Welcome back to Greenbackd for 2010. I hope the holidays were as good to you as they were to me.
The break has afforded me the opportunity to gain some perspective on the direction of Greenbackd. Away from the regular posting schedule I found the time to write some Jerry McGuire The Things We Think and Do Not Say treatises, quickly consigning most of them to trash so that they couldn’t come back to haunt me at a later, more lucid and, perhaps, sober moment (I did say the holiday was good to me). Some (heavily edited) remnants of those rambling essays will filter through onto this site over the coming weeks. I’m charged up about several topics that I want to explore in some depth, which is a change from the net net ennui that was starting to creep in before the break.
The beauty of the Graham net net as a subject for investment is its simplicity. Conversely, that same characteristic makes it a poor subject for extended contemplation and writing. There is a limit to which the universe of Graham net nets, even those entwined in activist or special situations, can be subject to analysis before the returns to additional analysis diminish asymptotically to approaching zero. Note that in this context I don’t mean investment returns, but returns to the psyche, good feelings, the avoidance of boredom…in other words, the really important stuff. The investment returns in that area are good, but we all already know that to be the case. What am I contributing if I keep digging up undervalued net nets? Not much. Graham invented it. Oppenheimer proved it. Jon Heller writes about it better than anyone else. The rest of us are just regurgitating their work.
Really, this is old news. Greenbackd passed the point some time ago at which it was possible to hold off the tedium of net nets and evolved organically to embrace several related topics. I still love the activist dogfight for control or influence and I think a well-written 13D makes for excellent copy. I also still love finding blatantly misplaced securities, each one a little slash at the heart of the EMH. Greenbackd will continue to study individual securities and follow interesting activist situations, however, it will not be the sole focus of the site. For me, there are more interesting problems to tackle. My concern has been whether Greenbackd can contain the new topics or whether I’ll just annoy old Greenbackd readers with the new direction. My favorite blogger wrestled with same issue several years ago, and so I’m using her experience as a guide.
I think the smartest thinker and most lucid writer in the financial and political (in the broadest sense of the word) sphere is Marla Singer at Zero Hedge and occasionally Finem Respice (formerly Equity Private at Going Private). Marla, then writing as Equity Private, started out with a narrowly focussed blog about the “sardonic memoirs of a private equity professional,” but gradually expanded to cover only tangentially related topics like the role of government, economics, philosophy, literature, art, duelling, card sharping and cargo cults (the implications of which won’t be lost on most readers). For me, it was a thrilling departure, but Marla must have felt that Equity Private was too limited, and created Finem Respice before moving on to Zero Hedge. I was only too happy to follow, but I would have been equally happy for Equity Private to keep posting as Equity Private. (As an aside, I recommend following Marla at Zero Hedge. Her ability to tease out the hidden story from some granular detail in legislation or data is simply breathtaking and unmatched in the mainstream media.)
I’ll persist with Greenbackd because I like this boat, but it will be embarking for new shores. Pure net net investors are well served by other sites, so it’s probable that some readers will depart. This site will always be dedicated to deep value, but I want to find some uncharted territory. The voyage might not yield any new land, but I think it will be more fun than continuing to orienteer on Graham’s old maps. I have an inkling there is something interesting out there at the intersection of Montier, Montaigne, Taleb and Graham. Tomorrow, I’ll start to sketch out the new world. It also coincides with a personal change for me. Working in someone else’s fund has been enjoyable, but I feel it’s time to graduate to principal. I’m presently considering entering into an established partnership or starting my own fund. Whichever direction I go will likely have some influence on Greenbackd.
[…] 22, 2010 by greenbackd As I indicated in the first post back for 2010, I’m going to publish some of the more interesting 13D letters filed with the SEC. These are […]
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exceptionally well written piece. I look forward to your posts in ’10
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I will be excited to see where you take us with your renewed focus; however, I agree Thomas’ comments – the net-net coverage is second to none. Hopefully you continue blogging about them too. What other good net-net sites were you referring to? Thanks for the excellent work.
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I discovered your blog a few months ago, and really enjoy and appreciate your insights. Keep up the good work! Best of luck.
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Hi. I have followed your blog for some time and must say that what made me come here was the focus on net-net analysis. I hope you are not giving this up completely.
What other blogs do you refer to where you say there is plenty of other places to read pure stock analysis? I haven’t found anyone as good.
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Net-nets are good but as you say value investing is much wider than that.
Looking forward to your new ideas.
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In 1974, Richard Feynman gave the Caltech commencement address entitled Cargo Cult Science.
http://www.lhup.edu/~dsimanek/cargocul.htm
It is brilliant. Here’s an excerpt:
“But there is one feature I notice that is generally missing in cargo cult science. That is the idea that we all hope you have learned in studying science in school–we never explicitly say what this is, but just hope that you catch on by all the examples of scientific investigation. …. It’s a kind of scientific integrity, a principle of scientific thought that corresponds to a kind of utter honesty–a kind of leaning over backwards. For example, if you’re doing an experiment, you should report everything that you think might make it invalid–not only what you think is right about it: other causes that could possibly explain your results; and things you thought of that you’ve eliminated by some other experiment, and how they worked–to make sure the other fellow can tell they have been eliminated.”
Seems to me that Ben Graham practiced this “utter honesty” and by doing so, discovered the real nature of value investing.
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This reader looks forward to reading your thoughts on whatever subjects capture your interest. Good luck with your new ventures!
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