Even More on Einhorn

Does the media move in bunches on topics? Following up on recent posts on Einhorn, here is another profile of the hedge fund manager from yesterday's WSJ.

More from Einhorn - Speech at Grant's Interest Rate Observer Conference is Generating Buzz

Ben Stein had a column over the weekend in the NYTimes that asked the question: what is to blame for the meltdown of our financial system and our weakening economy? Stein answers that we may not have to look much further than David Einhorn's speech at a conference for Grant's Interest Rate Observer earlier this month. Einhorn lays out a pretty compelling argument for why many of the failing (or failed) firms were able to take on excessive amounts of leverage while hiding the riskiness of some of their investments from regulators.

Here is Einhorn's speech.

"Best Operated Airline," Continental, Says it No Longer Covets United

The need for consolidation in the airline industry have been outweighed by the increasing problems at United, as Continental announced today that it was backing out of its intended merger with UAL.

"Continental decided to drop the discussions after UAL announced worse-than-expected earnings, which sent shares falling last week. On Tuesday, United said it lost $537 million during the first quarter, on sharply higher costs for jet fuel. The airline, which spent more than three years under bankruptcy protection earlier this decade, said it would cut flights and eliminate a further 1,000 jobs."

David Einhorn's New Book: Fooling Some of the People All of the Time

The WSJ has reviewed David Einhorn's new book: Fooling Some of the People All of the Time

Einhorn's book covers his experience trying to short Allied Capital's stock, and the frustrations he had trying to bring to light the accounting gimmicks that he saw within the Company.

What gives the book a special value, beyond its backstage look at the life of an elite trader, is its insight into two important but usually neglected aspects of the investment business. First, Mr. Einhorn's carefully documented battles with Allied Capital say a lot about the temperament needed to be a great investor. Tenacity is vital. So is patience. And so, too, is an ability to keep a sane perspective.

As Mr. Einhorn's own firm prospered, he could have jammed far more money into his Allied Capital short position, determined to prevail by brute force. He didn't. He kept 3% of assets in that position but invested most of his money in other ideas that worked out better. Such discipline, we come to realize, is what distinguishes the wisest long-term investors from obstinate short-timers who veer between triumph and ruin.

The book also shows why good accounting really matters. It is easy to mock finicky people with green eyeshades who worry about financial footnotes. But reliable numbers are essential if capital is to be allocated properly in our economy. Otherwise good projects starve and foolish ones burn up money.

Mr. Einhorn is a hard-liner, wanting strict accounting standards that punish missteps quickly. Allied Capital, to judge by his version of events, liked living in a more lenient world, where there was plenty of time to patch up problems quietly. Regulators were comfortable with an easy-credit philosophy, too, to a degree that startled Mr. Einhorn.

In the current financial shakeout, people like Mr. Einhorn are entitled to say: "I told you so." It's to his credit that, telling the Allied story, he is often angry but never smug.

Last Lecture Buzz Continues with Pausch's Book

Many of us probably remember the buzz regarding CMU professor Randy Pausch and his "last lecture" that was given to the CMU community several months ago. Pausch, who is terminally ill with cancer, spoke about following your childhood dreams and the video became viral almost instantly. The WSJ seems to have started the buzz with its September 2007 article which highlighted the "Last Lecture" that Pausch gave.

Now the buzz is around Pausch's book, which has been hard to get a copy of.

Brookfield Asset Management CEO Speech - Bruce Flatt: Investing in Turbulent Times

Bruce Flatt, the CEO of Brookfield Asset Management, spoke recently about investing in the current environment. Brookfield invests in infrastructure assets (real estate, power plants, timber, etc).

Check out the video interview here.

