Actually, I lied. He really is not that bullish at all. But he does sound relatively upbeat by comparison to 5 months ago.
I have seen Whitney Tilson of T2 Partners a lot in the media of late. The two most recent appearances are with Tech Ticker where he talked about house prices and with the Financial Times, where he had a wide-ranging conversation with Aline van Duyn. I have already linked to the Tech Ticker piece in our newsfeed. So I would like to highlight the conversation with the Financial Times.
Below are the three links to the videos of the conversation. (Note: Tilson is a major investor in Berkshire Hathaway, the firm controlled by Warren Buffett. He used to be short the financials. He was pretty bearish in December. Watch the Bloomberg video to see what I mean.)
Tilson is a value investor who doesn’t think we are halfway through the unwinding of this debt bubble. While I would characterize him as a proponent of the ‘fake recovery’ meme, I believe he is too fundamental an investor to invest in that recovery. He sounds very cautious about what is coming down the pike for banks and the deleveraging of this debt bubble, but he does share my view that big banks will probably be able to see the eventual writedowns through as they will happen over a much longer time horizon.
“Whitney Tilson, managing partner of T2 Partners and well-known as a value investor and shareholder of Warren Buffett’s Berkshire Hathaway, discusses the recent pressures on the share price of Warren Buffett’s Berkshire Hathaway. Berkshire Hathaway shares are Mr Tilson’s fund’s biggest position. The huge increase in spreads on Berkshire Hathaway, which were the equivalent of those often quoted for highly distressed companies, followed the need of counterparties to hedge exposure to future payments they were due to receive from Berkshire Hathaway. The costs became so high that the original contracts were renegotiated in Berkshire’s favour. The wider CDS spreads – the result of technical factors – contributed to the decision by Moody’s Investors’ Services to cut Berkshire Hathaway’s triple A credit rating. Mr Tilson supports regulators’ plans to shift the CDS market to centralised clearing and for more disclosure about CDS positions.”
“Whitney Tilson, managing partner of T2 Partners and well-known as a value investor and shareholder of Warren Buffett’s Berkshire Hathaway, says it is difficult to be a value investor when the behaviour of other investors is so panicky. Recent panic selling has now been replaced with panic buying of the same stocks. The recent economic indicators which have been interpreted as signaling a potential bottoming of the US housing market are merely reflective of seasonal factors. Foreclosures, on which there has been a moratorium, will start increasing again. "That’s going to continue to pressure home prices for, we guess, at least another year, and I think a lot of investors are looking at some short-term data and not quite seeing that we’ve got a ways to go on this," Mr Tilson says.”
“Whitney Tilson, managing partner of T2 Partners and well-known as a value investor and shareholder of Warren Buffett’s Berkshire Hathaway, expects another wave of losses in the US mortgage market. As described in his new book New Mortgage Meltdown, he says the first wave of losses – which have reached over $1,300bn – was concentrated on mortgage-backed securities owned by banks and financial institutions. The second wave will hit mortgages still held on banks’ balance sheets, and losses end up being double or triple the current figure. With such losses looming, he says the strong rally, particularly in the financial sector, is "overdone".”
Other sources
T2’s Tilson Short Sells Wells Fargo, Bank of America: Dec 2008 – Bloomberg
T2’s Tilson Selling Short Wells Fargo, Bank of America: Video – Bloomberg (video here)