WEBVTT - Leon Cooperman on Finding the Overlooked Investment 0:00:02.240 --> 0:00:06.800 This is Master's in Business with Barry Ridholts on Bloomberg Radio. 0:00:10.000 --> 0:00:13.160 This week on the podcast, I have an extra special guest, 0:00:13.320 --> 0:00:16.639 and you are in for quite a treat. His name 0:00:16.800 --> 0:00:21.120 is Leon Cooperman and what a storied background he has, 0:00:21.200 --> 0:00:26.000 from Hunter College to Columbia NBA to Goldman Sachs who 0:00:26.000 --> 0:00:33.760 Omega Advisors. Essentially, we discuss everything from value investing and 0:00:33.800 --> 0:00:36.600 growth in a reasonable price to what it's like to 0:00:36.640 --> 0:00:40.280 have dinner at the White House with President Trump. UH. 0:00:40.320 --> 0:00:43.960 He is a participant in the Giving Pledge, where he 0:00:44.000 --> 0:00:46.839 has committed to giving away all of his billions of 0:00:46.880 --> 0:00:52.559 dollars to various philanthropies, including Columbia University, Hunter College. He 0:00:52.960 --> 0:00:55.880 UH funds a program in New Jersey that sends five 0:00:56.000 --> 0:00:59.800 hundred students to college. UH and there are few p 0:01:00.000 --> 0:01:05.319 people who know as much about the industry of investing 0:01:06.160 --> 0:01:10.039 as he does. He has seen it from just about 0:01:10.120 --> 0:01:14.840 every angle, be it creating Goldman Successet Management Division to 0:01:15.920 --> 0:01:19.920 beating the SMP five hundred by a substantial percentage over 0:01:19.959 --> 0:01:22.959 a long period of time at the Hedge Fund. I 0:01:23.000 --> 0:01:26.960 think you'll find this to be an absolutely fascinating conversation. 0:01:27.520 --> 0:01:31.759 And so with no further ado my Master's in Business 0:01:31.840 --> 0:01:40.200 conversation with Lee Cooperman. My special guest this week is 0:01:40.280 --> 0:01:43.600 Lee Cooperman. He has returned guest and we decided to 0:01:43.640 --> 0:01:46.479 bring him on because of some changes that he has 0:01:46.520 --> 0:01:50.320 made to his hedge funds Omega, which was launched in 0:01:51.360 --> 0:01:54.800 and has substantially beat the market by a fairly wide 0:01:54.840 --> 0:01:59.960 margin since then. Lee went to Hunter College undergrad got 0:02:00.160 --> 0:02:03.640 NBA from Columbia Business School, where he went with a 0:02:03.720 --> 0:02:07.680 number of esteemed colleagues. He joined Goldman Sachs in nineteen 0:02:07.760 --> 0:02:11.880 sixty seven, where he spent twenty two years in investment research, 0:02:12.280 --> 0:02:16.880 where he was frequently voted onto the Institutional Investors All 0:02:16.919 --> 0:02:22.080 America research team for portfolio strategy. He helped create and 0:02:22.200 --> 0:02:26.240 launched the Goldman Sacks Asset Management Unit, where he was 0:02:26.280 --> 0:02:32.360 eventually Chief Investment Officer, Chairman and CEO UH prior to 0:02:32.520 --> 0:02:38.200 launching Omega hedge fund in Lee Cooperman, Welcome back to 0:02:38.280 --> 0:02:43.720 bloom So. You recently set out a notice that you 0:02:43.760 --> 0:02:47.360 were converting Omega to a family office, and I thought 0:02:47.400 --> 0:02:49.760 that was as good an excuse as any to get 0:02:49.800 --> 0:02:53.679 you back UH into chat about markets in the economy. 0:02:53.720 --> 0:02:56.760 But first let's talk about that conversion. What was the 0:02:56.880 --> 0:03:01.160 thinking behind it? What what motivated that? Well, two factors. 0:03:01.520 --> 0:03:06.200 I turned seventy five in April, and I recalled reading 0:03:06.320 --> 0:03:10.960 somewhere that the statistics say, if you make it past 0:03:11.000 --> 0:03:14.440 sixty five and cancer doesn't get you, on average, will 0:03:14.440 --> 0:03:17.440 make it to eighty five. And I did not want 0:03:17.480 --> 0:03:20.160 to spend the next ten years, the remaining ten years 0:03:20.240 --> 0:03:24.840 from average running after the SMP and there would solidified 0:03:24.919 --> 0:03:28.640 that was. I went to a concert with Kenny Rodgers, 0:03:28.720 --> 0:03:32.560 the country and Western singer who I and like his talent, 0:03:33.280 --> 0:03:35.760 and I found an interesting He was having great difficulty 0:03:35.800 --> 0:03:39.440 negotiating a stage, getting around, and he made the comment 0:03:39.560 --> 0:03:41.800 that he's turning eighty, he shouldn't be doing this anymore. 