Alumnus is the Bubble Guru

In many ways, the life of Mark Elliott ’96 has played out like a scene from The Big Short, a film based on Michael Lewis’ popular book about the lead-up to the subprime mortgage industry collapse. Still in massive debt from dropping out of medical school (when you drop out, the interest rate on your student loans increases), Elliott decided to follow famed investor Warren Buffet’s philosophy: “Be fearful when others are greedy, and be greedy when others are fearful.”

For example, when the housing and stock markets collapsed in 2008, Elliott borrowed from his credit card – something he advises against – to take advantage of opportunities in real estate stock. He then took the return on his stock investments and bought undervalued homes in Las Vegas for less than the cost of the building materials and rented them for more than the mortgage payment. By the end of 2009, Elliott was
a multimillionaire.

Elliott has an uncanny knack for calling movements in the asset market in a timely fashion. “It’s very logical,” he explains. “The key is to not get caught up in the fact that the economy is horrible. Eventually, it’s going to turn around, and when things look their most dire, that’s when everyone’s fire selling everything. That’s when you don’t get scared; you get greedy.”

Elliott’s adherence to this philosophy has resulted in steadfast – and wealthy – clients, like Dr. Ryan Tran, based out of Los Angeles. “Not only does Mark put his money where his mouth is,” says Tran, “he’s made four major calls that were 100 percent accurate: Stay out of internet stock in 2000, keep out of the housing market from 2005 through 2008, invest in stocks in 2009 and get into the housing market in 2010.”

One thing Elliott didn’t predict: his world falling apart in 2013. First, his health deteriorated, then he was hacked and had to deal with a myriad of phone and computer security issues, and, on top of that, his home in Boston burned down. As always, tenacity has been his secret sauce, along with the loyalty of his small cadre of clients who appreciate his financial genius.

PRE-MED
The middle of three children whose father owned a business selling seafood directly from his truck, Elliott grew up in the small port city of Thomaston, Maine, where he stood out for his curiosity, thirst for knowledge and consummate test-taking ability. A high school guidance counselor recommended he apply to the College of Charleston, which Elliott did after reading reviews about the College being “a fairyland with pixie dust.”

The minute he stepped onto campus for a visit, his decision was made. An invitation to the Honors College and an academic scholarship only sweetened the deal.

When he entered the College in 1992, the campus population was three times the size of his hometown. Being part of the Honors College helped Elliott adjust to campus life. He found the professors took a personal interest in every student, offering each one a level of familiarity similar to what he experienced in high school.

“I was completely out of my element and in a totally different environment, but with the Honors College, there were people from all different walks of life, so I didn’t feel alone,” recalls Elliott. “It was just such a tight-knit group. We didn’t have any big lectures, with hundreds of students in an auditorium. Rather, it was small groups. In that intimate environment, we were able to understand each other from across the classes; we learned together and we helped each other.”

Honors classmate Lancie Affonso ’96, now a CofC computer science and management and marketing instructor and an Honors College Faculty Fellow, echoes Elliott’s sentiments. “It was an incredible experience,” says the Tanzania native. “We all got to know each other really well. And Mark was a great ambassador. He helped me adjust to college life and living in a new country. He always brightened up a room and showed enormous interest in people, cultures and learning.”

Elliott came to the College with the goal of becoming a doctor. “I love helping people, and where I grew up, when you are smart, the logical profession is to be a doctor.”

Elliott’s love of technology and learning new and different things almost deterred him from attending medical school. “The College was one of the first schools to be connected to the internet,” he says. “We used NCI Mosaic to do searches and Fetch to pull files, and we had to input a strange set of characters to send email. The new frontier that computer science presented proved tempting, but, ultimately, I decided to stick with biology.”

Upon graduation in 1996, Elliott entered the Geisel School of Medicine at Dartmouth because it is one of the smallest medical programs in the country and it had a comparable feel to the College. Elliott felt that Dartmouth’s Baker Hall was similar to Randolph Hall, but with the added bonus of serving afternoon
tea every day.

Later, one of Elliott’s medical school classmates pointed out that Elliott might have attention deficit disorder because of his inability to focus. “He presented examples that read exactly like me,” says Elliott. “Still, I struggled with the diagnosis. I viewed it as a psychobabble excuse for my skipping class and inability to remain focused.”

At the time, an ADD diagnosis was not very common, so Elliott went for tests, and his classmate’s diagnosis proved correct. Based on what Elliott learned about the condition, he had real concerns about his ability to treat patients effectively. “Although the odds were very slight, I simply didn’t want to chance missing something. I didn’t want to put anyone’s life at risk.”

Just months before finishing his medical rotations, Elliott took a break and turned to what he had considered to be more of a hobby than a career – investments.

NOT SO TINY BUBBLES
When most kids were playing with Legos and firetrucks, Elliott dreamed of buying stocks. He bought his first shares at age 6.

“I bought one share of GTE, now Verizon, and one share of Chrysler Corporation, which my dad’s broker recommended. Then I purchased one share that I researched myself – Telefonas de Mexico,” he recalls. “My biggest takeaway was that the broker’s commission was about the same as the cost of the shares.”

