What is Abnormal Returns?


The past couple of months have seen little original posting on our part.  So we were gratified when a month old blog post of ours gets an interesting discussion going.  Interesting, in large part, because it is about this very blog.

(We apologize in advance for the intense navel-gazing this post represents.  Readers not particularly interested in the nuts and bolts of this blog should avert their eyes.)

Jeff Miller at A Dash of Insight got us thinking with his post on when and why the blogosphere can work.  While the blogosphere is a vastly entertaining (and informative) place there exists a constant need for fact-checking.  Jeff believes that errors by some bloggers pass unchecked often enough that we should be concerned.  In short,

For the moment, the blogosphere does not have the self-correcting mechanisms that are needed.

Why don’t we actively work that angle?  The easy answer is time.  There is barely enough time to do a daily linkfest, let alone investigate the contents of each and every post.  Adam Warner at the Daily Options Report weighs in on the self-correction debate and on the challenges of doing a linkfest,

Doing that is WAY tougher and more time consuming than it looks. Trust me, I have done it.

In fact, investment blogging in general is more difficult than it would appear. We have seen any number of blogs come onto the scene with a big splash, but soon fade thereafter.  When we first started this blog we intended to write way more about the investment issues of the day.  However, time and the fact that other people said what we wanted to say before us led us to focus on the linkfest.

Another distinction worth making is between the positive and normative blogospheres.  We must be careful distinguishing between fact and opinion.  There is plenty of room for both, especially fact, in the blogosphere, but but both can be useful.  Indeed, investors should actively seek out opinions that are decidedly opposed to their own.  That is in part, what our daily linkfests try to accomplish.

The nature of this linkfest is fodder for an (overly) complimentary post by Zero Beta.  In examining the nature of the the question arises is to what degree does the blogosphere need a “gatekeeper.”  We certainly don’t claim that mantle, but there is an ongoing need to sort through the threads that weave themselves through the markets each day.

A quandary arises.  If we prize independence from those self-selected gatekeepers, how can they make it worth their while?  While we enjoy (and appreciate) the many accolades we have received, they are to-date non-pecuniary.  In short,

You always learn less from those who are seeking to maximize profits, power, or fame than those who seek to grasp and share truth.

To date, Abnormal Returns has little more than the writings of an individual with a keen interest in the markets.  The linkfest is a compilation of items we find interesting and/or informative.  (Many of the new blogs we cite come to our attention via a quick note.)  By definition we cannot agree with all of the things we link to, but at least we can say they are worth a further look.

The paradox that rises between “purity” and “profit” leads to interesting questions about the future of this blog.  This blog has been to-date largely a labor of love with little tangible reward.  So the question for a future post is:  What is (or should be) the future of Abnormal Returns?

P.S.  Comments are open.


6 Responses to “What is Abnormal Returns?”

  1. 1 BP

    What is Abnormal Returns?

    Quick and easy. Thank you.

  2. I love the ‘…returns’! Keep it going!! Here is a suggestion. Since you have already gone through each article why not actually clip the most important/interesting part from the article and put it on the post. So instead of a one line description with a link, it would be a “summary” view with each link. This I believe would be extremely beneficial to people like me who sometimes don’t want to click on every single link opening in new tabs/windows and the convenience of “summary” view far outweighing the cons it may come with. Either way, I love your labor of love..keep it going, my friend

    take care

  3. 3 hamad

    Krish has a point there. It would be sometimes nice to avoid clicking on a link but I do also admit that there is more than just a link since you add one sentence of commentary.

    I do also add that the linkfest is surprisingly relevant when compared to many other such attempts by many other blogs across the board. keep it up.

    maybe a summary and an extended version based on user request would be useful?

  4. 4 trich

    I don’t know what its future should be, I know I already find it of great value. Thank you for all the good work you’ve done!


  5. From Zero Beta reprinted for your comment thread:

    Abnormal Returns asked this week what to do with the and role as gatekeeper. While I know based on a prior discussion that Abnormal Returns is uncomfortable about going this route, I think at this point, Abormal Returns has more than enough respect and very limited options, making this what I believe to be the best and most exciting way to monetize.

    The idea is to charge a flat membership fee to be part of the Abnormal Returns “Universe”. Any blog could sign up, and the membership would include this:

    1) A guarantee that your blog will be considered for daily linkfest. No guarentee, however, that your blog will be ever included, perhaps even a warning that it probably will not. Abnormal Returns would also be free to link to whoever he wanted outside the universe, but most everyone who is link-worthy outside the universe would find more value to be inside anyways.