0:03:41.840 --> 0:03:44.200 But he's on his fifth marriage. He needs the money. 0:03:44.760 --> 0:03:46.400 And I said to myself, and though I've been lucky, 0:03:46.440 --> 0:03:49.440 having married fifty four years to one woman, I don't 0:03:49.440 --> 0:03:51.840 need the money. My money is going back to society 0:03:51.880 --> 0:03:56.880 through charitable giving. Um and uh. I wanted to fold 0:03:57.080 --> 0:03:59.520 at the top. So you know that's the difference between 0:03:59.560 --> 0:04:01.880 you and Rogers. You know when to hold them and 0:04:01.880 --> 0:04:04.520 went to fold them. Apparently Kenny does not. I hope. 0:04:04.520 --> 0:04:09.200 So basically, um Over the years, I've noticed, particularly in 0:04:09.200 --> 0:04:11.280 two thousand and eight, that a lot of hedge funds 0:04:11.440 --> 0:04:15.240 close up when they're down, and I don't consider they're 0:04:15.240 --> 0:04:18.400 just a personal view. I'm not moralizing, but I think 0:04:18.400 --> 0:04:20.800 a high water mark is an asset of the investor. 0:04:21.440 --> 0:04:24.560 And if you basically close up and give them their 0:04:24.560 --> 0:04:27.400 money back involuntarily, there was one thing that the investors, look, 0:04:27.480 --> 0:04:29.600 I had enough, I want my money back. They get 0:04:29.640 --> 0:04:32.119 their money back. But to give them their money back 0:04:32.240 --> 0:04:34.120 when they don't want it and they're willing to bet 0:04:34.160 --> 0:04:37.600 on you turning the ship around is not right. So 0:04:37.800 --> 0:04:41.040 I was up in the sixteen seventeen, them up about 0:04:41.080 --> 0:04:43.960 seven percent this year. So everyone that's with me at 0:04:43.960 --> 0:04:45.760 this moment time is it a record high and their 0:04:45.760 --> 0:04:48.920 capital count and now's the time to fold them? Because 0:04:49.160 --> 0:04:52.240 I do believe looking out Uh you know, I'm not 0:04:52.440 --> 0:04:55.279 a pessimist, but I think it's stands the reason that 0:04:57.040 --> 0:04:58.960 who have a market setback. I tend to be more 0:04:59.040 --> 0:05:01.520 long oriented and I don't want to be seventy seven 0:05:01.560 --> 0:05:03.440 years old owning some of the high water mark and 0:05:03.440 --> 0:05:06.520 feeling obligated to stay in business. What did clients say 0:05:06.600 --> 0:05:09.960 when you notified them, Hey we're here's some capital back. 0:05:10.000 --> 0:05:15.640 Thanks for sticking around for twenty six years. Uh, I've 0:05:15.680 --> 0:05:18.760 been very gratified. I'm not shocked, to be honestly, I 0:05:18.760 --> 0:05:20.719 don't want to stund self serving, but yeah, I've lived 0:05:20.720 --> 0:05:24.120 a very straight life. I've run the business and always 0:05:24.160 --> 0:05:26.600 through the eyes of the investor. And the emails I've 0:05:26.640 --> 0:05:30.520 gotten are just off the charts. Uh, favorable. I could 0:05:30.560 --> 0:05:32.360 read some of the m to you. I don't want 0:05:32.360 --> 0:05:38.400 to take your time, but it's um, it's very very gratified. 0:05:38.480 --> 0:05:40.240 Hold on to those. We're gonna come back to some 0:05:40.279 --> 0:05:45.240 of those emails a little later. Um. Internally within the firm, 0:05:45.360 --> 0:05:48.240 what was the decision making process? Like you obviously have 0:05:48.720 --> 0:05:52.040 employees were the most painful part of the decision. The 0:05:52.040 --> 0:05:55.480 most painful far and away is I have to resize 0:05:55.520 --> 0:05:58.680 the staff. You know, I have between thirty five and 0:05:58.760 --> 0:06:02.839 forty loyal working, very competent people, whether it be analytical 0:06:02.960 --> 0:06:06.080 or support. And in the family who officers, I'll probably 0:06:06.120 --> 0:06:09.000 have twelve to fifteen. So I have to help place 0:06:09.240 --> 0:06:14.440 or take care of upwards of and uh, that's the 0:06:14.440 --> 0:06:16.119 most painful part of it. You know, I've spent twenty 0:06:16.200 --> 0:06:23.720 six years building the right team, the right infrastructure, right computers, programs, 0:06:23.839 --> 0:06:27.039 everything to run the business. And I love what I do. 0:06:27.120 --> 0:06:29.560 To be honest with you, I do what I love. Uh. 0:06:29.720 --> 0:06:32.160 In fact, tonight I'm speaking to thirty five students at 0:06:32.160 --> 0:06:35.080 Columbia Business School. I tell them the secrets of successes. 