No One Is Ever Wrong Anymore
- Joshua M Brown
- February 2nd, 2012
I'm beginning to notice a very disturbing trend and I bet you are as well - Nobody is ever wrong anymore and admitting to any failure at all has become forbidden. It's almost like these people have forgotten (or have never learned) about how powerful the admission of wrongness can be. Mea culpas are fantastic, they clear out the inner insecurities and demonstrate both emotional and intellectual growth. They also show courage and honesty.
I have a book coming out in which I admit to a vast array of things I've been wrong about (luckily there was an editor), my friend James Altucher has dedicated his entire blog to rusticating guilt and shame about his own screw-ups over the years.
But for some reason, I feel like everyone else is going in the other direction. It's kind of bizarre.
Take Bruce Berkowitz, manager of the Fairholme Fund - here's a brilliant guy who unfortunately owned almost every single disastrous stock on the market in 2011 (he and John Paulson carved up the H-bomb list, if Bruce didn't own it John did). He torched his shareholders and lost billions of dollars juat as his fund had raised record levels of assets under management, a total shit-show. And yet, you read his just-released letter to investors and it almost reads like he's saying "I wasn't wrong, the market was." It really is an astonishing piece of writing...
Improving book value levels and ratios show companies recovering from tough times, prepared for uncertainty, and capable of profits without excess leverage. The Fund’s performance last year makes little sense in light of such positive trends and we can only hypothesize from public comments that investors did not fathom our financials’ assets.
Translation: You are all idiots and it's your fault I rode concentrated positions down 20, 30, 40, 50, 60 percent without any risk management whatsoever. Rather than admit that the Sears, Bank of America and St Joe ideas were flawed positions with poorly timed entries, Berkowitz tells us no one else understands how to read a balance sheet or income statement except him. Good luck, dude. (full text of letter here)
Berkowitz is not alone in the New Denial. This week Newt Gingrich lost the Florida GOP primary contest to Mittens and then gave a concession speech that was long on speech and short on concession. In fact, you could almost call it a non-concession speech. Newt shows up late to his own concession event while the DJ spins - I kid you not - Everybody Have Fun Tonight, Play That Funky Music White Boy and I Gotta Feeling. Then he gets up to the podium and says this: “It is now clear that this will be a two-person race between the conservative leader, Newt Gingrich, and the Massachusetts moderate, and the voters of Florida made that clear.” Then he declines to call Romney and concede the Florida contest like a gentleman, despite the fact that Romney did just that upon Newt's victory in East Dakota or whatever state chose him, I can't remember. Coming off as a sore winner when you've lost is a feat of pigheaded denial worthy of admiration, he's truly done the impossible here so please don't bother correcting him.
Earlier this week I was on CNBC's Fast Money and they had the most ridiculous human being I've ever seen on financial television discuss his current short call on Apple stock - originally made two years ago. I know. But ACI Research CEO Edward Zabitsky is "sticking to his guns" and maintaining his $270 target (a 50% haircut from the current price above $450). His short thesis has now changed. Of course it has - the original one was invalidated. This guy just looks and sounds like a walking margin call. And then, unbelievably, someone says that "at least he has the convictions to stick with his call" and my fucking head almost explodes. "Conviction" is stupidity when new evidence presents itself or circumstances change. Any real trader or investor can tell you that. No one is to be applauded for sticking with a call like that and inventing new reasons not to admit they're wrong. Scary stuff, but fortunately Edward probably doesn't have a dollar on the line with this call, him being an analyst at all.
So everyone is doing this now. There's a well-known bond manager out there who has adopted a new style of allocation: First he positions the portfolio for how things "should be", then he publicly browbeats the Fed about monetary policy, then he blames his returns on the Fed when it doesn't listen to him.
I don't know, for me it's so much easier to just say "I messed up and was wrong." I bought Sprint ($S) last year after it was universally lauded by some of the greatest money managers of our time at the Ira Sohn Value Investing hoedown. I got long and didn't get out until a gap down blew up the position for 40-50% losses. The trade "made sense" on the entry but violated all my rules as did my maintenance of the position - and it hurt like a bitch. Now, the CEO Dan Hesse happens to be a world-class putz (the company managed to turn the announcement of the Sprint iPhone into a negative news event) but my loss is my fault and not his. There: mea culpa. I make good trades and bad trades, that was a bad trade.
What's the big deal? Why can't anyone be wrong anymore?
Barry wrote the bible on being wrong back in January 2008, I really appreciate The Street keeping this open to non-subs:
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The Reformed Broker is a blog about financial markets and the economy. Joshua Brown is a New York City-based investment advisor for high net worth individuals, charitable foundations, retirement plans and corporations... More.