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Marc Gerstein

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  • Linn Energy: Many Ponzi-Like MLP Blow-Ups To Follow [View article]
    Not really . . . when an article uses the word Ponzi in a headline, not to mention the phrase blow-ups, I'd expect the comment count to be much higher, as probably would have happened had it not come out on a holiday weekend. (And it may yet climb.)
    Jul 7, 2013. 02:21 PM | 7 Likes Like |Link to Comment
  • Dividend Is Not A Four-Letter Word [View article]
    "How come I never see the growth people getting all defensive that people are saying bad things about capital gains? Dividend folks seem more wound-up than growth people. Why is that?"

    Many Seeking Alpha readers are experienced, sophisticated investors who do not need articles like this. But many others are still learning. When idiocy is propagated on the site by authors who, for some unknown reason, seem determined to discourage investors from pursuing what is in fact a very sensible investing strategy, it seems quite appropriate that the record be set straight.
    Jan 11, 2012. 07:17 PM | 7 Likes Like |Link to Comment
  • Dividend Yield Worship Could Lead You Down The Wrong Path [View article]
    "The whole purpose of this article was to combat the idea that a high dividend yield makes it suitable for investment. To quote Jim the commentator: 'You have to own X because it now yields 4%'."

    I think I'm starting to get the idea of this article.

    Alan, don't assume people look at yield and nothing else. As to Jim C's remark -- it was a #$&*%@ SOUND BITE . . . that's all. It was not analysis. That's what talking heads are trained to do. Heck, I've still got my DVDs and booklets from the media training Reuters sent me to in the mid-2000s. You'd be amazed at how systematically on-air personalities are taught to craft quotable quotes (every bit as systematized as building a discounted cash flow model). And Cramer came out with a couple of gems relating to income investing ("instant high yield," another one he used recently), that would probably get an A+ grade from any media trainer.

    That, sadly, is the nature of television, even investment television. If you look past his blustery showmanship, it's easy to see that Cramer is actually quite strong when it comes to substantive analysis (although I'm not sure you can see it without paying for any one of a number of premium content sets; he's not giving you the good stuff unless you show your credit card). Don't believe for a single second that Cramer actually believes anyone should buy a stock based on yield and nothing else. He's way the hell too smart for that. But CNBC producers aren't, and Cramer, like everybody else on the air, knows what it takes to keep the TV money coming.

    Have you ever been on CNBC, or Fox Business or Bloomberg? If so, you know nobody can deliver a credible investment analysis once the red light goes on. Even a relatively long segment of, say, five minutes barely allows enough time to introduce an analytic viewpoint, much less deliver anything substantive. (And by the way, don't get lulled by the fact tat Cramer's on for an hour -- the show is stitched together with lots of tiny segments. Bear in min lightning round is not one segment; it's lot and lots of miniature bite-sized TV segments.) The first time I went on TV, I spent hours ahead of time preparing on companies I planned to discuss. Eventually, though, I cut preparation to about five minutes as I came to realize I wouldn't have time to actually develop any legitimate analytic points and that even if i did say something stupid, nobody would remember two minutes after the segment was over and that if i didn't know the answer to a question, I could dodge it simply by answering whatever question I wished had been asked while moving my arms boldly to distract the audience from the substance (laugh, laugh) of what I was saying. That is the context of Jim C's so-called income investing wisdom.

    Does all this suck? Hell yes! But don't blame Cramer (who, at least, has the moxy to cash in on it) and don't take it out on income seekers (who just want to do their thing as best they can in the context of an incredibly low-interest-rate environment). Blame the networks, who feel even investment audiences (a much smarter than usual demographic) have the attention span of a two-year-old Red Bull guzzler. Or better yet, blame the jackasses who sit around all day watching these networks thereby giving the producers the ratings and ad revenue they covet. The only way we're ever going to get more substance on the air is if investment audiences push the "off" buttons on their remotes and make it clear they'll stay away until the networks proved quality programming. But that, of course, is a fantasy (maybe the producers are right about their audiences).

