No. of Recommendations: 8
No real reason was ever given for closure.

That was my purpose in conveying the metaphor Bill Mann offered. It made the reason clear, I thought: GG was closed because it didn't have enough subscribers.

I had made the call for introspection on GG failure but GG staff never participated on that forum.

So the question is: Why didn't it have enough subscribers?

Here are five factors I believe contributed, offered in descending order of importance:

5. The value orientation prevented the letter from recommending some of the best foreign stocks of the period because they were thought to be, perpetually, too expensive.

Solution: Either less doctrine and more pragmatism in the advisers, or, if they must be doctrinaire, more variety among them. Somebody needs to reverse engineer the failure to recommend Baidu, the best foreign stock of the period. Whatever it was, that impediment should be removed if they ever try an international stock adventure again.

4. The turnover in advisers. Bill Mann had both fans and detractors, but he had a clear identity on the boards, both at Hidden Gems and Global Gains. Tim Hanson came off quite differently, but he too was able to deliver a very clear sense of personality and leadership on the boards. Drafting both of them away from GG to asset management delivered an obvious message -- top talent at GG wouldn't be around long.

Solution: Next time, if there is a next time, be prepared not just to talk the marketing talk but also walk the investing walk. TMF can't keep talking about investing as a long-term pursuit, signing up subscribers on that basis, and then treating its vehicles as short-term pursuits.

3. Lack of selling discipline. Nothing saps the faith of subscribers more than big, heart-rending losses. The advisers were simply not decisive enough in limiting losses. This problem was exacerbated by the value orientation. When you have huge winners, as Rule Breakers has, it's easier to buy David Gardner's argument that big winners often fall as much as 50 percent on the way up. When you're in the value universe, seeking to stack gains of smaller magnitude, you must limit losses to smaller magnitudes as well.

Solution: Choose a course and make it explicit. If it's going to be value, establish strict selling discipline. If you're not going to have a strict selling discipline, don't eliminate high P/E growth stocks from your universe of possibilities. Simply put, if you're going to emulate Warren Buffett, emulate him all the way.

2. Difficulty. Lots of foreign stocks can be bought only on their own local exchanges, effectively eliminating them from consideration for most North American investors. Others are available on the Pink Sheets, which, while allowing them to be bought, offer much less basic information through the free automated internet data delivery services most individual investors use. This makes those investors more dependent on the advisers, and when the advisers are constantly changing, subscribers and potential subscribers are less likely to feel confident relying on them. In short, there is a knowledge gap between foreign and domestic stocks.

Solution: Technology should help to solve this problem over time as trading platforms incorporate more foreign exchanges and more companies make basic data accessible for automated delivery. But these additional hurdles mean more care, not less, must be taken with the relationship between advisers and customers.

1. Performance. As much as many of us feel personal attachments to some or all of the GG advisers, the scorecard they assembled is not a thing of beauty:

Churning out analysts is easy. Successful stock picking is hard. The TMF services that have been closed while I was subscribing -- GG and Pay Dirt -- both failed to perform. Index funds would have served you better. In a free market, it is perfectly rational that failure in this area should reduce your customer base to the point of extinction. They are better off just buying the market.

Solution: Do a hard-headed, self-critical analysis of the scorecard. Don't blame the market crash when you're getting beat by indexes. Be honest and forthright about why you went wrong where you went wrong and what you would do differently next time.

I wonder about the impact of failure of Chinese small caps on GG subscribership.

By rejecting the high P/E Chinese growers on the basis of valuation, GG restricted itself to those in which the markets had expressed less faith, for a variety of reasons. Combined with the unknowns of China's business culture, this resulted in GG making extraordinarily high-risk bets on sketchy firms even as it rejected investments in better firms on the basis of valuation risk. Ultimately, it proved to be an untenable approach.
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