    2) Inclusion in an annual (or perhaps even quarterly) membership review, where Abnormal Returns will publish a profile, review of every blog in the universe, best post of the period for each blog, and its advice on how each blog could better serve the blogging community (perhaps a painfully honest review for those who are not helping the community)

    3) On top of that Abnormal Returns could design and publish a montnly or quarterly transparent rating system, measuring and ranking each blog based on their “Returns Score”. This would be some measure of a blog’s positive contribution to the blogosphere. Basically, what makes Abnormal Returns more likely to link to someone – perhaps valuing the added value of each post. It could be a very honest and critical evaluation and a blogs score could be a mandatory widget or button that gets posted on each member’s blog. This would constantly remind their readers of the value (or lack of value) they are getting – thus giving them the incentive to create more. The Abnormal Returns Blog of the Year could be the equivalent to the pulitzer for financial media.

    The system would work for a few reasons:

    1. Abnormal Returns already has tremendous respect throughout the blogosphere. People would not believe this is another Seeking Alpha because they know that Abnormal Returns is who Abnormal Returns is – someone with a talent of filtering out the most relevant posts. This even gives Abnormal Returns an incentive to look at additional blogs and a wider universe to find “value”, thus increasing its overall value immediately. Nobody else could do this but Abnormal Returns, thus Abnormal Returns must do it.

    2. The system is designed so that best blogs, the ones with the highest “Abnormal Returns”, are subsidized by the worst blogs, the ones with the least. The relative incident of the fee therefore makes it least “expensive” for those who are adding value and more expensive for those who are not. It also an internal incentive for the blogosphere in general to become “better”. Lesser known blogs now know that they are on Abnormal Returns’ radar and are more motivated to add value to the blogosphere. The bigger, more popular blogs, are kept honest by the fact that there is now a large amount of blogs striving to get a higher Abnormal Returns score. Those blogs who don’t have any Abnormal will suffer, and perhaps come under scrutiny. It will become like an advanced industry certification – benefitting those who use it and hurting those who do not.

    3. The Abnormal Returns Score will immediately become a well-respected measure of value-added. A top 10 score will be an accolade sought after by the best blogs, who have taken it for granted up until now. It will also provide the others with a set of criteria and standards to strive for. Like a GIPS of the CFA Code and Standards, but for blogs.

    4. Since Abnormal Returns is essentially putting its blog and brand on the line and has few other ways of monetizing it to any substantial degree, there is a no incentive to have a universe filled with blogs that aren’t valuable. Thus, there is no real reason to reward the poor and mediocre, but there is an incentive to reward smaller or regularly mediocre blogs who have a superior post and are striving towards. This in turn is a positive reinforcement on superior posts, and a negative on inferior posts. Since a poor or mediocre blogger is essentially paying to be viewed and ignored and also most likely to be publicly “laced into” during the annual review, a universe of bloggers primarly made up of those who are either Excellent or striving towards it will form as the incentive mechanism for Universe members works it way through. This, then gives Abnormal returns less “risk” of allowing someone through the gate who should not, as all of those in line are doing what needs to be done to be Abnormal Returns material.

    While this would use up more of Abnormal Returns’ time, I think that Abnormal Returns is the only Aggregator that could pull this off and have it be widely embraced and respected. As long as Abnormal Returns doesn’t do anything differently except evaluate more blogs, it would not introduce any skepticism as to motivation. Abnormal Returns only self-interest is to have as many people as possible competing for what is essentially a fixed space – the daily linkfest. The extra demand along with the fixed supply should increase the value of each daily linkfest. Most people come to Abnormal Returns with the expectation to view the best and most valuable linkfest and would not wish to see this diluted. Abnormal Returns also has an extra layer of built in protection – the threat of doing risks cannabilizing an estabilished user base for a much more uncertain, more competitive, and less loyal one.

    In the past month it seems, Abnormal Returns has been implicitly nominated as the only real gatekeeper in the community, and many have acknowledged the need for such a gate. It is only natural to collect a toll to pay for providing the only gate in town. If blogging is a meritocracy, like many top schools, then providing a centralized place for those with merit to rise up, this plan is no different than Princeton, Harvard, or Yale charging over $40,000 a year for tuition. Each year, many high school students pay a somewhat substantial flat fee to apply to the best institutions (and more on preperation among other things Most of these institutions only except one out of every 50 who apply, but every year people still apply and the pool of applicants becomes strong. Abnormal Returns has the opportunity to be the Ivy League of the economic blogosphere. The business model appears to work, and it must be embraced.

  6. 6 nvestgrrl

    Yours is my favorite econozine email, the links always relevant, your summaries witty. I don’t want to see a single thing change. You already give a brief summary that allows me to quickly guage my interest and click if I want more. Since summaries are short I can scan through in an instant. If they were longer it would require more time/attention, which is seldom available since I — as we all — have hundreds of emails a day grasping for attention.

    That is my selfish desire — to see nothing change. As to how you can monetize, that’s a different story. Monetizing blogs or aggregators or reviewing sites has worked for about .00000001% of those who have tried. Even I, who love your stuff, wouldn’t pay for it (sorry). I would need original content I can’t get from my many other subscription.

    Good luck!

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