Fannie, Freddie Permitted to Boost Capital Cushions by Billions

Fannie, Freddie Permitted to Boost Capital Cushions by Billions

So the world was watching Calabria’s Twitter feed last night with bated breath, and this is what we got:

https://twitter.com/markcalabria/status/1178404592775766017?s=21

Funny guy – the comments are even funnier! 

Thankfully, Treasury/FHFA followed it up this AM with the real deal (see article below) and officially ended the Net Worth Sweep after 7 years of stripping these capital structures bare.  They are now allowed to retain up to a combined $45 bn of capital (up from the de minimus $6 bn).  This was very well-telegraphed into the market, so I don’t expect any trading fireworks from this alone; nevertheless, IT IS A BIG DEAL. 

It means that Treasury/FHFA are serious about allowing the GSE’s to retain capital, and ending the Net Worth Sweep is a necessary precondition for what must come after if the goal is to eventually build enough capital cushion to compete with banks.  I estimate this number to be close to $150 bn- $200 bn – a number that can only be reached by raising new private capital, and I’ve maintained for the last 11 years that one can’t raise new private capital if one eviscerates the old private capital (our junior preferreds). 

What happens next?  I see today’s announcement as a big first step to a more comprehensive plan.  There was no mention today of the senior preferreds, but I expect this liquidation preference of $190 bn to be increased (I’m guessing ~$250 bn) to compensate Treasury for the cost of an explicit guarantee over the last 11 years.  But then I expect that they will deem this number fully repaid, since Treasury has already swept ~$310 bn during conservatorship. 

Next, I expect Treasury/FHFA to settle the myriad outstanding shareholder lawsuits, especially now that the recent 5th Circuit decision gives shareholders significant judicial momentum.  The writ of certiorari I opened about in my last email adds additional pressure by bring this matter before the SCOTUS. 

Finally, when the capital structures and shareholder lawsuits are cleaned up, I expect Treasury/FHFA to commence the capital raising part.  This is unlikely to happen until end of 2020 at the earliest, coinciding with the Presidential election.  I expect that the Trump Administration will tout the successful recapitalization as a political win: “preserving the 30-year mortgage and home affordability for the masses.”

Stay tuned…

Meanwhile, here is an article about this:

Fannie, Freddie Allowed to Boost Capital by Billions

 

 

Copyright

© 2019-2020 Akanthos Capital Management, LLC. All rights reserved. Protected by copyright laws of the United States and international treaties. This website may only be used pursuant to the subscription agreement and any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), in whole or in part, is strictly prohibited without the express written permission of Akanthos Capital Management, LLC.

About

Kaoboy Musings is a private distribution list/blog that I created to encourage dialogue regarding the economy & markets, geopolitics, investment ideas, and life in general. I have a passion for the markets and investing, and even though I no longer accept investor capital, I try to keep current on global events and opportunities and remain active in the markets.  I’ve always found that writing my ideas down, sharing them with smart people, and encouraging two-way discourse and devil’s advocacy is often the best way to validate or invalidate a thesis and stay mentally flexible.

Disclaimer

Akanthos Capital Management, LLC (“Akanthos”) is an exempt reporting investment adviser with the state of California.  This message is for informational and professional purposes only, cannot be distributed without express written consent, and does not constitute advice, an offer to sell, or a solicitation of an offer to buy any securities and may not be relied upon in connection with any offer or sale of securities.  The contents of this message should not be relied upon in making investment decisions.  The information and statistical data contained herein have been obtained from sources that we believe to be reliable but in no way are warranted by us as to accuracy or completeness.  The accompanying performance statistics are based upon historical performance and are not indicative of future performance.  The types of investments discussed do not represent all the securities purchased, sold, or recommended for clients.  You should not assume that investments in the securities or strategies identified and discussed were or will be profitable.  While many of the thoughts expressed in this message are stated in a factual manner, the discussion reflects only Akanthos’ beliefs about the financial markets in which it invests portfolio assets.  The descriptions herein are in summary form, are incomplete and do not include all the information necessary to evaluate an investment in any investment or strategy.

