In this edition, a story of the world’s most feared investor, Paul Singer. A look at the chaos the financial markets have been in 2021. Japan’s stock market trying to regain the lost ground and conversation with Sebastian Mallaby on the workings of legendary hedge fund investors.
World’s most feared investor
This one is old, also a long one but an interesting read on Paul Singer, the head of Elliott Management hedge fund. He has developed a uniquely adversarial, and immensely profitable, way of doing business. He’s labeled as “aggressive, tenacious and litigious to a fault,” and also named as “The World’s Most Feared Investor.”
Singer’s Elliott Management has targeted the world’s biggest mining company, taken on Warren Buffett in a battle for Texas’s largest electricity distributor, ousted chief executive officers on both sides of the Atlantic and set off a chain of events that led to the impeachment of South Korea’s president.
He also went on to battle with Argentina for 15 years over its debt default and impounding one of the country’s warships in the process.
This is a comprehensive look at what happens when this ruthless activist investor begins to sniff around your company. It’s not so pretty.
“What I came to feel relatively early on in my career is that manual effort was actually not only a driver of value and profitability but an important way to control risk, dig yourself out of holes when you slip into a ravine.”
The Paranoid Style in American Investing
“Every age has its peculiar folly; some scheme, project, or phantasy into which it plunges, spurred on either by the love of gain, the necessity of excitement, or the mere force of imitation. Failing in these, it has some madness, to which it is goaded by political or religious causes, or both combined.” – Charles Mackay
While this article is set more in the context of US markets and the madness that unfolded in 2021. But it is true from our perspective as well. Whether it is the US or India, or in any market-- be it stock, or crypto– were on the path of quite weird behavior.
The year 2021 will be remembered as one in which markets tumbled down a rabbit hole and entered a financial wonderland: A once-elite undertaking became more populist, tribal, anarchic, and often downright bizarre. Retail investors upstaged hedge funds, crypto squared up against fiat currencies, and financial flows crushed fundamentals.
Regaining the lost ground
On 30th December 2021, Japan’s Nikkei posted its highest year-end close since over three decades ago. In 1989, the Nikkei finished trading at a record high of 38,915.87 in the midst of Japan’s asset-inflated bubble economy. What we can call the greatest bubbles of all time, to put it into perspective;
- From 1956 to 1986 land prices increased 5000% even though consumer prices only doubled in that time.
- In the 1980s share prices increased 3x faster than corporate profits for Japanese corporations.
- By 1990 the total Japanese property market was valued at over 2,000 trillion yen or roughly 4x the real estate value of the entire United States.
- The grounds on the Imperial Palace were estimated to be worth more than the entire real estate value of California or Canada at the market peak.
- There were over 20 golf clubs that cost more than $1 million to join.
- In 1989 the P/E ratio on the Nikkei was 60x trailing 12-month earnings.
Ever since the bubble burst, the Japanese stock saw its value decline over 80% in the next couple of decades, coinciding with the global financial crisis. Although the markets have recovered from their lows but still remain below the highs of 1989.
A few good reads on the topic:
Hunter S. Thompson’s Letter on Finding Your Purpose and Living a Meaningful Life
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