Editor’s note: This article was first published in July 2014, days after Gotham City Research published its report on Gowex and trading in the shares was suspended; the events described were current then. In July 2014 Gowex’s chairman, Jenaro García, admitted that the company’s accounts had been falsified for years, and the company went into insolvency. The views on other stocks below are the author’s July 2014 opinion and are not investment advice.
A lot of people are going to lose money with Gowex, and when people lose money they tend to look for someone to blame, in a way making the mistake of not blaming themselves for a voluntary decision to buy, one nobody forced on them at gunpoint.
The top-tier financial media have stayed neutral, playing their role as journalists, which requires neutrality in what they publish (apart from a few others who are already playing the “I knew it, but I didn’t say” game). At the other end are the blogs, which, for better or worse, not only publish the relevant information but also allow ourselves the luxury of giving our personal opinion. Perhaps that is what sets bloggers apart from the financial press.
In that context, when the recommendations we make pay off, readers come to treat us as “gurus” and geniuses, but we are always on that fine line where, if an investment does not turn out as we expected and readers have bought because of our recommendation, we can quickly go from geniuses to jerks.
That is exactly where GurusBlog finds itself right now: a site whose articles I consider professional, and which has had no luck with its investment portfolio. But its portfolio was designed to deliver big returns, and so we take it for granted that it was taking on more risk.
Now I see readers riddling them with criticism for their repeated recommendations of, and praise for, Gowex, which, after what has happened these past few days, adds to their earlier blunder with Pescanova and a few others. But the truth is, as we have said in previous articles, you can analyse a company’s accounts to see whether it is a good buying opportunity, but if the accounts are manipulated, all our fundamental or technical analysis goes down the drain.
The only mistake I saw at GurusBlog was the article that mentioned Gotham (the firm that has brought all the dirt to light) and took it for granted that it was a dirty attack, because, as one reader replied, “the dirty attack was the only clean thing about Gowex”.
And I think that mistake comes from patriotic bias, a bias that in my particular case is cancelled out by the disgust that “Marca España” (the Brand Spain campaign) usually gives me. If an outsider goes after a Spaniard’s management, I would rarely put my hand in the fire for the Spaniard, because the chances of getting burned are pretty high.
Some other blogs, which we will not name so as not to rub salt in the wound, even wrote that it was a good idea to take advantage of these days’ falls to buy Gowex shares. And that really is somewhat irresponsible. When a report like this appears, you should always start from the assumption that it may be true or false; but in the case of a Spanish company, it most likely has some truth in it, and in the case of a research firm, you should always understand that a successful short attack consists of attacking a company with an existing weakness, and that while not everything may be true, there are almost always more truths than falsehoods.
But the person I really feel sorry for is Juan Sainz, of JuanST.com, because he has been a direct victim, having had personal contact with Jenaro García, a director of Gowex. Juan published a reassuring message about Gowex’s situation, but it is hard not to send a reassuring message when the company’s own manager is convincing you, with all his nerve, that it is all made up by an unknown firm that wants to make money from a short attack. And those words led Juan to say: “I’m very calm, I think everything will soon return to normal”.
Can Juan be blamed for that? Honestly, I don’t think it would be fair. On the other hand, these media and bloggers are being brave in facing up to it and admitting the mistake, a mistake that can only happen to someone who sticks their neck out by making recommendations and writing an opinion about a company. Today it is them, but tomorrow it will be others. And what if one day it is me?
I have thought about it more than once. My biggest holding today is in Ezentis, and I know that many of our readers have followed me into this purchase. If Ezentis takes off as I expect, I will be a genius, but if tomorrow it springs an accounting surprise (and no investor can completely rule that out in a small company), I suppose I would become the biggest idiot on the web.
So we should neither worship anyone too much nor demonise or attack a mistake, because I can imagine how badly some of them must be feeling, having also been victims of the investment. That is my opinion.
But let this be a lesson for everyone (bloggers, investors, readers…): when an attack happens, you have to get out, because if it is false, the market will make it temporarily true, and if it is true… you end up like Gowex.
See also: 19 investing secrets everyone should know before they invest
Featured image: jose a. del moral, CC BY 2.0, via Flickr.
