The Stingy News Weekly (04/12/02)
The Markets This Week
DOW 30: 10,191 -0.79% with a median P/E of 34.7
TSE 300: 7,731 -0.66% with a median P/E of 30.5
The Value View
Dow at a P/E of 20: 5,874 (-42.4%) Poor Value
Dow at a P/E of 15: 4,405 (-56.8%) Fair Value
Dow at a P/E of 10: 2,937 (-71.2%) Good Value
TSE 300 at a P/E of 20: 5,070 (-34.4%) Poor Value
TSE 300 at a P/E of 15: 3,802 (-50.8%) Fair Value
TSE 300 at a P/E of 10: 2,535 (-67.2%) Good Value
Stock options and common sense
"The members of Congress decided to adjudicate the fight -- who, after all, could be better equipped to evaluate accounting standards? -- and then watched as corporate CEOs and their auditors stormed the Capitol. These forces simply blew away the opposition. By an 88-9 vote, U.S. senators made a number of their largest campaign contributors ecstatic by declaring option grants to be expense-free. Darwin could have foreseen this result: It was survival of the fattest."
Congress to IRS: you're a bunch of wimps
"Lawmakers aren't kidding about their desire to see the IRS get mean. 'If the IRS cuts down on its audits and enforcement, more people are going to say, 'The IRS isn't out there with a club, so we can do anything we want,'' warns Congressman Amo Houghton (R-New York), 'and that will erode the whole concept of our tax system, which is based on trust.'" - In clubs we trust?
ETFs stray from indexes
"In doing so, they are also hoping to 'add value' and thereby boost their fees. 'Index managers want to be better paid for their services,' said one U.S. based panelist."
Third Avenue Funds Q1 Report
"There is plenty of blame to go around for the apparent accounting frauds that led to Enron Corporation filing for relief under Chapter 11 of the U.S. Bankruptcy Code. In assessing blame, though, it would be a shame if conventional security analysts, conventional money managers and conventional finance academics were left out of the mix. Whatever their other talents - and these people tend to have many other talents - analysts, money managers and finance professors seem notoriously unqualified to be intelligent, responsible users of GAAP who actually understand the uses and limitations of financial statements." [PDF]
Loving the unloved
"James generally sticks to the microcap arena - which includes stocks with market caps of $300 million or less - and zeroes in on companies that have been neglected by both analysts and the stock market. He favors firms that were former market favorites but have encountered short-term difficulties. "
The marvel that is capitalism
"This speech by the president of the Mises Institute was given before students, professors, trustees, and others at an awards dinner sponsored by the Adam Smith Club, Campbell University, Buies Creek, North Carolina, April 4, 2002. Rockwell and entrepreneur Lewis Fetterman received the club's Free Enterprise Award."
The trivia questions this week are:
Q1. Who asked "If options aren't a form of compensation, what are they? If compensation isn't an expense, what is it? And if expenses shouldn't go into the calculation of earnings, where in the world should they go?"?
Q2. Who said "As a substitute for knowledge about specific securities, many money managers have well-developed top-down programs for investing centering on portfolio diversification and asset allocation."?
Q3. Who said "Do not use market-timing or technical analysis. These techniques can only cost you money."?
The answers for last week's trivia questions are:
Q1. Who said "Value Investing is just standard economics. Think logically about what you're doing. Think about it without emotion. And think about what makes sense."?
A1. Andrew Weiss
Q2. Who said "Quantitative data are useful only to the extent that they are supported by a qualitative survey of the enterprise."?
A2. Benjamin Graham
Q3. Who said "A common stock representing the entire business cannot be less safe than a bond having a claim for only a part thereof."?
A3. Benjamin Graham
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