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Article Archive: 2015 The Stingy News Weekly: December 27, 2015 12/27/15   SNW I'm pleased to present our free letter for the week ended December 27, 2015. This week we have activists, taxes, misers, and more." Activists through the decades 12/26/15   Markets "The famed activist investors of today are fine-tuning 400-year-old tactics. Shareholder fights with management stretch back all the way to the very first publicly-traded company, The Dutch East India Co., when shareholders tried to fight against a restructuring in the 1622." Bunking, debunking, and discovery 12/26/15   Science "As far as we can tell, most of the findings reported by social psychologists are false. It's a remarkable situation, to put it mildly. I never anticipated this. A recent attempt to replicate 55 social psychology findings published in top journals failed to replicate 75 percent of them. Other efforts have shown a similar pattern of non-replicability." The impact of taxes 12/26/15   Taxes "Consider the financial options of a high net worth individual living in California. She can choose to hold her wealth in shares of Berkshire and pay no tax at all on the returns unless or until she needs to consume out of them, at which point she will be able to monetize them at a preferential long-term rate, or she can own fixed income securities - say, a 30 year treasury bond - and pay a whopping 56.7% tax rate on the earnings. In the case of the 30 year bond, at a 2.90% yield, her after-tax yield would be a paltry 1.26%. Unless equities were in an outright bubble, with extremely low imputed returns, what reason could she possibly have, as a long-term investor, to choose the fixed income option?" Factors that launched 1,000 ETFs 12/26/15   Value Investing "Across the five factors, the average long/short spread was 10.3%/year for the entire period (1964-2015), 10.6% for the period of rising rates (1964-1981), 11.8% for the period of falling rates (1981-2008) and 2.3% for the ZIRP period. Clearly, things have tailed off." The Stingy News Weekly: December 20, 2015 12/20/15   SNW I'm pleased to present our free letter for the week ended December 20, 2015. This week we have pigeons, jealousy, beer, momentum, and more." Jealousy List 2015 12/19/15   Media "But throughout the year we are also reading, and every so often we feel a little twinge of jealousy: We wish we'd published that. What follows is our attempt to curate those twinges, and present a list of some of the best stuff we read this year." A great brewer 12/19/15   Science "One of the greatest minds in 20th Century statistics was not a scholar. He brewed beer. Guinness brewer William S. Gosset's work is responsible for inspiring the concept of statistical significance, industrial quality control, efficient design of experiments and, not least of all, consistently great tasting beer." The Pigeon King 12/19/15   Crime "Galbraith's reign as Pigeon King lasted seven years, from 2001 to June 2008, when his empire imploded. The prosecution likened his company, Pigeon King International, to a Ponzi scheme - much like Bernard Madoff's operation, which happened to crumble just months after Galbraith's, except that where Madoff's scheme centered on stocks and securities, Galbraith's used live birds. Pigeon King International sold breeding pairs of pigeons to farmers with a guarantee to buy back their offspring at fixed prices for 10 years." Backtesting: a cautionary tale 12/18/15   Momentum Investing "The failure to see consistent outperformance from the group as a whole has made me increasingly skeptical of investment approaches that claim to be data-driven. In my view, such approaches receive too much trust and respect, and not enough scrutiny. They hold a reputation for scientific credibility that is not deserved." Momentum deterioration 12/18/15   Momentum Investing "Buying high momentum has had a rough 15-years relative to longer-term history, but avoiding poor momentum has continued to work quite well." William Smead interview 12/18/15   Value Investing "Smead Value Investor fund.s William Smead explains why his concentrated, high quality, low turnover approach has delivered top investment performance." [video] The Stingy News Weekly: December 13, 2015 12/13/15   SNW I'm pleased to present our free letter for the week ended December 13, 2015. This week we have net-nets, enterprise multiples, 10-10s, and more." These sliders might get a grip 12/13/15   Stingy Investing "It's almost time to pull the toboggan out of storage and head to the hills for a little winter fun. After all, there's something special about speeding downhill on a crisp winter day. But going downhill is something stock investors fear and they've been taken on an infernal toboggan ride this year." [$] International enterprise multiple 12/13/15   Value Investing "The paper, published in the Journal of Financial and Quantitative Analysis, confirms the U.S. evidence that cheap enterprise multiple stock outperform expensive enterprise multiple stocks by about 1 percent per month. And it works just as well whether the markets are developed or emerging, and in stocks small and large." Consider net-net stocks 12/13/15   Value Investing "These are companies trading below liquidation value per share, which in some cases would be the best outcome. Needless to say, they are almost always microcap, thinly traded and facing severe headwinds." Patrick O'Shaughnessy interview 12/13/15   Value Investing "In this episode Preston and Stig talk to Patrick O'Shaughnessy about what he does best: 'Demystifying stocks with hard core facts!' Patrick O'Shaughnessy is a lead authority in the new generation of quant value investors, and he runs the amazing blog, The Investor's Field Guide. Co-hosting this week's show is bestselling author Toby Carlisle, who blogs at Greenbackd.com" Time to take carpe diem seriously 12/13/15   Health "The accompanying table shows the percentage of healthy people who will experience one of these critical illnesses (or die) in each 10-year span starting at age 50. While it should come as no surprise that the risk of death or critical illness rises with age, the steepness of the rise is shocking." Clarity on TFSA contribution limits 12/13/15   Taxes "Earlier this year, the Conservative government increased the annual contribution limit to $10,000. The Liberal government confirmed on Monday, however, that it will be rolled back to $5,500 in 2016. Going forward, the limit will be indexed to inflation, as it was prior to this year's increase." The Stingy News Weekly: December 6, 2015 12/05/15   SNW I'm pleased to present our free letter for the week ended December 5, 2015. This week we have Icahn, Pickens, growth, tax-loss selling, and more." Balance your portfolio With care 12/05/15   Markets "As for generating inflation-fighting returns, it's hard to see how bonds will do the job. A reliable predictor of future bond returns is the current yield. Today, that means a real return (after inflation) around zero. There will be periods when bond prices rise due to interest-rate declines and/or events in the corporate market, but their long-term returns are anchored by low yields." G&M broker ranking 12/05/15   Brokers "This year's overall winner is Virtual Brokers. VB has reclaimed the top spot from Qtrade Investor, now sharing second place with hard-charging Questrade. In third is a name you haven't seen for a while in the upper echelon of this ranking. It's TD Direct Investing, which has introduced a strikingly good new client website. The pressure's now on the other bank-owned firms to catch up." T. Boone Pickens talks with Carl Icahn 12/05/15   Value Investing "T. Boone Pickens sat down with legendary businessman and activist shareholder, Carl Icahn. The two men discussed energy security, including the effect of Saudi oil exports on America's production, Carl's views on the markets and much more." The persistence of growth 12/05/15   Growth Investing "Both the long term average and time series charts make this very clear: the growth rate advantage of high growth stocks from the past five years does not persist over the next five years. Growth stocks tend to keep growing, but their relative advantage over low growth narrows considerably. If and when the market prices stocks by extrapolating past trends into the future, there is an opportunity to bet against that misguided extrapolation (long value, short growth)." High-payout fund trickery 12/05/15   Hallett "In the world of investing, nothing turns my stomach more than when a member of the investment industry misleads investors and then directly benefits from said misinformation. Usually only subtle trickery is at play. And most often I have seen this in the form of funds sporting unsustainable cash payouts" How does your salary stack up? 12/05/15   Economy "According to StatsCan, the median income (plus our 10 per cent factor) in Canada in 2013 was $35,200. This means that half of Canadian tax filers have incomes over that number and half are under that number. What about the high income? Based on 2013 income data and our 10 per cent added factor, the top 10 per cent make $97,000 or more per year, the top five per cent make $137,000 or more and the top one per cent make $245,000 or more. Where are you?" The Stingy News Weekly: November 29, 2015 11/29/15   SNW I'm pleased to present our free letter for the week ended November 29, 2015. This week we have tax-loss selling, CFO golf, John Cleese, Superforecasting, and more." The season for tax-loss selling 11/29/15   Stingy Investing "We're quickly approaching the season for feasting on figgy pudding and watching Ebenezer Scrooge have a change of heart. It's also a charitable time of year for value investors who lend a helping hand to people who desperately want to sell their shares for tax reasons." [$] Hollywood bets on The Big Short 11/29/15   Books "Then, the following year, as I was handing the manuscript of The Big Short to my publisher, Billy Beane called and said, 'You bastard, Brad Pitt is on his way to my house. The babysitter showed up wearing a dress, and my wife is putting on makeup.'" Why is there an investor return gap? 11/28/15   Behaviour "The investor return gap persists, despite strong evidence that factor performance is mean reverting, because investors use the manager selection process for alpha timing." Chipping away at financial reporting quality 11/28/15   Management "Chief financial officers are responsible for managing the financial reporting process. We test whether the quality of a firm's financial reports is a function of the effort expended by the CFO. Using golfing records to measure leisure consumption, we first show that CFOs consume more leisure when they have lower economic incentives to work. We show further that higher levels of CFO leisure are negatively associated with a number of indicators of financial reporting quality. The use of firm fixed effects and an instrumental variable analysis suggest that the observed relations are causal. Further tests indicate that higher leisure consumption is associated with shorter conference calls with a more uncertain tone. Finally, the effects of lower quality reporting are demonstrated by results linking CFO leisure with analysts' forecast dispersion and weaker earnings response coefficients." New York is a city of NO 11/28/15   Government "New York now is a city of no. You have this great idea? No, you can't do it. You want to try this out? No. You go to Baltimore and it's a city of, 'Well why the f- not? Let's try this!' They really, really love their city and it's exciting. It's that energy I felt when I was growing up in New York." Revealing the closet indexers 11/28/15   Funds "The problem with closet indexing is that you wind up paying substantial fees for a fund that delivers little in the way of independent investing judgment. The extra charge - compared to what you could pay for a plain-vanilla exchange-traded fund that cheaply and efficiently tracks the same index - typically amounts to somewhere between one and two percentage points a year." John Cleese: So, Anyway 11/28/15   Books "John Cleese stopped by the Google NYC office to further discuss So, Anyway... a book chronicling the early life of his career." [video] Guessing the future 11/28/15   Books "Dan Gardner is the co-author of "Superforecasting: The Art and Science of Prediction," on the groundwork it takes to accurately predict the future. What makes some better able to hone in and others not? The Agenda examines what it takes to be prepared for the future." [video] What I learned as my industry died 11/28/15   Media "But even in our small, art-friendly city, we were abandoned, at first slowly and then very, very quickly. By our last year, each month was down some 30 percent from the already meager takings of the previous year, and it became increasingly clear that there was simply nothing we could do to stop the slide." The Stingy News Weekly: November 22, 2015 11/22/15   SNW I'm pleased to present our free letter for the week ended November 22, 2015. This week we have Cliff Asness, Dan Ariely, Robert Shiller, and more." Many unhappy returns 11/21/15   Retirement "Elroy Dimson, a professor at both the Cambridge and London Business Schools, is the co-author of a study of investment returns, covering 23 countries and more than a century of data. He thinks the likely future long-term real return on a balanced portfolio of equities and bonds will be 2-2.5%. AQR, a fund-management group, has come up with a remarkably similar figure, 2.4%, by assuming annual growth in dividends and profits of 1.5% for a portfolio priced at current valuations and split 60-40 between equities and bonds. It applied the same formula to valuations over the past century, and found that the current projected return is lower than at any time in the past" A conversation with Cliff Asness 11/21/15   Momentum Investing "Tyler and investment strategist Cliff Asness discuss momentum and value investing strategies, disagreeing with