"Only buy something that you'd be perfectly happy to hold if the
market shut down for 10 years."  - Warren Buffett


Stingy Links
http://www.stingyinvestor.com/SI/articles/articlearchive.shtml

Why we have never used the BSM option formula
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1012075
"Options traders use a pricing formula which they adapt by fudging and
changing the tails and skewness by varying one parameter, the standard
deviation of a Gaussian. Such formula is popularly called "Black-Scholes-Merton"
owing to an attributed eponymous discovery (though changing the standard
deviation parameter is in contradiction with it). However we have
historical evidence that 1) Black, Scholes and Merton did not invent any formula,
just found an argument to make a well known (and used) formula compatible
with the economics establishment, by removing the "risk" parameter through
"dynamic hedging", 2) Option traders use (and evidently have used since
1902) heuristics and tricks more compatible with the previous versions of
the formula of Louis Bachelier and Edward O. Thorp (that allow a broad
choice of probability distributions) and removed the risk parameter by using
put-call parity. 3) Option traders did not use formulas after 1973 but
continued their bottom-up heuristics. The Bachelier-Thorp approach is more
robust (among other things) to the high impact rare event. The paper draws on
historical trading methods and 19th and early 20th century references
ignored by the finance literature. It is time to stop calling the formula by
the wrong name."

ROIC patterns and shareholder returns
http://www.lmcm.com/pdf/ROICPatternsandShareholderReturns.pdf
"Three main points emerged from the analysis of ROIC patterns. First,
analysts need to consider the lessons of history when modeling rather than
approaching each model as unique. Analysts should view the experience of a
large sample of companies as a rich reference class. Second, the empirical
evidence shows ROICs tend to revert to the mean, a level similar to the cost
of capital. Randomness plays an important role in the mean-reversion
process. Finally, some companies do deliver persistently high or low results
beyond what chance would dictate. Unfortunately, pinpointing the causes of
persistence is a challenge."

The worst market crisis in 60 years
http://www.ft.com/cms/s/0/24f73610-c91e-11dc-9807-000077b07658.html
"The current financial crisis was precipitated by a bubble in the US
housing market. In some ways it resembles other crises that have occurred since
the end of the second world war at intervals ranging from four to 10
years. However, there is a profound difference: the current crisis marks the
end of an era of credit expansion based on the dollar as the international
reserve currency. The periodic crises were part of a larger boom-bust
process. The current crisis is the culmination of a super-boom that has lasted
for more than 60 years."

Societe Generale reports EU4.9 billion trading loss
http://www.bloomberg.com/apps/news?pid=20601087&sid=a2NmAKy7H6sY&refer=home
"Societe Generale SA said bets on stock index futures by a rogue trader
caused a 4.9 billion-euro ($7.2 billion) trading loss, the largest in banking
history. Jerome Kerviel, 31, was the trader responsible, the Paris- based
bank said today. Societe Generale plans to raise 5.5 billion euros from
shareholders after the loss and subprime- related writedowns depleted
capital. The Bank of France, the country's banking regulator, is investigating
the alleged fraud."

Generational housing bubble
http://www.informaworld.com/index/789053981.pdf
"Communities in the United States face an historic tipping point. After
decades of stability, we expect the ratio of seniors to working-age residents
to grow abruptly, increasing by roughly 30% in each of the next two
decades. We also expect that this change will make many more homes available
for sale than there are buyers for them. The exit of the baby boomers from
homeownership could have effects as significant as their entry, though with
different consequences."

Unintended consequences
http://www.nytimes.com/2008/01/20/magazine/20wwln-freak-t.html?_r=1&oref=slogin
"One year from today, a new president moves into the White House. This
president will be eager to carry out any number of plans . including, surely,
plans to help the segments of society that most need help. Extending a
helping hand, after all, is one of the great privileges and responsibilities
of the presidency. But before charging ahead with such plans, the new
president might do well to first ask him- or herself the following question:
What do a deaf woman in Los Angeles, a first-century Jewish sandal maker
and a red-cockaded woodpecker have in common?"

