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Diana West’s Insurgency of Facts

November 29th, 2013 · Articles

By Alyssa A. Lappen
Pajamas Media | Nov. 29, 2013


According to historian M. Stanton Evans’ “Law of Inadequate Paranoia,” in effect, things are always worse than you think. This holds true especially of conventional history books on World War II and the Cold War, Evans said last Wednesday, upon introducing Diana West, recipient of the 2013 Center for Security Policy Mightier Pen Award for her remarkably courageous work American Betrayal: The Secret Assault on our Nation’s Character.

One gets a hint of major historical oversights, passed off as fact for decades, the moment one opens West’s American Betrayal. At the dawn of the modern age, in 1920, she notes, Bertrand Russell already warned of a “conspiracy of concealment” well underway, by Western visitors to the new Soviet Union anxious to project a civilized veneer onto what Ronald Reagan six decades later so much more aptly termed the evil empire.

“Bolshevism combines the characteristics of the French Revolution with those of the rise of Islam,” Russell noted, as Ibn Warraq reminded us in Why I am Not a Muslim. Marxists and Islamists shared a sense of predestination and fatalism. Unlike the spiritual and mystical Christian and Buddhist doctrines, Russell noted, “Mohammedanism and Bolshevism are practical, social, unspiritual, concerned to win the empire of this world.”

West’s book proffers that these two parallel forces crept into the U.S. government, albeit in different periods, in much the same way. The author it challenges readers to suspend their disbelief at the door, and wonder aloud, with her, “why?”

West attempted in American Betrayal to unravel a series of Big Lies, she told the rapt audience. She started in our own age, after 9/11, with the Big Lie that “Islam is a religion of peace” and worked backwards from there, to the 1940s, when Americans were sold several bills of goods on the Soviet empire. “Uncle Joe Stalin is a friend of democracy” and “the USSR has freedom of religion,” for starters.

But the lies began much earlier. West found herself in agreement with Robert Conquest’s identification of the first “Big Lie” as the early 1930s press deception that passed off the Ukraine Terror Famine, an intentional genocide against some six million Ukrainian peasant souls, as something much less deadly, much more benign than it was, something almost natural and of little consequence. Some 80 years ago this month, on the heels of that intended mass murder by starvation, West notes, Franklin Delano Roosevelt recognized the Soviet Union.

Bad as that was, worse occurred when, as the great Soviet dissident Vladimir Bukovsky laments, the West failed to prosecute after the Soviet empire fell in 1991. That we did not is why Bukovsky insists that, actually, the West lost the Cold War.

Documents that Bukovsky recovered from the Soviet archives, he contends, largely explained Western inaction by virtue of the deep, extensive ideological collaboration they exposed between Western left-wing parties and the Soviets. Indeed, the same collaboration undoubtedly explained why the Soviets did not also go on trial at Nuremberg since, after all, Stalin fully collaborated in the September 1, 1939 Nazi invasion of Poland.

But there was, West notes, “no reckoning,” neither in 1945 nor in 1989. No one assumed responsibility for the lies, and no one assigned responsibility for them either. Instead, the lies only continued.

Communist regimes, of course including the U.S.S.R., murdered roughly 100 million souls, as documented in The Black Book of Communism by Stéphane Courtois and Mark Kramer. But 24 years ago, weeks after the Berlin Wall fell and George H.W. Bush met with Mikhail Gorbachev in Malta, we continued to eschew any talk of bringing communism to justice as we had done Nazism in the late 1940s. The_Black_Book_of_Communism_front_cover

Upon reading her manuscript, Evans warned West that she would be attacked, as indeed she has been. The attacks, he noted, have been far worse than he had imagined. But West counters with what Evans called a “triple threat,” namely her intelligence, principle and fearlessness.

At the tenth reunification of German, Dutch parliamentarian Geert Wilders tied Western failure to condemn totalitarian communism to our equally inept handling of Islamic totalitarianism. “Communism and Nazism set out to change…our sense of good and evil,” wrote Alain Besançon in 1998. “And in this, they committed acts unknown in prior human experience.” West said Besançon comforted her, by providing a fulcrum for a problem that had previously looked intractable by virtue of its unwieldy size. Likewise, she drew strength from Alexander Solzhenitsyn’s observation that Communism fully rejected morality, “good” and “evil,” convinced the world that these absolutes are relative, and left us with only “manipulation of each other.”

