Grubstakers - Episode 101: Dan Loeb feat. Brad from Hedge Clippers

Episode Date: September 24, 2019

This week we're joined by Brad from hedgeclippers.org to discuss billionaire "activist investor" Daniel S. Loeb. Hear how he built his hedge fund fortune from small time message board pump and dumps to being one of the big players extorting companies into laying off workers and asset stripping themselves in order to give him a payday. We also discuss how in 2002 Dan Loeb was traveling in Cuba and hit a child with his car and nobody knows what happened to the child. So Dan Loeb's attorneys if you're reading this: please just tell us where the kid is. For more information on Hedge Fund and Private Equity billionaires check out http://hedgeclippers.org/ The economist Jang-Sup Shin is actually a "he" not a "she" as Sean refers to them but here is his piece on how regulatory changes have made activist investors like Dan Loeb predatory value extractors. Also the shark in formaldehyde is by Damien Hurst not Jeff Koons so sorry about that one too: https://www.nakedcapitalism.com/2018/08/hedge-fund-activists-coopted-shareholder-democracy.html

I want to be held accountable for what I'm doing. This may sound like an exaggeration, but it was like the 9-11 of my career and certainly of making kombucha. Jesus is smart this idea of income inequality that always strikes me as a very it's a deceptive term income inequality well let's flip it around it comes from outcome inequality in five four three two welcome back to grstakers, the podcast about billionaires. My name is Sean P. McCarthy, and I'm joined by my team of investigative journalists. Andy Palmer.

Steve Jeffers. And so today we're talking... Yogi couldn't join us. He's meeting with our CIA handler, and it ran a bit long. So today we're talking about Daniel Loeb is a hedge fund billionaire. According to Forbes, he's worth about $2.9 billion as of September 2019. And I'm very much excited about this episode because we're joined by a man from a research firm publication that we have relied on a lot in the past. I'm talking about hedge clippers.

A lot of the episodes we've done, I've relied on research from Hedge Clippers. And so I'm very thrilled today to be joined by Brad from Hedge Clippers. Hey, hey. Thank you for being here. Thank you. And I guess for those listeners who are not aware, could you explain what Hedge Clippers is, what it does? Is it a research firm? Am I messing that up already? So Hedge Clippers is an effort to hold to account the financial industry and specifically the hedge fund and private equity folks. It started when a whole bunch of unions and progressive organizations

got together and realized that we were all fighting the same people and that we should centralize some information about them because they, you know, the hedge fund billionaires, the private equity billionaires, they fund all the politicians that we hate. They, you know, they do all of the, you know, corporate restructuring that results in job loss that we oppose and they get to hide behind their relative anonymity. And so this was an effort to kind of raise their profile and make them known and talked about, just like you guys are doing. Yeah.

Well, you're forgetting the most important thing Hedge Clippers does, which is reduce the amount of research time for me from four to two hours per episode. Right on. Yeah. A lot of good backstory on the from four to two hours per episode. Right on. Yeah. A lot of good backstory on the redhead from Billions, too. Well, we might talk about Billions a little bit in this episode, because Daniel Loeb definitely engages

in some Billions tactics. You know, not the Paul Giamatti kind. But I guess I wanted to ask you, Brad, because you did suggest we do this episode on Daniel Loeb. I need you to pee on me. You did suggest we do this episode on Daniel Loeb, and it was very interesting for me to do some research on him. But I wanted to start by asking you, why did you pick Daniel Loeb? What interests you about the guy?

Why do you think he's fascinating or worth studying or an example of what is wrong with American finance? Yeah, sure So I think lobe is interesting because he's an activist investor and I think activist investing is one of the sort of It's a strategy that hedge funds use and it's a strategy that's very pernicious It has a lot of effects that hurt Main Street and help Wall Street. So when activists go out and take a position in a company, what they're often trying to do is to get that company to give the investors a whole bunch of money that would otherwise be used for their operations, that would otherwise go into R&D.

And basically, for short-term profits, they're sapping our country and our economy of its long term sustainability. Yeah, and I think that's a good transition, because we should start with also a minor correction. Because for the podcast, we did this episode on Stephen A. Cohen of SAC Capital. And on the episode, we said hedge funds all either engage in endemic illegal insider trading or lose money. And that was unfair. They also engage in extortion or pump and dump scams. And I think the extortion and pump and dump scams is what we'll really get into when it comes to Dan Loeb here. So Dan Loeb, again, he's born 1961. Again, Forbes has him about 2.9 billion net worth.

Uh, he runs third point LLC is his hedge fund. It's got about 15 billion assets under management. And, um, uh, as of 2018, it was, it lost 11% of its value in 2018 when the S and P 500 lost about 6.5%. So he's going through a difficult time now where a lot of people are withdrawing from him and other hedge funds because not only are they not beating the S&P 500, but they charge these ridiculous 2 and 20 fees. So you pay like so much more in fees to a hedge fund just to like lose more money than you would get if you just stuck it in the S&P 500. But I guess we can start the biography chronologically and then kind of go through how he has kind of a pernicious effect on the economy generally. And I wanted to start with,

my main source was this Vanity Fair profile from 2013. It's called Little Big Man. But I actually preferred the subtitle, which is Dan Loeb's Skeletons. Did he hit a young Cuban with his car? The answer, yes. Yes, he did. Yes, so we'll get to this story. But Dan Loeb was mysteriously detained during a 2003 trip to Cuba

when he apparently called an associate on the verge of tears and said that he hit a Cuban child with his car. And nobody knows what happened to that Cuban child. The benefits of being a billionaire

are that... Even in Cuba, that's pernicious. Yeah. Well, at least that child has like the best health care available true to a cuban child who could get hit by a billionaire's car and then you know bribe his way off the island um but we'll get to that story in just a second what i what i found interesting is like look dan lobe is a born rich kid who just got richer uh according to this vanity fair profile he grew up in santa monica uh canyon you know north of los angeles but i found it interesting that his great aunt his great aunt created the barbie doll and with her husband they found it mattel incorporated so he grew up with uh barbie doll money uh and you know his father was a lawyer who

also served as interim president of mattel and on the mattel board so his great aunt was just the drunk malibu stacy come to life right now his uh his family fortune uh depended on creating a body dysmorphia among an entire generation of young American women. Got that Barbie money. Yeah. And so, you know, the Vanity Fair profile kind of goes through. I thought it was kind of interesting. His father, Ronald, passed away from Alzheimer's, but he was a partner in this Los Angeles law firm, IREAL and Manila. He worked there 38 years.

He was also general counsel at Williams-Sonoma. But I also liked his mother, according to this Vanity Fair profile. She wrote her Ph.D. dissertation on Herman Melville. And then quoting from the profile, Thanks to a political awakening that started with the civil rights movement she produced and hosted radio shows including one about art and institutions another about quote contested definitions of fascism unquote on kpfk the pacific leftist radio station in los angeles i am deeply anti-racist and continue to be offended by all symptoms of proto-fascism and authoritarian conduct,

Sparks says of her free market philosophical leanings, which she discusses on her blog. CIA plant. But it is like interesting. I've been reading the Manson book. She's CIA. Yes. Well, it is interesting it's like okay so his mom is like some radical uh uh free marketeer who uh attributes that to their anti-racism and anti-authoritarianism cia yes but you know that's

just the kind of woke household he grows up in he grows up you know certainly upper middle class at the least if not just straight up rich i mean he's able to borrow a lot of money to start his company which we'll get to but and you know he's kind of inoculated with this, let's say, standard free market Democrat ideology. And he will be a Democrat up until Obama says mean things about him and the other hedge funders. Then he's a Trump guy. Yeah. He switches to Romney. And, yeah.

