Getting publicity is a good thing?

**zqin** Thu Aug 18, 2005 12:00 pm

Getting publicity is a good thing?
Hi Blast,

In Graham's book, he mentioned that some investment theory worked well before they gained publicity on Wall Street. And they started losing their effectiveness after being adopted widely.

I haven't finished the book yet, but can you comment why blastinvest can escape from that fate after getting more and more publicity?

**blast_investor** Thu Aug 18, 2005 1:12 pm

Hi zqin:

Well, BlastInvest so far has not gained any publicity yet. BIRTP newsletter is small scale operation. Therefore, the issue you brought up is not an issue at this moment.

The core method of BlastInvest BIRTP newsletter is value investing. Value investing is a well known method for decades. But still BIRTP achieved very high performance so far, essentially doubling in 1.5 years. Of course, past performance is not indication of future performance, still the past huge return out of value investing was real returns.

**zqin** Thu Aug 18, 2005 1:16 pm

Then I guess my next question is why value investing is not losing its effectiveness. After all the book has been published for so many years.

blast_investor wrote: Hi zqin:

Well, BlastInvest so far has not gained any publicity yet. BIRTP newsletter is small scale operation. Therefore, the issue you brought up is not an issue at this moment.

**longtermbl** Thu Aug 18, 2005 1:31 pm

Maybe because patience is a virtue not many people have. And it's really different between knowing the path and really walking through it.

zqin wrote: Then I guess my next question is why value investing is not losing its effectiveness. After all the book has been published for so many years.

blast_investor wrote: Hi zqin:

Well, BlastInvest so far has not gained any publicity yet. BIRTP newsletter is small scale operation. Therefore, the issue you brought up is not an issue at this moment.

**blast_investor** Thu Aug 18, 2005 1:55 pm

zqin wrote: Then I guess my next question is why value investing is not losing its effectiveness. After all the book has been published for so many years.

That is good question. Here is my take.

(1) Although value investing book was published decades ago, not many individual investors/traders like the method or believe the method. Currently there are radio/TV shows with famous short term traders yelling "buy and sell" based on emotions, they try to time market in short term. they have huge fans. But you do not see any real solid value investors on any radio/TV shows. The value investing style is not exciting enough for a radio show. The picks from value investors will sit for years without buy/sell, most peole are not interested.

(2)Value Investing is against human nature, against human emotion. Although value investing does not require huge IQ, not many people can do it easily. It is just human nature to be emotional. Emotion determines short term based trading, chasing bubble and selling value. Human beings are slave of emotions. This human nature not only applies to retail investors, but also applies to majority of mutual funds. To believe in value investing means to change human nature. That is not a small change.

(3) Value investing is not easy to do for average people. It does require
knowledges and efforts to study fundamental of a company and industry. Many times the published earning or PE ratio are distorted and meaningless. Not many retail investors understand or want to study that. This probably turned off lots of failed want-to-be value investors. Many inexperienced investors bought "low published PE" stocks and suffered huge loss afterwards.

Therefore, most people would just want to chase quick money with short term oriented speculations. Unfortunately, quick money also means long term losers most likely.

**lzhang** Thu Aug 18, 2005 2:20 pm

I think value investing will lose its effectiveness once all people are value oriented, which I do not think it will happen.

Most of the time, people trade stocks with emotional greed and fear. Sell what you should hold, chase what is irrational pricy. I can not see anything about that will change in the near future. Even all people are finally and suddenly getting rational, which I think it just means value oriented investment is the only method people use. I do not think that is bad at all, but you certainly can not get above avg return any longer.

zqin wrote: Then I guess my next question is why value investing is not losing its effectiveness. After all the book has been published for so many years.

blast_investor wrote: Hi zqin:

Well, BlastInvest so far has not gained any publicity yet. BIRTP newsletter is small scale operation. Therefore, the issue you brought up is not an issue at this moment.

**RT Wolf** Thu May 04, 2006 9:40 am

Wall Street chases fads. They also have a tendency to distort ideas and facts, as well. They want quick money and don't have the patience to spend lots of time researching opportunities or have to wait years to yield returns. The last thing that is perhaps most important is that majority of Wall Street gets paid when and if you buy or sell. Wall Street is paid by activity, so it is in their best interest to keep activity high and not allow value investing to take hold. It's not a conspiracy, but it is a matter of skewed motivation.

Usually what happens is that value investors or some other group of very focused investors move into an area and do well there and then have to go find something else to do because Wall Street has caught up and driven prices up. Happened with the thirfts back in the 80s, the Nifty Fifty back in the day, smalls caps a little while ago. Right now I'm seeing a lot of money and buzz around forex and investing internationally, where as Templeton had an international fund a long time ago. Value investors have a history of getting to a party early and leaving early.

If EVERYONE started doing value investing (unlikely, the figure right now is probably some 2% of all investors are value investors). Everything would always be fair-priced (theoretically). Ironically, it is the fact everyone isn't a value investor that allows us to find inefficencies in the markets, so it's in our best interest to keep it under our hats. ;)

Another reason everyone is not a value investor is because of the enormous emotional fortitude you need. It takes some serious cojanes to hold on to a stock (or buy some more) as the stock keeps going down and down and down. VIs have to tread the line between being confident and cocky in their picks, and that's a tough job, too. VI also requires the ability to think independantly, to make decisions using your own research and just not be a herd thinker. The majority of people out there ARE herd thinkers and followers even in their daily lives. They are affected by what others think of them, so going against the crowd or going where the crowd isn't on a regular basis is especially tough for them.

So, Value Investors need the following traits:
Independance, confidence, patience, integrity, honesty, willingness to work hard, etc.