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In his book, You Can Be a Stock Market Genius, Greenblatt talks about using LEAPs to make leveraged bets. The book included his trade in Wells Fargo (WFC, another topic for a future post, I suppose).
But sometimes, stocks get down so cheap that they become priced like options. In the Genius book, the WFC LEAPs were priced at $14 while the stock was at around $77.
Here, we have a hedge fund manager trading less than $3.00/share, which is a typical price for regular options, not even LEAPs. Of course, all stocks are options on the residual value of businesses. But sometimes things are priced for either a large gain or zero, just like an option.
I call this a perpetual option, but that reminds me of those lifetime warranties. Like, who's lifetime? The manufacturer's? The store's? Yours? Nothing is forever, so I guess there really is no such thing as a perpetual option. But anyway...
Och-Ziff IPO'ed in 2007 at $32/share and traded in the mid $20's right before the crisis, then down to below $5.00 during the crisis and back up to the mid-teens. I've been watching this since the IPO and looked at it again when it was trading around $10/share. It's down quite a bit since then. I didn't own it back then but I did take a small bite down at $5.00/share.
I have mentioned other private equity and hedge fund managers here in the past but haven't owned most of them because of the amount of money that seemed to be going into alternatives. I was just worried that the AUM's of all of these alternative managers were going up so quickly that I couldn't imagine them earning the high returns that made everyone rush to them in the first place. Look at the presentation of any of these alternative managers and their AUM growth is just staggering.
Extremely Contrarian We investors walk around and think about all sorts of things; look at store traffic, taste new foods/restaurant concepts, count how many Apple watches people are wearing (I recently biked around the city with my kid (Brooklyn to Central Park, around the park (around the big loop) and all the way downtown back to Brooklyn (30+ miles) and I think I counted two Apple watches that I saw compared to countless iPhones. And this was in the summer so no coats or long sleeves to hide wrists).
And a couple of the things that we tend to think about are, What does everybody absolutely love, and what are they 100% sure of (other than that Hillary will win the election and that the market will crash if Trump wins), and What do people absolutely, 100% hate and don't even want to talk about? In the investing world right now, it seems like the one thing that everybody seems to agree with is that active investing is dead (OK, not completely true because we active investors never really lose faith in it). The data points to it (active managers underperforming for many years, legendary stock pickers too not performing all too well, star hedge funds not doing well etc...). The money flows point to it (cash flowing out of active managers and into passive funds, boom in index funds / ETFs; this reminds me of the 1990's when there were more mutual funds than listed companies. There are probably more ETFs now than listed companies). Sentiment points to it (stars and heroes now are ETF managers, quants etc.).
By the Way Oh, and by the way, in case people say that it is no longer possible due to this or that reason for humans to outperform indices or robots, I would just say that we have seen this before. Things in finance are cyclical and we've seen this movie before.
From the 1985 Berkshire Hathaway Letter, Most institutional investors in the early 1970s, on the other hand, regarded business value as of only minor relevance when they were deciding the prices at which they would buy or sell. This now seems hard to believe. However, these institutions were then under the spell of academics at prestigious business schools who were preaching newly-fashioned theory: the stock market was totally efficient, and therefore calculations of business value -- and even thought, itself -- were of no importance in investment activities. (We are enormously indebted to those academics: what could be more advantageous in an intellectual contest -- whether it be bridge, chess or stock selection than to have opponents who have been taught that thinking is a waste of energy?)
What Do People Hate? So, back to what people absolutely hate. People hate active managers. It's not even stocks that they are not interested in. They hate active managers. Nobody outperforms and their fees are not worth it. What else do they hate? They hate hedge funds. I don't need to write a list here, but you just keep reading one institution after another reducing their exposure to hedge funds. There is a massive shakeout going on now with money leaving hedge funds. Others like Blackstone argues that this is not true; assets are just moving out of mediocre hedge funds and moving into theirs.
This is a theme I will be going back to in later posts, but for now I am just going to look at OZM.
OZM OZM is a well-known hedge fund firm so I won't go into much detail here. To me, it's sort of a conventional equity-oriented hedge fund that runs strategies very typical of pre-Volcker rule Wall Street investment banks; equity long/short, merger arb, convertible arb etc. They have been expanding into credit and real estate with decent results. But a lot of their AUM is still in the conventional equity strategies.
What makes OZM interesting now is that chart from the Pzena Investment report (see here). These charts make it obvious why active managers have had such a hard time. The value spread has just continued to widen since 2004/2005 through now. Cheap stocks get cheaper and expensive stocks get more so. You can see how this sort of environment could be the worst for long/short strategies (and value-oriented long strategies, and even naked short strategies for that matter). Things have just been going the wrong way with no mean reversion.
But if you look at where those charts are now, you can see that it is probably exactly the wrong time to give up on value strategies or value-based long/short strategies; in fact it looks like the best time ever to be looking at these strategies.
Seeing that, does it surprise me that many pension funds are running the other way? Not at all. Many large institutions chase performance and not future potential.
Conceptually speaking, they would rather buy a stock at 80x P/E that has gone up 30%/year in the past five years that is about to tank rather than buy an 8x P/E stock that has gone nowhere in the past five years but is about to take off; they are driven by historic (or recent historic) performance.
OZM Performance Anyway, let's look at the long term performance of OZM. This excludes their credit and real estate funds which are doing much better and are growing AUM.
This is their performance since 1994 through the end of 2015:
OZM fund S&P500 1994 28.50% 5.30% 1995 23.50% 27.40% 1996 27.40% 23.00% 1997 26.70% 33.40% 1998 11.10% 28.60% 1999 18.80% 21.00% 2000 20.60% -9.10% 2001 6.30% -11.90% 2002 -1.60% -22.10% 2003 24.00% 28.70% 2004 11.10% 10.90% 2005 8.80% 4.90% 2006 14.80% 15.80% 2007 11.50% 5.50% 2008 -15.90% -37.00% 2009 23.10% 26.50% 2010 8.50% 15.10% 2011 -0.50% 2.10% 2012 11.60% 16.00% 2013 13.90% 32.40% 2014 5.50% 13.70% 2015 -0.40% 1.40% 5 year avg 5.85% 12.57% 10 year avg 6.69% 7.32% Since 1994 12.05% 8.87% Since 2000 7.59% 5.01% Since 2007 5.14% 6.53%
So they have not been doing too well, but it's really only the last couple of years that don't look too good. Their ten-year return through 2013 was +8.2%/year versus +7.4%/year for the S&P 500 index. It's pretty obvious that their alpha has been declining over time.