Eugene Fama, Marvel vs. DC, the inscrutability of risk, high frequency trading, the economics of Ayn Rand, bubble logic, and why never to share a gym with Cirque du Soleil." [video] Dan Ariely on relationships 11/21/15   Behaviour "Googler Logan Ury talks to behavioral economist and 'Predictably Irrational' author Dan Ariely in the second of our Modern Romance talks. They discuss the paradox of choice in the 'Age of Tinder,' why a canoe is the best place to test your long-term compatibility, and other research-based insights and advice for modern dating and relationships." [video] Demystifying Wall Street 11/21/15   Zweig "Can a better understanding of Wall Street help us become more successful investors? We are joined by Jason Zweig, a highly respected financial journalist, "The Intelligent Investor" columnist at The Wall Street Journal and author. His latest book, The Devil's Financial Dictionary provides an entertaining, informative and insightful look into Wall Street's true nature." [video] Phishing for phools 11/21/15   Shiller "Nobel Prize winner Robert J. Shiller visited Google's office in Cambridge, MA to discuss the book he co-authored with George Akerlof, 'Phishing for Phools: The Economics of Manipulation and Deception.'" [video] Chipping away at financial reporting quality 11/21/15   Accounting "Chief financial officers are responsible for managing the financial reporting process. We test whether the quality of a firm's financial reports is a function of the effort expended by the CFO. Using golfing records to measure leisure consumption, we first show that CFOs consume more leisure when they have lower economic incentives to work. We show further that higher levels of CFO leisure are negatively associated with a number of indicators of financial reporting quality. The use of firm fixed effects and an instrumental variable analysis suggest that the observed relations are causal. Further tests indicate that higher leisure consumption is associated with shorter conference calls with a more uncertain tone. Finally, the effects of lower quality reporting are demonstrated by results linking CFO leisure with analysts' forecast dispersion and weaker earnings response coefficients." The Stingy News Weekly: November 15, 2015 11/15/15   SNW I'm pleased to present our free letter for the week ended November 15, 2015. This week we have the Top 200, inflating dividends, and more." Top 200 11/15/15   Stingy Investing "We're pleased to say our approach has weathered both good times and bad over the past 11 years. Our All-Star Stocks, which combine the best growth and value prospects, gained 15.8% per year on average since we started in 2004. That assumes an equal dollar amount was put into each All-Star Stock in the first year and rolled into the new All-Stars each year thereafter. By way of comparison, the S&P/TSX Composite (as represented by the XIC exchange-traded fund) climbed 4.4% per year over the same period." [$] Reassurance for dividend investors 11/15/15   Stingy Investing "The spectre of rising interest rates hangs like a miasma over the Canadian economy. They're currently being warded off by an accommodative monetary policy from the Bank of Canada. But it is only a matter of time before inflation picks up and rates start to climb. If they shoot up too fast, the real estate bubble might pop and take down a large part of the financial system with it. It's a thought that's causing some dividend investors to toss and turn at night." [$] Insider trading 11/15/15   Crime "The idea is that if you're an insider and you disclose information for your own personal benefit, or just trade on it yourself for profit, then that sure looks like a breach of duty to your company. But if you don't get a personal benefit from the disclosure, then odds are that you're doing it for some legitimate, or legitimate-ish, business reason. It might be a misguided business reason, or one that the company doesn't like -- in Dirks itself, the insider was disclosing fraud to an investment analyst -- but it's probably not the sort of corrupt breach of duty that the law punishes." Canadian pension plans the new speculators 11/15/15   Government "Leverage at Healthcare of Ontario Pension Plan, widely known as HOOPP, now exceeds 100 percent of its net assets, leading to a more than doubling of the total assets at its disposal to invest. Ontario Teachers. Pension Plan, the nation's third largest, has leverage equal to half its net assets." How the Mad Men lost the plot 11/15/15   Media "Marketers consistently undervalue consistency. Diageo recently carried out an audit of all the endlines that it had attached to one of its biggest brands, Guinness, and were embarrassed to discover it had used more than 20 different slogans in 15 years. What's more, when it asked people to recall an endline, the only one they remembered was 'Good things come to those who wait', which hadn't run since 1999. Vast sums of money had been spent on campaigns which probably had short-term effects but barely left a trace in consumer memories." Retirement planning 11/08/15   Retirement "The work I've done shows that with a zero capital-market return in real [inflation-adjusted] terms, you need to save close to 30% of your income." The amateur investing advantage 11/08/15   Behaviour "People who are not professional investors - those Mom and Pop investors I refer to all the time - have enormous advantages of their own." The Stingy News Weekly: November 8, 2015 11/08/15   SNW I'm pleased to present our free letter for the week ended November 8, 2015. This week we have Icahn, O'Shaughnessy, other people's money, and more." Carl Icahn on activist investing 11/07/15   Value Investing Carl Icahn talks about his approach at the 2015 DealBook conference. [video] How patient an investor are you? 11/07/15   Behaviour "For investors, your lack of patience, both at an individual and institutional level, is forcing investment managers to take steps to control their own business risk and become sensitive to benchmark tracking error. If you want to know who to blame for closet indexing, look in the mirror." Value Investing is difficult 11/07/15   Value Investing "Even with a sound approach to equity investing, you should expect multi-year periods where crazy things happen." No place for 1.75% trailer fees 11/07/15   Funds "In fact, some go as high as 1.75%, prompting some within the industry to wonder why regulators don't cap trailers - if not ban them outright." Other people's money 11/07/15   Books "Industry insider John Kay argues that the finance world's perceived profitability is not the creation of new wealth, but the sector's appropriation of wealth - of other people's money." [video] James O'Shaughnessy interview 11/07/15   Value Investing "How to be humble about stock investing, and how you are likely to beat the stock market by taken yourself out of the equation" [audio] The Stingy News Weekly: November 1, 2015 11/01/15   SNW I'm pleased to present our free letter for the week ended November 1, 2015. This week we have dividends, nudges, Munger, and more." The power of nudges 11/01/15   Behaviour "In the meantime, that deal qualifies as a nudge that violates all three of my guiding principles: The offer was misleading, not transparent; opting out was cumbersome; and the entire package did not seem to be in the best interest of a potential subscriber, as opposed to the publisher." Charlie Munger vs. Valeant 11/01/15   Munger "Months before Valeant Pharmaceuticals International Inc. tumbled under attack from short sellers, Munger told investors in Los Angeles the company reminded him of the excesses of the 1960s conglomerate craze. 'I'm holding my nose,' Warren Buffett's longtime business partner said. Turns out, those remarks were just the start of his concerns." Take advantage of the market 10/30/15   Stingy Investing The slides from my talk at the The World MoneyShow in Toronto It's time to reap the season's dividend treats 10/30/15   Stingy Investing "The high-yield group outperformed the market by an average of 2.2 percentage points annually, which represents a considerable bonus for a very simple strategy. On the other hand, the no-dividend group suffered mightily and lagged the market by an average of 7.3 percentage points annually. As a result, investors should think twice before buying stocks that don't pay dividends." The myth of basic science 10/25/15   Science "The perpetual-innovation machine that feeds economic growth and generates prosperity is not the result of deliberate policy at all, except in a negative sense. Governments cannot dictate either discovery or invention; they can only make sure that they don't hinder it. Innovation emerges unbidden from the way that human beings freely interact if allowed. Deep scientific insights are the fruits that fall from the tree of technological change." The Stingy News Weekly: October 25, 2015 10/25/15   SNW I'm pleased to present our free letter for the week ended October 25, 2015. This week we have outsiders, return expectations, prosperity, and more." Buying begets buying 10/25/15   Thrift "Buy less and instantly you have less to store; you use less space. Eventually you can work less to pay for all of this stuff. Soon you will stress less too and, above all, your life will involve less waste." Tough decade ahead for stocks, says John Bogle 10/24/15   Markets "I think you can probably pretty accurately use a 2% inflation number for the next 10 years. So, all of a sudden, a 3.5% return becomes a 1.5% return." Beware phony CRA tax owing calls 10/24/15   Crime "The Canada Revenue Agency can be tough, but it won't call you to threaten court fines or arrest for tax evasion." Economic world history 10/24/15   World "The poorer countries, especially in South-East Asia, have caught up. The two-humped camel shaped has changed into a one-humped dromedar shape - the world is not divided in two anymore. And not only is the world more equal again, the distribution has also shifted to the right - the world is much richer" William Thorndike talks about The Outsiders 10/24/15   Books "What is the hallmark of exceptional CEO performance? Quite simply, it is the returns for the shareholders of that company over the long term." The Stingy News Weekly: October 18, 2015 10/18/15   SNW I'm pleased to present our free letter for the week ended October 18, 2015. This week we have heroes, suffering, value, and more." The ability to suffer 10/18/15   Stingy Investing "The capacity to suffer for a good cause is admired in heroes. But it also happens to be a quality that money manager Thomas Russo, of Gardner Russo & Gardner, looks for when selecting stocks. He's a devotee of Warren Buffett and seeks out high-quality businesses - that can withstand a few sword fights - with the view to holding them for the long term." [$] Interview with contrarian David Dreman 10/18/15   Dreman "Dreman is also well known for sticking to a bottom-up, low PE stock-picking approach. In the interview below, he explains the extensive research that has proven the quality of the strategy, where he sees opportunities in the market and the 19th century book he says investors should read." Michael Lewis on Tom Wolfe 10/18/15   Books "Michael Lewis delves deep into the archives of the legendary reporter turned novelist to discover what made the man in the white suit the voice of a journalistic generation." Fall 2015 Graham & Doddsville 10/18/15   Value Investing "The average investor tends to invest in the strongest past returns and get the worst forward returns." What they don't teach you 10/18/15   Academia "There are no classes called 'Investing is Hard.' This was probably the main message I tried to convey to these students because they were in a class that required them to invest real money on behalf of the school through their class. No one ever really tells you how hard it can be to earn excess returns in the markets. At that age you're worried about creating the most precise Excel model you can to accurately value a business. Figuring out that successful investing is not easy is actually one of the first steps you have to take to become a better investor." The Stingy News Weekly: October 10, 2015 10/10/15   SNW I'm pleased to present our free letter for the week ended October 10, 2015. This week we have quality value, buybacks, dead investors, and more." Buybacks and debt 10/10/15   Value Investing "The number one question I get about the shareholder yield factor is whether or not this debt-funding-buybacks is a big issue and something that should scare us. Asked differently, are companies that are taking on more debt to buy back shares ticking time bombs?" In praise of the dead 10/10/15   Behaviour "The dead have their drawbacks. They make for dull company, and when the dishes need washing, they are never around. As investment mentors, however, they have their merits." Thomas Russo on global value 10/10/15   Value Investing "I consider myself to be a farmer - not a hunter. And I think most people on Wall Street are hunters. They like to fell big beasts and I'm very comfortable planting a few rows and just tending to them carefully." [video] Taking on the drug profiteers 10/10/15   Government "The Turing scandal has shown just how vulnerable drug pricing is to exploitative, rent-seeking behavior. It's fair enough to excoriate Martin Shkreli for greed and indifference. The real problem, however, is not the man but the system that has let him thrive." The Stingy News Weekly: October 4, 2015 10/04/15   SNW I'm pleased to present our free letter for the week ended October 4, 2015. This week we have value vs. growth, love vs. credit, dividends, and more." Style swapping 10/04/15   Stingy Investing "It's been a hard year for Canadian value investors. Those who wisely steered clear of the resource sector might be down only a little bit. But others will have to do some belt tightening this Thanksgiving." [$] Relationships and credit scores 10/04/15   Behaviour "One new place where credit scores could prove useful is analyzing a prospective spouse." How not to wipe out with momentum 10/03/15   Momentum "Front runners and high transaction costs, a function of the strategy's required high turnover, largely destroy the potential benefits of a momentum-based passive portfolio." The active share debate 10/03/15   Academia "There is an interesting discussion in the geeky world of academic finance literature between the intellectual muscle at AQR and academia." Building optimal value portfolios 10/03/15   Value Investing "The authors also found that, due to a diversification benefit, a 50/50 blend of B/P and E/P outperformed both single-metric strategies during most 10-year periods between 1973 and 2013. The blended strategy had the highest annualized return: 14.21 percent per year over the period January 1973 through December 2013, followed by E/P with 13.48 percent per year and B/P with 12.79 percent per year." Are buybacks an oasis or a mirage? 