Acq. Multiple, Yog Berra and Financial Satire, and Hedge Fund Quiz

While at all times Wall Street analysts try to justify the valuations, here is a fun quote (via Bloomberg) from 2002 looking back from Scott McNeely, the CEO of Sun Microsystems, one of the darlings of the 2000 tech bubble:

“At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends. That assumes I can get that by my shareholders. That assumes I have zero cost of goods sold, which is very hard for a computer company. That assumes zero expenses, which is really hard with 39,000 employees. That assumes I pay no taxes, which is very hard. And that assumes you pay no taxes on your dividends, which is kind of illegal. And that assumes with zero R&D for the next 10 years, I can maintain the current revenue run rate. Now having done that, would any of you like to buy my stock at $64? Do you realize how ridiculous those basic assumptions are? You don’t need any transparency. You don’t need any footnotes.

What were you thinking?”

An educational, savagely satirical view of our current market conditions and lessons on valuation.   I read about 40 investment letters a quarter and this is about the best I have read in five years. Hilarious! Mark McKinney – Its Like Deja Vu All Over Again – Final and his prior letter: I Dont Get It – Mark McKinney – Final 8292017 New

An excellent interview by Tobias Carlisle.   CHEAPNESS not quality wins!  Yes, I was somewhat shocked.   Why?


Ackman’s embattled Pershing Square hedge fund laid off 18 percent of its staff on Friday — a total of 10 pink slips that brought head count down to 46.

Investors have suffered in Pershing Square (PSHZF) vs. S&P 500:

He wants to hire an analyst who can THINK INDEPENDENTLY.  You walk into his office and he asks you, “Can you think independently as an analyst?”

How do you reply.   Be careful…………think for awhile before you reply.  What proof can you give?

If you are struggling to answer, then

will provide clues.

What determines the price of gold:

How the price of gold is determined Monetary Metals 2018

9 responses to “Acq. Multiple, Yog Berra and Financial Satire, and Hedge Fund Quiz

  1. Thanks for sharing this! That letter was great, I’m definitely adding Mark Mckinney to my reading list.

  2. don’t fool yourself. Bill Ackman doesn’t want an independent thinker. Watch the Betting on Zero documentary at the 31 minute mark. He has no tolerance for views that don’t confirm his own biases. You can only convince him you are independent by saying “consensus view is that you are a dogsh*t investor, but I think you are a genius.”

  3. Gokiburi, is it POSSIBLE to think independently?

    • i see what you mean… we will generally spend the first third of our lives being brainwashed in some form or another, the second third making lots of mistakes as a result, and if we are lucky, we can spend the final third trying to undo the damage.
      but I still derive hope from the sage words of GI Joe – now you know, and knowing is half the battle.

  4. Ackman has said that he’s mainly interested in people who went to Harvard Business School, so this is an unrealistic scenario.

    With that being said, the response I have is: what type of analyst are we talking about? If an analyst is restricted in a certain way, e.g., he’s only allowed to look at oil stocks, then no, he can’t think independently.

  5. How do you know Ackman will ONLY hire HBS grads. That would be insane if he wanted to hire skilled employees.

    Also, where is the research from any source that graduating from Harvard improves the skills of employees.

    But is it possible for YOU or ME or ANYONE to think independently?

  6. Hi John, would it be possible for you to share a list of the various newsletters (40?) you like reading regularly, with some sort of ordering as to usefulness and type of investment awareness they help build?
    Thank you

    • I occasionally read the High Tech Strategist by Fred Hickey and Doom, Gloom and Boom by M. Farber, but generally I do not read any letters. Going through the Value-Line tear sheets on each company or about 400 each week is more than enough investment perspective.

      Also, just keeping up with six or seven companies that one knows well keeps you busy.

      Nobody knows anything so you might as well make your own decisions. I wish I was joking.

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