Let me tell you kids a story about David Baskin, owner of Baskin Wealth Management.
Baskin Wealth specializes in managing assets for high net worth families. Assets have grown from $25 million in 2000 to $900 million today, with approximately 500 wealthy families entrusting Baskin with their cash. Like many of you, I’ve only heard of David because of his semi-regular appearances on BNN’s Market Call.
Like many of us, David (and his Chief Investment Officer Barry Schwartz) like going on Twitter and discussing the stocks they like. One of their favorite stocks over the years has been Home Capital Group (TSX:HCG), the alternate (read: subprime) mortgage lender specializing in the Toronto market.
Home Capital has been a favorite punching bag for a large number of U.S.-based (Canadian-based, too) short-sellers. I’ll spare you kids the details, but shorts allege the company is basically ran by a bunch of crooks that is very happy to issue terrible mortgages to people who are actively lying on their applications.
I agreed with these shorts wholeheartedly. I thought Canada was in a massive housing bubble, a stance I’ve since relaxed a bit. Toronto was the epicenter of this bubble. Add in Home Capital’s, uh, reputation and I thought shorting the stock was the biggest no-brainer in the history of the world.
In 2015, Home Capital suspended 45 different mortgage brokers for submitting up to $2 billion in potentially fraudulent mortgages. The company essentially admitted that it knew some of those deals were obtained using doctored documents. They just weren’t sure how many.
Naturally, the stock tanked on the news. Baskin and Schwartz went on Twitter and defended the company, saying it was just a temporary thing and there isn’t much you can do when the fraudsters know the system. I was saying the exact opposite, convinced the company was trash. In a moment of weakness I mocked Baskin for backing such an obvious fraud.
So what happened?
Well, not much.
Home Capital shares have bounced around over the last 18 months, settling today at about the same level as they were back in the middle of all the controversy. Yawn. There have still been some issues with the stock — like the inability to grow the top line and a recent announcement that the Ontario Securities Commission is looking into the whole fraud scandal — but it’s pretty much been business as usual for Home Capital.
In the meantime I stumbled upon an interview with Barry Schwartz in the excellent book Market Masters by Robin Speziale, which has a series of interviews with high profile Canadian investors.
His investment philosophy was pretty simple. Baskin Financial focuses on good companies that generate a lot of free cash flow. I’m also a fan of companies that generate a lot of free cash flow. It’s the whole reason why I bought High Liner shares, among others over the years.
After reading that I started paying more attention to both Baskin and Schwartz’s tweets. With the exception of Home Capital Group (which I still don’t like), he would talk about the kinds of stocks I would invest in. I even found out we have a few holdings in common, including High Liner. Hell, it was Baskin who actually nudged me towards High Liner in the first place!
Here’s the important lesson here. Even if Baskin was completely wrong on Home Capital Group it doesn’t necessarily mean he’s wrong about everything. One opinion doesn’t make someone an idiot.
This applies to everything. I know a guy who actually stormed out of the room when somebody else said “Justin Trudeau isn’t that bad.” I have at least one older relative who is racist as balls. Probably more, actually. I know at least one 9/11 truther. Someone who I consider a friend will not drink milk (or eat ice cream) because, and I quote, “drinking another animal’s milk is 14 different kinds of screwed up. You don’t see that in nature.”
I don’t agree with any of these opinions. Yet I still regularly talk to people who spout them.
If we do nothing but focus on differences then we’re probably not going to get along with people. You saw that in a very big way with the recent U.S. election. If we focus on the things we have in common we’ll at least get along much better.
Debate is all fine and good, but be respectful about it. Attack the idea, not the person. And even then, say your point and be done with it. The exchange of ideas is fantastic. Shouting at somebody who isn’t going to change their mind isn’t.
The bottom line
David Baskin and I continue to disagree on Home Capital. He still holds the stock for clients. I’m still avoiding it with extreme prejudice. Disagreeing didn’t do me a damn bit of good. If anything I looked like an ass in the process.
The next time somebody has an opinion you disagree with, remember that isn’t the sum of their knowledge. You won’t learn anything with a closed mind.