But so just continuing from this profile see the key thing about being in a hedge fund is you know how to pick the winners just continuing from this vanity fair profile here uh like a lot of southern california kids daniel lobe loves surfing especially at third point the fabled break in the surf rider beach in malibu but even then he wasn't all that laid back he has claimed he dreamed from an early age about being an investor i used to write down third point over and over third point partners third point partners he once recalled and like he gives some speech in 2009 30 pages of it he gives some speech in 2009 where he talks about like you know girls

here when you had like crushes in high school you you used to write down the names of boys you liked in your notebook. I was doing that with my hedge fund. I was writing third point, third point partners in my high school notebook. I like that one of his teachers like recognized really early on that this kid was going to be like you know a financial like hedge fund dick and uh gives him the nickname milo mender bender right i've never read uh catch 22 i don't know how i escaped uh middle school without getting assigned that one but i you know apparently this is the person who is like the sort of king of the black market in the book and the teacher's like oh yeah this this kid this is who you remind me of just like i wonder if the teacher was like oh man this kid's kind of a

psychopath let's let's push him towards money and not you know keep him away from the frog dissection he was already he was already securitizing lunch money he was like uh hiring a bodyguard who eventually went and like for him at his venture capital fund. So the same person that he hired in, I think, middle school, Rob Schwartz, to be his bodyguard. He paid him a quarter a day. Eventually went on to work for Loeb at Third Point Ventures. Some people, when they have crushes, they think of them as their future partners in marriage. He saw them as their future partners in marriage. He saw them as their future partners in business.

I like to imagine that teacher just like already knew that his fund was going to invest in the pension and be like down 11% in 2018. I got to get my digs in early on this kid who's fucking up my retirement. But yes, no, like if you want a summary of dan love's personality and we will get to this in just a minute here but it's like already by middle school like kids were just uh their fists were magnetically attracted to his face and he's already like having to spend the barbie money like hiring security guards like he hasn't even opened his first fund yet and he already needs like a fucking secret service detail to protect him from swirlies uh but yeah no like so dan lobe was kind of an asshole rich kid and uh you know that's reflected in the fact that he had to hire security

to keep him from getting bullied um but so he goes to uh he goes to college on the west coast but apparently he like finds it, so he transfers to Columbia. He gets an economics degree from Columbia University. And what I found interesting was he gets his first job through just straight-up family connections. So he graduates with an economics degree from columbia university although it is interesting it should be noted here they always cite the example of while he was in columbia i think he was a senior there uh he played the stock market with his family's money and he was at one point up 120 000 but then he invested in all it all in a maker of medical equipment and from the Vanity Fair profile.

But when it reported that some of their anesthesia machines were linked to the deaths of a few patients, he lost everything. He owed his father $7,000, which it took him 10 years to repay. Just like, that's when you got to pad out the billionaire biography with a struggle story. Yeah.

Like, yeah, I owed my dad seven grand that I flushed down the toilet and it was really embarrassing for a while. What are you going to tell me next? He has dyslexia? That was bad. Probably cut that. Right. No, no, no. But that's kind of like the uh the the fucking um just the ability to lose that much

money on a medical supply company like that's just impossible today i like yeah the seven thousand dollars like won't even let you be seen as a patient by that company much less invest in it yeah his dad was mainly... Much less invest in it. Yeah. His dad was mainly mad that he didn't consult an expert network. Right. Yeah, we talked about... Anonymous industry tips.

Just random advice. Right. Just you want to learn more about the industry. Right. Like we should say for like legal purposes, in the Stephen Cohen episode, we talked a lot about hedge fund insider trading. Dan Loeb has never been formally accused by the SEC or any other body of illegal insider trading.

But the fact that he's always hanging out with Stephen A. Cohen, going in on investments with Stephen A. Cohen, doing fundraisers with Stephen A. Cohen, it's like, yeah, I'm sure he never just said, hey, this stock is a good idea. You want to go in on it with me? You know. He just likes Steve Cohen for his taste in art right he liked we talked he has the jeff coons shark steve cohen does and formaldehyde uh if you look at his house on google earth he's got one of those giant like uh i don't know who did it but the like chrome balloon dogs he has like a giant one outside his house it's it's obscene it's just a big sign that says

i'm an asshole i just uh i hope when the the revolution comes you can like trace the google maps year by year and you just see like him impaled on the fucking dog statue i don't know if i mentioned this but satire yes my uh my girlfriend went to the same art school that um jeff coons went to yeah and he did like a q a there and so she raised her hand or he did like a talk in a q a and at the end she raised her hand she was like so um would you say for aspiring artists that it's important to uh go into hedge fund managing before you go into art how do you take that uh he she said he just kind of uh stuttered a bit and was flustered uh actually art art is becoming like a more significant object of speculative financial

speculation oh absolutely these days like uh it's like a whole like wealth management asset asset class i want the bottom to blow out of that so bad well we've talked about it on i don't know it's kind of a digression on the mad episode yeah yeah yeah on the mad episode there is like art finance now it's like like somewhat important pillar of wealth management and it's also like people it's a great way of money laundering yeah that's what like fucking monet could not have predicted is that global financial criminals would be reliant on his fucking water lilies or whatever the fuck picasso probably did yeah oh but i would like if you were at a q a with jeff koons i'd be like so what are you spending that teacher pension money on just like what does that kind of shit by these days um but so yeah so his more self-published low jobs

made by a thousand crying interns all right but so yes his big struggle story is he's a fucking rich kid at columbia university he loses he's up 120 grand in the stock market he loses it all and he owes his dad seven thousand dollars which takes him 10 years to pay back. So that's the struggle. That's Daniel Loeb's struggle, as it were. But so what happens is, according to this book, House of Outrageous Fortune, it kind of goes through after he graduates from Columbia University. He works at a private equity firm called Warburg Pincus from 1984 to 1987. and just from house of outrageous fortune he got this job because quote his father knew a top executive at warburg pinkus and a godfather helped him engineer his first trading coup a 20 million dollar score

uh warburg pink is like one of the oldest private equities yeah trading firms on wall street yeah i know i've encountered them before but i can't remember where uh but yeah so warburg pinkus was also a uh they owned an equity stake in mattel and we mentioned his dad was interim president of mattel was on the board of mattel and new executives there who got his son the hookup so it's like this is just the most fucking gilded ascent and like the you know i mean not the most we've ever reported on. Forbes self-made score, seven. He actually is. I think you actually called it.

Oh, I got it? I think you actually called it. Let me see the Forbes. Yes. On Forbes.com, he has a seven out of 10 self-made score. I love that he tried to pass himself off as like one of the people that owned, you know, came from the Loeb family that owned Loeb Kuhn, the like investment banking house.

So he was trying to pass himself off as like an old money Loeb, not the like, you know, Barbie money Loeb. Yeah, the cadet branch. Yeah. Just the,

uh, uh, yeah, the, uh, the less ostentatious one. Um, but so, so wait, they had money before mattel

i don't know i think the family fortune goes back to mattel like his great aunt i mean like you know his dad was like a lawyer who had like and his mom was a phd so they were kind of like upper middle class but like it was their connection to the mattel fortune that made them like really rich okay because i was starting to think that maybe like his great aunt was more of a Wyatt Coke figure who just sort of drew a stick figure on a piece of paper and like handed it to a designer who invented Barbie.

That would be like a funny origin story. It was just like the Barbie creator couldn't draw. It's just like a stick figure with boobs. Like, no, you're supposed to put like 20 more pounds on this thing. Supposed to flesh out. This doesn't look like a real person at all. These feet don't work. Shut up.