For those who want more up-to-date figures, I redid the above table to include figures through September-end 2016. And instead of 5 year and 10 year returns, I use 4.75-year and 9.75-year returns; I thought that would be more comparable than saying 5.75-year and 10.75-year, and I didn't want to dig into quarterly figures to get actual 5 and 10s.
OZM fund S&P500 1994 28.50% 5.30% 1995 23.50% 27.40% 1996 27.40% 23.00% 1997 26.70% 33.40% 1998 11.10% 28.60% 1999 18.80% 21.00% 2000 20.60% -9.10% 2001 6.30% -11.90% 2002 -1.60% -22.10% 2003 24.00% 28.70% 2004 11.10% 10.90% 2005 8.80% 4.90% 2006 14.80% 15.80% 2007 11.50% 5.50% 2008 -15.90% -37.00% 2009 23.10% 26.50% 2010 8.50% 15.10% 2011 -0.50% 2.10% 2012 11.60% 16.00% 2013 13.90% 32.40% 2014 5.50% 13.70% 2015 -0.40% 1.40% 2016* 1.10% 7.80% 4.75 year 6.53% 14.58% 9.75 year 5.48% 6.72% Since 1994 11.68% 8.92% Since 2000 7.29% 5.27% Since 2007 4.82% 6.86%
So over time, they have good outperformance, but much of that is from the early years. As they get bigger, it's not hard to see why their spread would shrink.
They are seriously underperforming in the 4.75 year, but that's because the S&P 500 index was coming off of a big bear market low and OZM didn't lose that much money, so I think that is irrelevant, especially for a long/short fund.
More relevant would be figures from recent market peaks which sort of shows a through-the-cycle performance. Since the market peak in 2000, OZM has outperformed with a gain of +7.3%/year versus +5.3%/year for the S&P, but they have underperformed since the 2007 peak. A lot of this probably has to do with the previous charts about how value spreads have widened throughout this period.
I would actually want to be increasing exposure to this area that hasn't worked well since 2007. Some of this, of course, is due to lower interest rates. Merger arb, for example, is highly dependent on interest rates as are other arbitrage type trades. (The less risk there is, the closer to the short term interest rate the return is going to be.)
One thing that makes me scratch my head, though, in the 3Q 2016 10-Q is the following: OZ Master Fund’s merger arbitrage, convertible and derivative arbitrage, corporate credit and structured credit strategies have each generated strong year-to-date gains through September 30, 2016. In merger arbitrage, certain transactions in which OZ Master Fund participated closed during the third quarter, contributing to the strategy’s year-to-date gross return of +1.3%. Convertible and derivative arbitrage generated a gross return of +0.5% during the third quarter, driven by gains in convertible arbitrage positions, commodity-related volatility, commodity spreads and index volatility spread trades. Year-to-date, convertible and derivative arbitrage has generated a gross return of +1.3%. In OZ Master Fund’s credit-related strategies, widening credit spreads and certain event-driven situations added +0.4% to the gross return within corporate credit during the third quarter, while in structured credit, a +0.9% gross return during the quarter was attributable to the realization of recoveries in certain of our idiosyncratic situations. Year-to-date, the corporate credit and structured credit strategies are each up +1.2% on a gross basis. Gross returns of less than 2% are described as "strong". Hmm... I may be missing something here. Maybe it is 'strong' versus comparable strategies. I don't know. Anyway, moving on...
Greenblatt Genius Strategies Oh yeah, and by the way, OZM is one of the funds that are heavily into the yellow book strategies. Here's a description of their equity long/short strategy: Long/short equity special situations, which consists of fundamental long/short and event-driven investing. Fundamental long/short investing involves analyzing companies and assets to profit where we believe mispricing or undervaluation exists. Event-driven investing attempts to realize gain from corporate events such as spin-offs, recapitalizations and other corporate restructurings, whether company specific or due to industry or economic conditions.
This is still a large part of their book, which is a good thing if you believe that the valuation spreads will mean revert and that Greenblatt's yellow book strategies are still valid.
One thing that may temper returns over time, though, is the AUM level. What you can do with $1 billion in AUM is not the same as when you have $10 billion or $30 billion. I don't think Greenblatt would have had such high returns if he let AUM grow too much.
This seems to be an issue with a lot of hedge funds. Many of the old stars who were able to make insane returns with AUM under $1 billion seem to have much lower returns above that level.
Here is OZM's AUM trend in the past ten years. Some of the lower return may correlate to the higher AUM, not to mention higher AUM at other hedge funds too reducing spreads (and potential profits).
Just to refresh my memory, I grabbed the AUM chart from the OZM prospectus in 2007. Their AUM was under $6 billion until the end of 2003 and then really grew to over $30 billion by 2007.
Their 10-year return through 2003 was 18%/year vs. 10.6%/year for the S&P 500 index.
From the end of 2003 through the end of 2015, OZM's funds returned +7.2%/year versus +7.4%/year for the S&P 500 index. So their alpha basically went from 7.4%/year outperformance to flat.
This is actually not so bad as these types of funds often offered 'equity-like' returns with lower volatility and drawdowns. The long/short nature of OZM funds means that investors achieved the same returns as the S&P 500 index without the full downside exposure. This is exactly what many institutions want, actually.
But still, did their growth in AUM dampen returns? I think there is no doubt about that. These charts showing tremendous AUM growth is the reason why I never owned much of these alternative managers in the past few years I've been watching them.
The question is how much of the lower returns are due to the higher AUM. Of course, some of this AUM growth is in other strategies so not all new AUM is squeezed into the same strategies.
Will OZM ever go back to the returns of the 1990's? I doubt that. First of all, that was a tremendous bull market. Plus, OZM's AUM was much smaller so they had more opportunities to take advantage of yellow book ideas and other strategies.
Boom/Bubble Doesn't Mean It's a Bad Idea By the way, another sort of tangent. Just because there is a big boom or bubble in something doesn't necessarily make that 'something' a bad idea. We had a stock market bubble in the late 1920's that ended badly, but owning parts of businesses never suddenly became a bad idea or anything. It's just that you didn't want to overpay, or buy stocks for the wrong reasons.
