The Stingy News Weekly (05/10/02)
The Markets This Week
DOW 30: 9,940 -0.67% with a median P/E of 35.6
S&P/TSX: 7,596 -0.89% with a median P/E of 34.9
The Value View
Dow at a P/E of 20: 5,584 (-43.8%) Poor Value
Dow at a P/E of 15: 4,188 (-57.9%) Fair Value
Dow at a P/E of 10: 2,792 (-71.9%) Good Value
S&P/TSX at a P/E of 20: 4,353 (-42.7%) Poor Value
S&P/TSX at a P/E of 15: 3,265 (-57.0%) Fair Value
S&P/TSX at a P/E of 10: 2,177 (-71.4%) Good Value
The secret to Buffett's success is discipline
"Contrast this with Buffett, who patiently does the same thing year in and year out. Tech stocks are going to the moon and herald a "new paradigm"? No thanks--he didn't understand 'em, so he didn't buy 'em. Real estate investing? Last weekend, Munger professed that he and Buffett don't have any competitive advantage over others in the field, so they don't make many investments in real estate. Buffett and Munger simply wait patiently for a fat pitch to sail across their plate, no matter how frustrating the wait may be or how many pitches they have to let go past."
Wasting time on productivity
"The underlying stability in productivity has been obscured by large year-to-year fluctuations reflecting the economic cycle and other shocks. Such fluctuations have been much less in the last eight or nine years than in earlier periods."
Shakespeare on REITs
"Finally, beware of the risk of reaching for yield: purchasing high-yield securities when interest rates are low. At the time of writing (spring 2002), with interest rates at record lows, the number of new trusts appearing is very high. A similar situation occurred in 1997, when again interest rates were low and a large number of new royalty trusts were issued. Unfortunately, as in 1997, many of the new trusts are likely to disappoint investors as Bay Street unloads assets that are unsuitable for income trusts because of variable cash flow or poor quality of the underlying assets."
McDonald's to begin accepting Nortel shares
"'Sure, my grandchildren's inheritance is still pretty much right out the window, but, at least I'll be able to take them down to the local McDonald's for a quarter-pounder every now and then. That'll be a welcome change from my daily routine of cat food,' said McMorgan, a retired mill worker."
Rich beyond reason
"Warren Buffett is to be admired - but his fortune bears no proportion to his social or economic contribution" -- One very wrong comrade analyst.
How analysts' pay packets got so fat
"Salaries for Wall Street's researchers skyrocketed with the surging stock market. Fueled primarily by the tech and initial-public-offering boom, equity analysts' pay jumped fourfold in a decade--and with it, all pretense that research was being written to benefit the investor."
When Buffett talks, 14,000 people listen
"Terrorism, business ethics and wealth in society came up for discussion Saturday by Warren Buffett and his partner Charlie Munger at Berkshire Hathaway Inc.'s annual shareholders meeting in Omaha."
The trivia questions this week are:
Q1. Who said "Financial statements ought to be aimed at people equipped to use them, not stock market speculators focused on earnings per share from operations."?
Q2. What is Warren Buffett's annual salary?
Q3. When did Warren Buffett buy his current home?
The answers for last week's trivia questions are:
Q1. Who said "You talk generally about stock options plans in America and you have seen a lot of terrible behavior"?
A1. Charlie Munger
Q2. Who said "You should invest in a business that even a fool can run, because someday a fool will."?
A2. Warren Buffett
Q3. Who said "A lot is horribly wrong in corporate compensation in America"?
A3. Charlie Munger
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