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An alternative viewpoint: https://brontecapital.blogspot.com/2019/08/the-flat-out-silly-markopolos-ge-report.html?spref=tw https://brontecapital.blogspot.com/2

by arbuge 7y ago

An alternative viewpoint: https://brontecapital.blogspot.com/2019/08/the-flat-out-silly-markopolos-ge-report.html?spref=tw https://brontecapital.blogspot.com/2019/08/the-flat-out-sill... As Charlie Munger says, always look at the incentives to understand people's behavior. Markopolos' sponsoring hedge funds are shorting GE: https://www.bloomberg.com/news/articles/2019-08-15/ge-drops-as-madoff-whistle-blower-levels-accounting-accusations?srnd=premium https://www.bloomberg.com/news/articles/2019-08-15/ge-drops-... "Markopolos is working with a hedge fund he didn’t identify and stands to benefit from bets that GE’s stock will decline, according to the Wall Street Journal, which reported earlier on the accounting report. Markopolos and his colleagues also hope to collect a whistle-blower reward by reporting their findings to regulators, the Journal said."

tdaltonc 7y ago
That's an important point. But this is not a one-shot game. When they're all sitting around the table, picking a target to "whistleblow" against, 'pick a target that is actually doing something wrong' is probably very high on the list of criteria. They're going to want to do this again. They need to preserve their brand, "the guy who busted Madoff and wrote a best selling book about it" is a really valuable brand.
msbarnett 7y ago
> As Charlie Munger says, always look at the incentives to understand people's behavior. Should that include looking at the fact that GE constitutes ~7% of Bronte Capital Management’s portfolio? I’d want to spin things positively for them too, with that much skin on the line.
- eej71 7y ago
  While it can certainly color Bronte Capital's motivations, the author of the paper (John Hempton) has generally been forthright in his analysis of other companies and his analysis of GE doesn't seem different from his other comments.
  - msbarnett 7y ago
    Sure. But “they have skin in the game therefore the analysis is invalid irrespective of any actual criticism of the content of the analysis, which I have not bothered to mention” is OP’s insinuation, not mine. I’m just pointing out that that cuts both ways. If there’s a problem with Markopolus’ report it should be critiqued on its merits. OP didn’t bother to bring any of that forward and just focused on shortselling.
conistonwater 7y ago
The alternative viewport by Hempton is valuable, but I think the ad hominem against Markopolos is not. That's not how short-selling even works anyway. Could you please discuss it on merits instead?
arrty88 7y ago
Looks like he’s willing to put his money where his mouth is.
darawk 7y ago
The fact that he's shorting GE should probably give you more confidence that he's right. That demonstrates skin in the game. He's not just speculating idly - he's putting his own assets at risk in the bet.
- arbuge 7y ago
  It seems to me he is being paid by hedge funds to come up with research that supports their short positions. I see no evidence anywhere that he's shorting them using his own personal funds and even that would not necessarily give me any additional confidence he's right. With your logic one might also claim that promoters of pump-and-dump schemes should be commended for having skin in the game.
  - eganist 7y ago
    > It seems to me he is being paid by hedge funds to come up with research that supports their short positions. Regardless of whether this is true, should they successfully collect a reward, it would validate the research on merits.
    - slg 7y ago
      Not if this research is what causes the stock to drop and is what allows them to collect a reward. Then the merits of the accusations doesn't actually matter and they don't have to true for the people shorting the stock to profit from releasing them. I have no idea if these accusations are true, but the accuser's short position on the stock has zero positive bearing on the validity of the accusations.
      - eganist 7y ago
        > Not if this research is what causes the stock to drop and is what allows them to collect a reward. I don't understand the causative relationship you're asserting between a drop in value and a whistleblower award that's only granted after an enforcement action. How would a drop in stock value result in a whistleblower award?
makomk 7y ago
Wow, that comparison with Madoff's returns is so sleazy that the person who created that image has to know they're being a dishonest scumbag. For context, the suspicious thing about Madoff's returns wasn't just the size of the returns, it was that his Ponzi scheme returned that amount consistently year after year, seemingly risk free, regardless of what the markets did. That was the part that was "too good to be true" - the average returns of Madoff's scheme were pretty unremarkable. Also I'm pretty sure that's comparing apples to oranges, or rather return on investment with profit-to-income ratio.
- Gibbon1 7y ago
  > returned that amount consistently year after year, seemingly risk free, regardless of what the markets did. Reminds me of something someone pointed out. GE hit it's quarterly numbers to the point for 20 years under Jack Welch. http://www.robwalker.net/contents/mm_welch.html http://www.robwalker.net/contents/mm_welch.html
athrowaway3z 7y ago
That's not an 'alternative' viewpoint. Reading the headline already told me he was shorting the stock. An alternative viewpoint would be: All the numbers add up and we expect growth.
georgeecollins 7y ago
As has been pointed out by others, the alternate viewpoint is from a GE shareholder. https://whalewisdom.com/filer/bronte-capital-management-pty-ltd#tabholdings_tab_link https://whalewisdom.com/filer/bronte-capital-management-pty-...