We had a boom in the late 1990's in stocks that focused on picking stocks and owning them for the long term as exemplified by the Beardstown Ladies. Of course, the Beardstown Ladies didn't end well (basically a fraud), but owning good stocks for the long haul, I don't think, ever became a bad idea necessarily.
We had a tremendous housing bubble and various real estate bubbles in recent years. But again, owning good, solid assets at reasonable prices for the long haul never became a bad idea despite the occasional bubbles and collapses.
Similarly, hedge funds and alternative assets go through cycles too. I know many value investors are not with me here and will always hate hedge funds (like Buffett), but that's OK.
We've had alternative cycles in the past. Usually the pattern is that there is a bull market in stocks and people rush into stocks. The bull market inevitably ends and people lose money. Institutions not wanting to lose money rush into 'alternative' assets. Eventually, the market turns and they rush back into equities.
I think something similar is happening now, but the cycle seems a bit elongated and, and the low interest rates is having an effect as alternatives are now attracting capital formerly allocated to fixed income. In the past, alternatives seemed more like an equity substitution, risk asset.
Valuation OK, so what is OZM worth?
Well, a simple way of looking at it is that OZM has paid an average of $1.10/year in dividends in the last five years. During the past five years, the funds returned around 6%/year, so it's not an upside outlier in terms of fund performance.
Put a 10x multiple on it and the stock is worth $11/share.
Another way to look at it is that the market is telling you that it is unlikely that OZM will enjoy the success even of the past five years over the next few years. Assuming a scenario of failure (stock price = 0) or back to sort of past five years performance ($11), a $3.00 stock price reflects the odds of failure at 73% and only a 27% chance that OZM gets back to it's past five year average-like performance. Of course, OZM can just sort of keep doing what it's doing and stay at $3.00 for a long time too.
There is a problem with this, though, as the dividends don't reflect equity-based compensation expense; OZM gives out a bunch of RSU's every year.
To adjust for this, let's look at the economic earnings of the past five years including the costs of equity-based compensation.
Equity-based compensation expense not included in economic income is listed below ($000):
2008 102,025 2009 122,461 2010 128,737 2011 128,916 2012 86,006 2013 120,125 2014 104,344 2015 106,565
It's odd that this doesn't seem to correlate to revenues, income or AUM; it's just basically flat all the way through.
If we include this, economic income at OZM averaged around $520 million/year. With fully diluted 520 million shares outstanding, that's around $1.00/share in economic earnings per share that OZM earned on average over the past five years. So that's not too far off from the $1.10/share dividends we used above.
One of the interesting things about investing is when you find alternative ways to value something instead of just the usual price-to-book values, P/E ratios etc.
So how would you value this?
What about adjusting the implied odds from the above. What if we said there's a 50/50 chance of recovery or failure. Let's say recovery is getting back to what it has done over the past five years on average, and failure is a zero on the stock.
50% x $0.00 + 50% x $10.00 = $5.00/share
In that case, OZM is worth $5.00/share, or 70% higher than the current price. You are looking at a 60 cent dollar in that case.
Let's say there is a 70% chance of recovery.
70% x $10.00 + 30% x $0.00 = $7.00/share.
That's 130% higher, or a 40 cent dollar.
By the way, the AUM averaged around $37 billion over the past five years, and remember, their return was around 5.9%/year so these figures aren't based on huge, abnormal returns or anything.
As of the end of September 2016, AUM was $39.3 billion, and this went down to $37 billion as of November 1, 2016. OZM expects continued redemptions towards year-end both due to their Justice Department/SEC settlement and overall industry redemption trends.
The above ignored balance sheet items, but you can deduct $0.60/share, maybe, of negative equity, or more if you think they need more cash on the balance sheet to run their business.
Preferred Shares As for the $400 million settlement amount and preferred shares, the settlement amount is already on the balance sheet as a liability (which was paid out after the September quarter-end). The preferred shares were sold after the quarter ended. They have zero interest for three years so I don't think it impacts the above analysis. You would just add cash on the balance sheet and the preferreds on the liability side.
If you want to deduct the full amount of the settlement of $400 million, you can knock off $0.77/share off the above valuation instead of the $0.60/share.
Earnings Model The problem with these companies is that it's impossible, really, to predict what their AUM is going to be in the future or their performance. Of course, we can guess that if they do well, AUM will increase and vice-versa.
But still, as a sanity check, we should see how things look with various assumptions in terms of valuation.
First of all, let's look at 2015. In the full year to 2015, a year that the OZM funds were down (master fund), they paid a dividend of $0.87. Adjusted economic income was $240 million (economic income reported by OZM less equity-based comp expense) and using the current fully diluted shares outstanding of 520 million, that comes to $0.46/share. OK, it's funny to use current shares outstanding against last year's economic income, but I am trying to use last years' earnings as sort of a 'normalized' figure.
Using these figures from a bad year, OZM is current trading at a 29% dividend yield (using $3.00/share price) and 6.5x adjusted economic income. This would be 8.3x if you added the $0.77/share from the settlement above.
OK, so average AUM was $44 billion in 2015, so even in a bad year, they made tons in management fees. Fine. We'll get to that in a second. AUM is $37 billion as of November 2016, and is probably headed down towards year-end.
2016 Year-to-Date So let's look at how they are doing this year so far. Fund performance-wise, it hasn't been too good, but they do remain profitable. These fund businesses are designed so that their fixed expenses are covered by their management fees. Big bonuses are paid out only when the funds make money.
Anyway, let's look at 2016 so far in terms of economic income.
In the 3Q of 2016, economic income was $57.4 million. Equity-based compensation expense was $18.3 million so adjusted economic income was $39.1 million. Annualize that and you get $156 million. Using 520 million fully diluted shares (share amount used to calculate distributable earnings in the earnings press release), that comes to $0.30/share adjusted economic income. So at $3.00/share, OZM is trading at 10x arguably depressed earnings. (This excludes the FCPA settlement amount). If you include $400 million of the FCPA preferreds (total to be offered eventually), then the P/E would actually be closer to 12.6x.
For the year to date, economic income was $195 million, and equity-based comp expense was $56 million so adjusted economic income was $139 million. Again using 520 million shares, that comes to $0.25/share in adjusted economic earnings per share. Annualize that and you get $0.33/share. So at $3.00/share, OZM is trading at 9x depressed earnings, or 11x including the FCPA preferred.
OK, so maybe this is not really 'depressed'. With still a lot of AUM, it is possible that AUM keeps going down.
