Tag Archives: interview

Don’t Miss Your Opportunity To Prepare For A Dollar Crisis (Video)

By Samuel Bryan Dr. Ron Paul hosted Peter Schiff on his Liberty Report this week. They discussed the failures of the Federal Reserve and how its policies have subsidized an irresponsible federal government. While the long-term effects are going to be disastrous for the U.S., Americans still have a chance to protect themselves from an inevitable currency crisis. If they prepare wisely, they may even profit from the coming collapse. “I do believe this window of opportunity will be rapidly closing. People need to act quickly to get out of U.S. dollars, to accumulate foreign assets in places like Switzerland or Singapore or New Zealand, to buy some gold , buy some mining stocks. Do that before the bottom really drops out of the dollar, when everybody else finally wakes up to the reality, instead of the fantasy world they’ve been living in…” Highlights from the interview: Peter: I’m surprised [this dollar crisis] hasn’t happened already. But I think it’s because the rest of the world has just been so brainwashed by the mainstream media, by the central bankers, by Wall Street, that they just haven’t figured out the problems that the Federal Reserve has created over the last seven years, with three rounds of quantitative easing and zero-percent interest rates. I think the U.S. economy is poised on a much bigger cliff than the one we went over in 2008. You and I know it was the Federal Reserve that laid the foundation for that crisis. Now, with the same policies – only worse, they’ve laid the foundation for a much greater crisis… I do believe this window of opportunity will be rapidly closing. People need to act quickly to get out of U.S. dollars, to accumulate foreign assets in places like Switzerland or Singapore or New Zealand, to buy some gold, buy some mining stocks. Do that before the bottom really drops out of the dollar, when everybody else finally wakes up to the reality, instead of the fantasy world they’ve been living in… Dr. Paul: It seems like there are so few of us out there emphasizing the Fed… What’s the ultimate solution to the Fed? Peter: You’re a medical doctor. When you have a cancer, there is no superficial treatment. You’ve got to remove that cancer or the patient is going to die… We need to get to the root cause of the problems. We need major surgery… The Federal Reserve is at the heart of it, because the Federal Reserve is enabling government. It’s subsidizing it. It’s making it possible to run all these deficits. It’s propping up Wall Street. It is basically giving us the novocaine to numb the pain, so we can let the disease get worse without actually doing anything about it… Dr. Paul: Some people approach me with the question, “What should we do? Keep our money here and work it out here? Or go overseas and do some investing overseas?” Some people will even say Europe is a shaky place… What’s your answer to that? Peter: Fortunately, the world is a big place. It’s not all just U.S. and Europe. We are underweight Europe too. I am cognizant of the problems in Europe. I just think ours are even bigger… Ours are being obscured by the fact that the dollar is still the world’s reserve currency, so we get to profit by everybody else’s mistakes for now. Everybody buys dollars when they’re worried about problems, even though our problems are bigger than the ones they’re worried about in Europe. Because the dollar is overpriced, we get to buy imports cheaper. We can keep these artificially low interest rates. We get to live beyond our means. There are countries you can invest in. In Europe, there’s Switzerland… They’re not doing everything perfect, but they’re in a much better shape than the Eurozone or the U.S. We invest in places like Singapore, countries like New Zealand. Nobody is doing it perfectly. You have to figure out which countries are making the fewest mistakes, which countries have the most economic freedom, the fewest regulations, the lowest taxes, the soundest fiscal policies, the less reckless central banks. No one’s on a gold standard – it’s all fiat money. But it’s a question of degree… To hedge ourselves against all countries, we buy gold… The average investor doesn’t have anything in gold, and I think that’s completely foolish. You have to be completely ignorant as to economic history to be so complacent as to have no money in gold… Dr. Paul: In Austrian economics we’re taught that it’s harder to predict the exact timing. You and I would be convinced that we don’t know exactly what the price of gold will be tomorrow or one week from now. We do know trends. We do know that low interest rates and artificially inflating the currency has consequences. Nevertheless, I’m sure you’re asked and you have to plan for it, and I’m asked this all the time – I want to know: when it’s going to happen. There are bubbles out there, but it’s different now… Do you ever get a little more specific? Peter: You always get in trouble when you try to put a time on it. More often than not, you overestimate the ability of everyone else to figure out the problem. I obviously know we’re a lot closer to the endgame than we were a few years ago. I think there’s a lot of signs that we’re getting closer, based on the fact the Fed has backed itself into this box… I tell people you got to be early. If you’re not going to prepare early, you’re not going to prepare at all. You’re not going to finesse it perfectly. So if you’re not too early, you’re too late. You can’t afford to be too late. Currency crises come quickly. The value is lost, and it can never be retrieved…