    If you want to express frustration on Seeking Alpha, then write something bashing CNBC and broadcast media, not income investors!
    Sep 8, 2011. 11:17 PM | 7 Likes Like |Link to Comment
  • 'Buying Dividend Stocks For Income' Arguments Don't Make Sense [View article]
    I looked at the Altman article and stopped when I saw the tables listing year-by-year default rates. For the years when I was in the business, his numbers are way too low; back then I was able to reel off names of busted credits that brought a practical computation of a default rate well above what he has. (Those were close to the numbers I was referring to when I used to quip about how they just stopped counting.) So for me, that pretty much wipes out the credibility of the rest of the paper.

    As to your fixed income strategy, it seems like you're advising investors to pursue the same sort of mindless contrarianism in the bond market that you accuse them of doing (and for which you lambast them) with income stocks.
    Sep 2, 2011. 03:17 PM | 7 Likes Like |Link to Comment
  • Why I Am So Bearish: Time to Be a Deep Value Investor [View article]
    In the grand scheme of things, the number of people commenting here on DCA is a very small sample, so I would not suggest anybody conclude anything based on perceived emotionality of comments discussing the topic. DCA is what it is without regard to the emotions of practitioners or detractors.

    Speaking for myself, if the market for the security in question is liquid enough to accommodate a Buy or Sell in one shot, then I prefer to just place the order and get it over with. Fundamental analysis is challenging enough; I don't think I help myself by taking on the added burden of having to game the upcoming market moves as well.

    If you want to see an interesting example of where DCA may be going wrong, you may want to check Jim Cramer's Action Alerts or that site's Stocks Under $10 newsletter. Having looked a lot at their long-term trading records, which are fully disclosed, I'm not convinced they've helped themselves with DCA and may even have been hurting themselves. (I looked at Cramer some years ago; more recently I've been looking at Stocks under $10.)

    If I buy a stock and it runs against me, I'll just suck it in and say "Whoops . . . maybe I've got to sit through some market turbulence or maybe I just-plain f****d up." I've seen too many occasions where Cramer and Peltier (Stocks Under $10) chased bad stocks down, turning a potentially small capital loss into much bigger realized losses after it turned out Mr. Market was right and they were wrong. Obviously, there are times when DCA will work well, but when you add up all the good experiences and all the bad experiences, I think it takes an incredible degree of market brilliance (a heck of a lot more than I have) to have the good outcomes outweigh the bad ones.

    One counter argument might be that I should only be making trades in which I have a higher level of confidence. Fair enough. But I've been doing this long enough to know that nothing is more dangerous for an investor than an over-inflated ego. I do enough due diligence to support my basic opinion, but that's that. No matter how much study I do, I always respect the possibility that I may be wrong, so I prefer to control risk by diversifying (which reduces my exposure to individual analytic judgments), rather than DCA, which reduces my exposure to a specific execution price but actually increases my exposure to erroneous analysis.

    This is just one guy's ad hoc observations and opinion. But i think it does illustrate the sort of questions one could legitimately raise with anyone who advocates DCA.
    Apr 5, 2011. 01:31 PM | 7 Likes Like |Link to Comment
  • Black Swans Everywhere [View article]
    I get a sense that the author does not really know what "black swan" means. It seems that he assumes it is anything the market might view unfavorably.
    Mar 28, 2011. 09:14 AM | 7 Likes Like |Link to Comment
  • Just One ETF: Controlling Risk Through Hedge Fund Replication [View article]
    I've always been a but perplexed by hedge fund replication. This would, necessarily, be a backward-looking strategy in that the regression models would have to work with data from the past (not sure how much of a lage there is in reporting). So how can the model adjust to changes in hedge fund decisions?

    Wouldn't it make more sense to simply develop your own asset allocation models and buy an appropriate portfolio of ETFs. It wouldn't necessarily match with what hedge funds as a whole are doing, but who cares. That's an aggregate thing anyway. You'd probably match up with at least some hedge funds, and you'd have the benefits of being forward looking and be better able to stand behind your asset allocation models/decisions. If I were your client, I'd rather get asset allocations based on your forward-looking model rather than a backward-looking hedge-fund replication model.

