The Stingy News Weekly (09/19/2010)
Land of the free, home of the tightwad
"And – this is the probably the most important bit – it allows U.S. families to cut their debt a lot faster than you might believe. One analysis by Deutsche Bank projects that by 2013, American households might be able bring their debt ratios down to where they were about 20 years ago. That’s probably too optimistic. But consider the possibility that today’s frugality will feed a roaring economic expansion several years from now. In the short term, its economy is still messed up. But longer term? It’s never wise to bet against the U.S."
The Illusion of Pension Savings
"Earlier this year, Illinois said it had found a way to save billions of dollars. It would slash the pensions of workers it had not yet hired. The real-world savings would not materialize for decades, of course, but thanks to an actuarial trick, the state could start counting the savings this year and use it to help balance its budget."
A conversation with Charlie
Charlie Munger speaks at the Ross School of Business.
The razors-and-blades myth
"Gillette hadn't played razors-and-blades when it could have during the life of the 1904 patents and didn't seem well situated to do so after their expiration, but it was exactly at that point that Gillette played something like razors-and-blades and that was when it made the most money. Razors-and-blades seems to have worked at the point where the theory suggests that it shouldn't have. Why is that? Did Gillette succeed because of quality or were their powerful even-if-hard-to-discern-now locks - psychological or otherwise - between the razors and the blades?"
The two key housing problems
"It is important to note that falling house prices helps clear the excess supply, although more jobs and more households is the preferred solution. However falling prices makes the negative equity problem worse."
Classic relative value arbitrage
"Classic relative value arbitrage - the elegant, sometimes dangerous investment strategy that has proved the making and undoing of more Nobel prize winners than any other - used to be compared to picking up nickels in front of a steamroller."
The NYSE from 1815 to 1925
"In this paper, we collect individual stock prices for NYSE stocks over the period 1815 to 1925 and individual dividend data over the period 1825 to 1870. We use monthly price and dividend information on more than 600 individual securities over the period to estimate a stock price index and total return series that extends virtually to the beginning of the New York Stock Exchange. We use this data to estimate the power of past returns and dividend yields to forecast future long-horizon returns. We find some evidence of predictabiity in sub-periods but little predictability over the long term. We estimate the time-varying volatility of the U.S. market over the period 1815 to 1925 and find evidence of a leverage effect on risk. This new database will allow future researchers to test a broad range of hypotheses about the U.S. capital markets in a rich, untouched sample."
Travelling through Universal Travel Group
"The company claims in its most recent quarterly balance sheet to be carrying 43 million in cash and accounts receivable of almost 20 million. If the airline and hotel business are dubious then the profits generated that cash are dubious. In that case the cash itself is dubious.I know people will buy this as Ben Graham net-net stock if it collapses. Unless this company can get a big four audit firm to sign-off for them I think you can – at least for the moment question the entire balance sheet. "
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