Today, that manipulation manifests itself via narratives, West observes. Facts—on Islam or Communism or infiltration of either—carry no greater weight than narrative, even (and especially) false narrative. Whatever narrative proves loudest wins, regardless how demonstrably false its points.

That may explain Obama’s latest coup, a “deal” ostensibly intended to halt Iranian nuclear weapons development that in fact appears likely to promote Iran’s goal of launching a nuclear electromagnetic-pulse attack to flatten the entire U.S. electrical grid, and its whole infrastructure as well. Iran has openly voiced these aims, and hidden behind by a spineless, morally relativist western press corps.

West’s book initiates what our mutual colleague Christine Brim calls “an insurgency of facts,” a small encyclopedic against Communist infiltration in the 1920s, 1930s, 1940s and 1950s that at least begins to explain how we got into the mess we find ourselves today.

The attacks on West give us all the more reason to learn everything between her book’s covers, not least to prevent the same historical tragedies from occurring again.

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Sharia states, totalitarian to their core

October 26th, 2012 · Articles, Muslim Brotherhood

2012 Electoral Guide for the Perplexed

By Alyssa A. Lappen
Pajamas Media | Oct. 26, 2012

Review: Sharia versus Freedom: The Legacy of Islamic Totalitarianism by Dr. Andrew G. Bostom, Prometheus, Oct. 16, 2012, 600 pp.

By Alyssa A. Lappen

In little more than two weeks, American voters must decide whether to reelect or boot the current White House occupant. Dr. Andrew Bostom’s monumental new work, Sharia Versus Freedom: The Legacy of Islamic Totalitarianism, could not have come at a more fateful hour. This brilliant scholarship, while designed as an overarching analysis, also conveniently provides a sort of detailed, 2012 Electoral Guide for the Perplexed. [1]

Among recent perplexities that demand voters’ consideration:

  • For weeks after the murderous 9/11, 11th anniversary attack on the U.S. embassy in Benghazi, — U. S. president Barack Obama, rather than its jihadi perpetrators, blamed a crude and laughable internet parody aimed at the founder of Islam purported for inciting their actions. Incredibly, to a global audience during his Sept. 24 U.N. address, Obama six times reinforced that lie — again blaming the attack on the video.
  • Now Obama plans to authorize Iranian supreme leader Ayatollah Ali Khamenei to announce a temporary nuclear crisis “solution.” Iran will swap a temporary halt in partial uranium enrichment for U.S. sanctions cuts, including some on Iran’s Central Bank, before the March arrival of Nowruz, the pre-Islamic Persian New Year. [2] The U.S. Treasury Dept. long ago designated Iran’s Central Bank for supporting terrorism. The massive inflation caused by sanctions have increasingly harmed Iranian nuclear ambitions. Obama’s blatant ploy to win reelection loosens the noose.
  • Obama banned terms that help define the current Islamic war on the West — “jihad,” “sharia,” “radical Islam,” “Islamic terrorism” and the like — and effectively outlawed study of Islamic doctrine at U.S. official and security agencies. During World War II and the Cold War, the U.S. did not provide Nazi sensitivity training or ban reading books on or by Karl Marx.
  • In June 2009, at the world’s leading Islamic university, Cairo’s Al Azhar, President Barack Obama praised Islam and blamed the West for virtually all the world’s problems.
  • Within two years, Obama repudiated longtime U.S. ally Hosni Mubarak and embraced both Egypt’s Muslim Brotherhood and Libyan rebels shortly afterward discovered to include al Qaeda elements. The resultant Arab spring has benefited only the Muslim Brotherhood totalitarian types.
  • The Obama embrace of Egypt’s Muslim Brotherhood evidently extends to the Council of American-Islamic Relations (CAIR), the Hamas fund raising arm in the U.S. In March 2010, the Obama Department of Justice dropped indictments against CAIR and its co-founder Omar Ahmad, among others, despite massive evidence of the kind that in Nov. 2008 convicted Holy Land Foundation and its officers on 108 terror financing and fraud charges.