    I've often wondered if hedge fund replication is something that has been far more fascinating to quants and journalists than to investors.
    Feb 12, 2011. 09:37 AM | 7 Likes Like |Link to Comment
  • A Triple Play Income Strategy [View article]
    Yield pig? Did you see this and other related material: "So be careful about being a yield hog. That approach is risky . . . for real!"
    Feb 4, 2011. 10:17 AM | 7 Likes Like |Link to Comment
  • Is It Wrong To Take A Position In A Stock And Then Write About It On Seeking Alpha? [View article]
    Hi David,

    Well, this solves a mystery for me. When I checked my e-mail this morning and saw a notification that I had five new followers, I was confused. My schedule has been brutal lately so I haven’t had nearly as much time to contribute articles to SA as I would like, so I was wondering where five new followers came from. Now I know!

    : - )

    Seriously, thank you for taking the time to address the issues I raised.

    I would like to address a few points. Front running, talking book, whatever (not sure Wikipedia is the most authoritative definition of anything), I’m well aware that it complies with the letter of the law and have, accordingly, been careful in my comments about use of words such as fraud, manipulation, etc.

    But what’s legal in a court of law and what’s acceptable in the court of public opinion can be very different. Brand equity is great – while you have it. But once lost, it can be very hard to regain, if it can be regained at all.

    Recall that my quoted diatribe on talking book (to avoid semantic controversies, I’ll use that phrase) was one part of a three-part response to your article defending short-oriented articles. Recall that I said (I think as part of that same comment, if not, another in that thread) that nobody cares when SA publishes articles in which authors who are short AMZN, TSLA or other big names talk book. For all your readers care, they can talk book until their typing fingers fall off. These are liquid stocks and each article is just one voice among countless others and those authors will have to profit or lose on their short positions just like anybody else profits or loses on long or short positions – based on the market’s ultimate judgment of the merits of the situation. That’s fine. Heck, even Herbalife is fine for talking book. It’s liquid. Even Ackerman and his countless PowerPoint slides and hours of lecturing still can’t single handedly move the stock as he wishes; like everyone else, he’s subject to the ultimate judgment of events and the market.

    The problems with talking book as people object to it on SA, involve two other elements.

    One is liquidity:

    Unlike the situation with the liquid stocks, it is highly foreseeable that an illiquid stock will move quickly and vigorously with absolutely no regard to the quality of the analysis or the accuracy of any factual assertions. Keep this in mind as you continue to publish what in the investment community has come to be known as “Seeking Alpha hit pieces.” (And if I were working at SA and in charge of branding, I’d be in your office every day carrying on about the impact the evolution of this phrase is having on the brand.)

    The other point was practical – the $ impact:

    Talking book and pushing a stock up, does not damage most investors. Even if I’m not in the stock, all I have is an opportunity loss, and not even that if I used my capital for something else as good or better. But a bearish piece causes immediate losses for those who hold the stock. It doesn’t take an expert in behavioral finance to recognize that the legitimacy of the asymmetrical reaction (not caring about bullish articles but being hyper sensitive to bearish articles).

    I’m going to offer a set of proposals that I believe will balance the interests of all stakeholders and protect, and possibly enhance, SA’s brand:

    1. Consult your legal advisors and develop a workable numeric (trading volume, market cap, dollars traded, etc.) definition of a liquid stock. The idea is to have a threshold below which SA will presume that the article, regardless of the merits of the reasoning or accuracy of the fact, is highly likely to move the stock in a material way.

    2. For articles on stocks above the threshold, proceed as you now do.

    3. For articles on stocks below the threshold where the author has a position, edit for style as you now do but once that has been completed, send the article for a second round of more substantive review. Many media organizations use fact checkers (a function that is distinct from editing). As you know, the Sell side used Supervisory Analysts. Details can be worked out but ultimately, the aim is that when it is reasonably foreseeable that an article will move a stock simply by virtue of it’s being published, more care needs to be taken than to give it a standard edit.

