Some of you may have an issue with what these guys think

[muck]

Strongly worded feedback on the direction of the economy, etc. from some guys who've (generally) done quite well as investors over the past few decades.

[Perchoutofwater]

Damn straight!

[dmarc117]

those guys are so negative!!!!!

[wiegie]

The thing I most agree with has to do with not forcing the banking system to come clean about their books. We can hope that they can earn their way out of their problems, but I'm not so sure. As I have said for months, if the financial system doesn't get fixed, we are in for a long and very slow recovery (with a decent risk of a substantial downturn in the overall economy). Right now I am just hoping for the best and that the banks really can earn their way out of their holes, because I think there is little political will to do anything other than keep propping the banks up. (Fixing the problem will probably be expensive and letting the banks fail could be disastrous.)

[Clubfoothead]

Makes me want to invest in gold for some reason.

[Avernus]

HIGH FIVEEE!!

 

It's kind of like trying to dig your way out of a hole, but with having no sense of direction...so you end up digging the wrong way....

[muck]

Additional detail from the conference where these comments were reported ... as written by someone at hedgefund.net ...

 

Hedge Fund Managers Agree on One Thing: Economy is Still Bad

To paraphrase a hoary joke: "What do you get when you put a bunch of hedge fund managers in a room and give them 15 minutes to prognosticate?"

 

Disagreement, except on one count: the overall economy still has a long way to go before it works its way out of the current economic crisis.

 

Perhaps that was what should have been expected with hedge fund industry leaders like Kynikos Assoc.'s Jim Chanos, Pershing Square Capital Management's Bill Ackman, Paul Singer of Elliot Assoc. and David Einhorn of Greenlight Capital, as well as a host of others who took to the podium Wednesday at the 14th Annual Ira Sohn investment research conference.

 

The event is held to raise money for organizations that treat pediatric cancer. It is dedicated to the memory of Ira Sohn who was a Wall Street trader before succumbing to cancer at age 29.

 

At last year's event, Einhorn made his now famous short recommendation for Lehman Bros., arguing that the firm was over-leveraged and was not correctly valuing its losses. Lehman publicly pooh-poohed Einhorn, only to declare bankruptcy that September.

 

This year didn't have a dramatic prediction on the Lehman level, although to listen to the money managers the overall U.S. economy was still in dire straits and not likely to be better any time soon.

 

Peter Schiff, president of Euro Pacific Capital, who was one of the hedge fund managers who correctly called the subprime mortgage crisis, had a lot to say about government intervention, none of it good.

 

Alan Greenspan, the former Federal Reserve chairman, for example, "was the bartender who got everyone liquored up," according to Schiff, with his low interest rates that allowed the average citizen to splurge on houses and consumer goods they couldn't afford and the banks to provide the means to do so.

 

Schiff takes an exceptionally dim view of the Obama administration's attempts to shore up failing companies, calling it nothing more than a Ponzi scheme.

 

"I don't know know why we have Bernie Madoff in jail," Schiff said. "We should appoint him to be Secretary of the Treasury."

 

Paul Singer of Elliott Associates more temperately said that if the government didn't follow established rules of law, it would make it difficult for businesses to assess risk. Singer was critical of both the Bush administration's $700 billion bailout and Obama's excoriation of Chrysler hedge fund bondholders, saying that arbitrary government action wouldn't hold up in the long run, "where the rule of law gives way to steam rolling, or creditors being publicly pilloried, or Congress being threatened to write a blank check."

 

Unsurprisingly, Einhorn who was short the financial sector, was also not happy with bank bailout programs. His solution is that the banks own up to the losses that have already occurred and convert debt to equity to achieve proper levels of capitalization.

 

Einhorn's big short this year is Moody's Investor Services because he believes that the ratings agencies are a model that is broken and should not be fixed.

 

"Ratings contribute to bubbles," during an upturn, Einhorn said, while instead of downgrades being properly applied to warn about a company's problems, they are usually the final nail in the coffin.

 

One short seller who had a rosier view of the current federal government was Chanos. He said that what really happened for the last 30 years since the "Age of Reagan" was increased government involvement without regulation. Consequently, for-profit social services had thrived without delivering the best product.

 

"Obama is different," Chanos said, "despite the bailouts, which he inherited from [former Treasury Secretary Hank] Paulson."

 

Ultimately, Chanos said, Obama's belief that universal healthcare and education should be considered rights and are important to his legacy as President, would mean fundamental changes in those areas.

 

For-profit educational companies and certain healthcare services that rely on government subsidies would be vulnerable, Chanos said.

 

His prime example was Lincare Holdings Inc. (NASDAQ: LNCR), a respiratory care provider to patients at home. That industry is rife with potential for Medicare abuse, Chanos said, and Lincare is a "poster child" for what is about to happen as the federal government strives to reel in costs in the healthcare industry.