But so, you know, and so he works at Warburg Pincus from 1984 to 87. Then he gets a job at island records uh he apparently like runs finance there and he like engineers their sale to i think it was a dutch firm or something like that um but you know he kind of bounces around he ends up at another uh hedge fund uh laffer equity investors uh where he learns you know risk arbitrage and this kind of bullshit he learns about how if you reduce a tax rate to an optimal level you get

more tax revenue Arthur Laffer Laffer curve investments LLC yes and so he oh yeah so and then he's doing risk arbitrage. He ends up in 1991. He gets from this Vanity Fair profile, he gets a By then he thought I could do this as well as others. And it's interesting what he does at Jeffries & Co.

We've talked about this a fair bit on this podcast, is the Michael Milken large-scale fraud explosion, where a lot of people in the early 90s made their money picking up the pieces of that, where, you know, just to kind of rehash it quickly, the Michael Milken junk bonds, he eventually created what has been called, I think very convincingly, a Ponzi scheme, where Milken junk bonds, because he had these captured savings and loans and he had these captured insurance companies, Milken could say, I'm going to raise junk bond financing for X company,

even if it has like no revenue no uh conceivable path to profitability whatever he has a captive network that's like yeah we can raise a billion for that overnight and then we'll sell these junk bonds to our captive network so what happens in 91 that all explodes and all of these different like you know before they got involved with milken these viable firms are left holding the bag on this shit and then there there's like a bunch of different people, particularly Leon Black, we talked about, who like made their fortune, like going in and being like, okay, well, there's like value here, let's go buy up this shit out of bankruptcy. And then we have, you know, ownership of these companies that were valuable that are getting restructured. And so that's

what Daniel Loeb is doing at Jeffries & Co. He's a guy who looks at milk and junk bonds and tries to find value buying them out of bankruptcy, basically. Picking peanuts out of shit. Exactly. And so that's really what brings him up to 1995, which is where he founds third point capital uh with three million dollars from friends and family yes got that friends and family money he's a major beneficiary of friends and family llc uh he uh apparently he put in three from the vanity

fair he put in 340 000 of his own money uh he says his mom gave him 250 000 uh but yes three million uh almost all of which was from his immediate family other relatives and a wealthy friend and he put in 340 000 which was about what he uh what he made during uh his time on wall street um so yeah he he starts with like three million in startup capital and it's kind of interesting like we were talking about before we started recording his uh origin story like how how he operates his firm from 1995 to the year 2000 or so is um if you've ever gone on say the uh the 4chan finance board or uh any reddit board about bitcoins you might see an entire generation of young daniel lobe you're the only one who does that you might see an entire generation of you actually okay

it's you two and a bunch of like 18 year old libertarian psychopaths well you might see like some young uh entrepreneurial daniel lobe zoomer types who are like yeah i've got the initial paper initial coin offering of dog coin and i can demonstrate that this is a fraud sell your immediately and it's like it's online pump and dump and uh daniel lobe he founds his firm in 1995 and this is like right when the internet is taking off. So Daniel LaHope is a pioneer in online pump and dump. He's posting on not only the Yahoo message boards, but another one like investors, something or other. Silicon Valley investors, I think, or something.

Yes. Dot com. Yes. So he like, particularly in like 1997, this is his big game, but it's like he founds the firm in 95 and his whole deal up until around 2000 is he's finding like small cap uh stocks which is like not a big one like you can't mess with any of the the blue chip uh fortune 500 companies can we can we label him as the the first phpbb billionaire probably again yes but you know like if you find a company where it's like their

market cap is say 20 million or some like medium to small amount if you can go on the internet and get enough people to either believe that they're like about to announce some fucking major earning shoot up or if you're trying to short them get enough people to believe like this is a fraud the fucking u.s attorney is about to indict them. You know, this shit is going down tomorrow. Sell your stake right now. Once Dan became a part-time moderator of the 4chan finance channel,

he knew like, okay, I can do this. That really gave him his confidence. It's interesting. Like this guy is just extremely online, extremely early. And like that that theme really does carry throughout like you know until present day he's just really on the internet a lot um and some of this stuff definitely goateed someone oh yeah no and he's got these like he's

not doing this under his own name he's got a whole bunch of like little screen names and personas that he uses um names like mr pink from reservoir dogs uh senior pinchy way which i guess is like some kind of slur in spanish i think i might have encountered this guy on a family guy forum back in high school he has like he cultivates he doesn't buy fake accounts he He cultivates them himself for years. Yeah, he's got his own sock puppet. He's like, all right, it's time. I got to burn this one in order to dump an initial coin offering. Well, he has burned a few of them.

There's actually a precedent-setting case about one of these accounts that allegedly is Dan Loeb. So the senior pinchy way one was sued by Lisa Krinsky in a case that I think went up to like a circuit court. Eventually the subpoena for information about who this guy was was quashed, but it's been alleged, and I think very credibly, that it was Dan Loeb.

And some of the language here that's involved, you know, obviously it's definitely, the allegation was that it was Dan Loeb. And some of the language here that's involved, you know, obviously, the allegation was that it was defamatory. They, you know, he says things like, these are resolutions, allegedly, for Jerry Lou Cipher, who is the head of this company, SFBC International, that he was advising people to short on yahoo finance i will not try trade on inside information gleaned from clinical trials i will not worship the devil i will not purchase mansions from former fraudsters who ran crooked vitamin companies i will not i will reciprocate fellatio which is spelled wrong with lisa even though she has fat thighs a fake medical degree queefs and poor feminine hygiene i will not rip people off through crooked sales schemes on television i will not go bankrupt

which is also spelled wrong when i can't pay my pay for my mortgage we're so sorry lisa i it's you know uh he's just really it's class act stuff You can tell he really dug in on the financials. He found the vulnerability and he was just going with it. But yeah, like Lisa was an executive at this company and, um, he was like, so what I'm saying is like, that's like his resolutions. Was he saying like, he's, he's mocking this company and saying that's what their executives are doing. They're like, you know, uh, fucking engaged in fraud and, uh, mocking this company and saying that's what their executives are doing. They're, like, you know, fucking engaged in fraud and all this other shit.

And, yeah, like, he was sued a couple times, like you mentioned. Though, like, the senior pinchy way, the case was thrown out after the court determined that it actually was not liable to say Dreamcast was better than PS1. All of these posts are correct, actually. The other one that he was sued for was actually pretty funny, too. The person that he was making fun of was some executive of a company who was Greek, and the post was something like, you know, it was written to be from this executive. And it was saying, I'm going to retire to my villa, you know, in Greece with some nice grappa and a small boy. So, you know, he sued him for basically alleging that he was a pedophile. Right. He said, like, with a small boy, just like in the old country.

So he's like talking about Greek people. So now you can find his posts on country so he's like talking about Greek people so now you can find his posts on the Comptown Reddit talking about stuff retired to the temple and little St. James right and he gives so Dan Loeb gives this like we said he got sued over

these posts a couple times but he like never had to like disclose that he was the one making them but he does give this revealing quote to a bloomberg interview in 2005 i am honestly on his side about getting sued over posts uh he makes this uh uh quote to a bloomberg interview in 2005 where he says something to the effect of i'm paraphrasing but I can neither confirm nor deny that I am mr. pink but I do agree with a lot of the things he says and I think actually like in 2005 the Bloomberg article goes like mr. pink was like still posting and

apparently he like linked to an article about Dan Loeb and says like here's a great article on a really brilliant in in the lawsuit that quashed the subpoena to publicly reveal that he was Senior Pinchy Way, the court actually puts a quote by Senior Pinchy Way talking about how great Dan Loeb is in the final brief. So tipping the hand a little bit again that this is likely Dan Loeb. But yeah, so it is just kind of interesting where like,

particularly during the dot-com boom, and again, the early frontier of the internet, there is something about, well, a pump and dump scam. It's like using the web to pump and dump. Whereas before, you know, it would be like Sopranos guys in a boiler room being like, buy Wabistics. This is the only stock we sell. We recommend everyone buy Wabistics.