  • Andrew Bostom’s latest book exposes the logic that possibly motivated these and many similar perplexities — in an engrossing and encyclopedic catalog of ideology and history of the naked totalitarianism of Islamic religious and political doctrines. The introduction alone establishes the diametric opposite embodied in Islamic law (sharia) to free Western social structure. It prohibits political freedoms as well as freedoms of conscience, faith and expression (both oral and written). In Islamdom, one expresses personal views at great risk. As applied throughout its history and expressed in internal jurisprudence, the creed Mohammed founded has suppressed and oppressed all with whom it interacted — especially non-Muslims.

    Indeed, jihadism and Islamic canon are intrinsically totalitarian. Neither concerns or governs only “believers.” Islamophilic obfuscation notwithstanding, many sharia attributes make the ostensibly “religious” legal code intractable, even now. By Muslim belief, according to seminal scholar Joseph Schacht (d. 1969), the “clear path to be followed” establishes divine, global Islamic order and is therefore

    not to be penetrated by the intelligence . . . i.e., man has to accept it without criticism…It comprises without restriction, as an infallible doctrine of duties the whole of the religious, political, social, domestic and private life of those who profess Islam, and the activities of the tolerated members of other faiths so far as they may not be detrimental to Islam. [emphasis added]

    In short, sharia statutes also govern the unique Islamic institution of jihad war—and relationships of Muslims to non-Muslims. The code requires Muslims to mount regular jihad attacks on unvanquished non-Muslims and to permanently, deliberately humiliate these “inferior” jihad survivors. Incorporation into Islamic polity subjects non-Muslims to sharia (pp. 110-112) and with it, statutes covering inheritance, requirements and prohibitions and draconian hadd penalties — including death (by stoning) for adultery, apostasy and highway robbery (whose victim was murdered); loss of hands and feet for simple robbery; loss of right hand for simple theft; 100 lashes for “fornication;” and 80 lashes for wine drinking. Tracing to individual Quran passages (including 45:18, 42:13, 42:21, and 5:48) and other Islamic sacred texts, primarily hadith (Mohammed’s reputed sayings and deeds), sharia is ultimately understood by Muslims as “the totality of Allah’s commandments relating to the activities of man,” Schacht notes. It embodies “the most characteristic phenomenon of Islamic thought [and] nucleus of Islam itself.”

    These facts are not an expression of hatred for Muslims. “I have nothing against the people,” said Geert Wilders in a March 2009 interview Bostom later cited — in this respect, undoubtedly speaking for all anti-jihad scholars and writers.

    “I don’t hate Muslims. But Islam is a totalitarian ideology. It rules every aspect of life — economics, family law, whatever. It has religious symbols, it has a God, it has a book — but it’s not a religion. It can be compared with totalitarian ideologies like Communism or fascism. [In] no country where Islam is dominant [do] you have a real democracy, a real separation between church and state. Islam is totally contrary to our values.”

    Bostom shows in myriad ways how Islam cements “religion” to Mohammed’s crushing totalitarian 7th century creed. For openers, while the Arabic word “hurriyya” translates to “freedom” — it refers to “freedom as perfect slavery to Allah,” as prescribed by highly dogmatic sharia laws engineered by the same dictatorial chief (Mohammed said, by divine instructions delivered via the angel Gabriel). It means something diametrically opposite to the same word in English — study of which is now off limits for U.S. military and security officials.

    He draws largely from historical sources. Bostom cites 19th century academic William Gifford Palgrave, for example, who traversed Arabia’s then virtually unknown heart, disguised as a Muslim physician. Palgrave observed and studied Islam in situ, and describes its divine law (sharia) as “a pantheism of force,” with god acting as “a tremendously sympathizing autocrat,” very “jealous of his creatures,” delighted by making them all his complete slaves. 3 And he was hardly alone in deriving a negative assessment of Islam from primary experience and Islamic sources alike. As Bostom previously observed:

    “Repeatedly for 100 years, between the mid-19th through mid-20th centuries, important scholars and intellectuals — for example, the historians Jacob Burckhardt, Waldemar Gurian, and Karl Wittfogel, philosopher Bertrand Russell, [modern analytical psychiatry founder] Carl Jung, Protestant theologian Karl Barth, sociologist Jules Monnerot…, [pre-eminent Islamic law scholar] G.H. Bousquet, and even the contemporary Western eminence grise on Islamic civilization, Bernard Lewis — have all referred to Islam as a despotic or totalitarian ideology.”