0:06:35.160 --> 0:06:37.000 Do what you love, love what you do. Don't go 0:06:37.040 --> 0:06:39.080 in through a field for money. Go into a field 0:06:39.080 --> 0:06:40.400 because you have a passionate about it, and I have 0:06:40.440 --> 0:06:42.920 a passion about investing. We're not going to continue to do. 0:06:43.480 --> 0:06:45.640 I just did not want to have the responsibility of 0:06:45.720 --> 0:06:47.880 running other people's money at this stage of my life. 0:06:48.200 --> 0:06:50.960 So I've called you the hardest working man. And Hedge Funds, 0:06:51.000 --> 0:06:55.080 you know you're quoting my mutual friend Doug cast Brown 0:06:55.120 --> 0:06:57.039 of Hedge Funds is where I was gonna go with. Doug. 0:06:57.200 --> 0:07:01.000 Doug called you, um, when you this this transition, Are 0:07:01.040 --> 0:07:04.200 you still going to be starting at ungodly early hours 0:07:04.240 --> 0:07:08.440 and reading writing reports till midnight? Or is that right now? 0:07:08.960 --> 0:07:11.160 My alarm clock goes over five fifty in the morning, 0:07:11.200 --> 0:07:12.880 and I spent nar in ten minutes coming in from 0:07:12.880 --> 0:07:15.400 the suburbs to New York and nar and ten minutes 0:07:15.440 --> 0:07:17.840 going home at night, and I expect that I'll sleep 0:07:17.880 --> 0:07:21.200 a little bit later, but I'll visit more companies, will 0:07:21.200 --> 0:07:26.480 be intense. I will be oriented towards long term capital games. Uh. 0:07:26.560 --> 0:07:30.480 The SMP five will be in irrelevancy to me. Uh 0:07:30.760 --> 0:07:33.440 with right now, it's not. My investors paid me a 0:07:33.440 --> 0:07:35.880 fancy fee and they deserve to get the best performance 0:07:35.880 --> 0:07:37.760 I can give them. But I'm gonna be managing the 0:07:37.800 --> 0:07:42.800 money for AfOR tax returns after tax returns. So that's uh, 0:07:42.880 --> 0:07:45.960 that's a substantial change. What other changes are you looking at? 0:07:46.320 --> 0:07:50.280 You don't strike me as a golfer. I'm not a golfer. 0:07:50.320 --> 0:07:52.440 But I have a particular problem now as we sit 0:07:52.480 --> 0:07:56.240 here talking. I ride a bicycle in Florida every day 0:07:56.840 --> 0:08:01.280 and some octogenarian was not careful his golf cart and 0:08:01.320 --> 0:08:03.160 he hit me while I was riding my bike and 0:08:03.440 --> 0:08:04.760 fell on my shoulder. And I have a four and 0:08:04.800 --> 0:08:07.000 a half sent to me to rotate a cuff tear, 0:08:07.120 --> 0:08:10.560 which is, you know, reasonably painful, but at this kind 0:08:10.560 --> 0:08:12.720 of ending my golf days unless I go for surgery 0:08:12.720 --> 0:08:15.680 for repair, and the surgery I'm told it's very complex 0:08:16.120 --> 0:08:20.080 and the terrible. A year of physical therapy, you you 0:08:20.200 --> 0:08:23.280 got it. And so basically I've been to four different 0:08:23.280 --> 0:08:25.880 doctors and they all said the same thing. The only 0:08:25.880 --> 0:08:28.960 reason I have surgery is if you're can't sleep at night, 0:08:29.360 --> 0:08:33.600 you're in excruciating pain or affects your lifestyle. Thankfully, I'm 0:08:33.640 --> 0:08:36.520 able to sleep at night. The pain is mild but 0:08:36.559 --> 0:08:39.760 reasonably consistent, and it has affected my lifestyle. But I'm 0:08:39.800 --> 0:08:42.679 not a passionate golfer, so I'll live with it, and 0:08:42.679 --> 0:08:44.880 I go to physical therapy twice a week and they're 0:08:44.920 --> 0:08:47.240 trying to build up the muscles in the area to 0:08:47.280 --> 0:08:50.880 compensate