Speaker 1: bonds are just to higher interest rates and the decline

547
00:29:07,760 --> 00:29:11,440
Speaker 1: in price to keep the coupon current. The way stocks

548
00:29:11,440 --> 00:29:13,640
Speaker 1: and company to adjust to higher inflation is they take

549
00:29:13,680 --> 00:29:17,680
Speaker 1: the inflation in their costs, incorporating their selling prices, so

550
00:29:17,880 --> 00:29:21,360
Speaker 1: higher inflation lifts the nominal level of revenues and earnings.

551
00:29:21,960 --> 00:29:25,520
Speaker 1: Is only when the FED or central bank is fighting

552
00:29:25,680 --> 00:29:29,880
Speaker 1: to curb inflation that the market starts to decline because

553
00:29:29,920 --> 00:29:33,560
Speaker 1: curbing inflation is tanamount to curbing growth, and investors pay

554
00:29:33,560 --> 00:29:36,680
Speaker 1: a low multiple anticipation slow in growth. But we have

555
00:29:36,720 --> 00:29:39,840
Speaker 1: a FED that's very concerned about you know, income disparity,

556
00:29:40,000 --> 00:29:44,000
Speaker 1: social inequality, and wants to get more economic growth. And

557
00:29:44,040 --> 00:29:45,840
Speaker 1: so I think it's would be quite some time before

558
00:29:45,840 --> 00:29:48,520
Speaker 1: the FED takes the punch away from the punch bowl.

559
00:29:48,880 --> 00:29:50,720
Speaker 1: Uh you know, I mean it wasn't original. I think

560
00:29:50,720 --> 00:29:53,680
Speaker 1: it was George Schaeffer, some technician, uh fifty years ago

561
00:29:54,120 --> 00:29:57,240
Speaker 1: coined the phrase three steps and stumble. It took three

562
00:29:57,280 --> 00:29:59,360
Speaker 1: tightens by the FED for the market that to have

563
00:29:59,440 --> 00:30:01,960
Speaker 1: a stumble, and we haven't had the first tightening yet.

564
00:30:02,360 --> 00:30:06,040
Speaker 1: And it's fairly safe to say that we're not looking

565
00:30:06,080 --> 00:30:09,880
Speaker 1: at any sort of real inflation and wage growth, even

566
00:30:09,880 --> 00:30:13,280
Speaker 1: the most recent data, which has been improving, still fairly

567
00:30:13,320 --> 00:30:16,800
Speaker 1: tapped in terms of wage improvement. I would say that

568
00:30:16,880 --> 00:30:20,280
Speaker 1: the rate of inflation is stath of two percent, and uh,

569
00:30:20,320 --> 00:30:21,840
Speaker 1: it will be a while before we get above that.

570
00:30:22,400 --> 00:30:24,760
Speaker 1: So so let's talk about some of your favorite metrics.

571
00:30:24,800 --> 00:30:28,120
Speaker 1: You mentioned where the pe ratio is. Tell us about

572
00:30:28,160 --> 00:30:31,760
Speaker 1: other ways that you look to measure equities, whether it's

573
00:30:31,800 --> 00:30:36,120
Speaker 1: dividend yield or I'm very eclectic, you know. As I

574
00:30:36,160 --> 00:30:38,720
Speaker 1: said before, we've start out first trying to develop a

575
00:30:38,800 --> 00:30:43,200
Speaker 1: view of the market. Once we done macro view, and

576
00:30:43,240 --> 00:30:46,920
Speaker 1: then on the bottom up we try we understand the

577
00:30:47,000 --> 00:30:49,640
Speaker 1: value proposition at the SMP five hundred, which is the

578
00:30:49,720 --> 00:30:53,480
Speaker 1: broadest based, the most accepted index offers. So if you

579
00:30:53,560 --> 00:30:55,800
Speaker 1: look at the SMP five hundreds and index of five

580
00:30:56,040 --> 00:30:58,920
Speaker 1: companies growing on average five maybe six percent per adam

581
00:30:59,680 --> 00:31:02,560
Speaker 1: that basically has a dividend yield of about two percent,

582
00:31:03,080 --> 00:31:05,040
Speaker 1: that has a debt to capital ratio for around thirty

583
00:31:05,080 --> 00:31:07,800
Speaker 1: five or thirty six percent, sells a little under three

584
00:31:07,840 --> 00:31:12,360
Speaker 1: times this nominal book value. And four that statistics, you're

585
00:31:12,360 --> 00:31:15,560
Speaker 1: paying about sixteen a half seventeen times earnings. So our

586
00:31:15,600 --> 00:31:18,120
Speaker 1: game is very simple. We try to find more growth

587
00:31:18,200 --> 00:31:22,160
Speaker 1: at a lower multiple, more underlying asset value than the

588
00:31:22,200 --> 00:31:26,000
Speaker 1: market has at a lower evaluation, more income than the

589
00:31:26,040 --> 00:31:29,600
Speaker 1: market offers that a more attractive valuation. And you know,

590
00:31:30,120 --> 00:31:32,520
Speaker 1: the bond market is very homogeneous. You know, if you're

591
00:31:32,560 --> 00:31:35,200
Speaker 1: talking looking at triple A bonds, double A bond, single

592
00:31:35,200 --> 00:31:38,320
Speaker 1: A bonds, bonds of a similar quality moved with an

593
00:31:38,320 --> 00:31:40,440
Speaker 1: eighth of a point of each other, it's very homogeneous.

594
00:31:40,560 --> 00:31:43,960
Speaker 1: The stock market is heterogeneous. The SMP might be twenty

595
00:31:44,000 --> 00:31:46,320
Speaker 1: one as we speak, but there are some stocks that

596
00:31:46,400 --> 00:31:49,560
Speaker 1: might be already and some stocks that are seventeen hundred

597
00:31:49,560 --> 00:31:51,520
Speaker 1: on the index, and we're trying to be long the

598
00:31:51,640 --> 00:31:55,520
Speaker 1: seventeen hundred index type equivalence and be short of out.

599
00:31:56,400 --> 00:31:58,640
Speaker 1: So when you say some stocks are two hundred, you

600
00:31:58,640 --> 00:32:02,160
Speaker 1: mean they're very pricey, and the stocks are sere are

601
00:32:02,200 --> 00:32:05,760
Speaker 1: trading at a discount relative to what we perceived to

602
00:32:05,760 --> 00:32:08,640
Speaker 1: be the underlying asset value of the business. We've been

603
00:32:08,640 --> 00:32:12,600
Speaker 1: speaking with Leon Cooperman, founder of Omega Advisers. If you

604
00:32:12,720 --> 00:32:15,520
Speaker 1: enjoy this conversation, be sure and check out the rest

605
00:32:15,560 --> 00:32:18,520
Speaker 1: of our discussion. You could see that on Apple, iTunes,

606
00:32:18,920 --> 00:32:22,400
Speaker 1: Bloomberg dot com, and SoundCloud. Be sure and check out

607
00:32:22,440 --> 00:32:26,000
Speaker 1: my daily column on Bloomberg View dot com or uh

608
00:32:26,040 --> 00:32:29,200
Speaker 1: follow me on Twitter at Rid Halts. I'm Barry Ridhults.

609
00:32:29,240 --> 00:32:32,200
Speaker 1: You've been listening to Masters in Business. I'm Bloomberg Radio.

610
00:32:32,760 --> 00:32:35,440
Speaker 1: Welcome to the podcast portion of our show. I know

611
00:32:35,560 --> 00:32:37,480
Speaker 1: I say this every week and you guys will make

612
00:32:37,480 --> 00:32:40,240
Speaker 1: fun of me, but really I have a very special

613
00:32:40,320 --> 00:32:44,080
Speaker 1: guest this week, someone who I've been actually chasing for

614
00:32:44,480 --> 00:32:48,280
Speaker 1: quite a while. Lee Cooperman, a legend on Wall Street,

615
00:32:49,160 --> 00:32:54,520
Speaker 1: ran Goldman Sachs Research department for twenty plus years practically,

616
00:32:54,560 --> 00:32:58,040
Speaker 1: and then set up Goman Sacks Asset Management Division UM

617
00:32:58,120 --> 00:33:01,520
Speaker 1: his hedge funds Omega Partner now manages about ten billion

618
00:33:01,560 --> 00:33:04,560
Speaker 1: dollars just under Is that about right? Nine three nine

619
00:33:04,600 --> 00:33:10,040
Speaker 1: point three long term returns in excess of about four

620
00:33:10,440 --> 00:33:14,080
Speaker 1: fifty basis points over the SMP five over a long

621
00:33:14,080 --> 00:33:18,320
Speaker 1: period of time. I really have so many questions for you.

622
00:33:18,840 --> 00:33:21,880
Speaker 1: Let me start with some stuff that I we skipped

623
00:33:21,880 --> 00:33:25,640
Speaker 1: through on the radio portion. So I get the sense

624
00:33:25,680 --> 00:33:30,640
Speaker 1: from you that Colombia extremely formative to you as an investor.

625
00:33:31,680 --> 00:33:36,040
Speaker 1: Columbia Business School, Yeah, Well, as I mentioned, I studied

626
00:33:36,120 --> 00:33:40,200
Speaker 1: under Dr Roger Murray, who was a real practitioner of Mega.

627
00:33:40,560 --> 00:33:44,240
Speaker 1: If you're familiar with the Tech Security Analysis by Graham

628
00:33:44,240 --> 00:33:46,520
Speaker 1: and Dodd, which is the kind of bible in the classic,

629
00:33:47,320 --> 00:33:49,600
Speaker 1: and there is a section there where there's like a

630
00:33:49,720 --> 00:33:52,720
Speaker 1: ratio and now analysis where they had about the twenty

631
00:33:52,720 --> 00:33:56,080
Speaker 1: different ratios over ten years to study a company's financial progress.

632
00:33:56,600 --> 00:34:00,160
Speaker 1: I remember from my paper for Security Analysis as I

633
00:34:00,200 --> 00:34:04,000
Speaker 1: did a study contrasting JP Stevens with Burlington Industries, and

634
00:34:04,040 --> 00:34:07,480
Speaker 1: I had this ten year ratio history, twenty different ratios,

635
00:34:08,080 --> 00:34:10,920
Speaker 1: and I had a transposition and one of maybe two

636
00:34:11,360 --> 00:34:14,880
Speaker 1: statistics in the exhibit, and Dr Murray caught it and

637
00:34:14,960 --> 00:34:17,160
Speaker 1: circled it and read, this is the kind of guy

638
00:34:17,160 --> 00:34:22,439
Speaker 1: who was sharp understood the business. And you know his

639
00:34:22,440 --> 00:34:29,919
Speaker 1: his love of his of his uh vocation rubbed off

640
00:34:29,960 --> 00:34:32,760
Speaker 1: on me and you know it was a great business.

641
00:34:32,760 --> 00:34:35,920
Speaker 1: You know where else I'm getting paid for enjoying what

642
00:34:36,040 --> 00:34:38,920
Speaker 1: I do. I mean, it's my vocation, is my advocation,

643
00:34:39,360 --> 00:34:41,960
Speaker 1: and historically it's been a means of supplementing my income

644
00:34:42,160 --> 00:34:44,720
Speaker 1: because if you invest intelligently you could do very well.

645
00:34:45,080 --> 00:34:49,080
Speaker 1: So I kind of I love the game. Um, I

646
00:34:49,120 --> 00:34:52,440
Speaker 1: get an earlier, stay late, uh your your work ethic.

647
00:34:52,880 --> 00:34:56,160
Speaker 1: Doug Casts we just got stuck. Earlier, Doug called you

648
00:34:56,239 --> 00:34:59,560
Speaker 1: the James Brown of the investing business, the hardest working

649
00:34:59,600 --> 00:35:02,000
Speaker 1: man in the industry. Maybe it's because I have an

650
00:35:02,000 --> 00:35:03,400
Speaker 1: average right que, so I got to work card that

651
00:35:03,480 --> 00:35:06,759
Speaker 1: somebody else is smart. That's nothing, you know. I get

652
00:35:06,800 --> 00:35:09,200
Speaker 1: in around six thirty sixty five in the morning, and

653
00:35:09,239 --> 00:35:11,279
Speaker 1: I tend to be an information hog. So I go

654
00:35:11,320 --> 00:35:13,279
Speaker 1: out pretty much every night of the week with other

655
00:35:13,320 --> 00:35:17,840
Speaker 1: money managers or companies to try and basically develop insights

656
00:35:17,880 --> 00:35:20,600
Speaker 1: into my investments. Uh. And I always trying to learn

657
00:35:20,680 --> 00:35:23,720
Speaker 1: from people that are probably smarter than me or equally

658
00:35:23,760 --> 00:35:26,799
Speaker 1: adept at what they do, and we exchange ideas. But

659
00:35:27,080 --> 00:35:29,760
Speaker 1: I'm totally committed. I believe in the concept of total commitment.

660
00:35:30,239 --> 00:35:34,080
Speaker 1: I believe my investors are owed my total commitment and fidelity.

661
00:35:34,160 --> 00:35:38,319
Speaker 1: And uh, I'm never striving to be number one, but

662
00:35:38,400 --> 00:35:41,320
Speaker 1: I want to deliver a competitive return to my investors.

663
00:35:41,360 --> 00:35:44,560
Speaker 1: I do not want to get rich under performing. So

664
00:35:44,600 --> 00:35:47,759
Speaker 1: when I started my business, UH twenty four years ago,

665
00:35:47,920 --> 00:35:50,280
Speaker 1: I had an exhibit which is still my exhibit today

666
00:35:50,280 --> 00:35:53,480
Speaker 1: in my pitch book, and it says I tell people

667
00:35:53,560 --> 00:35:55,840
Speaker 1: when when I meet in a perspective investor, they say, well,

668
00:35:55,840 --> 00:35:57,480
Speaker 1: if I invest with you, what am I gonna earn?

669
00:35:57,840 --> 00:35:59,400
Speaker 1: I would always say the same thing. I don't know

670
00:35:59,440 --> 00:36:01,560
Speaker 1: what you're gonna earn, but let me tell you what

671
00:36:01,680 --> 00:36:04,760
Speaker 1: will make me happy. Because what makes me happy doesn't

672
00:36:04,800 --> 00:36:07,520
Speaker 1: make you happy. I'd rather not invest with me because

673
00:36:07,520 --> 00:36:10,560
Speaker 1: that's the basis of a flawed relationship. So my objectives

674
00:36:10,560 --> 00:36:12,680
Speaker 1: are Number one, no down years, and I've had four

675
00:36:12,719 --> 00:36:15,680
Speaker 1: down years in twenty four. Always came roaring back. But

676
00:36:15,719 --> 00:36:18,200
Speaker 1: I've had down years. Uh, that doesn't mean you change

677
00:36:18,200 --> 00:36:20,200
Speaker 1: your objectives. That's still my objective, not to have a

678
00:36:20,239 --> 00:36:22,600
Speaker 1: down year. Number two, I want to beat the SMP

679
00:36:22,719 --> 00:36:25,239
Speaker 1: five net of my fees. I don't want to make

680
00:36:25,280 --> 00:36:28,320
Speaker 1: a lot of money under performing some mindless ben benchmark.

681
00:36:28,800 --> 00:36:31,520
Speaker 1: Number Three, I don't run a leverage portfolio, so I'd say,

682
00:36:31,800 --> 00:36:34,040
Speaker 1: you know, ten to twelve percent net returned to the

683
00:36:34,040 --> 00:36:37,279
Speaker 1: investor would make me happy. We've done fourteen percent net,

684
00:36:37,360 --> 00:36:39,880
Speaker 1: so I'm fine there. And fourth, I like to have

685
00:36:39,960 --> 00:36:42,680
Speaker 1: less volatility than the market. So I like to app

686
00:36:42,680 --> 00:36:45,080
Speaker 1: perform the market while being less voltile of the market.

687
00:36:45,440 --> 00:36:48,080
Speaker 1: And if you buy into that value proposition, come invest

688
00:36:48,120 --> 00:36:49,960
Speaker 1: with me, and I can assure you that we have

689
00:36:50,000 --> 00:36:53,160
Speaker 1: a total alignment of interest. So you know, we met

690
00:36:53,239 --> 00:36:56,640
Speaker 1: nine point three billion of that is general partner capital,

691
00:36:57,239 --> 00:36:59,640
Speaker 1: So you know we So you're a big investor in

692
00:36:59,640 --> 00:37:02,440
Speaker 1: your own my firm. You you you eat your own cooking,

693
00:37:02,719 --> 00:37:05,320
Speaker 1: eat my own cooking, and the team meets their own cooking.

694
00:37:05,360 --> 00:37:07,239
Speaker 1: We have a forty nine of us in the firm,

695
00:37:07,360 --> 00:37:10,600
Speaker 1: twenty five general partners. They all have money in the

696
00:37:10,680 --> 00:37:14,440
Speaker 1: farm UH as investors. And what I'd like to say

697
00:37:14,560 --> 00:37:17,160
Speaker 1: is we prosper the most when we get it right,

698
00:37:17,239 --> 00:37:19,000
Speaker 1: and we get hurt the most when we get it wrong.

699
00:37:19,400 --> 00:37:21,360
Speaker 1: And we're not in an asset capturing mission. We're in

700
00:37:21,400 --> 00:37:23,600
Speaker 1: a mission of trying to generate capital games and have

701
00:37:23,640 --> 00:37:27,240
Speaker 1: a total alignment of interest. You mentioned your down years,

702
00:37:27,320 --> 00:37:30,960
Speaker 1: and you mentioned something and when I was so, we

703
00:37:31,040 --> 00:37:32,800
Speaker 1: do a lot of research before I sit down with

704
00:37:33,360 --> 00:37:36,319
Speaker 1: a Lee Cooperman and and one of the things I

705
00:37:36,360 --> 00:37:40,600
Speaker 1: read was really quite astonishing. So one of your down

706
00:37:40,680 --> 00:37:43,239
Speaker 1: years was oh eight, you were still less volatile than

707
00:37:43,280 --> 00:37:47,120
Speaker 1: the market the SMP. The SMP was down thirty eight percent.