But, you know, if you're on the early frontier of message boards, that was a great usage for them because you had a big audience and you could say, I have inside information on this stock. You need to either buy it or sell it depending on what your position is so he actually makes you know a decent return doing that from about 95 to 2000 uh to the point where um according to uh he invented cnbc yes uh according to the bloomberg profile uh by 2000 he starts with like 3 million uh of family money in 95 and by 2000 he's up to about 136 million assets under management. So he makes a decent return doing. I don't want to get in trouble by saying illegal, but let's say clearly a pump and dump scam all over the Yahoo message boards.

A legal pump and dump scam. But it is interesting. So this is really how he makes his bones but he transitions into a much more uh public one where according to this vanity fair profile he uh meets a hedge fund manager in california named robert chapman jr and robert chapman jr pioneers another hedge fund strategy that you'll see a lot that is just creating noise in the market where the SEC requires if you buy more than 5% of a company, you have to file what's called

a 13D, which is like your intent for the company and you're supposed to sign an affidavit saying you're not engaged in this in a joint stake with anybody else, which people lie about all the time. Business plan. Shoot john lennon yeah yes the hedge fund manager mark david chabman

it was like john lennon stole all my investing ideas john lennon bought google stock after i put it on the buy recommendations and he stole that idea from the message boards like play up the value of investing in john lennon and then shoot him um but yeah so robert chapman jr so his idea he kind of pioneers this is they file these public 13 d's with the sec but what he starts doing is you attach a letter to these 13 d's and this letter is like a poison pen letter where you just write out this letter and you say uh the executives of this company don't know what the fuck they're doing they need to be fired you can even say they're like engaged in fraud or they

have like really lavish benefits or they're like as an investor they're wasting our money on like you know uh champagne and uh fucking tickets to the u.s open or whatever else the case may be that this section of the 13d is like hardly ever used really right yeah but um i mean occasionally like for activist investors or corporate writers from the 80s and early 90s would would do this yeah and activist investing i think really is kind of like corporate rating like it's just another yeah yeah sometimes they're used almost interchangeably yeah it's not exactly the same but yeah yeah yeah carl icon the same the same thing but i think that the person is that robert chapman who kind of really invents like being really like juvenile and nasty and then lobe

just takes that to like fucking perfection right that's his thing you know this guy who like uh made his bones calling people pedophiles on the yahoo message boards like once he gets into like the true canvas which is the 13d letters and sec filings you know it's it's like picasso and that's actually it's an interesting part there's no character limit yeah you mean there are no moderators on the sec letters they cannot perma ban me for this there are no mods in the sec it's an empty office it's an investor secret but it is interesting where dan Loeb's really inflammatory rhetorical style actually serves to benefit him because some of these letters he writes go viral, all these different people are seeing these letters and maybe they're like, oh, maybe he's right about X, Y, Z, you know, complain about executives are

overpaid or they have no idea what they're doing or they're like, you know, hopelessly losing value that should belong to shareholders, you know. So, it is a strategy where if you can be inflammatory enough, you can get your message out there, even in these obscure SEC filings. And just from the Vanity Fair profile, Loeb took the rhetoric in these letters to new levels, and he refined the twist of making withering personal comments about a target company's executives. As a former Third Point employee, journalist Nicholas Stein in 2007, Loeb, quote, believes that if you embarrass a CEO in front of his friends at the club, make him feel like people are talking about it, you can exert change on his company. And again, the entire idea here is he just kind of like, let's say, green mails or black mails or extorts his way into getting some board seats and being like,

you guys need to lay off a bunch of employees. You guys need to do a shareholder buyback. You guys need to really juice your next quarter returns. And then once I've made my money, I'm going to dump my position and I don't really give a shit about the long-term health of this company. Most corporate board members,

the non-activist ones, are so passive and sedate that when someone like that comes in they like are you think they would like well i don't know i'm making a shitload of money i don't really i probably shouldn't uh change up what i'm doing here but actually they do respond to people like that yeah yeah it's crazy it's just like basic like uh being brigaded by someone someone like lobe all of a sudden tends to have that effect on these guys well it's interesting like there was an article in naked capitalism i'll get to

in a minute here that kind of talks about some of the regulatory change uh with regards to corporate raiders because what happened you know in the 80s guys like carl icon they actually did have to spend or at least threatened to spend a lot of money because you had to conceivably be able to buy 51% of the public stock of a company to take it over. But kind of what has happened since these regulatory changes, which we'll talk about, is guys like Daniel Loeb can just buy 5% or 10% of the company and then they actually are able to use that to really threaten changes without even conceivably being able to buy the the entire company yep um so it's a lot cheaper right so it's just like trying for like a long protected proxy war to get to 51 right so like the management of any given firm is like incentivized to just buy them out and make them go away uh because they don't want to engage in these proxy fights with them.

And, you know, I think part of the way that they're able to be so successful in doing that is to present, you know, Loeb and all these other activists will present what they're doing as something that's aligned with the interest of shareholders. And so they're saying, okay, when, you know, you've got this value that has yet to be unlocked in your company. And you should, you know, lay off these workers and unlock the, you know, salary that you pay them and put that right into share buybacks or whatever. And that's a good thing for everyone that owns the company. But in actuality, like, often it's not. I think we'll get into some more examples in a little bit. But there are all these times where Loeb has pushed for fire sales or other sort of financial restructurings of companies that end up harming that company in the long run.

Yeah, Brad, you pointed this out. So the hedge fund, like Orwellian speak, for laying off workers, and Daniel Loeb has used this, is he says a company should quote rationalize its american investments they say rationalize for just lay off a bunch of workers to unlock cash streams you know right just just gonna uh rationalize a guy in ohio into walking into his garage and starting his car and letting it run for 20 minutes um but yeah no so it's like you do have these like very uh disturbing uh uh fake jargon for what is destroying like good union jobs usually union but just jobs in general in order to like give them their little short-term payout and then once they've done their extortion they can get out and who gives a shit what happens to the company after

and in like the elite democratic crowds that lobe runs through in these days um well now he's i guess he's uh he's donating to both parties now but um earlier in his career um that really speaks to them like as part of their neoliberal ideology of like viewing dan as like an aspect of the market basically correcting itself for inefficiencies so the market can basically regulate itself right i mean it is something where uh there were a few different regulations that allowed shareholders like or activist investors unquote like daniel lobe to exert such a disproportionate influence but one of them was a 1995 law signed by bill clinton so it's like the democratic party decision under bill clinton to kind of play nice

with wall street had just really horrific effects for a variety of reasons but that's you know kind of why a guy like dan loeb at least least until 2012, can consider himself a Democrat, well, you know, undermining unions and really just not really providing any benefit whatsoever to the actual workers in a company. But oh, I did like one other quote from this Vanity Fair, just about like kind of the poison pen letters he would write. So he tried to get into this company called salton which s-a-l-t-o-n they're the people who make the george foreman grills he starts off with this big letter about how like my horror when i saw your executives at the u.s open hanging out with mary kate and ashley olsen using my money as an investor to like you know do all this bullshit and you know just all this kind of inflammatory stuff but in that particular case it didn't an all-agril would never have done this

in that particular case it doesn't actually work and so he exits the position but he's just like such a fucking poster like such a bitter asshole that he can't help but write another thing as he exits his position at a loss and he says quote the final decision to exit the position was not based on your incompetence arrogance and innumerable shortcomings alone it was my conclusion that the company's board is governed by a toothless crew of cronies or pathetically weak individuals who i can only conclude are in way over their heads and unable to take appropriate action. Dear Richard.