for the tear. Huh. Let's talk about those days 0:08:50.920 --> 0:08:56.960 in when you first started. Jim Chano said, when he 0:08:57.000 --> 0:09:00.920 began his fun there were only a few hundred UM managers, 0:09:00.920 --> 0:09:04.280 and most of them were generating alpha. Today there's eleven 0:09:04.320 --> 0:09:07.800 thousand hedge fund managers, and it seems the same few 0:09:07.880 --> 0:09:12.000 hundred are generating alpha. What was it like back in 0:09:13.679 --> 0:09:18.240 when you launched Omega, Well, there was less competition. I'm 0:09:18.280 --> 0:09:20.120 not sure what the exact number of hedge funds were, 0:09:20.200 --> 0:09:23.760 but one of the statistics that strikes me is about 0:09:23.800 --> 0:09:27.160 a decade ago to today, the number of publicly traded 0:09:27.200 --> 0:09:31.800 companies are down by about because it merges consolidations going private. 0:09:32.240 --> 0:09:35.280 In that same period, hedge funds are have gone up 0:09:35.280 --> 0:09:38.760 by fourfold. So you know, a number of companies down, 0:09:39.520 --> 0:09:43.280 number of competitors looking for alpha up fourfold. So you 0:09:43.320 --> 0:09:46.559 know it's difficult. But I never went into the hedge 0:09:46.559 --> 0:09:48.120 from business to make a lot of money. I was 0:09:48.160 --> 0:09:50.920 a very happy partner of Goldman Sachs. I was I 0:09:50.960 --> 0:09:53.400 think at the time, fifth high percentage partner of the firm. 0:09:54.080 --> 0:09:56.160 The firm was doing well. I loved what I did 0:09:56.160 --> 0:09:58.240 for a living, but I wanted to start a hedge 0:09:58.240 --> 0:10:01.200 fund as a way of code investing with my investors 0:10:01.480 --> 0:10:04.400 respective investors. And the firm at that time wasn't ready 0:10:04.440 --> 0:10:06.360 to have a hedge fund because they were they have 0:10:06.559 --> 0:10:08.959 vision in their mind which was incorrect in my opinion, 0:10:09.240 --> 0:10:11.360 that I would be short some investment banking client at 0:10:11.360 --> 0:10:13.720 the firm. The client would find out, find out and 0:10:13.720 --> 0:10:16.199 they'd have hell to pay. Um. The fact of the 0:10:16.240 --> 0:10:18.679 matter is I'm a long term investor and uh and 0:10:18.760 --> 0:10:21.200 that had the problem. And the firm is really the 0:10:21.360 --> 0:10:24.360 views of maturated because I think they have a lot 0:10:24.400 --> 0:10:27.280 of hedge funds on the premises. Now, in fact, there 0:10:27.320 --> 0:10:32.320 has been a fairly steady stream of people departing Goldman Sachs, 0:10:32.440 --> 0:10:36.600 but retaining the relationship with Goldman as a prime broker 0:10:36.679 --> 0:10:39.920 for for that hedge fund. What was the big change? 0:10:40.400 --> 0:10:43.400 You know, you when you left Goldman, you had previously 0:10:43.480 --> 0:10:46.200 said they were they were pretty supportive of everything you do. 0:10:46.360 --> 0:10:50.040 You know, how did they manage to mature their views 0:10:50.080 --> 0:10:54.600 on this? Well, just a passage of time, you know, Uh, 0:10:54.640 --> 0:10:58.600 if you go back to ancient history. Really a decade 0:10:58.640 --> 0:11:02.160 before I left, I was telling Goldman they were they 0:11:02.160 --> 0:11:04.200 were making a very big mistake by not being an 0:11:04.200 --> 0:11:08.439 asset management. And the senior partners at the time said, 0:11:08.520 --> 0:11:10.120 you don't get it. Lead. We're of the view that 0:11:10.160 --> 0:11:12.720 brokers should do brokerage, money manage and do money management. 0:11:12.960 --> 0:11:15.560 Don't compete with your customer. And I al would say, 0:11:15.559 --> 0:11:18.120 then wake up, smell the roses. Look at they have 0:11:18.200 --> 0:11:20.559 Merrill Lynchs in management. You have Webster, which the division 0:11:20.559 --> 0:11:23.959 a kid at Peabody CSFPSI management. Everybody was in the 0:11:24.000 --> 0:11:27.360 business except one firm who they viewed as their arts rival. 