Mistakes Create Mispricings in ETA (+ some potentially good SBA news?)

This Week in ETA:

Searchers: Quick update on the SBA eligibility issue we flagged last week: We’ve received some early, downstream indications that this may have been a glitch related to the ETRAN system - not an intentional policy change - and will be corrected. That said, we’re still working to confirm directly with the SBA. Stay tuned as we get more clarity.

Additionally, I was listening to a recent podcast with Howard Marks and his team, and they framed something in a way I haven’t heard as cleanly before: Mispricings come from mistakes. If markets were perfectly efficient, everything would be fairly priced and excess returns wouldn’t exist. So the only way to outperform is to find situations where someone else is wrong - and be right. But those mistakes aren’t random. They tend to fall into a few buckets.

First, emotional errors. Fear, greed, herding. People panic and sell too cheap, or get excited and pay too much.

Second, analytical mistakes. Overestimating growth, underestimating risk, assuming good times will continue. This is how companies get over-levered and eventually run into trouble.

Third, complexity and obscurity. If something is messy, hard to value, or buried in disclosures, most investors just move on. That lack of attention can create opportunity.

Fourth, structural or technical factors. Forced sellers, mandate constraints, liquidity pressure. These aren’t opinions—they’re rules. And they can push prices to irrational levels.

And finally, simple supply and demand imbalances. Too many sellers, not enough buyers.

Here’s the catch: You only get to buy something cheap if someone else is willing to sell it cheap, which means your job is to think better than the person on the other side. And it cuts both ways: sometimes assets are hated too much, sometimes they’re loved too much.

It’s not just what you buy - it’s also what you pay.

Plus:

• Remember: your personal cash does not equal the size of the business you can buy. This list of financing resources is a great place to start thinking bigger about your buy box - and please reach out if we can help with investor equity.

• Why we love helping business owners avoid selling their company due to business partner conflict.

Question:

Hit reply and tell us - Do you agree with Howard Marks’ list of mistakes that drive mispricing? What would you add?