Investment world hype types.
Ask Christopher Ma to characterize a certain type of high-rolling investor, and you might think he’s talking about this year’s crop of presidential hopefuls: “They are self-centered, egotistic, cocky and borderline narcissistic.” It’s how the director of the Roland George Investments Institute at Stetson University in DeLand, Florida, describes stock market moguls and pundits who mix self-promotion, rock-star decorum and wild prognostication into an elixir just as toxic as it is intoxicating. Here are six investment world hype types — many of whom have suffered spectacular failures that are market crashes unto themselves.
Bill Ackman: Pharma freakout (2016)
An activist investor, Ackman boasts his share of victories. His stake in General Growth Properties (ticker: GGP) exploded 11,000 percent before he sold it in 2015. But imagine accruing a $2 billion loss on a Canadian company, Valeant Pharmaceuticals International (VRX). Valeant is down 88 percent from this time last year and struggling to stay ahead of bankruptcy. Even buy-low types might not have the stomach to jump in at this point — and Ackman’s Pershing Square Capital Management has been punished, with investors pulling out more than $600 million this year.
Philip Falcone: Bathroom antics (2013)
Falcone made an astounding $15 billion “big short” bet against subprime mortgages in 2007 — netting $1.7 billion, Ma says. But then he pulled up short after illegally manipulating the bond price of MAAX Holdings, a Canadian bathroom products manufacturer. Falcone was convicted of securities fraud by the SEC in 2013 and banned from the securities industry for five years. Notes Ma: “Last time we checked, Falcone tried a ‘third act’ by offering a $1 billion cash to acquire The Andersons, a grain trader, in May.”
Whitney Tilson: Google boondoggle (2004)
Tilson — co-author of “The Art of Value Investing” — gave advice on Alphabet, then called Google (GOOG, GOOGL), that didn’t just miss the boat, but the aircraft carrier. In 2004 he predicted the stock would be “disappointing” to investors. Everyone knows what happened next but here’s a little context: If you took Tilson’s advice and unloaded Google stock three years after its 2004 initial public offering, you’d have missed out one of the greatest run-ups in history. Between 2004 and 2013, share prices skyrocketed more than 900 percent.
Jim Cramer: Bear Stearns nightmare (2008)
If you ever confuse Cramer with the uber-goof Kramer on “Seinfeld” reruns, this could be why. Word for word, here’s how the loud-mouthed host of “Mad Money” on CNBC addressed a viewer’s concern over Bear Stearns’ liquidity problem: “No! No! No! Bear Stearns is not in trouble. If anything, they’re more likely to be taken over. Don’t move your money from Bear.” That was on March 11, 2008. Three days later, Bear Stearns stock fell 92 percent on news of a Fed bailout and $2-a-share takeover by JPMorgan Chase & Co. (JPM) — making Cramer the Ultimate Bear.
Cramer part deux: Bad money (2015)
Just in case you think Cramer’s redeemed himself since the blown Bear Stearns call, there’s proof to the contrary, says Steve Gormley, founder and managing partner at Seventh Point, a private equity fund. “A retired finance professor from Illinois bought all 49 of Cramer’s stock picks as an experiment. The list was published in April 2015. Six months later, only 28 percent of the stocks ended up at a higher price.” Here’s hoping that professor didn’t let Cramer anywhere near his 401(k).
Bill Miller: Value Trust bust (2011)
As long-time manager of the Legg Mason Capital Management Value Trust, Miller beat the Standard & Poor’s 500 index for 15 consecutive years through 2005. Then his fund underperformed by such a large margin from 2006 through 2011, longtime investors saw their gains reduced to mediocre performance. Miller, who stepped down in 2011, “became overconfident,” says Bob Johnson, president and CEO of the American College of Financial Services in Bryn Mawr, Pennsylvania. Many of his bets focused on single sectors, “but when a sector goes south, there are few winners.”
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