10/03/15   Accounting "The dilution rate for the U.S. equity market in 2014 was 1.8% compared to the historical dilution rate of 1.7% over the 80-year period from 1935 to 2014." The Stingy News Weekly: September 27, 2015 09/27/15   SNW I'm pleased to present our free letter for the week ended September 27, 2015. This week we have Munger, Graham, Dreifus, activists, and more." Charlie Munger on Benjamin Graham 09/27/15   Munger "Charlie Munger has developed a powerful system that is useful in making any type of decision. One notable application of this system by Munger relates to investing and involves another system developed by Benjamin Graham." Mansion owners who plead poverty 09/27/15   Government "The tax unfairness caused by the growing phenomenon of mansion owners alleging poverty can be traced largely to Canada failing to catch trans-national migrants who refuse to report their total global income at tax times." How to beat activist investors 09/27/15   Value Investing "One problem with riding the coattails of activists is that their stocks rally sharply the second it becomes known that they have big positions in companies. So you miss out on a lot of their gains." Charlie Dreifus interview 09/25/15   Value Investing "veteran contrarian investor Charlie Dreifus explains why he is not worried about recent stock market turbulence and where he is still finding high quality bargains." Fake audiences 09/25/15   Media "About 18 months ago, he set to figuring out how much of his inventory - ad spaces for sale - was fake. The answer mortified him: Two-thirds was either fraud or suspicious" Playing the long game 09/25/15   Management "The premise that you're going to run a business, and that if someone is in need, I'm going to charge them a ton of money, is completely wrong" The Stingy News Weekly: September 20, 2015 09/20/15   SNW I'm pleased to present our free letter for the week ended September 20, 2015. This week we have burgers, dividends, Munger, and more." The best way to be smart 09/20/15   Munger "So how then do we channel our inner Munger? In this episode of the a16z Podcast, we discuss how to think about thinking; why the best investors and business leaders spend more time on what they don't know; and how the best way to be smart is to - not be stupid." Life of the McDonald's franchisee 09/20/15   Stocks "His final day as a franchisee was a Tuesday last November. He went to the Hastings restaurant that evening to meet Berg. They counted uniforms and emptied the safe of Jarvis's cash. Berg wrote Jarvis a check for the inventory; Jarvis posed for a farewell photo with Snyder. He didn't leave till after midnight. His eyes well up at the memory. 'It's like I sold my family,' he says." Popping the publishing bubble 09/20/15   Media "However, while the concern over ad-blockers may be too early, publisher angst is arguably too late: if iOS 9 ad blockers do end up causing serious harm it is only because the publishers have been living in an unsustainable bubble that is going to pop sooner rather than later." What's in it for your adviser? 09/20/15   Stingy Investing "If you stick to a fairly conservative mix of Canadian bonds - like that offered by the Vanguard Aggregate Bond ETF - you'll likely get similar yields on a before-fee basis. Thing is, the average annual fee for the portfolio I was looking at was 2.1 per cent. Subtract the fee from the expected yield of 1.9 per cent and the investor might expect to lose about 0.6 per cent annually on the bonds. That's not much of an investment." [$] Ad-Blocking 09/20/15   Media "The sands they are a-shifting. We have spam blockers, a whole industry trying to weed out bad e-mail, but we can.t get rid of bad ads? Come on." TFSAs and OAS 09/20/15   Retirement "One of the most intriguing facets of last week's leaders. debate was the determination with which all candidates steered clear of two issues that directly affect your personal bottom line. Anyone listening to the debate would have no clue that ordinary folks feel at all attached to their tax-free savings accounts (TFSAs) or Old Age Security (OAS)." The Stingy News Weekly: September 13, 2015 09/13/15   SNW I'm pleased to present our free letter for the week ended September 13, 2015. This week we have Grant, Zweig, Bakshi, and more." Three years of Strategy Lab 09/13/15   Stingy Investing "Pundits and analysts like to give the impression there's only one sure path to investing Nirvana. In fact, many techniques can result in bliss, as evidenced by the healthy gains achieved by all the Lab portfolios." The prejudices of Mr. Market 09/12/15   Value Investing "Sanjay will show how the stock market is deeply prejudiced in pricing moated businesses and that exploiting those prejudices - especially when they combine - has helped him in his investing process." [video] An interview with Jason Zweig 09/12/15   Zweig "Barry Ritholtz interviews Jason Zweig, a columnist for the Wall Street Journal and the author of 'Your Money and Your Brain.' They discuss social media and financial journalism." James Grant on WealthTrack 09/12/15   Grant "Are dangerous cracks already appearing in the foundations of the world's bond markets? In a rare interview, financial historian and bond market analyst James Grant, publisher of Grant's Interest Rate Observer warns of the building investment fault lines." [video] The Stingy News Weekly: September 5, 2015 09/05/15   SNW I'm pleased to present our free letter for the week ended September 5, 2015. This week we have art, mathematics, markets, and more." The mathematician who cracked Wall Street 09/05/15   Science "Jim Simons was a mathematician and cryptographer who realized: the complex math he used to break codes could help explain patterns in the world of finance. Billions later, he's working to support the next generation of math teachers and scholars." Keep calm 09/05/15   Stingy Investing "Smart investors stay on course even when the going gets tough. They fully expect to encounter hardship on occasion and can stick with their time-tested strategies over a complete market cycle. In other words, they stay calm and carry on." [$] Automated strategies fueling tremors 09/05/15   Markets "If every risk-parity fund is dumping assets, and the selling is big enough, it increases the perceived volatility, or riskiness, of the assets. That, in turn, encourages even more selling as risk-parity funds try to bring their overall riskiness back into line." Can it work if everyone knows about it? 09/05/15   Value Investing "We're going to argue that certain well-known classic strategies that have worked over the long term will continue to work going forward, though perhaps not at the same level and with different risks than in the past." The art of investing 09/05/15   Books "The market values of our leading securities [are] determined by...a howling mob of incurable lunatics" [via Jason Zweig] Bob Cable's inevitable wealth 09/05/15   Books "If you're the type of investor who is driven to act emotionally, then a buy-and-hold strategy is the answer for you. Ignore the market." The capacity to suffer 09/05/15   Value Investing "Tom Russo: The capacity to suffer doesn't mean you're supposed to suffer" [video] Diet advice that ignores hunger 09/05/15   Health "Questions like these about the relationship between calories, macronutrients and hunger have haunted nutrition and obesity research since the late 1940s. But rarely are they asked. We believe so implicitly in the rationale of eat less, move more, that we (at least those of us who are lean) will implicitly fault the obese for their failures to sustain a calorie-restricted regimen, without ever apparently asking ourselves whether we could sustain it either. I have a colleague who spent his research career studying hunger. Asking people to eat less, he says, is like asking them to breathe less. It sounds reasonable, so long as you don't expect them to keep it up for long." The cassette business 09/05/15   Media "The audiocassette tape is not dead. In fact, one Springfield, Mo., cassette maker says it has had its best year since it opened in 1969." Buying organic is a waste of money 09/05/15   Thrift "The science available thus far says any additional nutritional benefits from organic produce, compared with conventional, are very small." Chou Semi-Annual 2015 09/02/15   Value Investing "The current conditions make me feel that investors are being set up for heartbreaking disappointment, especially for the unwary." Why we hate cheap things 09/02/15   Thrift "There are two ways to get richer: one is to make more money; and the second is to discover that more of the things we could love are already to hand (thanks to the miracles of the Industrial Revolution). We are, astonishingly, already a good deal richer than we are encouraged to think we are." The Stingy News Weekly: August 30, 2015 08/30/15   SNW I'm pleased to present our free letter for the week ended August 30, 2015. This week we have zombies, hyperinflation, rising anxiety, and more." Zombie factories 08/30/15   World "Still, such steps may do little more than keep zombie companies alive - to the detriment of the overall economy. By pumping up growth with fresh credit and stimulus, the government might temporarily revive some factories, but also exacerbate the economy's problems of excess capacity and high debt." Rising anxiety 08/30/15   Shiller "It is entirely plausible that the shaking of investor complacency in recent days will, despite intermittent rebounds, take the market down significantly and within a year or two restore CAPE ratios to historical averages." Should the Fed tighten? 08/30/15   Economy "If I were at the Fed, I would consider a 'dare' quarter point increase just to show the world that zero short rates are not considered necessary for prosperity and stability." Mom and Pop win one 08/30/15   Markets "Here's a bit of role reversal for you: Mom and Pop were content to ride out the market's volatility this past month, more or less sitting tight. Meanwhile, the pros were driven to the point of near panic." High failure rates 08/30/15   Academia "More than 270 researchers from around the world came together to replicate 100 recent findings from top psychology journals. By one measure, only 36 percent showed results that were consistent with the original findings. In other words, many more than half of the replications failed." We still have a buck in the till 08/30/15   Debt "There will be failures among energy producers, and that could include nations. Failures with each will be temporary as debts get worked through/compromised and new management takes over, and high cost supply gets shut down. The question is: who will fail and who won't." Hyperinflation in Venezuela 08/26/15   World "Venezuela is preparing to issue bank notes in higher denominations next year as rampant inflation reduces the value of a 100-bolivar bill to just 14 cents on the black market." How silver wrecked China 08/26/15   World "In the Great Depression, China found itself vulnerable to the price of silver, thanks to the misguided moves of U.S. policy makers." The short-termism myth 08/24/15   Management "To the extent that companies are underinvesting in the future, the blame lies not with investors but with executives. The pay of many C.E.O.s is tied to factors like short-term earnings, rather than to longer-term metrics, which naturally fosters myopia." The Stingy News Weekly: August 23, 2015 08/23/15   SNW I'm pleased to present our free letter for the week ended August 23, 2015. This week we have relative strength, 100% equities, sewing machines, and more." Absolute strength vs relative strength 08/23/15   Stingy Investing "When it comes to the markets, the difference between a large wave on a fairly calm day and a huge wave on a stormy day is similar to the contrast between relative strength and absolute strength. But both momentum measures have provided outsized returns over the long run." [$] Sell-off not a bad thing 08/23/15   Markets "the best response for most investors trying to grapple with the latest bout of volatility is to take a deep breath, appreciate the remarkable run-up of the last five years, and remember that if you panic at the thought of losing 6 percent of your money in a week, that money really shouldn't be invested in the stock market to begin with." Why not 100% equities? 