Perishing Square's William Ackman has transcended the investing world and is has now become fodder for Wall Street's favorite contrarian newsletter writer. Wednesday morning Dennis Gartman spared nearly 1 page of his 8 page note to address Ackman's Valeant trade (and to take a few stabs at Bill).
Gartman compares Ackman's public disaster and transition from respected money manager to Wall Street's punchline to the Greek character Icarus:
"Here we have one of the true giants of the hedge fund industry; a gentleman once worth billions who ran billions more; a leader in the performance race for many years and now rather obviously a gentleman, who like Icarus of Greek mythology fame, flew too close to the sun and is now falling into oblivion"
Gartman then goes to discuss Paul Tudor Jones' "Losers Average Losers" philosophy and blasts Ackman saying:
"When one averages down into a long position… or averages “up” into a short position… only one thing can be happening to the equity in one’s account: it must, by definition, be falling. If you buy a company’s stock at $25/share and it goes to $20/share, you are worth less than you were before. It cannot be otherwise. It is simple arithmetic. On the other hand, if you buy a company’s shares at $25/share and they go to $30/share your equity can only be larger. Why, we ask, would you wish for the former?"
Dennis then takes a trip down memory lane and recalls the burnouts he has witnessed from the sidelines:
"We watched as USAirways’ stock fell from $125/share all the way to zero, with some of the great minds in the business having owned it… and having bought it… all the way down into oblivion. We watched as sugar prices in the early 70’s fell from $1.25/lb. to $0.03/lb., with buyers all the way down, and over the past three decades we’ve watched as the coupon on the long bond here in the US has gone from 14.25% to where it is today in single digits."
Finally, Dennis sticks it to Bill saying he is "headed toward investment oblivion" and that "he is trapped in a trade that he cannot...and will not...get out of".
To wit from Wednesday's Gartman Letter:
"The purpose for this exercise is to learn the lesson that Mr. Ackman is learning the very hardest of ways: that the market is wiser and larger and fiercer than are we. We are but small, imperiled cogs in a huge machine that can and will grind us into oblivion. The best that we can do is make certain that we have our trading positions in line with the market’s main trend; that we align ourselves with forces larger than are we and that we never, ever deviate from that intention.
Mr. Ackman is heading toward investment oblivion. He is trapped in a trade that he cannot… and will not… get out of. His institutional clients will make the decision to get out for him as they demand that their remaining capital be returned and that as he raises that capital he is forced to sell his remaining shares in Valeant.
This is an enormous tragedy of huge proportions being played out here before our eyes. Mr. Ackman’s investors did not deserve this fate, but they are being forced to live it nonetheless. How truly sad. He averaged down…again… and again…and again… and again. His eventual demise is a lesson to us all. Would that we learn from it: This is Greek tragedy of the saddest kind. No one deserves this fate"
Get it together William, you're breaking Dennis' heart.
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