Back in 2002 and even before, when Eliot Spitzer, Attorney General of New York, was a rising political star it was frowned upon to say one thing publically and do just the opposite behind the scenes. At the time, Merrill Lynch’s hot shot, high profile internet guru and analyst, Henry Blodgett, was being accused of touting to the public the worthiness of the high flying .com but privately, around the water cooler, dismissing them as “GARBAGE”.
The companies under Blodgett’s domain were giving Merrill Lynch millions of dollars of investment banking business so the benefits of misleading the public were obvious.
One of Blodgett’s “favorite 15”, the internet search company, InfoSpace, was publically touted but privately being called by Blodgett a “powder keg” and a “piece of junk”. Investors following Blodgett’s advice got into the stock in March of 2000 at $132.00 and out in 2002 at $1.46. The lesson for Henry and his cronies was don’t put your true thoughts into an e-mail. The lesson for investors, however, was totally different.
Several years later the antics of the past keep coming front and center. Most recently T. Boone Pickens proclaimed that oil would rebound to at least $70 by the end of 2016. His proclamation of $100 by 2015 seemed to be a bit off the mark but there really is no harm in being wrong. However, CNBC in total non-disclosure did not make it public that T. Boone Pickens’ proclamation of $70 all came on the heels of his total liquidation of his oil position. T. Boone, if you are trying to convince the public to buy why are YOU selling?
Now we learn that David Tepper, Appaloosa’s guiding light, while proclaiming publically on Bloomberg at the end of the 4th quarter of 2015, that for investors of all sizes “it might be a good time to take money off the table” which means for the majority SELL and for a select few others SHORT. So what did Tepper do? Or did he even follow his own advice? Appaloosa’s 13-5 as of September showed a long notional position of 2.9 billion, however, by year end it had increased by 75% to 5 billion. It appears that David was convincing you to get OUT, or SHORT, while he was getting in to enjoy the year end rally.
Being wrong is one thing, to benefit by convincing others to take a direction even though you know it’s opposite to what you are doing could simply be called criminal or maybe even a “Blodgett”.
Where is Eliot Spitzer when you really need him?
Oops, that’s another story!
PS Turn off the tube and watch what they do, not what they say. That’s your lesson.