Arbitrage of inconvenience: three key frictions

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In this Club Conversation, Dave Waters from Alluvial Capital, shares his unique journey into the world of investment management, highlighting his non-traditional background and the evolution of his investment philosophy. He discusses the concept of 'arbitrage of inconvenience' in micro-cap investing, the challenges of illiquidity, and the intricacies of expert markets. Waters emphasizes the importance of understanding why companies are public and how to value non-reporting companies. He also explores the role of catalysts in investment decisions, shares insights on international investment opportunities, and reflects on case studies of both successful and unsuccessful investments. Throughout the discussion, he provides valuable lessons on avoiding common investment mistakes and introduces his Tactile Fund strategy, which focuses on unique physical assets. Finally, Waters expresses his passion for investing and the importance of continuous learning, while also considering the future of investing education for his children.

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Chapters

00:00 Introduction to Dave Waters and His Journey

08:30 Investment Philosophy: Arbitrage of Inconvenience

13:24 Navigating Illiquidity in Micro Cap Investments

17:40 Understanding Expert Markets and Their Opportunities

21:34 Valuation Challenges in Non-Reporting Companies

25:41 The Role of Catalysts in Investment Decisions

29:56 Exploring International Investment Opportunities

31:19 Investment Strategies and Market Trends

32:56 Case Studies: Successes and Failures

40:56 Lessons Learned from Investment Mistakes

42:06 Avoiding Common Investment Pitfalls

45:50 Introducing the Tactile Fund

50:50 Managing Multiple Investment Strategies

54:46 The Passion for Investing and Continuous Learning

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