AUM was $37 billion in November, but let's say it goes down to $30 billion. That's actually a big dip. But let's say AUM goes down there. And then let's assume 1% management fees, 20% incentive fees, and economic income margin of 50% (averaged 56% in past five years) and the OZM master fund return of 5%.
In this case, economic income would be $300 million. Equity-based comp costs seems steady at around $100 million, so we deduct that to get adjusted economic income. This comes to $200 million.
That comes to around $0.40/share. At $3.00/share, that's 7.5x adjusted economic earnings, or a 13% yield, or 9.4x and 10.6% yield including the FCPA preferreds.
So that's not bad. We are assuming AUM dips to $30 billion and OZM funds only earn 5%/year, and with that assumption the stock is trading at this cheap level.
Things, of course, can get much worse. If performance doesn't improve, AUM will keep going down. You can't really stress test these things as you can just say their returns will never recover and that's that.
On the other hand, any improvement can get you considerable upside.
If assets return to $40 billion and returns average 6% over time, economic income margin goes to 56% (average of past five years), adjust economic income per share is $0.76/share and the stock could be worth $7.60/share for more than a double.
Here's a matrix of possibilities. Skeptics will say, where are the returns below 5% and AUM below $30 billion?!
Well, OK. If returns persist at lower than 5%, it's safe to assume that AUM will go down and this may well end up a zero. That is certainly a possibility. It wouldn't shock many for another hedge fund to shut down.
On the other hand, if things do stabilize, normalize and OZM recovers and does well, there is a lot of upside here. What is interesting to me is that the market is discounting a lot of bad and not pricing in much good. This is when opportunities occur, right?
5% 6% 7% 8% 9% 10% 30,000 $0.45 $0.52 $0.58 $0.65 $0.71 $0.78 35,000 $0.56 $0.64 $0.71 $0.79 $0.86 $0.94 40,000 $0.67 $0.76 $0.84 $0.93 $1.01 $1.10 45,000 $0.78 $0.87 $0.97 $1.07 $1.16 $1.26 50,000 $0.88 $0.99 $1.10 $1.21 $1.32 $1.42 55,000 $0.99 $1.11 $1.23 $1.35 $1.47 $1.58 60,000 $1.10 $1.23 $1.36 $1.49 $1.62 $1.75
The row above is the assumed return of the OZM funds. The left column is the AUM. Assumptions are 1% management fee, 20% incentive fee, 56% economic income margin (excluding equity-based comp expense) and $100 million/year in equity-based comp expense.
It shows you that it doesn't take much for adjusted economic income per share to get back up to closer to $1.00, and can maintain $0.45/share even in a $30 billion AUM and 5% return scenario making the current stock price cheap even under that scenario.
Conclusion Having said all that, there is still a lot of risk here. Low returns and low bonuses can easily make it hard for OZM to keep their best people. But if their best people perform, I assume they do get paid directly for their performance so that shouldn't be too much of an issue.
A lot of the lower returns in recent years is no doubt due to their higher AUM. But it is also probably due to crowding of the hedge fund world and low interest rates leading to an overall lower return environment for all.
If you think these things are highly cyclical, then you can expect interest rates to normalize at some point. Money flowing out of hedge funds should also be good for future returns in these strategies. The part of lower returns at OZM due to higher AUM may not reverse itself, though, if OZM succeeds in maintaining and increasing AUM over time.
But even without the blowout, high returns of the 1990's, OZM can make decent returns over time as seen in the above table.
In any case, unlike a few years ago, the stock prices of many alternative managers are cheap (and I demonstrated how cheap OZM might be here) and institutional money seems to be flowing out of these strategies.
So: OZM is cheap and is in a seemingly universally hated industry Money is flowing out of these strategies, particularly performance chasing institutions (that you would often want to fade) there is a bear market in active managers and bubble in indexing (which may actually increase opportunities for active managers) value spreads are wide and has been widening for years making mean reversion overdue etc. These things make OZM a compelling play on these various themes.
I would treat this more like an option, though. Buy it like you would buy an option, not like you would invest in, say, a Berkshire Hathaway.
There are a lot of paths here to make good money, but there are also plenty of ways to lose. If you look at this like a binary option, it can be pretty interesting!
Posted by kk at 8:11 PM No comments: Links to this post Email This BlogThis! Share to Twitter Share to Facebook Share to Pinterest
Saturday, October 29, 2016 Gotham's New Fund Joel Greenblatt was in Barron's recently. He is one of my favorite investors so maybe it's a good time for another post.
Anyway, this new fund is kind of interesting as I am sort of a tinkerer; this is like the product of some financial tinkering. I don't know if it's the right product for many, but we'll take a look.
But first, let's see what he has to say about the stock market in general.
The Market Greenblatt says that the market is "expensive". The market is in the 21st percentile of expensive in the past 25 years. Either a typo or he misspoke, he is quoted as saying that the market has been more expensive 79% of the time in the past 25 years. Of course, he means the market has been cheaper 79% of the time.
The year forward expected return from this price level is between 2% to 7%, so he figures it averages out to 4% to 6% per year. In the past 25 years, the market has returned 9% to 10%/year so he figures the market is 12% to 13% more expensive than it used to be.
He says: Well, one scenario could be that it drops 12% to 13% tomorrow and future returns would go back to 9% to 10%. Or you could underearn for three years at 4% to 6%. We're still expecting positive returns, just more muted. The intelligent strategy is to buy the cheapest things you can find and short the most expensive.
But... Immediately, bears will say that this 25 year history is based during a period when interest rates went down. The 10 year bond rate was around 8% back in 1991, and is now 1.8%. In terms of valuation, this would have pushed up asset values by 6.2%/year ($1.00 discounted at 8%/year then and $1.00 discounted by 1.8% now).
Declining rates were certainly a factor in stock returns over the past 25 years. Of course, the stock market didn't keep going up as rates kept going down. The P/E ratio of the S&P 500 index at the end of 1990 was around 15x, and now it's 25x according to Shiller's database (raw P/E, not CAPE). So the valuation gain over the 25 years accounted for around 2%/year of the 9-10% return Greenblatt states.
Here are the EPS estimates for the S&P 500 index according to Goldman Sachs:
2016 $105 20.4x 2017 $116 18.5x 2018 $122 17.6x
Earnings estimates are not all that reliable (estimates have been coming down consistently in the past year or so). But since most of 2016 is done, I suppose the $105 figure should be OK to use.