    4. For articles on stocks below the threshold where the author has a position, require the author to refrain from any trading in the stock or derivative based thereon for a certain period (determined in consultation with your legal advisors) after publication. In other word, don’t let one who talks book on an illioquid stock to grab a quickie profit simply by the publication of the article. Force him or her to give the market a fair opportunity to get past its initial knee-jerk reaction and digest the analysis. Afterward, the book talker can profit or not based on the market’s bona fide assessment of the merits of the situation – as should always be the case.

    5. For articles on stocks below the threshold where the author does not hold a position, I haven’t yet formed an opinion. But it is something that would need to be addressed.

    Meanwhile, I continue to vigorously disagree with SA’s position on anonymous authors. If they disclose their identities only to people inside SA, then only people inside SA should read and act on their articles. Speaking for myself, if the contributor does not respect the reader by so much as the courtesy of saying who he or she is, then the contributor has not right to ask me to respect anything about him or her, including (and especially) the opinions expressed in the article. Respect is a two-way street. A contributor that doesn’t give it has no right to receive it.

    I suppose that having gone there, I have to say something about SA’s crowd-sourcing theme. I don’t care. And judging by the comments you and Eli have been receiving in response to your articles (and by what I see in the real world), I strongly suspect that many or most or perhaps nearly all readers likewise don’t care. Inside SA’s offices, crowd sourcing seems to be seen as the heart of the organization. But I’m not sure the world at large has any interest in that mission. From what I see, readers just want good, well thought-out content and could care less about the “crowd.”
    Aug 7, 2014. 10:55 AM | 6 Likes Like |Link to Comment
  • Make 70% A Year With Math [View article]
    "There are a variety of well known factors which are old, well-worked over, tired, and commoditized which are favored by most investment industry pseudo-intellectuals. Therefore, these factors no longer earn outsized returns. By targeting less well known and understood factors (inefficiencies) which are purely mathematical in nature as opposed to intuitive factors which are well-known to equity fundamental practitioners, or would-be economists, we can achieve outsized returns."

    I've been very much into objective rules-based investing for more than 20 years so nobody needs to sell me on its benefits. But when it comes to what you're offering here, I beg to differ. This strategy you describe is 75% short the triple-leveraged treasury fund. In times of falling interest rates, treasuries rise in value meaning a short treasury fund will fall, and a triple short fund will fall much more briskly. You shorted the short fund, which means your portfolio had no choice but to rise briskly in response to falling rates.

    So actually, this is simply the natural relationship between interest rate movements and treasury bonds, a strategy that is one of those "well known factors which are old, well-worked over, tired, and commoditized which are favored by most investment industry pseudo-intellectuals." All you did was make an aggressive interest-rate bet. (Note the below-market performance in 2013, a year in which we had just a few months of market movements anticipating rising rates.)

    Where are the "less well known and understood factors (inefficiencies) which are purely mathematical in nature?" The 25% short in TVIX? Cute, but hardly worth all the self praise.

    As I said, I've been around the block here a lot and the more practitioners rant and insult "old, well-worked over, tired, and commoditized which are favored by most investment industry pseudo-intellectuals," the more likely they are to eventually fall prey to hubris and implode, as so many have. The ones that succeed over a prolonged period are those that understand that the established ideas are the ones with which we should work, the task being to find ways to express them in language a computer can understand and in ways that we won't be tripped up by situations that pass the letter of the law but fail the spirit of the law (data isn't pure science; there's a lot of art there, too, in collection, in presentation, and in interpretation and use).
    May 31, 2014. 06:26 PM | 6 Likes Like |Link to Comment
  • Bill Ackman's Folly With Herbalife: 7 Assumptions That Led Him Astray [View article]
    "Perhaps because of the heavy regulations many RIA's, RR's and CIMA's prefer to participate in a discussion without the full disclosure of our identity and the accompanying required reporting to our parent firms. "

    First of all, Quoth the Raven isn't merely participating in discussion. Its views stem from articles it published on SA.

    Now SA does have an explicit policy authorizing anonymous authors for reasons similar to what you stated, that some authors may be constrained by employment requirements from publishing articles. I, for one, have a huge problem with that. If your employment does not permit you to publish, then here's an idea -- Don't publish!

    If, on the other hand, an RR feels a strong desire to publish notwithstanding reporting requirements of his or her firm, then here's another idea -- Comply with the reporting requirements!

