Monday, November 2, 2015


Charlie Munger Isn't Done Bashing Valeant [H/T Will and Linc] (LINK)
Ackman said during the presentation that he spoke with Munger about his March remarks. The Berkshire vice chairman’s objections focused on leverage, tax rates and acquisitions, and Munger explained that he says what comes to his mind, according to Ackman. 
Munger elaborated on Saturday: Valeant relied on “gamesmanship” to run up its value. Its strategy, using acquisitions and price increases, is different from ITT, but it still created a “phony growth record,” he said. Unlike Enron, Valeant’s stock isn’t a house of cards because it has some some valuable properties, including its portfolio of treatments, he said. He isn’t holding or shorting the shares. 
Munger’s critique has been a topic of conversation at the fund manager. At a May investor meeting for Ruane Cunniff, someone asked what Goldfarb and his colleagues thought about the dig from Buffett’s right-hand man, according to a transcript of the event. 
Ruane Cunniff dismissed the comparison to ITT, saying that Valeant is more concentrated in a single industry and less likely to dilute shareholders by issuing stock to fund deals. The share plunge in recent weeks has pushed Sequoia’s current managers to publicly defend their pick to investors. 
It’s easy to see why investors have been so taken with the stock, Munger said. "It looks kind of Buffett-like,” because Chief Executive Officer Mike Pearson “cut out all the glitz” of running a drug company, he said. However, Valeant’s tumbling share price shows why morals should still be a part of the calculation for making an investment, Munger said. 
“They’re deeply intertwined,” he said. "I don’t think that investing should be divorced from reality."
Pharmacist at center of Valeant scandal accuses drugmaker of 'massive fraud' [H/T Will] (LINK)

John Kay discusses his latest book, Other People's Money, at Google (video) (LINK)

The Absolute Return Letter - November 2015 (LINK)

Hussman Weekly Market Comment: Last Gasp Saloon (LINK)
At present, the valuation measures we find most strongly correlated with actual subsequent S&P 500 total returns suggest zero total returns for the S&P 500 over the coming 10 years, and total returns averaging only about 1% annually over the coming 12-year period. After inflation, we estimate negative prospective real returns on both horizons. Over shorter horizons, market internals, and the investor risk-preferences they convey, are the hinge that determines how stocks are likely to respond to a broad range of other factors, including valuations, interest rates, Fed action, and economic activity.
Exponential Wisdom podcast: Ripe For Disruption… Agriculture and Transportation (LINK)

The Power of Nudges, for Good and Bad (LINK)
Related book: Nudge (and currently only $5.95 on Audible)
Pluto’s Moon Charon Has an Ammonia Leak (LINK)

Book of the day: On Writing: A Memoir of the Craft - by Stephen King