Market Musings / GSE Gyrations / Book Recommendations

 

Market Musings

It’s been an interesting week on a number of fronts. Markets chopped around and ended generally on a weaker note, likely due to the following factors:

  • Impeachment concerns around the Ukrainian controversy
  • Lack of progress on China trade talks and new talk of limiting investment flows into China
  • Weak market reception to the high-profile Peloton IPO (not to mention the shelving of the WeWork IPO)
  • A 20% drop in Bitcoin, as yet another barometer of “risk off” sentiment in speculative instruments
  • A collapse of oil prices back to pre-Saudi attack levels due to earlier-than-anticipated restoration of output as well as rumors of easing Iran sanctions
  • Continued collapse of streaming stocks like NFLX and ROKU

In my humble opinion, none of these factors are terminal to this market, and I find myself somewhat in the minority these days in terms of believing that the economy remains in decent shape and that a recession is not imminent.  Anecdotally, I generally hear that business fundamentals remain strong (if not gangbusters) amongst my peer group – even as there is a generally pervasive “wall of worry” of imminent recession simply due to the duration of the current expansion.  Although manufacturing has slowed appreciably due to trade concerns, the consumer remains strong, the Fed has become accommodative again, and I believe there will be a trade resolution prior to 2020 elections. 

The duration of the expansion does not concern me because the intensity of the expansion for the bulk of this 11-year period has been very tepid – although there are certainly bubbles in sub-sectors of the market, I simply don’t see an atmosphere of “irrational exuberance” across-the-board.  Picture yourself stretching one of those resistance bands at the gym – as long as you’re not holding this pose with maximum tension, you can probably hold the pose for a very long time.  That is how I see this economy currently.

In fact, as a “value investor,” I would say there are as many pockets of cheapness and value as there are of “giddiness” – the energy sector, for instance, is at multi-decade lows in terms of valuations.  Last I checked, market busts aren’t usually heralded by relatively healthy business and economic fundamentals coupled with “wall of worry” concerns that inherently stymie overconfidence and overcapacity – it’s usually exactly the opposite mix of these factors that we need to worry about.

  

GSE Gyrations

Enough macro talk, and onto some “micro” talk about my current favorite investment idea – the Fannie/Freddie preferreds. 

Although the market awaits the “Big Kahuna End of Net Worth Sweep” press release with bated breath, nothing has hit the tape yet.  I got some questions as to why these got hit earlier in the week only to rally back by end of week.  First, let me say that as an 11-year holder of these securities, I’m about as inured to volatility in these as I believe the market has become inured to impeachment talk!  

Nevertheless, my best explanation for the initial selloff is that impeachment concerns engendered a “risk off” move in the markets and these prefs specifically because the recapitalization plan is generally a Trump Treasury/FHFA-backed plan.  Certainly, a successful impeachment of Trump or a Trump loss in 2020 has the potential to slam these – although I’ve opined in the past that the market reality of unwinding the GSE’s will prove unpalatable to any Administration.

Then, on Wednesday, the plaintiff attorneys in the Collins case that recently “won” the 5th Circuit decision filed an unexpected writ of certiorari to the Supreme Court, which I read to accomplish the following:

  1. It attempts to preempt a remand/appeal by the Defendants and accelerates the timing of an outcome, creating max pressure for the Treasury/FHFA to settle
  2. It opens a new battlefront directly to the SCOTUS by attempting to insert the Plaintiffs’ assertion (that the FHFA is unconstitutionally structured) in front of the highest court because of another case before the SCOTUS regarding the constitutionality of another regulatory body, the CFPB
  3. It still keeps the option alive in the lower courts

Bottom-line: this was an unexpectedly aggressive tactic coming from the Plaintiffs, but one that is very smart in my opinion. 

Book Recommendations

Lastly, because I’m a huge fan of Charlie Munger’s idea that one must have “multiple mental models” to be a good investor, I’m going to share some periodic book reviews/synopses from my admittedly eclectic reading list. Here are a couple of my favorites of the year so far:

Endurance: Shackleton’s Incredible Voyage by Alfred Lansing

Incredible true account of Ernest Shackleton’s doomed expedition to Antarctica in 1914 and the amazing story of grit, leadership and the will to survive against seemingly impossible odds.  Very engrossing and quick read.