    BTW, SA was well up and running long before they started paying authors. Many authors were professionals and published not so much for money but from promotion, exposure. So needless to say, they used real names (how else can one attract clients). I really fail to see any legitimate, ethical justification for anonymity. Should one be allowed to do one thing on behalf of clients but publish the opposite on SA? Hmmm, this sounds familiar . . . Henry something or other, Elliot Spitzer, early 2000s . .. Hey, at least the Wall Street folks used their real names. That puts them all a huge leg up on the anonymous things that are, unfortunately, allowed to publish on SA.

    If, on the other hand, one is going to uses anonymity to commit fraud on employers, clients, etc., then how could I trust that such an author wouldn't commit fraud on readers? I can't and won't. (FWIW, be awate that unlike Wall Street firms that require employees to have their brokers send copies of their trade statements directly to them, media outlets, including SA, do not independently verify the disclosures published on the site; the authors are on the honor system.)

    In fact, this article is one example of the important benefits of known authors. I researched Thompson beyond his SA profile and saw material from the past, pre Ackman-HLF, where he had publicly spoken out against MLM bad apples I had heard of. Because he revealed his identity, I was able to comfortably satisfy myself regarding the integrity of the opinions he expressed in this article. Had he published under a pseudonym, Quoth the Earthworm, for example, I'd have had no way to gain comfort with the legitimacy of his views. For reputable authors expressing reputable views, disclosure is a good thing.
    Dec 12, 2013. 09:18 AM | 6 Likes Like |Link to Comment
  • The Mythology Of Tesla's Valuation [View article]
    Disclaimer: I have not looked at all into Tesla. It's so far out of my wheelhouse, I don't see the time needed for analysis as being worth my while. But like many, I have a curious streak when it comes to interesting stories so I clicked on this article out of curiosity. But . . .

    "As an investor, whenever I see that the market values a company several times more or less than my own assessment, I always ask two questions: What are the other investors missing? And, when are they going to realize that their expectations are wrong?"

    Oy vey! I stopped reading at that point.

    Speaking for myself, as an investor, whenever I see that the market values a company several times more or less than my own assessment, I always ask two questions: What might I be missing? And, am I sure my expectations are reasonable? Only after having done that would I move on to assessing/criticizing the expectations of others.
    Oct 16, 2013. 03:29 PM | 6 Likes Like |Link to Comment
  • Looking For High Yield In Out-Of-The-Way Places: Business Development Companies [View article]
    "a majority of dividend investors will shy away from BDCs due to fears based on not really understanding how they work. "

    Yes they will and that is a good thing. Remember the name of this site: "seeking alpha." Fears of not understanding how things work is a great road-sign pointing one in the direction of alpha.

    Universally cool, calm, calm, thoughtful, well-researched points of view are what alpha-seekers hate to see!
    Mar 12, 2013. 02:18 PM | 6 Likes Like |Link to Comment
  • A Different Take On A Warren Buffett Strategy [View article]
    "There is no doubt that he has been a standout asset accumulator for decades. This accomplishment may not be as impressive, however, as a single individual building a small business"

    The best response i can think of is a remark Buffett himself once made some years ago. A approximate quote is: "I'm very fortunate to have been born at a time when my one skill, allocating capital, is valuable. At another time, I may have been nothing more than lunch for some animal."

    We all have different skills and success comes to those who make the most of whatever it is they have.
    Feb 13, 2013. 07:48 AM | 6 Likes Like |Link to Comment
  • A Reality Check For Amazon's Haters [View article]
    "using 5 year averages to mask the fact that AMZN's margins imploded to 0% right right now"

    The current situation was addressed in the article. Did you not notice it, or . . . .

    "The investment thesis is also an obvious lie."

    . . . .are you deliberately choosing to ignore it so you entertain yourself by crafting a hostile comment?

    Actually, I notice that of the 63 comments you posted on Seeking Alpha to date, almost all were rants against AMZN, and indeed, fit the stereotype of the hater. Are you short the stock? I think you need to disclose.
    Oct 28, 2011. 04:24 PM | 6 Likes Like |Link to Comment