Don’t Follow Wealthy Investors, Part 14

We have counseled readers time and again not to follow in the footsteps of various Billionaires, like Warren Buffett, Michael Dell, Eddie Lambert, Wilbur Ross, or Bill Gates. The ultra wealthy have different motivations and goals when they are "deploying capital" — what you and I call investing. Capital deployment may not necessarily have as its goal straight up return maximization.

When Michael Dell buys his own stock, it is as much a PR move as it is an investment. He gets benefits from that purchase (Media coverage, analyst approval, retails sales promotion) that does not accrue to you.

Remember Kerkorian’s bid for GM ? The old man was trying to wrest control of one of the most storied names in American Industry. That’s an enormous ego stroke that you don’t get for your 1,000 or even 10,000 GM shares. I suspect the short term returns were inconsequential to him.

How about Joseph Lewis’ 7% stake in Bear Stearns? Taking a big stake in Bear made him a bold player in the high stakes game of Wall Street control. The loss of $500 million to Lewis is inconsequential; how’d that trade work out for those people who tagged along?  Eddie Lambert’s investment in Citi (C)?  A disasterous bet he is now unwinding.

Don’t imagine the Sovereign wealth funds are any better — they have their own agendas, political or otherwise. Besides, from what we have seen so far, they ain’t so hot anyway.   

My point isn’t that these guys are dumb (they are not) or bad investors — history shows otherwise. No, the point is that thy have different motivations, tools, and terms than you, and blindly following them into any investment is simply foolishness. (when Warren Buffett makes a deal, you can rest assured he gets slightly better terms than you).

I was reminded of this issue again yesterday, thanks to an article about the newspaper business in Editor & Publisher.

I recall wondering in these pages why a bright guy like Bruce Sherman would ever want to get involved in a dying transitional industry like Newspapers. The nasty emails and comments from his acolytes were both amusing, while being astonishing naive. According to these folk, Bruce could do no wrong. Thus, I was an idiot for even thinking about criticizing this investment. Clearly, only a moron doubts anything about Mr. Sherman. Only Sherman — and Chuck Norris — never buys any stock that goes down. Oh, and on top of that, newspapers were cheap on a P/E basis, thus providing additional proof of my cluelessness.

Well, it seems Mr. Sherman has thrown in the towel. According to Editor & Publisher, recent SEC filings reveal Mr. Sherman’s current newspaper holdings to be 0.0%.

Here’s an excerpt from E&P:

"Bruce Sherman, whose Private Capital Management (PCM) investment firm nearly single-handedly forced the sale of Knight Ridder — ushering in the era of Wall Street antipathy toward newspaper stocks — formally bid the sector goodbye in a series of regulatory filings Thursday.

In documents filed with the Securities and Exchange Commission (SEC), PCM said it no longer owned any stock in The New York Times Co., Lee Enterprises or Belo, and that it was effectively done as an investor in The McClatchy Co. . .

It was remarkable to see all those 0.0% ownerships of class in filing after filing because PCM not long ago had serious stakes in the nation’s biggest publishers. In September of 2005, for instance, PCM owned a gigantic 37.61% of McClatchy common stock. Thursday, the firm reported that it directly owned no shares at all, and was simply managing on behalf of an investor a tiny portfolio of 9,164 shares. In that same period, PCM owned a 15.07% stake in the Times Co., an 18.96% stake in Lee, and a 22.31% stake in Belo. It also had substantial positions in Gannett and a small amount of Tribune Co. stock."

Some of the emails about Mr. Sherman bordered on myopic hysteria over criticisizing any of his investments. These folks definitely have the first half of Strong Opinions, Weakly Held down pat. For their sake, I hope they are intellectually flexible enough to understand the second half. Perhaps the dittoheads who aped Sherman’s march into media were at least smart enough to follow his retreat out of them . . .

I emphasize this again and again, but we might as well say it once more for the record: LEARN TO THINK FOR YOURSELF. The importance of this cannot be stated enough.