08/23/15   Markets "We might, on the other hand, consider an all-equities portfolio. Whereas none of us have the centuries ahead of us that Yale can expect, we may have a time horizon of several decades--perhaps long enough according to both the historic performance figures of equities and to theories of their expected returns (shaky as they are), to justify having everything in stocks." How Singer won 08/23/15   History "The Singer Sewing Machine changed the way America manufactured textiles, but the invention itself was less important than the company's innovative business" OPEC of maple syrup 08/22/15   Government "While Mr. Trepanier studiously avoids calling the organization a cartel, he has described it as the OPEC of maple syrup in the past, referring to the group of oil-producing countries." Goodbye to all that 08/22/15   World "The real curse for producers is over-supply in almost all raw materials. Yet they continue to act as if they are blithely unaware of it. Capital is still pouring into holes in the ground, creating a hangover that may last at least a decade." The Stingy News Weekly: August 17, 2015 08/17/15   SNW I'm pleased to present our free letter for the week ended August 17, 2015. This week we have the hot potato, momentum, Buffett's wager, and more." How has the 4% rule held up 08/16/15   Retirement "The 4% rule has been much maligned lately, as recent market woes of the past 15 years - from the tech crash of 2000 to the global financial crisis of 2008 - have pressured both market returns and the portfolios of retirees. Yet a deeper look reveals that if a 2008 or even a 2000 retiree had been following the 4% rule since retirement, their portfolios would be no worse off than any of the other "terrible" historical market scenarios that created the 4% rule from retirement years like 1929, 1937, and 1966." China's long Minsky moment 08/16/15   World "Underlying all of this is the fact that China is still dealing with the consequences of an enormous credit and real-estate bubble that has accompanied, and prolonged, the latter stages of the growth miracle." Stock buybacks draw scrutiny 08/16/15   Markets "Is the government really going to outlaw buybacks, which over the past decade have become one of the business world.s favorite corporate finance tools? On its face, the issue may seem like a nonstarter. But a growing debate has emerged around the topic of buybacks that increasingly has Wall Street and corporate America worried." Inflation and market returns 08/16/15   Markets "On a nominal basis things look scary. On a real basis, not so much." Mind the gap 2015 08/16/15   Behaviour "Overall, the average investor return across all funds was 5.61% for the cheapest quintile and 3.28% for the priciest. The gap was 80 basis points for the cheapest quintile and 179 basis points for the priciest." Absolute strength 08/16/15   Momentum Investing "We document a new pattern in stock returns that we call absolute strength momentum. Stocks that have significantly increased in value in the recent past (absolute strength winners) continue to gain, and stocks that have significantly decreased in value (absolute strength losers) continue to lose in the near future. Absolute strength winner and loser portfolio breakpoints are recursively determined by the historical distribution of realized cumulative returns across time and across stocks. The historical distribution yields stable breakpoints that are always positive (negative) for the winner (loser) portfolios. As a result, winners are those that have experienced a significant upward trend, losers are those that have experienced a significant downward trend, and stocks with no momentum have cumulative returns that are not significantly different from zero. The absolute strength momentum strategy is related to, but different from, the relative strength momentum strategy of Jagadeesh and Titman (1993) and the time series momentum strategy of Moskowitz, Ooi, and Pedersen (2011). Time-series regressions show that the returns to the absolute strength momentum strategy completely explain the returns to the relative strength and the time series momentum strategies, but not vice versa. Absolute strength momentum does not expose investors to severe crashes during crisis periods, and its profits are remarkably consistent over time. For example, an 11-1-1 strategy that buys absolute strength winners and sells absolute strength losers delivers a risk-adjusted return of 2.42% per month from 1965-2014 and 1.55% per month from 2000-2014." Buffett's winning wager 08/16/15   Stingy Investing "Take a trip to Garrison Keillor's Lake Wobegon and you'll discover that all the children are above average. Similarly, most stock pickers believe they're above average, too. But the market has a habit of proving them wrong." The Stingy News Weekly: July 31, 2015 07/31/15   SNW I'm pleased to present our free letter for the week ended July 31, 2015. This week we have dividends, the Fed, price floors, and more." Dividend yield a value factor? 07/31/15   Dividends "Prior to the financial crisis bottom (pre-2009), the higher yielders were cheaper than the next bucket (2-4% yield) 92% of the time. Since 2009, they've only been cheaper 30% of the time." Ignore the Fed 07/30/15   Bonds "Instead of hanging on every Fed utterance, let me suggest you take a different approach. Take one phrase from the Fed as your mantra: data-dependent." Humans are underrated 07/30/15   Tech "We humans have good reason to be uneasy. Strange things are happening in the economy. Ever fewer men of prime working age - the group that historically has been the most thoroughly employed - are working, and while several factors are feeding the trend, most economists believe that advancing technology is one of them. In factories and offices, on construction sites and behind counters, technology keeps doing more jobs better than people." Alpha wounds 07/30/15   Funds "Chief among the alpha wounds is that the benchmark tail wags the portfolio management dog. What I mean is that benchmarks were supposed to be the foundation for understanding a portfolio manager's performance after the fact. Instead the investment industry evolved so that benchmarks are now the navigational compass for investment managers before the fact." Destination unknown 07/30/15   Economics "Fed up with pay increasing only at a snail's pace, politicians are resorting to the law instead, by increasing the minimum wages that businesses must pay. But this is taking them into uncharted territory." The Stingy News Weekly: July 26, 2015 07/26/15   SNW I'm pleased to present our free letter for the week ended July 26, 2015. This week we have dividends, real estate, the big one and more." A value asset allocation strategy 07/25/15   Value Investing "After enduring years of frustration trying to identify a valuation-based asset allocation technique.that actually worked.I think the team at Gestaltu is on to an interesting concept. By simply looking at real spreads between equity valuations and realized inflation (high spreads are good for equity; low spreads are bad for equity), one can devise a timing rule that captures most of the upside, but protects on the downside. Of course, this is all historical data and could very well be an exercise in data-mining. That said, the concept of buying equity assets when they have much higher yields than current inflation, is intuitively appealing." A survey of equity valuation models 07/25/15   Markets "Our forecast for core U.S. equities is a 0.8% annualized real return over the next decade." The really big one 07/25/15   Science "A thirty-second earthquake generally has a magnitude in the mid-sevens. A minute-long quake is in the high sevens, a two-minute quake has entered the eights, and a three-minute quake is in the high eights. By four minutes, an earthquake has hit magnitude 9.0." The minimum-wage muddle 07/25/15   Economics "Raising the minimum wage will produce winners among job holders from all backgrounds, but it will disproportionately punish those with the lowest skills, who are least likely to be able to justify higher employment costs." Housing market still not rational 07/25/15   Real Estate "The housing market is another matter. It is far less rational than even the often irrational stock market, for a couple of important reasons. First, most investors find it difficult to understand how housing supply responds to changes in demand. Only a small minority of people think carefully about such things. Second, it is very hard for the minority of smart-money investors who do understand such matters to bet against bubble-level prices in real estate markets. In housing, the smart money has relatively little voice." Index funds may work too well 07/25/15   Indexing "I have a good laugh every now and then about the people who think that index funds should be illegal because they make companies less competitive, but honestly it's a nervous sort of laughter. Those people are up to something, something so big and interesting that it makes them nervous too." Why people repeat financial errors 07/25/15   Value Investing "This week on our Masters in Business radio podcast, we speak with Howard Marks, co-chairman of Oaktree Capital Group. In our discussion, Marks explains what 'second-level thinking' means for investors and why so many people make the same financial errors." The Stingy News Weekly: July 19, 2015 07/19/15   SNW I'm pleased to present our free letter for the week ended July 19, 2015. This week we have burgers, cars, China, and more." High conviction buybacks 07/18/15   Value Investing "the high conviction companies have gone on to ourperform the average large stock by about 3.3% in the subsequent year, while the low conviction firms haven't really delivered much excess return at all (just 0.5%, on average)." Burger benchmark finds greenback too dear 07/18/15   World "Exchange rates are currently being buffeted by the euro crisis, the growing likelihood of a rise in interest rates in America, China's slowing economy and the sharp drop in the oil price, one of the drivers of the rouble's slump. By showing how much these forces have driven different currencies off course, the Big Mac gives a flavour of what may be to come." Could China be the next Japan? 07/18/15   World "China today is very similar to Japan in 1990, and the world's No. 2 economy should be wary of repeating the policy mistakes of Japan" China crash bigger than subprime 07/18/15   World "Hedge fund manager Paul Singer said that China's debt-fueled stock market crash may have larger implications than the U.S. subprime mortgage crisis, echoing warnings from fellow billionaire money managers Bill Ackman and Jeffrey Gundlach." Successful Austerians 07/18/15   World "Post-1990 Canada certainly looks like a country with successfully managed fiscal and monetary policy. The federal government brought fiscal policy under control and reduced the burden of government debt, and the central bank adhered to its announced inflation target. How did they do it? In the 1995 federal budget, some well-liked social programs, including government health care, remained more or less intact, and cuts were made in a politically palatable way." Self-driving cars and insurance 07/18/15   Tech "Self-driving cars have a near perfect driving record. So far, when self-driving cars do get into accidents, it's because humans were responsible. Since Google began to release details about self-driving car accidents, reports from the Wall Street Journal, the RAND Corporation, and KPMG have all predicted a dramatic shrinking in the auto insurance industry." Why robo-advisers are here to stay 07/16/15   Hallett "Much has been written about newer investment advisory firms that dispense advice through user-friendly websites, called Robo-Advisors. This new breed of advisory firms offers many potential benefits but also faces many headwinds." The Stingy News Weekly: July 12, 2015 07/12/15   SNW I'm pleased to present our free letter for the week ended July 12, 2015. This week we have fracking, Greece, value, momentum, and more." O-score and distress risk 07/12/15   Value Investing "Value investing always wins, even after controlling for distress. And value investing really wins among the most distressed firms. Oddly enough, expensive firms that are distressed earn 14.44% less than cheap firms that are distressed." Why momentum investing works 07/12/15   Momentum Investing "Even if you aren't a practicing value investor, the value anomaly is easy to explain - buy at a discount and then wait. The momentum factor is based on buy high, sell higher or alternatively, cut your losses and let your winners run. Value investing is based on a long-term reversion to the mean. Momentum investing is based on that gap in time that exists before mean reversion occurs. Value is a long game, while momentum is usually seen in the short- to intermediate-term." Ride out market tempests 07/12/15   Stingy Investing "diversified portfolios often sail through storms in reasonably good shape. Sure, it can be hard to watch them slip underwater for a few years. But they'll likely emerge and grow again. It's something to keep in mind when you're on the beach this summer and the storms come in." [$] Poorer than Greece 07/12/15   World "Europe's great Greek crisis is often cast as the downtrodden Hellenic heroes versus the ubermasters of austerity in Berlin. In reality, however, it is smaller nations that have faced crisis themselves, swallowed the austerity medicine and lived to tell the tale who are most hostile to another bailout for Athens." Greece's culture of victimhood 07/12/15   World "There are many issues at play in the Greek tragedy, but the fundamental thesis being tested is this: do states have a budget constraint? Is there a limit to how much a country can spend and borrow or - as the Syriza government and its academic apologists seem to suggest - is there not?" Refracking is the new fracking 07/12/15   Tech "But in an industry that is desperately trying to cut expenses after oil fell below $60 a barrel from over $100 a year ago, the technique's low cost has great appeal. Because the first step in the fracking process is already done -- the drilling of the wellbore -- the outlay is just a fraction of the $8 million or so it costs to tap a new well." The Stingy News Weekly: July 5, 2015 07/05/15   SNW I'm pleased to present our free letter for the week ended July 5, 2015. This week we have Greece, China, risk, value, and more." Germans call for Greece to leave 07/05/15   World "German Chancellor Angela Merkel's deputy said Athens had wrecked any hope of compromise with its euro zone partners by overwhelmingly rejecting further austerity." Check your risk 07/05/15   Stingy Investing "It's time to put storm windows on your portfolio and sensibly