Today, hedge fund bigwigs Bill Ackman and Carl Icahn delivered the most engaging TV smackdown in recent memory on CNBC.
Here's a story about two hedge funders who hate each other. It's also a story about whether or not a multi-billion-dollar nutrient company is actually a pyramid scheme.
Back in December, activist investor Bill Ackman gave the Powerpoint presentation to end all Powerpoint presentations -- it was 342 slides long -- about why he thought Herbalife, a company better known for weight-loss shakes and other assorted non-goodies, was doomed. The 1-slide version of his argument is that its web of distributors make more from recruiting new distributors than they do from actually selling products, making it less an Amway-style legal pyramid scheme, and more an illegal one. Ackman went short the stock -- in other words, he bet its price would go down by selling high and trying to buy low -- and very publicly said he expected it to go to zero.
Betting against a stock is a bit more involved than betting on it, because you can't exactly bet against something you own. Short-sellers have to first borrow the stock, then sell it, and hope to buy it back later at a lower price before returning it to the original owner. It's a risky game -- the stock can only go down so far, but it can go up an unlimited amount -- and Ackman seems to be playing a particularly risky version of it. He's short roughly 20 percent of the outstanding shares, which means he'll have a lot of stock to buy back that he might have trouble finding if, say, the price goes up and he tries to cut his losses.
That brings us to the billionaire battle. Activist investors aren't always the best of friends, and that's certainly the case when it comes to Carl Icahn and Bill Ackman. The two of them fought a seven-year legal battle over whether Icahn owed Ackman $4.5 million, a relative pittance in the rarefied air of Hedgistan, from the 2004 merger-sale of a real estate company -- a battle that Ackman ultimately won. That bad blood has carried over to Herbalife. Icahn thinks Ackman is just using his big media profile to make an easy buck manipulating the stock down, and that he's doing so in a way that could leave him very exposed. If other investors buy the stock for the express purpose of hurting his trade, Ackman might have to cover his large short position, which would send the stock racing up in a so-called "short-squeeze". Now, it's not clear Icahn is doing this ... but it certainly seems like a good bet.
Another good bet is that watching the two of them got at it on live television would be magical. It was. CNBC had the pair on, as you can see in the video below, and Icahn did not disappoint. This was tough, but here are his seven craziest quotes.
"I want to say what I want to say, and I'm not going to talk about my Herbalife position because you want to bully me ... So let's start with what I want to say. Ackman is a liar."
Discourse even more elevated.
"He wanted to have dinner once with me, and I had dinner with me. And I'll tell you, I laughed. I couldn't figure out if he was the sanctimonious guy I ever met in my life or the most arrogant."
Do these have to be mutually exclusive?
"I wouldn't have an investment with Ackman if you paid me to do it; if Ackman paid me to do it .... As far as I'm concerned, the guy is a major loser. You know, Disraeli once said, Disraeli once said about somebody that spoke in the Parliament, a young guy that spoke in the Parliament, 'Young man, I'd be happy if I could be as sure about one thing in my life as you are sure of everything.'"
"Ackman did it, look at the timing. Ackman did it with a week to go, or a month to go before he had to show his results. His results were bad for 2012, and this got his results up double, so he could get fees for himself. And then he talks about [giving these profits to] charity. That's complete bulls***."
Oops, live TV!
"I never said that I want to be friends with you Bill. I wouldn't be friends with you. And you said to me, you'd like to be friends so we could invest together .... I wouldn't invest with you if you were the last man on earth."
"I appreciate, Bill, that you called me a great investor. I thank you for that. Unfortunately, I can't say the same for you."
Give this man a mic to drop.
Okay, that was fun, but it's time for a serious point. Markets are mostly efficient, except when they're not. As Keynes, who knew a thing or two about picking stocks, pointed out, the market can be a bit like a newspaper beauty contest where you pick the six prettiest faces from a list of 100, and the winner is the one whose picks come closest to the most popular of the combined picks. But this means your optimal strategy is picking the faces you think other people think are the prettiest, not the ones you think are the prettiest. In other words, you're betting based on the crowd, and not the "fundamentals". It's the same with stocks, even before we consider hedge fund billionaires using a nutrient supplement company's stock to settle their grudge match.