0:11:27.360 --> 0:11:30.760 In trading, there were Solomon Brothers and one day, Solomon 0:11:30.760 --> 0:11:33.719 announced that Bob Solomon Jr. Who's a good man, was 0:11:33.800 --> 0:11:36.800 leaving the research department to start Solomon Brothers Asset Management, 0:11:37.360 --> 0:11:40.000 at which point the Steve Friedman and Barb Brubin collb 0:11:40.000 --> 0:11:41.360 me and said, you know you were right. We made 0:11:41.360 --> 0:11:43.760 a mistake. We should go into the business. Would you 0:11:44.080 --> 0:11:46.800 leave research and start asset management and build us a 0:11:46.840 --> 0:11:50.720 business like you built us in research. For the record, 0:11:51.000 --> 0:11:53.680 not blowing my own horn, but just factually, when I 0:11:53.720 --> 0:11:56.720 took over Golden Research and D and I guess there 0:11:56.800 --> 0:12:02.080 was seventy five seventy four road unranked, and when I 0:12:02.160 --> 0:12:04.320 left the research department, we were number one. I I 0:12:04.440 --> 0:12:06.800 number one in Greenwich Research, number one in financial world. 0:12:07.400 --> 0:12:09.440 I also happened to be the lead strategist, and I 0:12:09.440 --> 0:12:11.880 was number one for nine straight years in strategy. So 0:12:11.920 --> 0:12:15.040 I was ready for new challenge. And I accepted their 0:12:15.160 --> 0:12:20.240 invitation and started Goldmen's Access in Management. And frankly, about 0:12:20.280 --> 0:12:22.160 a year after I started, I realized I had made 0:12:22.200 --> 0:12:25.840 a mistake. The firm is a great firm, and they 0:12:25.920 --> 0:12:29.520 understood assets in the management times fee equal revenue, and 0:12:29.559 --> 0:12:32.080 they were interested in me building a big business. I 0:12:32.120 --> 0:12:35.480 was really focused on investment performance. I wanted to co 0:12:35.559 --> 0:12:38.640 invest with the investors and build a track record. And 0:12:38.720 --> 0:12:41.240 it became obvious to me that, you know, they wanted 0:12:41.240 --> 0:12:44.600 me on the road innovating new products, raising more money, 0:12:44.600 --> 0:12:46.760 and I wanted to manage the money. You know. I 0:12:46.800 --> 0:12:49.199 was a guy that discovered Henry Singleton of Teldine in 0:12:49.240 --> 0:12:50.959 Wall Street and made a big bet on him and 0:12:51.040 --> 0:12:54.040 proved to be correct. And so I went to them 0:12:54.040 --> 0:12:55.680 and said, look, you know, I'd like to start a 0:12:55.679 --> 0:13:00.000 hedge fund as part of the asset management business. And uh, 0:13:00.000 --> 0:13:02.839 they originally said yes, and then they changed their mind, 0:13:03.320 --> 0:13:05.880 and they changed your mind again. All this is nuances. 0:13:06.400 --> 0:13:09.280 They had a sponsored a fund called the Water Street 0:13:09.280 --> 0:13:12.160 Recovery Fund, which was a vulture fund. They would buy 0:13:12.240 --> 0:13:16.480 up the stress debt from the fault of the issuers 0:13:16.600 --> 0:13:21.079 and reorganized them. And that created some consternation from the 0:13:21.160 --> 0:13:23.760 high yeld clients of the firm. They were selling them 0:13:23.880 --> 0:13:26.680 bonds which they didn't know the firm was intending to 0:13:27.280 --> 0:13:29.760 restructure the companies, and so they had a lot of 0:13:29.760 --> 0:13:34.280 adverse biblicity. John Weinberg, bless him, Uh, it was impressed 0:13:34.280 --> 0:13:37.520 by the negative, you know feedback, and went in and 0:13:37.559 --> 0:13:40.320 closed the fund down and returned all the money. And 0:13:40.440 --> 0:13:42.320 they came back to me and they said, you know, 0:13:42.640 --> 0:13:44.280 forget about We're not going to go for the frying 0:13:44.280 --> 0:13:46.559 pan to the fire. No hedge fund will put you 0:13:46.600 --> 0:13:48.600 on the executive committee and you run g Sam. It's 0:13:48.600 --> 0:13:51.960 a business manager, not as a money manager. You couldn't 0:13:51.960 --> 0:13:54.240 be a money manager because you come into contact and 0:13:54.280 --> 0:13:56.960 a lot of confidence information if you're on the executive committee. 