The Silk Roads: A New History of the World by Peter Frankopan

I read this earlier this summer en route to the heart of Turkey for our family summer trip.  I generally like to read something topical to where we visit, and this was a phenomenal book about the importance of geography.  Of particular interest to me (due to my trip) was how and why Constantinople held such an important role in world history due to its geographic position straddling Europe and Asia.

Prisoners of Geography by Tim Marshall

Continuing down this theme of the importance of geography, I found this gem of a book which takes you around the globe and frames age-old conflicts and modern geopolitics in geographical terms. Fascinating to see how geography plays a huge role in a lot of current world conflicts like Russia/Ukraine, India/Pakistan, the instability in the Middle East, etc.

The Happiness Curve: Why Life Gets Better After 50 by Jonathan Rauch

Although I’m not yet 50, I guess I’m already prepping for it!  This is somewhat of a dense read, but I found it fascinating nonetheless.  In short, the author cites clear statistical evidence that happiness follows a U-shaped curve, starting off high during youth when “the world is your oyster,” declining into middle-age ostensibly due to unrealistic expectations gaps as well as biological reasons, and then rounding the corner and going back into the highs thereafter – surprisingly even in infirm old-age situations.  Apparently, this pattern generally holds true across geographies, ethnicities – and even in other primates.  To my middle-aged friends – we all have something to look forward to!

‘Til next time…

 

Copyright

© 2019-2020 Akanthos Capital Management, LLC. All rights reserved. Protected by copyright laws of the United States and international treaties. This website may only be used pursuant to the subscription agreement and any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), in whole or in part, is strictly prohibited without the express written permission of Akanthos Capital Management, LLC.

About

Kaoboy Musings is a private distribution list/blog that I created to encourage dialogue regarding the economy & markets, geopolitics, investment ideas, and life in general. I have a passion for the markets and investing, and even though I no longer accept investor capital, I try to keep current on global events and opportunities and remain active in the markets.  I’ve always found that writing my ideas down, sharing them with smart people, and encouraging two-way discourse and devil’s advocacy is often the best way to validate or invalidate a thesis and stay mentally flexible.

Disclaimer

Akanthos Capital Management, LLC (“Akanthos”) is an exempt reporting investment adviser with the state of California.  This message is for informational and professional purposes only, cannot be distributed without express written consent, and does not constitute advice, an offer to sell, or a solicitation of an offer to buy any securities and may not be relied upon in connection with any offer or sale of securities.  The contents of this message should not be relied upon in making investment decisions.  The information and statistical data contained herein have been obtained from sources that we believe to be reliable but in no way are warranted by us as to accuracy or completeness.  The accompanying performance statistics are based upon historical performance and are not indicative of future performance.  The types of investments discussed do not represent all the securities purchased, sold, or recommended for clients.  You should not assume that investments in the securities or strategies identified and discussed were or will be profitable.  While many of the thoughts expressed in this message are stated in a factual manner, the discussion reflects only Akanthos’ beliefs about the financial markets in which it invests portfolio assets.  The descriptions herein are in summary form, are incomplete and do not include all the information necessary to evaluate an investment in any investment or strategy.

Fannie/Freddie Prefs vs. Common?

Fannie/Freddie Prefs vs. Common?

Following up my writeup on the GSE preferreds, I’ve attached 2 research reports, one that favors the common stocks (FNMA/FMCC) and one that favors the preferred stocks (my view).

The first report argues that the upside of the common stocks far exceeds the potential upside of the prefs and was put out by Whitney Tilson’s Empire Investment Report (https://empirefinancialresearch.com), a paid subscription service that I have no affiliation with aside from the fact that I am friends with Whitney and that it was at his Value Investing Congress that I initially presented on this topic in 2011.  He has given me special permission to share this with you, because he also interviewed me in this issue. 

The second report was put out by Dick Bove at Odeon and suggests that the preferreds are the better way to play.  I share this view.

Whereas there certainly exist scenarios where the common upside outstrips the upside on the preferred, I believe there is an equally likely chance of a recapitalization scenario that effectively converts the pref into common, resulting in massive dilution at the common level and uncapping the upside to the preferred far beyond par.  I do not really see a scenario where prefs somehow get screwed in favor of the common.  Currently, the combined market caps of the two common stocks (FNMA and FMCC) total almost $34 bn, whereas the combined market caps of all 40 preferred stocks total only $16.3 bn on almost $34 bn par amount.  This makes no sense to me – imho, I think either the common should be much lower, or the prefs should be much higher.  We shall see.

