Forum Archive Index - October 2003

["Allan Potts" <ajp7079@excite.com>]

Good post Winner69.

Snoopy.  We have it on good authority -- "A prophet is never recognized in his 
own country".

To all sharechatters:  The debate between F/A and T/A and exchange of 
ideas/systems/outlooks/thoughts and analysis, is quite a good learning 
opportunity and helpful forum for me.  It is my CNBC of New Zealand and 
Australian financial information.

To ALL, yes ALL posters, with a special fondness for Phaedrus and Snoopy, a 
great big THANK YOU.  Next time in New Zealand it would be my privilege to meet 
as many of you as possible.

Allan

PS  Leaving for New York for a week then out to sea again.  If you don't hear 
from me for awhile, it's not because I'm not interested.

Allan  



 --- On Sat 10/11, winner69 . < wwinner69@hotmail.com > wrote:
From: winner69 . [mailto: wwinner69@hotmail.com]
To: sharechat@sharechat.co.nz
Date: Sat, 11 Oct 2003 04:07:26 +0000
Subject: [sharechat] Snoopy - the Billy Beane of the NZ investing scheme

That incredulous tirade from Morgy about Snoopy is reflected in this piece 
<br>from the dailyreckoning.com I came across.<br><br>Something that site 
doesn't normal have but well worth a read.<br><br>Maybe Snoopy 'the hobby 
investor with linited skills' (quote Morgy) is the <br>Billy Beane equivalent 
of the NZ investing scheme while Morgy is alike the <br>also rans 
.............<br><br>----------------------------------------------------------------------------------------------------------------------------------------------<br>How
 Baseball Games Are Won... And Fortunes Made Investing<br>Porter 
Stansberry<br><br>It was an investment parable, in the form of a baseball 
game...I speak of <br>the Oakland A's game five loss to the Boston Red Sox in 
the recent American <br>League playoffs. To most viewers the game ended when 
A's outfielder Terrence <br>Long struck out looking, in the bottom of the 
ninth, with two outs.<br><br>But the game was lost long before 
that...<br><br>As you'll see, the contest was actually decided when A's 
catcher, Ramon <br>Hernandez, got to first base earlier in the last 
inning.<br><br>Not one in a thousand baseball fans know why Hernandez reaching 
first base <br>was the poisoned dagger. But the Oakland A's General Manager, 
Billy Beane, <br>certainly does. And that's why the Oakland A's team manager, 
Ken Macha, will <br>soon be fired...<br><br>I can explain this riddle. And when 
I do, you'll see how this relates <br>directly to investing.<br><br>First, if 
you haven't read Michael Lewis' fantastic book "Moneyball," you're <br>missing 
out on a true intellectual classic. The book is a stunning account <br>-- and 
an explanation -- of Billy Beane's baseball dominance. For those of <br>you who 
don't follow baseball, the Beane-led Oakland A's have won more <br>regular 
season baseball games in the last five years than any other baseball <br>team 
ever before. But, even more impressively, they did this with only the <br>12th 
largest payroll -- one of the poorest teams in the game.<br><br>Beane's 
accomplishment is similar to the track records of great value <br>investors. He 
gets big results (profits), with few costs (volatility). <br>Interestingly too, 
value investors and Beane derive their edge with smart, <br>contrarian 
thinking.<br><br>Value investors ignore market sentiment and what's popular. 
They buy only <br>what's safe and cheap, no matter how ugly it might be. Beane 
literally does <br>the same thing. He eschews good-looking, high priced players 
with headline <br>grabbing batting averages. Instead he buys rejects for 
pennies on the <br>dollar, like the A's set-up man, Chad 
Bradford.<br><br>Bradford is a pitching freak. He throws the ball underhanded. 
With only an <br>84-mile-an-hour fastball and perhaps the ugliest release in 
the history of <br>the game, Bradford was on his way out of the majors when, 
out of nowhere, <br>Beane picked him up and made him one of the A's most 
important players. <br>Beane didn't look at Bradford's motion -- he looked at 
his results. <br>Bradford's stats showed he got hitters out more often than 
just about anyone <br>else in the game. How? He releases the ball lower than 
anyone else. <br>Sometimes, in fact, his knuckles literally scrap the ground. 
Therefore <br>Bradford's pitches travel a significantly shorter distance to the 
plate. <br>Thus, to hitters, who are used to seeing the longer traveling ball, 
<br>Bradford's pitches seem to be going much faster than they really are; 
<br>hitters say Bradford's fastball appears to be going near 100 
mph.<br><br>Another example: Beane took an injured catcher (Hatteberg) whose 
career was <br>over and turned him into a starting first baseman.<br><br>And, 
perhaps the most unusual thing about Beane is what he won't do. Unlike 
<br>every other general manager in the majors, Beane won't draft high school 
<br>players, no matter how talented. Instead he mostly buys experienced players 
<br>who are ignored or under appreciated because they're fat, or slow, or look 
<br>awkward when they're playing.<br><br>Beane's strategy is based on knowledge 
oth
 er General Managers either don't <br>have or refuse to acknowledge. And it's 
simply this: outs are the most <br>important statistic in baseball. Hitters who 
