Wednesday, September 7, 2016

If I could short Bill Ackman and his hedge fund right now, I would do it!

Bill Ackman

Bill Ackman just bought a 10% stake in Chipotle, a company with a 65 p/e that sells Mexican food. Mark my words, you can add that to his list of disastrous plunges over the last ten years. Herbalife, Valeant and “macro” plays that look they came right out of a Peter Schiff playbook.

If I could short Bill Ackman and his hedge fund I would do it right now. He doesn’t have much longer as a hedge fund manager, that’s my prediction. His Investments have been nothing less than a mind-blowing display of incompetence.  I cannot understand how people give this guy money, but then again, I say that about most of the big name hedge fund managers and it’s true.

Ackman is not a wealth creator; he’s a wealth destroyer, for his investors and for the businesses he invests in. Maybe he, personally, is wealthy, but like most hedge fund guys it’s because of the outrageous fees that stupid people pay him to lose their money.

I remember back in 2007 during the financial crash when everyone was talking about the TARP program and the bank bailouts. Ackman was on CNBC (of course, more idiots) proposing some cockamamie scheme of how the government could issue deeply discounted zero-coupon bonds to “raise the money” to help bail out the banks. He was completely clueless to the fact that the United States government has the capacity to credit dollars in an infinite amount to anybody's bank account if necessary. Where do they get the trillions to fight war? Sell zero coupon bonds?

Wtth the Herbalife deal there was that priceless on-air exchange between Carl Icahn and Ackman where Icahn, in very direct language, told Ackman that he used to beat up kids like him back when he was groing up in a tough section of Queens. It was hilarious. The CNBC anchor at the time had a look on his face, like, “this is going down as one of the most classic moments of television.” It was.

Turned out that Icahn took the occasion to beat up Ackman, again, at least financially. He bought a huge position in Herbalife right after that, probably just to screw with lil’ Billy from the playground, and made out like a bandit when the stock soared shortly afterward.

Now, here’s Ackman announcing his big Chipotle investment. How  do you buy a $440 stock that has a 65 p/e? Don’t get me wrong, I'm not necessarily against buying stocks with a high p/e ratios even though I don’t do that personally. Amazon is a perfect example. You could have bought that stock at 220 in 2012, with a P/E ratio almost as high. It seemed expensive then, but the stock is at 785 now. However, Amazon is a rare example of the ultimate disrupter. It is literally destroying brick and mortar retail. Stocks like that only come along every once in a while.

On the other hand what’s Chipotle’s business model? It sells burritos and tacos. I like Mexican food as much as the next guy but selling tacos isn’t a business model that' about to change the world. Even if Chipotle doubled its earnings it would still have a p/e over 30, which is way above the valuation of the sector that it is in. And if it tripled its earnings--which is simply not going to happen--then it would be about equal to its sector’s valuation. Furthermore, in both cases that would mean the stock could not move above its current level, just the earnings would have to rise. How likely is that?

So what the hell is Ackman doing? Same as he's always done, getting ready to lose money.

I remember some time ago Ackman said that he wanted to be like Warren Buffet. That is, run a giant, public company that’s really just a hedge fund. Forget it. Warren Buffett is one of a kind. For a really, really, big investor, he pretty much gets it. He gets the macro. He gets that it’s not about buying some dicey, pie-in-the-sky highly overvalued turnaround situation or, engaging in gimmicky tactics like shorting a stock then getting your friends in the media and at the SEC to write smear articles and launch investigations so that you can buy your shorts in at a lower price.

Buffett buys stocks like Coca-Cola and General Motors and Microsoft. Boring stuff, but established, world class businesses. Then, he waits. He waits until stupid, panicky and irrational investors dump them wholesale for no reason. (Maybe because Peter Schiff or some other idiot says the Dow is going to under 1000.) 
Actually, I WISH that Ackman could be like Buffett and go public. Then it would be easy to short his hedge fund. And I would do it all day long. I would mortgage everything to do it because it’s easy money. I’d clean up. When there are guys out there like Ackman or Schiff or Gross or Kyle Bass, you don’t need MMT,  you don’t need market knowledge, you don’t need anything except the understanding that a fool and his money will soon be parted.


Matthew Franko said...

Might have top-ticked restaurant menu prices if the Buffalo Wild Wings half price wings turns out to be a leading indicator of general menu price reductions going forward...

With the oil rent reductions, seems to me menu prices have been solid to up (as leading flows have remained solid to up) meanwhile unprepared food prices have been going down at grocery stores... might finally be rolling over as oil rent elimination finally get passed on to those dining out in the form of lower prices....

MRW said...

Matt, this is a criticism. But not a mean criticism, a helpful criticism, one to help me. One I want you to take to heart because your insights are valuable when they are understandable.

That said, what the fuck are you talking about?

Could you write in regular sentences? With periods. One idea per sentence. Read Mike Norman's posts. Reread this one. He's plain and he's clear. He makes sense.

This is incomprehensible: With the oil rent reductions, seems to me menu prices have been solid to up (as leading flows have remained solid to up) meanwhile unprepared food prices have been going down at grocery stores. Or too generalistic to make any sense. What are you trying to say?

Ditto the rest of your comment.

Random said...

More spending at the shops so they raised prices and at the same time paying their suppliers less MRW?

Matt Franko said...



710 Math

480 Verbal

Doing the best I'm made able to... ;)

Matt Franko said...

I'm saying that after the gas prices at the pump went down, I saw grocery store prices fall but restaurant prices increase...

So the restaurant people took advantage of the additional munnie in people's pockets and hiked prices meanwhile their input costs fell ... This MAY be turning around now and the restaurants are going to start to compete more on price...

This is the first big price pitch I've seen from a restaurant in quite a while... And this wing place is pretty popular...