 

Returning to that part of the healthcare industry that brought the hedge fund managers together to air their views, Einhorn said that his long-running short on Allied Capital (NYSE: ALD) had finally paid off and he could make good on a pledge to donate a portion of the profits from that trade to the Ira Sohn Conference Foundation.

 

With that the donation from Greenlight Capital and the more than $2 million raised from the conference, $5 million was the total raised for pediatric cancer care, according to Daniel Nir, co-chair of the conference and managing partner of Gracie Capital.

[wiegie]

Alan Greenspan, the former Federal Reserve chairman, for example, "was the bartender who got everyone liquored up," according to Schiff, with his low interest rates that allowed the average citizen to splurge on houses and consumer goods they couldn't afford and the banks to provide the means to do so.

Greenspan is definitely not blameless, however, there was also a HUGH international demand for securitized U.S. financial instruments. Investors would just lap up any sort of crap that got put before them.

 

Also, I agree with the hedge funds, I don't think we are out of the woods by any stretch of the imagination yet. Things are not getting bad as quite as fast of a rate as they had been, but overall, the situation is still tenuous.

 

I also think the ratings agencies are broken--however, I think there are potential ways to fix the problem instead of just scrapping the overall rating agencies (but that doesn't mean I think they will be as profitable in the future as they used to be).

[TimC]

Why would anyone want to still invest in Corporations after seeing the house of cards and lies they are built on?

[dmarc117]

Why would anyone want to still invest in Corporations after seeing the house of cards and lies they are built on?

 

 

and the fact that this admin will screw bondholders in bankruptcy.

[Perchoutofwater]

and the fact that this admin will screw bondholders in bankruptcy.

 

No kidding, GM restructuring:

 

Bond holders owed $27 Billion get 10% of the company

UAW owed $20 Billion gets 17.5% of the company

US owed $19.4Billion gets 72.5% of the company

 

This really makes me want to invest in bonds. For some reason I'm also having a hard time believing the administration when they say they don't want be in the car business.

[Sgt Ryan]

Forgive me, but wouldnt it make more sense to invest that money in the people of the US, than companies whose bad decisions caused the problem in the first place.

 

How much would each American have got, if every dollar sent to these companies thus far went to the tax payers.

 

Wouldnt American spending this money cause the economy to thrive again.

 

Wouldnt more money in peoples pocket, gven them money to put in banks, because of FDIC Insurance, which would actually help the banks.

Wouldnt more money in peoples pocket, give them money to put down on a new home, thus construction would crank up again.

Wouldnt more money in peoples pocket, give them money to buy new cars, thus the Govt wouldnt have to bail out the auto makers

Wouldnt more money in peoples pocket, cause more spending which could lead to more jobs.

 

 

Wouldnt the Govt be better off investing in its people, than its corporations who are proving failure at every turn.

 

Saying no to out sourcing over seas, or your company is taxed at 70%.

 

 

Hell wouldnt crime go down, if more people had money to spend, and an opportunity to better themselves.

 

 

Sometimes the right thing makes too much sense, yet Govt continues to follow the corportaions which continue to do the wrong thing.

Edited May 29, 2009 by Sgt Ryan

[Retrograde assault]

Forgive me, but wouldnt it make more sense to invest that money in the people of the US, than companies whose bad decisions caused the problem in the first place.

 

How much would each American have got, if every dollar sent to these companies thus far went to the tax payers.

 

Wouldnt American spending this money cause the economy to thrive again.

 

Wouldnt more money in peoples pocket, gven them money to put in banks, because of FDIC Insurance, which would actually help the banks.

Wouldnt more money in peoples pocket, give them money to put down on a new home, thus construction would crank up again.

Wouldnt more money in peoples pocket, give them money to buy new cars, thus the Govt wouldnt have to bail out the auto makers

Wouldnt more money in peoples pocket, cause more spending which could lead to more jobs.

 

 

Wouldnt the Govt be better off investing in its people, than its corporations who are proving failure at every turn.

 

Saying no to out sourcing over seas, or your company is taxed at 70%.

 

 

Hell wouldnt crime go down, if more people had money to spend, and an opportunity to better themselves.

 

 

Sometimes the right thing makes too much sense, yet Govt continues to follow the corportaions which continue to do the wrong thing.

 

 

Move along son, the government knows whats best for the people.

[Clubfoothead]

Move along son, the government knows whats best for the people.

 

I'm supposed to believe billionaires and their millionaire clinets better know what's best for people?

[wiegie]

Forgive me, but wouldnt it make more sense to invest that money in the people of the US, than companies whose bad decisions caused the problem in the first place.

 

How much would each American have got, if every dollar sent to these companies thus far went to the tax payers.

