The First Rule of Gnostic Capital…

For much of August and September, I typically hand scythe nitrogen/carbon on an organic property in the middle of nowhere.

On a farm purchase, I discovered an Austrian grass scythe a while back. It is durable and has no moving parts as the human user represents the fulcrum. There are no right-to-repair issues that go along with mechanical equipment that plague those in the midst of harvest. But, there is a learning curve to the motion and this bores those seeking the next “life-hack”. It also doesn’t scale beyond a certain acreage so most have moved onto mechanically powered solutions.

Modern scythes feature an aluminum snath and assembly is required. In the case of my scythe, the former owner, a Paraguayan farmer, had assembled it incorrectly. The grips were screwed in backwards with the effect that the blade swept towards the user, instead of away. I imagine that the result was a one-time use of the implement, incredible discomfort and potential risk of a severed artery, followed by a “this is not for me” realization, with the tool subsequently placed in a shed, forgotten. Yet, watch any YouTube video of several users methodically scything a field and you will be impressed. Despite hundreds of years of agricultural innovation, the scythe remains an essential, almost perfect, tool. I disassembled the snath, reassembled it correctly, peened and oiled the blade and now it works specifically as intended, as designed, an elegant solution.

The solitude and physical work affords me an opportunity to ponder many matters, both investment and non-investment related. Scything represents the agricultural equivalent of Tai Chi; a mind-body repetition of sweeping, choreographed and synchronized movements that take place in my alfalfa fields.

In the middle of my mantra, in late August, my inbox blew up.

Slightly flummoxed, not knowing the reason for such a bombardment of incoming emails, I did what I could to reply promptly, as remains my commitment. My hands were calloused; with autocorrect trying to convert investment phraseology to standard syntax, squinting into the sun, occasionally I was less than satisfied with the structure of certain replies.

Eventually, it became clear that somebody(ies) broke cover. Clients do not break cover; they understand that the broadcasting of a quiet thing increases execution risk. It was, therefore, likely a result of a newish reader seeking to promote a business update for their own potential short term trade. Possibly it was to defend a thesis on a specific equity to others. Maybe a reader wants to get the word out on “anti-transaction” investing.

Several contacts were extremely interesting. Threads developed with some that, hopefully, might progress into physical handshakes down the road.

Sadly, too many represented a repeat of negative interactions that occurred every prior time I poked my head above water. Exposure invariably brings out the carpetbaggers.

“Can I get a job with you?”

Would you invest in my business“?

“Will you loan/give me money“?

“Here’s a proposal, capitalize my hedge fund, we will trade around your fundamental portfolio and will arrange for a fractional profit split. In return, you grant us total live access to your account, a waiver on your IP so that we can do whatever we choose with this data, including the right to sell it elsewhere as we see fit, potentially even to competitors. You cede complete control. Oh, and also the initial $100+ million to seed the account. Doesn’t that sound good to you?”.

“Can I offer you MY unsolicited investment advice?

“Might we cut a side deal?”

“Will you promote my stock?”

Intrusive, invasive, self-dealing, is not why this open blog exists.

I am not an idiot CEO of a weight loss drug company, prepared to permanently throw away a tactical and competitive advantage for a temporary buck from the Chinese government. I do not choose to be an influencer, nor will I engage with those who attempt to influence. These articles represent my population of thoughts. Some posts ARE tactical, some represent business updates on equities, some are economic, a few are geo-political.

Articles have but one purpose, to maintain signage for the road less travelled, a guide as to what is possible. Posts sequence, in broad strokes, a sensible, pragmatic map as to how to navigate a journey with maximum fuel efficiency, to organize the routing so as to minimize tolls and to point out potholes and roadwork delays. It is not a forum for debate, not an opportunity for a redirect, not a venue for fast stock promotion.

To restate what has been stated, many times over many, many years; this isn’t a stock picking blog.

If you have arrived here via a third-party misunderstanding of that intent, should you have been directed by others to this site with hopes of finding a pick of the week, a pump or tout, then stop reading. It is that simple. There is an entire world of investment possibilities, systems being marketed, stocks being promoted, by almost everyone. No one should invest in a single equity, ever, as a result of a blog posting.

Next, for those newly landing on this blog, don’t bombard me with YOUR advice.

