Friday, March 22, 2002

BLOGROLLING. Hooray for me: I met the now-straight-haired, but blogless, Cathy Seipp, and the always hip Matt Welch last night over frog legs and $9 martinis. And also hailed a bartender for the Girl at Zanzibar. Tony Pierce, no doubt afearing the consequences from his blasphemy of Barry Bonds, was a no-show. The correlation between the crowds and the likely availability of free hors d'ouevres demonstrated something about the eternal relationship between journalists and free food.
TONY PIERCE complains that I judged Barry Bonds by his stats.

Well, duh.

It's baseball. At the close of nine innings, when it's the San Francisco Giants 5, and the Milwaukee Brewers 4, no one awards the Brewers the victory because they hit behind the runner or ran out a groundball or smiled at a reporter. Tony keeps insisting that Bonds's teammates don't like him, even though his teammates keep saying differently, and Bonds has never garnered a hundredth of ex-teammate disapproval that lovable Ken Griffey Jr. has.

And don't give me clutch. "Clutch" is something that only occurs with 20/20 hindsight. Ask, going into the 2001 Playoffs, who are the biggest "clutch" and "chokers" on the Yankees and Diamondbacks? The answer would be clear: Mariano Rivera, with umpteen consecutive saves and scoreless innings in the playoffs is Mr. Clutch, while Randy Johnson, with something like seven consecutive playoff losses, is Mr. Choke. I hate the Arizona Diamondbacks, but at least they provided a concrete example of the bogosity of "clutch"dom: it was Choker Randy Johnson who won three World Series games and the co-MVP, while Mr. Clutch Mariano Rivera botched an easy ground-ball play in the bottom of the ninth and ended up blowing the lead, the game and the World Series. "Clutch" has no predictive value, and no one using it has any business saying that stats lie.

Give me one left-fielder or one San Francisco Giant to choose for an all-time team, and there's no one better suited than Barry Bonds. Period.

Sunday, March 17, 2002

COMMISSIONER GORDON is shining the Max Power Signal into my office window, indicating that my mad lawyer skillz are needed elsewhere. I'll be back Sunday.
BLUE SKIES ABOVE. If you got referred here by Robert Musil, here's my first and second posts on the subject; here's Musil's revised first and second posts on the subject.

We disagree about the extent to which Greenspan endorsed the market run-up, and the extent to which Blue Sky commissions in the 1980's were viewed as a nuisance rather than a roadblock. But the crux of our disagreement is the extent to which the Blue Sky commissions could have stopped the tech sector run-up.

Musil asks why the tech sector got the bulk of new investment. He partially answers his own question--the belief that high-tech represented potential profits beyond the regulatory state--but the reality is that some stocks just get trendy. Popular writer Peter Lynch advised "Invest in what you know" and brought back the story stock, a concept that was somehow not shattered by the disappointing results in theme-park restaurant stocks, another trendy investment in the mid-1990's. The Motley Fool was propounding an investment theory that said that any stock that a lot of people said was overvalued was really a potential source of huge profits, and they had their five-digit percentage return in AOL to show for it:
The best Rule Breaking investments have been made when we closed our eyes to valuation: AOL Time Warner (NYSE: AOL), (Nasdaq: AMZN), Iomega (NYSE: IOM) -- stocks that had already multiplied a few times in value before we ever bought them, to the point that the Wise called us crazy for buying in the first place because they were SO "overvalued." So overvalued, just before those stocks went on to multiply many more times in value.

Learn the business. Ignore the pundits. Or even better, actively look for and HOPE the pundits are calling your Rule Breaker "overvalued." As you'll find later on, in another of our principles, this is a great contrary sign, one of the attributes shared by all true Rule Breaker stocks: Someone in the financial media thinks they're overvalued.

We similarly reject the deterministic power of market history so frequently claimed by market gooroos. "This is 1929 all over again" -- that's a typical example. Sorry, but 1929 ended more than 70 years ago, and it will never happen again.
Ah, those were the days, weren't they?

In this environment of tulipmania, a Blue Sky commission's attack would have been trumpeted by as an additional reason to buy. By late 1999, The Motley Fool had the power to double the price of a thinly traded stock in a matter of weeks simply by naming it to its "Rule-Breaker" portfolio. (Celera went up another 200% after that Slate article was published.)

Musil suggests that the biotech bubble was a "rational" investment that just happened not to work out, rather than a bubble. We're going to have to agree to disagree there. Biotech stocks in the 1980's without profits in the foreseeable future were trading at 50 times sales. Malkiel, who I've drawn several examples from in this discussion, calls it a bubble. Meanwhile, someone who invested in AOL, in Ebay, in Broadcom, in Yahoo, even in train-wreck at the time of their IPOs continues to see several-hundred percent returns in their investments, even when, as in the latter three cases, the stock price has declined 80-95% from its peak.