prepare for what might be to come. If you wait too long, your portfolio could be caught out in the wind and rain." China's stockmarket crash 07/05/15   World "The Shanghai Composite, the country's main index, has fallen nearly 30% in less than a month. The sell-off of small-cap stocks, which had led the rally, has been even sharper. Chinese regulators may have more levers to pull than their peers in most countries, but even they, it turns out, are powerless to tame the alternation between exuberance and fear that makes stockmarkets yoyo. In fact, their efforts to do so may be exacerbating the volatility." Why the Greek bailout failed 07/05/15   World "As the Greek crisis evolves, it is important to understand that a successful structural-adjustment program requires strong country ownership. Even if negotiators overcome the most recent sticking points, it will be difficult to trust in their implementation if the Greek people remain unconvinced. That has certainly been the experience so far. And without structural reform, there is little chance that the Greek economy will see sustained stability and growth . not least because official lenders are unwilling to continue extending an unreformed Greece significantly more money than it is asked to pay." The evolution of a value investor 07/04/15   Value Investing "Tom Gayner is the CIO of Markel Corp, where he manages the company's investment portfolio. He talks about his journey as an individual and value investor." Ten tips for writing a book 07/04/15   Books "Never write a book ..." Greece lost the public relations battle 07/04/15   World "One of the most striking aspects of the Greek situation is just how much the Greek government has lost the public relations battle. They have lost it among the social democracies, and they have lost it most of all with the other small countries in Europe. They retain some sympathy in the American government, but we are not willing to put any money on the table and basically we want the European Union to clean up the problems for us." Tsipras's wild promises 07/04/15   World "Now look at Sunday's referendum. The people have been given eight days to take a decision that will have repercussions for a generation. What's more, the question is convoluted. The people are officially being asked whether to accept or reject an offer made by Greece's creditors on 25 June. They are then referred to two complex documents, which have been translated into Greek from English. One of these was mistranslated to say that the country's debt was unsustainable under all three scenarios considered, whereas it actually said it was unsustainable under only one of the three. The ballot paper also puts 'No', Tsipras's favoured option, above 'Yes'." The Stingy News Weekly: June 28, 2015 06/28/15   SNW I'm pleased to present our free letter for the week ended June 28, 2015. This week we have how to calculate a stock's dividend yield, the Greek collapse, and more." In defense of active investing 06/28/15   Indexing "To the extent investment experts continue to do the important work of advising clients on investment policies to achieve their true objectives and values and sustain their commitments through various markets, our profession will be appropriately admired and well rewarded." Greece closes banks 06/28/15   World "Greece moved to avert the collapse of its financial system, shutting its lenders as of Monday, a measure that will deepen the recession and risk driving the nation toward an exit from the euro." Wishful thinking 06/27/15   Government "There is little sign that states will face reality soon. A recent rule change by the Governmental Accounting Standards Board was intended to bring the deficit calculations of public plans closer to those of the private sector. In practice, however, the CRR found that only seven of 150 plans had reduced their discount rate by more than half a percentage point." Close to the threshold 06/27/15   World "An incoherent proposal from the Greek government opens a new chapter in the crisis" The Stingy News Weekly: June 21, 2015 06/21/15   SNW I'm pleased to present our free letter for the week ended June 21, 2015. This week we have tricky timing, dividend value, buybacks, stop losses, and more. Timing strategies for value investors 06/20/15   Stingy Investing "Conservative investors should think about following Mr. Maida's lead and pare back on stocks because the markets might be sailing into trouble." [$] Dividend stocks and value investing 06/20/15   Value Investing "The results suggest that a sort on a simple value investing measure works well at sorting dividend stocks." Buyback extravaganza 06/20/15   Value Investing "Buybacks may not be well timed in aggregate, but they have been timed well (at least, timed at cheaper relative prices) by companies with the highest conviction buyback programs. These can get lost in the shuffle because, on average, the cash spent on buybacks by these high conviction firms represent 22% of the total cash being spend on buybacks (gross)." Momentum and stop losses 06/20/15   Momentum Investing "Stop losses and other trend following methods are a way to head off some of the usual pitfalls of human judgement, such as the disposition effect, loss aversion, ambiguity aversion, and flight-to-safety. There is no reason why they should not be used by all momentum investors." The Stingy News Weekly: June 14, 2015 06/14/15   SNW I'm pleased to present our free letter for the week ended June 14, 2015. This week we have the Greek banks, 215 years of momentum, bad behaviour, and more. Bruce Greenwald on the great recession 06/13/15   World "Bruce Greenwald talks about an alternative explanation of the great recession at 24th annual Hyman P. Minsky conference." [video] Momentum across time 06/13/15   Momentum Investing "One conclusion we can draw from these results is that whether we are talking about the equity premium, the value premium or the momentum premium, investors require patience and discipline - aided by strong belief - to benefit from most strategies." 215 years of global multi-asset momentum 06/13/15   Momentum Investing "Extending price return momentum tests to the longest available histories of global financial asset returns, including country-specific sectors and stocks, fixed income, currencies, and commodities, as well as U.S. stocks, we create a 215-year history of multi-asset momentum, and we confirm the significance of the momentum premium inside and across asset classes. Consistent with stock-level results, we document a large variation of momentum portfolio betas, conditional on the direction and duration of the return of the asset class in which the momentum portfolio is built. A significant recent rise in pair-wise momentum portfolio correlations suggests features of the data important for empiricists, theoreticians and practitioners alike." Lessons from market extremes 06/13/15   Value Investing "Bottom line: value wins again for consistency the fact that the median value stock has outperformed nicely. Glamour has the more fun and exciting outliers, but the median glamour stock gets killed and even the best ones are extremely volatile." Risky bet on Greece 06/10/15   World "The contrarian American billionaire Wilbur L. Ross Jr. made a bundle betting on the Irish banking system when it was down and out, and a similar wager on Cyprus now looks promising. But Greece may prove to be the toughest test yet of his knack for cashing in on eurozone crisis spots." The Stingy News Weekly: June 6, 2015 06/06/15   SNW I'm pleased to present our free letter for the week ended June 6, 2015. This week we have the death of value investing, bad behaviour, retirement, millionaires, and more. Value investing is far from dead 06/06/15   Stingy Investing "'Bring out your dead!' is the corpse collector's refrain at the start of a classic scene in Monty Python and the Holy Grail. In the movie, the collector encounters a customer who wants to dispose of a body that's, well, not quite dead yet. I was reminded of the scene when reading Ian McGugan's piece in ROB Magazine on the looming death of value investing. Just like the customer in the movie, I think he was little too eager to consign the time-tested strategy to the grave." [$] False assumptions by Ontario pension planners 06/06/15   Retirement "I believe that Canadians are reasonably well prepared for retirement. Most save more than the 5 percent household saving rate. Most can retire comfortably on less than the traditional 70 percent replacement target. The greatest challenges come early in their adult lives when the burdens of acquiring a home and supporting young children strain the family budget. After that, things get easier." Woe betide the value investor 06/06/15   Value Investing "Alas, the fund manager's profession is abysmally depressing. You are regularly reminded by academic research that, on average, you destroy value, net of fees; a monkey randomly selecting stocks, or a cap-weighted index, outperforms you. (Sort of makes you question the value of your MBA degree and CFA designation.) Nor are the select few who have delivered long-term outperformance spared. New evidence suggests that your clients' decisions undo your work, so that, in the end, your contribution to their financial well-being is still quite negative. Your time-weighted returns may be superior, but the dollar-weighted, net-of-fee returns the clients actually receive are nonetheless adverse." Timing poorly 06/06/15   Behaviour "Value investing is viewed as a historically successful investment strategy. The literature generally agrees on the robustness of the strategy but disagrees on the explanations for the success. While the empirical research focuses exclusively on the time-series returns - or the buy-and-hold return - of a value portfolio, the investor experience is, of course, driven by the internal rate of return (IRR) - or the dollar-weighted average return. Although the buy-and-hold average portfolio return may be the proper way to document the anomaly, the dollar-weighted average return can shed light on some interesting questions which cannot be addressed by analyzing the buy-and-hold returns. In particular, examining the dollar-weighted returns allows us to ask whether investors have actually generated superior IRR consistent with the reported buy-and-hold outperformance of value strategies." Frugal millionaires 06/06/15   Thrift "While the popular perception of millionaires is that they are more ostentatious than frugal, recent research shows that single-digit millionaires, at least, are generally far more mindful about how they save, spend and invest their money." The Stingy News Weekly: May 31, 2015 05/31/15   SNW I'm pleased to present our free letter for the week ended May 31, 2015. This week we have P/S, P/B, EV/EBIT, momentum, and more. History of price-to-sales 05/31/15   Value Investing "Price-to-sales is a very simple ratio. Arguably, it is the least nuanced and therefore least manipulated valuation measure. A sale, for the most part, is a sale. Unlike earnings, book value, and other fundamental measures which are sometimes more opinion than fact, sales is a more straightforward number." Tobias Carlisle talks at Harvard 05/31/15   Value Investing "Tobias Carlisle speaking to Michael Parzen's Business Statistics Class, Harvard College, April 21, 2015." [video] Using the price-to-book ratio 05/27/15   Value Investing "One key thing to note about price-to-book: it has tended to push investors towards financials, utilities, materials and industrials, and push them away from health care, technology, and consumer staples." Crisis in Illinois 05/27/15   Bonds "Illinois has one of the worst-funded pension systems in the nation. Chicago also has a pension crisis, leading Moody's Investors Service to downgrade its credit rating to junk status on May 12, potentially threatening the city's ability to borrow. And the state faces an expected budget deficit of $6 billion, which it needs to address quickly. With just days before a legislative deadline, the new Republican governor, who ran on cutting costs and holding down taxes, is at odds with Democrats who hold a veto-proof supermajority in the legislature." Q&A: Mawer vs Vanguard 05/27/15   Stingy Investing "Should investors opt for low-fee active funds that have outperformed in the past. It's a good question. Here are a few of my thoughts." [video] The Stingy News Weekly: May 23, 2015 05/23/15   SNW I'm pleased to present our free letter for the week ended May 23, 2015. This week we have the Top 200, index roulette, Buffett, Watsa, Russo, Gates and more. The original value factor 05/23/15   Value Investing "Book value (or 'common equity' calculated as total assets minus total liabilities) has some advantages. Unlike earnings, it is fairly stable through time and almost always a positive number. This makes calculation easy and leads to lower turnover in a live value portfolio based on price-to-book. Many famous style indexes and money managers use price-to-book to define value." Autonomous cars will reshape the economy 05/23/15   Economy "Most people - experts included - seem to think that the transition to driverless vehicles will come slowly over the coming few decades, and that large hurdles exist for widespread adoption. I believe that this is significant underestimation. Autonomous cars will be commonplace by 2025 and have a near monopoly by 2030, and the sweeping change they bring will eclipse every other innovation our society has experienced." Bill Gates and Warren Buffett 05/23/15   Buffett "Bill Gates talks with his friend Warren Buffett about his rules for smart investing, how he learned to explain complicated financial dealings so clearly, and how he got Bill into bridge and golf." Prem Watsa tells his Horatio Alger story 05/23/15   Watsa "You know why I got that job? Because I got a call for a second interview, and the other three didn't show up." Index roulette revisited 05/23/15   Stingy Investing "Momentum is one of the biggest and most omnipresent forces in