3 Of Seeking Alpha’s Best, Part II

Summary As a hedge fund manager, who do I think is worth following on SA? 3 (more) writers I take seriously and think you should too. This is the second in a continuing series. In Part I , I looked at three of Seeking Alpha’s best contributors. In this sequel, I offer three more worth following. They all happen to be hedge fund managers and friends of mine. Whitney Tilson Whitney Tilson founded and manages Kase Capital and he wrote The Art of Value Investing and More Mortgage Meltdown . He has been a valuable contributor to Seeking Alpha, especially on the short side. I want to highlight some of his short ideas that I found most compelling at the time. He has been one of the most consistent voices on the issue of World Acceptance (NASDAQ: WRLD ) since publishing his compelling investment thesis, World Acceptance: A Battleground Stock I’m Short . One of the next up was K12 (NYSE: LRN ). Shorting can be a painful waiting game, but he did not have to wait long on An Analysis Of K12 And Why It Is My Largest Short Position . For more on LRN, he also published this slide presentation. Whitney is probably best known on Seeking Alpha for the quality (and quantity) of his devastating work on Lumber Liquidators (NYSE: LL ), starting with My Analysis Of Lumber Liquidators’ Updated Guidance . Here was my reaction to the 60 Minutes episode on LL: Whitney, Well done and congratulations! It was a terrific and compelling piece. The LL founder was evasive and deceptive. I replayed his comments several times. He knew . This is an important and favorable development for short sellers. Shorting and exposing truth is not a conflict of interest – it is a confluence of interest. Ethics involves not lying/cheating/stealing; we cannot rely on the cheap substitute of listening only to people with nothing at stake. Modern investment management has often tried to rely on both thinking substitutes and ethics substitutes. Thinking substitutes such as diversification and volatility minimizing have fared poorly but have not yet been abandoned. Ethics substitutes (“listen to me because I promise that I have at no time and in no place ever even thought about doing with my own money what I now tell you to do with yours”) have fared just as badly but are still in daily use. Your 60 Minutes segment is a big step towards real morality in business and investing. Sure, you are invested in the outcome, but you are invested because your view – and the evidence you lay out – supports that outcome. That is a bigger deal than whatever ultimately happens to LL. Finally, it serves the interest of free enterprise and free trade to have markets self-policed. Pieces such as this can protect markets from inevitable calls to have endless central planning and control. The best way to counteract the self-interest of cheaters is with the interest of short-sellers. While the government may have the resources, it never seems to have the speed to act when it counts. You have both and did something about it. Chris DeMuth Jr. InterOil (NYSE: IOC ) is one that we have both followed for a long time. I wrote about our IOC short on my blog and in InterOil Increases Production… Whitney’s thinking was helpful to the short thesis, including his article Why There’s More Downside To Come For InterOil . When he wrote The Beginning Of The End Of The 3D Printing Bubble… …it was, in fact, the beginning of the end of the 3D printing bubble. Unilife (NASDAQ: UNIS ) has been a favorite topic of mine on my blog here and here , as well as in an article on my favorite pairs trade. While I do my own work, Whitney’s contribution to the topic further solidified my thinking on this company. Ben Axler Ben Axler founded Spruce Point Capital, a long/short hedge fund. He has exposed over $1.0 billion of alleged listed frauds on NASDAQ and the NYSE. Want a great short idea? Read about Caesarstone Sdot-Yam (NASDAQ: CSTE ) in Ben’s article: Caesarstone: A Counter To The Bull Thesis On Quartz Countertops Suggests 40-75% Downside . It has declined by over 20% since publication, but remains expensive and risky. Value investors, skeptics, and debunkers should follow him here on Seeking Alpha and here on Twitter. You can also learn more about his hedge fund and other investment ideas on Spruce Point’s site . He was kind enough to join us for our last biannual ideas dinner in New York City last month where he gave us a devastating preview of what would happen to CSTE. His update is available here: Downgrading Caesarstone On Concerns About Its Capital Expenditure Accounting And Management’s History At Tefron . Andrew Walker A portfolio manager at Rangeley Capital, Andrew is a long-time friend. We have collaborated on investment ideas that we’ve posted on Seeking Alpha as far back as our early work on ALJ Regional Holdings ( OTCPK:ALJJ ), which I wrote about here . If you have an hour to learn about investing in small caps, you should listen to this interview. Additionally, I describe our work together here . Next year, we will launch our new Special Opportunities strategy that will focus on small-cap equity opportunities including special situations. Andrew has been chosen as the portfolio manager to run that new endeavor. He is exactly who I always wanted to run such a strategy. I will follow the example of Charlie Munger, who says that: Berkshire (NYSE: BRK.A ) (NYSE: BRK.B ) is run with decentralization almost to the point of abdication. While I plan to do the same at Rangeley, this requires the perfect people to manage specific businesses. Happily, I have the right people. Meanwhile, if you would like to hear more of Andrew’s investment ideas, he and I will both be speaking at an upcoming conference focusing on microcap investing. Conclusion These are the types of people I rely upon. Charlie Munger said that: The highest form that civilization can reach is a seamless web of deserved trust – not much procedure, just totally reliable people correctly trusting one another. This is what my web of deserved trust looks like. Who is in yours? Who should I add to mine? I intend to keep this series going, so please let me know if there is anyone who writes on Seeking Alpha who should be included in a future edition. I am always in search for idea candidates for Rangeley Capital as well as candidates for both new submissions and new members for Sifting the World . Editor’s Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.