Or, as Disraeli might have said, there are lies, damn lies, and efficient markets.
"[Ackman's] like the crybaby in the schoolyard. You know, I went to a tough school in Queens, and they used to beat up the little Jewish boys. And [Ackman] was like one of these little Jewish boys, crying that the world was taking advantage of him."
Today’s empires are born on the web, and exert tremendous power in the material world.
Mark Zuckerberg hasn’t had the best week.
First, Facebook’s Free Basics platform was effectively banned in India. Then, a high-profile member of Facebook’s board of directors, the venture capitalist Marc Andreessen, sounded off about the decision to his nearly half-a-million Twitter followers with a stunning comment.
“Anti-colonialism has been economically catastrophic for the Indian people for decades,” Andreessen wrote. “Why stop now?”
After that, the Internet went nuts.
Andreessen deleted his tweet, apologized, and underscored that he is “100 percent opposed to colonialism” and “100 percent in favor of independence and freedom.” Zuckerberg, Facebook’s CEO, followed up with his own Facebook post to say Andreessen’s comment was “deeply upsetting” to him, and not representative of the way he thinks “at all.”
By announcing the first detection of gravitational waves, scientists have vindicated Einstein and given humans a new way to look at the universe.
More than a billion years ago, in a galaxy that sits more than a billion light-years away, two black holes spiraled together and collided. We can’t see this collision, but we know it happened because, as Albert Einstein predicted a century ago, gravitational waves rippled out from it and traveled across the universe to an ultra-sensitive detector here on Earth.
This discovery, announced today by researchers with the Laser Interferometer Gravitational-wave Observatory (LIGO), marks another triumph for Einstein’s general theory of relativity. And more importantly, it marks the beginning of a new era in the study of the universe: the advent of gravitational-wave astronomy. The universe has just become a much more interesting place.
By mining electronic medical records, scientists show the lasting legacy of prehistoric sex on modern humans’ health.
Modern humans originated in Africa, and started spreading around the world about 60,000 years ago. As they entered Asia and Europe, they encountered other groups of ancient humans that had already settled in these regions, such as Neanderthals. And sometimes, when these groups met, they had sex.
We know about these prehistoric liaisons because they left permanent marks on our genome. Even though Neanderthals are now extinct, every living person outside of Africa can trace between 1 and 5 percent of our DNA back to them. (I am 2.6 percent Neanderthal, if you were wondering, which pales in comparison to my colleague James Fallows at 5 percent.)
This lasting legacy was revealed in 2010 when the complete Neanderthal genome was published. Since then, researchers have been trying to figure out what, if anything, the Neanderthal sequences are doing in our own genome. Are they just passive hitchhikers, or did they bestow important adaptations on early humans? And are they affecting the health of modern ones?
Why the Syrian war—and the future of Europe—may hinge on one city
This week, the Syrian army, backed by Russian air strikes and Iranian-supported militias including Hezbollah, launched a major offensive to encircle rebel strongholds in the northern city of Aleppo, choking off one of the last two secure routes connecting the city to Turkey and closing in on the second. This would cut supplies not only to a core of the rebellion against Syrian President Bashar al-Assad, but also to the city’s 300,000 remaining civilians, who may soon find themselves besieged like hundreds of thousands of others in the country. In response, 50,000 civilians have fled Aleppo for the Turkish border, where the border crossing is currently closed. An unnamed U.S. defense official toldThe Daily Beast’s Nancy Youssef that “the war is essentially over” if Assad manages to seize and hold Aleppo.
The number of American teens who excel at advanced math has surged. Why?
On a sultry evening last July, a tall, soft-spoken 17-year-old named David Stoner and nearly 600 other math whizzes from all over the world sat huddled in small groups around wicker bistro tables, talking in low voices and obsessively refreshing the browsers on their laptops. The air in the cavernous lobby of the Lotus Hotel Pang Suan Kaew in Chiang Mai, Thailand, was humid, recalls Stoner, whose light South Carolina accent warms his carefully chosen words. The tension in the room made it seem especially heavy, like the atmosphere at a high-stakes poker tournament.