You are here because your returns are not my returns, no other reason. My policy is to follow wealthier investors with better performance, not those with inferior results. This is the pecking order of things, investment information flows downhill. Therefore, don’t attempt to get in my head, it is an unproductive use of your time and you may find the outcome to be unsatisfactory.

Many assume, despite my view that direct discussion with CEOs is an unwelcome distraction, that my adherence to such a practice places me at an information disadvantage.

On the contrary.

“I had some help. It ain’t like I can make this kinda mess all by myself.” (Post Malone)

I maintain and build out a network of “rocket scientists” in all areas I require. Scientists, medical researchers, AI specialists, excellence in all manner of disciplines, they are all a speed dial away based upon an awareness of time zones. My willingness to pick up a phone and engage with almost any authority in a field of interest, at any time, is goal driven, not frivolous. My cognoscente are vetted, are global and are, in many cases, on retainer. When I need a new expert in an emerging field , I vet them myself, not just for knowledge, but also for bias. Finally, they are screened to ensure that they are not a self-serving idiot. There are many credentialed professionals in any field; when one screens out the idiots, the field narrows markedly.

My experts are, to a person, extraordinary. Some work with me, and I work for some of them. So, what your friend, your co-worker, your former driving instructor, thinks, that is of no interest to my business. This is a meritocracy, not a “medianocracy”, not an “indexocracy”, not an “averageocracy”. My experts are better than your experts. What my specialists obtain from me is a genuine interest in their subject field, as I bone up beforehand, not being an idiot and all that, oh, and they get money. What I get from them, in exchange, is razor sharp insight, world class posits. I win, they win, such is reciprocity. .

The clients of Gnostic Capital understand, fully, what this process entails, what is at stake.

A number of persons have, over decades, evolved into apex predators insofar as portfolios are concerned. Their thinking, I believe, has been reinforced by rigorous discipline. Some liken them to investment snipers in a capital war, sitting quietly and patiently, not breaking cover, watching entire columns of ordinary investments march by. Occasionally they pick off a decorated officer in the column with a single shot. Aim small, miss small. So long as cover is not broken, high value targets can, almost indefinitely, be acquired without having to move position. Snipers require spotters. My job, for clients, is to be that spotter; to read the wind, evaluate targets and above all, maintain cover.

To have others promote individual stocks, in other forums, that I have remarked on, represents extremely bad policy.

I have, for decades, reported dutifully that my work represents portfolio work, to be viewed in aggregate. No individual equity stands above others within a portfolio as it represents one part in a moving machine. Therefore, don’t cherry pick any single idea mentioned, regardless of how much you personally like it, and then push it out to an untrained public with the intent of it going on a run for your personal benefit. Don’t talk up returns earned in the past with the goal of creating a “cult of personality”. Not a single stock has ever gone up and held those gains for the long term due to a stock promotion. No, they go up, over the long term, because superior businesses capture above normal revenue and profit growth from their business activities. That is it, there is nothing else.

This guidepost, this archaic, handwritten, map for the road less travelled, remains useful to me, personally.

I will never convert a trader to a long term investor and do not seek to try. In turn, do not seek to convert me into a trader. Writing solidifies my thinking on any subject, and I am constantly probing my own thesis even as I write, to ensure the path remains clear. As a result, I have yet to wreck my undercarriage by driving into a sinkhole.

The road less traveled is largely free of traffic for key reasons.

It is highly efficient to travel from one destination to another, point to point, on a one way road. As with actual travel, capital journeys are similar. Most of the super-wealthy use this routing to reach their destination. It IS a movement, standard practice, has been for generations, but remains a movement populated by very rich persons. They don’t want you cluttering up their road.

Should you be fortunate enough to stumble onto this path, as did I, you will quickly ascertain that there is no oncoming traffic to blind your view with ultrabright high beam lights at night, no risk of a drunk driver falling asleep at the wheel, or a senior suffering a stroke on the opposite road, then crossing the median and crashing into your vehicle head on. There are few, if any, distractions, and you can use cruise control most of the way. This highway, relative to other routes, is well maintained. That is the plus.

To choose to get on a one way street is a decision that requires one to be certain it is the route they are willing to take, until the destination is reached.

On a one way street, you cannot easily drive, in reverse, back to the on ramp, should you change your mind half-way. Vehicles in your rear will pile into you and destroy your conveyance. Nor can you just turn around and head in the opposite direction because there is no median to cross to another lane, no shoulder; the road truly goes in just one direction. Taking the most efficient routing requires you to be really, really, sure that you intend to get to the end of that road, not just 1/4, 1/3 or 1/2 of the way.