Brookfield Asset Management stock performance

Flatt's Thesis (courtesy of Gurufocus):
1. never deviate from the following 7 principles.
2. execution. Success depends on ability to execute, is what separates BAM from competition. Remember this principle and put it into practice every day.
3. build with quality people. Business and life, do things you enjoy. Finding good people, team players most important thing, greatest asset of company. Brilliant but non team players can be divisive. BAM believes they have edge because of quality people.
4. invest against the common trend.
5. don't be moved by bad news or good news.
6. prudently finance your assets. Many people get #7 and #8 right (buy great quality asset), but then mess up by mismanaging finance and getting caught by liquidity crisis, overleveraging, etc. Best assets are worthless if you can't hold it to see another day.
7. invest for long term – buy under assumption we will own it forever. Never try to catch latest fad. Tax benefits, etc.
8. we like great assets, are willing to pay more for quality and location, and great fundamentals. We've paid more, but in premium locations like NY, sydney, london, etc. Irreplaceable assets and locations. Rarely buy cheap land where barrier of entry is low, easy to duplicate

David Winters: Barron's Interview

Last week's issue of Barron's had a great interview with fund manager David Winters. See the reprint here (no login required).

Barron's Interview with Steve Tananbaum of GoldenTree Asset Management

Barron's had a good interview with GoldenTree Asset Management fund manager Steve Tananbaum in this weekend's issue.

Tananbaum laid out a bullish thesis on the bank loan market vis-a-vis the high yield bond market.

See the article here.

Martin Whitman and Richard Haydon Discuss the Markets at Syracuse Conference (Video)

Famed investors Martin Whitman of Third Avenue and Richard Haydon of Neuberger Berman spoke at Syracuse's annual Breakfast Panel and the video of the interview is available on the web here.

Warren Buffett on the Market, the Economy, etc.

Fortune Magazine had a decent interview with Warren Buffett that stemmed from his recent meeting with over 100 Wharton students in his Berkshire offices.

Private Equity's Style Drift

The Prince of Wall Blog's had an interesting post on the state of the private equity industry. As the post points out, the typical private equity fund has diversified its lines of business, which may not necessarily be great for PE investors.

As a follow-up, the Economist has published a similar article on the structural shift in private equity.

Tonight: George Soros Interview on PBS

For those that are free (or have a DVR), Charlie Rose is interviewing George Soros on PBS tonight. In Chicagoland, it's on PBS WCCY (channel 20 on RCN). If you miss the interview, go here tomorrow to watch the full thing.

More from Kedrosky: Pete Peterson Interview

More from Kedrosky's Blog - Good interview from Charlie Rose's show with Blackstone CEO Pete Peterson.

Kedrosky questions if online journal n+1's interview with an anonymous hedge fund manager is genuine

Paul Kedrosky had a post recently that questioned if n+1's interview series with an anonymous hedge fund manager is an interview with an actual hedge fund manager.

Here is the n+1 article in question.

April Fools Hoax Part of Rally?

Alan Abelson's column yesterday brought to light an extremely bullish column written by uber-bear Doug Kass. Of course the whole thing was an April Fool's joke, and yet, as Barry Ritholtz mentioned in his blog, several "elite" (Bloomberg, WSJ) members of the financial media took the article for its actual contents. The market rallied on the day, and while correlation might not imply causality (there was also other "bullish" news, including the fact that Lehman and UBS are raising capital), it would be hard to say that Kass' column wasn't instrumental in part of the bump.

One line from Kass' column: While I initially expected a 5% to 10% decline in the S&P 500 this year, my new year-end S&P target is 1,666, for a gain of 26% from current levels. I might be low.

FT Sits Down with Naseem Nicholas Taleb

The FT had a nice interview with Black Swan and Fooled by Randomness author Naseem Nicholas Taleb.

Soros: False ideology at the heart of the financial crisis

It's been a while since I've updated the blog, but expect more updates going forward (7-10 links a week). I had been busy with wedding planning and am now catching up on reading, so hopefully this weekend you'll start seeing a deluge of posts.

George Soros had an interesting column in today's Financial Times. See the article here.

Essentially Soros argues that the Fed (and other market-related government organizations) have held a belief that the markets will naturally self correct for things like asset bubbles, liquidity issues, etc. While these government orgs may believe that the market has a way of playing itself out, it is interesting then that the Fed has been intervening to prevent perceived market crises. This intervention (and perhaps the belief from market participants that somebody will intervene if the market goes south) may be fueling the excessive credit environment and moral hazards that brought us to where we are today.