Driving Through the Gap Between Buffett and Ackman: Opening LineC. Thompson
The question that’s always nagged at us about activist investing emerges today in a story by Peggy Collins and Noah Buhayar, who got Bill Ackman and Carl Icahn to respond to the disdain Warren Buffett and Charles Munger expressed over the weekend for their style of play: Are these activist investors really in it for the good of shareholders or are they in it for their own gains?
When you’re the type who schemes to seize control of a company, secretly acquires an influential stake in it, then announces in a surprise that you’re delivering the company into the hands of its aggressors from that inside position -- basically, you’re a Trojan horse -- that doesn’t really have the ring of selflessness to it.
Activist investing: “I don’t think it’s good for America,” Munger said during the Q&A session of the annual meeting in Nebraska, with Buffett noting activist investing “scares the hell out” of management.
Ackman and Icahn tell Collins and Buhayar they don’t want their practices lumped in with the type Buffett and Munger discussed. Guys, you’re two of the world’s people who represent activist investing the most. Whom did you think those old guys on the stage in Omaha were referring to? Ackman and Icahn agree, in principle at least, with the criticisms Buffett and Munger have for their ways, yet they pretty much do it anyway.
Take Buffett’s comments about Bank of America’s stress-test screw-up: “That error they made does not bother me,” Buffett said. “You do the best you can. It doesn’t change my feeling about Bank of America or its management.”
This does not sound like either Ackman or Icahn. It sounds like someone who is patient, like someone who thinks creating value in a company doesn’t happen in “four, five, six years or more,” the time span Ackman offered as proof of his commitment to the companies he, well, raids.
Which is why when Buffett speaks of “Phase Two” in Berkshire Hathaway’s approach to growth -- making some big acquisitions (perhaps with help again from 3G Capital) instead of stock-picking -- you get the sense there will be a measured approach with civil tones, a lot of homework resulting in companies being happily acquired.
Don’t suppose Buffett’s interested in a drug company or two.
The European Commission’s spring economic forecast wasn’t quite what Carney wanted to hear. GDP will grow by 1.7 percent in 2015, compared with a February prediction of 1.8 percent, and inflation will be 0.8 percent this year and 1.2 percent in 2015, both lower than previously forecast and below the ECB’s target of just below 2 percent.
Most markets in Japan and South Korea are closed today and tomorrow, as they are today in the U.K., because Cinco de Mayo is big in these countries. A holiday built around limes? In England? You kidding?
They’ll miss the PMI report at 9:45 a.m. and the ISM services index at 10 a.m. New York time in the U.S. today, when earnings reports will come from Pfizer and AIG, among a handful of others. Earnings momentum picks up again tomorrow.
The roster of speakers at this year’s Sohn Investment Conference, held today at Lincoln Center in New York, is packed with names you want to hear. Joel Greenblatt, Ackman, Jeff Gundlach, Paul Tudor Jones and more. Most of them will be speaking to Bloomberg Television after their appearances, so don’t touch that dial.
What’s the price of keeping the world in order? We’ll find out. The sanctions against Russia, like its wealth, will have to go through a handful of European countries, who have, shall we say, varying degrees of motivation to commit fully to what is, right now, the only option for reining in Russia that doesn’t involve something a lot more grim.
Because after this weekend, you could reasonably say that the fighting has begun. They may be only limited skirmishes for the moment, but how long is that going to be the case, when the bear has the U.S. equivalent of a full corps ready to enter its former soviet state.
Now countries like the Netherlands and Luxembourg, Switzerland and Ireland, conduits to low-tax or no-tax havens within and without their own borders, are in a pinch, having lured Russian assets into their safekeeping only to find the U.S. and EU leaning on them. Except for Switzerland, that is: They won’t accept any new business or any transfers from individuals on the sanctions lists, but they won’t freeze assets either, according to exhaustive reporting today from Jesse Drucker, Alan Katz and Andy Hoffman.
In the Netherlands, at least, there is some soul-searching.
“On the one hand we invite them, and make it possible for them to avoid taxes through the Netherlands, while on the other hand we say we freeze the assets, which is a good thing,” says Arnold Merkies, a Dutch parliament member from the Socialist Party. “But why did we allow them in the first place? We even stimulated them to do this.”
It’s not every day a career politician makes a professional comedian look like an amateur. HEY, DID YOU HEAR THE ONE ABOUT HOW CHRIS CHRISTIE IS FAT?
Also, would it kill you to shave, Joel?
Twitter reported slowing user growth last week just in time for a lockup on its shares to expire today, potentially creating an environment for some devoted selling this week. Instead, Twitter is finding the potential sellers devoted to the company.
Holders accounting for at least 205 million shares of Twitter, which has dropped 39 percent this year, say they’re holding their stakes, providing a show of support right when it appears Twitter could use some.
Yet while some holders may be itching to sell, this might not be the best time. “The irony here is that the pressure to sell is reduced by the relative price weakness,” Max Wolff, an analyst at Citizen.VC, tells Sarah Frier.
At the same time, there’s creeping concern that the market is becoming oversaturated with new sales, the subject of today’s greet-the-week in equities. One new stock, the pending initial public offering for Alibaba, will be a must have.
“Most money managers are generally fully invested and so one of the issues is that for these mega ones, the buy side has to free up some liquidity to buy the new IPO,” Skip Aylesworth, a portfolio manager for Hennessy Funds in Boston, tells Lu Wang.
