The Stingy News Weekly (01/11/02)
The Markets This Week
DOW 30: 9,987.53 -2.65% to a P/E of 28.2
TSE 300: 7,701.93 -1.68% with a negative P/E
The Value View
Dow at a P/E of 20: 7,083 (-29.1%) Poor Value
Dow at a P/E of 15: 5,313 (-46.8%) Fair Value
Dow at a P/E of 10: 3,542 (-64.5%) Good Value
Of risk and myopia
"To repeat: the risk tolerance of an investor is determined largely by how often he checks his portfolio. This is nothing new. Benjamin Graham commented in The Intelligent Investor that holders of obscure mortgage bonds happily held onto them through the depths of the Depression until they eventually recovered their value because they were highly illiquid and not often quoted. On the other hand, holders of frequently-quoted corporate bonds (far less risky but priced daily in the papers) panicked and sold after their initial drop."
One number that won't lie
"But anyone can understand that business success is ultimately about earning more money than your capital costs. With that in mind, take a fresh look at some of today's most important business stories."
Are we there yet?
"Like unhappy families, every recession is different. Some are short and shallow, others protracted and deep. Since the early 1950s none has lasted for more than 16 months. If this one were to match the record jointly held by the slumps of 1973-75 and 1981-83, it would end in July 2002."
Nebraska Business interviews Buffett
"The simple test of good ethics, is how would you feel about any act, if a reasonably intelligent, but unfriendly reporter were to write it up and put it in tomorrow's paper for everyone to see. If it passes that test, it's okay, and if you have to think about it, it probably isn't the right thing to do." [PDF]
New Economy goes from Boo.com to boo-hoo
"Let's take a look at your investment portfolio. In the current market, you should have most of your money in something fairly conservative, such as a coffee can buried under your house. If you want to diversify, you might consider investing in two separate coffee cans. Whatever you do, do NOT put money in the stock market."
The trivia questions this week are:
Q1. Who said "I don't read economic forecasts. I don't read the funny papers."?
Q2. Who said "An investor who has all the answers doesn't even understand the questions."?
Q3. Who said "Markets can remain irrational longer than you can remain solvent."?
The answers for last week's trivia questions are:
Q1. What is Buffett's first rule of investing?
A1. Rule 1: Never Lose Money
Q2. What is Buffett's second rule of investing?
A2. Rule 2: Never forget Rule 1
Q3. What is Buffett's first instruction in his succession plan?
A3. "When they open that envelope, the first instruction is to take my pulse again."
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