    Like Bostom’s two previous landmark studies on Islamic jihad and antisemitism (Legacy of Islamic Jihad: Holy War and the Fate of Non-Muslims and Legacy of Islamic Antisemitism: From Sacred Texts to Solemn History), his third adds significantly to our knowledge base. Often, contemporary scholars contend that Islam grew hateful upon absorbing Nazi antisemitism in the 20th century. Yet, Bostom shows, even in the Nazi era, intellectual luminaries saw the truth as quite the opposite. Like “Islam of old,” Barth warned in 1939, National Socialism’s political experiment promised to those willing to participate; but when resisted, it could “only crush and kill.” Nazism, he wrote, was best understood as “a new Islam, its myth a new Allah and Hitler as this new Allah’s Prophet.”

    Muslim totalitarianism across the ages

    A host of important Muslims, across time, thought likewise. Totalitarian terror, for example, pervaded “heavenly,” peaceful Andalusia. Spain’s purportedly enlightened Ummayyad conquerors were notoriously brutal, observed historian Evariste Levi-Provencal (1894-1956). They established strict Malikite Sunni doctrine, championed “jealous orthodoxy” and “fiercely opposed innovations;” their totally “immobile doctrine suspected and condemned in advance for the slightest attempt at rational speculation.” (p. 368) In 1914, Miguel Asin Palacois saw Muslim Spain in the same light — as had Cordovan Muslim al-Kinani (d. 901), a student of “scholar of Spain par excellence” Ibn Habib (d. 853). When walking outdoors, al-Kinari noted, Jews were required to wear patches bearing the image of an ape, and Christians, patches picturing a pig. In about 1000, Muslim jurist Ahmed ibn Said ibn Hazm (of Hispanic Christian descent) reported that an infidel who did not pay his annual “head tax” (jizya) risked execution or sale into slavery — and put his entire coreligionist community at risk of losing their “protection.” Muslim rulers could impose the same penalties for “public outrage against the Islamic faith” — e.g. exposing a cross or wine jug. (pp. 368-375)

    In Granada, Jewish viziers appointed to protect their community were assassinated between 1056 and 1066. After the murders of Samuel ibn Naghrela and his son Joseph, a fiery anti-Jewish “ode” by Muslim jurist and poet Abu Ishaq filtered through Muslim Granada. Very possibly, the hateful “ode” incited the Muslim pogrom that then annihilated Granada’s entire Jewish population of up to 5,000 — as many or more than the number of Jewish people reportedly killed during the First Crusade’s pillage of the Rhineland some thirty years later. (pp. 176-177)

    Ottoman Turkey 400 years later similarly fostered totalitarian Islamic dogmas. Molla Khosrew (d. 1480) — celebrated writer, Hanafi jurist and cleric to Sultan Mehmed II — rested his jihad directives on them. Religious obligation (fard al-kifaya) requires jihad and one must “begin the fight against the enemy, even when he [the enemy] may not have taken the initiative to fight,” Khosrew instructs. Early on, he reasons, Mohammed allowed Muslims only self-defense, but later on,

    “he ordered them to take the initiative at certain times of the year, that is, at the end of the haram months, saying ‘Kill the infidels wherever you find them.” (Q: 9:5) He finally ordered fighting without limitation, at all times and in all places, saying “Fight those who do not believe in God and the Last Day.” (Q: 9:29) (p. 178)

    Fast forward 500 more years, to 1948, when English speaking Arab League Office member Aboul Saud described Islam to investigative journalist John Ray Carlson.

    “You might describe Mohammedanism as a religious form of State Socialism… The Quran gives the State the right to nationalize industry, distribute land, or expropriate the right to nationalize industry, distribute land or expropriate property. It grants the ruler of the state unlimited powers, so long as he does not go against the Quran. The Quran is our personal as well as our political constitution.” (p. 256)

    An interview with the late Muslim Brotherhood founder Hassan al Banna led Carlson to conclude, average Egyptians “worshiped the use of force,” given that “terror was synonymous with power.” This also explained both the sensational rise of the Muslim Brotherhood, and the near universal popularity of Nazism in Egypt.