financial markets. Its fingerprints can be found in stock returns, across geographies and between asset classes." [$] Russo on long-term value 05/23/15   Value Investing "Tom Russo invests in iconic brand name companies for the long term. Which global businesses is he most enthused about now?" How the dollar store war was won 05/23/15   Markets "The inside tale of how Carl Icahn and a bevy of billionaires brawled in the greatest activist contest of the millennium - for companies that sell panty hose and paper towels to discount shoppers." S&P 500 unhinged from reality 05/18/15   Markets "The concept is embodied in a measure known as the Q ratio developed by James Tobin, a Nobel Prize-winning economist at Yale University who died in 2002. According to Tobin's Q, equities in the U.S. are valued about 10 percent above the cost of replacing their underlying assets -- higher than any time other than the Internet bubble and the 1929 peak." The Top 200 Canadian Stocks for 2015 05/18/15   Stingy Investing "Our annual All-Star stock picks, which combine the best growth and value characteristics, have climbed by an average of 17.3% a year since we started 10 years ago. That assumes an equal dollar amount was put into each All-Star stock in first year and rolled into the new All-Stars each year thereafter. By way of comparison, the S&P/TSX Composite (as represented by the XIC ETF) advanced by just 5.3% annually over the same period. The All-Stars beat the market by an average of 12.0 percentage points per year over the last decade." The Top 500 U.S. Stocks for 2015 05/18/15   Stingy Investing "The U.S. All-Stars have performed very well since the stock market collapse in 2008. If you had purchased equal dollar amounts of them six years ago and rolled your portfolio into the new list of All-Stars each year, you'd have gained 22.9% per year on average. The market also fared well over the same period with the S&P 500 (as represented by the SPY ETF) advancing 13.6% per year." The Stingy News Weekly: May 17, 2015 05/17/15   SNW I'm pleased to present our free letter for the week ended May 17, 2015. This week we have asset growth, rebalancing, tax avoidance, value investing, and more. David Mitchell on tax avoidance 05/15/15   Fun "Comedian David Mitchell on talks about tax avoidance." What's wrong with finance 05/15/15   Economics "Both financiers and economists still get the blame for the 2007-2009 financial crisis: the first group for causing it and the second for not predicting it. As it turns out, the two issues are connected. The economists failed to understand the importance of finance and financiers put too much faith in the models produced by economists." The O'Doul's of value investing 05/15/15   Value Investing "I don't really get why anyone would prefer fundamental index to more concentrated, pure-play bets on value or shareholder yield. Let's see why." Is your asset allocation a bit askew? Relax 05/11/15   Stingy Investing "If your asset allocation is a little askew, relax. Minor variations probably won't make a big difference to your overall results. Instead, slowly tune up your portfolio in a cost-effective manner." The Stingy News Weekly: May 9, 2015 05/09/15   SNW I'm pleased to present our free letter for the week ended May 9, 2015. This week we have new retirement math, value and momentum, getting richer, and more. Combining value and momentum 2 05/09/15   Value Investing "We find that sorting stocks on value and then momentum has been a historically successful strategy. However, sorting stocks on value and then quality, which is inline with a fundamental value philosophy, works just as well, if not better. We hypothesize that the .momentum. effect identified within the cheap stocks bucket, is really a proxy for strong fundamentals and positive operational momentum among the cheapest, highest quality value stocks. Our preference.based on empirical and philosophical grounds.is to go with a more .pure. value philosophy that focuses on buying the cheapest, highest quality value stocks, as opposed to a muddled value approach that buys the cheapest, highest momentum value stocks." New math for retirees 05/09/15   Retirement "The big question now - difficult even for an aerospace engineer to answer - is whether a new worst case is beginning to play out, given the painfully low interest rate environment, which yields little for safer bond investments, where retirees often hold a big portion of their money." A kinder philosophy of success 05/09/15   Behaviour "Alain de Botton examines our ideas of success and failure -- and questions the assumptions underlying these two judgments. Is success always earned? Is failure? He makes an eloquent, witty case to move beyond snobbery to find true pleasure in our work." Greece saunters across the autobahn 05/07/15   World "If you want to predict what people will do in most financial situations, then figure out what is in their narrow self-interest to do, and assume they will sooner or later figure it out, too. But that doesn't work when people's behavior isn't confined to the narrow channel of self-interest. That's why it's so hard to predict which way the Greek people will jump. And why it must feel so tempting, when they jump right in front of your BMW, to simply run them over." Methods to improve the Piotroski F-Score 05/04/15   Value Investing "We have identified ways to improve the baseline Piotroski F-Score and enhance value investing strategies. The final product is the FS-Score, which incorporates net-share repurchases and free-cash-flow metrics and arranges the metrics to align closer with traditional value-investing principles." Adopting factor investing 05/04/15   Markets "Over the years, academics have compiled an extensive body of research demonstrating the existence and characteristics of various factor premiums. But do their findings hold up in the real world, when factor strategies are implemented by mutual funds? This is a vital question for investors because, unfortunately, there's often a long way to go from theoretical returns (which don't include implementation costs) to realizable returns (which do)." The rich are getting richer 05/04/15   Markets "Profit margins have been steadily rising for huge companies, but margins have been stagnant or falling for smaller companies. Clearly, the large are getting richer. But viewed a slightly different way we see an even more exaggerated trend: the rich are getting richer." To hedge, or not to hedge 05/04/15   Hallett "ETFs provide many options for hedging, but you need to ask whether or not this is necessary for your clients" Retirement 100: Fall 2014 05/04/15   Stingy Investing "We're happy to report that our efforts have paid off handsomely so far. If you had rolled your portfolio into our new batch of A-graded stocks every year since our launch in 2007, you would have enjoyed a total gain of 142%. You'd be up a total of 91% if you had followed stocks with either A or B grades. That's pretty good, considering that the market suffered from a huge crash during that period. By way of comparison, the S&P/TSX Composite Index ETF (XIC), which tracks the broad Canadian stock market, logged a total return of just 38% over the same period. We also beat the dividend-oriented iShares Canadian Select Dividend ETF (XDV), which climbed by 58%." Tiny margins for tiny companies 05/04/15   Markets "The U.S. market's profit margin remains very high, but smaller stocks are suffering. While margins for the largest companies have remained well above their long-term averages, margins for the 40% of stocks in the market with smaller market caps have current margins well below their long-term average. This divergence highlights a broader key point: small caps provide unique opportunities and dangers, but are often lost in a market dominated by large caps." The Stingy News Weekly: May 3, 2015 05/03/15   SNW I'm pleased to present our free letter for the week ended May 3, 2015. This week we have Buffett, Watsa, value, and more. Financial ignorance is widespread 05/03/15   Education "Lusardi and Mitchell found that providing financial knowledge to people with low levels of formal education boosts their economic situation by an amount equivalent to 82 percent of their initial wealth, while the equivalent value for college graduates is a substantial 56 percent." Back to basics 05/03/15   Stocks "The business, which had lost its triple-A rating, was designated a 'systemically important financial institution,' and that limits the amount of leverage it can use and subjects it to tougher regulations." Another Gladwell mindworm dies 05/03/15   Behaviour "Wouldn't it be cool if there was a simple trick to score better on college entrance exams like the SAT and other tests? There is a reputable claim that such a trick exists. Unfortunately, the trick does not appear to be real." The 2015 Berkshire Hathaway AGM 05/02/15   Buffett "MoneyBeat live-blogged the all-day event from Mr. Buffett's first sip of cherry Coke to his last bite of See's candy. Here's how it all went down" I was wrong on interest rates 05/02/15   Buffett "Buffett said that he wouldn't have predicted that interest rates could have stayed this low for this long without a problem. 'So far, I have been wrong on interest rates,' said Buffett. 'It is so hard for me to believe that you can drop money from a helicopter and not have inflation, but we haven't.'" Seeing the future from the past 05/02/15   Markets "Across the board, consumer staples stocks have dominated. They've delivered the highest return, and the second lowest overall AND downside volatility. Technology has been the polar opposite, delivering lackluster and volatile returns to investors." Lifting the hood on low-volatility ETFs 05/02/15   Hallett "These ETFs are designed to smooth the ride for risk-adverse clients, but take the time to understand the strategy" Frank Martin speaks in Toronto 04/27/15   Value Investing "Frank Martin talks about CAPE" Russell Napier speaks in Toronto 04/27/15   Value Investing "Mr. Napier talks about equity valuation, inflation, deflation and mean reversion" The Stingy News Weekly: April 26, 2015 04/26/15   SNW I'm pleased to present our free letter for the week ended April 26, 2015. This week we have success, the next generation, mortgages, taboos, value, and more. The next generation of value investors 04/25/15   Stingy Investing "To the youth of today, Ferris Bueller's Day Off is a movie from a bygone age. But the '80s hit came back to me when I saw three teams of MBA students advising investors to 'skip' a little-known company with a name reminiscent of the movie's main character." The paradox of success 04/25/15   Retirement "The paradox of success is this: The mental wiring that enables a person to claw to the tippy-top of Corporate America or sports or entertainment or any other field that offers vast wealth is the same mental wiring that most of the time leads people not to retire before they have to - no matter what the diminishing marginal utility of money would suggest." On the Gredge 04/23/15   World "A Greek exit from the euro may soon become inevitable" What's scary about mortgages in Canada 04/21/15   Real Estate "if real estate disappoints and/or interest rates swell, just when it comes time to renew your mortgage in three to five years, well, I guess these 1.8 million Canadian families will learn what it's like to run their house like a hedge fund." The money taboo 04/20/15   Behaviour "Knowledge was power, and knowing how much things cost would lead to movement among the social classes" The Stingy News Weekly: April 19, 2015 04/18/15   SNW I'm pleased to present our free letter for the week ended April 18, 2015. This week we have Apple, value, and more. Ben Graham Centre conference slides 04/19/15   Value Investing The slides used at least week's value investing conference are now available. Take heart, value investors 04/17/15   Value Investing "These are tough times for bargain-hunting investors. Ever since the financial crisis, most value-oriented portfolios of stocks have lagged the broad market, and for fairly obvious reasons. When central banks are injecting massive amounts of money into the economy, and holding interest rates at record lows, investors have no great reason to be choosy about which companies to buy. The entire market is headed up." The Stingy News Weekly: April 12, 2015 04/12/15   SNW I'm pleased to present our free letter for the week ended April 12, 2015. This week we have Buffett, Marks, Greenblatt, value, and more. Rock stars of value investing 04/12/15   Stingy Investing "When Mr. Watsa takes centre stage on Thursday to opine about his company and the markets more generally, it will be interesting to get a measure of his bearishness." Joel Greenblatt speaks with Howard Marks 04/12/15   Value Investing "Joel Greenblatt Managing Partner and Co-CIO of Gotham Asset Management speaks with Howard Marks Chairman, Oaktree Capital Management L.P." [video] Why are you working? 