market folly

Lee Cooperman, founder of hedge fund firm Omega Advisors, last month gave a presentation entitled, "Observations regarding: life, hedge funds, the investment outlook" at Roger Williams University.  Here are some of the highlights:


On Hedge Funds

- If you produce the returns, you'll grow.  What separates the men from the boys is how you do during periods of adversity

- He again detailed his characteristics of an outstanding analyst or portfolio manager 

- He tries to make money in 5 ways: market direction,  asset allocation (stocks versus bonds), undervalued stocks on the long side, sell stocks short. and macro investing (and he candidly mentioned the egregiously high fee structure that hedge funds use as well)

- "Eat your own cooking" i.e. your capital is aligned with that of your investors


On Investment Outlook

- Moderately constructive US equity market view: no recession in forecast horizon, monetary policy accomodative, valuation reasonable, investors have derisked

- "Stocks are the best house in the financial asset neighborhood - it is still not clear whether it's a good or bad neighborhood."  He touched on this at the Delivering Alpha panel as well

-  China is slowing more than expected and needs to be monitored carefully

- Factors needed for self-sustaining economic expansion: improving employment, pent up consumer demand, improving consumer balance sheet, pent up demand for houses, home prices stabilizing, positively sloped interest rate yield curve, growth in bank lending, excess liquidity, strong corporate balance sheets, absence of metrics foreshadowing recession

- Government bonds unattractive

- "The stock market does whatever it has to do to confound the largest number of investors."  Large de-risking over past few years as institutions move to bonds from equities, so the max pain trade is equities moving significantly higher


On Life

- Four observations: 1. there's nothing more important than family, 2. it's great to have friends but you have to be one, 3. never do anything that you'd be embarassed about if it appeared in the paper, and 4. when you've achieved success then share with others less fortunate

- Find something you like and pursue it

- He says getting an advanced degree (MBA) is what helped him get in the door on Wall Street

- 'Obsession': the word he uses to describe his approach to investing

- The harder he works, the luckier he got.  To be successful, you have to make sacrifices.  "It doesn't matter whether you are a lion or a gazelle; when the sun comes up you'd better be running."

- Surround yourself with the most able people and don't be threatened by them

- Respect people even if they can't do anything for you


Embedded below is the video of Cooperman's hour-long presentation:



For more on this manager, be sure to check out Cooperman's 14 attributes that make a good portfolio manager.