 

Wouldnt American spending this money cause the economy to thrive again.

probably not--the multiplier on these tax credits is likely pretty low right now

[Choppy]

Forgive me, but wouldnt it make more sense to invest that money in the people of the US, than companies whose bad decisions caused the problem in the first place.

 

How much would each American have got, if every dollar sent to these companies thus far went to the tax payers.

 

Wouldnt American spending this money cause the economy to thrive again.

 

Wouldnt more money in peoples pocket, gven them money to put in banks, because of FDIC Insurance, which would actually help the banks.

Wouldnt more money in peoples pocket, give them money to put down on a new home, thus construction would crank up again.

Wouldnt more money in peoples pocket, give them money to buy new cars, thus the Govt wouldnt have to bail out the auto makers

Wouldnt more money in peoples pocket, cause more spending which could lead to more jobs.

 

 

Wouldnt the Govt be better off investing in its people, than its corporations who are proving failure at every turn.

 

Saying no to out sourcing over seas, or your company is taxed at 70%.

 

I got your back on this one Sarge.

 

Hell wouldnt crime go down, if more people had money to spend, and an opportunity to better themselves.

 

 

Sometimes the right thing makes too much sense, yet Govt continues to follow the corportaions which continue to do the wrong thing.

[i_am_the_swammi]

No kidding, GM restructuring:

 

Bond holders owed $27 Billion get 10% of the company

UAW owed $20 Billion gets 17.5% of the company

US owed $19.4Billion gets 72.5% of the company

 

This really makes me want to invest in bonds. For some reason I'm also having a hard time believing the administration when they say they don't want be in the car business.

 

I agree the bondholders look like they are getting a raw deal, but the white night often gets the best deal.

 

For instance, we are under contract to buy a hotel in NYC for $238M. It was purchased by the current owner in 2007 for $415M. He put 30% equity into the deal ($121M), and the bank note is for $293M. Owner (PE firm in LA) was foreclosed upon in February, and the bank is taking a write down of $55M. this scenario will happen 1000x over in hte next 6-12 months, crippling the commerical real estate and banking markets as these write-downs hit their balance sheets.

 

Everyone (PE firm, its invetors, bank & its investors) loses except for us.

 

Apply this scenario tloosely to GM, and you get the idea. And make no mistake, the administration does not want to be in the car business. They want and need GM to stay afloat, and as an added benefit, they (we) should get a solid return on their investment if the restructuring pans out.

[i_am_the_swammi]

Forgive me, but wouldnt it make more sense to invest that money in the people of the US, than companies whose bad decisions caused the problem in the first place.

 

How much would each American have got, if every dollar sent to these companies thus far went to the tax payers.

 

Wouldnt American spending this money cause the economy to thrive again.

 

Wouldnt more money in peoples pocket, gven them money to put in banks, because of FDIC Insurance, which would actually help the banks.

Wouldnt more money in peoples pocket, give them money to put down on a new home, thus construction would crank up again.

Wouldnt more money in peoples pocket, give them money to buy new cars, thus the Govt wouldnt have to bail out the auto makers

Wouldnt more money in peoples pocket, cause more spending which could lead to more jobs.

 

 

Wouldnt the Govt be better off investing in its people, than its corporations who are proving failure at every turn.

the part I find amusing is that most people don't realize the money that the government is providing these companies, inevitably, IS going back into our economy...you just want the money to go direcdtly to you, rather than be used to potentially garner two benefits: save a company that is vital to our economic health, AND provide economic stimulus/jobs to our nation.

 

That level-headed Hannity had a comical show on last night...the "Top 100 wastes of government money"...one of them was a $390M restoration of a museum in NYC. Does he think that the money is going to be placed into the toilet? Does he not understand that the money will be used to fund 1000's of jobs, millions of dollars in materiels that will directly benefit the economy? Almost all of his examples were in this vain...pathetic.

 

Selfishly wanting the money to go directly into your pocket is poor thinking for deploying moneies that can serve multiple benefits.

[Clubfoothead]

Is what these guys are saying news or a commercial for their financial services?

 

Einhorn seems like one smart dude but that doesn't mean that he has the nation's best interest in mind. If he bets right, he can make money either way the economy goes. Seems to me, he's rightfully trying to capitalize on the Lehman Brothers success. I'm impressed by his financial acumen. He's betting on the economy not improving and selling Ford debt post UAW concessions and gold. So what's best for Einhorn and a Frod employee aren't the same.

 

At what point does his predictions become a self-fufilling prophecy? Seems to me there's tons of money to be made in making America energy-independent utilizing renewable energy. That would stimulate the economy and make rich people money but if the rich people are putting all their money in gold then the free market is failing to move our nation in the right direction on that front. I consider energy-independence a matter of national security. So if the economy is not healthy enough for the rich people to pull us in the right direction by their desire to make money, then someone needs to and that only leaves on entity left.