  

Copyright

© 2019-2020 Akanthos Capital Management, LLC. All rights reserved. Protected by copyright laws of the United States and international treaties. This website may only be used pursuant to the subscription agreement and any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), in whole or in part, is strictly prohibited without the express written permission of Akanthos Capital Management, LLC.

About

Kaoboy Musings is a private distribution list/blog that I created to encourage dialogue regarding the economy & markets, geopolitics, investment ideas, and life in general. I have a passion for the markets and investing, and even though I no longer accept investor capital, I try to keep current on global events and opportunities and remain active in the markets.  I’ve always found that writing my ideas down, sharing them with smart people, and encouraging two-way discourse and devil’s advocacy is often the best way to validate or invalidate a thesis and stay mentally flexible.

Disclaimer

Akanthos Capital Management, LLC (“Akanthos”) is an exempt reporting investment adviser with the state of California.  This message is for informational and professional purposes only, cannot be distributed without express written consent, and does not constitute advice, an offer to sell, or a solicitation of an offer to buy any securities and may not be relied upon in connection with any offer or sale of securities.  The contents of this message should not be relied upon in making investment decisions.  The information and statistical data contained herein have been obtained from sources that we believe to be reliable but in no way are warranted by us as to accuracy or completeness.  The accompanying performance statistics are based upon historical performance and are not indicative of future performance.  The types of investments discussed do not represent all the securities purchased, sold, or recommended for clients.  You should not assume that investments in the securities or strategies identified and discussed were or will be profitable.  While many of the thoughts expressed in this message are stated in a factual manner, the discussion reflects only Akanthos’ beliefs about the financial markets in which it invests portfolio assets.  The descriptions herein are in summary form, are incomplete and do not include all the information necessary to evaluate an investment in any investment or strategy.

Welcome to Kaoboy Musings! / Fannie/Freddie explained in detail

Welcome to Kaoboy Musings!

What started as an informal distribution list to my friends & family regarding the economy & markets has evolved into a blog about the markets, the economy, and life in general.  I hope you will find the posts relevant and impactful.  

After 22 years in the hedge fund business (17 of them at my own firm), I decided to close my fund to outside investors and focus primarily on managing my own money.  Despite "retiring," I still have a passion for following the markets and economy and enjoy expressing my ideas and opinions.  I may, from time to time, opine on an investment idea or theme that I am involved in and invite your devil's advocacy.

I’ve always found that writing my ideas down, sharing them with smart people, and encouraging dialogue and critique is often the best way to validate or invalidate a thesis and to stay mentally nimble.  As a firm believer in Charlie Munger's concept of having "multiple mental models," I am a prolific reader about a broad swath of topics and will include occasional content reviews as well.

With that in mind, I encourage you to be vocal in the forums and share your views!

  

Fannie/Freddie explained in detail

As some of you know, I mentioned an interesting opportunity a week or two ago: Fannie and Freddie “junior” preferred stocks.  Here’s the quick recap:

Thesis: I think there is a decent chance of a double or more in the next 12-18 mos. 

There are about 40 different issues totaling about $34 bn face amount, and they currently trade at roughly 50% of par, although there are differences based upon issue size and liquidity.  The most liquid are FNMAS and FMCKJ that trade around $13.50 (54% of $25 par amount).  There are less liquid ones (which I currently own) like FNMFO, FNMAG, FMCKK, etc. that trade at lower % of par (like 45%), but they are much harder to trade. 

In the name of full disclosure, I have owned these for 11 years since the conservatorship post-2008 at a basis of 2-3% of par, but it has been a long road that is finally (hopefully) coming to an end soon, given that the Trump Admin wants to have a win that does not require Congress, and recapitalizing Fannie/Freddie could be that win.