708
00:37:47,200 --> 00:37:49,560
Speaker 1: You have down thirty But what I wanted to ask

709
00:37:49,600 --> 00:37:52,920
Speaker 1: you about in oh eight and o nine, every hedge

710
00:37:52,920 --> 00:37:57,279
Speaker 1: fund I read about was gating their funds meeting. They

711
00:37:57,360 --> 00:38:02,799
Speaker 1: have an an option to not let their investors withdraw money,

712
00:38:02,880 --> 00:38:06,360
Speaker 1: and you refuse to do that. You said, we're on gated.

713
00:38:06,400 --> 00:38:08,240
Speaker 1: If you're not happy and you want to take your money,

714
00:38:08,520 --> 00:38:10,960
Speaker 1: it's your money. Take it. Yeah, I have Uh. I

715
00:38:11,000 --> 00:38:12,680
Speaker 1: think it was in New York Times and a little

716
00:38:12,680 --> 00:38:14,960
Speaker 1: story about that time. That's where I found that that

717
00:38:15,040 --> 00:38:16,760
Speaker 1: they had a picture of me and under the pictures

718
00:38:16,760 --> 00:38:18,680
Speaker 1: said they'd have to load me into my grave before

719
00:38:18,680 --> 00:38:20,560
Speaker 1: I get a capital who did not honor a high

720
00:38:20,600 --> 00:38:23,520
Speaker 1: water market. There were two aspects of oh eight, I'm

721
00:38:23,640 --> 00:38:27,000
Speaker 1: sure your your listeners understand. But one of the negatives

722
00:38:27,040 --> 00:38:29,040
Speaker 1: of the hedge fund, and it's fair by the way, uh,

723
00:38:29,560 --> 00:38:32,560
Speaker 1: compensation schemes is a so called high water mark, you know,

724
00:38:32,560 --> 00:38:35,640
Speaker 1: where you get paid for appreciation and lose money. You've

725
00:38:35,600 --> 00:38:37,640
Speaker 1: got to make back the lossit before you get paid again.

726
00:38:37,880 --> 00:38:40,400
Speaker 1: Another word, just started a hundred bucks and you're getting

727
00:38:40,400 --> 00:38:44,239
Speaker 1: two and twenty, it drops down to eighty. The performance

728
00:38:44,280 --> 00:38:47,280
Speaker 1: feed doesn't show up again until you're over that hundred

729
00:38:47,280 --> 00:38:50,200
Speaker 1: again exactly, and a lot of money. Match is elected

730
00:38:50,239 --> 00:38:52,279
Speaker 1: to close up and oh wait, because they got way

731
00:38:52,320 --> 00:38:54,360
Speaker 1: below their high water and they could not make an

732
00:38:54,400 --> 00:38:57,640
Speaker 1: incentive fee, and I kind of feel that's morally wrong

733
00:38:57,800 --> 00:39:00,839
Speaker 1: because it's one thing if it investors. Look, I'm scared

734
00:39:00,840 --> 00:39:03,160
Speaker 1: about the environment, and I want my where where I

735
00:39:03,160 --> 00:39:04,960
Speaker 1: I'm scared about you the money matag, I want my

736
00:39:05,000 --> 00:39:07,080
Speaker 1: money back there. To stay of money, they should get

737
00:39:07,120 --> 00:39:11,600
Speaker 1: it back, okay, But to voluntarily give somebody back the money.

738
00:39:11,640 --> 00:39:14,400
Speaker 1: And so I'm closing up and retiring because i can't

739
00:39:14,440 --> 00:39:17,759
Speaker 1: make money is wrong because the high watermark is an

740
00:39:17,760 --> 00:39:20,400
Speaker 1: asset of the investor, and you should not deprive that

741
00:39:20,480 --> 00:39:22,520
Speaker 1: investor of the asset as long as he or she

742
00:39:22,640 --> 00:39:25,799
Speaker 1: is willing to continue to take the risk. And so, uh,

743
00:39:26,160 --> 00:39:28,120
Speaker 1: closing up and giving back money I think was wrong.

744
00:39:28,480 --> 00:39:30,160
Speaker 1: And the other thing that and then, by the way,

745
00:39:30,200 --> 00:39:33,640
Speaker 1: relaunching under a different name, there's some huge some of

746
00:39:33,640 --> 00:39:35,879
Speaker 1: that happened. When you started. There were you know, I'm

747
00:39:35,880 --> 00:39:39,040
Speaker 1: gonna quote Jim Channos back when you know, we look

748
00:39:39,080 --> 00:39:41,920
Speaker 1: at how many hedge funds are not generating alpha, and

749
00:39:42,080 --> 00:39:44,400
Speaker 1: Jim Chanos said said, well, when he launched, there were

750
00:39:44,400 --> 00:39:46,560
Speaker 1: a hundred or so hedge funds and they were all

751
00:39:46,600 --> 00:39:49,520
Speaker 1: really profitable. Now there's ten thousand hedge funds and it's

752
00:39:49,560 --> 00:39:52,520
Speaker 1: the same hundred that are generating most of the YA.

753
00:39:53,280 --> 00:39:56,759
Speaker 1: I can't generalize, UH, but you know, I've used this

754
00:39:56,760 --> 00:39:59,960
Speaker 1: as a hand out. I think a very very distinct

755
00:40:00,040 --> 00:40:03,680
Speaker 1: whish the person for for good reason. Carol Loomis, who

756
00:40:03,760 --> 00:40:06,360
Speaker 1: has been advising Warren Buffett on the writing of his

757
00:40:06,400 --> 00:40:10,680
Speaker 1: annuary portfet know fifty years I think nineteen seventy one,

758
00:40:11,280 --> 00:40:15,200
Speaker 1: wrote a very negative article about hedge funds UH, focusing

759
00:40:15,280 --> 00:40:18,960
Speaker 1: on the performance from nineteen sixty eight to nineteen seventy

760
00:40:19,000 --> 00:40:21,480
Speaker 1: where all the hedge funds got murdered, with the exception

761
00:40:21,520 --> 00:40:23,359
Speaker 1: of Stein, Hunt, find and Burke, which which was up

762
00:40:23,400 --> 00:40:26,359
Speaker 1: five percent in that period. And she kind of rang

763
00:40:26,440 --> 00:40:29,200
Speaker 1: the death knell for hedge funds. UH. And if you

764
00:40:29,280 --> 00:40:31,759
Speaker 1: go back and look as as distinguished and smart as

765
00:40:31,800 --> 00:40:34,440
Speaker 1: she is, and she is distinguished, you're smart. Couldn't been

766
00:40:34,440 --> 00:40:37,200
Speaker 1: more wrong. The largest hedge funds in nineteen sixty eight

767
00:40:37,320 --> 00:40:41,120
Speaker 1: was a W. Jones at two hundred million, okay, And

768
00:40:41,160 --> 00:40:43,759
Speaker 1: the whole industry might have been a billion dollars if

769
00:40:43,760 --> 00:40:45,799
Speaker 1: you're lucky. And today I don't know, the hedges over

770
00:40:45,920 --> 00:40:49,200
Speaker 1: three trillions, three trillion dollars. And you said ten thou

771
00:40:49,400 --> 00:40:53,400
Speaker 1: hedge funds. Bridgewater has a hundred almost a hundred fifty

772
00:40:53,480 --> 00:40:56,560
Speaker 1: billion a q u R as a hundred plus. It's

773
00:40:56,600 --> 00:40:59,719
Speaker 1: all about performance. If you could deliver the performance, you'll

774
00:40:59,760 --> 00:41:02,440
Speaker 1: have a business. And so what happened in two thousand

775
00:41:02,560 --> 00:41:08,680
Speaker 1: and eight is uh, the stabilitating year of the five

776
00:41:08,800 --> 00:41:11,520
Speaker 1: years before two thousand eight, Let's say two thousand and

777
00:41:11,520 --> 00:41:14,279
Speaker 1: two to two thousand and seven, hedge funds were out

778
00:41:14,280 --> 00:41:19,560
Speaker 1: performing conventional money managers, and they attracted a lot of money, okay,

779
00:41:19,719 --> 00:41:22,240
Speaker 1: And what happened two thousand eight is people got scared.

780
00:41:22,600 --> 00:41:24,400
Speaker 1: I didn't realize you could lose money by being in

781
00:41:24,440 --> 00:41:26,120
Speaker 1: a hedge fund. The fact that the average hedge fund

782
00:41:26,200 --> 00:41:29,239
Speaker 1: was only down six less than half d SMP didn't

783
00:41:29,239 --> 00:41:31,560
Speaker 1: impress People say, I didn't realize you could lose money,

784
00:41:31,800 --> 00:41:34,120
Speaker 1: so they asked for their money back, and the hedge

785
00:41:34,120 --> 00:41:36,920
Speaker 1: fund industry shot themselves in the foot by gating capital.

786
00:41:37,280 --> 00:41:39,719
Speaker 1: There's nothing no better way to get money from an

787
00:41:39,719 --> 00:41:42,839
Speaker 1: individual by telling me you closed, you know, like made

788
00:41:42,880 --> 00:41:47,240
Speaker 1: off with time. People we want that which we can't have, Okay,

789
00:41:47,239 --> 00:41:51,040
Speaker 1: exactly that well phrased, and uh, there's no better way

790
00:41:51,040 --> 00:41:53,239
Speaker 1: of scaring people than telling you can't have your money back.

791
00:41:53,600 --> 00:41:56,239
Speaker 1: So even though the hedgefund industry performed their role by

792
00:41:56,280 --> 00:41:59,480
Speaker 1: being down less than half of the industry by gating capital.

793
00:41:59,520 --> 00:42:02,239
Speaker 1: They're scared everybody, But we didn't get We had about

794
00:42:02,280 --> 00:42:05,239
Speaker 1: six seven million dollars of redemptions. Every dollar was met

795
00:42:05,280 --> 00:42:08,680
Speaker 1: for cash, no gating, no in kind, and life went

796
00:42:08,719 --> 00:42:10,879
Speaker 1: on and we worked very hard to recover our high

797
00:42:10,920 --> 00:42:15,399
Speaker 1: water mark, which we did. You know, two thousand nine,

798
00:42:15,400 --> 00:42:20,319
Speaker 1: you were up about doubled the market performance. So well,

799
00:42:20,360 --> 00:42:23,160
Speaker 1: that's been a tendency where we underperformed. The history has

800
00:42:23,200 --> 00:42:28,040
Speaker 1: been that we generally significantly outperform coming out uh we uh,

801
00:42:28,080 --> 00:42:30,240
Speaker 1: you know, we were up a week before Lehman Brothers

802
00:42:30,320 --> 00:42:31,600
Speaker 1: hit in two thousand and eight. We were up on

803
00:42:31,640 --> 00:42:34,319
Speaker 1: the ear We totally really because the market was down

804
00:42:34,400 --> 00:42:37,759
Speaker 1: about I want to say about twenty something. I think

805
00:42:37,880 --> 00:42:42,319
Speaker 1: was less than that before Lehman hit before made less

806
00:42:42,320 --> 00:42:44,920
Speaker 1: than that. But but I recall that point in two

807
00:42:45,000 --> 00:42:47,000
Speaker 1: thousand and eight was a negative year off to look

808
00:42:47,080 --> 00:42:49,160
Speaker 1: up to very I think much more modestly. I'd helped

809
00:42:49,200 --> 00:42:54,320
Speaker 1: take it up modestly, and we totally misgauged the effect

810
00:42:54,400 --> 00:42:57,040
Speaker 1: of Lehman's and ovously in the market, and the fact

811
00:42:57,080 --> 00:42:58,719
Speaker 1: that there were a lot of people along with us,

812
00:42:58,760 --> 00:43:01,840
Speaker 1: including the government, is irrelevant. My investors looked to me

813
00:43:01,920 --> 00:43:05,760
Speaker 1: to protect their capital and with my responsibility is my era. Okay,

814
00:43:05,840 --> 00:43:08,120
Speaker 1: The only good thing I can say is we stuck

815
00:43:08,200 --> 00:43:11,440
Speaker 1: with the guns. We came back fifty and oh nine

816
00:43:14,280 --> 00:43:18,640
Speaker 1: flat and eleven thirty four in twelve and thirty eight

817
00:43:18,640 --> 00:43:22,040
Speaker 1: and thirteen and this year. Uh. Last year we had

818
00:43:22,040 --> 00:43:24,040
Speaker 1: a bad year, my worst year relative to the market.

819
00:43:24,040 --> 00:43:26,000
Speaker 1: We were flatish and the Y S and P was up.

820
00:43:26,160 --> 00:43:28,000
Speaker 1: But this year we're about two and a half times. Yes,

821
00:43:28,040 --> 00:43:31,319
Speaker 1: and people have about seven eight percent. But it's tough.

822
00:43:31,360 --> 00:43:33,719
Speaker 1: Game has gotten tougher and a lot of competition, a

823
00:43:33,800 --> 00:43:38,000
Speaker 1: lot of competition. But you're you even still with this competition,

824
00:43:38,080 --> 00:43:41,120
Speaker 1: you've managed to put up some those are all star numbers.

825
00:43:41,120 --> 00:43:44,319
Speaker 1: Even with a flat year or or an underperforming year.

826
00:43:44,680 --> 00:43:46,759
Speaker 1: That that's a heck of a run. That's seven year.

827
00:43:47,719 --> 00:43:50,239
Speaker 1: Well said enough. You know, we've been blessed by a

828
00:43:50,280 --> 00:43:53,040
Speaker 1: trended bull market. Now of course the UH and on

829
00:43:53,080 --> 00:43:55,400
Speaker 1: the right side of it, yeah, we we've had a

830
00:43:55,440 --> 00:43:58,920
Speaker 1: positive view. We try to add value to portfolios in

831
00:43:59,000 --> 00:44:01,279
Speaker 1: five ways, and the first as I mentioned before is

832
00:44:01,680 --> 00:44:04,120
Speaker 1: stocks are high risk financial assets. Short term bonds and

833
00:44:04,160 --> 00:44:06,839
Speaker 1: cash lowrist financial assets. And we spent a great deal

834
00:44:06,840 --> 00:44:09,960
Speaker 1: of time trying to study the market. I have a

835
00:44:10,080 --> 00:44:14,880
Speaker 1: terrific partner, vice chairman, Steve en Horne. He worked I

836
00:44:15,160 --> 00:44:17,480
Speaker 1: actually one of my better heart my best hire in

837
00:44:17,560 --> 00:44:19,719
Speaker 1: my career. I hired him at a podential insurance. He

838
00:44:19,760 --> 00:44:22,600
Speaker 1: worked directly under me for twelve years a goldman. I

839
00:44:22,640 --> 00:44:26,640
Speaker 1: retired from Goldley. He retired from Goldley in ninety eight,

840
00:44:26,719 --> 00:44:29,000
Speaker 1: not with the intent of joining me. He wasn't sure

841
00:44:29,040 --> 00:44:31,360
Speaker 1: what he was gonna do. And I read about his retirement.

842
00:44:31,400 --> 00:44:33,759
Speaker 1: I called him up and we had dinner, and I

843
00:44:33,800 --> 00:44:36,120
Speaker 1: got him to rejoin me as vice chairman. And he

844
00:44:36,200 --> 00:44:39,000
Speaker 1: spends the bulk of his time on the macro big picture.

845
00:44:39,000 --> 00:44:41,160
Speaker 1: Does a wonderful job for the firm. And we have

846
00:44:41,200 --> 00:44:43,880
Speaker 1: a whole policy group that meets every Monday to discuss

847
00:44:44,000 --> 00:44:47,839
Speaker 1: the global economy and FED and so let's talk about that,

848
00:44:47,920 --> 00:44:52,200
Speaker 1: because I'm fascinated by your process. What are those Monday

849
00:44:52,239 --> 00:44:55,239
Speaker 1: morning meetings like, well, you know, we get we get

850
00:44:55,280 --> 00:44:58,680
Speaker 1: together at eight fifteen the morning. Our head of macro

851
00:44:58,800 --> 00:45:01,120
Speaker 1: trading is on the many. Actually we have two people

852
00:45:01,160 --> 00:45:04,880
Speaker 1: in macro trading on the committee and they're studying China, Japan,

853
00:45:05,120 --> 00:45:09,839
Speaker 1: currency fixed income. We have a consulting economists that participates

854
00:45:09,840 --> 00:45:12,600
Speaker 1: in the meeting, Steve and I and our two co

855
00:45:12,760 --> 00:45:16,440
Speaker 1: directors of research and we we we it's like kind

856
00:45:16,440 --> 00:45:20,040
Speaker 1: of putting together a heuristic model about the world. You

857
00:45:20,080 --> 00:45:24,200
Speaker 1: know what looks miss priced, you know what looks overvalued?

858
00:45:25,360 --> 00:45:27,040
Speaker 1: When is the FED gonna move? What is the FED

859
00:45:27,120 --> 00:45:29,640
Speaker 1: move gonna be? Uh? What is it gonna what's the

860
00:45:29,680 --> 00:45:32,520
Speaker 1: impact on the market. You would you rather be in, uh,

861
00:45:32,680 --> 00:45:36,480
Speaker 1: Japan or Europe or United States? What's the return profile

862
00:45:36,520 --> 00:45:39,040
Speaker 1: on each of these markets? Where do you see FED

863
00:45:39,080 --> 00:45:41,960
Speaker 1: funds at the end of t s And we're trying

864
00:45:42,000 --> 00:45:43,920
Speaker 1: to find, you know, where the intelligent bed is. So

865
00:45:43,960 --> 00:45:45,640
Speaker 1: we're doing well this year in part because we have

866
00:45:45,640 --> 00:45:48,040
Speaker 1: money in Japan, we have money in Europe. Were short

867
00:45:48,080 --> 00:45:50,520
Speaker 1: to short endo the yell curve UH, and we've been

868
00:45:50,560 --> 00:45:53,800
Speaker 1: short UH the yen and been short the euro. Was

869
00:45:54,320 --> 00:45:56,960
Speaker 1: about to ask you are you long Japan shortly end

870
00:45:57,040 --> 00:46:00,040
Speaker 1: and and how do you affect that trade? Well? In

871
00:46:00,280 --> 00:46:03,799
Speaker 1: the in the cash market, we don't need to borrow money.