Stoner and five teammates were representing the United States in the 56th International Mathematical Olympiad. They figured they’d done pretty well over the two days of competition. God knows, they’d trained hard. Stoner, like his teammates, had endured a grueling regime for more than a year—practicing tricky problems over breakfast before school and taking on more problems late into the evening after he completed the homework for his college-level math classes. Sometimes, he sketched out proofs on the large dry-erase board his dad had installed in his bedroom. Most nights, he put himself to sleep reading books like New Problems in Euclidean Geometry and An Introduction to Diophantine Equations.
Once it was because they weren’t as well educated. What’s holding them back now?
Though headway has been made in bringing women’s wages more in line with men’s in the past several decades, that convergence seems to have stalled in more recent years. To help determine why, Francine D. Blau and Lawrence M. Kahn, the authors of a new study from the National Bureau of Economic Research parse data on wages and occupations from 1980 to 2010. They find that as more women attended and graduated college and headed into the working world, education and professional experience levels stopped playing a significant role in the the difference between men and women’s wages. Whatever remains of the discrepancy can’t be explained by women not having basic skills and credentials. So what does explain it?
When four American women were murdered during El Salvador’s dirty war, a young U.S. official and his unlikely partner risked their lives to solve the case.
On December 1, 1980, two American Catholic churchwomen—an Ursuline nun and a lay missionary—sat down to dinner with Robert White, the U.S. ambassador to El Salvador. They worked in rural areas ministering to El Salvador’s desperately impoverished peasants, and White admired their commitment and courage. The talk turned to the government’s brutal tactics for fighting the country’s left-wing guerrillas, in a dirty war waged by death squads that dumped bodies in the streets and an army that massacred civilians. The women were alarmed by the incoming Reagan administration’s plans for a closer relationship with the military-led government. Because of a curfew, the women spent the night at the ambassador’s residence. The next day, after breakfast with the ambassador’s wife, they drove to San Salvador’s international airport to pick up two colleagues who were flying back from a conference in Nicaragua. Within hours, all four women would be dead.
The hit new indie release is the opposite of action-packed, yet it’s compelling in its simplicity.
Solitude, it turns out, can be addictive. So I learned playing the new hit indie game Firewatch, where all the action amounts to you, the player, being alone in the woods. You’re a lookout assigned to a summer posting in the Shoshone National Forest of Wyoming in 1989, meaning your job consists of nothing more than wandering around, clearing brush, and calling in any fires you might spot. Most video games equip you with tools and weapons, complex missions, and action sequences. All Firewatch gives you is a map, a compass, and a walkie-talkie—but it’s still one of the most compelling video games I’ve ever played.
It’s the latest in a quiet movement of video games, more psychological products that tap into the atmosphere and wonder of loneliness rather than looking for the simpler thrills the medium usually provides. It’s tempting to trace this trend’s origins back to Minecraft, which launched in 2009 and became a worldwide phenomenon on the back of its extraordinary simplicity. But in Minecraft, you start armed only with your bare hands in a world of monsters, and can eventually upgrade into a city-builder armed with powerful tools. Firewatch is a more intimate affair: a short story, playable over a few hours, that succeeds first and foremost as an emotional experience.
If Bernie Sanders is serious about a political transformation in America, he needs a better plan.
If there’s one thing that fires up Bernie Sanders supporters—and makes his detractors roll their eyes—it’s his call for a “political revolution.” To his base, it’s the very point of his anti-establishment, anti-elite candidacy. To his critics, it’s the very embodiment of his campaign’s naïve impracticality and vagueness.
But now that voters in Iowa and New Hampshire have spoken, it’s time to take the idea of political revolution more seriously—more seriously, indeed, than Sanders himself appears to have. It’s time to ask: What exactly would it take?
It starts with Congress. And here it’s instructive to compare Sanders and Donald Trump. Both rely on broad, satisfying refrains of “We’re gonna”: We’re gonna break up the big banks. We’re gonna make Mexico build the wall. We’re gonna end the rule of Wall Street billionaires. We’re gonna make China stop ripping us off.