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Jacob Wolinsky
Jacob Wolinsky
Articles  | Author's Website |

John Burbank's Presentation From The Value Investing Congress

I am lucky enough to be attending the Value Investing Congress. I took extensive notes on every speech and hope to post each one on GuruFocus over the next few days, in addition I will be posting a couple of interviews I plan on conducting. To follow my live updates from the Congress sign up for my Twitter alerts http://twitter.com/valuewalk

John Burbank of Passport Capital spoke on the first day of the Congress.

John H. Burbank is the Founder and Chief Investment Officer of Passport Capital, LLC, a San Francisco global investment firm which manages over $3.0 billion in assets. Prior to founding the firm in 2000, he was a consultant to Roger Richter of JMG Triton Offshore, Ltd. and before that was director of research for ValueVest Management. Mr. Burbank earned a B.A. from Duke University and an MBA from Stanford Graduate School of Business.

I will cover all the points of his speech that I was able to write down. Any statement I was unsure of I did not include. However, it is possible that I misheard one or two things.

(Note: this speech was highly political and I am just reporting what Burbank said. These views do not necessarily reflect my views).

John got started in investing right before the Asian crisis in the late 90s. He learned an important lesson from the crisis and it helped him avoid the dot com fiasco a couple of years later.

John mainly spoke about political activism, and advocated for investors to be more political active.

Burbank is very surprised by how little people know about politics and DC.

US is changing and it should be more like emerging markets, pure bottom up value investing is dead.

You have to talk to people so too with DC. Everything runs in 2 year cycles which cause massive changes in the equities markets..

We are in awful financial shape.

Demographics play a big part in economics.

2025-debt to GDP in US will be 112%.

If nothing changes, by 2025 entitlements will exceed all revenues, this is not sustainable path.

You can vote, volunteer and contribute.

Too many lawyers work in Washington compared to people with MBAs. John does not think that having an MBA is necessarily good, but he would like to see more people with a business background working in politics. Many people in congress have less than five years in private sector.

From 2010-2012 will be gridlock, you have to be mindful of. However this period will be more stable.

$5.3 billion was given in 2008 to candidates.

Americans are incredibly disconnected from DC, we affect DC very little and do not realize how much it affects us.

People in the investment industry can give more donations to affect political change.

Long term we can be like Argentina or Germany .

10 year treasury is falling very low, but it is not telling you the value of what it will be worth 10 years from now.

Burbank thinks there is a new alignment in how we look at countries. They can be divided into four separate categories:



Emerging markets

Frontier markets

Economic freedom index Hong king, Australia, Switzerland, New Zealand, Canada, Ireland, and Singapore are all leading America. Besides Ireland the countries have an average corporate tax rate of 24%

The big debt countries US, Japan, UK, Italy, France and Spain have a corporate tax rate closer to 33%

The emerging world will do well although they might have to deal with inflation due to spending by western world. Burbank thinks that the way we get out of our problems will cause problems in the emerging world.

Burbank thinks the US has the best chance to lead the west out of the entitlement era.

Campaign finance reform is murky issue and he did not have much to comment in that regard.

People writing histories do not know much about finance, history is really about countries trying to make money and increase living standards. Burbank that the financial system was good overall but the system was gamed by certain big players.

Burbank likes psychical gold over holding a gold ETF. He holds his gold in Zurich. Burbank recently wrote a 20 page paper explaining why physical gold is better than an ETF.

He thinks emerging markets are big bubble, but commodities are good because of inflation induced by the fed. His biggest investment is coking coal in Mozambique.. Markets keep changing now people are bullish on emerging markets and investors are not realizing this risk, especially liquidity risk. He thinks most hard assets will do well be long what china is short. He likes commodities that China needs such as potash, and oil.

Burbank also suggests blue chip western companies that are trading 9-10x earnings with 4% yield compared to 10 year treasury yield we are now buying Exxon, Microsoft, Nestle, Kraft.

He assumes he does not know anything meets with people and tries to find out what is going on. You can get people to talk with small donations like $2400. You want to be where other people are not and politics is an area where people are not. Tilson mentions that you can have incredible returns if you are a special interest groups with millions of dollars. This must be countered by more investor activism in DC. Burbank thinks doing this will have a positive effect, and if people do not get involved we are on a dangerous path.

Conclusion: Burbank advocates investors getting more involved in politics to try to sway politicians to have a more capitalist view.

Disclosure: Long MSFT and KFT


About the author:

Jacob Wolinsky
My investment ideas have been inspired by many of value investors including Benjamin Graham, Charles Royce, John Neff, Joel Greenblatt, Peter Lynch, Seth Klarman,Martin Whitman and Bruce Greenwald. .I live with my wife and daughter in Monsey, NY. I can be contacted jacobwolinsky(AT)gmail.com and my blog is www.valuewalk.com

Visit Jacob Wolinsky's Website

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