With the first full quarter of publication of the Arete's Observations letter complete now, I have a better perspective to judge the pros and cons. In sum, I am pleased with the content but have work to do to increase the reach.
Perhaps the most important thing I have learned with Observations is that it has served as a good incremental discipline for my research. I read and dig into interesting stories all the time, but producing the newsletter has forced me to become more organized and more consistent.
I also feel like it provides a good vehicle by which to communicate my work and findings for clients and followers of Areté. It gives me a platform to sort through all of the news items and focus on those I consider most important. It also allows me to put stories into context. Finally, it allows me to provide important foundational content such that investors can manage risk on an ongoing basis rather than after the fact.
All of that said, there are also a couple of areas that I believe need improvement. One is to find the right balance between frequency and utility. When I started the letter in early May, the selloff from March was still fresh, the consequences unclear, and the interest in commentary very high. The letter was partly a response to that situation and the needs it created.
Later in the summer, sentiment had stabilized, “breaking" investment news slowed to a trickle, and interest in commentary subsided as well. I'll keep experimenting to find the best way to be responsive when necessary, but also able to dive in when investment opportunities present themselves. Indeed, this a timely consideration since I am observing an enormous array of underappreciated risks in the market right now that can create enormous opportunities later.
The other area that really needs improvement is marketing reach. When my materials get posted on various investment sites, it always attracts notable readership, but does little else. Substantial interest is not translating into commitment.
From what I can tell, this problem is endemic to the industry. It is easy for investors to get material and a lot of it can be gotten for free. When markets are rising, as they generally have been for the last eleven years, little substance, quality, reliability, access, or accountability are required.
When things turn, however, as they did in March, it raises a lot of questions and highlights a lot of risks. A quote from the latest "in gold we trust .report" captures the situation well: "A financial crisis is a great time for professional investors and a horrible time for average ones." While I do believe things are due to change, the existence of only a few fleeting moments of real investment challenges has temporarily diminished demand for professional investment advice.
In an important sense, that challenge is less onerous for Areté than it could be. The main reason is that the value proposition has always been a fairly unique one designed for a targeted audience. As a result, I do not feel compelled to do the types of things associated with appealing to a mass market such as producing large volumes of content and competing aggressively for internet search rankings. That is a different business.
Rather, I am much more interested in finding investors who are long-term oriented and who value a strategic perspective. This includes people who are more interested in being positioned properly than in desperately competing for slightly better returns each quarter. If you know anyone who might be interested, please feel free to share Arete's Observations or any other material with them and/or have them contact me at email@example.com.
As for research, I have started allocating more time to the effort lately. While I have spent most of my time on higher level, macro issues through the summer, I plan on increasing the proportion of industry and company-specific research over the next several months. My sense is that the market is getting close to a tipping point that could produce enormous opportunities. That being the case, I like to put in the work up front to prepare.
Finally, while I have been frustrated that the financial crisis in 2008 did not serve as an impetus for meaningful change, that just means the change is even closer today. It's been a long time coming. When it does, I think Areté's mission of helping investors to get the most out of their investing activities will resonate deeply.
Thanks for your support!
David Robertson, CFA
CEO, Portfolio Manager