872
00:46:03,880 --> 00:46:07,200
Speaker 1: We have plenty of UH. You know capital and we

873
00:46:07,400 --> 00:46:10,720
Speaker 1: basically are we don't do a lot of individual stocks

874
00:46:10,719 --> 00:46:13,640
Speaker 1: in Japan, so they're not to my liking in all

875
00:46:13,680 --> 00:46:17,800
Speaker 1: honesty with long the topics and Nikki as opposed individual

876
00:46:17,800 --> 00:46:20,040
Speaker 1: stocks because we don't have a lot of stock expertise,

877
00:46:20,080 --> 00:46:23,560
Speaker 1: but we've had a strong macro view Japan. Don't have

878
00:46:23,600 --> 00:46:26,400
Speaker 1: a lot of Japanese stock expertise, no, but we have

879
00:46:26,480 --> 00:46:29,440
Speaker 1: a view of the Japanese market, so we've may expressed

880
00:46:29,440 --> 00:46:33,200
Speaker 1: that bet through the indices um and we kind of

881
00:46:33,280 --> 00:46:37,000
Speaker 1: you know, you have qui infinity. There many globally competitive

882
00:46:37,000 --> 00:46:40,520
Speaker 1: companies sellaying a very reasonable valuations with the multiples in

883
00:46:40,560 --> 00:46:43,360
Speaker 1: Japan are quite low relative to their intrat strate structure.

884
00:46:43,880 --> 00:46:46,200
Speaker 1: And we believe Europe is several years behind the United

885
00:46:46,239 --> 00:46:49,040
Speaker 1: States in terms of the economic recovery right now. Has

886
00:46:49,040 --> 00:46:52,480
Speaker 1: been buffeted by what's going on in Greece, but general

887
00:46:52,520 --> 00:46:55,279
Speaker 1: belief is there will be an agreement with Grease and

888
00:46:55,400 --> 00:46:58,359
Speaker 1: not gonna exit, and if they did exit, other than

889
00:46:58,360 --> 00:47:00,799
Speaker 1: a short term adjustment. The reality is Greece is two

890
00:47:00,800 --> 00:47:04,360
Speaker 1: tents of one percent of global gdp UM and it

891
00:47:04,400 --> 00:47:07,719
Speaker 1: would not be as significant as the market seems to

892
00:47:07,760 --> 00:47:09,600
Speaker 1: make it make it out, and I think that they'll

893
00:47:09,600 --> 00:47:15,200
Speaker 1: stay in the because Germany will basically compromise. You mentioned

894
00:47:15,440 --> 00:47:20,000
Speaker 1: Steinhardt earlier, Um, I believe his farm. He's an adviser

895
00:47:20,040 --> 00:47:22,560
Speaker 1: to wisdom Tree. Is that right? Yeah, that's a personal

896
00:47:22,560 --> 00:47:24,560
Speaker 1: investment he made. I don't know that much about it,

897
00:47:24,640 --> 00:47:27,960
Speaker 1: but they're big product over the past few years has

898
00:47:28,040 --> 00:47:33,279
Speaker 1: been there hedged Yen Long Japan product which has just

899
00:47:33,560 --> 00:47:36,320
Speaker 1: blown up. It's become a huge made a great investment

900
00:47:36,360 --> 00:47:39,640
Speaker 1: Wisdom Tree. Jonathan Steinberg has done a great job. I

901
00:47:39,680 --> 00:47:41,719
Speaker 1: didn't have the pleasure of knowing him. I knew his dad,

902
00:47:42,040 --> 00:47:44,719
Speaker 1: but basically Michael had the opportunity to back him, and

903
00:47:44,760 --> 00:47:47,080
Speaker 1: Michael made a great investment decision. I think Michael has

904
00:47:47,080 --> 00:47:50,239
Speaker 1: done extremely well in that investment. I don't know, I

905
00:47:50,280 --> 00:47:51,640
Speaker 1: don't know the details, but I think he's made a

906
00:47:51,640 --> 00:47:54,239
Speaker 1: lot of money. So let's keep working our way through

907
00:47:54,280 --> 00:47:57,920
Speaker 1: some of the questions. Uh I missed you mentioned Mario

908
00:47:58,040 --> 00:48:02,360
Speaker 1: Gibelli was with you at Columbia. Who else was in

909
00:48:02,400 --> 00:48:05,440
Speaker 1: your class of Columbia? Two guys that made remain clost

910
00:48:05,480 --> 00:48:08,759
Speaker 1: most closely in touch with were classmates. Is Art Sandberg

911
00:48:09,719 --> 00:48:12,240
Speaker 1: and what's he doing? That is he's doing a venture

912
00:48:12,239 --> 00:48:14,840
Speaker 1: capital in a major way. And he's pleased to report

913
00:48:14,880 --> 00:48:19,680
Speaker 1: he's extremely happy, doing very well, very successful financially, very scable,

914
00:48:20,080 --> 00:48:23,080
Speaker 1: just a very high quality human being. UH. And then

915
00:48:23,120 --> 00:48:26,279
Speaker 1: Mario and I have made remained closely in touch for

916
00:48:26,440 --> 00:48:31,560
Speaker 1: fifty years. UH. I have great admiration for Mario. I

917
00:48:31,600 --> 00:48:35,600
Speaker 1: like people that deal well with this success, that remember

918
00:48:35,640 --> 00:48:38,439
Speaker 1: where they came from, UH, and are prepared to give

919
00:48:38,480 --> 00:48:41,880
Speaker 1: back the society and the nice thing I like to say,

920
00:48:41,920 --> 00:48:44,399
Speaker 1: and I've said this so often about Mario. The only

921
00:48:44,440 --> 00:48:46,799
Speaker 1: thing that's changed with Mario, other than a lot of

922
00:48:46,880 --> 00:48:50,279
Speaker 1: digits after his net worth, is the color of his hair.

923
00:48:50,320 --> 00:48:52,120
Speaker 1: When I knew Marrio, he was a redhead. Now he's

924
00:48:52,160 --> 00:48:55,120
Speaker 1: got a full head of gray hair. He weighs less,

925
00:48:55,120 --> 00:48:56,600
Speaker 1: I think today than he weighed when he went to

926
00:48:56,600 --> 00:48:59,400
Speaker 1: Columbia business schools, which I would say I'd love to

927
00:48:59,400 --> 00:49:02,480
Speaker 1: be able to say. I can't say. I'm a bit heavier.

928
00:49:02,880 --> 00:49:05,600
Speaker 1: But he's a He's a great person, great human being,

929
00:49:05,640 --> 00:49:08,600
Speaker 1: and a terrific investor and has built a fabulous business.

930
00:49:08,600 --> 00:49:11,200
Speaker 1: I think they manage it with fifty billion dollars, a

931
00:49:11,280 --> 00:49:15,120
Speaker 1: very successful public company and very generous and UH. He

932
00:49:15,200 --> 00:49:18,399
Speaker 1: and I get together. I say at least a half

933
00:49:18,440 --> 00:49:21,279
Speaker 1: a dozen times a year. In fact, I invited him.

934
00:49:21,280 --> 00:49:23,359
Speaker 1: He's not Jewish, as you can hell from the name

935
00:49:23,880 --> 00:49:25,680
Speaker 1: I took. I took him on a u j A

936
00:49:25,760 --> 00:49:28,520
Speaker 1: mission to Cuba at eighteen months ago with his lovely wife,

937
00:49:28,520 --> 00:49:32,239
Speaker 1: Regina uh And then he and I and wives went

938
00:49:32,320 --> 00:49:35,839
Speaker 1: on about ten day around the world trip. On one

939
00:49:35,840 --> 00:49:39,360
Speaker 1: of these was sponsored by Columbia where they tartted a

940
00:49:39,440 --> 00:49:41,440
Speaker 1: plane for seven year eighty people and they have a

941
00:49:41,480 --> 00:49:44,440
Speaker 1: few lecturers and a doctor that goes along with you

942
00:49:44,520 --> 00:49:47,200
Speaker 1: and plane lands. The next thing you see, your luggage

943
00:49:47,239 --> 00:49:49,520
Speaker 1: is in your hotel room, and you put your luggage

944
00:49:49,520 --> 00:49:52,360
Speaker 1: at your your hotel room door and it's gone and

945
00:49:52,400 --> 00:49:56,839
Speaker 1: so very nice too. We went to Turkey, Egypt, uh Ti,

946
00:49:56,920 --> 00:49:59,400
Speaker 1: porn Agria, India, the Los city of Petro, and Jordan's

947
00:50:00,040 --> 00:50:04,040
Speaker 1: and uh Monica, Morocco, and it was very interesting and

948
00:50:04,080 --> 00:50:06,920
Speaker 1: we spent that time together. Now he's a global investor.

949
00:50:07,040 --> 00:50:09,880
Speaker 1: He's all over the world on a fairly regular basis.

950
00:50:09,840 --> 00:50:11,880
Speaker 1: Big transformation for him because he used to say it

951
00:50:11,920 --> 00:50:14,520
Speaker 1: was strictly United States only, but now he's a big

952
00:50:14,560 --> 00:50:18,399
Speaker 1: emerging market. Guys, but you were are famous for not

953
00:50:18,480 --> 00:50:22,640
Speaker 1: really liking to take a vacation. Well, uh, let me

954
00:50:22,760 --> 00:50:25,400
Speaker 1: say this that you said, or let me we phrase

955
00:50:25,480 --> 00:50:28,120
Speaker 1: that the best part about going on vacation is coming home.

956
00:50:28,440 --> 00:50:32,239
Speaker 1: That I would absolutely acknowledge. And the vacation I just

957
00:50:32,360 --> 00:50:35,719
Speaker 1: referenced with Mario. The best part of vacation was as follows.

958
00:50:36,480 --> 00:50:39,040
Speaker 1: I'm standing in the value of the kings and lux

959
00:50:39,080 --> 00:50:42,320
Speaker 1: for Egypt looking at that many many, many, many thousand

960
00:50:42,360 --> 00:50:45,680
Speaker 1: year olds fink statue. My cell phone goes off at

961
00:50:45,680 --> 00:50:48,120
Speaker 1: one o'clock in the afternoon and it's seven am New

962
00:50:48,200 --> 00:50:50,960
Speaker 1: York time. It's my trained desk calling to tell me

963
00:50:51,000 --> 00:50:54,560
Speaker 1: that largest position Atlas Energy just agreed to be taken

964
00:50:54,600 --> 00:50:58,800
Speaker 1: over above the last sales by a chevron. And I

965
00:50:58,840 --> 00:51:00,360
Speaker 1: would say that was the highlight of the trip, not

966
00:51:00,400 --> 00:51:04,200
Speaker 1: take anything along. So it wasn't the sphinx. It was

967
00:51:04,280 --> 00:51:09,160
Speaker 1: a takeover, and the takeover happened to be a largest position.

968
00:51:09,520 --> 00:51:13,400
Speaker 1: Um so uh yeah, I'm I kind of in touch

969
00:51:13,440 --> 00:51:16,400
Speaker 1: with the office all the time. And uh but you know,

970
00:51:16,600 --> 00:51:18,160
Speaker 1: let me say this, and I give my wife a

971
00:51:18,200 --> 00:51:21,319
Speaker 1: great credit. I have two wonderful kids, have three great grandchildren,

972
00:51:21,400 --> 00:51:25,200
Speaker 1: I have a terrific marriage, and I don't think I

973
00:51:25,239 --> 00:51:28,160
Speaker 1: would be successful if I didn't have a successful marriage,

974
00:51:28,160 --> 00:51:30,480
Speaker 1: if I didn't have terrific kids. And I've had a

975
00:51:30,560 --> 00:51:33,840
Speaker 1: very balanced life, and I've always had that wisdom to

976
00:51:33,960 --> 00:51:37,240
Speaker 1: know when they go home and cut short that business

977
00:51:37,239 --> 00:51:41,440
Speaker 1: trip or not go away to balance. And yes, there

978
00:51:41,480 --> 00:51:43,400
Speaker 1: was a perfect example. I was supposed to go to

979
00:51:43,440 --> 00:51:44,960
Speaker 1: a business dinner and I sent, you know, for the

980
00:51:45,000 --> 00:51:46,520
Speaker 1: last two weeks, I've been that every night other week

981
00:51:46,800 --> 00:51:48,640
Speaker 1: at the time to co up to missus and say,

982
00:51:48,680 --> 00:51:51,920
Speaker 1: I'll meet you at Touro's for a pizza for dinner

983
00:51:51,920 --> 00:51:53,920
Speaker 1: if you're free. And that was the right thing to

984
00:51:53,960 --> 00:51:57,160
Speaker 1: do down near Canal Street. You know. That was Toros

985
00:51:57,200 --> 00:52:00,279
Speaker 1: in the Maplewood, New Jersey. Okay, so you're just a

986
00:52:00,360 --> 00:52:05,879
Speaker 1: regular pizza I am. I am. I'm a regular guy.

987
00:52:05,920 --> 00:52:09,640
Speaker 1: I have not learned how to live rich. So let's

988
00:52:09,680 --> 00:52:12,840
Speaker 1: let's go back to that the plumbers wrenches. That is

989
00:52:12,840 --> 00:52:15,400
Speaker 1: that a myth? Or is that true? No? Well, I

990
00:52:15,400 --> 00:52:19,040
Speaker 1: guess an analogy. I would say that when I started Omega,

991
00:52:21,200 --> 00:52:24,920
Speaker 1: I hung personally every picture in our office. And I

992
00:52:24,960 --> 00:52:27,359
Speaker 1: don't ask anybody do anything that I'm not pre paid

993
00:52:27,360 --> 00:52:30,360
Speaker 1: to do myself. I take great pride of ownership. I

994
00:52:30,480 --> 00:52:33,239
Speaker 1: like to make sure the office looks proper. And you know,

995
00:52:33,320 --> 00:52:37,279
Speaker 1: I just ask people to basically be committed to the

996
00:52:37,280 --> 00:52:42,040
Speaker 1: client's interests uh and basically know what you're doing and

997
00:52:42,600 --> 00:52:46,520
Speaker 1: work hard and be knowledgeable. And I tried to set

998
00:52:46,560 --> 00:52:49,000
Speaker 1: an example, like I said a moment ago, I don't

999
00:52:49,040 --> 00:52:50,520
Speaker 1: ask people to do what I'm not pre paid to

1000
00:52:50,520 --> 00:52:54,959
Speaker 1: do myself. So so, and this goes back to Doug said,

1001
00:52:55,800 --> 00:52:58,720
Speaker 1: so he shared some insights with me about you, because

1002
00:52:59,200 --> 00:53:01,759
Speaker 1: so for those people don't know, Doug cast runs Sea

1003
00:53:01,800 --> 00:53:05,120
Speaker 1: Breeze Partners and and his very articulate and writes a

1004
00:53:05,120 --> 00:53:08,680
Speaker 1: lot and and Doug said, Lee never wanted to forget

1005
00:53:08,680 --> 00:53:12,160
Speaker 1: his roots that he comes from. Um a dad who's

1006
00:53:12,160 --> 00:53:14,160
Speaker 1: a plumber. And he used to walking around in his

1007
00:53:14,200 --> 00:53:18,560
Speaker 1: briefcase with this heavy giant plumbers wrench. And I didn't

1008
00:53:18,560 --> 00:53:20,640
Speaker 1: know if he was pulling my leg. I think he was.

1009
00:53:20,680 --> 00:53:22,799
Speaker 1: I mean, I don't recall mean I car enough waight

1010
00:53:22,880 --> 00:53:26,960
Speaker 1: around as it is principally saying he's right, But I

1011
00:53:27,120 --> 00:53:28,880
Speaker 1: never carried around the plumbers ranch. And I've used the

1012
00:53:28,880 --> 00:53:31,920
Speaker 1: plumbers wrench. I've cleaned that, I've cleaned out stoppages and

1013
00:53:32,040 --> 00:53:35,280
Speaker 1: used a wire. Wait, so you're cleaning toilets and omega,

1014
00:53:35,320 --> 00:53:37,759
Speaker 1: is that what you're telling me? No? But now what

1015
00:53:37,800 --> 00:53:39,120
Speaker 1: I do is I put a sign on the wall,

1016
00:53:39,160 --> 00:53:40,960
Speaker 1: please shut the light off when you finished. You know,

1017
00:53:42,080 --> 00:53:44,920
Speaker 1: you would rather give them money away than just waste

1018
00:53:44,920 --> 00:53:49,640
Speaker 1: it frivolously. Yeah, that's the motivation behind this. I think

1019
00:53:49,680 --> 00:53:53,799
Speaker 1: there was something I made note of. Um and uh,

1020
00:53:54,520 --> 00:53:59,239
Speaker 1: go ahead, correctly. And I really don't associate this with

1021
00:53:59,320 --> 00:54:02,120
Speaker 1: the person who said it, Okay, but it is the

1022
00:54:02,160 --> 00:54:05,760
Speaker 1: meaning of life is to find your gift. The purpose

1023
00:54:05,800 --> 00:54:08,200
Speaker 1: of life is to give it away. That's that's an

1024
00:54:08,239 --> 00:54:11,719
Speaker 1: interesting I'm saying that. Pablo Picasso. Actually it was a

1025
00:54:11,760 --> 00:54:16,080
Speaker 1: bit of a womanizer. But basically, uh, you know, I

1026
00:54:16,239 --> 00:54:18,799
Speaker 1: having taken the giving pledge and having taken care of

1027
00:54:18,840 --> 00:54:21,920
Speaker 1: my kids and all. And I'm not complaining, not bragging,

1028
00:54:21,960 --> 00:54:26,000
Speaker 1: because the people I know have a similar oriolation. But

1029
00:54:26,160 --> 00:54:30,080
Speaker 1: you know, I'm working for charity. Okay, so you look

1030
00:54:30,120 --> 00:54:32,000
Speaker 1: at all the money you raise at this point is

1031
00:54:32,040 --> 00:54:34,640
Speaker 1: going to go to a higher purpose. That's the fact

1032
00:54:34,680 --> 00:54:36,239
Speaker 1: that like, and I would just like to make sure

1033
00:54:36,280 --> 00:54:41,520
Speaker 1: it's properly utilized. You know, I've worked too hard for

1034
00:54:41,520 --> 00:54:43,680
Speaker 1: this money. I want to make sure that it accomplishes

1035
00:54:43,719 --> 00:54:45,719
Speaker 1: some end to it. So so let's talk about that

1036
00:54:45,760 --> 00:54:48,279
Speaker 1: a little bit, because that's a question that I see

1037
00:54:48,280 --> 00:54:51,759
Speaker 1: all the time. How can one make sure that the

1038
00:54:51,800 --> 00:54:57,640
Speaker 1: philanthropical gifts that are made are actually you're lying up

1039
00:54:57,640 --> 00:55:00,319
Speaker 1: on other people? Look, there's no greater example that and

1040
00:55:00,480 --> 00:55:05,239
Speaker 1: the Warren Buffett, very very very complex individual, and he

1041
00:55:05,360 --> 00:55:09,239
Speaker 1: basically says that I am the warm buffet investing. I'm

1042
00:55:09,239 --> 00:55:11,840
Speaker 1: not the warm buffet of charitable giving. And when the

1043
00:55:11,880 --> 00:55:13,439
Speaker 1: time comes to get away my money and I will

1044
00:55:13,440 --> 00:55:15,520
Speaker 1: give it away. I want the warm buffet of childboll

1045
00:55:15,560 --> 00:55:17,479
Speaker 1: giving giving it away. I think he went to Billy

1046
00:55:17,480 --> 00:55:19,640
Speaker 1: Wollnda Gates. He said, look, you're a lot younger than me.