    Strict dogma survives and thrives

    The 1918 demise of the Ottoman empire and dissolution of the last Islamic Caliphate hardly assuaged Islamic totalitarianism. Rather, Muslim fervor rose to reestablish a new and stronger translational religious superstate — and with it rose individual and Islamic societal yearning for a totalitarian, sharia-based cultural regimen, including discriminatory governance of non-Muslims.

    A 1979 treatise on jihad warfare by Pakistani Brigadier S.K. Malik reflected the bedrock Islamic ideas as had others centuries before. Published in Lahore, the book was prefaced by former Pakistan advocate general Allah Buksh K. Brohi:

    “Islam views the world as though it were bipolarized in two opposing camps — Darul-Salam (Islam) facing Darul-Harb — the first one is submissive to the Lord in cooperating with God’s purpose … but the second one … is engaged in perpetuating defiance of the same Lord. Such a state of affairs which engages any one in rebellion against God’s will is termed as “Fitna” [which] refers us to misconduct on the part of a man who establishes his own norms and expects obedience from others, thereby usurping God’s authority—who alone is sovereign.” (p. 201)

    Hanafi judicial school founder Abu Hanifa (d. 767) designed the bifurcated Muslim world view, which others widely distributed too, including Muslim historian and Quranic commentator Abu Ja’far Muhammad ibn Jarir al-Tabari (d. 923), in the Book of Jihad. Al-Tabari includes Abu Hanafi (and followers’) extracts “affirming the impunity with which non-combatant ‘harbis’ — women, children, the elderly, the mentally or physically disabled — may be killed.” (p. 62)

    Countless famed Muslim jurists repeated these foundational doctrines through Muslim history, and still do, Bostom shows. In July 2003, “moderate” Muslim Brotherhood spiritual leader, Al-Jazeera TV personality and MB European Council for Fatwa and Research chief Yousef Qaradawi generally approved pillage and (certainly) as related to Israelis:

    “Islamic law [has determined] the blood and property of the people of Dar al-Harb [the Domain of Disbelief where the battle for domination of Islam should be waged] is not protected… in modern war, all of society, with all its classes and ethnic groups, is mobilized to participate in the war, to aid its continuation, and to provide it with material and human fuel required for it to assure the victory of the state fighting its enemies.” (p. 64)

    Alas, Muslim religious and political leaders don’t harbor these views in a vacuum. An alarming swath of the Muslim public also avidly supports them. In April, 2007, the University of Maryland/ released startling results of interviews with 4,384 Muslims (1,000 Moroccans, 1,000 Egyptians, 1,243 Pakistanis and 1,141 Indonesians), run from Dec. 2006 to Feb. 2007. Nearly two thirds of the subjects (2,872) wanted “To unify all Islamic countries into a single Islamic state or Caliphate” (including nearly half of “moderate” Indonesian Muslims); 65.5% also agreed, “every Islamic country” should “require a strict application of Shari’a law.” [emphasis added] A Dec. 2010 Pew poll in Egypt, Pakistan, Jordan, and Nigeria documented similar strong support for legislating hadd punishments: 82% of Egyptians and Pakistanis wanted adulterers stoned, as did 70% in Jordan and 56% in Nigeria; 82% of Pakistanis, 77% of Egyptians, 65% of Nigerians and 58% of Jordanians supported whipping and amputation for theft. The vast majority of Muslims polled also supported execution of apostates (Jordan, 86%; Egypt, 84%; Pakistan, 76%; Nigeria, 51%).

    Such attitudes also apparently prevail among Western Muslims. A secret Dec. 2010 cable from the U.S. Embassy in London revealed alarming sentiments in a study of 600 British Muslim students: 40% want to replace British law with sharia and 32% support killing for Islam.

    The dangers of “Political Correctness”

    Bostom takes innumerable contemporary assurances of Islam’s beneficence — from Muslims, political figures, Islamophiles or vaunted Western scholars like Bernard Lewis — and cuts them to proper size.

