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There was a study that came out recently suggesting that when famous hedge fund managers share their favorite ideas publicly it’s usually because they want to round up some buyers that they can sell to. It’s probably not fair to say this is true of all of these guys. There are some good guys still left in the game. But I think it can be true on occasion.¬†There’s one occasion, in particular, that I remember very clearly where I believe this was the case.

Back in late-2014, Bill Ackman was touting his short position in Herbalife. I don’t think I have I ever seen a short-seller so vocal and persistently melodramatic about a position as he was in this case. He cried when he first presented the idea in public. Afterward, he appeared on several financial networks to discuss the trade in a very short period of time. He also went so far as to appear at a Chicago town hall meeting of the League of United Latin American Citizens, and to notify the media well in advance, to frame his case as a civil rights one rather than a financial one and all I could think was, “the lady doth protest too much.”

This is usually something you see on the part of company managements who have been caught red handed but it also can be seen in major investors when someone calls their bluff. When you are confident of an eventual outcome you don’t need to convince others of its validity. You can calmly make your case and trust that it will all come out right in the end. It’s only when you lose confidence that you really feel the need to recruit others in your crusade. The less confidence you have the stronger you feel the need to find others to confirm your thesis or even to bail you out.

And it was abundantly clear to me at the time that Ackman had lost all confidence in the trade. Because he had a billion dollar short position and none other than Carl Icahn had called his bluff he was growing more and more desperate to find a group to bail him out of the position. In other words, he needed a group of new sellers to come into the market so he could cover his massive short position without pushing the shares up and creating the sort of short squeeze that could cost him his fund.

And I imagine this is just how it went down. I have no evidence of it by I think there’s a very good chance that while he was posing with “Herbalife” victims for the television cameras causing panic in the shares his traders back at the office were buying into the weakness hand over fist. The moral of the story is to be very careful trying to ride the coattails of famous investors, even those you admire, because there are those that are more than willing to take advantage of it. What’s more, when you see one of these guys protest too much you might just find a compelling case for trading against him. (Sadly, I also sold this one too soon.)