Italy seminar; Japan opportunities; Reader feedback on why female fund managers outperform and the impact of Chinese tariffs; Real Hedge-Fund Managers Have Some Thoughts on What Epstein Was Actually Doing
1) We just wrapped up the 16th Annual Value Investing Seminar in Italy. After thunderstorms and hail on Wednesday, the sunny weather typical of southern Italy returned for the last two days, giving my co-host Ciccio Azzollini and me a beautiful view of the Trani harbor at dinner last night...
2) At the seminar, a dozen investors pitched great ideas from the U.S., Canada, Europe, and Asia. I'll be sharing some of their slides in upcoming e-mails, starting today with a presentation by Christoph Hilfiker of LLB Asset Management on a) the attractiveness of the Japanese market and b) why he recommends the stock of Japan Aviation Electronics Industry (TYO: 6807). You can read it here.
3) In last Monday's e-mail, I included an article by Bloomberg columnist Matt Levine about "why asset managers who grow up poor tend to outperform those who grow up rich," which led one of my friends, a woman who has spent more than two decades in the industry, to comment:
Levine's thesis on why fund managers who grow up poor outperform those that grow up rich – that the handful who make it have to be much better to make it – is the perfect thesis for explaining why women managers outperform men. Rather than the pop psychology I hear about risk preference, it's probably the massive weeding to get in and stay in beyond a junior level that accounts for it. I don't know any women with more than five years tenure on the buy-side who are not really good...
4) And responding to last Tuesday's e-mail on the impact of tariffs on Chinese goods, reader Richard L. writes:
I am a small business owner who imports some of our raw materials from China. When the 10% tariff went into effect, we negotiated a split cost; we each paid 5%. When the 25% tariff went into effect, we negotiated again. Now we pay 10% and they are discounting the sales price by 15%. The bad part is that we have to pay the 25% at customs; and since the vendor terms are Net 30, we don't "recover" the additional 15% until 30 days later.
5) My friend Doug Kass of Seabreeze Partners and I are both quoted in this article about serial pedophile Jeffrey Epstein: Real Hedge-Fund Managers Have Some Thoughts on What Epstein Was Actually Doing. There's no way he was running a legitimate fund – most likely it was an extortion racket. Excerpt:
Given this puzzling set of data points, the hedge-fund managers we spoke to leaned toward the theory that Epstein was running a blackmail scheme under the cover of a hedge fund.
How such a scheme could hypothetically work has been laid out in detail in a thread on the anonymous Twitter feed of @quantian1. It's worth reading in its entirety, but in summary it is a rough blueprint for how a devious aspiring hedge-fund manager could blackmail rich people into investing with him without raising too many flags.
Kass and former hedge-fund manager Whitney Tilson both emailed the thread around in investing circles and both quickly discovered that their colleagues found it quite convincing. "This actually sounds very plausible," Tilson wrote in an email forwarding the thread to others.
"He somehow cajoled these guys to invest," says Kass, speaking of hypothetical blackmailed investors who gave Epstein their money to invest, but managed to keep their names private.
The fact that Epstein's fund is offshore in a tax haven — it is based in the U.S. Virgin Islands — and has a secret client list both add credence to the blackmail theory.
Best regards,
Whitney