Hi, it's Ted, if you haven't figured that out already.

Today's episode is a new feature we're adding to the podcast. It's an audio version of my blog.

Every other month or so, I find myself repeating an investment insight and putting pen to paper

to flesh out the thoughts. We call the blog WTT, or what Ted's thinking, because, well, that's

what it's about. You can see the written version on our website, capital allocators.com,

under the tab blog, and while you're there, you can sign up for our mailing

list to receive it in your inbox. We'll also soon post these blogs on Substack. I've been thinking

about frauds recently, which led to the title of this post. It's called You Won't Detect

The Next Fraud. So without further ado, here it is. In the fall of

1998, I sat down with famed value investor Michael Price and asked him what he learned from having

invested in the accounting fraud perpetrated by chainsaw Al Dunlap at the Sunbeam Corporation.

He responded, absa-fucking-lutely nothing.

Michael went on to explain a principle about frauds. When you conduct analysis on an investment,

you spent 99% of your time assessing the merits of the opportunity and 1% thinking about

whether what you see is real. The fraudster spends 100% of their time

staying two steps ahead of you. Fraud is a risk you bear in every investment and sometimes

you can't avoid it. As he put it, fraud is fraud. I thought about this when my wife and I

watched Madoff the Monster of Wall Street on Netflix

last week.

Bernie Madoff did not make any trades.

He literally spent 100% of his time taking actions to stay a few steps ahead of anyone

who got too close to the truth.

...