    He garners considerable aid from stellar scholars, far less prone than Lewis to view Islam through rose-colored panes. One can generally confirm academic errors due to their susceptibility to rational argument, wrote German scholar Karl Binswanger in conclusion to a 1977 analysis of Ottoman imposition of Islamic law on non-Muslims. Not so, the “religious,” “dogmatic” Islamophilic domain, given a modern

    “attempt to present the moral aspect of an Islamic fact as ethically valuable (not value-neutral!!) even if historic (and any other) sense does not support such an interpretation.

    … [W]homever — consciously or not— downplays or misrepresents the morally negative aspects of the Dhimma [sharia “protection” designed to oppress non-Muslims] or even distorts it into its (moral) opposite, because he would otherwise have to partially revise his preconceived evaluation of Islamic culture, he is behaving like the Marxist “researcher” who simply demonizes every manifestation of “evil” feudalism, instead of, or without (even therefore) investigating the functional accomplishments of feudalism. The Marxist researcher” acts this way because there is no place for critical examination of his own position in his preconceived conception of the world and science. For him “scientific socialism” is a dogma,”

    into the like of which — an “obstinate ‘scientific Islamophilia’ — Orientalist studies by 1977 seriously risked descending. (p. 52) The litany of gross factual errors since floated by mainstream academics, media and politicians defies description in this already lengthy review.

    But that rose-tinted discourse of Islam has spread its tentacles far beyond academia — into politics and the press — and endangered the entire nation. Americans must turn elsewhere for their data, and quickly. Post haste purchases of this book may help recalibrate the national discussion on Nov. 6 — at the ballot box.

    To which end, we should perhaps return to Moses Maimonides, the 12th century Jewish author of the original three-volume Guide to the Perplexed. A physician by profession and theologian by avocation, the Ramban lived his entire life among Muslims, himself escaped numerous Islamic jihad depredations, and generally termed Mohammed the Madman.”

    As a medical man, Maimonides taught doctors for all time to examine facts before treating. Interpret, but do not stray from reason. His lesson applies equally to everything, even politics. This book supplies a large dose of reason. It can help undecided voters, and perhaps even some “decided.” Post election, it can help radically shift U.S. policies that stand, perhaps intentionally now, totally blind to the ravages of jihad and sharia. Facts we can no longer ignore: Sharia opposes all basic American ideas — and states under its law are totalitarian to their core.


    1 The brilliant Jewish doctor, philosopher and sage, Moses Maimonides produced the original 12th century Guide to the Perplexed — a timeless and apolitical three volume treatise on Jewish law and philosophy relative to religion — during an unrivaled Islamic persecution of Spain’s Jewish people. Muslim-ruled Andalusia was never a calm or comfortable home for Jews, but the Berber Moravid successors to Spain’s Umayyad conquerors, opposed any “liberality and toleration” at all and were far “surpassed in cruelty and fanaticism” by the 1148 Almohades conquerors of Cordova. Yet, as translator M. Friedlander notes in his introducing his second, 1904 English edition, the “brilliant luminary” Maimonides emanated “rays of light and comfort,” and advised philosophically – and by personal example — that historical attempts to eliminate the Jewish faith had invariably failed, as would Islamic efforts contemporary to his time.

    2 Nowruz is the most important Zoroastrian holy day. While a vestige of pre-Islamic culture, this festival remains the most widely celebrated Iranian holiday. After the 1979 revolution, Shiite clerics attempted unsuccessfully to ban the holiday all together.

    3 William Gifford Palgrave, Personal Narrative of a Years Journey Through Central and Eastern Arabia, 1862-63.

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    Richard Driehaus screen: A momentum strategy focused on earnings growth

    August 22nd, 2012 · Citations

    Stockopedia | Aug. 22, 2012

    In brief

    Richard Driehaus is the founder and chairman of Chicago-based fund management firm Driehaus Capital Management. He rose to prominence in the investment community during the 1980s and 1990s by delivering impressive returns using momentum strategies that focused on small and mid-cap stocks. He was particularly attracted to firms that displayed strong earnings growth and he used earnings ‘surprises’ as buy and sell signals.


    Driehaus began investing in the stock market at the tender age of 13 (with the proceeds of a paper round) and he went on to spend considerable time researching and reading investment newsletters. In an interview for Jack Schwager’s book The New Market Wizards: Conversations with America’s Top Traders, Driehaus said he had been particularly inspired by John Herold’s America’s Fastest Growing Companies. It was here that he began to focus on what he perceived as the importance of long term earnings growth as the ultimate driver of share price movement.