Just the kind of guy who either gets into hedge funds or posts on podcast Reddits. But it's funny because he's got all this vitriol, right? And that's a through line throughout his entire career. But he's also this big yoga guy. Right. Yeah. There's this portrayal of him in this article in New York Magazine that apparently just drives him crazy.

He's not named. The character of Dan Loeb is given the pseudonym Mr. Hedge Fund. But it's been credibly alleged that it's him several times, including in the Vanity Fair article. And it's just absolutely insane. Like, he's really into this yoga stuff. He's into surfing. He's into, like, all this Zen shit. He's got a yacht that's named after some Buddhist principal.

And the quotes in this New york magazine article are just crazy where he's talking about um he went to uh see his guru for a month and the fun was up the fund was up eight percent for the month i was there he told me a whole month with the guru my shit is so on right now and it's it's just like how do you not being in the office for a month yeah making decisions like he he says there's another quote where he's like there are many paths to happiness this is you know him telling uh vanessa uh giorditis i don't know how to say the last name right um you know there are many paths to happiness don't worry we only wrote sean for that there are many paths to happiness but only yoga is the true one from some fucking billionaire can you imagine if you're like a reporter like scraping by you

know whatever and like you're at somebody's like southampton mansion and they're like there are many paths to happiness but let me tell you it's yoga that's the true one yeah in that same article he like the reporter sees him at a party or something and he she asks him do i know you from somewhere and he says yeah we slept together which wasn't true but it's just like the kind of uh thing that a guy who's five foot nine says just like overcompensating yeah i fucked you he's got another quote going around india with a begging bowl is the easy way out of course it's an excuse for not doing anything with your life and that's not my style um mr headman the article goes on mr hedge fund style has more to do with winning companies are short management's trying to defraud us and and I'm like Rambo in my office,

headset on, three computers in front of me, mowing them all down. Yoga is all about focus and perfect aim. Didn't this guy get arrested? Yeah, he definitely would have been a school shooter if he wasn't pointed towards hedge funds. I swear, this guy got arrested

at the end of the movie Boiler Room. He's like every villain from an oliver stone movie but you know i mean this is like just the kind of fucking mentality it breeds where it's like yeah going around and begging in india is the easy way out uh for all those people who had the option to be born into the uh barbie dreamhouse fortune can we can we safely say uh without getting sued that he killed willem dafoe and platoon well i don't know was william dafoe a seven-year-old cuban child he's got range uh so the the the cuban child story i just want to give that here and i'll quote the entire vanity fair two paragraphs on it in march 2002 there was a strange blip in loeb's biography when he traveled

to cuba with his friend alexander von uh furstenberg son of designer diana von furstenberg a vanity fair contributor for what was supposed to be a long weekend. Things unexpectedly took a dark turn, and according to a lawsuit later filed by a former Third Point analyst who accused Loeb of breach of contract, among other things, quote, Cuban authorities had refused to allow him to leave, unquote. Asked what happened in Cuba, Loeb told me earlier this year that he had had been involved in a car accident stuck around for a couple more weeks had a legal hearing and everything turned out fine but according to chapman the other hedge fund guy we mentioned earlier a desperate and sobbing lobe had called him from cuba where he was confined to his hotel after the accident i remember how scared dan said dan sounded when

describing the incident involving his hitting a local cuban kid with his car recalls chapman i truly felt sorry for him when he told me he had found himself unable to leave the country curled up in a ball on the floor of his room crying promising god that he'd do anything if the almighty got him out of this predicament it wasn't as if dan had done it on purpose and who really knows what ended up happening to the kid wow poor dan lobe yes so going back to the thing about him not being at his fund for a month and that you know putting the fund up for up eight percent there's actually you know related to this particular incident there's some truth to that so

there's this book about the house that he lives in in central park west and sort of the various characters in that house and the the chapter on lobe uh mentions that he was um detained for seven weeks in cuba and while he was there uh his fund had this provision called a key man provision where if the like person who's running the fund is not available and can't be reached, the fund liquidates. And it just so happened that when they invoked the key man provision at Third Point, according to the sources quoted in House of Outrageous Fortune, he made a lot of money as a result, is a direct quote. with a his absence coincided uh a with a steep drop in the stock market and third point ended up uh benefiting from dan lobe uh sitting in a hotel room under

what i guess would be hotel arrest yeah and like presumably he paid some fucking money to somebody to get out of the country yeah um but yeah no i know there's like uh uh leftist uh soundcloud commenters who get mad if you criticize the cuban model of socialism but i just want to go on record and say the fact that the government decided to not summarily execute damn lobe was a disgraceful abandonment of socialist principles and i would argue an abandonment of socialism itself well fidel wasn't a true communist i was more of socialist principles and i would argue an abandonment of socialism itself well fidel wasn't a true communist i was more of his brother and che who yes and so maybe fidel was i guess you won't have to lick that bowl yeah that's when we know uh uh castro truly abandoned

communism for state capitalism was when they let dan lobe leave the country um but yeah so you know that's just kind of like a weird story and if you ever see dan lobe or if he ever gets on twitter make sure to tweet that of him just what happened to the cuban child because we'd all like to know because that's the end of the story there's some cuban kid and we have no idea if he's alive or dead or what happened he's an obsessive poster and he's not on Twitter? That's true. He was on Twitter. He had a pre-lockdown account. He would delete his tweets every week. Yeah.

Yeah. Oh, so he's on an alt now. Right. Probably. He's like Pope Hat or something. He switched from Twitter to AshleyMadison.com and that really took care of his posting needs. I actually really love his

excuse so dan lobe did get caught on ashley madison uh gawker published this thing about how he had a profile on ashley madison and um you know they he was looking for discreet fun with a nine or a ten lobe you know married in 2004 yeah loeb was married in 2004 to his uh his yoga instructor um and this was you know several years later that he goes and creates the account and in response um to inquiries from gawker about this uh this is the the email from his pr rap as my family friends and business colleagues know i'm a prolific web surfer. Did I visit this site to see what it was all about? Absolutely.

Years ago, at the time, I was invested in Yahoo and IAC and was endlessly curious about apps and websites. Did I ever engage or meet with anyone through this site? Never. I couldn't reply. That was never my intention intention as evidenced by the fact that I never provided a credit card or set up an account. And the site goes, the Gawker article goes on to mention that that's a pretty plausible excuse, except for the fact that he

went back and checked his private messages, which is one of the fields that was captured in leaked data as recently as December 9th, 2013. So, yeah, it kind of caught him in a lie there. I do like that his excuse for having an Ashley Madison account was like, no, no, you don't understand. I was just using this to engage in illegal pump and dump posting. I was doing equity research. Messaging random women like this stock is fucking shit yeah i'm looking for a management management doesn't know what they're doing looking for a nine or ten ready for some stock tips so after this article came out i went and downloaded the actual ashley madison like nice thing to see if i could find his info in there for

research purposes right yeah for research purposes right yeah for research purposes like and it's so it's you know giant database and if you scroll through it you can find the discrete fun with nine or ten like as one of the fields and uh the account that he's using has the name of the the screen name that he uses is the same as one of the characters in catch 22 it's not milo my minder bender minder bender it's yoserian uh but he like i just think it's funny that like this guy's you know through line whatever his psychology is like so simple that like he's pulling back to that same fucking book from like middle school or whatever that everyone's already pegged him with to like pluck another screen name out right and you were

saying he's on fling.com too or yeah if you search on on fling.com with that email address there's fling.com which is like ashley madison also got leaked and there's a fling.com account um also yeah with the same email address that he used for Ashley Madison. Also looking for 9 or 10s or 8s as well. It actually doesn't say, but presumably he was also endlessly curious about the app and website fling.com. Looking for 9s or 10s on the self-made score. Yeah, fling.com is a website where married men can discreetly find supermodels and urge them to buy wabistic stock uh but yes so uh dan lobe uh probably not a faithful husband by all accounts but you know

when you kill a cuban kid with your car it's everybody copes with that differently uh one of my favorite i can't get off with my wife anymore it was like yeah it's too much intensity he got he got way too hard murdering that child allegedly satire actually no i would sue me dan lobe i want to know what happened to that cuban kid i will bankrupt myself with legal fees just to find out in discovery what the fuck happened to that cuban child uh one of my favorite like sort of gawker stories that's ever come out about lobe is this thing where it's kind of like a blind item or like a pseudo blind item they've got like his history as a person and then it ends with with married, you know, his wife in 2004. And the article is about him flying around a couple of like young, pretty bloggers in his jet from Davos back to New York City.

