Investing Radicalism
Submitted by QTR's Fringe Finance
Oh, finance. I could never leave you, as much as I hate you.
An industry full of shitheads trying to sell you toxic products cloaked in faux-academic sounding jargon — and littered with hobbyists who love to pretend their outlook is forward-looking while obsessively staring into the rearview mirror.
Recency bias isn’t just a quirk of the industry; it’s practically the operating system. If something has worked lately, it’s declared timeless. If something has struggled lately, it’s labeled broken, obsolete, or fraudulent. And yet every single document in this industry begins with the same sacred line: past performance is not indicative of future results. It’s the most universally displayed and universally ignored sentence in capitalism. And it’s the reason I have a blog — because most people simply don’t understand that simple concept.
When I published my piece about my friend Mark Spiegel earlier today, including 5 of his “deep value”-ish positions, people went apeshit. Why? Because in their minds, Mark’s inability to generate great returns the last few years, his underperformance of the market and getting run over on his Tesla short makes him an idiot in their eyes.
Yet this is an industry full of “smart” people who constantly get thrashed by Mr. Market — all of us reading this included. And Mark’s underperformance the last few years is not hidden. I said it immediately. I called him stubborn. I wrote that his fund has had a rough run. There was no attempt to airbrush reality.
But apparently acknowledging underperformance up front does not immunize you from the performance police, whose primary investment strategy is extrapolation.
The pushback came in two flavors. First: why publish ideas from someone who’s been underperforming? Second: he’s not “deep value”, he’s catching “falling knives”.
One commenter wrote:
Deep value, good grief, Volkswagen has fallen 77% since 2014. If that is not a falling knife scenario, i don’t know what is. Germany is f’ed and Volkswagen’s success is directly linked to Germany. Paypal is another falling knife.
The first argument about underperformance is just rearview-mirror thinking. If someone has been wrong for several years but the environment that made them wrong is about to shift, would you not want to understand their framework before that shift happens? Or do we only read people after the turn has already occurred and the returns have already printed? Michael Burry’s LP’s screamed for their money back when he was down something like -50% — days before he finished up 489% and made a profit of $2.69 billion...(READ THIS FULL COLUMN HERE).