don't get out (who have a high <br>on-base percentage) are the most important 
ones to own -- no matter if <br>they're short or fat or broken in some way. 
Likewise, pitchers who can get <br>outs are the best; no matter how fast or how 
slow they sling the meatball. <br>Amazingly, even die-hard baseball fans 
typically have no idea what player <br>statistic (on-base percentage) is most 
highly correlated with winning <br>baseball teams.<br><br>Again, this is a lot 
like smart value investors who know the only statistic <br>that really matters 
in investing is price-to-book. Value investors don't buy <br>promising early 
stage growth companies (high school prospects). They don't <br>buy expensive 
blue chips (all stars). They don't pay attention to glorified <br>stats that 
have no statistical relevance to long-term results (batting <br>average, stolen 
bases). Meanwhile, like baseball fans, enthusiastic <br>investors typically 
have no idea which investment metrics are correlated <br>with high future 
returns.<br><br>What I like so much about Beane and the world's top value 
investors is that <br>they don't care -- at all -- what anyone else is doing. 
They know how "the <br>world works" and they can prove it, logically and 
empirically. Bud Selig <br>called the A's success an "aberration." That's the 
highest praise I've seen <br>Beane garner yet: when morons castigate your 
success, there's no more sure <br>sign that you're right on 
target.<br><br>So...what does all this have to do with the last A's vs. Red Sox 
game...?<br><br>Let me walk you through the bottom of the ninth inning and I'll 
show you.<br><br>The first batter up for the A's was Scott Hatteberg. This was 
<br>fortuitous...because while Hatteberg's batting average is only .253 his 
<br>on-base percentage is much higher, .342. The difference is, of course, 
<br>walks. According to Billy Beane, earning a walk to first base is the most 
<br>valuable offensive play in all of baseball. It cannot lead to an 
out.<br><br>If you're Scott Hatteberg and you know that by not swinging you 
have a much <br>better percentage chance of getting on base, what would you do? 
Right...you <br>wouldn't swing. Nevertheless, most major league glory-hounds 
(especially <br>blue-chip players) dream of hitting the tying homerun. They 
swing away <br>regardless and end up losing a lot of games. Fortunately for the 
Oakland <br>A's, Scott is a seasoned pro, and he earned a walk.<br><br>Thus, 
the winning run came to the plate with no outs. The A's were now in a 
<br>really good position.<br><br>Jose Guillen, another well-coached player came 
up to the plate.<br><br>Guillen bats .311 -- an impressive figure. But again, 
rather than swinging, <br>he too earned a walk, the safe play. The A's were now 
in a great better <br>position. NO OUTS. Two runners on -- one in scoring 
position. All they <br>needed to win was a single. Or two more 
walks.<br><br>But...instead of making the smart play as they'd done all night 
(and all <br>season)...the A's team manager decided he had to "manufacturer" a 
run. He <br>instructed the next hitter, Ramon Hernandez, to hit a sacrifice 
bunt towards <br>third. It's totally contrary to "value" baseball to 
intentionally earn an <br>out. But that's exactly what Macha 
did.<br><br>Imagine if Warren Buffett suddenly decided to start buying shares 
of <br>Microsoft...<br><br>Hernandez, whose on-base percentage is an excellent 
.322 should have done <br>his best to earn a walk, and, if he got the right 
pitch, he should have <br>swung away. Almost any hit would have scored the 
tying run. Plus, even if <br>the worst thing happened (a double play ball), the 
team would still have a <br>runner on base and the game wouldn't be over yet. 
With only three outs left <br>in the entire season, spending an out 
intentionally to advance a runner <br>already in scoring position was 
incredibly stupid.<br><br>And what happens next proved it...<br><br>Adam 
Melhuse, 
 a rookie, made a rookie mistake. He struck out looking with <br>runners at 
second and third base. And then Chris Singleton -- a savvy pro -- <br>came to 
the plate. Not surprisingly, he got on base -- earning a walk and <br>loading 
the bases. This walk would have scored the tying run, if, instead of 
<br>sacrificing, Hernandez had gotten on base with a walk or a 
hit.<br><br>Singleton should have been a hero. Macha could have been the 
winning coach. <br>And the A's could have played the Yankees and maybe gotten 
to the World <br>Series.<br><br>But that's not what happened...<br><br>With the 
bases loaded, the next batter, Terrence Long, unexplainably struck <br>out 
looking. Long will be remembered as the guy who cost the A's the game. <br>But 
that burden really belongs to Macha: the tying run should have already 
<br>scored.<br><br>Regards,<br><br>Porter Stansberry<br><br>P.S. The "Billy 
Beane" of investing works for me. His name is Dan Ferris. He <br>buys only what 
he can prove matters to investors: safe and cheap picks. In <br>his first year 
at the helm of Extreme Value, he racked up better than 33% <br>average gains -- 
without a single strike out (loss). If you haven't read his <br>newsletter yet, 
you're missing the very best way I know to actually make <br>money in stocks. 
Click below to read 
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