The Stingy News Weekly (01/23/2011)
Stingy News Flash
I'll be speaking at The Investment Show (http://www.theinvestmentshow.ca). The show is being held at the Hyatt Regency, 370 King Street West in Toronto on February 5 and 6. I'm due to go on at 10am on the 6th and I'll be available to chat afterwards at the Canadian MoneySaver booth. If you preregister, a weekend pass is $10. (Canadian MoneySaver subscribers are eligible for an even better deal.)
New @ StingyInvestor
7 Graham Stocks for 2011
"Graham's time-tested strategy for defensive investors gained ground this year but, in a rare turn of events, it failed to beat the market. As a result, it has only bested the market in eight out of the last ten years which, as they say, ain't bad."
"A flush Berkshire Hathaway is in its best shape ever and piling up cash so quickly that it could be sitting on close to $50 billion at its core insurance operation alone by year end, and might even begin paying a dividend. Berkshire's profit recovery, aided by some smart acquisitions and investments by CEO Warren Buffett -- notably its purchase of the Burlington Northern railroad -- has gone largely unrecognized on Wall Street, where Berkshire's Class A shares, now trading around $121,000, haven't budged in nearly a year."
Hedge Fund Analyst Checklist
"Anyways, I was cleaning out some old files and came across these notes from the class and thought I would repost them as they are a wonderful guide for a young analyst on how to think about investing in stocks."
A path to escape debt
"Policymakers are working behind the scenes to come up with a way to let states declare bankruptcy and get out from under crushing debts, including the pensions they have promised to retired public workers."
A continuing disgrace
"However, what is disgraceful is that savers cannot hedge this inflation risk. The government stopped the sale of index-linked national savings certificates last year. This was not because the government didn't need the money the budget deficit is still £150 billion. It can only be viewed as a deliberate attempt to punish savers by denying them the chance of a positive real return. And slamming savers is not in the country's long-term interest."
China is a bubble close to bursting
"The Mayfair hedge fund manager said he started work when he saw some news reports on China’s “ghost towns”. Last year Al Jazeera, the Middle Eastern television channel, aired a short report from Ordos Shi, a city in inner Mongolia built for one million people that is almost entirely empty. The report reveals empty streets, housing estates, shops and restaurants. The locals prefer the old town of Ordos and tell the cameras there’s no need to move to the new city. According to Corriente, China has consumed just 65pc of the cement it has produced in five years, after exports. The country is outputting more steel than the world’s next seven largest producers combined. It has 200m tons of excess capacity. In property, Corriente said it had found an excess of 3.3bn square meters of floor space in China – yet 200m square meters of new space is being constructed each year. Despite the vast population, the property is generally out of the price range for most. House prices are around 22 times disposable income in Beijing."
Forensic Finance, Benford's Way
"One of the more curious statistical anomalies of the universe has turned out to have a range of practical applications in the world of finance. It also turns out to be one of the stranger laws underpinning the stock market, although figuring out why is a painful process. Above all, Benford’s Law can be used to spot financial fraudsters because of a psychological quirk that means we humans are dead useless at pretending to be random. All of this comes from a law that was discovered by one man, explained by another and named after a third. Now that’s random."
The Groupon Bubble
"The paper reports that Groupon, which turned down $6 billion from Google last month, is in talks with Wall Street for an IPO that Wall Street is pitching to investors valuing the company at between $15 billion and $20 billion. The NYT says the two-year-old Groupon “is pushing ahead with plans for its initial public offering,” and I’m sure it is. I’d be pushing to cash in too before this bubble pops."
Blaming the Rat
"Here’s the problem in a nutshell: our mix of jobs has changed profoundly while our approach to incentives has not. As a consequence, we have employees who have lost motivation and faulty incentive programs that have introduced a raft of unintended consequences."
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