Monday, June 22, 2009

Review of Einhorn's Book

In preparation for writing a review of Fooling Some of the People All the Time, I read all 16 reviews (from mostly major publications) listed at its site, and others besides.

With a few exceptions, most did not actually review the book--showing what it said and why what it says is important. I set out to write a review that did do these things. And I did. You can read the opening paragraphs of it here, at The Objective Standard.

Note, for the curious, this is partly why my posts here are going to be few and far between. I decided to focus on doing a few in-depth, quality articles or reviews rather than the many posts I've been putting up here these past few months.


  1. Hey Daniel,

    A couple of questions for you:

    Did you ever write a post explaining why you selected the five gurus for your site? The two I'm curious about, for different reasons, are Einhorn and Heebner. Einhorn is relatively young -- did you pick him mainly because of his short bias? Heebner obviously has a long and successful track record, but given his recent sharp turns in strategy (e.g, from investing in commodities based on extensive research from primary sources to diving into financials last fall), I wonder what lessons an individual investor can draw from him.

    Also, regarding your writing for an Objectivist journal, do any of the folks there find it interesting that you are writing from a communist country, given how Ayn Rand's experience under communism inspired her work?

  2. Hi Dave,

    I never actually made a post on it. The five here aren't necessarily the best but they were chosen because they are among the best--doing roughly the same thing in different ways.

    Einhorn is young but he has a stellar track record over more than a decade. Because he isn't investing Berkshire-sized dollars yet, and buying companies isn't part of his fund's long-term strategy, he can go short comfortably--and does. But I didn't choose him for his ability to go short alone.

    More than that strategy and his persistence or courage in following it, I particularly admire the way he thinks about investing.

    As far as Heebner goes, he was probably a mistake to include on here. But only because he doesn't talk about everything he's reading and learning...

    I disagree with those who say his strategy has changed. His investments in commodities were based on a large pool of data as were those he made on financials. He knows a lot about both sectors and followed the conclusions of his own mind irrespective of what everyone else was doing.

    Though the outcome has definitely been different (and I was with him on the commodities and not on the financials) I think Heebner's strategy is sound and investors can learn a lot from it.

    But not perhaps much more than he says--which, unfortunately, isn't much (compared especially with people like Whitman and Buffett who talk a lot about what they have done and why).


    As for the last question, I don't know whether the editors or writers (or for that matter readers) find it very interesting or not.

    At least not in the sense that you're probably asking that question.

    My guess is they'd find it a bit more interesting that Ayn Rand's works are being published in the local language here--because that says a lot more about how much things have changed in this area.

  3. Daniel,

    Heebner may not have changed his strategy, but if he didn't change it, I'm not sure what it was to begin with. Based on reports of him reading things like "China Metals Weekly", meeting with Matt Simmons, etc., I assumed he was long commodity plays because, after doing a lot of primary research, he was a secular bull on the sector, like Jim Rogers is. If that were the case, though, he would have averaged down on his commodity stocks last fall, instead of jumping from them into financials. I'm not sure what to make of that.

    Re Einhorn, I should read more on him, as I've been thinking more about short-selling recently. I do recall him being interviewed by the loudmouth Bartiromo on CNBC last year, and we was impressive in how patient and articulate he was in the face of a bunch of questions by someone who clearly had not done a lot of thinking on the topic at hand.

    Interesting point about Rand being translated into Vietnamese. I guess a good way to get people interested in capitalism is to give them a taste of communism first while watching their more capitalist neighbors lap them on economic growth and quality of life improvements for a couple of decades.

  4. Any thoughts on what Heebner's strategy was, or still is, Daniel?

    Also, your tag about this blog as a dip -- I assume this is an allusion to Seth Godin's concept (which I think I read once in a post of his that you linked to). Would you be willing to elaborate on that? It sounds like you're phasing out the blogging in favor of writing pieces for the Objectivist -- and if they're paying you for that, I'm sure it's a better deal than Google ads -- but what were your goals for this blog when you set out, and why do you think you are insurmountably stymied at this point?

  5. Wow. Good eyes on the tag sighting--"why this blog is a dip that I didn't push through"--and good guess about its source.

    You're right, the tag is based on the book by Seth Godin.

    The question here is not whether I could push through the dip but rather whether I should--given that there are only 24 hours in a day and I am very busy elsewhere...

  6. I bounced this question about Heebner off of the folks at GuruFocus as well, because I am still stumped. I don't see the consistency in his strategy, if it hasn't changed.

    Re the blog, I think you had some momentum with your previous, eponymous blog. You had at least one big advantage with it: since you were writing about your own investments, you didn't have to speculate on motivations or methodology, because they were yours. It was also interesting because some of the investments you wrote about didn't get much coverage anywhere else. Had you kept up that blog, even if the performance of those investments might have suffered with the market crash last year, I suspect your readership would have continued to grow.

    Then again, to what end? This is the meta-question about blogging I've thought about myself recently. Unless you are one of the exceedingly tiny handful of bloggers with a large enough readership to earn significant revenues from Google ads, you have to ask yourself how you are getting compensated (financially or otherwise) from the time-consuming effort of blogging regularly. In other words, are you working for your blog, or is your blog working for you?

    I have to do some more thinking about how to get my blog to work for me. I may end up posting less frequently and keeping my posts more narrowly focused on topics that are relevant to my business endeavors.

  7. Hope you're enjoying your honeymoon.

    Now that I've read some Seth Godin, I think you alluded to the wrong book here; you should have mentioned The Purple Cow. Your eponymous blog was a Purple Cow: it featured detailed analysis of stocks readers didn't hear about everyday, written by an investor/blogger who was posting impressive returns. Then you abandoned your purple cow and bought a brown cow -- another blog featuring commentary on well-known investors.

    Focusing exclusively on just five investors was a minor purple cow angle, but you didn't offer unique insights on those investors here (which would have been tough to do, in any case, since you only had access to the same publicly-available information about them as everyone else). Maybe a "purpler" angle would have been a "Microcap Five" blog focusing on investors such as Edelheit and Sonkin who don't get as much attention as the Buffetts and Whitmans.

  8. I could have mentioned Purple Cow if I was focused on the growth in traffic of the blog as opposed to my desire for writing one (compared to other options). Given the context I wrote about, it was the correct reference.

  9. As I haven't read The Dip, I'll take your word for it that that was the correct reference. When all you have is hammer and all that.

    BTW, Any chance you'd be interested in blogging about individual stocks again? If so, take a look at this and see what you think. I'm already getting a custom logo & semi-custom template done for a new blog and can get a discount from my designer for this new stock blog as well. Haven't decided if I'm going to do it yet, but the idea would be for it to be a team-written blog, with each author only covering 1-3 stocks. At this point, my three would probably be AYSI.OB, USEG, and DSNY.OB. You could pick whatever stocks you wanted that fit the criteria.

  10. Sorry for not responding to this in so long! I'm not interested in writing for the blog--having my hands full at the moment--but I sincerely wish you well!