0:13:57.559 --> 0:14:00.120 And I told him my wife. I went home, what 0:14:00.160 --> 0:14:01.800 a boat. My wife came up with a great line. 0:14:01.840 --> 0:14:03.079 She said, you know how old you're gonna be and 0:14:03.120 --> 0:14:04.600 how rich you're gonna before you do what you want 0:14:04.600 --> 0:14:07.199 to do. So I went back. I said, listen, that's 0:14:07.240 --> 0:14:09.520 been a great place to me, Goldman. I really want 0:14:09.559 --> 0:14:15.480 to manage money. Uh and uh basically, UM, you know, 0:14:15.600 --> 0:14:16.960 I'll stay as long as you want me to stay, 0:14:17.000 --> 0:14:19.120 but I would like to basically ultimately. And I stayed 0:14:19.160 --> 0:14:21.840 for a year and consulted for a year, and it 0:14:21.880 --> 0:14:23.720 was a great place. I grew up at Goldman, and 0:14:23.720 --> 0:14:27.760 I have great, great feelings about Goldman. So walk us 0:14:27.800 --> 0:14:31.560 through what your process was like at Omega or is 0:14:31.600 --> 0:14:33.640 still like it Omega When you're trying to make you 0:14:33.760 --> 0:14:36.680 still we're still in business and Omega and uh, I'll 0:14:36.720 --> 0:14:38.800 run it the same way. I like to have a 0:14:38.880 --> 0:14:42.480 lot of arrows in my quiver. You know, it's very 0:14:42.480 --> 0:14:46.360 hard to take fifteen off the top and beat the market, okay, 0:14:46.880 --> 0:14:48.680 and so I like to have a lot of different 0:14:48.720 --> 0:14:53.800 strategies that I could pursue and um. Basically, we try 0:14:53.840 --> 0:14:57.560 to make money for the investors in five different ways. First, 0:14:57.840 --> 0:15:00.560 stocks or high risk financial assets. Short term bonds in 0:15:00.600 --> 0:15:03.360 cash are low risk financial assets. And we spent a 0:15:03.400 --> 0:15:05.400 lot of times is Steve Ian who are my partner, 0:15:05.400 --> 0:15:08.360 we've been working together for over forty years. A terrific guy. 0:15:08.520 --> 0:15:10.760 Terrific guy, and we spent a lot of time studying 0:15:10.760 --> 0:15:13.640 the economy, the FED valuation and trying to figure out 0:15:13.680 --> 0:15:17.040 is the market undervalued going up, overvalue going down, It 0:15:17.120 --> 0:15:20.400 could be fully valued going up, etcetera. Because that de 0:15:20.480 --> 0:15:23.960 termines our exposure to risk assets. Number two, all the 0:15:24.000 --> 0:15:28.320 studies I've read on portfolio returns say more important being 0:15:28.320 --> 0:15:30.600 the right individual stock in anyone years also being the 0:15:30.680 --> 0:15:32.920 right asset class. So we spent a lot of time 0:15:33.000 --> 0:15:37.200 looking at returns in fixed incomeverse equities and fixed income 0:15:37.280 --> 0:15:41.400 we cover the gamut where government bonds, high grade, industrial bonds, 0:15:42.200 --> 0:15:46.160 high yield bonds, structured credit, and we're trying to look 0:15:46.160 --> 0:15:49.360 for the store hat in the winter. What's the mispriced asset? Okay? 0:15:49.680 --> 0:15:51.520 The third thing we do we shually have bread and 0:15:51.600 --> 0:15:53.720 butt of business, was right? Spend most of my time 0:15:54.240 --> 0:15:57.600 is UNDERVAD stocks and alongside uh not a successful We 0:15:57.640 --> 0:16:00.480 spend time looking forward a stocks in short side. And 0:16:00.480 --> 0:16:02.840 then we do a certain amount of macro trading where 0:16:02.880 --> 0:16:07.040 we'll basically go longer, shorter, currency, longer, shorter commodity, longer 0:16:07.040 --> 0:16:09.960 short and index away from the SMP five hundred, and 0:16:10.000 --> 0:16:12.240 we risk about two percent of capital in the macro 0:16:12.360 --> 0:16:15.000 area to make it an incremental five or six percent 0:16:15.040 --> 0:16:17.560 a year. So I would bill Omega saying we're an 0:16:17.560 --> 0:16:20.520 equity oriented hetche fhow with a macro capability. So let's 0:16:20.560 --> 0:16:23.200 let me put some numbers, some flesh on the bones. 