Why it's fair weather for Fairfax investors
http://www.financialpost.com/story.html?id=253583
"There was one reason Fairfax, a holding company with subsidiaries in the
property and casualty and re-insurance business, landed in the company of
the "recession-proof" fast-food restaurant and the seemingly unstoppable
value investment vehicle run by the Oracle from Omaha Mr. Buffet: Credit
Default Swaps. Analysts are twigging to Fairfax's portfolio of credit default
swaps, with a "notional" value of US$18.5-billion against a purchase
price of US$343-million, perhaps the perfect hedge against the economic
turmoil that led to yesterday's dramatic stock market sell-off."


S&P/TSX60 Value Screens
http://www.stingyinvestor.com/SI/strategy.shtml 

High Dividend Yield Stocks                     P/E P/B P/S P/C P/D Yield*
============================================== === === === === === ======
Biovail (BVF)                                   5   5   3   5   5    5
CIBC (CM)                                       5   4   4   3   5    5
National Bank of Canada (NA)                    3   4   4   3   5    5
Bank of Montreal (BMO)                          3   4   4   3   5    5
Telus (T)                                       3   4   3   4   5    5
Royal Bank (RY)                                 4   3   3   2   5    5
BCE (BCE)                                       3   3   3   4   5    5
Bank of Nova Scotia (BNS)                       4   3   2   2   5    5
Shaw Comm Cl.B (SJR.B)                          2   4   3   4   5    5
TransCanada (TRP)                               2   3   2   3   4    4
More Info: http://www.stingyinvestor.com/SI/strategy/dogs.shtml 

Value Ratio Stocks                             P/E P/B P/S P/C P/D  VR
============================================== === === === === === =====
Biovail (BVF)                                   5   5   3   5   5   0.5
CIBC (CM)                                       5   4   4   3   5   1.4
Thomson (TOC)                                   5   4   2   3   4   1.9
Teck Cominco Limited (TCK.B)                    5   4   4   5   4   2.0
Bank of Montreal (BMO)                          3   4   4   3   5   2.6
Royal Bank (RY)                                 4   3   3   2   5   2.8
Bank of Nova Scotia (BNS)                       4   3   2   2   5   2.8
National Bank of Canada (NA)                    3   4   4   3   5   2.9
BCE (BCE)                                       3   3   3   4   5   3.2
Telus (T)                                       3   4   3   4   5   3.2
More Info: http://www.stingyinvestor.com/SI/strategy/valueratio.shtml 

Graham Stocks                                  P/E P/B P/D   G$   dG$(%)
============================================== === === === ====== ======
MDS Inc. (MDS)                                  5   5   0   40.85 143.02
Lundin Mining Corporation (LUN)                 5   5   0   16.99 130.55
Biovail (BVF)                                   5   5   5   18.96  49.28
Thomson (TOC)                                   5   4   4   49.00  35.14
Magna Cl.A (MG.A)                               4   5   3   99.23  30.57
Teck Cominco Limited (TCK.B)                    5   4   4   41.93  28.38
CIBC (CM)                                       5   4   5   78.73  17.09
ACE Aviation Holdings Inc. (ACE.B)              5   5   0   26.17  13.70
Petro Canada (PCA)                              5   4   2   49.84   7.62
Talisman Energy (TLM)                           5   3   2   17.28   5.12
Sun Life (SLF)                                  4   5   4   49.12   1.91
More Info: http://www.stingyinvestor.com/SI/strategy/graham.shtml 

*Notes: http://www.stingyinvestor.com/SI/strategy/notes.shtml 

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Books for Stingy Investors

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ISSN 1499-2795 Copyright Dan Hallett and Associates Inc., 2008.
All rights reserved. The securities mentioned in this report are not
appropriate for all investors. Consult your professional investment
advisor before making any investment decision.  While all reasonable
effort is made to ensure the accuracy of information and data
contained herein, accuracy can not be guaranteed. Past performance is
not a good predictor of future performance.  Results are not
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information in this newsletter, and in its related website, is not
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