Dennis Gartman Mocks Bill Ackman’s "Demise"; Tries To Understand Bitcoin, Fails
By Tyler Durden
In an unexpected development, in his latest note the best market inflection point indicator alive, Dennis Gartman, has decided to pick on none other than billionaire Bill Ackman. This is the result:
We wish to talk once again about the incredible collapse of Valeant’s shares and the damage being wrought upon the reputation of those hedge fund managers still caught long of this company’s shares, with the leading example remaining the demise of the once sterling reputation of Mr. Bill Ackman of Pershing Square Capital. 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.
Pershing Square’s assets are down 18.6% for the year as of the end of May we are told. We see no sense in being vindictive for there is nothing to be gained in being so; rather we wish simply to point out that the “Rules of Trade” are meant to be adhered to and that the “first among equal” of our rules of trading is the first: that one is never, ever, under any circumstance to average down into a trade. As our old friend, Paul Tudor Jones, says in this regard, “Losers average losers.”
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?
When a stock begins to fall there is no actual way of telling how far down it may fall before its weakness is stemmed. Enron’s shares fell relentlessly… inexorably… from $85/share to zero, and it was considered to be under-valued at every single penny lower as it fell. Buyers bought all the way down into bankruptcy. 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.
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 …read more
Source: Dennis Gartman Mocks Bill Ackman’s "Demise"; Tries To Understand Bitcoin, Fails
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