The Stingy News Weekly (05/24/02)
The Markets This Week
DOW 30: 10,104 -2.41% with a median P/E of 33.5
S&P/TSX: 7,668 -0.76% with a median P/E of 33.9
The Value View
Dow at a P/E of 20: 6,032 (-40.3%) Poor Value
Dow at a P/E of 15: 4,524 (-55.2%) Fair Value
Dow at a P/E of 10: 3,016 (-70.2%) Good Value
S&P/TSX at a P/E of 20: 4,524 (-41.0%) Poor Value
S&P/TSX at a P/E of 15: 3,393 (-55.8%) Fair Value
S&P/TSX at a P/E of 10: 2,262 (-70.5%) Good Value
Jim Otar's Retirement Simulator (Version 4)
Jim has programmed an Excel spreadsheet with historical data to help investors get a better grip on stock market variation. With this spreadsheet you will be able to discover the impact of 1929 like highs on your retirement plans along with more normal returns. It's easy to use and I found it both fun and illuminating.
Is Time Running Out For The S&P 500?
"The S&P 500 has defined the U.S. stock market for decades. But more and more institutional investors are swearing off the index, saying it distorts the very market it purports to represent. Academics agree. Is it time for a new benchmark?"
The death of dividends
"the demise of dividends over the last 20 years was facilitated by greedy executives who used accounting shenanigans and the bull market to pocket significant stock option gains. Now that the bull market is over and accounting tricks are slowly being purged from financial statements all that remains is the greedy executives"
Berkshire sells 1st negative coupon paper
"They carried an effective coupon of negative 0.75 percent and are convertible into Berkshire shares at a 15 percent premium over the "A" shares' at Tuesday closing price. Berkshire, which boosted its sale from $250 million, said it may sell $100 million more SQUARZ to meet demand." -- Buffett seems to imply with this sale that Berkshire is overvalued at $87,285.
Which CEO's greed scared off Buffett?
"But it's even more astonishing that an investor who has this kind of power felt powerless to do anything but sell his shares and go quietly into the night. When even Warren Buffett won't name names it tells you how intractable the problem is."
Selling the downside
"As you may have guessed from our opening feature, the prices being paid for some assets via income and royalty trusts have exceeded our wildest expectations, but have exhausted neither the imaginations of the corporate financiers of Bay Street, nor the credulity of the Canadian public. It has truly been a situation where, as Buffett says, those who don't know are buying from those who don't care. How have these price levels been reached?"
Options' costs revealed
"It has taken an awfully long time - not to mention a crucial assist from the debacle known as Enron Corp. - but finally the investment world is inching toward truth in financial reporting where stock options are concerned."
The end of mutual fund dominance
"Combined with the toll taken by fund costs and the toll taken by market timing, this penalty for adverse selection is the third leg of the unfortunate triumvirate of tolls that has left mutual fund investors in the backwater of the returns earned by the financial markets. If financial advisors do no more than keep your client from paying these unnecessary tolls, you've made a great start on serving them well!"
Rogue waves & standard deviations - part 2
"The companies, funds, investors, and governments best able to withstand a crisis are those who are unleveraged, liquid and have access to cash. Having no debt enables one to ride out a storm. Leverage becomes a ticking time bomb that offers few avenues for escape. In summary, the best protection against adversity is to have minimal debt and plenty of liquidity."
The trivia questions this week are:
Q1. How many no-load Canadian equity funds have a MER of less than 2?
Q2. How many no-load U.S. equity funds have a MER of less than 2?
Q3. How many no-load International equity funds have a MER of less than 2?
The answers for last week's trivia questions are:
Q1. When did Warren Buffett file his first tax return?
A1. At age 13 (selling newspapers)
Q2. When did Warren Buffett make his first profit?
A2. At age 6 (selling Coke)
Q3. Is singer Jimmy Buffett related to Warren Buffett?
A3. They are distant cousins
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