Hedge Fund Clips @HedgeFundClips

NVIDIA, Palantir, Tesla — all in Buffett's "too hard" pile. Pabrai says 99% of stocks belong there. Mohnish Pabrai, founder of Pabrai Investment Funds and author of The Dhandho Investor. Mohnish Pabrai explains: "99% of stocks should go into what Buffett calls the "too hard" pile." "There's actually a box on Buffett's desk that says "too hard" on it." "I went to his office, saw the box and said, "Warren, the box is empty." He said, "Mohnish, it's not supposed to be empty" — then dumped a stack of papers in it." "What does NVIDIA look like 5 years from now? It's not a question I need to answer. Too hard pile." "Tell me NVIDIA's cash flows 5, 10, 15 years out. If you know them with conviction, buy or sell becomes obvious." "I don't know what NVIDIA's cash flow is gonna be. Too hard pile. Palantir, too hard pile." "Tesla, definitely too hard pile. Tremendous company, but the valuation doesn't make sense on current cash flows."

Rick Guerin was Buffett & Munger's 3rd partner. He used leverage, got margin-called in '73-74, and sold his Berkshire at $20. Those shares: $700k today. Mohnish Pabrai, founder of Pabrai Investment Funds, explains: "In the early '60s there were three of them: Warren, Charlie, and a third guy named Rick Guerin." "Charlie and I knew very early we'd get very rich — but we were not in a hurry. Rick was in a hurry." "Rick was a very good investor, and still is. But at that time he was using a lot of leverage." "'73, '74, huge drawdown. Rick got margin calls and was forced to sell." "Warren bought Rick's Berkshire at $20 a share. Those shares are now worth 700,000 apiece — 35,000X." "If you're even a slightly above average investor, spend less than you earn, and use no leverage, you cannot help but get rich over a lifetime."

Sanctions taught Russia one lesson: dump dollars, buy gold. China and every EM central bank learned it too. Jeff Currie, co-founder of 1947 Oil and Gas, explains: "Mnuchin used secondary sanctions in March 2018 — punished Rusal and Deripaska. That morning the financial system froze up." "What did the Russians learn? Do not own dollar assets. They had $93B of US Treasuries — sold them down incredibly quickly, replaced it with gold." "Then Ukraine happened, they sanctioned the rest of the Russian Central Bank portfolio. China and every EM looked at it: we're not owning dollars anymore. We are done." "The normal relationship between gold and interest rates — you can see the day they disconnected. Gold shot up." "Crypto? No. It leaves a footprint. You go in, you get out. Gold you can sneak around." "You can move billions of dollars of gold quietly in trucks because it's so dense. Tankers in Hormuz — satellite sees that." "As a share of reserves in China and the emerging markets, gold is still too small."

it's crazy how trading, looksmaxxing, gambling are all perceived solutions to the same problem. when your human capital feels worthless, the rational move is convexity: take egregious risk in whatever market you can access, and hope the payoff is big enough to matter in an AI economy. no capital for the financial lottery? your face is the other asset you can lever. "ascending" is the same trade in a different market. it's all one lottery economy. and the house always keeps the best seat: gigalong prediction markets, perps exchanges, anything selling the tickets

Flood @ThinkingUSD

3 days ago

Trading will be the single fastest growing industry over the rest of this decade. People feel like they are running out of options to change their financial situation.

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Warehouse company trading at 2% of liquidation value. $8M got Pabrai a third of it. It's now worth $1B+. Mohnish Pabrai, founder of Pabrai Investment Funds, explains: "It was screening as the cheapest market in the world. All the foreign investors were running to the exits. Mass panic, extreme panic." "I focused on businesses where the currency is not relevant. Inflation and currencies don't matter because it'll work itself out." "Market cap is 16 million US dollars. Liquidation value is 800 million. They rent warehouses to Fortune 500 companies." "It's trading at 2% of value. Is it a fraud? He said, no, I have money in it." "I said why is it so cheap? He said: it's Turkey. Everything is cheap." "60 properties. Brokers valued them at 1 billion. 200 million of debt. Liquidation value 800 million." "For $8 million, I got one third of the company, which we still own today. The market cap now is over a billion."

