ModelPrice Guy – “You’re too technical for me!”

A glass of wine (OK, maybe multiple) was required to loosen the lips of a friend and a reader of this blog. “I have read your blog and it’s too technical for me.” Nothing like a bucket of water in the face to review everything we have been doing for the last few months.

Why?

She’s my perfect reader. Early sixties – do it yourself (DIY) investor and former financial industry veteran. If she doesn’t get “it” than nobody else will! So with these comments and a mild hangover I set about with new eyes not only looking critically at the blog but also reviewing my objectives for this blog in conjunction with Facebook.

Objectives of what I’m trying to do?

1. Demystify Finance. The way and what is taught in modern finance is not helping the public at large make sound financial investments. If the professionals want to use our concepts so be it.

2. Use social media platform (Facebook), so investors are helping other investors with their investments.

How are we demystifying finance?

We have developed Model Price. Simply put, model price, is our definition, of fair market value. We calculate model price everyday and display model price and its’ history on over 2000 securities in a database we created on Facebook.

Since the dawn of man, and our economic progress to date, relies heavily on trade and economic transactions. When we transact, we give value for value. We have a fair estimate of worth and we transact based on these inherent values. However, when it comes to the financial markets, particularly the equity markets, our common sense of inherent value eludes us.

So we developed a database where the public at large can see model price for Canadian and US securities. Simple. Simple line (purple dashed line) calculated on a nightly basis. This is free and available for public use.

So armed with this database, you the public, have the answer on what the company is worth? Simple. Would you pay a 25% premium for your new car? Would you over pay for lawn care? Would you not consider a purchase if something was “On Sale”? Equities go “On Sale” everyday. You liked Apple’s prospects; you could have purchased Apple at model price last December. Maybe you will again down the road, but at least you can enter a financial transaction that is priced like every other transaction in your economic world.

Use of Social Media

Social media is five years old. Even though social media is a child, its’ impact is shaking the world population and its’ institutions. Social media can also change the financial investing world as well.

This may take some time however, we see individuals helping individuals in terms of investing. We have set up a platform for this to happen on Facebook. We will provide the platform where individuals, if they so choose, can start their own advisory/blog, inside and outside the regulatory system, on an area that interests them. With over 2000 securities there is a multitude of investable strategies for individuals to follow. We are willing to help, teach, and educate all users to be better investors with more relevant financial concepts that we have developed and found.

Conclusion

So I believe through this blog, hopefully a reader can see why I was hurt by the “Your too technical” comment. There is no angle. There is enough money in social media for everybody by helping other people.

You will also see some changes in this blog – over the next few weeks. I will endeavor to rank each blog on four levels, using our four square logo. Each level will be more advanced, in terms of financial concepts (i.e., convexity), than the last. We will also create a “Getting Started” tab, with blogs that are basic to our work so new readers can start their process of learning, in a non-threatening way instead of jumping into the first blog of the site, whatever that maybe, which maybe too complex for the new reader to understand.

Many thanks to those of you for reading so far, and don’t be shy, wine or no wine, with your comments.

4 responses to “ModelPrice Guy – “You’re too technical for me!”

  1. Richard the Student April 19, 2012 at 10:38 am

    Next reply.
    Do not be hurt by your friends comments, the thing that is germaine is she is interested. She cares.
    Couple of things. When one hears a concept or an idea for the first time, one hardly gravitates to it nor understands it as well as someone who has been working with it for 10 years.
    Your M.P.G. Key Concepts are excellent for a CFA student but tough slugging for a lay person. I have seen analysts speak in terms more understandable. What is obvious to you is less so for a DIY investor. This learning is a function of time and experience.
    For example, I find convexity similar in concept to duration, something I do understand. How many people understand duration?
    Keep working at it M.P.C. It can be more simple ………. if the objective is to demystify finance for the ‘average’ investor and you achieve your objective, you will have done something remarkable.
    And what about the comment that a certain percentage of the market has to see it the way M.P.C. guy does, or at a minimum, come to the same conclusions, for the valuation needle to move?

  2. ModelPrice Guy April 19, 2012 at 2:50 pm

    Thanks for caring!