1047
00:55:20,239 --> 00:55:23,600
Speaker 1: I trust you. I really get my jollies by making it.

1048
00:55:23,719 --> 00:55:26,640
Speaker 1: Not because I'm greedy, because I like to make investment decisions.

1049
00:55:27,120 --> 00:55:31,360
Speaker 1: I don't much care about charitable activities. So if you

1050
00:55:31,520 --> 00:55:34,359
Speaker 1: leave Microsoft and spend full time on chardable giving, I'll

1051
00:55:34,400 --> 00:55:36,920
Speaker 1: take my sixties seventy billion dollars and put into the

1052
00:55:36,920 --> 00:55:39,600
Speaker 1: Bill of Milinda Gates Foundation. I mean what you and

1053
00:55:39,680 --> 00:55:42,360
Speaker 1: Bean does that? You know that was an amazing gift,

1054
00:55:42,480 --> 00:55:44,879
Speaker 1: he says, I trust Bill millind the gates and that's

1055
00:55:44,920 --> 00:55:48,120
Speaker 1: not my forte. My forte is investing, not charitable giving.

1056
00:55:48,840 --> 00:55:51,839
Speaker 1: And so, in a sense to answer your question, I

1057
00:55:51,880 --> 00:55:53,960
Speaker 1: tried to make a judgment, just like I try to

1058
00:55:54,000 --> 00:55:56,279
Speaker 1: make a judgment to invest in the right company with

1059
00:55:56,360 --> 00:55:58,799
Speaker 1: the right management, that they have the right motivations and

1060
00:55:58,800 --> 00:56:01,080
Speaker 1: they have the smarts and the skill set in the

1061
00:56:01,120 --> 00:56:03,600
Speaker 1: common sense to do a good job. I'm trying to

1062
00:56:03,640 --> 00:56:06,920
Speaker 1: support those organizations that I think have a common interest

1063
00:56:06,960 --> 00:56:11,120
Speaker 1: of common gold with a person I'm investing that responsibility

1064
00:56:11,120 --> 00:56:14,080
Speaker 1: and has the same passion about it then in their

1065
00:56:14,200 --> 00:56:17,359
Speaker 1: organization and I have in my business. So Jennifer Rabb,

1066
00:56:18,000 --> 00:56:21,120
Speaker 1: president of Hunter College, worked me out with pretty good

1067
00:56:21,280 --> 00:56:23,399
Speaker 1: and then went up giving twenty five million dollars to Hunter.

1068
00:56:24,040 --> 00:56:29,080
Speaker 1: Uh My mom went the Glenn uh Hubbard of Columbia

1069
00:56:29,120 --> 00:56:31,399
Speaker 1: Business School has worked me over nicely, and I've given

1070
00:56:31,480 --> 00:56:34,399
Speaker 1: him thirty three million dollars. And you've also, in doubt,

1071
00:56:34,480 --> 00:56:37,040
Speaker 1: you've done more than just that. You've in doubt chairs

1072
00:56:37,080 --> 00:56:40,240
Speaker 1: you've given scholarships to them. You have a very extensive

1073
00:56:40,239 --> 00:56:43,799
Speaker 1: relations Clumbia. They're not shy and asking. I told cool

1074
00:56:43,880 --> 00:56:47,000
Speaker 1: that I totally administration of Columbia that they order to

1075
00:56:47,000 --> 00:56:48,960
Speaker 1: basically give a few leaps out of their book to

1076
00:56:49,120 --> 00:56:52,839
Speaker 1: the u J. A u J is notorious, Columbia is

1077
00:56:53,200 --> 00:56:57,040
Speaker 1: maybe even better. Really that that's fascinating to hear. So,

1078
00:56:57,040 --> 00:56:59,920
Speaker 1: so you mentioned a little bit about you invest in

1079
00:57:00,000 --> 00:57:03,520
Speaker 1: gate philanthropy, the way you investigate stocks. Let's talk about

1080
00:57:03,560 --> 00:57:06,520
Speaker 1: that a bit. What what is your process? How do

1081
00:57:06,560 --> 00:57:11,000
Speaker 1: you identify and evaluate a given stock prior to making

1082
00:57:11,560 --> 00:57:14,160
Speaker 1: We have a team, you know, and I am just

1083
00:57:14,320 --> 00:57:17,640
Speaker 1: one member of the team, but I generally would say

1084
00:57:17,680 --> 00:57:23,120
Speaker 1: that we have seventeen analysts. It's their job to mind

1085
00:57:23,200 --> 00:57:27,280
Speaker 1: the areas of expertise that they focus on and to

1086
00:57:27,920 --> 00:57:30,360
Speaker 1: capture profits out of the market. So the analyst job

1087
00:57:30,400 --> 00:57:33,200
Speaker 1: is to propose. And we have a stock selection committe

1088
00:57:33,200 --> 00:57:37,760
Speaker 1: OMEGA that disposes, propose and disposed so the analysts, so

1089
00:57:37,800 --> 00:57:40,840
Speaker 1: that bubbles up and then this committee and his report

1090
00:57:40,920 --> 00:57:43,760
Speaker 1: proposes the idea of the stock selection committee which consists

1091
00:57:43,800 --> 00:57:46,560
Speaker 1: of co directors of research Steve Ienho and Vice Himan

1092
00:57:46,600 --> 00:57:49,400
Speaker 1: the firm, myself and a couple of the senior macro people,

1093
00:57:49,760 --> 00:57:53,720
Speaker 1: and we vet the idea and every report is required

1094
00:57:53,800 --> 00:57:57,919
Speaker 1: to have price objective in the recommendation of downside risk

1095
00:57:58,560 --> 00:58:02,040
Speaker 1: um and if we buy the stock, it's simplicitly we've

1096
00:58:02,080 --> 00:58:07,720
Speaker 1: accepted the return and risk profile. After stock declines to

1097
00:58:08,120 --> 00:58:11,680
Speaker 1: the risk point or below, the analyst becomes a secondary

1098
00:58:11,720 --> 00:58:15,000
Speaker 1: input into the decision making going forward, and it's taken

1099
00:58:15,000 --> 00:58:17,320
Speaker 1: over by what we call the cesspool committee, you know,

1100
00:58:17,360 --> 00:58:20,320
Speaker 1: with a cesspool where that's all the junkos and so

1101
00:58:20,800 --> 00:58:23,640
Speaker 1: I chair the sesspool committee, and we'll bring in people

1102
00:58:23,640 --> 00:58:26,880
Speaker 1: from the outside to help us vet the idea. UH,

1103
00:58:26,920 --> 00:58:30,520
Speaker 1: and we can decide either to double down meeting average

1104
00:58:30,560 --> 00:58:32,640
Speaker 1: down in the position. Do you do that? Often? Does

1105
00:58:32,680 --> 00:58:34,880
Speaker 1: that happen for it? It varies. At times we sell,

1106
00:58:34,880 --> 00:58:37,800
Speaker 1: at times we just sit patent. At times we basically

1107
00:58:37,840 --> 00:58:41,000
Speaker 1: double down. And it really depends upon the characteristic of

1108
00:58:41,040 --> 00:58:43,280
Speaker 1: the company, the diving in the yield, the asset value

1109
00:58:43,280 --> 00:58:46,720
Speaker 1: of the multiple, what the overall market is doing. You know,

1110
00:58:46,880 --> 00:58:48,760
Speaker 1: a rising tide, lifts of ships that we've seen tide

1111
00:58:48,800 --> 00:58:51,200
Speaker 1: loads of ships, as I said before, And sometimes stock

1112
00:58:51,280 --> 00:58:52,720
Speaker 1: is down because of the market and you want to

1113
00:58:52,720 --> 00:58:56,960
Speaker 1: separate out the noise and um. So we we have,

1114
00:58:57,080 --> 00:58:59,600
Speaker 1: like I said, invest in policy committee that sets policy

1115
00:58:59,640 --> 00:59:02,400
Speaker 1: for the farm. We have a stock selection committee, that

1116
00:59:02,560 --> 00:59:04,960
Speaker 1: responds to the analysts. And then, of course a certain

1117
00:59:05,000 --> 00:59:08,880
Speaker 1: amount of the activity is top down, where I would

1118
00:59:09,440 --> 00:59:11,880
Speaker 1: or Steve iron Horn or other people on the policy

1119
00:59:11,920 --> 00:59:14,000
Speaker 1: coming would have an idea about a sector and we

1120
00:59:14,000 --> 00:59:15,600
Speaker 1: would go to the analysts and asked them to look

1121
00:59:15,640 --> 00:59:17,840
Speaker 1: at a particular area. So now let's talk about a

1122
00:59:17,840 --> 00:59:21,400
Speaker 1: stock that's working out. It's it's one decision when you're

1123
00:59:21,400 --> 00:59:24,120
Speaker 1: buying something at X, and now it's down ten or

1124
00:59:24,880 --> 00:59:28,520
Speaker 1: and very different. It's very difficult if you're a value investor.

1125
00:59:28,560 --> 00:59:30,800
Speaker 1: If you like something at ten, you should like it

1126
00:59:30,920 --> 00:59:33,360
Speaker 1: more to nine or eight. But there are those times

1127
00:59:33,400 --> 00:59:37,400
Speaker 1: where something is tangibly changed and the circumstances have changed,

1128
00:59:37,440 --> 00:59:39,600
Speaker 1: and you've got to make a different decision. So the

1129
00:59:39,600 --> 00:59:42,200
Speaker 1: way I'd like to answer the question is we sell.

1130
00:59:42,320 --> 00:59:44,480
Speaker 1: You know, a typical question from a consultant that comes

1131
00:59:44,480 --> 00:59:48,000
Speaker 1: in your shop, what is your cell discipline? Okay? And

1132
00:59:48,080 --> 00:59:50,920
Speaker 1: I say we sell the stock for one or four reasons.

1133
00:59:51,560 --> 00:59:54,600
Speaker 1: The first and the highest quality reason is we board

1134
00:59:54,600 --> 00:59:56,920
Speaker 1: a stock at X. We thought it was worth X

1135
00:59:56,920 --> 00:59:59,480
Speaker 1: plus thirty or forty, it goes up thirty percent, nothing

1136
00:59:59,520 --> 01:00:03,680
Speaker 1: has changed, we sell, So even even once it hits

1137
01:00:03,680 --> 01:00:07,760
Speaker 1: your price, objective even if there's no change in circumstances.

1138
01:00:07,840 --> 01:00:10,160
Speaker 1: If there is no change of circumstances. So give you

1139
01:00:10,160 --> 01:00:12,760
Speaker 1: a perfect example. I bought twenty five million shares of

1140
01:00:12,840 --> 01:00:15,919
Speaker 1: Bosting Scientific in between five and six dollars a share.

1141
01:00:16,200 --> 01:00:19,040
Speaker 1: We thought it was worth twelve or thirteen. It got there.

1142
01:00:19,160 --> 01:00:22,400
Speaker 1: We didn't see circumstances that change. We saw unfortunates a mistake.

1143
01:00:22,400 --> 01:00:24,800
Speaker 1: But I think it's about eighteen and nineteen now, okay.

1144
01:00:24,800 --> 01:00:27,160
Speaker 1: But so the first reason, just generically is it is

1145
01:00:27,200 --> 01:00:29,800
Speaker 1: always a full sale or is it ever well, let's

1146
01:00:29,800 --> 01:00:33,320
Speaker 1: sell half of varias. It very again depending on the company,

1147
01:00:33,320 --> 01:00:35,720
Speaker 1: depending upon the characteristics. And look, I believe in looking

1148
01:00:35,720 --> 01:00:39,400
Speaker 1: at charts. You know you do, Bob, absolutely is what

1149
01:00:39,440 --> 01:00:41,160
Speaker 1: are the ingredients? Because I think the stock markets are

1150
01:00:41,240 --> 01:00:44,920
Speaker 1: highly quality leading indicator. And you know, often times when

1151
01:00:44,960 --> 01:00:46,240
Speaker 1: it comes in kind of that with bed earnings of

1152
01:00:46,280 --> 01:00:48,720
Speaker 1: stock was down we before the earnings, and they come

1153
01:00:48,760 --> 01:00:50,480
Speaker 1: away with blow where your earnings of stock is up

1154
01:00:50,480 --> 01:00:52,160
Speaker 1: before that, and the market has a way of knowing

1155
01:00:52,200 --> 01:00:55,120
Speaker 1: there's some secretary typing of breast release for some CEO

1156
01:00:55,560 --> 01:00:57,680
Speaker 1: who's got a cousin or got a wife, who's got

1157
01:00:57,680 --> 01:01:01,960
Speaker 1: a relative or whatever. So there's a discounting mechanisms out. Yeah, exactly.

1158
01:01:02,240 --> 01:01:05,120
Speaker 1: So you're not we would never consider you a techno

1159
01:01:05,200 --> 01:01:08,560
Speaker 1: analyst or chartist. You're not making buying cell decisions based

1160
01:01:08,600 --> 01:01:12,160
Speaker 1: on because Doug said. Doug cass said, asked Lee if

1161
01:01:12,200 --> 01:01:16,400
Speaker 1: he's believes in voodoo. No, we are deep dive fundamental investors.

1162
01:01:16,400 --> 01:01:19,240
Speaker 1: We work hard to developer information. But I'll look at

1163
01:01:19,240 --> 01:01:22,200
Speaker 1: a chart because the confirmation of what you think and

1164
01:01:22,360 --> 01:01:24,680
Speaker 1: raised the question when the truck's going the wrong way?

1165
01:01:25,040 --> 01:01:28,320
Speaker 1: You know, because again, the stock market is a leading indicator,

1166
01:01:28,800 --> 01:01:31,680
Speaker 1: and so stocks tend to give you some indication of

1167
01:01:31,720 --> 01:01:34,440
Speaker 1: what's going on. So the first reason we sell the stock,

1168
01:01:34,560 --> 01:01:36,960
Speaker 1: which the highest quality. Reason we bought something that X,

1169
01:01:37,040 --> 01:01:38,800
Speaker 1: we thought it was worth something more than X. It it

1170
01:01:38,680 --> 01:01:42,040
Speaker 1: it appreciates nothing has changed. We sell. Second reason we

1171
01:01:42,080 --> 01:01:44,760
Speaker 1: sell something is I tell my guys, stay in gals,

1172
01:01:44,800 --> 01:01:48,560
Speaker 1: stay on top of your companies. Not everything unfolds the

1173
01:01:48,600 --> 01:01:52,360
Speaker 1: way you anticipated. So talk to suppliers, talk to competitors,

1174
01:01:52,360 --> 01:01:56,160
Speaker 1: talk to companies. You know, foul what's going on the economy,

1175
01:01:56,400 --> 01:01:58,760
Speaker 1: and if you get to sense things are unfolding differently

1176
01:01:58,760 --> 01:02:01,520
Speaker 1: than you anticipated. Let's out before we get murdered. This

1177
01:02:01,560 --> 01:02:05,200
Speaker 1: it's hard to make up two kind of environment. The

1178
01:02:05,240 --> 01:02:07,560
Speaker 1: third reason we sell as we are not the Federal

1179
01:02:07,560 --> 01:02:11,200
Speaker 1: Reserve Board. We cannot print money. So sometimes you develop

1180
01:02:11,240 --> 01:02:14,040
Speaker 1: a new idea that has a much better ratio of

1181
01:02:14,080 --> 01:02:17,080
Speaker 1: reward to risk than something you currently own. So we'll

1182
01:02:17,160 --> 01:02:20,240
Speaker 1: rotate out of something that has got more modest attraction

1183
01:02:20,480 --> 01:02:23,080
Speaker 1: to something that we think has greater attraction. And the

1184
01:02:23,120 --> 01:02:26,080
Speaker 1: fourth reason we sell is we change our view of

1185
01:02:26,080 --> 01:02:29,000
Speaker 1: the market. Okay, and you know you could deal with

1186
01:02:29,080 --> 01:02:31,440
Speaker 1: futures or options for a while. But the end of

1187
01:02:31,440 --> 01:02:34,000
Speaker 1: the day, if you go off bullish to bearish and

1188
01:02:34,040 --> 01:02:35,880
Speaker 1: you want to take your exposure from ninety your arm

1189
01:02:35,920 --> 01:02:38,920
Speaker 1: present down a fifty or sixty percent, you gotta sell inventory.