Your vehicle, your present portfolio, may prove unsuitable for a journey on that one way street.

One doesn’t bring a knife to a gun-fight and one doesn’t drive a Jeep Liberty in the Daytona 500. Likewise, one doesn’t bring an ordinary collection of equities on an anti-transaction journey. You might consider your equities to be excellent and durable, but are they really just shiny and unsubstantial? How will you handle breakdowns?

I invest for the climate and report on the weather.

Many blog articles identify current issues with long held equities in the portfolio. Some misunderstand why this takes place.

When driving one vehicle throughout the entire year, on a one-way route, a decline in temperature leads to a temporary decrease in tire pressure. Fuel economy decreases. A percentage of drivers will assume a tire pressure decline is due to a leak, that a tire needs to be changed, that they should pull over to the side of the road and call AAA. I work through my thinking as to whether or not a reduction in fuel economy is meaningful, or is it just seasonal, based upon the weather. An understanding of business momentum or a change in friction is always prudent. Periods of rain and snow, high winds, they all impact traction. A change in weather is, invariably, temporary.

Anti-trade investing is certainly the road less traveled by individual investors, and it is a one way road.

For my purpose, and for that of an exceedingly small minority, it is the right road to choose. That said, most investors lack the conviction and the portfolio to embark on such a journey. They prefer the comfort of an off-ramp, a median to cross and to head home if they change their mind, an out. There is no out with anti-transaction portfolios; all the risk is completely front ended in the equity selection process. You may not know, for some years, if your choice was optimal. People are highly impatient, even when they assert themselves to be long term. Invariably, we are all long-term investors, until an equity stops going up for a time.

It would prove to be a shame, for me, to discontinue this open blog.

Nevertheless, one thing that I absolutely insist on, of readers, is that you neither actively promote me, nor my writings. From a tactical perspective, enormous sums are annually expended by the investment industry to push individuals, no matter how much wealth that they have accumulated, towards a revenue model that produces a highly reliable income stream for the industry.

My model represents the opposite approach, an antithesis, practically a rebuke, of an entire multi-trillion dollar investment industry. I organically grow out that model via compounding, not through acquisition of new clients. So, I am tolerated as an irritant, a bug. But, should many more investors migrate to a low-turn model, even if it is the right thing, the just thing, then this runs the risk of transforming into a mass market movement, “anti-transaction” populism. That cannot occur because it is already the operating model for the ultrawealthy and they won’t permit it to go down market.

This site is as thematic as it is investigative, illuminating the potential of the anti-transaction.

Taking a quiet thing and creating a mass market movement could divert hundreds of billions in assets away from transaction based systems, rather than billions; that becomes a revenue problem for the industry. John Bogle, of Vanguard, created the index fund and started a movement. The investment industry is now steadily destroying it from within, by making passive products active and developing ETFs to promote trades.

Ironically, the industry always tells you the truth with nomenclature, and then diverts you with fancy marketing. Case in point is the name Exchange Traded Fund, or ETF. Quite obviously, the concept is tied, completely, to trading; the disclosure remains front and center in second word of the name (TRADED). Were an ETF designed to be an actual long term investment product without trading, would it not be more accurately named an Exchange INVESTMENT Fund, or EIF?

Any explosion of anti-transaction accounts, resultant from populism, will hasten an industry decision to quash momentum through the levying of high maintenance fees for inactivity, all the while offering a fee waiver to persuade anti-traders to hold proprietary products. So, don’t force their hand, there is no upside in breaking cover.

…”You do not talk about Gnostic Capital“.

Those of you who have stumbled upon this blog, this investment version of an Austrian haying scythe, well and good. Learn how to apply what is written to your advantage, but it isn’t an “investment hack”, there is a learning curve. Correct assembly is required.

Do not popularize an implement that you, yourself, have yet to master.

Do not expose the tactical advantage of anti-trading through self-interest stock promotion, even if you have the best of intentions.

When you choose to be a sniper, never break cover. A rifleman jumping up and down, waving their arms in the air and shouting “look at me, look at what I’m shooting at!”, is worse than a fool, they are a danger to themselves and others. The only achievement from exposure is an increase in the long term cost of doing business, for yourself and for others, due to a misplaced goal of earning a temporary, fast, buck.

Thank you.