The Stingy News Weekly (08/17/02)
The Markets This Week
DOW 30: 8,778 +0.38% with a median P/E of 30.4
S&P/TSX: 6,572 -1.11% with a median P/E of 28.6
The Value View
Dow at a P/E of 20: 5,775 (-34.2%) Poor Value
Dow at a P/E of 15: 4,331 (-50.7%) Fair Value
Dow at a P/E of 10: 2,888 (-67.1%) Good Value
S&P/TSX at a P/E of 20: 4,596 (-30.1%) Poor Value
S&P/TSX at a P/E of 15: 3,447 (-47.6%) Fair Value
S&P/TSX at a P/E of 10: 2,298 (-65.0%) Good Value
Do-it-yourself style investing
"The prototypical DIY investor is Lethbridge, Alberta-based Keith Betty, a retired chemist whose investing approach is outlined on the Net as Shakespeare's Primer."
Tyco, others face $60B in payments
"Tyco International Ltd., Vivendi Universal SA and more than 50 other companies around the world may have at least $60 billion in unexpected cash payments due by the end of next year."
Nike: Can we talk?
"A shocking First Amendment ruling against Nike radically reduces the rights of corporations to speak their minds. Will the Supreme Court let it stand?"
The Sage seizes on energy's distress
"When Warren E. Buffett acquired MidAmerican Energy Holdings Co. in late 1999, Wall Street snickered. At the time, investors were enthralled with New Economy stars like Enron Corp., which had glamorized the energy business by reinventing itself as an "asset-light" deregulated trading company. MidAmerican was the Old Economy epitomized, a boring electric and gas utility--based in Iowa, no less. Buffett, the famously technophobic chairman and CEO of Berkshire Hathaway Inc., (BRK ) just didn't get it, various bull market savants scoffed. He was history. What a difference a bear market makes."
Rapid growth in rough times
"Not so long ago, you'll recall, growth was a good thing. Unquestionably a good thing. CEOs promised to deliver it at all costs, investors gobbled it up (at all costs), and companies that didn't post eye-popping numbers paid what was then the ultimate cost--a languishing share price. Of course, that was a time when an Arthur Andersen audit seemed like a good idea too."
"Get out that stack of Bibles. With what seems like a new accounting scandal almost daily, investors are wary of whether companies have been truthful in stating earnings. The Securities and Exchange Commission has set an Aug. 14 deadline whereby CEOs and CFOs of 947 companies must swear under oath that recent results are accurate."
The high cost of debt gone wrong
"Leverage can be a great asset, as long as your assets are great. Some readers who borrowed to buy stocks in the bull market report being happy with their results. But others warn leverage newcomers to be wary if the bear market deepens."
This week's trivia questions are:
Q1. How much has the S&P500 gained in the last 5 years?
Q2. How much has the DOW gained in the last 5 years?
Q3. How much has the S&P/TSX Composite gained in the last 5 years?
The answers to last week's trivia questions are:
Q1. Who said "We would rather buy 10% of wonderful business T at X per share than 100% of T at 2X per share."?
A1. Warren Buffett
Q2. Who said "When a management with a reputation for brilliance tackles a business with a reputation for poor fundamental economics, it is the reputation of the business that remains intact."?
A2. Warren Buffett
Q3. Who said "Too many accountants played footsie with stock-promoting managements by certifying earnings that weren't earnings at all."?
A3. David Babson in 1971
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