I don't know if it's apples to apples (reported versus operating etc.), but if we assume the 'current' P/E of the market is 20x, then the valuation tailwind accounted for 1.2%/year of the 9-10%. But then of course, even if this was a fair comparison, there is still the aspect of lower interest rates boosting the economy by borrowing future demand (and therefore overstating historical earnings).
In any case, one of the main bearish arguments is that this interest rate tailwind in the past will become a headwind going forward. Just about everyone agrees with that.
But as I have mentioned before, calling turns in interest rates is very hard, Japan being a great example. If you look at interest rates over the past 100 years or more, you see that major turns in trend don't happen all that often; it's been a single trend of declining rates since the 1980/81 peak, basically. What are the chances that you are going to call the next big turn correctly? I would bet against anyone trying. OK, that didn't come out right. I wouldn't necessarily be long the bond market either.
Gotham Index Plus So, back to the topic of Gotham's new fund. It is a fascinating idea. The fund will go long the S&P 500 index, 100% long, and then overlay a 90%/90% long/short portfolio of the S&P 500 stocks based on their valuations.
The built-in leverage alone makes this sort of interesting. Many institutions may have an allocation to the S&P 500 index, and then some allocation to long/short equity hedge funds. The return of the Gotham Index plus would be much higher (when things go well).
I think this sort of thing was popular at some point in the pension world; index plus alpha etc. Except I think a lot of those were institutions replacing their S&P 500 index portfolios with futures positions, and then using the cash raised to buy mortgage securities. Of course, when things turned bad, oops; they took big hits in S&P 500 futures, tried to post cash for the margin call and realized that their mortgage funds weren't liquid (and was worth a lot less than they thought).
Or something like that.
There is risk here too, of course. You are overlaying two risk positions on top of each other. When things turn bad, things can certainly get ugly.
I think Greenblatt's calculation is that when things turn bad, the long/short usually does well. I haven't seen any backtests or anything, so I don't know what the odds of a blowup are.
Expensive stocks tend to be high-beta stocks and cheaper stocks may be lower beta, so in a market correction, the high-beta, expensive names may go down a lot harder.
To some extent, lower valuations may reflect more cyclicality, lower credit risk / lower balance sheet quality too so you have to be a little careful. In a financial crisis-like situation, lower valuation (lower credit quality) can tank and some higher valuation names may hold up (like the FANG-like stocks).
But Greenblatt's screen is not just raw P/E or P/B, but is tied to return on capital, so maybe this is not as much of an issue compared to a pure P/B model.
The argument for this structure is that people can't stay with a strategy if it can't keep up with the market. Here, the market return is built in from the beginning and you just hope for the "Plus" part to kick in. In a long/short portfolio, the beta is netted out to a large extent so can lower potential returns. This fixes that. But there is a cost to that.
In any case, I do think it's a really interesting product, but keep in mind that it is a little riskier than Gotham's other offerings.
Oh, and go read the article on why this new fund is a good idea. Greenblatt is always a great read.
Chipotle (CMG) Well, Chipotle earnings came out and it was predictably horrible. The stock is not cheap so it hasn't been recommendable in a while, but I really like the company. There was a really long article on them recently which was a great read. It didn't really change my view of them all that much. I think they will get a lot of business back, eventually.
The earnings call was OK, but what was depressing about it was that they decided to ditch Shophouse. I don't think any analysts asked about it so it was a given, I guess. I had it a couple of times in DC and liked it and was looking forward to it in NY, but I guess that's not going to happen. As an investor, that was not baked into the cake, I don't think, even though there was probably some hope that the CMG brand can be extended into other categories.
This puts a lot of doubt into that idea. Someone said that brand extensions in restaurants/retail never work, and that has proven to be the case here. I wouldn't get too excited about pizza and burgers either. Burgers are really crowded now and will only get more so.
If CMG has to look to Europe for growth, that is not so great either as the record of U.S. companies expanding into Europe is not good. I would not count on Europe growth.
Anyway, this doesn't mean it's all over for CMG. I think they will come back, but there are some serious headwinds now other than their food poisoning problem; more competition etc. They were the only game in town for a while, but now everyone seemingly wants to become the next Chipotle, so there are a lot of options out there now.
As for Ackman's interest in CMG, I have no idea what his plan is. There is no real estate here as CMG rents all their restaurants, and their restaurants had high 20's operating margins at their peak. I don't know if they will ever get back up there, but it's not like these guys don't know how to run an efficient operation. Maybe Ackman sees SGA opportunities, but pre-crisis, SGA was less than 7%, so there wouldn't be that much of a boost from cutting SGA. Or maybe he thinks it's time for CMG to do what everyone else is doing and go for the franchise model. Who knows? I look forward to seeing what his thoughts are; hopefully some 500 page presentation pops up somewhere...
McDonalds I don't want to turn this into a food blog, but I can't resist mentioning this. I have been a lifelong MCD customer; I have no problem with it. OK, it may not be my first choice of a meal in most cases, but it's fine. And when you have a kid, you tend to go more often that you'd like. But still, it's OK. It is what it is, right?
I like the remodelling that they are doing, and the fact that they have free wifi is great too. But here's a big clustermuck they had with their recent custom burger and kiosk idea. I walked into a MCD without knowing anything about any of this recently. A lady said I can order at the kiosk and I said, no, I'll just go to the counter, thank you.
And I waited 10 minutes or so in line, looking up at the tasty looking special hamburgers on the HD, LCD menu board. It was finally my turn at the cash register and I said I want that tasty looking hamburger up there on the screen. And the lady said, oh, you can only order that at the kiosk. I was like, huh? That was really annoying. So I wait all this time and I can't get what I want; I have to walk all the way back and get in another line again? Come on! At that point, I didn't want any other burger so I just ordered a salad (and the usual for my kid).
OK, so it's my fault, probably. User error. But as a service company, as far as I'm concerned, that was a massive fail on the part of MCD.
OK, Now That I started... And by the way, since I got myself started, let me get these two out too. Yes, I spend too much time at fast food joints. Guilty. But still, here are my two peeves related to two of my favorite fast casual places:
Shake Shack: Being dragged there all the time, I have learned to love the Shack-cago hot dog. Chicken Shack is awesome too, in case you don't want to eat hamburgers all the time. But I can't tell you how often they get take-out and stay wrong. I had a long run where they didn't get it right at all and had to ask for things to be packed to go. It is really annoying and wastes everyone's time.