Best-performing hedge fund in the world to down 50% in 2 weeks. He was inside Melvin during GameStop. Michael Barton, Sector Head at Coatue, previously at Melvin Capital, explains: "Before Coatue I was at Melvin Capital — the hedge fund short GameStop." "We went from probably the best-performing hedge fund in the world to down 50% in two weeks." "We didn't realize how powerful retail could be when they focus all their energy on a single stock." "Any time people were short a stock there were squeezes, but it was always catalyzed by something." "This was just a lot of guys and girls on the internet deciding they were gonna buy it, and people had to cover." "A GameStop going up because of Reddit was not a thing that existed up until that point." "It completely changed investing and the risk people think about."

brian kelly, ex-crypto hedge fund manager, now running a trading firm where every employee is an AI agent. his prediction for what a hedge fund looks like next: "what I think wall street looks like is one single hedge fund manager working with maybe 1 or 2 people under them, and then a swarm of agents under that." "but my job as the human being is to be one step ahead of it, on creativity. so far AI agents haven't been able to do that. so they're much more of a tool in the whole process rather than a replacement of it." he says people at big funds told him they are building their own versions. no results published on his side yet. guess we will have to check back in the future.

Buffett's hit rate: 3-4%. Of 300-400 Berkshire deals, 12 made the whole thing. Mohnish Pabrai, Founder of Pabrai Funds, explains: "Most of the acquisitions Warren did did not work well for Berkshire. Let that sink in." "Warren said 12 ideas over 58 years led to the creation of Berkshire." "He's made 300 to 400 investments in six decades. It's a 3 or 4% hit rate." "Go back 90 years in the US market — about 4% of businesses delivered all the returns." "The other 96% barely matched bonds or inflation." "What happened in the bigger market and inside Berkshire have been very similar in percentages." "It's humbling to know that most of the time when we act, the odds are stacked against us."

Hedge fund director: I've seen exactly ONE manager consistently beat the market. And you can't get access to them. Joseph Macaione, hedge fund director, on what a front-row seat taught him about active vs index. Joseph Macaione explains: "From my old seat, it didn't take me long to realize I should probably be in index funds" "I haven't seen anybody consistently good enough. I've seen one" "The people who I think can legit beat the market — my former employer did. 19% net over three decades" "So it's possible. But can you get access to them? Nope" "When they tell you they're closed, you should listen to them" "Nobody wants to dilute what they can do — their returns. So when these funds say 'we're closed,' you should be okay with that" "Millennium returned like $60 billion to investors in the last 5, 10 years — because they don't want to be over-capitalized"

High PEs have never predicted higher growth. They predict tough times. Jeremy Grantham, GMO founder, explains: "In every bull market they say the future must be wonderful, otherwise the market wouldn't be so high-priced. It's quite the reverse." "The three or four terrible times are not randomly distributed. They precisely follow the great bubbles." "The Great Depression precisely follows the 1929 peak. Japan's lost 20 years follow that amazing 65 times earnings in 1989." "There's no example of a high PE predicting higher profits, higher growth, higher productivity in history." "What they do predict is tough times. And if ever there was likely to be a case of that, it's now."

@Po100x7 youtube.com/watch?v=NpqZ2Q…

How to learn investing: skip the models and academic theory. Open a $10K IB account, run an 80-position long/short book, grind 1,000 reps. David Orr, former pro poker player, founder of hedge fund Militia Capital, explains: "Put in whatever, 5,000 bucks, or even 1,000. You have a huge edge with a small account — get in and out of any position instantly, no friction. It's the greatest way to learn." "You're not even trying to make money. You're trying to learn how to have an edge." "Find 30 genuinely different longs. Nvidia and a bunch of semis is all the same bet." "If you can win 30-50% a year on a small account, that's a pretty good sign." "If you're not loving it enough to do it 15 hours a day within the first month, just give up. You'll never be a great investor." "Most of your ideas will be horrible, which is fine. If you lose a few thousand bucks, who cares — it's cheap tuition." "Don't do models. Don't read academic theory. Don't try to see how the professionals do it. Just try tons of different bets." "By the time you have 500 or 1,000 reps in, you'll have a real chance of generating real edge."

I’m super bullish @orrdavid Why? His success in the hedge fund business is explained by skill alone. > pro online poker player in Thailand > reads "Betting Against Beta" in 2017 > teaches himself markets from scratch > +91%, then +171% in his personal account > strangers DM him asking to invest > launches with $3M in 2021 > up 71.2% in 2022 > ~49% annualized ever since > up 37.2% YTD Zero pedigree. Zero connections. Zero family money. Dude's gonna continue to win big time

Hedge Fund Clips @HedgeFundClips

6 days ago

How to learn investing: skip the models and academic theory. Open a $10K IB account, run an 80-position long/short book, grind 1,000 reps. David Orr, former pro poker player, founder of hedge fund Militia Capital, explains: "Put in whatever, 5,000 bucks, or even 1,000. You have

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$20B company he'd never heard of. 5 min with the CEO and he texted his boss: get in here now. Michael Barton, Sector Head at Coatue, previously Melvin Capital, explains: "A buddy called me: 'it's small, but something's happening here, it's starting to grow really fast.'" "I met him, and I literally knew nothing about this company besides they do mobile games." "Within five minutes of meeting Adam, you knew there was something really special here." "This guy was the most locked in person I have ever met." "They'd put GPUs on their advertising business — the ad engine went from growing 15% to 50, 70." "The AI learnings from LLMs were directly impacting their ability to serve ads better." "Two years ago Facebook growing above 10% seemed impossible. Now they're mid-to-high 20s."