0:16:23.800 --> 0:16:26.640 You return twelve point six percent a year net of 0:16:26.760 --> 0:16:31.600 fees versus nine point six percent for the SMP five hundred, 0:16:32.160 --> 0:16:36.240 about a third better than the broad index did. What 0:16:36.320 --> 0:16:38.920 do you think is the single biggest contributor to that 0:16:39.000 --> 0:16:43.880 out performance? Well, you know, uh, number one with the records. Okay, 0:16:43.920 --> 0:16:45.800 there are better records around, but you know you've got 0:16:45.880 --> 0:16:49.600 address for risk. We've done it, maybe set long over 0:16:49.640 --> 0:16:53.000 twenty six years, twenty six years, and I said, we 0:16:53.160 --> 0:16:56.040 were disciplined. You know, we're we're value oriented. So as 0:16:56.040 --> 0:16:58.200 I said before, we figured trying to figure out the market. 0:16:58.280 --> 0:17:01.320 We've got the market right a lot of the time. 0:17:01.800 --> 0:17:05.120 And then second we really look at individual stocks and 0:17:05.560 --> 0:17:07.840 my benchmark and I look at the SP five hundred 0:17:08.160 --> 0:17:10.359 and what is that represent Most people don't even know 0:17:10.400 --> 0:17:13.760 what the recup five represents an index of five companies 0:17:13.800 --> 0:17:16.359 that are growing about five percent a year that have 0:17:16.640 --> 0:17:20.119 a dive it in the yield of about one that 0:17:20.320 --> 0:17:25.119 have debt about the capital structure. I think I've mentioned 0:17:25.200 --> 0:17:28.000 growing about five six percent a year. And for that 0:17:28.240 --> 0:17:31.640 statistical compilation, you're paying about eighteen times earnings. So we're 0:17:31.680 --> 0:17:35.240 looking for more growth. More earning is more asset value. There, 0:17:35.320 --> 0:17:38.480 they're training around three times book value for a lower price, 0:17:38.720 --> 0:17:40.840 and that's what we do. So we just looking for value. 0:17:41.359 --> 0:17:44.359 And generally speaking, if you correctly identify value, that's one 0:17:44.359 --> 0:17:46.320 of the big protectors of your downside. If you're buying 0:17:46.359 --> 0:17:48.680 something as a reasonably cheap to begin with margin of safety. 0:17:49.119 --> 0:17:52.119 Let's talk a little bit about something we discussed the 0:17:52.200 --> 0:17:54.600 last time you were on and we had a kind 0:17:54.600 --> 0:17:57.600 of dance around it because it was still um an 0:17:57.600 --> 0:18:01.359 open live issue. Uh, you had a run in with 0:18:01.400 --> 0:18:05.400 the SEC. Tell us a little bit about that. What 0:18:05.480 --> 0:18:08.560 was it like when you first learned uh they were 0:18:08.560 --> 0:18:13.160 looking into Omega and how did it affect your your trader. 0:18:13.720 --> 0:18:15.480 Let me just say this, I entered into what's called 0:18:15.520 --> 0:18:19.120 and no admit and no deny agreement. So I don't 0:18:19.160 --> 0:18:22.000 admit I did anything right or wrong whatever the hell. 0:18:22.400 --> 0:18:24.720 But between last time you were here, you were pretty 0:18:24.720 --> 0:18:28.879 adamant you didn't do anything wrong. Yeah. Yeah, but like 0:18:28.920 --> 0:18:31.399 I said, I'll repeat, there's a sort to legally is 0:18:31.480 --> 0:18:36.400 below no no deny UM. I totally did not appreciate 0:18:36.520 --> 0:18:40.879 the power of the SEC, their abusive nature, UM, and 0:18:40.920 --> 0:18:44.560 the problems with the system where they served me. There 0:18:44.640 --> 0:18:47.240 was no broad escale investigation to also to trade and 0:18:47.280 --> 0:18:51.919 new was investigation to trade on one company and Uh, 0:18:52.240 --> 0:18:55.879 basically we told them when we received the subpoena that 0:18:56.040 --> 0:18:58.520 withdraw the subpoena. And I guess I want to make 0:18:58.560 --> 0:19:01.320 the point every step along the way where they had 0:19:01.359 --> 0:19:04.760 the chance to uprate in in a proper manner, in 0:19:04.840 --> 0:19:08.200 my opinion, proper matner. They basically rejected it. They tried, 0:19:08.280 --> 0:19:11.760 you aren't adversarial, you're very cooperative. Try to get them 0:19:12.240 --> 0:19:14.440 to sit down. Let me explain this to you. This 0:19:14.560 --> 0:19:16.840 is really very simple. Every step on the way they 0:19:16.880 --> 0:19:20.879 rejected it like they wanted to inflict maximum damage. We 0:19:20.960 --> 0:19:24.399 stay succeeded in doing so. We