Chipotle: This hasn't happened to me the last couple of times, but this is the usual conversation that happens to me just about every time I go to Chipotle.
CMG: "Hi, what can we get you today?" (or some such) Me: "Um, I'll have a burrito..." CMG: putting the tortilla in the tortilla warmecooker, "and would you like white rice or brown rice? Me: "White rice is fine" CMG: with tortilla still in the cooker, "and black beans or pinto beans?" Me: "black beans". CMG: laying a sheet of aluminum foil on the counter and placing the tortilla on it, moving over to the rice area, "Was that white rice or brown rice?" Me: "white rice" CMG: sliding over to the beans, "and black beans or pinto beans?". Me: "black".
I can't tell you how many times this exact thing happened to me. If you can't remember what I say, don't ask beforehand! Just ask when we get to whatever you are going to ask me about! This is not rocket science, lol... Incredibly annoying.
Anyway, I still love CMG and will keep eating there.
Oh, and to make things interesting, I decided to post a contact email address in the "about" section of the blog. I will try to respond to every email, but keep in mind I may not look in that email box all the time.
I will try to post more, though. http://brooklyninvestor.blogspot.com/2016/11/perpetual-option-och-ziff-capital.html
(read original with tables)
By David Walsh 22 September 2016
Edward Albee, one of the most prominent figures in the postwar American theater, died at his home in Montauk, New York on September 16. He was 88 years old.
Albee is best remembered for works he wrote a half century ago or more, including The Zoo Story (1959), The Death of Bessie Smith (1960), The Sandbox (1960), The American Dream (1961), Who’s Afraid of Virginia Woolf? (1962) and A Delicate Balance (1966). Out of critical and popular favor for decades, Albee experienced a degree of renewed success with Three Tall Women (1991) and The Goat or Who is Sylvia? (2000). During his lengthy career, Albee won numerous awards, including three Pulitzer Prizes for Drama and two Tony Awards for Best Play.
Albee was an immensely gifted and articulate writer, with a genuine feeling for the rhythm of language and an obvious flair for the dramatic. His early works, including The Zoo Story, a one-act play, and, most especially, Who’s Afraid of Virginia Woolf?, a full-length work, made a strong impression on the public when they were first performed. In these works, and others of the time, Albee launched fierce attacks on middle-class complacency and hypocrisy, and the moral failure of American society.
The playwright described himself on many occasions as an enemy of the status quo. This was entirely to his credit. However, if Albee’s conception of this enmity remained quite limited, as we shall discuss, this was bound up with the social-cultural environment in which he matured in Cold War America and the milieu in which he circulated.
Albee’s family background is a singular one. He was born in Washington, DC in March, 1928 to a woman who could not support a child. The father had “deserted and abandoned both the mother and child,” according to the subsequent adoption papers. When he was 18 days old, the child was adopted by Reed A. Albee and Frances C. Albee, a wealthy, childless couple. Reed Albee’s money came from his father, the head of the Keith-Albee chain of vaudeville theaters. The Albees lived in luxury in Larchmont, New York on the Long Island Sound.
The writer later claimed that he always felt like an interloper in the household. “They bought me. They paid $133.30”—i.e., the cost of the adoption services. His “outsider” status in his own family and his discovery of his homosexuality at an early age no doubt helped distance Albee from the American mainstream. He had a difficult time in school, being expelled or dismissed from several high schools and colleges. He left home for good in his late teens. Toward the end of his life, Albee told an interviewer he had been “thrown out” of the family home because he refused to become the “corporate thug” his parents desired him to be.
During the 1950s, Albee lived in Greenwich Village in New York City and worked at numerous odd jobs. He also received money from a trust fund. He wrote poems, plays and novels that were not published.
Albee wrote The Zoo Story in three weeks in 1958. It was first performed in West Berlin in 1959 on a double bill with Samuel Beckett’s Krapp’s Last Tape.
The short play takes place in Central Park in New York. There are two characters. Peter, a middle-aged man, an executive with a small publishing house, who “wears tweeds, smokes a pipe, carries horn-rimmed glasses.” We eventually learn that he has a wife, two daughters, two cats and two parakeets, the perfect, contented American family. Peter is peacefully reading his newspaper on a park bench on a Sunday afternoon when Jerry enters into conversation with him. The latter is younger, poorer and suffering, according to Albee’s description, from “great weariness.”
The conversation begins innocently, if oddly, enough, with Jerry’s now-famous line: “I’ve been to the zoo. (PETER doesn’t notice) I said, I’ve been to the zoo. MISTER, I’VE BEEN TO THE ZOO!” Peter responds politely enough, but Jerry becomes more and more intrusive, asking personal questions and revealing the character of his own lonely existence. When Peter has had enough and tries to leave, Jerry becomes aggressive and pulls out a knife. He drops it and tells Peter, “There you go. Pick it up.” The other man does so and Jerry eventually impales himself on the blade. In his final, dying words, he thanks Peter.
Something about the coldness and isolation, and inequality, of modern urban life emerges. Jerry lives in a rooming house, with a “few clothes, a hot plate that I’m not supposed to have, a can opener.” His neighbors are the marginalized. His closest relationship, aside from those with prostitutes, is with his landlady’s dog, about whom he speaks in a lengthy monologue.
Years later, Albee would explain, “Jerry is a man who has not closed down, … who during the course of the play is trying to persuade Peter that closing down is dangerous and that life for all its problems, all of its miseries, is worth participating in, absolutely fully.”
Albee was attacked for his play in establishment circles. On the floor of the US Senate, Prescott Bush (father and grandfather of two US presidents) denounced The Zoo Story as “filthy.”
The influence of Beckett, Eugene Ionesco and the “theater of the absurd” is evident in The Zoo Story, which is to say, Albee was under the influence of some of the same social and intellectual tendencies as those writers. British playwright Harold Pinter, born in 1930, was an almost exact contemporary. Pinter’s first play, The Room, was written and performed in 1957.
The intellectuals of the time, or the more sensitive ones, were appalled by contemporary society, by the giant corporations and institutions that had emerged in the aftermath of World War II, by the Cold War, by the threat of nuclear destruction, by the officially sponsored conformism and pursuit of material wealth.
