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Fall of Montgomery Ward


oddballstocks
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Found this short piece interesting.  The comments are especially fascinating:

 

http://krugman.blogs.nytimes.com/2014/12/27/the-fall-of-montgomery-ward/?smid=tw-NytimesKrugman&seid=auto&_r=0

 

Such as this one

 

"Peter Boswell -

There are some great pictures of Sewell Avery, my favorite shows him standing next to a huge chart of stock prices over time that showed every war from the Civil War onward was followed by a crash. He hoarded a billion dollars, letting the stores rot in need of repair, while waiting for the crash that was sure to follow WWII as Sears borrowed heavily at 2% and took over the department store market. By the way, surviving a year working for Sewell Avery and then being fired was considered a plus on any resume."

 

"Professor Leo Loll, at the University of Alaska, from New York University, (wrote the first SEC broker test or something if I recall correctly) used to preach about that in our classes back in 1962.

 

Part I liked best was that all the vultures soon learned of his stockpile and attempted to take control of the company in order to distribute a fat stock dividend."

 

And a related article (which is excellent) with a picture of Avery being carried away by the Army in his desk chair: http://www.bloombergview.com/articles/2012-12-07/when-the-army-invaded-montgomery-ward

 

In Security Analysis Graham discuses companies with giant cash hoards and government regulations prohibiting those hoards.  How times have changed.  Also interesting that Buffett's uncle (? I believe) held similar views to Avery.

 

This is a cautionary tale to not let macro-economic predictions or political views taint your investing.  There are markets all the world over in all political systems, and investors who are flexible and savvy are able to make money regardless of the environment.  Those who tie themselves to a specific political ideology and let that drive their investment decisions usually don't end up with the same returns. 

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Very fun to read.

 

I think there is an underlying fault to just blindly ignoring the macro.  You end up focusing on the relative (buying the cheapest against other options, aka the market) and you always assume the position of managing risk.  I think there are times to get out of managing risk and simply sit on your hands.

 

I look at it like being a value investor in Greece pre-2010.  It didn't really matter what you invested in, you got freaking killed in every asset class.  On a relative basis you might have the best performance or more wealth in comparison to other Greeks, but does that really matter at the end of the day? 

 

In my view we are all investing in assets or our businesses/lives at different points in massive economic swings.  In one universe Mr. Avery looks like a fool and in the other a genius.  Which is why having a process that works versus single defining events is what separates a Warren Buffett versus someone like John Paulson. 

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