get to subpoena and 0:19:24.720 --> 0:19:27.920 I tell my lawyers, tell them, withdraw the subpoena. I'll 0:19:27.960 --> 0:19:30.359 meet with you. I'll answer all your questions, and if 0:19:30.400 --> 0:19:32.520 you don't like the answers, you can reinstate the subpoena 0:19:33.000 --> 0:19:35.520 and you have nothing to lose. They refuse, They say, 0:19:35.600 --> 0:19:38.000 respond to subpoena. So I spent a couple of million 0:19:38.040 --> 0:19:43.080 dollars or more. Respond to the subpoena and uh. Basically 0:19:43.640 --> 0:19:48.119 they then and my lawyer, you know, my lawyer basically 0:19:48.119 --> 0:19:50.160 tells me, and you're ruining the man's business. We've studied 0:19:50.200 --> 0:19:53.840 the trading. There's no inside trading here. It's unfair. And 0:19:54.600 --> 0:19:57.520 they went down to Washington and basically the guy at 0:19:57.560 --> 0:20:00.439 the AC says, well, if Mr Coopman wants to settle, 0:20:00.560 --> 0:20:02.480 will take a five year bar from the industry, the 0:20:02.520 --> 0:20:06.440 mission of guilt, effective admission of guilt, and ten million 0:20:06.520 --> 0:20:09.040 I'll fine. And I told my lawyer's look, you tell 0:20:09.119 --> 0:20:13.120 him whatever somebody from Harvard and Yale Law school tells them. 0:20:13.800 --> 0:20:15.359 I grew up in the South Bronx and you can 0:20:15.359 --> 0:20:18.399 give them the Rockefellow salute for me if your viewers 0:20:18.440 --> 0:20:21.600 know what that is. But when Nelson Rockefellow spoke, but 0:20:21.760 --> 0:20:24.000 the inmates of Attica and they shoutowed him down, and 0:20:24.080 --> 0:20:26.440 he got frustrated and he gave him the index finger 0:20:28.320 --> 0:20:30.480 or the adjacent to thee in the middle of the 0:20:30.560 --> 0:20:35.880 middle of thing, whatever that's called. And um, five months later, 0:20:36.800 --> 0:20:40.879 after my business was substantially damaged, the SEC, with no 0:20:41.000 --> 0:20:46.560 new information, comes back and says, okay, no admission of guilt. 0:20:46.600 --> 0:20:49.800 No no, it's called no admit, no deny, no time out, 0:20:49.880 --> 0:20:54.119 and give us four point nine million dollars. As lawyers say, congratulations, 0:20:54.280 --> 0:20:57.240 you win, And I said, what did I win? We 0:20:57.320 --> 0:21:00.399 don't have losing party pays in America. The government has 0:21:00.440 --> 0:21:04.720 sovereign immunity. I can't sue them. Uh, And they basically 0:21:05.960 --> 0:21:09.359 are using taxpay money to fund their piccadillos um. And 0:21:09.480 --> 0:21:14.080 so my advocacy after I close up Omega and become 0:21:14.080 --> 0:21:16.120 a family office is we should have a losing party 0:21:16.200 --> 0:21:21.000 pays system because what happens, so it shouldn't be a speculative. 0:21:21.080 --> 0:21:24.400 Let's just throw it against the walls lawyers. Again, I'm 0:21:24.440 --> 0:21:26.639 attributing this to my lawyers, which are factual in a 0:21:26.720 --> 0:21:28.919 court of law. You know, I don't want any problems 0:21:28.960 --> 0:21:32.960 with the sec. My lawyers say, congratulations, you won. Okay. 0:21:33.200 --> 0:21:36.600 If we go to trial, we think nine percent probably 0:21:36.680 --> 0:21:39.720 you're gonna win, but of course you let me finish, 0:21:39.960 --> 0:21:43.400 not even probably gonna win. Okay. The temper cent chance 0:21:43.440 --> 0:21:45.040 you don't win has nothing to do with the case 0:21:45.680 --> 0:21:48.080 is because you're rich. It's because you run a hedge 0:21:48.119 --> 0:21:50.480 fund and because you're a former Goldman Sachs partner. The 0:21:50.600 --> 0:21:53.080 juries don't like guys like you. I said, but listen, 0:21:53.119 --> 0:21:55.760 I'm sending five minute kids to college in Newark, New Jersey. 0:21:56.359 --> 0:21:58.560 They don't care. They don't like guys like you. If 0:21:58.600 --> 0:22:01.959 we go to trial, the change you win, we estimated, 0:22:02.000 --> 0:22:04.800 they'll tie you up for two years with appeals, and 0:22:04.880 --> 0:22:07.080 of course you twenty million dollars give him the four 0:22:07.119 --> 0:22:09.320