Thank you Brett Arends

Hello everyone,

First things first…Jamaica was magnificent. Dawn and I stayed at her parent’s place in Treasure Beach. I highly recommend this area of Jamaica to anyone for its unspoiled beaches, clean water, outstanding weather and sweet people. When I say unspoiled beach I mean it. For the entire week we were there we saw only 5 other people! To have crystalline green Caribbean waters to yourself like this is unheard of. Treasure Beach is a bit of a haul from Montego Bay – a 3 hour drive – but well worth it if you want to recuperate and rejuvenate.

Second, the day of my departure Brett Arends of the Wall Street Journal responded to the blog post in which I said that his tune had changed. In the comments section he listed all of the times this Spring that he was a bull on equities. Thank you Brett for the comment and thank you for reading. It’s nice to know that he has a news spider out there trolling for news about his column. I am guessing this is a recent tool added to his arsenal because he missed the posting of Friday, April 24, 2009 or chose not to comment. This will take some sorting out, but is necessary to demonstrate how both of us are correct in this situation.

First of all we have to consider the word “context.” Context determines how information (factual or non-factual) is interpreted. Brett Arends‘ context is that of a columnist for the Wall Street Journal. He sees and knows about everything he does, says and writes. From his context as a Wall Street Journal writer what I said about him being a contrarian indicator is inaccurate. Let’s grant Brett his own words. From the comments section of the blog he wrote in his defense:

“Please get your facts straight.

‘Here is what I wrote in the Wall Street Journal on March 3, just as the market was plummeting to its (terrifying) low:

‘There are now a lot of genuine “value” opportunities around. It’s true they may get cheaper yet — which supports the argument for investing slowly and dollar cost averaging. But in the words of Boston fund manager Jeremy Grantham… “If stocks look attractive and you don’t buy them and they run away, you don’t just look like an idiot, you are an idiot.”

‘On March 5 I pointed out all the great values available in the market, and asked:

‘ “Should shares in Kraft Foods really be so low they have a dividend yield of about 5 1/2%? What about AT & T (7%)? Or DuPont (9 1/2%), Philip Morris (8%), American Electric Power (6%), British Petroleum (9 1/2%), drinks giant Diageo (5%) cellular network giant Vodafone (8.5%), Merck (6 1/2%) or a host of many others?”

‘Here’s what I wrote on March 8, the day before Wall Street finally hit the bottom:

‘ “The world has not come to an end. Much more importantly, there are now an incredible number of stocks around that look very good value. Many offer very generous dividend yields.

‘ Those who buy good stocks cheaply and hang on for a long time tend to make a lot of money. But it’s important to stay disciplined.”

‘(I also correctly suggested a massive stock market rally might be on the way, and that a rally, on its own, would not necessarily mean the bear market had ended)

‘And on March 15th, a few days into the rally, I showed how dollar cost averaging would have helped an investor in the 1930s and concluded:

‘ “It’s an argument for sticking to regular investments through this crash: Not bailing, and not jumping in with both feet either. The simplest strategy worked; investing the same amount, every month. It’s also an argument for investing globally, and not just in the U.S., which is a lot easier to do today than it was in 1929.”

‘Yours

‘Brett Arends“

Essentially Brett is providing what he feels is the proper context for evaluating himself. He is certainly allowed to do this. Looking back, my regret is that I did not more properly state that I don’t see Brett Arends specifically as a contrarian indicator, but journalists, in general. Unfortunately my lack of specificity meant that Brett felt the need to defend his comments.

I also too strongly stated the following about him: “What he doesn’t say was that he told you to steer clear of it.” Brett provides lots of evidence of instances where he did say it was an opportune time to invest. Ahhh, but now we get to my context.

I am a professional investor with lots of experience investing for thousands of people and hundreds of millions of dollars. My context is always one of analytical precision coupled with intuitive timing. Here is what I said on Friday, April 24th in response to Brett Arends‘ column:

“So one of my favorite contrarian indicators is to do the opposite of what the business press advocates.

‘Specifically I wanted to highlight an article in the Wall Street Journal by one of its more renowned contributors, Brett Arends. The story appeared on April 22, 2009 and was entitled, “Why I’m Staying Away From Bank Stocks.” Mr. Arends says:

‘Many are wondering if the crisis is now over. Are happy days here again? And is it too late to get on board.

‘I wish shareholders the best. And maybe this rally in banking stocks will keep going. I have no idea – I never try to foretell short-term moves in the market.

‘But I wouldn’t touch banking stocks with a 10-foot pole. If I had any shares I’d be looking to sell.”

Note that I quoted Brett Arends…so the words are his and my facts are straight. My contribution as a financial analyst is the timing; I selected the timing of my quoting of Brett Arends in service to my purpose: to write an informative and useful blog with impeccable timing. Brett, as quoted, was representative of a number of journalists who were getting a little airsick from the market turbulence. Likewise my post of last week, which Brett Arends responded to directly, was about timing. The fact that at many other times Brett advocated buying equities or not is not relevant to the context of this blog. Like it or not Brett Arends has a public face and is therefore bound to be used (and sometimes abused) by others. Like it or not, he and his words are allowed to be interpreted and allowed to be seen as a contrarian indicator. So the proper context from Brett evaluating me is whether or not what I said on April 24th was accurate.

So I stand by the fact that at a critical juncture for the financial markets, April 22nd (the date of his article), that Brett Arends “wouldn’t touch banking stocks with a 10-foot pole.” I thought that was ridiculous and unwarranted and publicly stated that I felt those words were a contrarian indicator of future market success.

Unfortunately for Brett, and for all of us who post public market commentaries, the results of the financial markets are measured objectively, not subjectively. A check on the performance of banking stocks subsequent to April 24, 2009 demonstrates clearly that I was correct in thinking that Brett Arend’s comments should have been interpreted in a contrarian fashion. As previously stated I regret only my latter comments which were not detailed enough. I should have re-quoted Brett Arends‘ words directly so that it was clear to what I was referring. I am certainly guilty of a little laziness. The point of my post last week was to highlight my success of April 24th, not to demonstrate that Brett Arends missed the rally.

I sincerely hope that Brett continues to read the blog. I think that both of us are in alignment in our belief that the general public needs solid market commentary divorced from noise. Hopefully there is enough middle ground for a continued, respectful admiration. I also am flattered that the blog is (let’s bring this full circle now) in Beach Boys-like fashion (remember Jamaica) “getting around.”

Respectfully,

Jason