by arbuge 7y ago

tdaltonc 7y ago

That's an important point. But this is not a one-shot game. When they're all sitting around the table, picking a target to "whistleblow" against, 'pick a target that is actually doing something wrong' is probably very high on the list of criteria. They're going to want to do this again. They need to preserve their brand, "the guy who busted Madoff and wrote a best selling book about it" is a really valuable brand.

msbarnett 7y ago

> As Charlie Munger says, always look at the incentives to understand people's behavior. Should that include looking at the fact that GE constitutes ~7% of Bronte Capital Management’s portfolio? I’d want to spin things positively for them too, with that much skin on the line.

eej71 7y ago
While it can certainly color Bronte Capital's motivations, the author of the paper (John Hempton) has generally been forthright in his analysis of other companies and his analysis of GE doesn't seem different from his other comments.
- msbarnett 7y ago
  Sure. But “they have skin in the game therefore the analysis is invalid irrespective of any actual criticism of the content of the analysis, which I have not bothered to mention” is OP’s insinuation, not mine. I’m just pointing out that that cuts both ways. If there’s a problem with Markopolus’ report it should be critiqued on its merits. OP didn’t bother to bring any of that forward and just focused on shortselling.

conistonwater 7y ago

The alternative viewport by Hempton is valuable, but I think the ad hominem against Markopolos is not. That's not how short-selling even works anyway. Could you please discuss it on merits instead?

arrty88 7y ago

Looks like he’s willing to put his money where his mouth is.

darawk 7y ago

The fact that he's shorting GE should probably give you more confidence that he's right. That demonstrates skin in the game. He's not just speculating idly - he's putting his own assets at risk in the bet.

arbuge 7y ago
It seems to me he is being paid by hedge funds to come up with research that supports their short positions. I see no evidence anywhere that he's shorting them using his own personal funds and even that would not necessarily give me any additional confidence he's right. With your logic one might also claim that promoters of pump-and-dump schemes should be commended for having skin in the game.
- eganist 7y ago
  > It seems to me he is being paid by hedge funds to come up with research that supports their short positions. Regardless of whether this is true, should they successfully collect a reward, it would validate the research on merits.
  - slg 7y ago
    Not if this research is what causes the stock to drop and is what allows them to collect a reward. Then the merits of the accusations doesn't actually matter and they don't have to true for the people shorting the stock to profit from releasing them. I have no idea if these accusations are true, but the accuser's short position on the stock has zero positive bearing on the validity of the accusations.
    - eganist 7y ago
      > Not if this research is what causes the stock to drop and is what allows them to collect a reward. I don't understand the causative relationship you're asserting between a drop in value and a whistleblower award that's only granted after an enforcement action. How would a drop in stock value result in a whistleblower award?

makomk 7y ago

Wow, that comparison with Madoff's returns is so sleazy that the person who created that image has to know they're being a dishonest scumbag. For context, the suspicious thing about Madoff's returns wasn't just the size of the returns, it was that his Ponzi scheme returned that amount consistently year after year, seemingly risk free, regardless of what the markets did. That was the part that was "too good to be true" - the average returns of Madoff's scheme were pretty unremarkable. Also I'm pretty sure that's comparing apples to oranges, or rather return on investment with profit-to-income ratio.

Gibbon1 7y ago
> returned that amount consistently year after year, seemingly risk free, regardless of what the markets did. Reminds me of something someone pointed out. GE hit it's quarterly numbers to the point for 20 years under Jack Welch. http://www.robwalker.net/contents/mm_welch.html http://www.robwalker.net/contents/mm_welch.html

athrowaway3z 7y ago

That's not an 'alternative' viewpoint. Reading the headline already told me he was shorting the stock. An alternative viewpoint would be: All the numbers add up and we expect growth.

georgeecollins 7y ago

As has been pointed out by others, the alternate viewpoint is from a GE shareholder. https://whalewisdom.com/filer/bronte-capital-management-pty-ltd#tabholdings_tab_link https://whalewisdom.com/filer/bronte-capital-management-pty-...