Tuesday, February 23, 2016

Market Masters

Almost 30 successful investors were interviewed for Robin Speziale's new book, Market Masters. Speziale must be one heck of a salesman, as his book was endorsed by a lot of people you've probably heard of in the money management business like Ken Fisher, Guy Spier and Mohnish Pabrai.

I really enjoyed the interviews of the money managers I respect, including Francis Chou and Bill Ackman. I was very impressed that Speziale was able to land these guys.

I thought the book had a real recency bias, however. A lot of the people interviewed seemed to have very short track records. In one case, returns of 23% per year were touted, so I looked the fund up; it was only around 2 years! From the time the book was written until today (and it's a new book), those returns have already fallen dramatically; it doesn't take much when the track record is so short!

Related to the recency bias, I didn't feel like the role of luck was given adequate due. The strategies of a lot of the interviewed people were just assumed to be good because of their track records, but colour me skeptical. Because the track records were so short it's likely that a lot of these guys were just lucky.

Of course, it's difficult to tell how much of someone's returns are actually luck, but some acknowledgement of this elephant in the room was probably in order. A lot of stocks that were touted as big success stories for many of these investors have already done very poorly since the book was written. For example, Valeant was mentioned by many investors in the book as one of their success stories. In case some readers have heart conditions, I won't post its chart here, but you can look it up.

Other interviewees seemed not to know what they don't know, which is very dangerous in this business. For example, by looking at an overlay of the USD vs crude oil during the last crisis, one of the "masters" says about oil "I am saying it's a bottom. So you're not going to see crude at 30 bucks." A wise man once said "It ain't what you don't know that gets you in trouble, but what you know for sure that just ain't so."

All in all, I really enjoyed the interviews of the real masters. But the interviews of the pretenders/promoters costs the book some credibility from my perspective.


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