The Stingy News Weekly(11/01/02)
The Markets This Week
DOW 30: 8,518 +0.88% with a median P/E of 21.5
S&P/TSX: 6,321 -1.33% with a median P/E of 23.6
The Value View
Dow at a P/E of 20: 7,924 (-6.9%) Poor Value
Dow at a P/E of 15: 5,943 (-30.2%) Fair Value
Dow at a P/E of 10: 3,962 (-53.5%) Good Value
S&P/TSX at a P/E of 20: 5,357 (-15.3%) Poor Value
S&P/TSX at a P/E of 15: 4,018 (-36.4%) Fair Value
S&P/TSX at a P/E of 10: 2,678 (-57.6%) Good Value
Buffett succeeds at nothing
"Warren Buffett is known as being one of the best investors of all time. But it might come as a surprise to many that his investing strategy often encompasses long periods of what he calls "sitting on my butt." There have been periods of years when Berkshire Hathaway has purchased not a single share of stock, interspersed with some enormous activity. Sometimes doing nothing is the best thing you can do."
Cognitive biases in market forecasts
"There is no statistically significant relationship between dividend yields and P/E ratios and returns in the subsequent one or two years. The relationship between P/E ratios and dividend yields and stock returns over 10-year periods is much stronger, but it offers far less than perfect reliability."
The P/E myth
"There is no linkage of market P/Es to subsequent returns--no matter how you measure the ratio and no matter over how long (up to five years) you measure returns."
Nothing pays dividends like a new dividend
"Investors would do well to look for cash up front. Few companies are launching dividends anymore, but those that do often follow up with market-beating performance."
Some perks aren't worth the pain
"Ken Brier, a tax lawyer with Bingham McCutchen in Boston, says that the confusion is probably "the last nail in the coffin" for split-dollar deals. "It's a hell of a lot simpler to just pay executives more and let them buy their own insurance," he says."
Pedal to the metal
"Metal Supermarkets is one of Canada's top retail chains. You'll never guess what they sell."
Waves of doubt
"Complicated financing deals were supposed to protect insurers and banks. Now they're another reason investors are jumping ship."
Canada's top MBAs
"What's an MBA really worth? That's been the question almost every business publication seems to be asking this year-and most have arrived at decidedly negative answers. Well, we beg to differ, and we've got proof-at least as far as Canada's business schools are concerned."
Why James Grant will never be Louis Rukeyser
"One of the striking things about the financial press during a bear market is what isn't in it: bona fide financial celebrities."
The painful truth about profits
"But let's be blunt: Profits may very well rise next year--but it won't simply be a normal business recovery. The process of boosting earnings is going to be far more difficult than most people expect, and it is going to entail far more pain for workers. Under mounting pressure from investors and corporate boards to get their earnings up--without accounting tricks--executives are going to have to make deep cuts in payrolls and productive capacity."
The oracle of everything
"Warren Buffett has been right about the stock market, rotten accounting, CEO greed, and corporate governance.The rest of us are just catching on."
The value machine
"A small quiz, if you don't mind: Kindly describe what each of the companies in the top ten of the Most Admired does. Most readers could breeze through eight of these paragons. They're into megastores (Wal-Mart) and securities brokerages (Schwab) and computer chips (Intel) and so on. General Electric is tougher to parse: It's financial services, but also a TV network and an electrical equipment and aerospace empire, soon to include Honeywell. But the real puzzler is No. 7, Berkshire Hathaway of Omaha. Using a sharp No. 2 pencil, could you please write 500 words on that company's business?
Warren Buffett on the stock market - 2001
"What's in the future for investors--another roaring bull market or more upset stomach? Amazingly, the answer may come down to three simple factors. Here, the world's most celebrated investor talks about what really makes the market tick--and whether that ticking should make you nervous."
Mr. Buffett on the stock market - 1999
"The most celebrated of investors says stocks can't possibly meet the public's expectations. As for the Internet? He notes how few people got rich from two other transforming industries, auto and aviation."
Ticking sound may be your pension fund
"Wall Street is waiting for the next shoe to drop. The next smackdown may come from the big hole the stock market's crash has punched in corporate pension funds."
This week's trivia questions are: Q1. Who said "I don't know what the seven wonders of the world are, but I do know the eighth - compound interest."? Q2. Who said "Get inside information from the president and you will probably lose half of your money. If you get it from the chairman of the board, you will lose all of it."? Q3. Who said "The chief losses to investors come from the purchase of low-quality securities at times of favourable business conditions."? The answers to last week's trivia questions are: Q1. Who said "My biggest winners continue to be stocks I've held for three and even four years."? A1. Peter Lynch Q2. Who said "The intelligent investor is likely to need considerable will power to keep from following the crowd."? A2. Benjamin Graham Q3. Who said "There will always be bull markets followed by bear markets followed by bull markets."? A3. John Templeton Source: Wall St Wit & Wisdom The Stingy StoreDownload a sample of the Rothery Report Download a sample of Frugal Funds Subscribe Today Bullishly Yours, Norman Rothery ISSN 1499-2795 To (un)subscribe please use our email centre at http://www.stingyinvestor.com/cgi-bin/email.cgi Refer to legal & conflict of interest disclaimers at http://www.stingyinvestor.com/SI/legal.shtml http://www.stingyinvestor.com/SI/legal/conflict.shtml
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