Tuesday, February 28, 2017

What went wrong...

I assume that most, if not all of the people working in finance are familiar with the Herbalife saga and Bill Ackman's ill-suited short of the company. Now four years in the making, the protracted battle Pershing Square - Herbalife (HLF) is detailed nicely in the most recent New Yorker magazine article "Financiers fight over the American dream" by Sheelah Kolhatkar.

I don't wish to talk about HLF, rather I look at Ackman' moves that scream 'wrong' in general:

  • Going Big (10% AUM is huge) instead of tip-toeing.
  • Sheep-herding -As you learn that Ackman went after Herbalife following David Einhorn, you wonder if he didn't know Einhorn is an able poker player. If this was that good, why didn't Einhorn take a big bite to begin with.
  • Herbalife was long lived MLM, has been around for decades. Whether for the right or the wrong reasons, a business that has survived for a long time / many lawsuits /economic cycles is not "garbage" or can be easily dismissed. If HLF was an easy target it would have fallen by then.
  • If PSC has a L/S strategy that is in fact mainly L(Long) why commit so many resources to a short ? To add injury to the offense "Ackman pledged to donate his personal profits from the short to charity." Not in the [realDT] world, not in any world !
  • Ackman: "I am more interested in fighting evil." If you need a government investigation, do you really think the government is going to favor a hedgie [profiting from the fall of it] ?
  • Then came the CNBC Ackman-Icahn face-off that was of comic proportions, most of you watched it. I think Icahn was trying to irk Ackman.
  • A stock drawn into a public battle almost never goes down (unless it's an epic fraud something like Enron).
  • Another moral of this story is not to fall for a a business that easily morphs forms. MLM "adjust their business models to remain in the zone of legality." Ackman was vindicated as far as the government investigation that ensued and the settlement the company had to reach. Morally he won...yet lost the pocketbook score.

Friday, February 24, 2017

Decyphering Donald Trump's power style

Since I write a blog focused on decrypting power moves and attaining top career goals, I will focus today on the Man of the Hour, Trump.

People that are not business owners or that have not been responsible for their own revenue line have a poor understanding of what a CEO, or even a top salesman, are. CEOs, ostensibly the ones in the public eyes, let very little of their own true image show though in interviews and publications, because they worry about their public image. Politicians do too, with the exceptions of Donald Trump, which had to reveal himself to get elected.

People are so divided over Trump. It's hard to find anyone that's indifferent or not opinionated. His fiercest supporters call him "King", while his critics are no less shy in going to the other extreme. I think this division goes into institutions as well.

Well, what is ? What's the secret sauce that has taken millions of people by the storm ?

What Trump does he speaks to the emotions of the audience. Trump uses language designed to provoke and enrapture the listener. He is, in my opinion, often bare of facts, ignoring content but getting a deep emotional response that have his supporters raving and his detractors go mad. You can do anything but ignore him. Both his words and body language are a battery of emotion-laden imagery, a emotional rollercoaster. His outbursts are very carefully scripted. This comes from CEO and showbiz training. You can't very well argue with that -Watch the grab-and-jerk handshake. Trump has an emotional gravitational pull and unbridled frank language that along with his open hand gestures constitute his trademark. What the stunt doesn't tell you Trump functions like a good businessman, and number one law in business is that "All relationships are transactional."

Business community leaders have come out of WH meetings expressing being "charmed" by Trump. Reality check: negotiations are rarely done by the President, but by his aides. I would default to Frank Underwood on this one: "Shake with your right hand but hold a rock in your left."

Saturday, February 18, 2017


A friend texted me today excited that Showtime' Billions Season 2 is on this weekend.

I replied that I was privileged to have seen another show, days earlier, better than "Billions". The show I watched you bet it's going to cost billions. I don't think Bobby Axelrod is half that shitty.

There was this hyena with angry outbursts. She was crazy. She launched at the lions with a playbook I have seen before.

How to make billions (or cost somebody billions):

  1. Say you have a face "everybody" loves. Everybody loves you.
  2. And you love everybody. Nobody cares more for fanny than you do.
  3. "Say: It's not what you think it is" when in fact, it is exactly what you see.
  4. Say you can lowball anyone. Save them a penny while costing them a dollar.
  5. Push to the forefront low priority/unnecessary problems. Do them the favor and solve them. 

Tuesday, February 14, 2017

Fiercest battle of them all: the battle of the sexes

In Japan the tradition is for women to give gifts and chocolates to men on Valentines Day (USA Today). Men get a chance to reciprocate one month later, on White Day, a more recently established tradition.

How is a Wall Street veteran to weight in the battle of the sexes ? From a strategic point, men have lost that battle. Women have largely won, their sense of self-aggrandizement and self-entitlement is out-of-scale. A few bright guys in the manosphere brought to light the so called reality based "red pill" thinking, but that is not necessarily new.

Women initiate 70% of divorces, so who's in the driver seat ?

"Sixty per cent of the 2,000 women surveyed by London dating app The Inner Circle admitted refusing a second date with a guy - after finding he had a lower salary than them.- Express U.K.

"Love never dies of starvation, but often of indigestion". -Ninon de L'Enclos, French author

Let's have a look at dating and female manipulation with excerpts

Saturday, February 11, 2017

The most important interview question

What's the SINGLE most important interview question a job seeker needs to know the answer to ? The question the job seeker-you- should, without fault, know the answer to before getting the job ?

How much are you worth ?

That's the most important question in a job interview for the job seeker to answer. The question has nothing to do with how much money you have in the bank, how many assets, liabilities, debt and so worth. It's about your self-worth and putting a dollar sign on it. You could be dead broke and be worth a million dollars. Until you have an ingrained, authentic belief of what you're worth and resonate with people, you will not be getting "that" job, that dream offer, or that promotion. It is a very simple concept yet it escapes many.
Note: This question is loosely tied to what the offered pay is.