They posted pictures of themselves flying in the jet, which had a tail number on it. And so the Gawker staff were able to go and look up who that plane actually belonged to and found out it was dan loeb it's very dangerous to take those pictures in flight yeah yeah um and so you know after gawker reaches out to the two bloggers um one of them removed the photos from her blog uh and so you know the implication here i think is pretty clear that you know maybe for whatever reason she didn't want people knowing that she was flying with damn low back from davos damn i can't believe something so horrible would occur at davos or in a private jet well so something i wanted to to go back to to is you know we'll talk about the

2008 crisis briefly and we'll talk about kind of what Dan Loeb has done to some of these companies that he's been an activist and vet investor and but something you said Brad before we started recording is like once you get to a certain level like uh as say a hedge fund it's almost like the path is kind of gilded for you so you know we mentioned like he's just kind of shorting or just kind of pumping and dumping small cap stocks up from 95 to 2000 but by like 2005 he's like really an established investor and he's been able to juice his returns enough to like point to years where he beat the S&P 500 and then, you know, get some pension money or institutional money and this kind of stuff. And then it's like once you're there and, you know, we talked about this on the Stephen Cohen episode, you're able to get Goldman Sachs or whoever else to have you be a first call client.

So you're like, I mean, you're playing a rigged game. I'm glad these are the type of people who are allowed to invest people's pension money um but is that a fair description of what you said yeah so i i think you know i i firmly believe that you can't like using your own sort of skill and acumen beat the market consistently over time. And some people get lucky, right? You have people who have... If this was flipping coins and if you got a head, you beat the S&P that year. And if you got a tails, you didn't. There are people that are going to flip heads eight times in a row if you've got thousands of people flipping coins until they

bust out. But when you're an activist investor, you basically get... Once you've got thousands of people flipping coins until they bust out. But when you're an activist investor, once you've established your track record, you kind of get to be right or successful forever, right? Because what you're doing isn't about really an analysis of the fundamentals of the company or looking for some kind of discrepancy in valuation that you can exploit. What you're doing is kind of like looking for a company that can be bullied by the public pressure that you put on it to take an action that benefits you financially. And as you get more of a reputation, people are going to kind of defer to your past success and they're going to be afraid of what could happen if they mess with you. And so I think what Loeb and some of these other activists have been able to do

by being successful early on, they've kind of like ossified their ability to be successful in every new endeavor, right? They're like, anytime they go out and file one of these letters, they're going to be taken much more seriously than if it's some young upstart. It should be noted that he underperformed the SMPP last year. So some of the magic is wearing off. But certainly those years where he is beating the S&P, like, again, he's never credibly been accused of insider trading by the SEC. But it's like, it's just so endemic in the hedge fund world. And then the other part of it is just green mail just blackmailing uh various companies and

being like hey lay off workers juice your quarterly returns uh fucking do a shareholder buyback and then give me some money and i'll get out and stop you know fucking with your ability to run the company i mean it's shooting fish in a barrel once you're an established hedge fund you know so so what is the kind of definition of activist investor? Because I've always, I hear that term a lot, but I'm not quite sure what it means. That's a good question. So I'm not sure like this is a precise definition, but the way sort of I hear it used is it's an investor who has some outcome in mind for a change in management or a change in corporate structure of the company when they take a position with the company, right? And that can be, I guess, long or short.

You could be a short activist like Muddy Waters and you're going to go and take a short position on a company and then publish research about why you think that company is a fraud. Or you could be a long activist like Loeb often is, and you're, you know, taking a long position, you're buying shares in the company, and then you're saying, here's how the company can make changes that I support as a large shareholder now, that I believe will return more money, you know, unlock value for shareholders. And these are, as we've talked about, often kind of short-termist things that might benefit the shareholders sort of immediately, but are going to maybe do so to the detriment of the long-term viability of the company. I think it would be, as an activist, I think it would be in your best interest to cut all R&D and do a full shareholder buyback yeah yeah like it's certainly not like you should get out

of like uh buying you know stuff that children made in sweatshops you know right right it's not that kind of activist when when we covered ackman he was the opposite he's a activist short seller right against herbal life was it yeah which like uh we don't really have time to get into but dan lobe was on the other side of that trade. There was a famous feud between them, and apparently somebody saw them at a party, and Ackman went up to Dan Loeb and said, Why'd you do that, man? You didn't have to do that. Because apparently Loeb would also post on his Bloomberg terminal, because uh because carl icon was was short squeezing bill ackman and low posted something on his bloomberg terminal terminal about like wait

they have a message board on there yes uh he posted something on his bloomberg terminal about like uh uncle carl has like something going up ackman's behind or a new new herbalife product uh herbalife enema administered by by Uncle Carl right so he's saying like Uncle Carl is giving Bill Ackman an enema and it's just like you know like he didn't even make that much money on it it was just like being an asshole to another billionaire because that's his personality I didn't know that Bloomberg was a mod Bloomberg actually has like a version of Craigslist that's only available from a bloomberg terminal you should check that shit out it's insane you're just like if you want to get a

used maserati yeah if you really want to like gin up some like pretty fucking serious class hatred like just read off the listings it's you know those terminals those terminals um you know even just one costs like upwards of ten thousand dollars i was gonna say let's get a sponsor and just have one just a single terminal and then shit post yeah yeah yeah the ad is like don't even do any trades and then we'll play like um space invaders on it with their inverted color scheme. The ad for the Maserati is like, barely used, less than a thousand miles. Previous owner tried to

testify in the Epstein trial. Never been in an accident involving a Cuban child. But so, what I wanted to do with the time we have left here is from the Vanity Fair, it is interesting, like Dan Loeb kind of got in trouble when he was trying to solicit investment from the

American Federation of Teachers. You know, of course, these pension funds invest in hedge funds and private equity, which we've talked about before, is like really sowing the seeds of their own destruction in a lot of cases. But so at the same time, he was trying to solicit their uh 800 billion dollar pension fund to like put some money to be managed by him he was also uh an enthusiastic supporter and board member of students first a national organization that advocates among other things replacing teachers defined benefit pension plans with defined contribution plans so while he's like

trying to get this pension money he's also being like we have to destroy their pensions and like of course you know um defined contribution is great for wall street because you know then uh teachers don't know how much they're going to get out so they have incentive to put even more of their paycheck in but they do know how much in fees that their pension manager will have to pay right to wall street and you know so it is just something where like he was kind of confronted about this oh and he was like such an asshole where uh aft asked him like hey could we have a meeting about how you're like funding and like advocating organizations trying

to destroy our pension and he was like no and then like just to be a total dick uh we talked about on the episode with freddie de bauerBoer, Success Academy Charter Schools in New York City. So he was originally going to make a, Dan Loeb was originally going to make a $2 million donation to Success Academy Charter Schools. But then after American Federation of Teachers called him out, he made a $3 million donation to Success Academy Charter Schools. So he's just kind of a petty asshole but you know it's interesting and like at least in that particular scenario uh that particular pension fund uh avoided him uh which is a good thing though he does have other pension investments which i think is a big mistake because not only are they like underperforming the s&p but

