Greetings from Las Vegas, where I’m attending the annual hedge-fund conference run by investing firm Skybridge Capital, known as the SALT Conference. Here are a few of the notable moments from Day 2 of the conference:
UPDATE, 10:45 pm ET, May 17, 2017
Billionaire investor Bill Ackman of Pershing Square Capital Management riffed on how Donald Trump can save his presidency. Julia LaRoche captured it nicely.
Ackman also discussed his big investment in Chipotle, saying he started buying when the stock was around $380. It’s now at about $485. Why does he like Chipotle? “It’s the highest quality food you can buy at the lowest price.” He eats there sometimes. Ackman thinks the recently troubled fresh casual chain has lots of room to grow, because it still doesn’t offer breakfast or deserts or late hours, unlike, say, McDonald’s, which is trying to everything to eke out growth.
Finally, Ackman discussed his failed investment in Valeant Pharmaceuticals, which cost him a reported $4 billion or so, most likely his biggest loss ever. “Our biggest mistake on Valeant was that we were incredibly dependent on management,” he said. “Selling Valeant [at a huge loss] was one of the best things we did. It got the organization totally focused on what was core to us.” The result, he said, was one big trade Pershing Square is executing now, and might publicize in a couple of months, and another big move it’s getting ready to execute.
UPDATE, 5:15 pm ET, May 18, 2017
Famed investor Jim Chanos, president of Kynikos Associates, unloaded on two of his favorite targets: Tesla and Donald Trump.
Chanos, who is short Tesla, criticized Wall Street analysts who base high valuations of the stock on earnings projections for 2020 or 2025, even as the company bleeds money today. “In a low interest rate environment, when it’s a company with a visionary CEO, investors are willing to forget about current losses,” Chanos told reporters on the sidelines of the SALT conference. “People are valuing this on 2025 earnings while the analysts can’t predict what’s going to happen next quarter.”
Tesla shares have soared since last fall, in part because of anticipation that the firm’s forthcoming Model 3 will be a hit. But Chanos isn’t buying it. “It’s a capital-intensive business with negative cash flow, huge debts, and a management team with a cavalier regard for the truth,” he said. “If you wouldn’t be short this, what would you be short?”
Chanos, a Democrat, also took aim at President Trump, pointing out that Richard Nixon’s approval ratings were higher on the day he resigned than Trump’s are now. “This administration is dysfunctional,” he said. “I I think markets are hoping for VP Pence being president.”
Chanos, who lectures at the Yale School of Management, said he’s teaching a course on the history of financial market fraud that involves a segment on the hotels and casinos Trump has owned, including the four casino bankruptcies Trump has been involved with. Asked if he feels Trump’s business dealings were fraudulent or just unfortunate, Chanos said, “the course focuses on fraud. If you look at SEC filings, he got caught a few times manipulating his earnings. His operating acumen was not very good.”
Earlier, Chanos gave a presentation on a new strategy to short Express Scripts and Malinckrodt on account of high drug prices, which Julia LaRoche wrote about.
ORIGINAL POST, 12:30 pm ET, May 18, 2017
John Brennan, former CIA Director, said that like President Trump, he was troubled by all the leaks coming from intelligence sources in Washington. “The real damage to US national security is the leaks,” he said. I wrote a separate story about this, which you can read here.
Brennan also said one of his biggest regrets as CIA Director under President Obama, from 2013 to 2017, was the failure to halt the Syrian Civil War: “One of my biggest regrets is seeing a beautiful country like Syria undergo many years of destruction and genocide.”
He seems to believe a lot more turmoil lies ahead in the Middle East: “The Arab spring was just a preview of what will be coming in some years in some countries.”
And he seems to hope for a coup in North Korea, with senior officials there concluding at some point that they must get rid of dictator Kim Jong Un on their own: “Maybe there are people around Kim Jong Un who are going to say enough is enough.”
There was a discussion on politics involving Republicans Karl Rove and David Bossie, and Democrats Donna Brazile and Josh Earnest. A lot of this was backward-looking, including discussion about the 2016 election, but there were a couple of interesting comments.
Karl Rove said that Trump’s presidency “is not over. He’s got troubles. Big troubles. The appointment of Bob Mueller is good for President Trump. He’s not gonna go in there and say I’ve gotta have a scalp. At the end of it the American people will have confidence in the outcome.”
Donna Brazile, former chair of the Democratic National Committee, said “the Democratic party is in the wilderness. We cannot survive simply by being an anti-Trump party.”
David Rubenstein, co-founder and co-CEO of private-equity firm The Carlyle Group, gave a primer on what kind of legislation is likely to come out of the Trump administration. Rubenstein is an old Washington hand who worked in the Carter administration before founding Carlyle, and interacts regularly with dozens of members of Congress. His message: Don’t expect much. “If you’re in the investment world and looking for relief from Congress, you should look elsewhere,” he said.
Rubenstein thinks at best, the corporate tax rate might come down from 35% to 25%. There could be some small tax cuts, without offsetting revenue gains, which means the deficit will go up. The reason: “Congress is as divided today as it was under President Obama.”
Rubenstein also encouraged the wealthy financiers in the audience to be generous with their money and do more to give back to society. “If you can afford to come here, you are no doubt in the one-tenth of 1%,” he said. “I’ve enjoyed making a lot of money, but I’ve enjoyed giving it away more.”
Investor Dan Loeb of Third Point Capital spent 30 minutes on stage, sharing his thoughts on the economy and the investing climate. But it was off-the-record, even though several hundred people were in attendance.
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Read more from the SALT Conference:
Rick Newman is the author of four books, including Rebounders: How Winners Pivot from Setback to Success. Follow him on Twitter: @rickjnewman.