Here is a full list of tickers and current prices:

Fannie Prefs
 
Par/Unit Par % Mkt Px
Ticker ($) (%) ($)
FNMAT $           25 52.1% $     13.02
FNMAS $           25 53.8% $     13.45
FNMAJ $           25 50.0% $     12.50
FNMFN $           50 47.2% $     23.60
FNMAI $           25 50.6% $     12.65
FNMAM $           50 46.2% $     23.10
FNMAK $           50 46.1% $     23.06
FNMFO $   100,000 45.6% $    45,627
FNMAG $           50 46.8% $     23.40
FDDXD $           50 46.8% $     23.40
FNMAN $           50 46.0% $     23.00
FNMFM $           50 45.9% $     22.94
FNMAL $           50 46.3% $     23.15
FNMAH $           25 49.6% $     12.40
FNMAP $           50 46.5% $     23.25
FNMAO $           50 45.8% $     22.90

Freddie Prefs
 
Par/Unit Par % Mkt Px
Ticker ($) (%) ($)
FMCKJ $           25 52.8% $     13.19
FMCKI $           25 48.8% $     12.20
FMCCT $           50 46.2% $     23.10
FMCKL $           25 49.9% $     12.48
FMCCP $           50 46.0% $     23.00
FMCKO $           25 47.4% $     11.85
FREJN $           50 44.8% $     22.40
FREGP $           50 44.8% $     23.14
FMCCO $           50 46.3% $     23.14
FMCCK $           50 46.0% $     23.00
FMCKP $           50 46.6% $     23.30
FMCKN $           25 47.8% $     11.95
FMCKM $           25 48.8% $     12.20
FREJP $           50 45.2% $     22.60
FREJO $           50 44.9% $     22.45
FMCCH $           50 45.6% $     22.80
FMCKK $           50 45.7% $     22.85
FMCCS $           50 43.9% $     21.94
FMCCG $           50 43.0% $     21.50
FMCCI $           50 43.1% $     21.55
FMCCN $           50 43.0% $     21.50
FMCCL $           50 43.5% $     21.75
FMCCJ $           50 43.9% $     21.96
FMCCM $           50 43.2% $     21.60

Summary of events:

September, 2008 – Treasury Secretary Paulson put Fannie and Freddie into conservatorship in the name of forestalling a crisis of confidence (I wrote several articles back then for thestreet.com that took the opposite view – that Treasury’s actions exacerbated the crisis).  In one fell swoop, Treasury stopped paying dividends on $36 bn worth of AA- rated preferred and crushed them down to 2-3c on the dollar.  I bought them then, because I thought they represented “perpetuity options” – options on recovery with no imminent expiration date because: 1) Fannie and Freddie represent systemically important institutions that are nearly impossible to replicate, 2) our country is predicated on the rule of law and private property.  The US government would eventually inject ~$190 bn of senior preferred ahead of the juniors with a 10% dividend to the US Treasury – never mind the fact that TARP-rescued banks only paid 5%.  The FHFA was appointed the “conservator,” which traditionally means a role that conserves assets and rehabilitates its wards.  Instead, FHFA/Treasury plundered the assets of the institutions they were supposed to conserve.

May, 2011 -- I pointed out the unfairness of the situation in a presentation (attached) I made at the Value Investing Congress, where I recommended these junior prefs at 6-7% of par.  I predicted that despite the massive burden of the 10% dividend to government, these companies would begin to start making profits large enough to overcome these onerous dividends and then some.

August, 2012 – Right after Freddie Mac announced blowout Q2 profits over and above their 10% dividend burden, Treasury Secretary Geithner enacted the infamous Third Amendment, or Net Worth Sweep, that replaced the 10% dividend with a 100% sweep of profits to Treasury – with no termination date and with no consideration to shareholders!  Needless to say, this engendered a veritable onslaught of shareholder lawsuits that are still plodding through our judicial system to this day.  Throughout the years, these prefs have been on a roller-coaster ride, dictated by the ups and downs of various lawsuits.  Notably, Judge Lamberth’s ruling in 2014 dealt shareholders a significant blow early on in the cases; this precedent has basically been on appeal for years in multiple jurisdictions – more on this later.