his entire strategy when he does beat the s&P is terrible for worker pensions and unions and workers in general. And so with the time we have left, I wanted to talk about the 2008 crash because it's interesting. Like Dan Loeb gives this speech in 2009. It's on YouTube. And he talks about like, yeah, my firm almost went bankrupt in 2008. You know, I thought we were going to get wiped out, but I just kind of barreled down and I made the right investments and I bet on the government bailout. And it's like just the total lack of self-awareness where it's like every billionaire that's around

today, particularly the financial ones, the only reason they kept their position is because in 2008 and 2009, the federal government turned on a fucking fire hose of public money, sprayed all over the place, you know? Like, Dan Loeb would not be a billionaire if the Obama administration and the Bush administration didn't bail him out. And, you know, of course that goes to the Federal Reserve, quantitative easing, all these other trillions of dollars. But for Dan Loeb, it particularly goes to the auto bailout. Because the Bush and Obama auto bailout, Dan Loeb was an investor in Chrysler. We talked about that on the Steven Feinberg episode. Chrysler was a huge beneficiary of Bush and Obama funneling

billions of dollars. But he was also an investor in a company called Delphi. We talked about this on the paul singer episode paul singer was a guy who uh along with dan loeb and others they bought up delphi which like provided um uh supply uh parts it manufactured parts that were needed for gm and chrysler and they essentially extorted the government where they're like you need to get a 12 year old girl high on volcanic gases until she started hallucinating um but yeah so they would say to the federal government like you want to bail out the autos you got to go through us first and we'll like just green mail you into just buying us off and greg palace writes an article in the nation in 2012 that goes through

how mitt romney benefited from this but he also talks about dan lobes dan lobes gains as of 2012 on this one deal where billions of dollars in federal tax money were spent uh with 390 million dollars so it's like how is dan lobe a billionaire because the federal government sprayed money all over him you know like and he still like has the nerve to after obama saves his fucking ass because obama at least rhetorically kind of attacked private equity and hedge funds in 2012 lobe saw this as such a betrayal that he's like i am you know this guy hates free enterprise and america and all this i'm going to fundraise for mitt romney um yes and uh it's true obama's rhetoric didn't uh resonate with dumb people uh so just according to this article in greg palace uh uh without taking billions in taxpayer

bailout funds and slashing worker pensions the hedge funds investments in delphi would not have been worth a single dollar according to calculations by gm and the u.s treasury altogether in direct and indirect payments the government provided these investors been worth a single dollar, according to calculations by GM and the U.S. Treasury. Altogether, in direct and indirect payments the government provided these investors, padded these investors' profits handsomely, blah, blah, blah. The paydays were made possible by a generous donation of $12.9 billion from U.S. taxpayers. And that's not even including the, I think it was $7 billion they put into Chryslerler so you know dan loeb clears uh over 300 million on this which should have been an absolute wipe out of every dollar he put into

delphi and um chrysler oh and uh one last quote from that article uh third points daniel loeb whose net worth was 1.3 billion in 2012 owns much to his share in the delphi windfall he told his funds backers this past July that Delphi remains an excellent investment because, quote, it has virtually no North American unionized labor, and thanks to U.S. taxpayers, quote, significantly smaller pension liabilities than almost all its peers. Because Delphi had 25,000 union workers, all of their union jobs were wiped out in bankruptcy. Their pensions were also wiped out and assumed by the U.S. federal government. So they got huge

haircuts on their pensions. And it's like, I mean, it's fucking horrible. Like these people, many of them lost everything. Like Greg Palast talks about various people who are in foreclosure and, you know, can't pay their medical bills because of this. And it's like guys like Dan Loeb get to say they're fucking self-made free market billionaires because of this fire hose of public money that saved them when the economy went under. Yeah, the pension thing is really gross, too, because that's, you know, another area where they're taking, you know, the pension gets when these companies go through restructuring, gets shunted off to the pension benefit guarantee corporation.

And that's a public entity. Like, so you and I and everyone else paying taxes. I assume you pay taxes on podcasts, but I don't want to presume, you know, we're going to have to edit this out. Somebody from the U.S. government listens. You know, we're not our handler, like on the hook for this. Right. And he gets to, you know, invest in this company as on the hook for this right and he gets to you know invest in this company as it's going through restructuring and make a killing uh and it's it's just it's gross yeah and um you know so just uh the story with delphi as we again mentioned

25 000 unionized workers uh they instead shifted production overseas so uh most of Delphi's jobs were sent to China. Delphi now produces the parts used by General Motors and other automakers, particularly in China. Delphi dropped from 25,000 union workers to 5,000 domestic workers who are now non-unionized. And yeah, so that's the story of how daniel loeb is a billionaire um but i guess with the time we have left i wanted to talk about uh some of his investments such as yahoo and uh what exactly being an activist investor means for let's say everyday people everyday workers wait he started investing in yahoo you always return to the scene of the crime he bought the mods yeah i mean the yahoo story is is really crazy um so in 2012 uh lobe goes in big on yahoo which you know safe bet right yahoo this e-commerce giant right um in reality i mean

the reason you know jokes aside that he wanted to kind of go into this is that Yahoo was the 40% shareholder of Alibaba, which is now the world's largest online retailer. And, you know, this stake, even in 2012, was worth billions and billions of dollars. And Loeb's clever plan to unlock value here was to sell off that stake and return that money to shareholders, of which he was the largest, right? So, you know, pretty clear exit strategy here. To get this done, Loeb relies on a tactic that he uses a lot. He gets private investigators and other researchers to go dig up dirt on the current CEO, find out that he didn't have a degree in online or whatever he said he had a degree in, and they throw him out and replace him with Marissa Mayer.

Do you guys remember Marissa Mayer? Yes. Yeah, yeah. She also bought Tumblr and then banned the porn, which destroyed the value of Tumblr. Monster. Bought Tumblr for $1.1 billion. I think it was later sold for less than 3 billion by verizon to the creator of wordpress like that guy had enough money to buy

tumblr i mean it's it's so much value unlocked jettisoned but you know so they they engineer the sale right like they you know he gets board seats, buys this position, throws out the CEO, gets Marissa Mayer in, and and verizon eventually spins off the stake in alibaba to a separate company a separate public company called altaba and when altaba goes out of business i think in 2018 or 2019 the 11 of alibaba that they owned was worth over 40 billion dollars so you know lobe engineers this quick, you know, kind of pump and dump kind of thing. He makes a ton of money off of it. I forget exactly how much he made. But, you know, he exits pretty quickly in 2013. And then he leaves Marissa Mayer to clean up the mess of Yahoo, which eventually was sold for like $5- billion dollars to verizon in 2017 yeah according to tech crunch

so he got alibaba or so he got yahoo to sell their half of their stake uh in alibaba they sell half their stake in 2012 for 13 a share uh just two years later alibaba went public uh shares were 68 at the bell uh and then, I believe the article is 2019 or 2018, they're worth around $181. So it is just, I mean, it's asset stripping. That's a good way to describe it, where he goes into Yahoo and it's like, okay, you have these shares that I can get a payday

if you just unload at fire sale prices right now. But of course, for the long-term health of the company, it would be way smarter if they just didn't fucking asset strip themselves. now but of course for the long-term help of the health of the company it would be way smarter if they just didn't fucking asset strip themselves you know come on we'll just get another season of community and there were like at least 2 000 layoffs at yahoo when he took over he he got the mod who banned him for saying the n word he uh you know he he called those 2 000 layoffs like uh he said he was disappointed in them that they weren't going far enough um so you know real empathetic yogi

um and uh just like another company is so he was involved in um uh an interesting case which is like the merger of dupont and dow chemical they're like it's kind of confusing where they like merge these two and now they're going to split these two again but uh the joseph de stefano writes in the philadelphia inquirer this year and he talks about what exactly has happened because this first took place in 2015 and it's been kind of like a giant train wreck all the way up to today but But according to Joseph DiStefano, Dow Chemical and DuPont have, since this merger, destroyed 18,000 jobs. Their research expenditure is down 40%. Their capital expenditure is down 33%.

