United States, China, Asia discussed on My Worst Investment Ever Podcast
To founding the forerunner to acquire his fund. In two thousand isn't ten. Tobias was an analyst at an active his head fund general counsel of a company listed on the Australian Stock Exchange and a corporate advisory lawyer as a lawyer specialising in mergers and acquisitions. He has advised on transactions across a variety of industries in the United States. The U K China Australia Singapore Bermuda Papa. New Guinea New Zealand in Guam. He is a graduate of the University of Queensland in Australia. With degrees in law and Business Tobias take take a minute and filling any further tidbits. Not Your Life. The only thing that I should be the main thing to mention is my full time. Job Is as portfolio manager manager of the acquirers fund which is an ETF listed on the New York Stock Exchange. The ticket is Z. I. G. Zig Ziglar in the markets eggs. That's a long long short deep value fund very traditional sort of long positions. We try to buy them really deeply valued which means that. I don't like to pay a lot for growth for balance sheet strength. Lots of free cash lead buying back stock and short stuff that's massively evaluate in in distress losing lots of money lots of debt on the balance sheet and so it makes it really easy to buy. We run that it's kind of a it's a passion. It's a vacation. It's an avocation and so that's my fulltime job so I got lots of loses lots of really bad positions. It's really easy to talk about that because we were wrong. About forty percent of the time and at fifty two percent of the time. So that's a little bit of an a coin. Flip Hebert honey when I'm right I'm really right. It's the magnitude of a frequency right when you for those isometric position so when you get them right you make galant when you get them wrong. You don't lose much exactly. I'm just curious before we go on to the main question over here in Asia. We don't have such such things as ETF's as kind of a method of implementing your strategy. Can you just give us a briefing for the listeners. kind of what does that mean. Because in the old days you started a fund and you went out your applied for all the man and you know you raise money into that fund. I'm just curious. Like what's the Pros Rosen cons and how what like. Yeah that's a great question. So an exchange traded fund. ETF is a slightly different structure. So you might be it. Familiar with a mutual fund or a limited partnership which is how most hedge funds structured. What those things are that? You have to sort of contact the manager Asia in order to invest in those things often you need to be credited which is which means you need a certain level of assets or income and any moves the manager of the manager sales position that has some capital gains in that flows through to you as the whole so you might not have a gain but you re paying tax acce the ETF is this incredible creation that you can buy three. Oh brokerage accounts of European up your brokerage account it should be available in the NYC he's Zig Zag NYC whichever way around Zig dot us. Something like that. And it's not a four three vehicle for capital gains provided that it's managed properly which means set we make buys and sells in the font and they don't impact you. What happens is your capital gain is where you buy it and ways so So it's it's a lot. It's the same as buying a share price shot. So it's it's like a stock exactly right. It's like a stock trades of stocks. And just curious because when I left America was nineteen ninety two and I left America right about where you are living and came to Thailand and of course we didn't really even have EDF's offset that time. I'm just curious. Maybe you could just give the the listeners. Just a real brief discussion of why would somebody implement their ideas it through an ETF. In America to say where where there's lots of options versus implementing your ideas through a fun what benefit you get from that the reason reason to do it as some sort of hedge fund so you can charge higher fees you get you get a big fat management fee and a big fat carry. If you're like I am and you sort sort of you know clearly Australian of been in the states for about a decade now the way that I've got recognition or the way that have gotten on is through writing books. 'cause I don't have a great network here on people so there's a trend in this industry towards lower fees for the most part so I kind of height getting lockups. I think there's any reason to look up capital which is what the hedge funds. It's difficult to get in and out of the Hedge Fund when you have an underlying so this the hedge fund invests my phone sorry invests in basically the universe is the S. and P. Fifteen hundred which is a compasses index the largest fifteen hundred stocks out of that. Maybe there are like three thousand investable stocks in the states. That's very liquid so there's just no reason from to throw up gates and make it very common for people to get in and out so this thing is it's easy for smaller. Investors to invest through their brokerage account directly into the fund. I can manage it. Describe what's happening. You can say the holdings role published every day on the website which is acquires fun dot com and you can see all of the in in a workings and everything so it's just a trend of the will towards transparency and love phase and so I just thought I'd get out in front of the trend. Got It that makes sense. Do you know. Oh how many large and liquid companies there are in the Chinese stock market if you just said that don in the US market you mentioned about three thousand as has. Potentially you know kind of what we could call investable. It's hunt with individual. It