Meanwhile, the Net Worth Sweep has continued; to date, the US Treasury has swept nearly $310 billion from the capital structures of Fannie and Freddie, and not one cent of the $190 bn of senior pref ahead of the juniors has been deemed repaid, nor have junior prefs received one cent of dividend or compensation of any kind.  We are used to seeing governmental plundering like this in countries like Venezuela, but certain not the United States.  The result is that these mortgage giants are truly too big to fail – on a $5 trillion mortgage guarantee book, they only have a razor-thin $3 bn of capital cushion due to these relentless profit sweeps.  By contrast, most banks keep $1 in reserves for every $9-$10 in liabilities.  Also by contrast, the longest bank conservatorship last 18 months; here, we are going on 12 years!

Why are the prefs interesting NOW?

Earlier this year, the term of Obama-era FHFA Director Mel Watt ended, and the Trump Administration appointed its own FHFA Director Mark Calabria.  This is significant, because Dr. Calabria comes from the world of mortgage finance and understands the need to recapitalize these entities.  Treasury Secretary Mnuchin also comes from a mortgage finance background, and his appointment was heralded by pref shareholders initially with great fanfare; that fanfare turned to disappointment in recent years due to his inaction so far in halting the Net Worth Sweep.  I believe that this inaction was due to the fact that he lacked political cover to do so, as the last several years saw many (failed) Congressional proposals to wind down Fannie & Freddie, not to mention less-than-favorable court rulings in multiple jurisdictions due to the Lamberth precedent. 

All of these negative factors, however, are suddenly lifting, and I think the market is so inured and jaded by this 11-year long trade that the market is overlooking an incredible opportunity.

In my May, 2011 presentation, I outlined several potential remedies that the government could undertake to recapitalize and eventually release these companies from conservatorship.  I was very excited to see that Treasury/FHFA just released a comprehensive blueprint earlier this month (9/4/19) that contemplates a range of remedies not dissimilar to the ones I espoused 8 years ago. 

Perhaps even more significantly, on 9/6/19, the 5th Circuit delivered a surprise ruling in favor of shareholders on appeal from the Collins case from the Southern District of Texas; the 5th Circuit ruled the Net Worth Sweep unconstitutional and remanded to the lower court for remedies.  On 9/10/19, both Mnuchin and Calabria testified before Congress regarding this blueprint.  Although the 5th Circuit decision was not mentioned, I believe it has finally given Mnuchin/Calabria the political cover they need to end the Net Worth Sweep.  Also significant is the fact that the hearing seemed to garner bipartisan support to recapitalize these entities – a far cry from the die-hard “GSE wind-down” voices heard just a few years ago.  Indeed, Calabria gave an interview on 9/16/19 (https://twitter.com/FHFA/status/1173649117408583680) where he not only confirmed his intention to end the Net Worth Sweep, but provided hints on timing.

Upside/Downside

I believe the upside from here is 100%+.  How can these go above par and yield returns greater than 100%?  If you take a look at page 32 of my May, 2011 presentation, I laid the framework then for potential recapitalization scenarios that would effectively make these prefs the new equity of the recapitalized entity.  I think Treasury/FHFA is contemplating some scenarios that resemble this one.

What could go wrong?  At the end of the day, I believe this is a medium/medium-high risk trade with political risk as the key risk.  The government has stretched this process out for 11 years, and any news of delays could knock these lower.  The real risk lies in a Trump loss in 2020, because a Democratic President like Elizabeth Warren is much more likely to fire Calabria, install their own FHFA Director, and push for dissolution of the GSE’s -- even though market realities of major disruptions in the mortgage market would likely preclude this outcome in my view.  Even in this scenario, I don’t think prefs will get completely wiped out, but could they trade off 50% based on the process “going back to square one”?  Sure – I have lived through many years of ups and downs on this one, but have held on because I ultimately believe there is no viable solution but to recapitalize and release these entities.

. . .

I have attached 1) a 2014 interview I did where I talk extensively on this thesis (pages 4-5), and 2) my May, 2011 presentation at the Value Investing Congress.

Here is an additional list of articles/interviews I did throughout the years on the GSEs:

I will end it here and invite your feedback!

Copyright

© 2019-2020 Akanthos Capital Management, LLC. All rights reserved. Protected by copyright laws of the United States and international treaties. This website may only be used pursuant to the subscription agreement and any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), in whole or in part, is strictly prohibited without the express written permission of Akanthos Capital Management, LLC.

