Thursday, February 6, 2020

'Melt Up' thesis; The Culture of Misogyny Inside Victoria's Secret; She Helped a Customer in Need. Then U.S. Bank Fired Her; Why hard work is so important (and still under-rated)

By Whitney Tilson

1) I don't know of anyone who has nailed this bull market from the start like my colleague Dr. Steve Sjuggerud has. His "Melt Up" thesis, which he first outlined in a free webinar in 2017, has played out pretty much exactly as he described – and the weighted return for his 10-stock portfolio is an incredible 34.4% versus the S&P 500's 26.4% total return over the same period. His best pick was Roku (ROKU), which he recommended 13 months ago at $42 per share – it has nearly tripled since then.

So what should you do now? Does the Melt Up still have room to run, or is it time to book profits and prepare for the bust that will inevitably follow?

To hear Steve's answers to these questions, I strongly encourage you to tune in to the 2020 Melt Up Event that Steve is hosting next Wednesday, February 12.

He's going to share an important new update on his Melt Up thesis... including the No. 1 sector he expects to soar this year.

And he'll even give out the name of a stock in that sector that he believes will soar higher than any other, for free, just for tuning in.

The event is absolutely free to attend, but you must first reserve a spot by clicking here.

2) I don't think regulators do a very good job reining in abusive companies – they usually come along to merely shut the barn door after the horse has fled. So, I'm a huge champion of high-quality investigative journalism to keep powerful companies and people in check. With that in mind...

Kudos to the New York Times for this excellent investigative piece, uncovering terrible misdeeds at lingerie maker Victoria's Secret, which is owned by L Brands (LB): 'Angels' in Hell: The Culture of Misogyny Inside Victoria's Secret. Excerpt:

Victoria's Secret defined femininity for millions of women. Its catalog and fashion shows were popular touchstones. For models, landing a spot as an "Angel" all but guaranteed international stardom.

But inside the company, two powerful men presided over an entrenched culture of misogyny, bullying and harassment, according to interviews with more than 30 current and former executives, employees, contractors and models, as well as court filings and other documents.

Ed Razek, for decades one of the top executives at L Brands, the parent company of Victoria's Secret, was the subject of repeated complaints about inappropriate conduct. He tried to kiss models. He asked them to sit on his lap. He touched one's crotch ahead of the 2018 Victoria's Secret fashion show.

Executives said they had alerted Leslie Wexner, the billionaire founder and chief executive of L Brands, about his deputy's pattern of behavior. Some women who complained faced retaliation. One model, Andi Muise, said Victoria's Secret had stopped hiring her for its fashion shows after she rebuffed Mr. Razek's advances.

An industry insider friend of mine added:

I have been told this article is tame versus the reality of the culture. Not only were countless criminal actions taken against women, but this Mad Men attitude also led to the erosion of $10-plus billion of market cap when the old "sex sells" marketing strategy ceased to be viable. They got Razek out last year, but it was years too late and Wexner still won't let go.

Also, the popular refrain in Jewish philanthropy circles that Wexner really didn't know about Jeffrey Epstein has lost all credibility.

3) Kudos as well to New York Times columnist Nicholas Kristof for exposing U.S. Bancorp's (USB) heartless decision: She Helped a Customer in Need. Then U.S. Bank Fired Her. Excerpt:

To understand how some companies have lost their souls, consider what happened after U.S. Bank stiffed a customer before Christmas.

Marc Eugenio had deposited a $1,080 paycheck into his account at U.S. Bank. The bank put a hold on most of the sum, and he spent many hours in a branch office over two days, trying to get access to the money so he could buy presents for his 9-year-old daughter and 13-year-old son.

On Christmas Eve, Eugenio found himself parked at a gas station in Clackamas, Ore., a Portland suburb, both his fuel gauge and his bank balance on empty. A bank employee had told him that money would soon show up in his account – perhaps a ruse to get him out of the branch office. For hours Eugenio then tried his debit card at the gas pump, so he could buy a few gallons and get home to his wife and children.

