Dubroff: Author Michael Lewis is the master at spotting undervalued assets
By Henry Dubroff Friday, October 24th, 2014
Even if the moderator is not exactly hitting the mark.
Even if you already have put in a 12-hour day.
And even if there is a World Series game that beckons, it is worth it to invest 90 minutes or so listening to author Michael Lewis, perhaps the premier financial journalist of our time.
Which is why I trekked to Santa Barbara’s Grenada Theater on Oct. 21, to hear Lewis talk his way through a disjointed conversation with Sonari Glinton of NPR West.
The reason why Lewis is worth a four-block walk is that he combines a rare set of gifts — a knack for storytelling with a talent for spotting unique ways that markets misprice assets.
Whether he is writing about the suddenly increased value of left tackles in the NFL in “The Blind Side,” the use of statistics and scientific theory to win baseball games on the cheap in “Money Ball” or how a Canadian banker with the temperament of a boy scout unmasked a massive stock fraud in “Flash Boys,” Lewis has a way of spotting market breakdowns and writing about them in a lively way.
Like another of my favorite authors, historian David McCullough, his talks about writing are highly entertaining. Even better, they make you think.
Lewis, who I met and spoke with at a journalism conference in Phoenix earlier this year, is reluctant to prognosticate on markets and economic trends — to his credit, he prefers to take the flotsam and jetsam that comes through his transom and weave it into a compelling tale. “I write about the transformation of value in the world,” he said. “I look for value in places people don’t think value exists.”
But thinking about his remarks, or rather the things not said as he professed an inability to see into the future, I felt compelled to come up with my own list of mispriced assets in today’s chaotic marketplace.
In the overvalued category, my first pick would be hedge fund managers posing as activist investors. Every day we read headlines about Wall Street types writing demand letters to managers of very large companies, ordering them to break up in order to create value.
Comments this week from Daniel Loeb of Third Point and directed at Amgen management are typical. But do the hedgies actually know what they are talking about? Hedge fund manager Bill Ackman’s “exposé” of Herbalife fell extremely short, reminding me of a Lewis dictum: “People on Wall Street have a great fear of seeming to be ignorant but no fear of actually being ignorant.”
In the undervalued category, my No. 1 candidate is the American small-business owner. There aren’t that many of us — just a few million.
We are targeted by the left for not paying living wages and wooed by the right with promises of much lower taxes. But the fact is that most of us are centrists who want a fiscally responsible government, are happy to pay reasonable taxes and want the freedom to grow our businesses without a lot of interference.
We still think the big banks were the ones who tanked the economy, and we hate the fact that they’ve not been held accountable.
But those of us who’ve persevered through the recession are now ready to grow our businesses at a measured pace, which is largely why the economy is creating a few million jobs this year.
Finally, and also in the undervalued category, the presidency of Barack Obama. Tipping his hand just a little bit, Lewis said he’s spent about six months with the president and wants to spend more time with him after he leaves office.
This is a president with low ratings. The midterms are not looking good. His plans for immigration reform and a tax overhaul are on the shelf. He’s been criticized for being too soft on ISIS, Syria and Iran; too hesitant about stimulus and ineffective in managing Congress.
But the U.S. economy has grown under his watch, the stock market has soared and the nation has been on a slow-but-steady recovery for more than half a decade. One suspects that Lewis thinks the public will soften its view and that Obama will be seen over time as a transformational president.
One thing is sure. Lewis, who redefined how we think about baseball, football and Wall Street, will have a lot to say about the Obama presidency.