    Driehaus set up his own broking and fund management business in the early 1980s after successful spells as a money manager for firms including A.G. Becker, Mullaney, Wells & Co. and Jesup & Lamont. By 2000 his success had earned him a place in Barron’s All-Century Team – a group of influential fund managers that counts investment gurus Peter Lynch and Bill Miller among its members.

    Investment strategy

    While Driehaus has never directly documented his investment techniques in a book, several analysts have scrutinised his strategies. According to the American Association of Individual Investors (AAII), the heart of the Driehaus method is to identify those companies with improving earnings growth rates and then identify which of them are most likely to continue the trend. Driehaus then screens for firms that are beating analyst expectations and producing positive earnings surprises.

    In Schwager’s The New Market Wizards, Driehaus explained that while he was prepared to hold equities for very long periods of time, his strategy meant being willing to turn over the portfolio more frequently than the conventional norm to get superior returns.

    He claimed to take exception to the market paradigm of ‘buy low and sell high’, believing instead that more money is made buying high and selling at even higher prices. He explained:

    “That means buying stocks that have already had good moves and have high relative strength – that is, stocks in demand by other investors. I would much rather invest in a stock that’s increasing in price and take the risk that it may begin to decline than invest in a stock that’s already in a decline and try to guess when it will turn around.”

    In an extensive article on Driehaus for Institutional Investor magazine in November 1993, Alyssa Lappen said Driehaus was relaxed about high P/E ratios and balance sheet debt so long as sales and earnings growth looked sure to accelerate. “Not every stock that Driehaus buys has a stratospheric P/E. He’s an opportunist who sometimes picks up growth stocks at value prices,” she said. Lappen also noted that he showed no sentimentality to his stocks:

    “He unceremoniously dumps his mistakes the moment the fundamentals deteriorate, the price pattern breaks down – or he finds a stock he likes better.”

    What to watch

    Although momentum strategies have proved to be an effective tool for investors there can be significant drawbacks – and none more so than the critical issue of timing. Momentum investors routinely risk getting their timing wrong on trades and in extreme market conditions, as seen in 2009, these strategies can crash. In addition, as Driehaus conceded, the higher level of portfolio turnover means that a momentum strategy needs a lot of work. Overall, this type of investing can be time-intensive and rack up comparatively high trading costs.

    Does it work?

    Driehaus has insisted that the investor who simply applies momentum as a technician will never survive and that investors must keep the faith even if the portfolio value falls significantly. In terms of performance, Driehaus Capital Management was reported to have delivered compound annual returns of 30% during the 12 years after it was started in 1980. An interpretation of Driehaus’s methods, produced by AAII, has returned 13.5% and 18.1% over five and 10 years respectively. By comparison, the S&P 500 returned just -1.1% and 4.2% over the same periods. Stockopedia’s interpretation of Driehaus’s strategy currently boasts annualised returns of 35.1% and in the last six months delivered 6.96% versus -1.48% for the FTSE 100.

    Screening Criteria

    Stockopedia’s Driehaus screen is based on the book Investment Gurus: A Road Map to Wealth from the World’s Best Money Managers by Peter Tanous (available on Amazon). Here are the criteria:
    EPS Growth Streak > 2 EPS Growth % (TTM) > 0 EPS Growth % (TTM) > Industry Group Median % 50 Day Moving Average > 0 EPS Surprise %, Last Year > 5 # Brokers < 6 Rank ( Market Cap £m ) < 85% Relative Strength over 1 Month > 0 How can I apply this screen?

    Further reading

    Check out more momentum investing articles on Stockopedia, including:
    Relative Strength: How Does Momentum Investing Work? The Top 5 Momentum Indicators Every Trader Needs to Know Searching for Momentum – six stocks that are riding a wave

    For more information about Richard Driehaus:
    Wikipedia on Richard Driehaus The New Market Wizards: Conversations with America’s Top Traders, Jack Schwager Investment Gurus: A Road Map to Wealth from the World’s Best Money Managers, Peter Tanous AAII on Dreihaus Married to the Market, Alyssa Lappen

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