The Ira Sohn Conference gathered some of the biggest names in the hedge fund industry and left participants with lots of good thoughts spanning the investing field. Carl Icahn, for example, complained about how dysfunctional boards in the U.S. don't hold their members accountable for their actions while telling investors to bet on Icahn Enterprises; also at Ira Sohn was Brazilian billionaire Eike Batista, who predicted he’d outstrip Carlos Slim as the world’s richest man by 2015. Other high points included contrarian investor marc Faber on the dire situation caused by the deficit in the U.S., Mark Hart making the case to short China, and Ira Sohn investment idea winner Sunjay Gorawara making a bullish case for Bridgepoint Education.
Icahn gave a sort of key note, closing speech at the Ira Sohn conference this year, held at Jazz at Lincoln Center in New York. The legendary activist investor told those in attendance they should bet on Icahn Enterprises with a joke, “I don’t understand why I don’t get a premium and Warren [Buffett] does, maybe it’s because he’s older,” adding, “Icahn Enterprises has great management, and the management is me.”
The billionaire explained his modus operandi and criticized the “dysfunctional set up of boards in America.” By first purchasing stocks and getting a minority position, Icahn then likes to be a little confrontational in the context of a proxy fight to get some control. “If you have power and you go to war, which, I must admit, I enjoy, then you should win,” he told the audience, adding that it’s all about cutting costs and making managers accountable. “Don’t try to micromanage,” he warned, “just threaten to fire [the upper management]” to make them accountable.
Right before Icahn spoke Brazilian billionaire Eike Batista, number 8 in Forbes’ World Billionaires list. Like Icahn, Batista spoke of his companies’ success and suggested that investors “join [him] in beating Slim.” Batista loves to repeat that he will soon pass Carlos Slim Helu as the world’s richest man, and, in his speech at Ira Sohn, he put the date at 2015. Batista claimed his EBX Group, a holding company for his various enterprises spanning mining, energy, and logistics, has an underlying value of $2.3 trillion and a market cap of $45 billion. “I like creating ‘idiot-proof assets’ because sometimes you have idiots running them,” said Batista, causing the crowd to erupt in laughter. (Read Billionaire Ken Langone Calls Lists Like Forbes 400 'Destructive').
Mark Faber, contrarian investor and author of the Gloom Boom Doom reports, gave one of the most interesting and lively presentations of the conference. Telling investors to steer clear of Treasuries, Faber ridiculed Fed policy and Bernanke’s claims that he’s an expert on the Great Depression. “Bernanke may be an expert but he doesn’t know what caused it,” said Faber, pointing the finger at excessive credit growth. (Read Master Short Seller Jim Chanos Targets First Solar And Renewables).
“The Fed’s philosophy is that we can’t identify bubbles, but when they burst, just drop interest rates and flood the system with money to avert deflation,” said Faber. As debt to GDP levels approach 400%, the Fed won’t have any option but to keep the printing press going, killing Treasuries, the dollar, and inflating China. “With emerging economies now larger than advanced economies for the first time, geopolitical conflict will emerge, you have to prepare your portfolio,” warned the pony-tailed investor.
Joining the ranks of the bears, Mark Hart III, chairman and chief investment officer of Corriente Advisors, gave his case for shorting China. The hedge funder called China a “credit fueled bubbled” and not a growth miracle, adding he’s long puts on Chinese renminbi. Excessive capital printing, to absorb massive currency flows, have led to a misallocation of capital which will lead to a massive bust caused by inflation, said Hart.
While many think China is shielded by massive FX reserves, Hart noted that those reserves, apart from being insufficient, carry with them corresponding liabilities, which will have an effect whenever China begins to need them for stability. And even though most think the RMB can only appreciate, devaluation is the path of least resistance in a China bust scenario.”
The Ira Sohn Foundation organized its first investment contest, which a senior at Indiana University won with a bullish argument for Bridgepoint Education. Sunjay Gorawara made the case for the for-profit, almost exclusively online, university pointing at its past performance, where it has crushed estimates every quarter since its IPO in 2009. One of the most heavily shorted stocks in the market, Bridgepoint had been part of a generalized attack on the sector by hedge fund manager Steve Eisman at the 2010 Ira Sohn Conference. (Read Hedge Fund Billionaire Falcone Likes Crosstex Energy And MLPs).