Jacob Wolinsky posted John Paulson's Q3 investor letter at ValueWalk yesterday. Reading through what seemed like Paulson's 100th apology to investors in the last few months got me thinking about the wisdom of mea culpas to investors. Now, don't get me wrong. I'm absolutely sure he's sorry for the results. The question is more of what he's apologizing for. Paulson has really been caught up in a perfect storm this year. A large number of both his macro and individual stock picks were wrong. He thought the economy would be better by now, benefiting financials. He also picked a bunch of stocks that dropped on company-specific information or that he sold into a price drop, including Sino-Forest, Hewlett-Packard (HPQ), Transocean (RIG), News Corp. (NWSA) and Hartford Financial (HIG).

To be fair, a lot of value investors and hedge fund managers are hurting this year. It hasn't been a good environment to be a stock picker. The unique thing about Paulson is that some of his picks dropped because of things like fraud and mismanagement, not because their true value isn't being recognized by the markets. What are the chances that will happen again? A lot of it can be chalked up to poor luck and a need to put all those billions of dollars to work.

If a portfolio manager's results are poor, but his process was right, then what is there to apologize for? No one can control the short term, and despite what Twitter participants think, one year is still short term in the value investing world. Consistency of process is what ensures long-term success.

That's what worries me about Paulson's apologies. Will it negatively affect his process in the future? Learning from mistakes is certainly a positive, along with tweaking some of his strategies, but is he either going to make wholesale changes to his approach in the future (I doubt it), or is he saying that his approach in the past was wrong (I also doubt it)? If that's the case, then an apology is really a hollow thing and unnecessary.

I'm sure Paulson is sorry that he bought Bank of America (BAC) when it was trading above $10. I am too, but that's not how the game works. If we thought it would be worth $30 at the time, which we did, then we thought we were getting a deal. There's no reason to apologize for that. I just saw how he's buying more BAC in the $5s. I'm glad he is, but that just makes it appear that he believes his original process was correct, doesn't it?

I'm sure Paulson feels bad that one of his funds is down nearly 50% on the year, but feeling bad doesn't mean that he should feel the need to say I'm sorry. He can prove that by keeping the fund's open at least until he gets above their high water mark. In the letter he says he’ll do that. I hope he sticks to his word.

Disclosures: Long BAC

Intellectual Honesty

Track Gurus’ Stock Purchases Daily – Real Time Guru Picks

GuruFocus "Real Time Picks" reports the stock purchases and sales that Gurus have made within the prior 2 weeks. The report time lag can be as short as 3 days after the date of the transaction. This is just one of the features provided with GuruFocus Premium Membership.

Click Here to Try It Free!

More Gurufocus Links

Latest Guru Picks	Value Strategies
Warren Buffett Portfolio	Ben Graham Net-Net
Real Time Picks	Buffett-Munger Screener
Aggregated Portfolio	Undervalued Predictable
ETFs, Options	Low P/S Companies
Insider Trends	10-Year Financials
52-Week Lows	Interactive Charts
Model Portfolios	DCF Calculator
RSS Feed	Monthly Newsletters
The All-In-One Screener	Portfolio Tracking Tool