Greenblatt On Value Investing

Earlier this year Wharton released a video where Howard Marks interviewed Joel Greenblatt . It was a short interview packed with wisdom from the two value investors. Greenblatt first came across value investing after reading Ben Graham, which offered him a new perspective on investing. He defines value investing perfectly: Figure out what something is worth, pay a lot less, leaving a large margin of safety. He repeated this definition several times during the interview. Most people never get past the first part, but he offers two guarantees to those that do the work. “If they do good valuation work, the market will agree with them. I just don’t tell them when.” “In 90% of the cases for an individual stock, two or three years is enough for the market to recognize the value they see if they’ve done good work.” So good work and the conviction to wait a few years is required. This is why most people fail before they get started. Bad behavior creeps in. They expect too much, too soon, and quit before they get rewarded. The hardest part about investing is waiting. Indeed, Greenblatt’s students regularly tell him – but it was easier to make money when you started then it is today. He has two responses to this. The first is for special situations (Greenblatt literally wrote the book on special situations, titled You Can Be A Stock Market Genius – the worst title ever according to the author). These special situations are built for the small investor because most situations are too small to move the needle for large investors. People who get very good at analyzing businesses with special situations make a lot of money. Because of that, they get too big to play in that obscure area of the market, making room for new investors. His second response is toward technology and why value investing still works in an “efficient market”: Let’s go look at the most followed market in the world. That would be the United States. And let’s go look at the most followed stocks in the most followed market. That would be the S&P 500 stocks to a large extent…Take a look at the S&P 500. From 1996 to 2000, it doubled. From 2000 to 2002, it halved. From 2002 to 2007, it doubled. From 2007 to 2009, it halved. From 2009 till today, it’s basically tripled. That’s my way of saying people are still crazy. And that’s really an unfair thing to say because the S&P 500 is an average of 500 stocks. There’s huge dispersion going on within that average between stocks that are in favor, that people love emotionally, and stocks that people hate. So it’s really much worse than what I just described. There’s a huge dichotomy between things people like, people don’t, things that are out of favor…All this noise is going on within that average. That average is smoothing things . The S&P 500 offers a nice measure of “the market”. But we can’t forget it’s only a small subset of the total market, and mostly representative of large cap stocks. Being too reliant on the bigger picture, means you overlook everything not included in the index and miss what’s really going on in the market. Investing seems as though it’s harder today than the past, but investing was never easy. Investors’ behavior is the same as it ever was. If anything, technology has only made it easier to add a new layer of complexity to strategies and it definitely compounds the short-term mindset driving the market. If anything, that combination should make it easier for the most disciplined investors. Marks added this gem at the end to put it all into perspective: If you want to be exceptional as an investor you have to dare to be great…But to be great, you have to be different because if you think the same as everybody else you’ll take the same actions. If you take the same actions, you’ll have the same performance. You certainly can’t be exceptional if you follow the common course. So to be exceptional, you have to be different. You also have to dare to be wrong.