On the other hand, for the most part they saw no way out of the situation. Stalinism and its crimes, widely identified with communism and socialism, seemed to many to have closed off the possibility of revolutionary change. The various counterrevolutionary “labor” bureaucracies suppressed the working class politically. Existentialism and other forms of irrationalism suggested that the human condition was absurd, but that one had to endure and find some meaning in what was perhaps a meaningless existence. Abstract expressionism in painting and the “Beat” movement emerged from these general ideological conditions.
In The Death of Bessie Smith Albee paid oblique tribute to the civil rights movement and the suffering of African Americans. The short play takes place in Memphis, Tennessee in 1937, in a hospital. An overworked white nurse, a white intern and a black orderly feature prominently. The premise of the play is that Bessie Smith, the great blues singer (who never appears in the play), dies following a car crash because she is refused admittance to a whites-only hospital. This was generally believed at the time. In fact, Smith was taken directly to a hospital in Clarksdale, Mississippi where she died seven hours after the accident. But Albee’s play concerns itself with race and class relations in America, and retains much of its power. The character of the Nurse stands out in particular.
Albee reserved much of his venom for the American upper-middle-class, nuclear family. In The American Dream, an absurdist satire, the central characters are Mommy, Daddy and Grandma. The couple, we discover, had once adopted a son. Unhappy with it, they mutilated the child and ultimately killed it. As Grandma, a sympathetic character, explains, “Well, for the last straw, it finally up and died; and you can imagine how that made them feel, their having paid for it and all. … They wanted satisfaction; they wanted their money back.”
A Young Man shows up, whom Grandma names “The American Dream,” who turns out to be the original boy’s twin. The old woman moves out and the psychologically damaged Young Man moves in. He will take the place of the original adopted child. The dialogue consists largely of a series of clichés and banalities. In typical Albee fashion, a well-to-do family conceals all the brutal realities.
Albee later asserted that the play “is an examination of the American Scene, an attack on the substitution of artificial for real values in our society, a condemnation of complacency, cruelty, emasculation, and vacuity; it is a stand against the fiction that everything in this slipping land of ours is peachy-keen. Is the play offensive? I certainly hope so.”
The work for which Albee is best known, Who’s Afraid of Virginia Woolf? (made into a film with Richard Burton and Elizabeth Taylor, released in 1966), opened in October 1962, only a few days before the eruption of the Cuban Missile Crisis, the confrontation between the US and the USSR over the deployment of Soviet missiles in Cuba. The often intangible and even unnamable psychological menace and paranoia generated by the threat of nuclear annihilation are woven into Albee’s early plays, as they are in many writers’ and filmmakers’ work of the time.
In its framework and episodes, Who’s Afraid of Virginia Woolf? (borrowed from a bit of “intellectual’s” graffiti found on a wall) is more naturalistic than Albee’s previous efforts. George is a middle-aged associate professor of history at a small New England College; his wife, Martha, six years his senior, is the daughter of the college president. They return home late at night after a party, where they have already had a good deal to drink. Two guests arrive, a younger couple: Nick, a biology professor, and his wife, Honey.
For the rest of the night, George and Martha engage in furious, non-stop and occasionally amusing abuse of one another in front of the younger pair. Martha relentlessly taunts George and humiliates him. She dismisses her husband as “a FLOP! A great … big … fat FLOP!” In response, George breaks a bottle and holds the remains, like a weapon. Martha remarks, “I hope that was an empty bottle, George. You don’t want to waste good liquor … not on your salary.” It goes on like this.
At one point he pretends to shoot her. “GEORGE: Did you really think I was going to kill you, Martha? MARTHA (Dripping with contempt): You? … Kill me? … That’s a laugh. GEORGE: Well, now, I might … some day.”
The hosts play various vicious games, some on each other, some on their guests. When one of his games turns cruel, George explains calmly, “I hate hypocrisy.” George and Martha also claim to have a son, who is coming home that day. In the end, it turns out that they have no child and the fantasy that they do is one of the great lies sustaining their lives and marriage.
The play, above all, suggests America’s decline into something miserable, sick and full of self-deception. Again, the fear and selfishness under the surface of middle class existence come out, along with that social layer’s hypocrisy and servility. Success and stature, the jockeying for position, on this wretched, unimportant little campus absorb much of the time and thought of all four characters. Whatever was promising about America and the American Dream (and George and Martha, of course, are the names of the first president of the US and his wife) has somehow come down to this: stupid, petty and sterile infighting, an endless drunken, malicious quarrel in the middle of the night. All this expenditure of energy … for what?
The characters are not so much hateful, as pitiful. Toward the end of the play, Martha laments, “I do not wish to be happy, and yes I do wish to be happy. George and Martha, sad, sad, sad.”
In A Delicate Balance, a well-to-do couple, Agnes and Tobias live with Agnes’s alcoholic sister, Claire. Their daughter Julia is expected to arrive home soon, fleeing her fourth unsuccessful marriage. Friends of Agnes and Tobias’s, Harry and Edna, arrive and ask if they can stay. A terrible, intangible fear has overtaken them.
What to do with Harry and Edna, whether to ask them to leave or accept them and accept responsibility for them in their plight, becomes a central question in the play. The strongest element of A Delicate Balance, once again, is the contrast between the well-established rules of conduct of these polite, educated people and the painful, contradictory realities of life.
Albee wrote many other plays, including adaptations of works by Carson McCullers (The Ballad of the Sad Café) and Vladimir Nabokov (Lolita), but these early works contain the most compelling expression of his artistic ideas and social concerns.
Albee insisted until the end of his life that he was an enemy of existing conditions. In his introduction to Box and Quotations from Chairman Mao Tse-tung (1968), Albee argued that one of the chief obligations of the playwright was to “try to alter his society,” since, as he explained, “very few serious plays are written to glorify the status quo.” In an interview in 2009, he told a journalist, along the same lines, that “A play should be an act of aggression against the status quo.”
Nor did Albee have much use for fashionable and marketable “identity politics.” Defending his decision to write about a host of characters, he told an interviewer, fellow playwright Craig Lucas, in 1992, “After all, there are a number of things we have not been, you and I. We’ve not been women, we’ve not been 80 years old, we’ve not been black. A lot of things we haven’t been. But its our responsibility to be able to be them, isn’t it?”
Albee attracted criticism for rejecting the term “gay writer.” In a May 2011 speech, he commented, “A writer who happens to be gay or lesbian must be able to transcend self. I am not a gay writer. I am a writer who happens to be gay. … Any definition which limits us is deplorable.” After his comments were attacked, he told National Public Radio, “Maybe I’m being a little troublesome about this, but so many writers who are gay are expected to behave like gay writers and I find that is such a limitation and such a prejudicial thing that I fight against it whenever I can.”