1190
01:02:39,400 --> 01:02:40,800
Speaker 1: And so you sell a stock because you want to

1191
01:02:40,800 --> 01:02:42,720
Speaker 1: get out of harm's way. And we did a poor

1192
01:02:42,800 --> 01:02:44,480
Speaker 1: job in two thousand and eight because we missed a

1193
01:02:44,480 --> 01:02:46,960
Speaker 1: significance of Lehman. But by a law, those are the

1194
01:02:46,960 --> 01:02:50,520
Speaker 1: four reasons we sell. Price appreciation hit our target, we

1195
01:02:50,560 --> 01:02:52,800
Speaker 1: get out. The second is things are not unfolding. Is

1196
01:02:52,840 --> 01:02:55,080
Speaker 1: we anticipated it out before you get murdered. The third

1197
01:02:55,120 --> 01:02:57,160
Speaker 1: reason we sell as we found a new idea better

1198
01:02:57,200 --> 01:03:00,120
Speaker 1: than the one that we have in the fourth reasons

1199
01:03:00,120 --> 01:03:01,520
Speaker 1: we've changed our view with the market. We want to

1200
01:03:01,560 --> 01:03:06,240
Speaker 1: reduce exposure. That's quite fascinating. Do you generally you mentioned

1201
01:03:06,560 --> 01:03:08,720
Speaker 1: a little bit of hedging. Do you generally hedge? Because

1202
01:03:08,720 --> 01:03:11,720
Speaker 1: from what I've been looking at, you're pretty much. I

1203
01:03:11,760 --> 01:03:15,280
Speaker 1: would say we tend to be long oriented, more long

1204
01:03:15,360 --> 01:03:17,200
Speaker 1: and the typical hedge fund, which has served as well

1205
01:03:17,240 --> 01:03:20,520
Speaker 1: the last five or six years. UM. I would say

1206
01:03:20,600 --> 01:03:24,120
Speaker 1: that our short positions range from five to fiftent to

1207
01:03:24,160 --> 01:03:27,720
Speaker 1: the fund. We do not run a big gross book

1208
01:03:27,760 --> 01:03:31,280
Speaker 1: and a small netbook. I found it very difficult because

1209
01:03:31,840 --> 01:03:34,280
Speaker 1: we tend to want to know our companies, so we

1210
01:03:34,400 --> 01:03:36,880
Speaker 1: have about ninety positions at any point in time. We

1211
01:03:37,000 --> 01:03:40,720
Speaker 1: have seventeen analysts that divide seventeen. I'm asking my colleagues

1212
01:03:40,760 --> 01:03:42,959
Speaker 1: and the five or six companies better than somebody else,

1213
01:03:43,720 --> 01:03:46,480
Speaker 1: which means we had that luxury of knowing our companies

1214
01:03:46,480 --> 01:03:50,520
Speaker 1: really well, which I want you know. Uh. Wall Street

1215
01:03:50,560 --> 01:03:53,000
Speaker 1: has changed from the time I was on Wall Street today.

1216
01:03:53,360 --> 01:03:57,400
Speaker 1: Wall Street has become a distribution business. Okay, sure they

1217
01:03:57,400 --> 01:03:59,840
Speaker 1: would like you as their client to make money, but

1218
01:04:00,040 --> 01:04:04,200
Speaker 1: their primary objective is distributing securities and also the regulatory

1219
01:04:04,240 --> 01:04:07,800
Speaker 1: environment appropriately has created a level of playing field, and

1220
01:04:08,080 --> 01:04:09,960
Speaker 1: they'll give you the information when they give it to

1221
01:04:10,000 --> 01:04:12,880
Speaker 1: everybody else at the same time. So we really want

1222
01:04:12,880 --> 01:04:15,520
Speaker 1: to do our own research. And Wall Streets large become

1223
01:04:15,560 --> 01:04:19,680
Speaker 1: an access and underwriting business. They'll have conferences and seminars

1224
01:04:19,720 --> 01:04:22,960
Speaker 1: and managing meetings and they'll provide access. Luckily, we're large

1225
01:04:23,000 --> 01:04:24,560
Speaker 1: enough to get access in our own but we do

1226
01:04:24,640 --> 01:04:27,080
Speaker 1: go to all these conferences and that's what wall Ster

1227
01:04:27,240 --> 01:04:29,480
Speaker 1: is helpful. And then they underwrite securities and if there's

1228
01:04:29,480 --> 01:04:31,880
Speaker 1: something we're interested in, we would hope to get a

1229
01:04:31,880 --> 01:04:35,160
Speaker 1: good allocation. We tend not to be flippers. We tend

1230
01:04:35,160 --> 01:04:39,000
Speaker 1: to be investors, uh, and so by having a good

1231
01:04:39,000 --> 01:04:41,280
Speaker 1: relationship with Wall Street, we tend to get good allocations

1232
01:04:41,440 --> 01:04:44,280
Speaker 1: where we're interested. We don't to slip deals for sake

1233
01:04:44,280 --> 01:04:47,920
Speaker 1: of flipping deals. So you mentioned your investors not flippers. Typically,

1234
01:04:47,920 --> 01:04:50,800
Speaker 1: how long do you not not even syndicate or I

1235
01:04:50,840 --> 01:04:53,200
Speaker 1: p o s? But something that your team finds that

1236
01:04:53,520 --> 01:04:56,080
Speaker 1: you're enthusiastic about, how long do you have not an

1237
01:04:56,120 --> 01:04:58,440
Speaker 1: asset base is taxable, so you know, we try to

1238
01:04:58,480 --> 01:05:00,360
Speaker 1: go a long term and we actually have a tax

1239
01:05:01,320 --> 01:05:04,120
Speaker 1: advantage fund where we represent we go a long term.

1240
01:05:04,840 --> 01:05:08,640
Speaker 1: But I would say seventy inventory is made for investment

1241
01:05:08,760 --> 01:05:11,800
Speaker 1: with the horizons of over a year, not quite the

1242
01:05:11,800 --> 01:05:15,200
Speaker 1: Warm Buffet horizon, which almost as permanent. But I respect

1243
01:05:15,240 --> 01:05:17,320
Speaker 1: and admire that. You know, most people who miss really

1244
01:05:17,320 --> 01:05:20,840
Speaker 1: Buffett's record and they criticize the under before this year

1245
01:05:20,960 --> 01:05:24,720
Speaker 1: or he's in line with you. Remember, all I heard

1246
01:05:24,840 --> 01:05:28,000
Speaker 1: was this Warren Buffett guy. He's done his best years

1247
01:05:28,000 --> 01:05:31,080
Speaker 1: of behind and this guy's a different You know, Warren

1248
01:05:31,080 --> 01:05:36,480
Speaker 1: Buffett's record is great pretax. It's better than great aff

1249
01:05:36,480 --> 01:05:39,920
Speaker 1: attacks because m yeah, you know, he's not looking to

1250
01:05:40,000 --> 01:05:42,640
Speaker 1: buy this year's hot stock, flip it out and by

1251
01:05:42,680 --> 01:05:45,600
Speaker 1: next year's hot stock. He's looking for after tax returns.

1252
01:05:45,600 --> 01:05:48,680
Speaker 1: And I forget the annual meeting, the annual report year

1253
01:05:49,000 --> 01:05:52,880
Speaker 1: maybe twenty five years ago, maybe even thirty. He showed

1254
01:05:52,920 --> 01:05:56,120
Speaker 1: an example if you had a great money manager that

1255
01:05:56,720 --> 01:06:00,640
Speaker 1: but this year's hot stock made fift and sold it,

1256
01:06:00,880 --> 01:06:03,520
Speaker 1: and what yester next year's hot stock made fifty and

1257
01:06:03,640 --> 01:06:05,960
Speaker 1: sold it. Where you found a great company that was

1258
01:06:05,960 --> 01:06:08,080
Speaker 1: a great investment, held it for twenty or thirty years

1259
01:06:08,120 --> 01:06:10,360
Speaker 1: and made fifteen percent a year, what did you have

1260
01:06:10,520 --> 01:06:13,560
Speaker 1: as attacks at the end of thirty years was thousands

1261
01:06:13,600 --> 01:06:16,200
Speaker 1: of times different. The flippers giving up a third of

1262
01:06:16,240 --> 01:06:18,880
Speaker 1: thet of his prophecy, which I could be a discipline

1263
01:06:18,920 --> 01:06:21,840
Speaker 1: and him. Unfortunately the business and client a man don't

1264
01:06:21,840 --> 01:06:24,680
Speaker 1: allow completely for that. But we're sympathetic to that. You know,

1265
01:06:24,760 --> 01:06:27,520
Speaker 1: we've seen the holding period shrink and shrink and shrink,

1266
01:06:27,600 --> 01:06:30,800
Speaker 1: but it sounds like you're still longer than many. I

1267
01:06:30,840 --> 01:06:36,080
Speaker 1: would say. You know, in two thousands, I remember my investors,

1268
01:06:36,160 --> 01:06:37,800
Speaker 1: many of my investors coming to me and said, Lee,

1269
01:06:38,120 --> 01:06:40,200
Speaker 1: you're doing very well. We're making a lot of money,

1270
01:06:40,240 --> 01:06:43,160
Speaker 1: but we really don't want to pay the taxes. Do

1271
01:06:43,160 --> 01:06:46,640
Speaker 1: you have anything tax advantaged? I said, Jesus, that's music

1272
01:06:46,680 --> 01:06:50,000
Speaker 1: to my years in the largest investment Omega. I'll tell

1273
01:06:50,000 --> 01:06:51,920
Speaker 1: you what you know. And I'm not just not a commercial.

1274
01:06:51,960 --> 01:06:55,080
Speaker 1: I'm not looking to investors. I said, if you give

1275
01:06:55,120 --> 01:06:58,800
Speaker 1: me a three year commitment period, Okay, we have three

1276
01:06:58,840 --> 01:07:03,320
Speaker 1: year commitment period, I'll give via one in fifteen conversation

1277
01:07:03,360 --> 01:07:08,360
Speaker 1: scheme and five percent hurdle rate. And uh, if something

1278
01:07:08,400 --> 01:07:10,840
Speaker 1: happens to you the investor in that three period, you're

1279
01:07:10,840 --> 01:07:13,360
Speaker 1: stay can get out immediately. If something happens to me,

1280
01:07:13,400 --> 01:07:14,920
Speaker 1: the money manage and you want to get out, you

1281
01:07:14,920 --> 01:07:18,680
Speaker 1: can get out immediately and represent for that package seventy

1282
01:07:18,720 --> 01:07:20,840
Speaker 1: five percent more of the games will be long term

1283
01:07:20,840 --> 01:07:24,040
Speaker 1: capital gains. I believe in memory and I think it's

1284
01:07:24,040 --> 01:07:26,280
Speaker 1: pretty accurate. We've beat in the SMP by thousand basis

1285
01:07:26,360 --> 01:07:28,440
Speaker 1: points and a hundred percent of the games a long

1286
01:07:28,560 --> 01:07:31,320
Speaker 1: term capital gains. And that's for people that are tax

1287
01:07:31,360 --> 01:07:34,160
Speaker 1: sens So let's go over that one in fifteen versus

1288
01:07:35,440 --> 01:07:37,400
Speaker 1: because we had allowed to be we raised it maybe

1289
01:07:37,440 --> 01:07:39,320
Speaker 1: five years later to one and half in twenty. Still

1290
01:07:39,320 --> 01:07:42,280
Speaker 1: have a five percent hurdle rate meaning what meaning the

1291
01:07:42,320 --> 01:07:44,440
Speaker 1: first five percent we don't get compensated on in terms

1292
01:07:44,480 --> 01:07:49,760
Speaker 1: of incentive. There's no doesn't count. Yeah, it's twenty above

1293
01:07:49,840 --> 01:07:52,560
Speaker 1: the five and I think we beat the SMP by

1294
01:07:52,560 --> 01:07:54,760
Speaker 1: a moment with a thousand basis points in that period

1295
01:07:55,520 --> 01:07:59,760
Speaker 1: well spent over a hundred percent of games with long

1296
01:07:59,880 --> 01:08:02,440
Speaker 1: term capital gains. The best way to understand the product

1297
01:08:02,600 --> 01:08:06,439
Speaker 1: is we buy a stock. Okay, we intend to hold

1298
01:08:06,480 --> 01:08:08,680
Speaker 1: it for a year. Sometimes you get a gain much

1299
01:08:08,760 --> 01:08:12,440
Speaker 1: more quickly. They appreciate to a sell point more quickly

1300
01:08:12,520 --> 01:08:16,160
Speaker 1: from regular fund. We don't represent tax efficiency will sell

1301
01:08:16,200 --> 01:08:18,959
Speaker 1: it for this fund. We we'll do is use options

1302
01:08:19,320 --> 01:08:21,519
Speaker 1: to age the position to go long term, so you

1303
01:08:21,600 --> 01:08:23,280
Speaker 1: put a collar on it, or you just marry it

1304
01:08:23,320 --> 01:08:26,599
Speaker 1: put to it, or well will put some basically increasing

1305
01:08:26,640 --> 01:08:30,000
Speaker 1: the long position, will sell calls against the position until

1306
01:08:30,080 --> 01:08:32,360
Speaker 1: we go long term, and you have to sell calls

1307
01:08:32,400 --> 01:08:35,560
Speaker 1: that are slightly out of money to avoid stopping the

1308
01:08:35,640 --> 01:08:39,000
Speaker 1: holding period. There's certain I risks require to make twelve

1309
01:08:39,080 --> 01:08:42,120
Speaker 1: full months. That's fascinating and that sounds like that's done

1310
01:08:42,240 --> 01:08:45,960
Speaker 1: really really well. It has is what percentage of your

1311
01:08:46,000 --> 01:08:49,879
Speaker 1: assets are are in the tax advantage? That one product

1312
01:08:50,120 --> 01:08:54,479
Speaker 1: is probably about eleven percent of our assets alright, and

1313
01:08:54,880 --> 01:08:57,519
Speaker 1: spargaining in the Western world away. It sounds like it's

1314
01:08:57,680 --> 01:09:01,960
Speaker 1: based on the performance plus the the admendation fee, that

1315
01:09:02,080 --> 01:09:05,680
Speaker 1: that hurdle is something that that's not very typical in

1316
01:09:05,680 --> 01:09:09,960
Speaker 1: a low return world. It's uh, it's a significant benefit

1317
01:09:10,040 --> 01:09:13,840
Speaker 1: to the investor. There was I think probably the markets

1318
01:09:14,040 --> 01:09:17,439
Speaker 1: adequately priced to day that I would be had. I

1319
01:09:17,439 --> 01:09:19,320
Speaker 1: would think the market if it gave you six to

1320
01:09:19,400 --> 01:09:23,560
Speaker 1: eight percent including dividends over the next five years, that

1321
01:09:23,600 --> 01:09:25,920
Speaker 1: would be a good return. And so the idea of

1322
01:09:26,000 --> 01:09:28,000
Speaker 1: not getting compensated for the first five percent is a

1323
01:09:28,080 --> 01:09:30,720
Speaker 1: pretty significant benefits sure to say. To say, at least

1324
01:09:30,920 --> 01:09:34,320
Speaker 1: you mentioned um Warren Buffett not too long ago you

1325
01:09:34,400 --> 01:09:38,080
Speaker 1: took a trip to their annual meeting. Yeah, I did,

1326
01:09:38,360 --> 01:09:41,320
Speaker 1: uh tell us about that. Well, I look, the guy is,

1327
01:09:41,640 --> 01:09:44,960
Speaker 1: he's the man, right, he's the guru. I didn't learn

1328
01:09:45,240 --> 01:09:48,120
Speaker 1: very much because if you study Buffet, you know one

1329
01:09:48,120 --> 01:09:49,439
Speaker 1: are the things I did this and that. We're going

1330
01:09:49,479 --> 01:09:53,200
Speaker 1: back thirty five years ago. I was the guy at

1331
01:09:53,240 --> 01:09:56,200
Speaker 1: Goldman Sachs that used to send them around Warren Buffet's

1332
01:09:56,640 --> 01:09:59,960
Speaker 1: annual Report to all my partners at Goldman Sacks and keep.

1333
01:10:00,040 --> 01:10:02,000
Speaker 1: But I and this guy, he's gonna be famous one day,

1334
01:10:02,200 --> 01:10:04,760
Speaker 1: good good call. This was well before Goldman had that

1335
01:10:04,840 --> 01:10:08,920
Speaker 1: special relationship where this is way before two thousand and

1336
01:10:08,960 --> 01:10:11,760
Speaker 1: eight where warn't invested directly in the firm. So I've

1337
01:10:11,760 --> 01:10:13,559
Speaker 1: always had a very high regard from my read as

1338
01:10:13,560 --> 01:10:15,439
Speaker 1: annual report cover to covered. If you read as annual

1339
01:10:15,439 --> 01:10:16,600
Speaker 1: report cover to cup, you don't have to go the

1340
01:10:16,640 --> 01:10:19,639
Speaker 1: annual meeting. But I went to the annual meeting because

1341
01:10:19,760 --> 01:10:22,040
Speaker 1: in part Columbia asked me to speak at a dinner

1342
01:10:22,160 --> 01:10:25,360
Speaker 1: the Friday night before the annual meeting at dinner. But

1343
01:10:25,479 --> 01:10:27,760
Speaker 1: you know the managed to be admired. There's no person

1344
01:10:27,880 --> 01:10:30,160
Speaker 1: alive and the invest in business has more quotable lines

1345
01:10:30,200 --> 01:10:34,479
Speaker 1: than Warren and his record is unbelievable and you have

1346
01:10:34,560 --> 01:10:38,840
Speaker 1: to admire respect the guy. Um, So you flew to

1347
01:10:39,000 --> 01:10:44,160
Speaker 1: a recent meeting with a rock star collection of people, Um,

1348
01:10:44,760 --> 01:10:49,599
Speaker 1: Doug Cast, Marty Cohen, Steve Roth, Harvey Eisen, Miles NDL.

1349
01:10:50,120 --> 01:10:52,680
Speaker 1: What was that was? Was that a recent trip or

1350
01:10:53,280 --> 01:10:56,160
Speaker 1: that was a connection with the annual report, the annual meeting?

1351
01:10:56,800 --> 01:10:59,439
Speaker 1: And what was that crew like to to go to

1352
01:10:59,520 --> 01:11:05,360
Speaker 1: bar show? Look Dougs catalytic, bright, thoughtful guy, Harvey Eisen, Uh,

1353
01:11:06,240 --> 01:11:10,040
Speaker 1: different character but also thoughtful. Steve Roth is a major

1354
01:11:10,080 --> 01:11:16,080
Speaker 1: accomplished guy. Rety that's a monster company each success. Uh.