For an interviewer, the most important question to get answered to hire the best candidate is:

New Benchmarks for Private Equity Performance

This month Cambridge Associates (CA) introduced some nuanced Investment-Level Benchmark by vintage years, Gross/Net IRR quartiles and sector analysis. CA is also making a breakdown between "Gross IRRs" and "Net IRRs"looking for the lowest "fee drag".

CA is gauging the effect of fees on LP returns:
" fund-level fees cost private equity investors 616 basis points (bps) (on average), or about 0.2x MOIC over the life of a fund. Of course, the effect of carried interest can increase the fee drag significantly in better-performing funds and stronger vintage years. For example, for the five best-performing private equity vintages across 1986–2010, the average net to LP returns are a healthy 26.1% IRR and, as a result, the average gross-to-net spread is a hefty 959 bps per year. Expensive for sure, but a price most investors are quite happy to pay for such robust net returns."
Source: Cambridge Associate, A New Arrow in the Quiver: Investment-Level Benchmarks for Private Investment Performance Measurement

"Anytime you continually do something or even think about something the same way, you'll eventually stop growing" -Bill Eckstrom 

Monday, February 6, 2017

Getting A Job - older age, experienced candidates edition

I take a lot of pride in our file and rank folk that fight the good fight in finance and that have proven themselves. I hurt to see veterans getting booted and replaced with 24-year old paper boys with Harvard degrees for whom a bad day is a day fighting laryngitis.

If the trend of "Juniorization" of Wall Street continues, it can prove damaging to the institutions that allow it. Experienced workers (with more than 6 years of experience in the industry) are routinely let go and replaced with young talent because the "millennials are the greatest generation" and Ivy League schools churn too many of them. Meanwhile, older workers sit idly unable to get a job. How can they get a job when the HR firewall is a 25-year old genius. Millennial wisdom: If you're not on Snapchap, you don't exist. How many Instagram followers does a 40-year old suppose to have to "make the cut" ? "We look for evidence of your social media influence." an HR Director told a colleague of mine. You know, we need someone that's hungry and driven. We're looking for a data whiz, who "lives and breathes" data algorithms. My colleague: But...I got references ! Sorry, if those references are over 5 years old, they're out-of-date. Tough luck ! A Resume with over 10 years of work history gets dinged automatically.

From the "Juniorization of Wall Street" on Efinancialcareers we find who does that systematically:
"On Wall Street at least, the answer appears to be Goldman Sachs, closely followed by Deutsche Bank and Barclays." Goldman Sachs has 30% entry level (Analysts, 0-3 years) workers and ONLY 6% workers with 20 years or more.
Please note this is happening in other industries as well, outside of banking in NYC.

If Goldman Sachs keeps sucking the millenial tit, a number of things can happen:

-firms like Goldman will fall behind the sophistication to execute deals or trades, because the ability to execute is non-existent in newbies (aka excel monkeys).

-all other things being equal, older, more experienced workers produce higher quality product. Since most of the production at Goldman is entry level worker generated, it will have more mistakes and redundancy.

New York is a pretty straight forward place. Imagine what happens in Silicon Valley.  How many workers over the age of 50 does Facebook have, other than janitors, servicemen, and shuttle drivers ?

So what is an older and experienced worker to do in an environment where millennials are given preference in the workforce ?

(If you are an entry level or recent grad, read my Guide to Getting A Job -college edition)

1. First, set the record straight with your former employer. Were you forced to resign ? You may have a lawsuit going. Get a good lawyer, If you were replaced with a younger worker, document it, if you are over 40 years of age, you may have an age discrimination and wrongful discharge case. Is your U4 record clean ? You may also have a defamation lawsuit going.

2. Most people don't sue even if they were wronged for fear of ruining their name for future employment.

3. When looking for a new job, look the chicken shit HR millenial in the eye and tell her "Excuse me, Ms./Mr you got flushed cheeks ! What's happening ? Are you feeling well ? Should we call an ambulance for you ?

Real #3 now. Never go through HR. As an experienced hire or lateral, you should never go through HR. Your best bet is someone already working there and them pushing your Resume. HR resume piles are for deletion only.

4. A good idea is to have the Resume tailored for the position. If applying for an entry level (0-3 years) your Resume should not show more than three years of experience. If you have 10 years of experience, cut the last 7 out. They mean nothing. You get no extra points from the HR bums.

5. It's been said that getting a job is a lot like dating. It is a numbers game. There's no escaping that.

Thursday, February 2, 2017

Third Point Capital Q4 2016 Letter

This is a nice overview of where we are and maybe where we are heading. Remember what I often said: watch what your competitors are doing, but not necessary do what they do. Here are some stick points that resonated with me:

"Many people are bullish for rate sensitive financial stocks."

"creating a virtuous cycle by following a 1980s blueprint is highly unlikely."

"There is a similar Value-At-Risk coming from heathcare, technology, industrials and financials."

" if anything, banks have been over‐staffed and have over‐spent for years during a period of subdued activity."

"Credit–like equities–is starting from a relatively high point in valuation this year and we expect the rising rate backdrop to provide a headwind. Retail- probably distressed this year."

The letter, released Feb. 1st concludes:

"While America may or may not be made great again, there is no question that the rules are literally being rewritten and there is likewise no question that this process will be carried out in a flamboyant fashion. We do not plan to trade the tweets but we expect an increasing number of real and, even better, fake dislocations to create some extremely rewarding investing opportunities."


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