Sherman’s March: Man Who Forced Knight Ridder Sale, Says Goodbye to Newspapers
Mark Fitzgerald
February 15, 2008 5:40 PM ET updted Friday

Category: Apprenticed Investor, Investing, Psychology

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Category: Commodities, Consumer Spending, Economy, Inflation

Friday Night Jazz: Billie Holiday

All_or_nothing_at_allBy now, you should have some feel for my taste in music, and the wide ranging and eclectic flavors that live on my iPod. But unless you are a fool or a wizened old pro, any attempt at doing a Friday Night Jazz on Billie Holiday is likely to fall flat on its face.

Lucky for us, Nat Hentoff — formerly the Music critic of the Village Voice, and now the Jazz columnist  of the WSJ is just such an old pro. In this week’s WSJ, he looked at a few new reissues of Lady Day’s music:

"Billie must have come from another world," said Roy
Eldridge, often heard accompanying her on trumpet, "because nobody had
the effect on people she had. I’ve seen her make them cry and make them
happy." Lady Day, as tenor saxophonist Lester Young named Billie
Holiday, still has that effect through the many reissues of her
recordings, including the recently released "Lady Day: The Master Takes
and Singles" of the 1933-44 sessions (Columbia/Legacy, available on
Amazon) that established her in the jazz pantheon.

Rare_live_recordings_19341959I grew up listening to those sides, which infectiously
demonstrated — as pianist Bobby Tucker, her longtime pianist, noted –
that "she could swing the hardest in any tempo, even if it was like a
dirge . . . wherever it was, she could float on top of it." But none of
the previous reissues, as imperishable as they are, have as intense a
presence of Lady as in the truly historic new five-disc set "Billie Holiday: Rare Live Recordings, 1934-1959" on Bernard Stollman’s ESP-Disk label.

This is a model for future retrospectives of classic
jazz artists of any era because researcher and compiler Michael
Anderson, in his extensive liner notes, provides a timeline of her jazz
life — describing the circumstances of each performance in the context
of her evolving career. One example: a live radio remote from Harlem’s
Savoy Ballroom in 1937 when the 22-year-old singer "began a special
association with her comrade, ‘The Prez,’ Lester Young" — grooving
with the Count Basie band in "Swing Brother Swing."

Complete_billie_holiday_on_columbiaHow could I possibly hope to improve on that?


For those of you who may be unfamiliar with Lady Day, a great place  is NPR Billie Holiday: ‘Lady Sings the Blues’ special. There’s a 54 minute radio broadcast discussing her history and music.

As far as albums go, there are lots of choices, but they pretty much come down to a) Boxed Sets; 2) Early work; 3) Later years.

If you want to start with something basic, go for A Musical Romance -  agreat duet with Holiday and her long time friend and msucial collaborator, Lester Young. You can also go to the 2 disc All or Nothing at All. The 2 CD Complete Decca Recordings is also quite good.

Complete_billie_holiday_on_verve_19For the more ambitious, the boxed sets are the way to go:

Lady Day: The Complete Billie Holiday on Columbia (1933-1944)

The Complete Billie Holiday On Verve, 1945-1959   

The set Hentoff refers to above is the 5 disc set  Rare Live Recordings, 1934-1959   

Students of her latter work will be interested in:

Lady in Satin 

Lady in Autumn




Videos after the jump . . . 



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Category: Digital Media, Friday Night Jazz, Music

How SubPrime Really Works

Since its a slow Friday before a 3 day weekend, let’s have some fun.

As the credit market has gone into the crapper over the past few weeks, gallows humor seems to have gotten the best of investors and traders. This hysterical piece of financial wit — in Powerpoint no less — has been circulating round Wall Street trading desks for a few days now.

I embedded it into Google apps and posted it on line so everyone can enjoy the warped sense of humor that accompanies losing $100s of billions of dollars.

Ain’t Wall Street grand?!?

click to launch slide show


Category: Credit, Derivatives, Finance, Real Estate, Trading, Video, Web/Tech

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The Monolines Are F#@%ed!

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