Oh, yeah, dude. Since 2014, both companies have spent over $3 billion in shareholder buybacks. So, you know, trying to pay off guys like Dan Loeb. But even despite all of that, the companies have lost more than $40 billion in value since going into this thing. And it's just kind of a funny story where Dan Loeb, I think the other hedge fund he went in on this with, they were smart enough to just fucking smash and grab, you know, get the fuck out. But he actually like said he stayed in and he said, I expect the value to rise 50 percent. And he's absolutely like I mean, it would be funny if, you know, of course, these 18000 workers weren't out of a fucking job. But he said that this is now one of his, quote, top five losers because he's just been fucking hosed on this and it's

like yeah this is what happens when you get high on your own supply you have like a smash and grab financial strategy and you convince yourself that you're actually unlocking value and you stay in instead of getting the fuck out and now your hedge fund is down 11 on the year because of your idiot investments found yeah you'd have to completely retool your your investing philosophy i guess in order to try and make something like that work you'd have to become warren buffett and just become an insane person who goes to mcdonald's and pays like 350 and change every day for his uh for his breakfast and like so jang sub shin writing in Naked Capitalism, and I'll probably link this article, she kind of describes, she's an economist, and she describes these various regulatory changes that have allowed activist investors like Dan Lo convince institutional investors to allow them to access proxies for them and these other kinds of things and i'll she cites two other regulatory changes but she does cite this 1995 law um

she says a third set of regulatory changes which allowed hedge fund activists to gain even more power followed from the 1996 national securities markets improvement act part of the financial market deregulation that took place during the clinton administration uh nsmia effectively allowed hedge funds to pool unlimited financial resources from institutional investors without regulations requiring disclosure of their structure or prohibiting overly speculative investments this threw uh the door wide open to co-investments between activist hedge funds and institutional investors who put their money into the hedge funds as, quote, an alternative investment. And she cites the examples of the California Teachers Retirement System cooperating in this campaign against DuPont from the beginning, co-signing a letter supporting the hedge fund's

demands. So what kind of happens is these pension funds that invest in the hedge funds say yeah we want to get in on some of this green mail of destroying a company those aren't our pensions we don't care so the law allows them to do that and it is just something where she makes the point that because of these that and other regulatory changes uh there's been an increased incidence of predatory value extraction in the U.S. economy. For more than a decade, major public corporations have routinely dispersed to shareholders nearly all of their profits, and often sums equivalent to more than their profits in the form of stock buybacks, dividends, and deferred taxes,

while investing less for the future and undertaking restructuring simply for the sake of reducing costs, laying people off simply for the sake of reducing their, or choosing their quarterly returns so that Dan Loebs of the world can profit. Yeah. Got to get that money. Yeah. And, yeah, and so she also makes the point that, you know, management is just scared of these hedge funds and their mantra, she quotes someone who says their mantra,

management's is to settle with hedge funds before it gets to a fight over control of the company and so you know we could go through all the different things you know uh we're already a little bit at the time here but uh you know i just want to mention dan lobe is also engaged in kind of some some shady tax shit uh with like a reinsurance company uh that you can check out hedge clippers if you want to know a little bit more about like what they're doing with reinsurance and kind of tax avoidance there uh but i did want to cite uh just in case you think dan lobe and his yoga have uh allowed him to grow up according to chalkbeat.com uh they compiled uh all of the various racist statements dan lobe has made on his personal Facebook page.

Hell yeah. So one from 2016. Again, this is not like a fucking shit poster on the Yahoo boards in the 90s. This is a grown man billionaire writing in 2016. He says this on his personal Facebook page. Quote, if you truly believe that education is the dividing line, and I concur, then you must recognize and take up the fight against the teachers union the biggest single force standing in the way of quality education

and an organization that reach that has done more to perpetuate poverty and discriminate against people of color than the kkk so he is saying the teachers unions have done more to damage people of color than the klu klux klan yeah dan loeb's facebook is phenomenal you should check it out he's also like a like a big gun guy now and his um his like facebook cover photo for a long time was him like prone with this like sniper rifle like in like camo gear and shit um that's weird combo he's also like a yogini buddhist person who loves guns he's an enigma wrapped in yeah no and so you know and again we don't really have time to get into it but uh fairfax was a canadian insurance company and they sued dan lobe and Stephen A. Cohen and others for essentially

engaging in a harassment campaign where the other part of like hedge fund pump and dump is once you're like an institution like SAC Capital or Third Point or whatever else, you're like, you're so watched by, you know, Bloomberg and CNBC that if you say a company is like a fraud or is, you know, you should be short this company, that message will get amplified a million times. So just by saying it, you can destroy a company company and fairfax sued them and alleged that they were like uh calling them at their homes like harassing calling the executives at like 2 a.m and like sending them like weird packages and shit and like stalking them going through their trash all sorts of other just for the listeners whenever sean says call he makes a little phone

motion with his hands and he ate a banana earlier but that would have been a much better visual yeah for the those of us in the room but um but yeah no i mean it was just very uh fascinating going through the life of dan lobe and i think he really does uh encapsulate a lot of different things that are wrong with the financialization of our economy. And, you know, hopefully we start taking back some of the power from him. But Brad, I want to thank you for being here. And I guess I want to ask you if there's any stuff, any major things we didn't really get to in Dan Loeb and his kind of biography. You know, I think it's pretty comprehensive, but if there is, it would be on hedgeclippers.org. Yes. Nice. And I shouldn't let you go without asking you because you did send this to us.

There is a leaked email from one of the Walton heirs. You listened to our episode on the Waltons and you pointed out one of the Walton heirs has an email where he apparently offered to use his family fortune to bankroll an ayahuasca shaman for about $2,000 a month? Yeah, you know, I don't have too much more info on this, but I forget this kid's name. He's a Walton grandson, I think.

And he is the, like, you know, hopefully the one that takes over the family fortune. I'm really pulling for him uh he went to uc boulder uh and you know looks the part of somebody who would be um encouraging uh the walton family foundation or whatever to to give daniel pinchback two thousand dollars a month um but apparently that's uh that's what he did right like pinchback was one of these 2012 mayan m times prophecies guys who also like loved psychedelic fucking experimentation just for their record the mayan thing it's the same thing as when we went from 99 to 2000 it was just a turnover in their calendar but but that's what i love is like the way our economy is structured now is you can get universal basic income if you give acid to one of the Waltonaires. Dude, you know, I think.

And we think we're better than the Aztecs. There is a long storied history of philanthropy supporting the leading intellectual minds of every generation. And really, why wouldn't Daniel Pinchback be entitled to two thousand dollars a month you know yeah We don't need uh we don't need uh andrew yang just be the fucking connect for like some billionaire fail son And then he'll be on email being like yeah, man the two thousand a month have been wired to your account You're taken care of Just fucking get billionaires high. that's like the most profitable strategy go with psychedelics it makes them more um more suggestible optimizing your skill set yeah

um but uh brad from hedge clippers i want to thank you here i know you're not really online but is there anything you want to plug or advertise to people or encourage them to check out just hedge clippers.org all right check out hedge clippers uh they've informed a lot of our research in the past i'm sure they will in in the future and uh thank you for listening check us out on patreon and uh we'll see you next week bye bye love you