why the name, SouthSeaSports.com?

ever hear of sir isaac newton?  warren buffett?  benjamin graham?  i assume you know 2 of those names, but benjamin graham is probably not a name you’re familiar with.  graham is a name that anyone on wall street must know and a name that all fantasy owners should get to know.  warren buffett considers him the second greatest influence on his life, second only to his father.  the reason?  value investing.  graham was a professor at columbia business school when buffett was attending there.  graham’s book, the intelligent investor, is buffett’s bible.  in the book, graham writes about the “margin of safety”, and it’s role in successful investing.  in fantasy terms, the intrinsic value of a player is more important than the market value, when deciding on a player’s true value.  for instance, when carson palmer was on the bench his entire rookie season, his value in the marketplace fell, yet his true value was increasing as he learned his craft.  when he became the starter, his true value didn’t change, his value in the marketplace changed.  if you had purchased palmer based on his intrinsic (true) value when his value (price) was down in the market, you’d have made a nice profit once the market corrected. the difference between what you paid for palmer and his intrinsic value is the “margin of safety”. this is what’s known as value investing.

ok, but what about sir isaac newton?  he was a genius, what’s he have to do with investing?  on page 13 (in the commentary on the introduction section, the zweig version) in my copy of the intelligent investor, there is a little story about sir isaac newton.  the point of the story is good news for you, assuming you’re not a genius.  according to graham, what is essential for being a successful investor has nothing to do with genius.  being a genius and being a good investor are two different things and one does not necessarily make you the other.  the story (quoted from the book) goes like this…

and back in the spring of 1720, sir isaac newton owned shares in the south sea company, the hottest stock in england.  sensing that the market was getting out of hand, the great physicist muttered the he “could calculate the motions of the heavenly bodies, but not the madness of the people.”  newton dumped his south sea shares, pocketing a 100% profit totaling 7000 (pounds).  but just months later, swept up in the wild enthusiasm of the market, newton jumped back in at a much higher price and lost 20,000(pounds).  …for the rest of his life, he forbade anyone to speak the words “south sea” in his presence.

that is the story as i first read it.  newton, though a genius, was no match for the south sea company or the fluctuations in the market.  newton got caught up in the frenzy, along with the investing public and lost.  the south sea stock then, was no different than the hottest fantasy player today.  when the masses want a player, sell.  when the masses don’t want a player, buy.  it’s that simple.  of course, buying the right players is the trick.  you have to buy the players that have an intrinsic value that exceeds the current market price.  if you can do that, you can make millions.  SouthSeaSports.com is here to help.