The Stingy News Weekly (03/08/02)
The Markets This Week
DOW 30: 10,572.5 +1.96% to a P/E of 30.2
TSE 300: 7,910.3 +2.59% with a negative P/E
The Value View
Dow at a P/E of 20: 7,002 (-33.8%) Poor Value
Dow at a P/E of 15: 5,251 (-50.3%) Fair Value
Dow at a P/E of 10: 3,501 (-66.9%) Good Value
Buffett's 2001 letter
"Some people disagree with our focus on relative figures, arguing that "you can't eat relative performance." But if you expect - as Charlie Munger, Berkshire's Vice Chairman, and I do - that owning the S&P 500 will produce reasonably satisfactory results over time, it follows that, for long-term investors, gaining small advantages annually over that index must prove rewarding. Just as you can eat well throughout the year if you own a profitable, but highly seasonal, business such as See's (which loses considerable money during the summer months) so, too, can you regularly feast on investment returns that beat the averages,however variable the absolute numbers may be." [PDF]
"What even the most actively trading managers will concede, though, is that if you'd better have a good reason. Otherwise, turnover can chew up a big chunk of your fund's returns, particularly if you are holding that fund outside a registered plan."
"They lie they cheat they steal and they've been getting away with it for too long."
Sam Walton made us a promise
"Wal-Mart's founder made a pact with employees: He would be fair to them, and they would work hard for him. It was a good deal, but can it survive in the 24-hour service economy?"
The trivia questions this week are:
Q1. Who said "Volatility is not risk. Avoid investment advice based on volatility."?
Q2. Who said "To their shame, these business leaders view shareholders as patsies, not partners."?
Q3. Who said "Do not make an investment decision based on correlations. All correlations in the market, whether real or illusory, will shift and soon disappear."?
The answers for last week's trivia questions are:
Q1. What is the median P/E ratio of the S&P 500?
Q2. What is the median P/Book Value ratio of the S&P 500?
Q3. What is the median P/Sales ratio of the S&P 500?
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