04/11/15   Behaviour "If you are like us, you often find yourself working on weekends and are criticized by somebody (your spouse, a friend, a colleague) who thinks there is something inherently wrong in spending some time over the weekend on work-related activities. Do they have a point?" Benjamin Graham and index funds 04/11/15   Graham "Benjamin Graham also believed in index funds, as his own statements show." Ivey students meet Buffett 04/11/15   Buffett "One thing that Sam Walton and Mrs. B had in common is they had passion for the business. It isn't about the money, at all. It was about winning. Passion counts enormously; you have to really be doing it because you love the results, rather than the money. When we buy businesses, we are looking for people that will not lose an ounce of passion for the business even after their business is sold. And getting in bed with people like that is what it's all about." The Stingy News Weekly: April 4, 2015 04/04/15   SNW I'm pleased to present our free letter for the week ended April 4, 2015. This week we have Buffett, Chou, Marks, value, momentum, repurchases and more. Buffett can't find cheap stocks to buy 04/04/15   Buffett "Legendary investor Warren Buffett is not ready to say stocks are in bubble territory, but he also thinks there are 'very few' cheap stocks out there." How to combine value and momentum 04/04/15   Value Investing "The evidence suggests that we keep highly active exposures to value and momentum in their purest forms (assuming we are doing high-conviction non-watered down versions of the anomalies). Blending the strategy dilutes the benefit of value and momentum portfolios." Howard Marks talks at Google 04/04/15   Value Investing Howard Marks talks about investing with people at Google. [video] How I was almost suckered into a pyramid scheme 04/04/15   Crime "This got me thinking. What makes people like this so effective? How is it that smart people routinely lose their life savings to hucksters? How can we identify their strategies in advance so that we don't fall into these traps? While I don't have all the answers, the presenter at this event used many classic emotional-manipulation techniques discussed by Robert Cialdini in his book, Influence" The power of share repurchases 04/04/15   Value Investing "Each incremental refinement to investing in the U.S. large cap stocks has led to significant improvement in returns. After controlling for nefarious or misguided motivations, a strategy based on both dividends and buybacks has delivered outsized returns since 1982. Further qualifying the strategy by insisting on attractive valuations and high quality earnings creates a strategy that has been formidable in what arguably should be the most efficient area of the global stock market." How Chicago used financial engineering 04/04/15   Government "Unsurprisingly, some of Chicago's bonds are already trading at junk levels. That said, the rating agencies and most other market participants still appear to be light years away from understanding the true scope of Chicago's financial problems. The city has a very - well, let's just call it unconventional - approach to borrowing money and probably should not be considered investment grade." Dogs ready for a rebound 04/04/15   Stingy Investing "Long-term reversal is just the sort of momentum effect that value investors love. After all, if a company can resolve the troubles that sent it tumbling in the first place, its stock may bounce back to its former highs." The Stingy News Weekly: March 28, 2015 03/28/15   SNW I'm pleased to present our free letter for the week ended March 28, 2015. This week we have Munger, Chou, Pabrai, Spier, and more. Chou annual for Canadians 03/28/15   Chou "In 1981, I felt the economic conditions were such that you were set up for a huge success. You just needed the courage to load up the truck and buy everything in sight. By contrast current conditions make me feel that investors are being set up for a heartbreaking disappointment, especially for the unwary." Mohnish Pabrai and Guy Spier 03/28/15   Value Investing "Mohnish Pabrai and Guy Spier in conversation with Saurabh Madaan at Google" [video] A liberal heretic contradicts Piketty 03/28/15   Economics "Despite Rose's pedigree and his meticulous, thoughtful studies pointing out that the supposed stasis in living standards for the poor and middle class doesn't hold up, a contrary narrative has taken root in the media and few dare to contradict it." Kraft-Heinz 03/28/15   Buffett "That sounds like a good deal to me. You get a nice premium, and you end up with a better stock than you owned previously. You were stuck with sort of a no-growth situation and suddenly there is hope. The new Kraft-Heinz (synergies are already priced into the above metrics) would not only have better margins, but also a much more interesting and promising growth profile than the current KRFT." Munger mocks Greek idea 03/28/15   Munger "Billionaire investor Charles Munger faulted Greek citizens for their notion that you can 'vote yourselves rich.'" The Stingy News Weekly: March 22, 2015 03/22/15   SNW I'm pleased to present our free letter for the week ended March 22, 2015. This week we have consistency, problems, advisors and more. How fees, taxes, and inflation impact returns 03/20/15   Stingy Investing "It is vitally important for investors to reduce, where possible and legal, investment-related fees and taxes. Those who don't might wind up taking all the risk and getting very little in the way of real returns." [video] Advisors behaving badly 03/20/15   Funds "Investors should similarly watch out for advisors changing firms or recommending moving portfolios to segregated funds or other DSC mutual funds that may trigger a new set of commissions. (New DSC purchases will also have you pay a fee to exit the funds within the next 6-7 years.)" No, that's not the IRS calling. Just hang up. 03/20/15   Crime "Phone calls by fraud artists posing as Internal Revenue Service employees and demanding money have surged in recent months" The stock-bond disconnect 03/20/15   Markets "How should one understand the disconnect between the new highs reached by global equity indices and the new depths plumbed by real interest rates worldwide? Several competing explanations attempt to reconcile these trends, and getting it right is essential for calibrating monetary and fiscal policy appropriately." Eating better 03/20/15   Behaviour "There are all sorts of ways that companies can help people eat better and make more money" Problems with the Dow 03/20/15   Stingy Investing "My main beef isn't with Apple but with the Dow itself. While I don't want to see the average fade away entirely, it should be retired and replaced with a more diversified index such as the S&P 500 for most purposes." 3 Stingy Stocks for 2015 03/19/15   Stingy Investing "It's worked well so far because the Stingy Stocks have gained 15.2% per year on average since 2001. By way of comparison, the S&P500 (as represented by the SPYETF) advanced only 6.5% a year over the same period. The Stingy Stocks bested the index by an average of 8.7 percentage points a year." 3 Graham Stocks for 2015 03/19/15   Stingy Investing "If you had purchased equal dollar amounts of the Graham stocks and replaced them with the new batch each year, your portfolio would be up a whopping 877% (18% annualized) over the full period." The Stingy News Weekly: March 15, 2015 03/15/15   SNW I'm pleased to present our free letter for the week ended March 15, 2015. This week we have letters, watches, time, and more. Third Avenue Funds letter 03/14/15   Value Investing "In analyzing junior securities of companies with perpetual lives, especially the common stocks of corporations, markets tend to be quite inefficient in measuring long-term underlying value." Fairfax 2014 letter 03/14/15   Value Investing "The CAPE (Cyclically Adjusted Price Earnings) Ratio for the S&P500 is currently at 28 times. It has been higher only twice before; both times ended badly. The first time was in 1929 and the second time during the dot.com boom of 1999 to 2002. The rising U.S. dollar (with over 40% of the average S&P500 companies' earnings coming from abroad) and the current record after-tax profit margins, combined with deflation, could result in significant declines in the earnings of the S&P500 companies - just as the index hits record highs. We say 'caveat emptor', and continue to be very cautious about our equity positions. I have reminded you many times in past Annual Reports of the warning from the distant past from our mentor Ben Graham: 'Only 1 in 100 survived the 1929 - 1932 debacle if one was not bearish in 1925'." Sequoia Fund 2014 report 03/14/15   Value Investing "One reason we think the trend could have legs is that markets continue to grow more efficient. Our colleague Greg Alexander likes to say 'the Index is a lot better than it used to be.' U.S. corporate managements are generally competent and focused on creating shareholder value. There are not a lot of mutts left in the kennel, so to speak, so winning the dog show is harder." A pioneer of the investment industry 03/14/15   Kahn "His passion for investing shown through in everything he did. We owe him a great deal of gratitude because he helped to demonstrate that investing should be moved from the back office to the executive suite." TFSA criticisms miss key points 03/14/15   Taxes "The TFSA isn't just a popular savings instrument among Canadians, especially for many middle-income Canadians facing retirement. It is also an economic tool, generating economic growth, jobs - and ultimately government revenues. Anyone examining the 'costs' of TFSAs must also look at the benefits." Watch prices and the industrial revolution 03/14/15   Academia "Although largely absent from modern accounts of the Industrial Revolution, watches were the first mass produced consumer durable, and were Adam Smith's pre-eminent example of technological progress. In fact, Smith makes the notable claim that watch prices may have fallen by up to 95 per cent over the preceding century; a claim that this paper attempts to evaluate. We look at changes in the reported value of over 3,200 stolen watches from records of criminal trials in the Old Bailey court in London from 1685 to 1810. Before allowing for quality improvements we find that the real price of watches in nearly all categories falls steadily by 1.3 per cent per year, equivalent to a fall of 75 per cent over a century, a rate considerably above the growth rate of average labour productivity in British industry in the early nineteenth century." Daylight saving time 03/14/15   Fun "Daylight saving time doesn't actually benefit anyone. Strangely, it's still a thing!" [video] The Stingy News Weekly: March 7, 2015 03/07/15   SNW I'm pleased to present our free letter for the week ended March 7, 2015. This week we have austerity, TFSAs, deep value and more. Days to cover and stock returns 03/07/15   Academia "The short ratio -- shares shorted to shares outstanding -- is an oft-used measure of arbitrageurs' opinion about a stock's over-valuation. We show that days-to-cover (DTC), which divides a stock's short ratio by its average daily share turnover, is actually the theoretically correct measure because trading costs vary across stocks. Since trading costs are inversely related to share turnover, DTC is then approximately the marginal cost of the shorts. At the arbitrageurs' optimum it equals the marginal benefit of the shorts, which is their opinion about over-valuation. Consistent with our model, DTC is a stronger predictor of poor stock returns than short ratio. It is distinct from the stock lending fee effect but has comparable forecasting power. An equal-weighted long-short strategy based on DTC generates a significant return of 1.2% per month." Austerity is not Greece's Problem 03/07/15   World "Unsustainable growth paths often end in a sudden stop of capital inflows, forcing countries to bring their spending back in line with production. In Greece, however, official lenders' unprecedented munificence made the adjustment more gradual than in, say, Latvia or Ireland." Get your income here 03/07/15   Markets "According to Citigroup, the dividend yield on the equity market is higher than the 10-year government bond yield in Australia, Canada, France, Germany, Japan and the UK. In the US, the two yields are neck-and-neck but equity investors can get an extra cashflow boost from buy-backs." Tobias Carlisle interview 03/07/15   Value Investing "I had a lot of fun recording an interview with Stig Brodersen and Preston Pysh of The Investors Podcast on one of my favorite subjects, deep value investing." Chou America Annual 03/05/15   Chou "We believe that CDS are starting to sell at prices that are becoming interesting. At recent prices, they appear to offer one of the potentially cheapest forms of insurance against market disruptions. We are continuing to monitor CDS prices and may potentially invest in CDS in the future." The Stingy News Weekly: March 1, 2015 03/01/15   SNW I'm pleased to present our free letter for the week ended March 1, 2015. This week we have Buffett, the long term, value and more. Hunting for value in the stock market 03/01/15   Stingy Investing I was very pleased to give a talk to the friendly folk at a Canadian MoneySaver conference this weekend. Here's a copy of the slides that were used. (I'd also like to thank everyone who gave me feedback on them!) Cliff Asness interview 03/01/15   Funds "In a far-ranging 90 minute conversation, we discuss everything from value to momentum to the small cap effect. We also discuss the Efficient Market Hypothesis, how and why markets can be irrational, and what it was like to be part of the Quant Flash Crash of 2007. If you are interested in what quants actually do, be sure to check out the podcast portion when its posted." No new bets in 80 years 03/01/15   Funds "Equity investors pursuing a buy-and-hold strategy might want to check out a fund that hasn't made an original stock market bet in 80 years. The Voya Corporate Leaders Trust Fund, now run by a unit of Voya Financial Inc bought equal amounts of stock in 30 major U.S. corporations in 1935 and hasn't picked a new stock since." Learn from Buffett 03/01/15   Stingy Investing "Value investors are thinking about lives well lived this week. They're looking forward to reading what Warren Buffett and Charlie Munger have to say about Berkshire Hathaway's next 50 years. At the same time, they're celebrating the life of Irving Kahn who gave Methuselah a run for his money." Berkshire's 2014 Letter 02/28/15   Buffett "Undeterred by my first mistake of committing much of BPL's resources to a dying business, I quickly compounded the error. Indeed, my second blunder was far more serious than the first, eventually becoming the most costly in my career." The Stingy News Weekly: February 21, 2015 02/21/15   SNW I'm pleased to present our free letter for the week ended February 21, 2015. This week we have dogs, retirement, freedom, and more. Is it time to dump market-cap weighting? 