 

If Einhorn were arguing that the $700 billion could be better spent elsewhere that'd be one thing. But we all know he believes in a minimalist government that stays out of his way while he makes money for himself and his clients. If my portfolio consisted of more than my 401k, the girls' college fund and a phototron, I'd be sending my money his way.

 

I just don't see a link between making a lot of money and knowing what's best for the country. That doesn't make Einhron wrong, either, but seeing as he is selling financial services, I'll take his opinions under advisement.

[muck]

Is what these guys are saying news or a commercial for their financial services?

 

Einhorn seems like one smart dude but that doesn't mean that he has the nation's best interest in mind. If he bets right, he can make money either way the economy goes. Seems to me, he's rightfully trying to capitalize on the Lehman Brothers success. I'm impressed by his financial acumen. He's betting on the economy not improving and selling Ford debt post UAW concessions and gold. So what's best for Einhorn and a Frod employee aren't the same.

 

Einhorn has a great track-record over the last 15-20years (possibly longer); I want to say that his annualized return over that period of time is in excess of 20% / yr (after fees and expenses).

 

So, to me, that would indicate he has a more-than-decent eye for seeing something that is broken and "betting" appropriately. Also, this would indicate that he has a good eye for opportunities and "betting" appropriately. This would be a key thing to look for in policy-makers, too, I would think...that way (hopefully) things wouldn't get too out of control (either good or bad).

 

At what point does his predictions become a self-fufilling prophecy?

 

 

The whole "self-fulfilling" thing is a big part of stuff like Warren Buffett's and Bill Gross's world (BG runs the biggest bond fund around at PIMCO, a subsidiary of Allianz).

 

People often refer to this as "talking their book" ... i.e., telling the world what they own because other people will want to coat-tail and push the prices in the direction they'd like for them to go, improving the probability that they end up being right.

 

Seems to me there's tons of money to be made in making America energy-independent utilizing renewable energy. That would stimulate the economy and make rich people money but if the rich people are putting all their money in gold then the free market is failing to move our nation in the right direction on that front. I consider energy-independence a matter of national security. So if the economy is not healthy enough for the rich people to pull us in the right direction by their desire to make money, then someone needs to and that only leaves on entity left.

 

I'm not sure that renewable energy is a gold-mine financially.

 

As a quick FYI, the cumulative P/L for people investing in airplanes and automobiles is approximately $0 since the dawning of those two inventions. Yes, they changed the world ... but, that doesn't make them good financial investments. Investing in things that can benefit from these two things, however, can be a great investment though.

 

If Einhorn were arguing that the $700 billion could be better spent elsewhere that'd be one thing. But we all know he believes in a minimalist government that stays out of his way while he makes money for himself and his clients. If my portfolio consisted of more than my 401k, the girls' college fund and a phototron, I'd be sending my money his way.

 

I just don't see a link between making a lot of money and knowing what's best for the country. That doesn't make Einhron wrong, either, but seeing as he is selling financial services, I'll take his opinions under advisement.

 

I'm not sure we can say definitively that Einhorn has libertarian views as to the necessary size/scope of the Federal Government. Or, at least I cannot. Maybe you can.

 

Einhorn gets paid to be right. He gets paid well because he's right (i) quite often and (ii) in large ways. As I said above, I believe these are desirable traits for anyone in a policy-making role.

[polksalet]

I don't even read this crap anymore. I've come to realize the no one has a very good handle on this stuff. I'll keep putting my 401k's into index funds ad spending the bulk of my time and money developing land. That being said it is comforting in a masochistic way to know that the denizens of the tailgate have as good of a handle on the economy as Geitner, Obama, and Buffet.

Edited May 30, 2009 by polksalet

[Retrograde assault]

I'm supposed to believe billionaires and their millionaire clinets better know what's best for people?

 

 

The only people that know whats best for the people is the people, but the private business sector will do a better job of creating jobs and opportunity than our old uncle sam ever will. Uncle Sam is a monetary black hole.

[Retrograde assault]

I'm supposed to believe billionaires and their millionaire clinets better know what's best for people?

 

 

The only people that know whats best for the people is the people, but the private business sector will do a better job of creating jobs and opportunity than our old uncle sam ever will. Uncle Sam is a monetary black hole.

[westvirginia]

I'm supposed to believe billionaires and their millionaire clinets better know what's best for people?

 

As opposed to listening to folks who've never actually held gainful employment in their entire lives? I mean, if you don't like working for rich folks you can always go ask a poor person for a job.

[Perchoutofwater]

I think we are in store for a bunch of trickle up poverty if we continue down the present path.