"In mid-December, we published a lengthy article on why Netflix was our largest bearish bet at the time. With the stock up nearly 25% since then, one might assume that we’d think it’s an even better short today, but in fact we have closed out our position because we are no longer confident that our investment thesis is correct." Whitney Tilson
Is it just remotely possible, that 50% of the people in the United States of America can't possibly afford to live in Bullish Projection America and that the growth that is priced into the markets is, perhaps, overly optimistic?
Despite new claims for unemployment putting up the largest weekly increase since September 2005...
The market keeps rolling because retail sales missed expectations, ratings agencies...
Whitney Tilson, the consummate "value investor" is the latest confirmation of what we have been claiming since the beginning of 2010: namely that with the Fed's intervention in capital markets, those who plan on making money using a gold old fashioned long-short, 130/30 portfolio distribution, value trading are in the bullseye of central planning. What has happened over the past year, when courtesy of the Chairman's endless market manipulation, is that the worst of the worst stocks, those traditionally shorted by all, the 5x beta crapshoots, were the ones the screamed higher, with State Street and BoNY making it impossible to hold shorts in anything, not to mention repo desks calling in borrow on a daily basis, and killed traditional fundamental analysis, where good companies are purchased, and bad ones are shorted. Congratulations Bernanke: with your reckless destruction of prudent capital allocation decisions, you will put every single "value investors" out of business. Which is why we feel for Whitney, who despite his seemingly constant appearance on CNBC at one point talking his book, returned just 10% net for his fund, compared to the S&P which did about 50% better. Hopefully the redemption requests leave something in their wake. On the other hand, like every single self-respecting asset manager, Tilson blamed the bulk of his underperformance on Netflix. Of course, he is absolutely right: the company is worth exactly nothing, but it will likely take a few years for the momo crew to figure it out. By then, all shorts in the name will be but a memory.
The market crept up again today like Jessica Simpson's pants or like Pete Townshend at...
The theater of the macabre goes one further following the just released response by Whitney Tilson to this morning's attempted rebuke of the short Netflix thesis by Reed Hasting. StreetInsider cites Tilson, who told the breaking news site the following: ""I'm glad Reed Hastings took the time to reply to some of the issues we raised. He made a number of good points and helped us -- and other investors -- understand him and his company better. I think a friendly, respectful debate like this is healthy and wish there was more of it." We are now holding our breath until we get Reed's response to this follow up response, to his original response, over just how overvalued his company is. Ironically, we don't really see what the reason for this theatrical acrimony is: after all it is pretty obvious that both Hastings (and the firm's CFO prior to his surprising resignation recently) and Tilson are on the same side of the trade.
In what is rapidly becoming a mockery of the investing process, after Netflix recently advised shorts to cover during their investor call, the firm's desperation has hit a new all time low. Today NFLX CEO, Reed Hasting, has responded directly to ongoing attacks by Whitney Tilson that his company is due for a major correction, by posting in financial website Seeking Alpha. Hastings' stunning conclusion: " Whitney lays out a series of potential issues for us: Our CFO’s
recent resignation; threats to the First Sale doctrine for DVDs;
Internet bandwidth costs potentially increasing; declining FCF
conversion; market saturation; weak streaming content; paying more for
streaming content; and increased competition hurting margins. He only
has to be right on one or two of these issues in 2011 for him to make
money on his short of Netflix. Odds are he is wrong on all of them, in my view. Let’s take them one at a time." And while Tilson has indeed suffered major losses so far on this short, we are very confident that his perseverance will pay off. As we noted previously, the major concern facing Netflix is not so much margins (which is a major concern), but cash flow generation. As such, we continue to view the probability of a follow on offering by the company to be very high, as the firm already issued high yield bonds recently and has very little dry powder left under the "indebtedness incurrence" basket. In the meantime, we can all enjoy the spectacle that is NFLX' defense of its ludicrous 100x+ fwd P/E position.
Oh shit, it is on again like white on rice, stink on shit, and Black on Scholes (and for you quants, just know that Brownian motion has more than one meaning), as a flurry of blue chip companies beat earnings guesses and pushed the market higher. With the 50 day moving average now rising above the 200 day moving average the S&P has hit the fabled Golden Cross (which is kind of like the Hindenburg Omen only less fiery, with fewer McClellan Oscillators, and the exact opposite), which means technicians are expecting to be showered with returns.
Our research on Interoil (IOC) leads us to believe there may be a lot of skeletons in its closet, making it a top choice for our next bearish position.
"Sometimes the cheapest situations are the ones that everyone agrees are cheap, but there's no catalyst. We think cheapness is its own catalyst and if you can be patient, sometimes for a year or two, you'll be rewarded. Our patience and the investor base we built that allows us to be patient is a big advantage."
Whitney Tilson was up 3.5% in July, surprisingly not beating the market's 7% rip, even with his well publicized BP position (cost basis of $29). Tilson's notable movers: "On the long side, winners of note included BP (up 33.2%), Goldman Sachs (14.9%), Resource America (13.0%), American Express (12.4%), AB InBev (10.5%), CIT (7.4%), and General Growth Properties (5.0%), slightly offset by Berkshire Hathaway (-2.5%). On the short side, we profited handsomely from VistaPrint (-30.4%) and Gentiva Health Services (-23.6%), but these gains were more than offset by losses on MBIA (up 54.7%) and InterOil (35.1%)." Additionally, Tilson shares an in depth thesis of his three favorite stocks: AB InBev, Microsoft and BP.
Investors are understandably scared of the sovereign debt crisis unfolding in Europe. Amid their angst, however, they are ignoring a more likely, and significantly larger, debt catastrophe that is about to hit the nation with the second-largest economy in the world — Japan. Two decades of stimulative, low-interest-rate fiscal policy have made Japan the most indebted nation in the developed world, and as new Prime Minister Naoto Kan recently said, in his first address to Parliament, that situation is not sustainable. Japan has little choice but to raise interest rates substantially, with dire consequences far beyond its shores.
BP has discovered the largest and most powerful well in history, and control of it may be outside existing technology. Less than 1% of the spilled oil is ending up on the beaches. Possibly 36 million barrels will end up in the sea, the same amount put there by German U-boats during WWII. The best historical analogy is not asbestos or tobacco, but Vioxx. Not for widows and orphans
Gulf Methane Levels 1 Million Times Above Normal Are Depleting Oxygen And Creating Marine Dead ZonesSubmitted by Tyler Durden on 06/24/2010 14:45 -0500
Reuters is so not getting the administration's latest round of taxpayer bail out funding when mainstream media comes knocking on Obama's door looking for handouts. The media company has shockingly decided to release some of the truth about the biosystematic genocide currently happening in the Gulf: "As much as 1 million times the normal level of methane gas has been found in some regions near the Gulf of Mexico oil spill, enough to potentially deplete oxygen and create a dead zone, U.S. scientists said on Tuesday. Texas A&M University oceanography professor John Kessler, just back from a 10-day research expedition near the BP Plc oil spill in the gulf, says methane gas levels in some areas are "astonishingly high." Luckily, America is gradually realizing that the entire food chain in the southeast is about to be turned around on its head, leading to a massive and unprecedented ecological disaster, which will certainly wipe out thousands of species and result in not only a surge in unemployment (that's a given) but outright loss of life (at statistically significant levels), and the anger is mounting. Perhaps the one good thing to come out of the worst ecological disaster in world history will be the sudden, and jarring awakening from the generational slumber for most of America, and a long overdue overhaul of a broken political and economic system.