might be. They might be more than that. It might be. It could be five thousand or something like that the for sort of professional investors. It's about three thousand. Yeah I DID FOR MY PhD dissertation. One of my things I needed to do is look look at markets across the world particularly across Asia and determine what was you know what was the definition of large and liquid and I came up with the definition. Well well I would say that. The definition of large and liquid is probably minimum two hundred fifty million dollars and you would say average average daily turnover of depends. I mean you could say half a million dollars to a million dollars the definition depends. Are we talking about kind of a high net worth or are we talking about an institutional investor but something along that line so it does include small-cap. We don't want to exclude small-cap but it got to be that you could put some reasonable reasonable amount of money in it. If it's only trading one hundred thousand dollars a day you know. It's very hard to allocate money to that which to standards. It's harder to meet. Do you think the two eight hundred fifty million or the half million to a million shares a day. The half a million two million shows a day. And it's really what's most important is that you can actually get it in and out for most people but what was interesting to me is that China has three thousand large and liquid companies. Wow investable companies and it's growing at such a pace I think my number for the US with something like four thousand five hundred so your number that you said about five thousand is probably about right and we do this study. I did the study about three years ago and I've updated pretty regularly. I haven't really published it. I should do more on that but I would. Guess it's five five thousand so I'll take you. I'll take your number. So what my forecast from that is that five years from now based upon trends in China and in the US China we'll we'll have more large and liquid companies in their stock market. In fact China will become a bigger more investable stock market the core war of capitalism states. That's crazy that's amazing. I mean that's just a an interesting statistic based upon you know what we're talking about so yeah there you go in fact I should probably include a link to that in the show notes. If anybody wants to dig immoral. I'll take a look at a study up. Yeah I will so anyways anyways now it's time to share your worst investment. Ever since no one goes into their worst investment thinking it will be tell us a bit about the circumstances leading up to it and then tell us your story. Why should say I've always you know I read all of buffet stuff before I ever started investing in kind of prevented from investing in a lot of stuff because I was an eminent lawyer Royal? It's just not a good look at the youngest lawyer on the deal team has a position in the stock. That's getting taken over. Looks like insider trading so we kind of always bod from buying anything so I had read all the theory by the time I got before I even opened my first brokerage account and so I didn't advocate of never got very concentrated of never had an enormous awesome out of network in any individual positions. So I've been quite comfortable making lots of dumb Ariza and putting the money in the wrong positions and I've learned a lot. That's how you learn. You know you might make as many mistakes as you can as quickly as you can. And that's kind of figure out what you're doing so it's hard for me to narrow it down to just one but I'll tell early. This was for me. This is an important one in my own evolution as an investor so I started out looking for kind of undervalued assets. That's how I started up. I stock up. You're looking at net Karnak net net steel Graham net nets and I graduated from Graham net nets to looking at more of these kind of acid heavy heavy businesses and trying to find ones that would deeply devout so in when the BP oil spill happened. I forget exactly when that is maybe be at more than a decade ago. I had this thought. I don't WANNA be right in the epicenter of that. I don't want to be in BP but there were all of these other any oil and gas company that was in the Gulf or nearby got dinged up pretty badly and one in particular was seahawk drilling and what seahawk drilling at the head. About one hundred fifty of these Jack Up Rigs Jack up rig is something at floats out into the middle of the Gulf of Texas put sits Harland's it's down into the bottom and injects itself up out of the water and drills and what they did. was they lease them out to other companies that were drilling so you can imagine as soon as the BP oil go happens all those drilling stops. They get there in a lot of trouble and so they don't have a lot of cash flow but they're very acid heavy so I figured out that trading like ten cents on the dollar. That was my estimate estimate. The big problem is that is not cash for so they were saying. There's never been an opportunity like this to buy Jack Up rigs in the Gulf Texas and it's like really capitalizing become you know the big driller in this area. And so I thought well this is here. We go these guys know what they're doing very very undervalued value. They're going to capitalize on this. This is exactly what I'm looking for. And I have subsequently learned when I wrote concentrated investing we and we interviewed Christian. CMO Em. WHO's like the Norwegian oil and Gas Maestro? He created transition. He's been around forever. He says you buy these companies when Abe it when they're losing the money that's the time to buy. You seldom when making a lot of money. You know. It's counter cyclical counter-intuitive. That's kind of contrary sway value works.