1355
01:11:16,240 --> 01:11:19,519
Speaker 1: And these are all in you know, interesting individuals. Miles

1356
01:11:19,520 --> 01:11:23,120
Speaker 1: and del also is a self made guy h MC

1357
01:11:23,920 --> 01:11:28,360
Speaker 1: NBC partners and I've done extremely well over the years, um.

1358
01:11:28,720 --> 01:11:31,600
Speaker 1: And you know, each individual has their own strengths and weaknesses.

1359
01:11:31,720 --> 01:11:34,559
Speaker 1: And Uh, I like learning from people, listening to people

1360
01:11:34,800 --> 01:11:38,200
Speaker 1: and seeing how they respond to my questions and that

1361
01:11:38,560 --> 01:11:42,320
Speaker 1: makes life interesting to say the least. Um, So let

1362
01:11:42,360 --> 01:11:44,760
Speaker 1: me let me shift gears a little bit on you. Um,

1363
01:11:45,280 --> 01:11:46,960
Speaker 1: let's talk a little bit about books. One of the

1364
01:11:47,040 --> 01:11:51,639
Speaker 1: things Buffett and short conversation, because you're all you're reading

1365
01:11:51,760 --> 01:11:54,200
Speaker 1: so many a book every day, but reading a book

1366
01:11:54,240 --> 01:11:58,600
Speaker 1: of reports from my seventeen analysts. Um, you know, I

1367
01:11:58,720 --> 01:12:01,919
Speaker 1: wish I read more. I'm very proud of my oldest granddaughter.

1368
01:12:02,040 --> 01:12:05,840
Speaker 1: My god, she reads all the time. Fabulous writer. But

1369
01:12:07,560 --> 01:12:11,800
Speaker 1: book reading is not my major suit. You're drilling down

1370
01:12:11,840 --> 01:12:15,080
Speaker 1: into company reports and researching for Financial Times, the Wall

1371
01:12:15,160 --> 01:12:18,680
Speaker 1: Street Journal, in New York Times, research reports. You know

1372
01:12:20,000 --> 01:12:24,840
Speaker 1: right now, I'm reading books about prosecutorial abuse, and you know,

1373
01:12:24,960 --> 01:12:26,880
Speaker 1: having received the subpedia that I got to deal with

1374
01:12:27,160 --> 01:12:30,240
Speaker 1: and be mystified by what the government is thinking about.

1375
01:12:30,760 --> 01:12:32,720
Speaker 1: So do you talk about it? I was gonna say, well,

1376
01:12:32,800 --> 01:12:34,679
Speaker 1: I don't think we really can discuss that. I don't

1377
01:12:34,680 --> 01:12:36,720
Speaker 1: think your lawyers would be happy. Well, we told that

1378
01:12:36,800 --> 01:12:39,360
Speaker 1: investors is that there's nothing wrong. We've been done. We've

1379
01:12:39,400 --> 01:12:41,880
Speaker 1: responded to the subpoena and the government, and the government

1380
01:12:41,920 --> 01:12:44,200
Speaker 1: is analyzing the response and we're quite comfortable. When the

1381
01:12:44,200 --> 01:12:46,760
Speaker 1: analyze the response they'll see that nothing wrong was done.

1382
01:12:47,080 --> 01:12:48,840
Speaker 1: We do our homework. We worked very hard. We do

1383
01:12:48,920 --> 01:12:52,400
Speaker 1: fundamental research and that and that is that. So we'll

1384
01:12:52,439 --> 01:12:56,799
Speaker 1: leave that, uh, that that question alone. Um, you mentioned

1385
01:12:56,880 --> 01:12:59,800
Speaker 1: one of the professors at Columbia as a mentor. Who

1386
01:13:00,040 --> 01:13:02,240
Speaker 1: who else we were some of your early mentors. You know,

1387
01:13:02,320 --> 01:13:04,040
Speaker 1: you're you're learning a lot of different things with a

1388
01:13:04,080 --> 01:13:07,439
Speaker 1: lot of different people. On the trading side, the guy

1389
01:13:07,560 --> 01:13:10,519
Speaker 1: that was a major name and institution in his own right,

1390
01:13:10,560 --> 01:13:15,320
Speaker 1: Bob Manusian, was in charge of trading, uh Goldman Sachs.

1391
01:13:15,439 --> 01:13:19,080
Speaker 1: Unusual at that time. A Yale graduate ran trading at

1392
01:13:19,080 --> 01:13:22,400
Speaker 1: Goldman Sachs. L J. Tannembaun who was deceased. The Bob

1393
01:13:22,479 --> 01:13:25,120
Speaker 1: is still very much alivee thankfully, a great guy. L J.

1394
01:13:25,200 --> 01:13:29,479
Speaker 1: Tanneman ran arbitrage. Gust of Levy. You saw him in action.

1395
01:13:29,520 --> 01:13:31,840
Speaker 1: I worked directly with him on a number of assignments.

1396
01:13:32,520 --> 01:13:36,080
Speaker 1: He passed away in nineteen seventy six. A real dynamo

1397
01:13:36,520 --> 01:13:38,400
Speaker 1: man got into seven o'clock in the morning, kept two

1398
01:13:38,439 --> 01:13:41,160
Speaker 1: secretaries busy. There wasn't a charity in New York that

1399
01:13:41,240 --> 01:13:43,560
Speaker 1: he did not work with in support and help. And

1400
01:13:43,920 --> 01:13:46,400
Speaker 1: so you learned about chadbl instincts giving back from people

1401
01:13:46,479 --> 01:13:51,560
Speaker 1: like us Levy. John Whitehead was deceased John Weinberg a Screenberg.

1402
01:13:52,160 --> 01:13:54,960
Speaker 1: You know you just watched people in action and uh,

1403
01:13:55,800 --> 01:14:00,360
Speaker 1: you know, um, you learn and you and your mature yourself.

1404
01:14:01,080 --> 01:14:03,240
Speaker 1: I have a family foundation I set up I think

1405
01:14:03,360 --> 01:14:07,800
Speaker 1: in the and that long ago. Yeah, well when when

1406
01:14:07,840 --> 01:14:11,000
Speaker 1: when when my income started to exceed my course of

1407
01:14:11,080 --> 01:14:13,479
Speaker 1: living and I started to build up savings, I was

1408
01:14:13,560 --> 01:14:17,040
Speaker 1: really committed to give back. Um. And again, as I

1409
01:14:17,080 --> 01:14:19,439
Speaker 1: said before, I don't want to picture myself as being

1410
01:14:20,040 --> 01:14:22,240
Speaker 1: different than anyone else. The guys that are in my

1411
01:14:22,439 --> 01:14:26,280
Speaker 1: category all have a similar view, you know. Uh. I

1412
01:14:26,360 --> 01:14:29,519
Speaker 1: have a great admiration for Canlan gown Stand, Drucca Miller,

1413
01:14:29,600 --> 01:14:36,479
Speaker 1: Michael Steinhardt, Um, Bill Ackman, John Paulson, uh and Dan Loeby.

1414
01:14:36,479 --> 01:14:38,640
Speaker 1: I apologize with peopleho name I left up? Is there

1415
01:14:38,760 --> 01:14:41,559
Speaker 1: so many of them that are giving back, that work

1416
01:14:41,680 --> 01:14:44,720
Speaker 1: hard because they have a professional instinct and take the

1417
01:14:44,840 --> 01:14:48,280
Speaker 1: financial success and share what others less fortunate. So I

1418
01:14:48,280 --> 01:14:50,840
Speaker 1: shouldn't mention I'll open up a Pandora's box. But I

1419
01:14:50,960 --> 01:14:55,240
Speaker 1: got quoted recently negatively towards Hillary Clinton. And it wasn't

1420
01:14:55,280 --> 01:14:58,640
Speaker 1: negative about her necessarily as a person, but you know,

1421
01:14:59,040 --> 01:15:02,080
Speaker 1: comes out of the box and uh kind of criticize

1422
01:15:02,120 --> 01:15:05,519
Speaker 1: and craps all over hedge funds. I don't see this,

1423
01:15:06,000 --> 01:15:09,519
Speaker 1: you know, pitting against the one percent, I don't see it.

1424
01:15:09,920 --> 01:15:13,040
Speaker 1: You know, the nine to one percent are not victimizing.

1425
01:15:14,800 --> 01:15:16,479
Speaker 1: Most of the one percent that I know are giving

1426
01:15:16,560 --> 01:15:20,200
Speaker 1: back and trying to create a better life than um.

1427
01:15:20,520 --> 01:15:24,240
Speaker 1: And so why why criticized hedge funds when, particularly in

1428
01:15:24,280 --> 01:15:25,840
Speaker 1: our case, she hangs out with them, which is goes

1429
01:15:25,880 --> 01:15:28,080
Speaker 1: to Montha's vineon in the hand, not afraid to ask

1430
01:15:28,160 --> 01:15:32,040
Speaker 1: for donations from from Wall Street. That's been her to

1431
01:15:32,200 --> 01:15:36,920
Speaker 1: the Clintons. Certainly they want to advocate the higher taxation

1432
01:15:37,160 --> 01:15:40,320
Speaker 1: and things like that. That's fine, that that's a different

1433
01:15:40,439 --> 01:15:43,240
Speaker 1: that's a policy issue. And I was I've been quoted

1434
01:15:43,280 --> 01:15:46,840
Speaker 1: now for seven years. I've said that the idea of

1435
01:15:47,080 --> 01:15:52,880
Speaker 1: the income being carried taxes carried interest is wrong. My

1436
01:15:53,000 --> 01:15:55,679
Speaker 1: income is a special exemption that if you are running

1437
01:15:55,720 --> 01:15:58,800
Speaker 1: a private partnership like a private equity or hedge fund,

1438
01:15:59,280 --> 01:16:02,640
Speaker 1: you're paying a lower tax rate. Now, they should not

1439
01:16:02,800 --> 01:16:07,200
Speaker 1: pertain to my income in managing the business. It should

1440
01:16:07,280 --> 01:16:11,000
Speaker 1: pertain to my income as an investor investing alongside of

1441
01:16:11,040 --> 01:16:13,840
Speaker 1: my other investors. And for some reason the government has

1442
01:16:14,320 --> 01:16:17,200
Speaker 1: not been focused on that, just like I think that

1443
01:16:17,280 --> 01:16:19,320
Speaker 1: there's a lot of efficiency to be gained that we

1444
01:16:19,400 --> 01:16:23,559
Speaker 1: have a Department of Education at the federal level, cabinet level,

1445
01:16:23,600 --> 01:16:26,559
Speaker 1: that's over a hundred billion dollar department. I don't think

1446
01:16:26,640 --> 01:16:28,760
Speaker 1: we have to spend a hundred billion dollars for the

1447
01:16:28,840 --> 01:16:31,760
Speaker 1: federal government to tell the state and local governments how

1448
01:16:31,760 --> 01:16:34,200
Speaker 1: to educate their children. That might have been the case

1449
01:16:34,479 --> 01:16:37,360
Speaker 1: fifty years ago, and segregation things like that, but I

1450
01:16:37,439 --> 01:16:39,920
Speaker 1: don't think it's today. How much of that budget is

1451
01:16:40,000 --> 01:16:43,000
Speaker 1: just them dolling out money to different states, I honestly

1452
01:16:43,000 --> 01:16:44,439
Speaker 1: don't know the number. I don't want to be like

1453
01:16:44,920 --> 01:16:48,400
Speaker 1: the fello from Texas, Uh say the four things MoMA

1454
01:16:49,320 --> 01:16:53,519
Speaker 1: oops oops, Yeah, but the four reasons we sell a stock?

1455
01:16:53,560 --> 01:16:56,400
Speaker 1: I remember the four reasons. Well, that that's the area

1456
01:16:56,439 --> 01:16:58,719
Speaker 1: you focus on, So that would that would certainly make sense.

1457
01:16:59,160 --> 01:17:04,440
Speaker 1: So when we look at issues in society of income inequality,

1458
01:17:05,479 --> 01:17:10,519
Speaker 1: your perspective is the wealthier doing at least amongst Wall Street,

1459
01:17:11,000 --> 01:17:15,080
Speaker 1: the people you know are contributing a lot to charity.

1460
01:17:15,200 --> 01:17:22,000
Speaker 1: It's very complex. You know, the President understandably would like

1461
01:17:22,320 --> 01:17:25,360
Speaker 1: to narrow this income disparity. I would like in narrow

1462
01:17:25,400 --> 01:17:28,720
Speaker 1: the income to how do we do that? Well, I'm

1463
01:17:28,760 --> 01:17:31,960
Speaker 1: an economist, you know, but I think you have to

1464
01:17:32,080 --> 01:17:36,759
Speaker 1: do through education, by improving the skill set of these youngsters,

1465
01:17:36,920 --> 01:17:40,920
Speaker 1: by giving them a exposure to improving themselves. I look

1466
01:17:40,960 --> 01:17:44,479
Speaker 1: at my own situation, you know, it's my college education,

1467
01:17:45,240 --> 01:17:48,960
Speaker 1: it's my NBA Columbia that literally changed my life, changed

1468
01:17:49,000 --> 01:17:52,280
Speaker 1: my whole income prospect. I mean, I left Xerox making

1469
01:17:52,360 --> 01:17:55,000
Speaker 1: seven thousand dollars a year. I go back to business

1470
01:17:55,040 --> 01:17:56,800
Speaker 1: school getting the m b A. And I hired into

1471
01:17:56,840 --> 01:18:01,360
Speaker 1: Goldman at five hundred, which is a substantial was doubled

1472
01:18:01,439 --> 01:18:04,720
Speaker 1: my income by going to business school for thirteen months.

1473
01:18:04,760 --> 01:18:06,400
Speaker 1: There was a tri messed deals. I went right through

1474
01:18:06,439 --> 01:18:08,559
Speaker 1: the summer because I couldn't afford to take time off

1475
01:18:09,200 --> 01:18:10,479
Speaker 1: six months old kids and I had to make a

1476
01:18:10,560 --> 01:18:15,040
Speaker 1: living um. And so it's education. It's getting into the

1477
01:18:15,160 --> 01:18:18,120
Speaker 1: home to educate the parents, to motivate them. I mean

1478
01:18:18,920 --> 01:18:22,160
Speaker 1: the Jews of a hundred years ago today or the

1479
01:18:23,000 --> 01:18:27,599
Speaker 1: Asians who who really pushed education. Each wave of immigrant

1480
01:18:27,680 --> 01:18:31,280
Speaker 1: has their own focus on education. Test and I think

1481
01:18:31,320 --> 01:18:33,559
Speaker 1: the wonderful thing in this program the Kopman College scholes,

1482
01:18:33,560 --> 01:18:35,680
Speaker 1: when the kids showed up with their parents. You know,

1483
01:18:35,800 --> 01:18:37,760
Speaker 1: it was wonderful to see, you know. I give money

1484
01:18:37,800 --> 01:18:40,400
Speaker 1: to a South Bronze educational program called the South Bronze

1485
01:18:40,479 --> 01:18:43,400
Speaker 1: Educational Foundation. And I think seven year, eighty percent of

1486
01:18:43,439 --> 01:18:45,800
Speaker 1: the kids have never met their father. Really, and I

1487
01:18:45,840 --> 01:18:48,479
Speaker 1: look at the and I appreciate the significance of my

1488
01:18:48,600 --> 01:18:51,160
Speaker 1: father in my growing up. That these kids have a

1489
01:18:51,280 --> 01:18:57,360
Speaker 1: terrific disadvantage. And so I'm trying to create equal opportunity

1490
01:18:57,840 --> 01:19:02,000
Speaker 1: through my charitable efforts, uh by giving them a platform

1491
01:19:02,080 --> 01:19:05,640
Speaker 1: to achieve an education where they have the aptitude and

1492
01:19:05,680 --> 01:19:09,200
Speaker 1: the willingness and the desire. So so you're willing you

1493
01:19:09,320 --> 01:19:13,519
Speaker 1: support getting rid of that carried interest for the income side,

1494
01:19:13,600 --> 01:19:17,040
Speaker 1: not the investment side. What other policy changes do you

1495
01:19:17,120 --> 01:19:21,200
Speaker 1: think should we look? I was beginning to develop a thought.

1496
01:19:21,280 --> 01:19:23,560
Speaker 1: The irony of the whole thing the last five or

1497
01:19:23,600 --> 01:19:30,200
Speaker 1: six years is uh Bernankee wanted to create economic growth

1498
01:19:30,240 --> 01:19:33,200
Speaker 1: and employment, and he figured out the best way to

1499
01:19:33,280 --> 01:19:36,960
Speaker 1: do that is to create wealth, because wealth creates consumption

1500
01:19:37,160 --> 01:19:40,599
Speaker 1: and consumption creates jobs. So he said, the way I'm

1501
01:19:40,600 --> 01:19:42,400
Speaker 1: gonna do is to get the stock market up to

1502
01:19:42,479 --> 01:19:45,559
Speaker 1: create wealth, to create consumption, to create jobs. The trouble

1503
01:19:45,680 --> 01:19:47,719
Speaker 1: is is a mald distribution of the ownership of stock.

1504
01:19:47,760 --> 01:19:51,240
Speaker 1: So guys like me have benefited mightily. And because we've

1505
01:19:51,280 --> 01:19:55,400
Speaker 1: had this gridlock and government where the Republican the Democrats

1506
01:19:55,479 --> 01:19:58,200
Speaker 1: don't seem to get along and the President can't seem

1507
01:19:58,240 --> 01:20:02,599
Speaker 1: to unite them, we've not had phisical policy initiatives designed

1508
01:20:02,640 --> 01:20:05,320
Speaker 1: to go along with the monetary initiatives. So the entire

1509
01:20:05,400 --> 01:20:07,960
Speaker 1: burden to deal with the recessions for in monetary policy.