"I was stranded," he told me. "I could have walked home, but it would have been five miles in the cold."

That's when Eugenio found an angel.

He telephoned the bank's toll-free number and spoke with Emily James, a senior officer at a call center in Portland. She spent an hour on the phone with Eugenio, trying to get some money released so he could at least get home. She soon realized that he had been misled, and that money wouldn't reach his account any time soon. Feeling bad for a customer stuck on Christmas Eve, James offered to drive over from her call center and personally hand him $20.

"No, no, no," Eugenio told her. He couldn't impose. But she suggested she could use her break, and she received permission from a supervisor to drive 20 minutes to Eugenio. She later recalled that when she arrived, she wished him Merry Christmas and handed him $20 of her own money.

"Twenty dollars wouldn't break me," she explained to me, "and it would enable him to get home to his family."

When U.S. Bank found out that it had such a generous employee, what did it do? It fired her.

Thanks to Kristof, this story has a happy ending:

Update: On Saturday evening, after this article went online, I had a contrite phone call from Andrew Cecere, the CEO of U.S. Bank. "This is not who we are," he said. He added that companies sometimes make mistakes, and that he accepted ownership of what went wrong. He also telephoned Emily James and expressed concern for her and for her supervisor, Abigail Gilbert. "I will fix this," he told me.

4) In my June 12 e-mail last year, I slammed Tim Ferriss' book, The 4-Hour Workweek: Escape 9-5, Live Anywhere, and Join the New Rich, writing "It's one of the dumbest books I've ever read." I continued...

The overall message that you can get ahead only working four hours a week (or even four hours a day) is absolutely preposterous. It's not just bad advice, it's dangerous advice because anyone who follows it will likely derail his career.

There's no substitute for hard work, especially early in your career. Trust me, you are far more likely to get ahead if you are the first into the office every morning and the last to leave. You will learn and accomplish more in 10 or 12 hours than in eight. You'll also send a powerful signal to your employer that you're a dedicated employee – and thus are more likely to get promoted.

I've never forgotten what Hollywood executive Peter Guber said when he spoke at Harvard Business School during my first year there in 1992: "I've gotten ahead by working half days. And you know what? It doesn't matter which 12 hours a day I work."

There's simply no substitute for a lot of hard work – at least in the first few decades of your career.

And it's perfectly doable: 12 hours a day dedicated toward your job/career leaves 12 hours a day for everything else: seven to eight hours of sleep, one hour of exercise, and three to four hours of eating, socializing, relaxing, etc. Then, on weekends, cut your work in half to six hours – and be sure to take some wonderful vacations!

I was reminded of this when I read this article recently: Why hard work is so important (and still under-rated). Excerpt:

There are three ways of being a Massive Success:

  1. Getting extraordinarily lucky
  2. Being born with extraordinary gifts that no one else has
  3. Working insane hours 

These are the only three ways to Massive Success. And many people that reach Massive Success have a combination of these three.

But if you do not have extraordinary luck (like your parents do not happen to be billionaires) and you were not born with an IQ score of over 200, your only strategy to reach massive success is working crazy hours.

Even if you were born with gifts that are off-the-charts rare (think of LeBron James's amazing athletic ability coupled with his near-photographic memory), you likely still need to have LeBron James's famous work ethic to succeed.

Best regards,


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Empire Financial Research

Whitney Tilson

Empire Financial Research founder and CEO Whitney Tilson is the editor of the Empire Investment Report, a monthly investment advisory that focuses on cheap, high-quality stock ideas.

Whitney graduated with honors from Harvard University and Harvard Business School, where he earned an MBA and was named a Baker Scholar. Whitney spent nearly 20 years on Wall Street, during which time he founded and ran Kase Capital Management, growing assets under management from $1 million at inception to a peak of $200 million.

Once dubbed "The Prophet" by CNBC, Whitney predicted the dot-com crash, the housing bust, the 2009 stock bottom, and more. Now, he's sharing his secrets and strategies with followers of his latest endeavor, Empire Financial Research.

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