Joseph Macaione, hedge fund director, on the #1 tell of a well-run fund: where the risk sits. "First fund: the head takes half the risk, the head of risk sits at the other end of the table. My confidence he'd listen to the risk manager was zero." "Second place, the head of the fund didn't take risk, and the risk managers could care less what the PM wanted to do." "Is that the better place to be? 100%." "The only person emotionally tied to the trade is the trader." "You have a trade on and tanks roll into Ukraine—is this an opportunity, or are we cutting it because we have no idea what Putin's gonna do?" "Those are conversations you have to have with people who are not emotionally invested in the trade." "Tell me the fundamentals now, and try to block out your wife and kids and your tuition payments at the same time. Good luck with that."

AI's at 100 IQ already. The bottleneck isn't the model — it's that a child can't work right away. Michael Barton, Sector Head at Coatue, previously Melvin Capital: "Each model is like a child. With each breakthrough, the IQ of that child goes up." "Today the IQ of the child is about 100. And there's a lot of work a 100 IQ person can do in this economy." "But remember, it's a child. The child can't work right away." "The tech's good enough — we just need time to build the applications for it." "There's going to be a lag between the tech and the revenue."

$40 stock. $45/share cash coming in 2 years. Plant, inventory, equipment all free. Got acquired at $160. Mohnish Pabrai, Founder of Pabrai Investment Funds, explains: "The Metcoal thesis is more similar to IPSCO than Frontline. This was just a beautiful math game." "It's like playing blackjack in Vegas. What a blessed life." "$40 stock, $15/share cash on the balance sheet, no debt, and they announced $15/share of cash flow for each of the next two years." "Hold the stock for two years and you have $45 in cash. Stock is at 40. Plant, equipment, inventory, everything free." "Year three is cyclical, cash flows could go negative. But why entertain such morose thoughts?" "I put 10% of the funds in IPSCO." "Truth is stranger than fiction because fiction has to make sense. Why that Swedish company didn't offer 50 bucks when it was 40 is something I'll never understand."

Most contrarian trade now: buy China, fund it by selling America. Every market near its high — China near its low. Anthony Bolton explains: "The most contrarian thing you can do now? China. Definitely." "How would you fund it? America. Everyone loves America, valuations are high, all the money's gone in." "Often divide the journey from the arrival — normally when you get to the arrival, that's the end of a trend." "Trump's inauguration is the end of the journey up. With China, everyone's been scared of tariffs for months — the date they come could be the turning point." "The idea that AI only rubs off on a handful of US stocks makes no sense to me. It's so similar to the dot-com." "American tech into Chinese tech." "Three-year bear market, authorities want stocks higher, bond yields at record lows. There's really one other place money can go — equities." "My view today: we're in the early stage of a new bull market in China."

Throw feathers off a Miami high-rise in a hurricane. You can't predict where any lands, but every last one hits the ground. Jeremy Grantham, founder of GMO, on why value works like gravity. Jeremy Grantham explains: "Some land a block away in half a minute, some get swept to Maine in 8 days like a songbird caught in the storm." "But you know one thing with absolute confidence: every single feather will hit the ground." "You know something with absolute certainty in the long term, and absolutely no certainty about the short term." "The short term is followed by another short term, followed by another short term—but sooner or later the gravitational effect wins." "For me, value is the gravitational equivalent. Being cheap has consequences. Being expensive has consequences." "However much you're to the moon, winning over a month or two—eventually value will out."

One stock is more than half the fund. "If you have less than 20% of your net worth with me, you have nothing to be concerned about." Mohnish Pabrai, Founder of Pabrai Funds, explains: "In some cases one stock is more than half the fund." "If you have less than 20% of your net worth with me, you have nothing to be concerned about." "46% of Walmart is owned by family members 56 years after the IPO. They are not diversified." "The Walton family would be far worse off if they had listened to the helpers." "You don't need to listen to the helpers. The helpers are just helping themselves." "Most billionaires had 90, 95, 99% of their net worth in a single stock, and they don't lose sleep over it." "A couple running a Chinese restaurant has 90% of everything in the restaurant — it's not even liquid, they don't lose sleep over it." "Here we have a portfolio we can buy and sell every day, and we want to own one of everything. That makes no sense."