1510
01:20:08,960 --> 01:20:13,080
Speaker 1: Maybe we should have a jobs program, maybe, Uh, infrastructure

1511
01:20:13,240 --> 01:20:16,720
Speaker 1: that normal posting back all this retained earnings that sit

1512
01:20:16,800 --> 01:20:20,680
Speaker 1: offshore and bank accounts doing nothing productively bring it back

1513
01:20:20,760 --> 01:20:25,320
Speaker 1: and attacks howiday tie to hiring and infrastructure development to

1514
01:20:25,400 --> 01:20:28,400
Speaker 1: take this big collapse in the price of energy. Uh,

1515
01:20:28,600 --> 01:20:31,840
Speaker 1: put an energy tax on design to infrastructure building. We

1516
01:20:31,960 --> 01:20:34,600
Speaker 1: don't seem to have the fiscal initiatives. And I'm not

1517
01:20:34,720 --> 01:20:38,400
Speaker 1: blaming the president. Okay, I blamed the President for some

1518
01:20:38,479 --> 01:20:42,360
Speaker 1: of his dialogue on you know, class warfare and stuff

1519
01:20:42,400 --> 01:20:44,640
Speaker 1: like that, but that was an old story. And I

1520
01:20:44,720 --> 01:20:50,400
Speaker 1: got ordered by virus by president basically just a Coincidencely,

1521
01:20:50,560 --> 01:20:52,479
Speaker 1: I hope, so that's nothing let's over to do. But

1522
01:20:53,040 --> 01:20:55,960
Speaker 1: I think we need a better coordination of fiscal monetary policies,

1523
01:20:55,960 --> 01:20:57,800
Speaker 1: and hopefully in time we'll get it. But we don't,

1524
01:20:57,800 --> 01:20:59,880
Speaker 1: we'll get head it to a disasters. We really haven't

1525
01:21:00,040 --> 01:21:03,599
Speaker 1: seen the normal fiscal stimulus that you get following forget

1526
01:21:04,479 --> 01:21:08,519
Speaker 1: an economic crisis following a normal deep recession, when it's

1527
01:21:08,600 --> 01:21:12,320
Speaker 1: just hasn't been following on the heels of monetary policy exclusively.

1528
01:21:12,600 --> 01:21:14,720
Speaker 1: So it's all it's all that, all right, So let's

1529
01:21:14,800 --> 01:21:16,880
Speaker 1: keep let's go through. I only have you for a

1530
01:21:16,960 --> 01:21:19,800
Speaker 1: few more minutes, so let me ask you some of

1531
01:21:20,080 --> 01:21:24,280
Speaker 1: um the standard questions I ask everybody, and they're they're

1532
01:21:24,320 --> 01:21:29,759
Speaker 1: always always generates some interesting response. Um. So you mentioned

1533
01:21:29,800 --> 01:21:32,360
Speaker 1: you start really early. To take us quickly through a

1534
01:21:32,479 --> 01:21:34,920
Speaker 1: day in the life of Lee Cooperman, You're you're up

1535
01:21:34,960 --> 01:21:39,200
Speaker 1: at five in the morning, at the five ten. I

1536
01:21:39,400 --> 01:21:44,400
Speaker 1: leave my house at a proixing five, depending upon traffic,

1537
01:21:44,439 --> 01:21:49,479
Speaker 1: I come in from suburbs against the officer si. Um

1538
01:21:50,840 --> 01:21:54,640
Speaker 1: and uh, you're there for twelve hours until six o

1539
01:21:55,040 --> 01:21:57,439
Speaker 1: lea about you know, depending upon the time of my dinner.

1540
01:21:58,040 --> 01:22:00,599
Speaker 1: I leave the office between five. I have to leave

1541
01:22:00,640 --> 01:22:03,000
Speaker 1: tonight at five. Story have dinner with a client at

1542
01:22:03,080 --> 01:22:05,960
Speaker 1: six o'clock. Meeted a restaurant last night, had dinner with

1543
01:22:06,000 --> 01:22:08,400
Speaker 1: the company. I met the company at six. I got

1544
01:22:08,439 --> 01:22:11,960
Speaker 1: finished with dinner at eight and went home. Um, and

1545
01:22:12,040 --> 01:22:14,679
Speaker 1: I get home, I take a shower, and I logged

1546
01:22:14,720 --> 01:22:16,920
Speaker 1: into a Bloomberg not paid commercial. I love into my

1547
01:22:16,920 --> 01:22:20,160
Speaker 1: Bloomberg terminal. He's the most powerful terminal out there. But

1548
01:22:20,280 --> 01:22:22,960
Speaker 1: by the way, during this entire interview, and I'm not exaggerating,

1549
01:22:23,280 --> 01:22:26,920
Speaker 1: you've been checking stock prices. People don't realize you're multitasking

1550
01:22:27,360 --> 01:22:30,360
Speaker 1: this whole conversation. Yeah, well, I'm not making investment decisions.

1551
01:22:30,760 --> 01:22:32,400
Speaker 1: Of course, I'm trying to see what But you have

1552
01:22:32,439 --> 01:22:34,960
Speaker 1: an eye on what's going on. Even throughout this conversation.

1553
01:22:35,200 --> 01:22:42,160
Speaker 1: I would say, I'm pretty plugged, pretty obsessive, excessive, obsessive, compulsive. Um,

1554
01:22:43,360 --> 01:22:46,000
Speaker 1: So you go to dinner and then go home, my shower,

1555
01:22:46,160 --> 01:22:48,960
Speaker 1: and I logged into Bloomberg terminal and see what's going

1556
01:22:49,000 --> 01:22:51,479
Speaker 1: on in China, what's going on Japan, what's going on

1557
01:22:51,600 --> 01:22:54,559
Speaker 1: the euro dollar, what's going on in the dollar yen?

1558
01:22:55,320 --> 01:22:58,600
Speaker 1: And see what the headlines are, And uh, this is

1559
01:22:58,680 --> 01:23:02,439
Speaker 1: my life. You know, it's it's you know I said

1560
01:23:02,520 --> 01:23:04,120
Speaker 1: earlier on but you know, do what you love, what

1561
01:23:04,240 --> 01:23:06,439
Speaker 1: love what you do. You can't possibly work at this

1562
01:23:06,560 --> 01:23:08,920
Speaker 1: pace and this engagement if you didn't like what you did.

1563
01:23:09,280 --> 01:23:13,080
Speaker 1: My wife tells people that I'm gainfully unemployed. I get

1564
01:23:13,080 --> 01:23:15,200
Speaker 1: paid for doing what I would be doing for free anyway.

1565
01:23:16,000 --> 01:23:19,520
Speaker 1: And you know that that's difference with me. And retirement

1566
01:23:19,800 --> 01:23:22,719
Speaker 1: would be one word, and that one where would be investors.

1567
01:23:23,520 --> 01:23:25,519
Speaker 1: If I did not have investors, I would be doing

1568
01:23:25,560 --> 01:23:29,719
Speaker 1: exactly what I'm doing now. But I probably couldn't afford.

1569
01:23:29,840 --> 01:23:33,400
Speaker 1: Not probably I couldn't affords. I'm too cheap, basically afforced. No,

1570
01:23:33,520 --> 01:23:35,880
Speaker 1: I say it seriously. You know, I joke with people.

1571
01:23:36,360 --> 01:23:38,800
Speaker 1: You know I have a home in Florida. I spent

1572
01:23:38,840 --> 01:23:41,439
Speaker 1: a lot of time in Florida working, and I have

1573
01:23:41,560 --> 01:23:43,680
Speaker 1: two cars in Florida. I just put my second car

1574
01:23:43,760 --> 01:23:45,640
Speaker 1: and floor. I have two cars in New Jersey. My

1575
01:23:45,760 --> 01:23:49,160
Speaker 1: first three cars with two thousand twos, two thousand and

1576
01:23:49,280 --> 01:23:52,599
Speaker 1: two Lexus convertible with two thousand two Alexus Sedan, two

1577
01:23:52,640 --> 01:23:56,000
Speaker 1: thousand eight Lexus oh wheel drive sedan, and I just

1578
01:23:56,160 --> 01:23:59,720
Speaker 1: bought a used Volkswagen facade. But I feel like a

1579
01:23:59,800 --> 01:24:03,440
Speaker 1: rich man. Why it's the first three cars preceded Bluetooth.

1580
01:24:03,920 --> 01:24:07,200
Speaker 1: My new car used with thirteen miles wokes Away inside

1581
01:24:07,240 --> 01:24:09,000
Speaker 1: his bluetooth. So I get into the car and I

1582
01:24:09,080 --> 01:24:12,120
Speaker 1: feel like a rich man. I say, call Billy Gordiano

1583
01:24:12,360 --> 01:24:15,400
Speaker 1: at work and it does, and it does. My other

1584
01:24:15,479 --> 01:24:17,000
Speaker 1: three cars I can't do that, So I feel like

1585
01:24:17,040 --> 01:24:19,120
Speaker 1: a rich man. You know you can. You can replace

1586
01:24:19,280 --> 01:24:22,559
Speaker 1: those old cars. And by the way, the newer cars,

1587
01:24:22,720 --> 01:24:27,400
Speaker 1: the safety technology, the lane you know, they stop automatically.

1588
01:24:27,640 --> 01:24:31,960
Speaker 1: I don't drive a lot, uh. And I'm told in

1589
01:24:32,080 --> 01:24:35,880
Speaker 1: a two thousand and two Lexus LS four thirty, with

1590
01:24:36,000 --> 01:24:39,120
Speaker 1: the best Lexus they made, I got eighty thousand miles

1591
01:24:39,240 --> 01:24:43,120
Speaker 1: on it like a new car. It drives like a

1592
01:24:43,200 --> 01:24:45,960
Speaker 1: new car, and I'd rather give the money to charity.

1593
01:24:46,080 --> 01:24:48,799
Speaker 1: So that's what I was about to say, is you know, people,

1594
01:24:48,840 --> 01:24:52,479
Speaker 1: you describe yourself as cheap. But again going back to

1595
01:24:52,640 --> 01:24:55,160
Speaker 1: and say cheap, I respect money. I'm not going to

1596
01:24:55,240 --> 01:24:56,960
Speaker 1: tell you how much I give away every year to charity,

1597
01:24:56,960 --> 01:24:59,560
Speaker 1: but its millions of dollars and I don't spend that

1598
01:24:59,600 --> 01:25:01,599
Speaker 1: kind of mone in my cell boast. You know you'd

1599
01:25:01,680 --> 01:25:03,960
Speaker 1: rather give it away than buy a Nu mercedy because

1600
01:25:04,439 --> 01:25:05,840
Speaker 1: you know it's the end of the day. I don't

1601
01:25:05,840 --> 01:25:07,880
Speaker 1: play so much value in that. I don't. I don't

1602
01:25:07,880 --> 01:25:09,759
Speaker 1: want to give anything. I don't deprive myself of anything.

1603
01:25:09,800 --> 01:25:12,120
Speaker 1: If I want something, I buy it because I could

1604
01:25:12,160 --> 01:25:14,600
Speaker 1: afford it. But there's nothing that I really want I

1605
01:25:14,680 --> 01:25:17,320
Speaker 1: don't have. You're not, you said earlier, and you're not.

1606
01:25:17,720 --> 01:25:21,640
Speaker 1: I'm not. I'm not a clothes horse obvious reasons. I'm

1607
01:25:21,760 --> 01:25:26,920
Speaker 1: overweight and you know, uh so I have the clothes

1608
01:25:27,000 --> 01:25:29,599
Speaker 1: I need. You're in a suit and tie, dressed nicely.

1609
01:25:29,680 --> 01:25:34,599
Speaker 1: I dressed properly. I dress adequately. Though a guy I laughed,

1610
01:25:34,960 --> 01:25:40,200
Speaker 1: I got you know, it's a funny story. Yeah, um,

1611
01:25:41,320 --> 01:25:45,160
Speaker 1: Anthony Scaramucci. Sure. He said publicly somewhere that I was

1612
01:25:45,200 --> 01:25:48,320
Speaker 1: the worst dress billionaire he hasn't met, And I said

1613
01:25:48,360 --> 01:25:51,880
Speaker 1: to him multi he jokes about that all the time.

1614
01:25:52,320 --> 01:25:55,200
Speaker 1: I actually think I'm pretty well addressed. You're well put together.

1615
01:25:55,760 --> 01:25:58,120
Speaker 1: Your wife picked out the tie. Though I know my wife.

1616
01:25:58,680 --> 01:26:01,560
Speaker 1: He leaves me alone. I'm I Actually I'm building a

1617
01:26:01,600 --> 01:26:04,960
Speaker 1: new house now Florida, and my wife sees everything to me. Really,

1618
01:26:05,400 --> 01:26:09,640
Speaker 1: my uh my wife basically knows what she's interested in,

1619
01:26:09,880 --> 01:26:13,040
Speaker 1: and she pursues what she's interested in. And uh, very

1620
01:26:13,080 --> 01:26:16,880
Speaker 1: purposeful purpose and very very smart lady, terrific wife. That

1621
01:26:17,080 --> 01:26:22,679
Speaker 1: that sounds fantastic. So um, we mentioned your your mentors,

1622
01:26:22,760 --> 01:26:25,760
Speaker 1: We mentioned some of the investors. Actually we didn't get

1623
01:26:25,760 --> 01:26:29,320
Speaker 1: any other than Buffett. What other investors have influenced your

1624
01:26:29,400 --> 01:26:33,800
Speaker 1: approach to invest Roger Murray, Warren Buffett. I mentioned Bob

1625
01:26:33,840 --> 01:26:38,240
Speaker 1: Minutia and Geodd Whitehead. I mean all in different ways.

1626
01:26:38,600 --> 01:26:44,280
Speaker 1: You know, Bear Sterns was notoriously positive firm and with

1627
01:26:44,439 --> 01:26:48,360
Speaker 1: charitable instincts, and so you pick up different things, and

1628
01:26:48,479 --> 01:26:50,880
Speaker 1: then you watch different investors, and I'd say it's the

1629
01:26:51,120 --> 01:26:53,679
Speaker 1: process of learning. I can't I can't point to anyone

1630
01:26:53,800 --> 01:26:56,960
Speaker 1: individual that's changed my life on the industrial side. The

1631
01:26:57,040 --> 01:26:59,479
Speaker 1: guy that I had the greatest admiration for where I

1632
01:26:59,520 --> 01:27:02,200
Speaker 1: spent really first twenty five years of my life studying,

1633
01:27:02,280 --> 01:27:05,240
Speaker 1: was Dr Henry Singleton, was a founder of tel Dine

1634
01:27:05,320 --> 01:27:09,800
Speaker 1: and arguably the smartest guy I ever met. Really absolutely

1635
01:27:10,080 --> 01:27:15,519
Speaker 1: and uh, basically uh. I have no greater authority to

1636
01:27:15,680 --> 01:27:19,360
Speaker 1: that view than Warren Buffett. In two thousand and seven,

1637
01:27:20,040 --> 01:27:22,600
Speaker 1: he gave a speech at the Value Investing Conference on

1638
01:27:22,680 --> 01:27:25,800
Speaker 1: two subjects. One was I was highly critical of stock

1639
01:27:25,920 --> 01:27:29,920
Speaker 1: repurchased the way it was being um um, you know,

1640
01:27:30,080 --> 01:27:32,679
Speaker 1: practice of time. And then I went through a case

1641
01:27:32,720 --> 01:27:35,599
Speaker 1: study that used at Harvard UH and it was untiled.

1642
01:27:35,680 --> 01:27:39,120
Speaker 1: The financial brilliance of Dr Henry Singleton of tele Dine.

1643
01:27:39,680 --> 01:27:42,960
Speaker 1: Warren Buffett got ahold of those two presentations. Not by accident.

1644
01:27:43,000 --> 01:27:46,000
Speaker 1: I sent to him, having great respect for Warren's And

1645
01:27:46,160 --> 01:27:47,920
Speaker 1: there's a letter he sent me. I hope he doesn't

1646
01:27:47,960 --> 01:27:50,920
Speaker 1: mind them reading it publicly November twenty thousand and seven,

1647
01:27:51,520 --> 01:27:53,240
Speaker 1: and he said, dearly, I don't think you could have

1648
01:27:53,280 --> 01:27:56,160
Speaker 1: picked two better subjects, Henry. That's Henry Singleton has a

1649
01:27:56,200 --> 01:27:58,840
Speaker 1: manage that all investors CEO would be CEO s and

1650
01:27:59,000 --> 01:28:01,160
Speaker 1: NBA students should stud In the end, it was one

1651
01:28:01,840 --> 01:28:04,000
Speaker 1: rational and there are very few CEOs about whom I

1652
01:28:04,000 --> 01:28:08,000
Speaker 1: could make that statement. Paragraph the stock repurchase situation is

1653
01:28:08,040 --> 01:28:10,559
Speaker 1: fascinating to be that's because the answer is so simple.

1654
01:28:10,640 --> 01:28:12,479
Speaker 1: You do it when you are buying dollar bills and

1655
01:28:12,560 --> 01:28:16,800
Speaker 1: click cutting significant discount, and only then underline only paragraph

1656
01:28:17,160 --> 01:28:19,599
Speaker 1: and the general observation. I would say that most companies

1657
01:28:19,640 --> 01:28:21,640
Speaker 1: that repurchase shares thirty years ago, we're doing for the

1658
01:28:21,760 --> 01:28:24,400
Speaker 1: right reasons, and most companies doing it now are wrong.

1659
01:28:24,479 --> 01:28:27,240
Speaker 1: When doing so time of the time, I see managers

1660
01:28:27,240 --> 01:28:30,920
Speaker 1: who are attempting to be fashionable or subconsciously hoping to

1661
01:28:31,000 --> 01:28:34,439
Speaker 1: support their stock. Lows is a great example. I use

1662
01:28:34,479 --> 01:28:36,559
Speaker 1: Low as an example of a good buy back program.

1663
01:28:36,920 --> 01:28:39,240
Speaker 1: Lows is a great example of the company's always repurchase

1664
01:28:39,240 --> 01:28:42,080
Speaker 1: shares the right reason. I could give examples the reverse.

