Be Like Mike? Or Shane? Or RIck? — Looking beyond the Obvious

Here at "A Dash" we like the comparisons between analyzing sports and analyzing markets.  There is much more data in sports, and the risk/reward calculations are similar.

When it comes to the NBA, we are zeroed in on the Michael Jordan era.  To celebrate a birthday party for a famed Chicago options trader, one of our friends sent invitations to a party — dinner and Bulls tickets for a playoff game that night.  Attendance was excellent!

Can We Learn from the NBA?

Shrugging off the current Bulls record, we try to remain open to new information.  In particular, is there any relevance for investors?

Investment experts are weighing in on the Shane Battier article by Michael Lewis.  In a reprise of Moneyball, Lewis shows how Battier is more valuable than his obvious stats indicate.  Briefly put, he makes everyone on his team better — and stars on the opposing team worse.

Dr. Brett Steenbarger shows his typical excellence in drawing performance parallels.  We noted this when we reviewed his book on trader performance, suggesting then that anyone in any field could learn from the lessons.  Brett describes how traders could "be like Shane."

At another of our featured sites, Adam Warner also highlights the Lewis article.  He emphasizes the +/- aspect of the analysis, with bows to the Moneyball aspect and a humorous look to hockey.

Shane Battier is no Michael Jordan, but they share the characteristic of improving the players around them.  It would be interesting to see similar data on the Jordan era.

Investment Implications?

Our own take is implicit in the Lewis analysis. Investors should look beyond the obvious comments and stats, seeking the undervalued and poorly-measured effects.

Today's celebration of Rick Santelli's revolt is a good example of the obvious.  The story was featured in many places, but Adam Warner's piece is a good recap.  While we almost always agree with Adam, we dissent on his endorsement of the Santelli revolt.

Here is why.

Popularity is Easy on CNBC

It is easy to speak on your home field — Rick's supporters on the trading floor, for example.  The audience on CNBC shares his political bent.  So does the readership of most blogs or mainstream media articles.

Being like Rick is not being like Mike.  His popular viewpoint weakens the surrounding team, encouraging them to fight a war that has already ended.

Any of the many government programs is an easy target.  Those of us who feel secure in jobs and did not engage in reckless borrowing can criticize everyone else.  We can complain that government money is helping the foolish, the dishonest, and the deceitful.  Readers and viewers will cheer.

It does not matter.  The election is over.  Our mission has changed.  No matter what our preferences were last November, it is now a new problem.  Any government policy should be judged in two ways:

1. Is there a societal benefit?
2. What are the investment implications?

Let us be completely clear.  We are not stating what will work, although it is on our writing agenda.  We are simply arguing for keeping a clear head about the criteria.

Too many analysts are taking the role of the taxpayer as investor, asking whether the return on investment is justified.  This is silly.  None of us would hire the government to be our investment manager.

The real question is whether the entire package of government programs will address systemic problems.  As a government, we should act to assist groups for a societal purpose.

Conclusion

Instead of asking what each program does for us personally, we should ask whether the entire body of programs — Fed lending, stimulus package, mortage rate reduction, housing help, and more — can succeed in restoring a stronger economy, with normal and sensible lending.  Without such actions, our state and local governments will fail, our property tax rates will rise, our local services will decline, our investments will falter, our property values will sink, and eventually, all of our businesses will be threatened.

This question, like Shane Battier's stats, is not so obvious.  Understanding the less obvious effects may be the key to investment success in 2009.

Our current indicators are pretty bearish, reflective of the general sentiment.  Meanwhile, most pundits are confusing their political persuasion with a dispassionate analysis of policy impacts.  At "A Dash" we expect the multiple and massive government actions to be reflected–eventually– in the upcoming economic data.  The market will respond, but it may be kicking and screaming all the way.