Thread by @MoatlessCapital

As we look up and see former Fintwit darlings get demolished and see accounts deleted, it is time to revisit this piece by @GrahamDuncanNYC: grahamduncan.blog/the-playing-fi…

Some reflections witnessing the significant drawdowns of former darlings:

1) Whatever 'edge' you had in recognizing something that others 'did not see' is transitory. It literally takes a few minutes for a view/thesis to be pitched...

...and perhaps a few days for 'fast moving' funds/analysts to validate said view and take action. Research intensive firms may take a few weeks to get up to speed, and slower moving LOs will come soon after.

Perhaps an indication here is that if the factor-focused ("we buy things for less than 10x earnings") managers start getting intrigued - whatever you thought was special is just consensus.

As an example, since I'm the only one tweeting about @MoutaiGlobal - there are baijiu distributors in China with half a dozen WeChat groups full (literally the max, which is 500) of investors with whom he's discussed baijiu on calls (think about how much GLG/Thirdbridge $$).

Perhaps expert calls used to be proprietary, and at some point table stakes, but it would appear to me that baijiu distributor experts are now the consensus for Baijiu stocks. What you hear from them is in the stock price.

This business is moatless. I'm always reminded by this scene in Shooter. And by my tagline - the line between niubi and shabi is quite thin.

2) Anchoring to a specific style. We've seen the death of many "low p/e investors" before this implosion of "growthy stocks". As I've joked in DMs with someone, perhaps the day that the guy with the handle @FCFpershare deleted Twitter is the day that 'growth' peaked.

As the original article by Graham Duncan points out, it is your job to make money, not to be smart. Anchoring to specific styles seems like a surefire path to hell - 'low p/e' or 'profitless growth = deferred gratification'. The environment is constantly changing, adapt, or die.

3) Observing paradigm shifts. "ZIRP = TINA" went away in about a few months time - the market is fast moving and there was quite a few high CPI prints before Team Transitory went away. Understanding how the economy works is crucial.

We've had a generation of analysts/PMs who've never had to look at macroeconomic conditions to suceed. How many PMs launched funds because they were good TMT analysts over the past decade? Were they good TMT analysts or were they simply lucky analysts that were dropped into TMT?

How many oil and gas analysts/PMs that would have been more macro aware are no longer in the industry because of the 2014-2018 oil downturn?

The heuristic that 'macro doesn't matter, just buy good businesses that go up to the right' was perhaps right for the ZIRP = TINA world, but sure as hell would've gotten your face ripped off T12M. What is the new heuristic? Who knows.

But knowing that you don't know is more important than thinking you know and suffering a 80% drawdown. How many go -80% and come back?

Analysts/PMs in this industry haven't gotten here by thinking they aren't smarter than average - but it seems to be a mistake to believe that you are going to be consistently smarter than average in an industry full of the smarter than average crowd.

Something something paradox of skills.

For example, investment paradigm in China has completely shifted over the past 2 years as a result of a deliberate policy move to evolve the domestic political economy. Even those who observed the intended outcome correctly were likely hurt as a result of mistakes along the way.

People who are doing this should not be buying Chinese securities. I've written quite a few thread on this subject matter in the past:

https://twitter.com/MoatlessCapital/status/1582126045243015168?s=20&t=60mOIolCrvzjDt50oi8vKw

Time will tell whether investing in China will pay off - but you don't make omelets without breaking eggs. I'm sure a British shareholder in the trusts that were broken by Teddy would feel that "America is uninvestable".

Unlearning, it would appear, is much more important than learning. /endrant