1665
01:28:42,200 --> 01:28:44,879
Speaker 1: I love this following statement, but I follow the dictum

1666
01:28:45,200 --> 01:28:48,920
Speaker 1: praise by name, criticized by category, best regarded warrant. I

1667
01:28:49,040 --> 01:28:52,439
Speaker 1: showed that letter to my two older my two sons,

1668
01:28:52,880 --> 01:28:54,960
Speaker 1: and it's a great philosophy of life. You never see

1669
01:28:55,000 --> 01:28:58,840
Speaker 1: warrant criticizing any one individual in public. We might criticize

1670
01:28:58,880 --> 01:29:01,920
Speaker 1: invest in bankers and criticized hedge funds, but it doesn't

1671
01:29:01,920 --> 01:29:03,880
Speaker 1: go after anyone. That's a good philosophy of life. In

1672
01:29:03,960 --> 01:29:07,479
Speaker 1: my opinion, that's a fascinating What's the date on that letter?

1673
01:29:07,720 --> 01:29:12,759
Speaker 1: That data on that letter was November two thousand and seven,

1674
01:29:13,080 --> 01:29:16,160
Speaker 1: So here it is eight years later. We see a

1675
01:29:16,400 --> 01:29:20,040
Speaker 1: massive run of buy backs the past few years. What

1676
01:29:20,160 --> 01:29:22,960
Speaker 1: are your thoughts on these are are buy backs? Are

1677
01:29:23,000 --> 01:29:26,000
Speaker 1: they buying dollar bills at a substantial discount, or they

1678
01:29:26,120 --> 01:29:29,439
Speaker 1: being fashionable? There are four kind of buy backs that

1679
01:29:30,040 --> 01:29:32,519
Speaker 1: that's a theme four of everything. It sounds like, well

1680
01:29:33,120 --> 01:29:37,120
Speaker 1: quinciense bibe back type one has nothing, and I'll give

1681
01:29:37,160 --> 01:29:41,280
Speaker 1: examples nothing to do with fundamental value. Remember in D

1682
01:29:41,400 --> 01:29:43,720
Speaker 1: and ninety four, being on the chowel line at the

1683
01:29:43,800 --> 01:29:47,240
Speaker 1: Allen and Company media conference, standing behind Andy Grove, and

1684
01:29:47,320 --> 01:29:50,200
Speaker 1: I said to Andy, what statement is Intel making my

1685
01:29:50,320 --> 01:29:53,080
Speaker 1: buying back stock at fifty times earnings? He says, We're

1686
01:29:53,120 --> 01:29:56,599
Speaker 1: not looking to make any statement. Basically, Uh, we don't

1687
01:29:56,640 --> 01:29:59,600
Speaker 1: want the flak from the shoreholders over option creep. So

1688
01:29:59,720 --> 01:30:01,920
Speaker 1: with I'm back enough shares to keep the up the

1689
01:30:02,160 --> 01:30:05,440
Speaker 1: share count flat. Second kind of buy back very nefarious.

1690
01:30:05,760 --> 01:30:08,720
Speaker 1: The one that warrant to sends the reference. That's managements

1691
01:30:08,760 --> 01:30:11,120
Speaker 1: that are looking to either support their stock or create

1692
01:30:11,200 --> 01:30:15,760
Speaker 1: this impression that's undervalued or married maybe even creating a

1693
01:30:15,840 --> 01:30:19,040
Speaker 1: conditioned market where they're buying backstock for the company their

1694
01:30:19,040 --> 01:30:21,600
Speaker 1: selling stock themselves. I'm not going computing them, but you know,

1695
01:30:21,720 --> 01:30:24,840
Speaker 1: Andrew Mazzolo has spent so several hundred million dollars worth

1696
01:30:24,840 --> 01:30:27,360
Speaker 1: of stock at forty while country Wide Credit was buying

1697
01:30:27,400 --> 01:30:30,400
Speaker 1: backstock at forty two billion dollars worth, only to sell

1698
01:30:30,439 --> 01:30:32,479
Speaker 1: the company to Bank of America at four, and I'm

1699
01:30:32,479 --> 01:30:34,320
Speaker 1: telling you back in America is very sorry they bought

1700
01:30:34,360 --> 01:30:37,200
Speaker 1: it it for. Okay. The third kind of buy back,

1701
01:30:37,360 --> 01:30:39,759
Speaker 1: which is the typical buyback now, is companies that blessed

1702
01:30:39,760 --> 01:30:42,360
Speaker 1: with excess cash flow. They've kind of convinced themselves that

1703
01:30:42,439 --> 01:30:44,960
Speaker 1: dividends forever. We don't want to be embarrassed by having

1704
01:30:44,960 --> 01:30:46,960
Speaker 1: the kind of dividend we could always turn off a

1705
01:30:47,000 --> 01:30:49,320
Speaker 1: buyback program. So we're gonna take excess case flowing buy

1706
01:30:49,360 --> 01:30:52,320
Speaker 1: back stock. And I would you rather see those folks

1707
01:30:52,360 --> 01:30:57,000
Speaker 1: doing a higher dividend than many cases in many cases, okay.

1708
01:30:57,120 --> 01:30:59,160
Speaker 1: And the fallacy of that is that the average Carmon

1709
01:30:59,200 --> 01:31:02,400
Speaker 1: stock is yielding, uh, you know, two percent for every

1710
01:31:02,439 --> 01:31:04,679
Speaker 1: shore you buy back, your buying back fifty years of dividends.

1711
01:31:04,840 --> 01:31:07,120
Speaker 1: And it turns out that a dividend policy was the

1712
01:31:07,120 --> 01:31:09,280
Speaker 1: wrong policy and cut the dividend, your stock doesn't get

1713
01:31:09,320 --> 01:31:12,400
Speaker 1: cremated anyway. So look, look, I mean, I have enormous

1714
01:31:12,439 --> 01:31:14,680
Speaker 1: respect for Goldman Sacks. Goldman Sack sports stock back for

1715
01:31:14,680 --> 01:31:17,040
Speaker 1: the Treasury over two hundred and two thousand and seven

1716
01:31:17,120 --> 01:31:19,400
Speaker 1: only sell stock to warm buffet and under eighty if

1717
01:31:19,479 --> 01:31:22,080
Speaker 1: you propably account for the warrants, and all the banks

1718
01:31:22,120 --> 01:31:24,320
Speaker 1: and financial institutions and some of the old companies with

1719
01:31:24,400 --> 01:31:27,200
Speaker 1: buying back stock are totally inappropriate prices. And the fourth

1720
01:31:27,280 --> 01:31:29,040
Speaker 1: kind of buy back the one I love, the one

1721
01:31:29,080 --> 01:31:31,439
Speaker 1: that Henry singled him did the eight self tender offers

1722
01:31:31,479 --> 01:31:34,439
Speaker 1: made retire nine of the company stock and there was

1723
01:31:34,479 --> 01:31:38,200
Speaker 1: a billiont executed. Program is they understand the value proposition

1724
01:31:38,240 --> 01:31:40,720
Speaker 1: of their company. They can correctly determine their stock is

1725
01:31:40,800 --> 01:31:43,519
Speaker 1: under valued and buy back under badge stock. They leverage

1726
01:31:43,560 --> 01:31:46,040
Speaker 1: the return to those investors that aren't selling. If what

1727
01:31:46,240 --> 01:31:49,840
Speaker 1: companies have to you know, understand is when you buy

1728
01:31:49,960 --> 01:31:53,240
Speaker 1: back stock, you're lodging the ownership of those who are

1729
01:31:53,280 --> 01:31:57,439
Speaker 1: not selling. If you're lodging the ownership but those not

1730
01:31:57,600 --> 01:32:02,679
Speaker 1: selling your disservice. You're investor by buying backstock and inappropriate prices,

1731
01:32:03,080 --> 01:32:05,200
Speaker 1: so at the right price at the right place. I

1732
01:32:05,280 --> 01:32:08,080
Speaker 1: love it. You know, it's funny you mentioned the goldman

1733
01:32:08,400 --> 01:32:12,760
Speaker 1: Um situation. Uh Dell recently went private, and before they

1734
01:32:12,800 --> 01:32:14,639
Speaker 1: went private, we were looking at some of the numbers.

1735
01:32:15,000 --> 01:32:17,799
Speaker 1: It turned out, over the course of their entire history,

1736
01:32:18,280 --> 01:32:21,160
Speaker 1: they spent more on buy backs than they actually earned

1737
01:32:21,200 --> 01:32:23,160
Speaker 1: in profit. I have I don't want to get into

1738
01:32:23,200 --> 01:32:25,000
Speaker 1: a debate with Michael Dell, but I have a very

1739
01:32:25,080 --> 01:32:27,439
Speaker 1: negative view of what they did. That carl I com

1740
01:32:27,600 --> 01:32:30,559
Speaker 1: was on the right track in a sense. Going private

1741
01:32:31,200 --> 01:32:33,559
Speaker 1: is a giant case of instruy trading by managing against

1742
01:32:33,600 --> 01:32:37,720
Speaker 1: their shaholders. Okay, uh. I would have thought it would

1743
01:32:37,720 --> 01:32:40,800
Speaker 1: be more appropriate for Dell to recapitalize the company, making

1744
01:32:40,800 --> 01:32:43,400
Speaker 1: an offer to shareholders, take out those showers they want

1745
01:32:43,439 --> 01:32:45,720
Speaker 1: to go out and those shareholders that wanted to take

1746
01:32:45,760 --> 01:32:48,240
Speaker 1: the risk of a more leverage enterprise, and bet on

1747
01:32:48,360 --> 01:32:51,200
Speaker 1: Michael Dell's management team and his own talent to improve

1748
01:32:51,280 --> 01:32:53,360
Speaker 1: the situation. That would a fair a way to go.

1749
01:32:53,960 --> 01:32:56,040
Speaker 1: So three years from now when he fixes it up

1750
01:32:56,080 --> 01:32:58,479
Speaker 1: and creates a normal capital game for him in silver

1751
01:32:58,640 --> 01:33:02,280
Speaker 1: Lake and tried to bring it, Yeah, that was gains

1752
01:33:02,400 --> 01:33:04,479
Speaker 1: that were really belonging in the pocket of the investor.

1753
01:33:04,600 --> 01:33:06,479
Speaker 1: The investor. So you mentioned carl I Con. What do

1754
01:33:06,600 --> 01:33:10,920
Speaker 1: you think of activist investor. I would say I'm balanced positive,

1755
01:33:11,000 --> 01:33:12,920
Speaker 1: you know, I think there's some negative aspects to it.

1756
01:33:13,320 --> 01:33:15,880
Speaker 1: I think this formula go out and borrow a lot

1757
01:33:15,920 --> 01:33:17,760
Speaker 1: of money, leverage up a couple of turns of debt,

1758
01:33:18,120 --> 01:33:20,600
Speaker 1: capital and buy back a lot of stock is not

1759
01:33:20,760 --> 01:33:23,680
Speaker 1: suitable for every company, but buying Lodge, I would say

1760
01:33:24,240 --> 01:33:26,960
Speaker 1: activism has to be viewed in a constructive light. And

1761
01:33:27,040 --> 01:33:32,200
Speaker 1: he's been totally brilliant the Netflix trade also, and the

1762
01:33:32,280 --> 01:33:34,280
Speaker 1: guy has got a phenomenal record. He's only to be

1763
01:33:34,320 --> 01:33:38,400
Speaker 1: admired and respected. And um, what sort of advice would

1764
01:33:38,439 --> 01:33:41,320
Speaker 1: you give to millennials or someone just starting out their

1765
01:33:41,360 --> 01:33:44,559
Speaker 1: career today? I think we covered some of it. I mean, uh,

1766
01:33:45,120 --> 01:33:48,639
Speaker 1: I look at my situation. Uh coming fore I came.

1767
01:33:48,800 --> 01:33:52,160
Speaker 1: I think education, it's important if you're interested in the

1768
01:33:52,280 --> 01:33:56,040
Speaker 1: business world. I think, uh, get a good business education.

1769
01:33:56,280 --> 01:33:58,720
Speaker 1: You know, accounting is the language of business. So my

1770
01:33:58,920 --> 01:34:01,599
Speaker 1: NBA made a all the difference to me in terms

1771
01:34:01,640 --> 01:34:03,479
Speaker 1: of not only could open up doors, it gave me

1772
01:34:03,560 --> 01:34:05,679
Speaker 1: technical skills. They didn't have a major in the chemistry,

1773
01:34:05,720 --> 01:34:08,479
Speaker 1: mind and meth and physics. Uh. And don't go into

1774
01:34:08,520 --> 01:34:10,280
Speaker 1: a field just for money. You know, all these kids

1775
01:34:10,320 --> 01:34:14,479
Speaker 1: interviewing they could join hedge funds. Everything is cyclical. Figure

1776
01:34:14,520 --> 01:34:17,160
Speaker 1: out what your aptitude and your interests are and pursue

1777
01:34:17,240 --> 01:34:20,280
Speaker 1: that career and go to work for somebody respect and admire.

1778
01:34:20,760 --> 01:34:23,480
Speaker 1: You know, it's very important and you get a good foundation.

1779
01:34:24,240 --> 01:34:26,920
Speaker 1: And then our final question, and I asked this of

1780
01:34:27,000 --> 01:34:30,920
Speaker 1: all my guests, what do you know today about investing

1781
01:34:31,000 --> 01:34:34,360
Speaker 1: and asset management that you wish you knew forty years

1782
01:34:34,400 --> 01:34:40,639
Speaker 1: ago when you started. I loved my career at Goldman Sachs.

1783
01:34:41,600 --> 01:34:44,439
Speaker 1: I owe a great gratitude to Goldman Sachs. I think

1784
01:34:44,479 --> 01:34:46,720
Speaker 1: Goldman Sacks owes me. But I performed very strongly as

1785
01:34:46,720 --> 01:34:49,200
Speaker 1: a professional. But I probably would have gone into this

1786
01:34:49,280 --> 01:34:51,640
Speaker 1: business earlier. What I did you wish you would have

1787
01:34:51,680 --> 01:34:53,920
Speaker 1: started earlier? Now it's a chicken and egg. You know.

1788
01:34:54,040 --> 01:34:58,920
Speaker 1: I developed my reputation at Goldman, but this is a

1789
01:34:59,280 --> 01:35:01,479
Speaker 1: much more p off of the hedge fund business. You

1790
01:35:01,640 --> 01:35:03,640
Speaker 1: had fun business, but you know, and you have a

1791
01:35:03,720 --> 01:35:06,280
Speaker 1: lot more control when it's essentially you at the top

1792
01:35:06,360 --> 01:35:10,400
Speaker 1: of the part. Your hoppers are higher down as are lower.

1793
01:35:10,640 --> 01:35:12,720
Speaker 1: You know, you're out there alone. And I do have

1794
01:35:12,760 --> 01:35:14,439
Speaker 1: a team that I have a very competent team, But

1795
01:35:14,560 --> 01:35:16,720
Speaker 1: the truth is I didn't have the same infrastructure I

1796
01:35:16,720 --> 01:35:19,439
Speaker 1: had a Goldman SAX. You know, I was the number

1797
01:35:19,479 --> 01:35:23,960
Speaker 1: fifty partner made was fifty partners in total, five hundre employees,

1798
01:35:23,960 --> 01:35:25,960
Speaker 1: and today is thirty eight thousand people, I think in

1799
01:35:26,040 --> 01:35:28,640
Speaker 1: four hundred, that's an amazing that's an amazing set of

1800
01:35:28,760 --> 01:35:32,040
Speaker 1: numbers from five. So now when you're a partner and

1801
01:35:32,120 --> 01:35:36,080
Speaker 1: you leave that partnership and have to digress briefly because

1802
01:35:36,120 --> 01:35:38,760
Speaker 1: you brought this up, are they buying you out of

1803
01:35:38,880 --> 01:35:41,200
Speaker 1: the partnership? How does that a capital We were a

1804
01:35:41,240 --> 01:35:43,840
Speaker 1: private partnership. You have a capital account. The firm had

1805
01:35:43,840 --> 01:35:46,960
Speaker 1: a very strong capital retention rules. When you retire, they

1806
01:35:47,000 --> 01:35:49,720
Speaker 1: gave you half of your capital back. The other half

1807
01:35:49,760 --> 01:35:52,080
Speaker 1: you got back after five years. So I took the

1808
01:35:52,120 --> 01:35:53,680
Speaker 1: amount of cap I can get a go home in,

1809
01:35:53,720 --> 01:35:55,719
Speaker 1: plus whatever else I had, and I put into Omega

1810
01:35:56,200 --> 01:36:01,880
Speaker 1: and I started Omegan and that number has grown, uh

1811
01:36:04,400 --> 01:36:07,280
Speaker 1: something like that, not too chevy, and uh, that's because

1812
01:36:07,280 --> 01:36:09,280
Speaker 1: I believed in myself and I left my money in

1813
01:36:09,560 --> 01:36:11,719
Speaker 1: and I want to be a co investor with my investors.

1814
01:36:12,320 --> 01:36:14,720
Speaker 1: I want to eat my own cooking, and so I

1815
01:36:15,040 --> 01:36:17,960
Speaker 1: believe in that very strongly. And so I lost more

1816
01:36:18,000 --> 01:36:19,920
Speaker 1: money than anyone lost in two thousand and eight, and

1817
01:36:20,000 --> 01:36:22,599
Speaker 1: I've done extremely well subsequent to that. And I think

1818
01:36:22,640 --> 01:36:26,639
Speaker 1: that's the that's the alignment of interest that should exist. Lee.

1819
01:36:26,720 --> 01:36:29,200
Speaker 1: I can't thank you so much for how generous you've

1820
01:36:29,240 --> 01:36:33,840
Speaker 1: been with your time. Um, this just has been tremendous. Uh.

1821
01:36:34,240 --> 01:36:37,840
Speaker 1: You've been listening to my conversation with Leon Cooperman of

1822
01:36:38,120 --> 01:36:41,479
Speaker 1: Omega Advisors. If you enjoy this conversation, be sure and

1823
01:36:41,600 --> 01:36:44,360
Speaker 1: check out an Inch above or an Inch Below on

1824
01:36:44,479 --> 01:36:48,240
Speaker 1: Apple iTunes to see all the rest of our various shows.

1825
01:36:48,720 --> 01:36:52,080
Speaker 1: Check out my daily column on Bloomberg View dot com.

1826
01:36:52,280 --> 01:36:55,920
Speaker 1: Follow me on Twitter at Ridholtz. You've been listening to

1827
01:36:56,080 --> 01:36:58,559
Speaker 1: Masters in Business on Bloomberg Radio