In college, Elliott didn’t have the money to invest, but while in medical school in the late 1990s during the buildup and breakup of the tech bubble, he loved to share his thoughts on the market.

“What people don’t often know is that, when taking a break, doctors like to talk about investments,” he shares. “Every now and then I would pipe in and say, ‘Well, I think this is all a big bubble.’ Then I would get, ‘Who are you?’ If they gave me the time to speak, I would go to the white board and draw out the scenario. My take-home message then was to save their money, max out their 401(k) and buy a house as soon as possible.”

Elliott thinks bubbles destroy wealth over time as people flock like lemmings after the next great fad. “We keep creating these bubbles because we all have access to the same information, and if we all do the same thing, we create market distortion,” he explains. “We have had more bubbles in the last 15 years than we have had in the last 50 years before that.”

After Elliott’s forecast about the tech industry bubble proved to be spot on – on April 14, 2000, the NASDAQ plummeted 9.67 percentage points, its largest point loss in history – word traveled around the medical school. He was even invited to speak about investments at other medical schools, where he met someone who asked him to manage a Boston family’s wealth. Given his recent ADD diagnosis, he decided to leave medical school and pursue the opportunity.

Because Elliott didn’t have the professional licenses to manage wealth, he visited different investment companies to research which would be best for this particular family. He came away disappointed and decided to start from scratch and get his licenses. It took some time, but he became a registered investment adviser and opened his doors for business in 2006.

Elliott approached asset management like he approaches everything: He studies nonstop, always calculating the risk-reward ratio. He attributes his success to following mainstream media in order to gauge where people are most likely investing, as well as reading annual reports and financial statements.

“My mind works like the World Wide Web,” he explains. “I’ll read a financial statement and see a reference to some company in an interesting industry and start researching that company. What I don’t do is read third-party research reports, because I find they bias me; I need to come to conclusions myself.”

Not only did he need to do his homework on market trends, Elliott had to assess his clients’ risk-reward ratio. He needed to make sure he had clients with a long-term market outlook and iron guts – clients who could handle going against the tide. He aimed to create a tight-knit group – just like his close circle of friends at the Honors College.

“I always tell my clients that I’m going to put them into things that everybody’s going to say you’re crazy for doing,” says Elliott. “It’s a lot of trust that they put into me.”

That trust often takes time.

“I met Mark through my son,” says Dwight Jereczek, one of Elliott’s clients in Los Angeles. “I had retired in 2006 and was managing my 401(k) quite well. Still, Mark kept warning me to move my assets. I just pooh-poohed him. When 2008 came around, I lost thousands and got frazzled. I was in way over my head. I asked Mark to take over a percentage of my portfolio, to which he replied, it was all or nothing. When I took an even bigger hit, I conceded.”

Because Elliott had moved to Las Vegas in 2009 to manage his real estate investments, Jereczek arranged to meet Elliott at a halfway point between Las Vegas and Los Angeles. They met in an abandoned gas station, and Jereczek signed over his assets. He has never looked back.

“Mark has become a really close friend,” says Jereczek, who attributes his ability to travel the world to Elliott. “He has an intense ability to figure things out. It’s absolutely remarkable. I’ve been with him 10 years now, and he has hit so many home runs. It just goes against the grain.”

SHANGHAI SURPRISE
After he formed Elliott Asset Management, his first piece of prescient advice was warning clients about the pending real estate crash of 2008.

“My client base was in Southern California,” says Elliott. “People were spending way too much money and living off debt, but they still wanted to invest. I told them, ‘Don’t give me too much money because there will be a crash. Wait and give me money when you least want to give it to me.’ When the real estate crash came, I went back and told them that now was the time to give me money. No one gave it to me.”

Elliott took his own advice, however, and invested in real estate that year and in stocks after the stock market crash in 2008. His investments led to him being flush with cash. With his business doing well, he decided to tour Tibet in 2011. When a member of his tour asked him what he was doing with a bunch of people in their 60s, Elliott shared his story. One of the Chinese tour guides overheard him and passed his information to a friend at China Business News, a daily financial newspaper targeting business owners, C-suites and board members. The friend contacted Elliott for an interview with the paper’s elite real estate and financial magazine, Gold Master. Elliott accepted the request, but never once considered that he might be photographed for a cover story. Not one to be too concerned about his appearance, Elliott threw on some clothes and went for his interview. His arrival at the Shanghai office in a wrinkled shirt caused a kerfuffle. In the editorial team’s mind, he was too disheveled to be considered for the cover. To add insult to injury, Elliott learned that his idol, Warren Buffet, had been on the cover the prior month.

Despite this sartorial faux pas, Elliott’s interview went well. It was early 2012, and he shared how the U.S. real estate market was undervalued and about to take off. He warned that the shadow inventory would be gone soon and observed that few Chinese were buying U.S. foreign capital, which would be a great investment opportunity.

Enthralled with China, Elliott decided to stay in Shanghai for a while and research the financial market. One day he received a call from People’s Daily, the official newspaper of the Communist Party. The staff wanted help with questions for an interview with then–Secretary of State John Kerry. When he asked when the interview would take place, the reply was “in 10 minutes.” He quickly gave some questions to ask, and later received another call from People’s Daily to come to its office to make a presentation to the entire staff. They had received a directive from Beijing to focus more on Western finance, and they needed help. Elliott pulled together a presentation for the staff about the financial climate in the West and shared story ideas.