Some of the citizens of Prince George’s County in Maryland aren’t taking well to the police department’s idea of using Twitter to broadcast prostitution arrests in real time. Even though the police are saying the sting operation destined for Twitter will target the customers, not the prostitutes, it’s getting plenty of heat in 140 characters.
It’s unclear how this would differ from what we see on an episode of “Cops” or those Dateline NBC stories when Chris Hansen surprises pedophiles. Perhaps there’s still something new left to feel about social media after all.
The first comment following the story in the Washington Post had an interesting idea:
“Sex workers and their customers need to come up with a safe harbor for their activities. I suggest calling their transactions ‘‘investment banking.’’ Law enforcement will surely leave it alone then.”
If you’re looking for an illustration that captures what’s at stake in the debate over net neutrality, an Internet free from corporate influence, this is it.
When we get back behind the wheel after a week at the mothership in Manhattan, it feels like we haven’t driven a car in a year. It takes 10 minutes before the synapses fire normally, but before then we are conscious that we are driving. Which might not be a bad thing once in a while.
Take that week and turn it into 18 years and you understand why no one would want to be on the same road with Hillary Clinton now. Even more amusing is that when Clinton made note of this a few months ago, she was addressing the National Automobile Dealers Association.
Angela Greiling Keane pursued this theme and seized on it today, after it was reinforced during a gag-reel at the White House Correspondents’ diner showing Biden flashing the leather aviator jacket and Ray-Ban shades (at night) behind the wheel of a canary-yellow, convertible Corvette that can go no farther than the White House gates. She tells a story of U.S. leaders relegated to the back seat for most of the rest of their lives while the Secret Service does the driving.
Real American Presidents and first ladies with sprawling ranches, like Reagan and Bush, have private land to navigate if they want. Indonesian-Kenyan community organizers are left with golf carts. Besides, Clinton can’t find her way out of Benghazi, anyway.
The notion of what is mainstream ideology among Jews was thrown into relief last week when the Conference of Major American Jewish Organizations voted against admitting the lobby group J Street. Among many articles, Yochai Benkler, a Harvard law professor writing in the New Republic, finds that what is considered the “mainstream Jewish community” is part of the conflict.
Israel is withdrawing into an increasingly orthodox, nationalistic and undemocratic society, Benkler writes, and American Jews’ unquestioned -- and unquestionable -- support run smack up against J Street, an American lobby that gives it a pain. J Street (presumably a play on K Street, the D.C. address for much of the lobbying industry) backs the two-state solution in its approach to peace with the Palestinians and reserves the right to criticize Israel -- and it does criticize Israel.
“J Street, and the modern, independent liberal Jewish identity it represents, has to take its place in organized American Jewry,” Benkler says. “Otherwise American Jewish organizations risk becoming nothing more than a narrow interest group representing a declining portion of American Jews who support an Israel that looks less and less like the one David Ben Gurion declared in 1948 as a Jewish state dedicated to social and civil equality irrespective of race, religion, or sex.”
We spoke to Papadopoulos again yesterday for a little debriefing and to discuss his review of the race today, and he related a little inside observation few of us would have picked up.
“There was one moment earlier in the race when the rider on Samraat had a chance to put him in a lot of trouble, and the kid (jockey Jose) Ortiz decided not to,” Papadopoulos says. “He just kind of decided, ‘I’m going to ride my horse, I’m not going to pay attention to the favorite,’ and he let California Chrome get outside. He had a chance to put him in jail and keep him locked in behind horses -- which maybe would have made the race different, I don’t know -- but that was kind of the one moment that was a little dicey.”
That will be one of the questions facing California Chrome as he prepares for the Preakness Stakes in two weeks. How will he react if he finds himself boxed in a pocket?
“Now, some horses love traveling in the pocket and it could be a great trip, that pocket trip.” But. “It’s an unanswered question with California Chrome how he’ll handle that trip whenever he faces it. Some horses can’t stand it and absolutely do terribly with it. I don’t think this horse is super-comfortable behind other horses, taking all that dirt in his face, and that might be his Achilles heel.
‘‘At this point, I think this race showed how superior he is to this crop of 3-year-olds,” Papadopoulos says. “If he gets beat -- which he certainly could; this is horse racing -- if he gets beat in the Preakness or beat in the Belmont -- I think what gets him beat isn’t his competition. I just think it could be himself.”
It’s like talking to Erie Smith.
OK, it wasn’t the New York Rangers’ best game. Considering how much time they’ve been on the ice lately -- a seventh game needed to put away Philadelphia, a Game 1 overtime win against Pittsburgh to begin the second round of their NHL playoffs, and yesterday’s game, all inside a week -- yesterday’s 3-0 shutout loss at Pittsburgh pretty much makes sense. And Game 3 is tonight, in New York. Who’s scheduling these?
Earlier in the day, Chicago had the look of a team coming into form in its 4-1 win over Minnesota. The Blackhawks are ahead 2-0 in their best-of-seven second-round series.
In the NBA, Brooklyn needed all seven games but they got it done by one point in Toronto, 104-103. They move on to face Miami in the second round starting tomorrow night.
In San Antonio, the battle for Texas went to the Spurs, who finished off Dallas 119-96 behind Tony Parker’s 32 points. They also begin their second-round series tomorrow night, facing Portland.