About

Kaoboy Musings is a private distribution list/blog that I created to encourage dialogue regarding the economy & markets, geopolitics, investment ideas, and life in general. I have a passion for the markets and investing, and even though I no longer accept investor capital, I try to keep current on global events and opportunities and remain active in the markets.  I’ve always found that writing my ideas down, sharing them with smart people, and encouraging two-way discourse and devil’s advocacy is often the best way to validate or invalidate a thesis and stay mentally flexible.

Disclaimer

Akanthos Capital Management, LLC (“Akanthos”) is an exempt reporting investment adviser with the state of California.  This message is for informational and professional purposes only, cannot be distributed without express written consent, and does not constitute advice, an offer to sell, or a solicitation of an offer to buy any securities and may not be relied upon in connection with any offer or sale of securities.  The contents of this message should not be relied upon in making investment decisions.  The information and statistical data contained herein have been obtained from sources that we believe to be reliable but in no way are warranted by us as to accuracy or completeness.  The accompanying performance statistics are based upon historical performance and are not indicative of future performance.  The types of investments discussed do not represent all the securities purchased, sold, or recommended for clients.  You should not assume that investments in the securities or strategies identified and discussed were or will be profitable.  While many of the thoughts expressed in this message are stated in a factual manner, the discussion reflects only Akanthos’ beliefs about the financial markets in which it invests portfolio assets.  The descriptions herein are in summary form, are incomplete and do not include all the information necessary to evaluate an investment in any investment or strategy.

Welcome to Kaoboy Musings!

Welcome to Kaoboy Musings!

What started as an informal distribution list to my friends & family regarding the economy & markets has evolved into a blog about the markets, the economy, and life in general.  I hope you will find the posts relevant and impactful.  

After 22 years in the hedge fund business (17 of them at my own firm), I decided to close my fund to outside investors and focus primarily on managing my own money.  Despite "retiring," I still have a passion for following the markets and economy and enjoy expressing my ideas and opinions.  I may, from time to time, opine on an investment idea or theme that I am involved in and invite your devil's advocacy.

I’ve always found that writing my ideas down, sharing them with smart people, and encouraging dialogue and critique is often the best way to validate or invalidate a thesis and to stay mentally nimble.  As a firm believer in Charlie Munger's concept of having "multiple mental models," I am a prolific reader about a broad swath of topics and will include occasional content reviews as well.

With that in mind, I encourage you to be vocal in the forums and share your views!

  

Copyright

© 2019-2020 Akanthos Capital Management, LLC. All rights reserved. Protected by copyright laws of the United States and international treaties. This website may only be used pursuant to the subscription agreement and any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), in whole or in part, is strictly prohibited without the express written permission of Akanthos Capital Management, LLC.

About

Kaoboy Musings is a private distribution list/blog that I created to encourage dialogue regarding the economy & markets, geopolitics, investment ideas, and life in general. I have a passion for the markets and investing, and even though I no longer accept investor capital, I try to keep current on global events and opportunities and remain active in the markets.  I’ve always found that writing my ideas down, sharing them with smart people, and encouraging two-way discourse and devil’s advocacy is often the best way to validate or invalidate a thesis and stay mentally flexible.

Disclaimer

Akanthos Capital Management, LLC (“Akanthos”) is an exempt reporting investment adviser with the state of California.  This message is for informational and professional purposes only, cannot be distributed without express written consent, and does not constitute advice, an offer to sell, or a solicitation of an offer to buy any securities and may not be relied upon in connection with any offer or sale of securities.  The contents of this message should not be relied upon in making investment decisions.  The information and statistical data contained herein have been obtained from sources that we believe to be reliable but in no way are warranted by us as to accuracy or completeness.  The accompanying performance statistics are based upon historical performance and are not indicative of future performance.  The types of investments discussed do not represent all the securities purchased, sold, or recommended for clients.  You should not assume that investments in the securities or strategies identified and discussed were or will be profitable.  While many of the thoughts expressed in this message are stated in a factual manner, the discussion reflects only Akanthos’ beliefs about the financial markets in which it invests portfolio assets.  The descriptions herein are in summary form, are incomplete and do not include all the information necessary to evaluate an investment in any investment or strategy.