When Elliott learned that Chinese President Xi JinPing wanted Waigaoqiao, a foreign trade zone (FTZ) near Shanghai’s Pudong International Airport, to take a more Westernized approach to business, his interest was piqued. Through his People’s Daily connections, Elliott obtained a meeting with officials at the FTZ. He pitched serving as an adviser on how to Westernize operations. He also offered to set up a pilot business to show how a Western business could operate within the FTZ. While he was there, he caught the attention of a woman walking by who asked that he return the next day.

Xing Huifang, the woman who inquired about Elliott, turned out to be the president of the international trade and operation center, which is the main government entity managing Waigaoqiao. She asked him to serve as an adviser and set up the pilot company. Things were going well until the day Elliott arrived to find an empty office. He was told to report to Xing. He assumed the worst but learned that his office had been moved to the executive floor so company leadership had easier access to him and his ideas.

Elliott thrived at Waigaoqiao: “I had so much fun, and I learned a lot about China’s political system and how the government works. It was quite a thrill to help the second-largest, most dynamic market in the world. I felt like I had my finger on the pulse of the hotspot of the world economy.”

Troubled Times In 2013, Elliott returned to Las Vegas for surgery to remove a mass in his throat. After being released from the hospital, he went to his penthouse condo for rest and recovery. That night he woke up to a terrible stench. He called the concierge, who said it was nothing. Elliott went back to sleep and awoke the next morning feeling very disoriented.

It turned out that his building had a chemical leak, and Elliott developed hyperreactive airways and chronic and acute lung failure. Doctors weren’t sure if he would make it, and, even if he did, the thickened tissue around his lungs meant he would have to use an oxygen tank for the rest of his life.

Around the same time, Elliott learned that his home in Boston, which he had owned for more than 10 years, had burned to the ground. On top of that, he also got hacked and had to deal with all the drama of his technology not working.

“When I got sick, I became unreliable,” he admits. “All the legal issues and medical care were overwhelming.”

He reached out to his small group of clients to explain his condition in case they wished to move elsewhere. His clients stuck by him. “Mark at 50 percent is better than other guys at 100 percent,” says Jereczek.

While Elliott sued over the chemical leak and fought with insurance companies over the coverage of his Boston home, China had to take a back seat. By the end of 2015, he was told Waigaoqiao had to let him go. To add salt to the wound, Elliott lost every one of his legal battles, largely due to technicalities, he says.

Living in the world as a permanently disabled person was a new experience for Elliott. Despite his physical ailments, Elliott’s mind continued to function at a high level, but for nearly a year he struggled to speak due to his lung condition. “It was emotionally painful to have so much I was thinking about and not be able to share it,” he says. “I felt my insurance company, contractors, tenants – everyone – took advantage of the situation. It made me think that my experience is what it must be like for people with ALS [amyotrophic lateral sclerosis, aka Lou Gehrig’s Disease – a neurological disease that impacts voluntary muscle movements like chewing, walking and talking].

“There were times when I was in so much pain and felt so isolated that I wanted to give up – just stop breathing,” he adds. “Then I would think about how much more I had to give and if I could get over things, I could make a positive difference and not waste everything I worked hard to achieve for myself and people like the Jereczeks and Dr. Tran.”

The process wasn’t easy, but Elliott took baby steps. In the beginning, he worked to simply keep breathing, first with an oxygen tank and later independently. Then, he focused on getting through the everyday pain. Next, he had to build trust in himself. “It was the toughest thing I’ve ever done,” says Elliott. “I can never convey how hard that was. I still wake up with nightmares of not being able to breathe or talk to ask for help.”

Moving On While his health will always be an issue – Elliott deals with physical pain daily – he is back doing what he loves and following Warren Buffet’s advice of being “greedy when others are fearful.” This time, it’s with COFINA Puerto Rican bonds post–Hurricane Maria.

“I said I would never invest in bonds, but these were just too good to pass up,” he explains. “These sales tax revenue bonds are secure and were rated AA. They were downgraded to junk by agencies and were being traded like Puerto Rico would never recover after Hurricane Maria.”

Elliott did his homework, concluded the heavily discounted bonds would get a return and bought them for both himself and his clients. The only way the bonds wouldn’t pay out is if Puerto Rico declared bankruptcy.

“This is his fifth major call,” says Dr. Tran. “We’ve given him the benefit of the doubt. It’s not easy to go against the grain, but we have all dived in, and I think we’ll do well.”

For Elliott, it’s all about following the research and being logical. “People get so overloaded with information and get caught up in the hype. It’s my job to see the trends, the upcoming bubbles.”

Right now, the return on the COFINA bonds is about eight times the purchase price, but Elliott and his clients are still waiting to see how it all plays out. If things go according to his predictions, he and his clients will come out winners. Now, Elliott has his eye on the next big opportunity – China’s real estate market – and, of course, the bubble guru’s already ahead of the game.