Oct 7, 2021

The Newsletter Business

Believe it or not, it has been an ambition of mine to write a financial newsletter for almost 20 years—going back to about 2003.

I was an index arbitrage trader at Lehman at the time, and we used to get The Gartman Letter delivered to our inbox every morning.

Now, people are full of opinions about Dennis Gartman and his letter, but the great thing about it is that it really put the “news” in the newsletter. He would write it at 2 am, and you’d read it when you got to work to catch up on all the latest happenings in finance. I never paid much attention to the trade recommendations—too high-frequency for me.

So, I turned to my boss and asked, “How many people read this thing?” No idea. “How much do we pay for it?” No idea. But it seemed like a great business because it was infinitely scalable—it took the same effort to write one copy as it did a hundred thousand copies.

I did some more digging on financial newsletters and found that they came in all different shapes and sizes. At the time, I fancied myself writing a retail, personal finance sort of newsletter, charging $150, getting 1,000 subscribers, and making $150,000 a year. I was not too ambitious.

So, in 2004, I started writing at Lehman Brothers, sending out my thoughts to our institutional clients, and it went viral. Before long, I had thousands of people on my distribution list. I was ready to start The Daily Dirtnap , which was intended for investment professionals.

So, when Lehman went bankrupt, I sent out my last note and asked for indications of interest on my newsletter. About 800 people said they would sign up.

Within a month, I was set up and ready to go, and I started asking for money, and… a little more than 200 signed up. When it comes time to write the check, people disappear, especially in the middle of a financial crisis.

Now, this was a strictly institutional client base. And there were some large firms sprinkled among those 200 subscribers. I did okay that year, but I took a big pay cut from what I was making at Lehman. It would take quite a few years to get back to where I was on Wall Street, compensation-wise.

But never have I had so much fun.

Now, I have “many thousands” of subscribers. And they are all smart people. Super-smart. Instead of spending my time with dummies, I get to spend my time with the smartest people in the investment community—online, at least. And the newsletter has grown into a giant community… with conferences, music, swag, parties, and more. What an incredible life.

Why Do I Bring This Up?

There are knitting newsletters and running newsletters and barbecuing newsletters, but none of them make as much as financial newsletters. And the reason is that it makes economic sense to pay a few hundred bucks for someone to feed you ideas that might make you several thousand bucks one day.

Of course, the proprietor of a newsletter is a human being, and some do not have any particular edge. But that’s okay. The goal here is idea generation, and if a newsletter helps improve your thought process, you should subscribe to it, regardless of what its “track record” is. On one or two occasions, people have actually told me they take the other side of my trades, and I’m fine with that. I’m here to help. They are not too successful, though.

The newsletter business gets beat up from time to time because you have these people who market themselves as gurus who could not trade their way out of a paper bag. When you select investment research, I would focus on an analyst who has managed risk at one point in his or her career. I once went through the LinkedIn profiles of several well-known gurus. Very few of them had ever run money. And that’s ok, too, because idea generation is a different skill than risk management, but you still want someone who knows how to construct a portfolio.

And the number one characteristic you want in a newsletter writer is… humility. The ability to admit when you’re wrong. Shockingly few people do this. Sure, trades go sideways all the time, but newsletter writers have the tendency to kick sand on their losing ideas, hoping people don’t notice, rather than just coming out and saying, “I was wrong.”

Most people find this very hard to do. Nobody should expect someone to be right all the time. But they should expect someone to account for their mistakes.

I’ve been doing this for 13 years (17 if you count the time at Lehman), and I think I’ve gotten pretty good at it by now. But I’m still learning and still making mistakes. I can tell you one thing: it’s a lot harder than it looks. I’ve attracted a lot of imitators over the years, and most of them don’t last long. Getting people to pay to read what you write is not the easiest thing in the world.

Jared Dillian

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