02/20/15   Indexing "We are not trying to say market-capitalization indexing is a bad thing, it is better than many of the alternatives out there. The problem we often see, however, is that investors do not realize how big of an allocation Canadian markets have toward a few industries." The Financial Freedom Index 02/20/15   Retirement "My adjustments suggest that a median Canadian family in 2015 has about $74,000 in annual after-tax income. I figure to generate that same income in a portfolio split evenly between Canadian stocks and Canadian five-year government bonds, you would need just under $4.5-million." [For those who want to party like Bertie Wooster.] Achievable retirement planning 02/20/15   Retirement "Despite widespread warnings to the contrary, veteran financial planner and investment advisor Jonathan Pond believes no matter what your age or circumstances you can take steps to get your financial house in order and achieve a comfortable retirement." [video] The Stingy News Weekly: February 14, 2015 02/14/15   SNW I'm pleased to present our free letter for the week ended February 14, 2015. This week we have book value, caffeine, free money, and more. Why the high street is overdosing on caffeine 02/14/15   Economics "He found that even a market full of independents will seem a little too crowded. This is because firms will keep showing up and looking for customers until there is not enough demand to cover their costs. The last entrepreneur to enter is the one that just breaks even, scraping together enough customers to pay for the cost of setting up the business. She is indifferent to whether she is in business or doing something else entirely. However, every other entrepreneur in the crowded market is wishing that she had stayed away." Nestle is getting paid to borrow money 02/14/15   Bonds "Once upon a time, you actually had to pay lenders to borrow money. It was an archaic ritual called 'interest'" Piotroski Score Backtest Part 2 02/14/15   Value Investing "As you can see in the bar chart above, average excess returns are negative for F-Scores below 3. The average excess returns then climb up from just over zero for F-Score 3 and then climb steadily to about 5% for F-Score 8. Then the average excess returns jump to 9% for F-Score 9. There appears to be something a bit special for getting a perfect score. However, we have to be careful not to draw too many conclusions about F-Score 9, since the average portfolio size for Piotroski Score 9 is only 34 positions." Ebitda abuse 02/14/15   Accounting "As investors engage in an increasingly desperate global competition for higher-yielding securities, debt issuers appear to be taking advantage of the extraordinary demand by manipulating one of Wall Street's favorite metrics of profitability." Concentrated P/B does badly 02/14/15   Value Investing "Book to price is a bad value factor. It is a decent stock selection factor overall, but relative to the other ways of measuring value (earnings to price, cash flow to price, EBITDA/EV, etc) it is sub par." Martin Whitman interview 02/14/15   Whitman "In this exclusive interview taped at the Museum of American Finance, Whitman takes on Congressional and Wall Street ignorance about debt, credit worthiness, and earnings." [video] Rummaging through the stock bargain bin 02/14/15   Stingy Investing "Value investors like to buy discounted stocks and they spend their days rooting through the market's half-off bin. But they have to be wary because, much like dollar-store specials, the bargains can be illusory." The Stingy News Weekly: February 7, 2015 02/07/15   SNW I'm pleased to present our free letter for the week ended February 7, 2015. This week we have new tricks, low-cost investing, misfits, and more. Eveillard: Legendary Value Investor 02/07/15   Value Investing "An exclusive interview with legendary value investor Jean-Marie Eveillard" [video] Piotroski F-Score backtest 02/07/15   Value Investing "This backtest for Piotroski F-Score reveals that the first quintile underperforms the S&P 500 Equal Weight Index benchmark. These companies typically weak balance sheets and weak earnings performance so it is not surprising that stock returns for these companies would underperform. The second through fifth quintiles have higher than average annual excess returns than each of the previous quintiles. I like that there was a consistent linear trend upwards from the 1st to 5th quintiles. The Piotroski F-Score does appear to be a powerful fundamental predictor of 1-year stock performance." Misfit stocks 02/07/15   Indexing "These types of stocks have at least two advantages. First, well, they're neglected and underappreciated, which means investors have low expectations for them. Second, they often have depressed prices, which makes for a potentially favorable starting point." How Taxes Can Impact Your Investments 02/07/15   Stingy Investing "Taxes can dramatically reduce your long-term returns. Learn what a 23% capital gains tax, levied annually, can do to stock market investors." [video] The Impact of Fund Fees on Long Term Returns 02/06/15   Stingy Investing "A quick look at how much you give up by picking a high fee fund and holding it over the very long term." [video] The Stingy News Weekly: January 31, 2015 01/31/15   SNW I'm pleased to present our free letter for the week ended January 31, 2015. This week we have profits, low expectations, funny economics, and more. 10-year expectations for asset class returns 01/31/15   Markets "Do we have convincing evidence that starting yields determine subsequent returns? Yes." Drivers of a profit margin explosion 01/31/15   Markets "In this piece, I'm going to show that the profit margin expansion seen in the U.S. corporate sector over the last two decades has been driven largely by gains in the financial and technology sectors. I'm then going to examine arguments for and against the sustainability of this shift." World CAPEs 01/31/15   Markets "The Shiller P/E can be used in a valuation context, by comparing the current multiple to the historical values. As the multiple gets stretched far beyond the average, reversion is expected to occur." A mock economics talk 01/31/15   Fun "Zach Weinersmith of Saturday Morning Breakfast Cereal gives a mock economics talk entitled 'Economic-con 2015: A Theory of Maximizing Social Welfare via Top-Decile Earners.'" Asset Mixer Update 01/31/15   Stingy Investing We've updated our Asset Mixer to include inflation-adjusted data for 2014. Periodic Table Update 01/31/15   Stingy Investing We've updated our periodic table of annual returns for Canadians to include inflation-adjusted data for 2014. The best of the biggest 01/31/15   Stingy Investing "Inequality also happens to be the rule rather than the exception on Wall Street. Capitalism usually produces a handful of giants firms and a slew of tiny nippers that peck away at what's left over." The Stingy News Weekly: January 25, 2015 01/25/15   SNW I'm pleased to present our free letter for the week ended January 25, 2015. This week we have record, unloved, baseball, and more. What now for Greece? 01/25/15   World "With 90 percent of the vote counted, Syriza, an acronym for Coalition of the Radical Left, took 36.3 percent, just two seats short of an absolute majority. Leaders of smaller parties signaled their willingness to back Tsipras in the formation of a new government." Unloved stocks 01/25/15   Markets "Curiously, stocks with the fewest buy recommendations have been outperforming the broader market" Median P/Es at post-war record 01/25/15   Markets "Finally, rather than suggest an imminent bear market, the widespread overvaluation of the U.S. stock market mostly indicates vulnerability." Venezuela should be rich 01/24/15   World "The problem with socialism isn't that you eventually run out of other people's money. It's that you eventually run out of oil money. Well, at least in Venezuela." The Stingy News Weekly: January 18, 2015 01/18/15   SNW I'm pleased to present our free letter for the week ended January 18, 2015. This week we have when to retire, the despised, big banks, and more. Buy the most despised company 01/18/15   Value Investing "Between April 1983 and December 2007, the despised portfolio outperformed the admired one by more than 2 percentage points per year, on average. In addition, the professors found that increases in admiration were, on average, followed by lower returns." Claiming a loss 01/18/15   Taxes "It makes sense, then, to segregate any day trading activity (sometimes considered on income account) into a separate account from your buy-and-hold securities." Playing big-bank poker 01/18/15   Stingy Investing "Last year, I challenged readers to pick the best, and the worst, big Canadian bank to buy in 2014. With only six of them to choose from, it seemed like a simple task. But no one got it quite right." Dogs of The Footsie 01/18/15   Dividends "The dogs are also well ahead over the past 13 years, growing by an average annual 16.3 per cent in total return terms, two-and-a-half times the 6.5 per cent total return figure for the index." Pat Dorsey Lecture 01/18/15   Value Investing "What does it mean for a company to have a moat? What are the key drivers to valuation? Pat Dorsey will use examples to shed light on these, and more questions." [video] The Stingy News Weekly: January 12, 2015 01/12/15   SNW I'm pleased to present our free letter for the week ended January 12, 2015. This week we have Greeks, spending, anomalies, shareholder value, and more. MiB: Patrick O'Shaughnessy 01/12/15   Books "O'Shaughnessy discusses that despite the difficulties of the economic environment, youth have tremendous advantages youth in terms of an investment horizon of up to half a century. This allows compounding to take place. In our conversation, we discuss active versus passive, why investors are their own worst enemies, and what they should - and should not - be doing." Shareholder value is undervalued 01/12/15   Markets "Those who say maximizing shareholder value is something like 'the worst idea ever' are essentially saying markets are wildly inefficient - disastrously and obviously so - at setting prices. Now, one is free to believe this extreme hypothesis. One can believe that markets are horrifically bad no matter how much I, and the legion of evidence, may disagree. One is free to cite the handful of exceptions that actually prove the rule here (exceptional managers and exceptional times for markets) and believe market prices consistently have no toehold on reality. But one must acknowledge that the trendy denunciation of 'maximize shareholder value' is exactly this self-same extreme radical denunciation of markets themselves. If you believe maximize shareholder value is the 'worst idea ever' you aren't simply cynical about how well markets function. No, you go much further. You directly claim they are utter disasters and that you have a better way. Good luck with that. Of course, you could temper your view, perhaps rephrase as 'maximizing shareholder value is a pretty good though imperfect idea and here are a few suggestions for improvement,' but those articles are way less exciting..." Institutional investors and stock return anomalies 01/12/15   Academia "We examine institutional investor demand for stocks that are categorized as mispriced according to twelve well-known pricing anomalies. We find that institutional demand during the year prior to anomaly portfolio formation is typically on the wrong side of the anomalies' implied mispricing. That is, we find increases in institutional ownership for overvalued stocks and decreases in institutional ownership for undervalued stocks. Moreover, abnormal returns for all twelve anomalies are concentrated almost entirely in stocks with institutional demand on the wrong side. We consider several competing explanations for these puzzling results." The spectre of a Grexit 01/12/15   World "Meanwhile the messages from Berlin are becoming louder: Greece should in principle stay in the euro, but Mr Tsipras's demands for a debt write-off and spending binge are unacceptable. The spectre of a Grexit, laid to rest while the Samaras government got on with its reforms, has resurfaced." Asset Mixer Update 01/08/15   Stingy Investing We've updated our Asset Mixer to include nominal data for 2014. Periodic Table Update 01/08/15   Stingy Investing We've updated our periodic table of annual returns for Canadians to include nominal data for 2014. The Stingy News Weekly: January 4, 2015 01/04/15   SNW I'm pleased to present our free letter for the week ended January 4, 2015. This week we have resolutions, surging, red tape, and more. The education of a value investor 01/04/15   Books "Guy Spier talks about his book at Google" [video] Surge 01/03/15   Economics "Suppose you just don't care about distribution and you favor price-rationing of scarce goods over alternative schemes full stop. Then you should still be troubled by Uber's surges, because Uber itself is a cartel." Red tape is strangling good samaritans 01/03/15   Government "Regulations and rules are making it harder to do the right thing." Check out low-fee balanced funds 01/03/15   Stingy Investing "If you're just getting into the markets then it's best to test the water by putting a small amount of money into a balanced fund. If the ride proves to be too wild then it's an easy matter to lean more heavily on bonds and GICs. Alternately, those who don't mind the ups and downs might tilt their portfolios a little more heavily to stocks. Either way, it's a valuable lesson to learn before putting a large amount of money at risk." Why Are Resolutions So Hard To Follow? 01/01/15   Behaviour "While setting New Year's resolutions is routine for many of us, research from the University of Scranton shows while 45% of Americans usually make New Year's resolutions, only 8% actually stick to them. So, why are resolutions so quickly discarded? The easy answer is because most resolutions require a change in habit." 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