    As for the Key Concepts tab, I was thinking we had to show some intellectual heft. 99% of any financial modeling I have seen involves some sort of regression analysis. I hate any and all regression analysis! I guess what I wanted to show in the Key Concepts tab, if a person(s) was interested in exploring our work I wouldn’t waste their time with something superficial.

    The model price calculation and line have numerous variables and we are highlighting four of those variables that are unique to our calculation. Plus in future blogs we will draw on these concepts from time to time to fully explain what they mean and their impact on a company’s valuation. However, leaving all this aside model price is robust and comes from a complex theoretical construct.

    Not sure of your last question?
    “And what about the comment that a certain percentage of the market has to see it the way M.P.C. guy does, or at a minimum, come to the same conclusions, for the valuation needle to move?

    • Richard the Student April 19, 2012 at 4:43 pm

      OK I buy your ‘intellectual heft’ position, given that your target market understands regression analysis. Some CFA students don’t.
      This to me is a marketing issue. Who is your target? I read your stated objectives and they resonate with a lay investor who is not a pro. Your whole site/blog/twitter position is all marketing. Simple stuff ….. awareness and comprehension. You are doing well on awareness. The comprehension piece is a conundrum. You want simple, and while this may be simple to you, it appeals (in my view) to a sophisticated investor. The comprehension piece is not easy for a lay investor.
      Again, who is the target ….. I say if it is PM’s, analysts, people inclined toward technical analysis, sophisticated investors, investors interested in modeling ….. Then you have appealed to your target. However, if you want to reach DIY investors and demystify the “black box” guys, survey of one, you have missed the mark. These people have no time or inclination to learn this stuff.
      Back to “comprehension” If I can understand it, I can gravitate to it, if I can’t I won’t.
      Maybe you peel back the layers as a client (user) requires, so that I don’t get the Full Monty all at once. If I want more info on the process, give it to me. If I just want to check your valuations,
      easy.
      Finally, my question. ” blah blah blah …… The valuation needle to move”
      My understanding is that the market is imperfect and irrational. Thus, for a stock to move, up or down, a predominant percentage of the float has to have a view …. one way or another. Some see it as a buy, some see it as a sell. Doesn’t matter, but one of those positions has to prevail for the needle to move. How they got to that point of view doesn’t matter. It’s how they place their bets. Thus, the market participants (the float for a given stock) either have to buy in to your view or have a view coincident with your view to make the needle move. Right?
      Richard the Student.

      • ModelPrice Guy April 23, 2012 at 11:10 am

        Great Stuff!

        Thanks for the compliment on the marketing. Let’s tackle comprehension. There are two pieces I am delivering. The first is the Facebook database. This is a mechanical process that anyone can use. Hopefully the social aspect will come later.

        The second deliverable is the blog. Three comments on this:

        1. In terms of comprehension, as I said in my initial blog some people would get this “stuff “ some will not. A blog is a personal construct. By definition “I can’t be all things to all people.” This blog is a world I have created in terms of figuring out why stocks do certain things in the financial markets. I’m scanning all stocks (large cap) in all markets. In almost three months I have written 65 pieces on various companies with no extra energy on my part, believe it or not. If I tried to think about or focus group aspects of my writing, my output would be slower, and less interesting both for me and the reader I hopefully want to attract.

        2. As I have said in the “your too technical” blog, I will give a rating on each blog I do. We have devised a 4 level rating system that will rank each blog from “Easy” to “Advanced”. We will index all blogs so new or less experienced readers can read the “Easy” blog histories first, if they choose. Maybe this will help on the comprehension level. (This will be coming in a couple of weeks.)

        3. Start a blog yourself! The Facebook platform has been built, and anybody can use it. As DIY investor you can attract others who are in the same situation as yourself. This is what social media is all about. We will help in anyway possible. Individuals such as yourself can build strategies, say “Safe high yield equities for your portfolio” – a strategy of purchasing high yielding equities that have upside to model price – and be very successful not only as an investor but also as a blogger as well.

        As far as your last question. I will give you two quotes [with my edits]. Benjamin Graham, “In the short run, the market is a voting machine [popular] but in the long run it is a weighting machine” [valuation]. The second by Charlie Munger, “All intelligent investing is value investing – to acquire more than you are paying for [upside to model price]. Investing is where you find a few great companies and then sit on your ass [and wait till the market has a coincident view as your own, “to make the needle move”.]

        Happy to keep the conversation going!

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