Albee’s criticism of the “status quo” could be quite fierce. He was quoted in 1980 as saying, “I think television is the destruction of the United States. I mean, that and the Republican Party … And the Democratic Party, for that matter, come to think of it.”
In Everything in the Garden (1967), Albee’s American adaptation of a black comedy by British playwright Giles Cooper, a group of respectable suburban housewives turn to prostitution en masse (although unbeknownst to one another) to supplement their husbands’ incomes. When one of the wives is caught out, she turns on her husband and decries the corrupt, even criminal manner in which each of the men earns a living. She sums it up: “You all stink, you’re all killers and whores.”
Albee’s sincerity was unquestionable. However, when the playwright spoke of opposition to the status quo, he meant primarily the moral, sexual and psychological status quo. To many intellectuals and artists in the US, and this view was encouraged by the various academic left tendencies (the Frankfurt School and so forth), capitalism had resolved its economic contradictions. What remained were the problems of alienation, aloneness, conformism and sexual repression.
Continuing to engage exclusively with these issues and ignoring the explosive questions that emerged in the 1970s and beyond, including the growing impoverishment of masses of Americans and the overall economic-cultural decline of the US, meant that Albee’s work failed to treat much of what was new and challenging, and urgently in need of artistic description, in American life.
Many of Albee’s later plays, and even some of the early ones, are not strong or convincing. Plays like Tiny Alice (1964), Malcolm (1966), Seascape (1975), Counting the Ways (1976), The Man Who Had Three Arms (1982) and others are not particularly engaging. The self-conscious “absurdism” often wears thin. There is a great deal of repetition, between and even within plays. The ideas are often murky and secondary, or commonplace.
Albee was at war with hostile critics for many years, and the critics were often obtuse, but the lack of success of many of his plays with the general public was not principally due to the reviewers’ shortcomings. He wrote numerous tedious and almost pointless plays. He seemed to have run out of important things to say at a relatively young age.
Albee returned time and time again to his early family relations. The ineffectual, “castrated” father, the domineering mother, the victimized son … There are only so many times one can cover the same ground. Did Albee have a childhood that was so excruciating, or that was of such world-historical significance that it needed to be treated over and over again, from different angles, during the course of 40 years?
No, that is not the case. It is rather that there are social and political conditions in which the artist’s individual psychological problems and traumas take on “world-historical” importance to him or her. There are periods when one’s family life dominates, when what one’s mother and father did or didn’t do years ago continues to be a central obsession in later life. This was the type of historical period in which Albee matured, when the class struggle apparently receded into the background.
Albee was no Henrik Ibsen, the Norwegian playwright, but some of the comments that Russian Marxist Georgi Plekhanov made on the subject of Ibsen in a 1908 essay (“Ibsen, Petty Bourgeois Revolutionist”) seem appropriate. Plekhanov noted that at the time when “Ibsen’s opinions and ideals were being formulated, a working class, in the present sense of the term, had not yet developed … and was, therefore, nowhere evident in public life.” This encouraged in Ibsen, “individual protests against the hypocrisy and vulgarity which surrounds him.” His was “the revolt of the modern spirit.”
Plekhanov goes on, “Now if a man teaches revolt simply because it is revolt, not knowing himself to what end it should lead, then his teaching will take on a rather nebulous character. If he is an artist, and thinks in terms of images and forms, then the vagueness of his thinking will necessarily result in vague artistic images. An abstract and schematic element will creep into his creative work. … The ‘revolution of the spirit of man’ leaves everything unchanged. The pregnant mountain has again given birth to a tiny mouse.”
Unhappily, for much of his later career, as a result of the nebulousness of his ideas and the formlessness of his opposition to the status quo, Albee gave birth to nothing but “tiny mice.”
Robert Brustein, the distinguished critic, producer and academic, once referred to Albee “as one who sympathized profoundly with the oppressed of the world.” One has no reason to doubt this, but it is not distinctly and sharply present in his work or public utterances. It is worth noting that in Mel Gussow’s biography, Edward Albee: A Singular Journey (1999), there is a single reference to the Vietnam War in the index. According to an August 1968 New York Times article, Albee did lend his name as a sponsor of the anti-war “Summer of Support,” aimed at US servicemen, along with Pete Seeger, Dustin Hoffman, Phil Ochs and others.
Overall, however, as one commentator notes, Albee’s plays in the 1970s spoke to “personal” rather than “social” disillusionment.
One has to look to the general features of Albee’s time, the postwar economic expansion and the Cold War, for the conditions that shaped his thinking. He traveled to the Soviet Union and Eastern Europe, and certainly distinguished himself from the extreme right confrontationists, but his comments on the USSR do not rise above the level of garden variety anticommunist liberalism. His facile use of selections from Mao’s “Little Red Book” in Quotations from Chairman Mao Tse-tung, either wooden truisms or Stalinist falsifications, gives some sense of his attitude toward what he took to be “Marxism” and “revolutionary theory.”
The “abstract and schematic element” in Albee’s work also manifests itself in the ahistorical character of his plays, and the often nameless characters: Mommy and Daddy, Young Man and Grandma, He and She, A B and C. He once told an interviewer, “Most of my plays are not tied to time, particularly.” He didn’t care for having the phrase “timeless” applied to his work, he explained, “but I don’t think they [the plays] are beholden to specific dates.”
Unfortunately, there is nothing that becomes dated more rapidly than the “dateless.” Abstract psychological characterizations and speculations and, frankly, the obsession with oneself do not generally lead to the most rewarding, enriching art. “We all wish to devour ourselves, enter ourselves, be the subject and object all at once,” asserts a character in Albee’s Listening (1976). But the artist seriously attuned to the world and life has more compelling things to do.
Albee’s great strength lay in his ability to represent his upper-middle-class figures, to reveal their inner lives. He helped demystify and discredit the affluent layers who thought themselves fully in control. Moreover, his rejection of corruption and cowardice, his insistence on unpleasant truths about American society in the late 1950s and early 1960s unquestionably contributed to the mood of radicalism and opposition that emerged later in the decade.
To paraphrase Plekhanov, drab, postwar American reality showed Albee what had to be opposed, but it could not by itself show him which road to pursue. https://archive.is/FJ1xA
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