The Stingy News Weekly (11/21/2010)
Life and investing after Buffett
"So it may be time to start taking a look at Berkshire substitutes. While no company is a Berkshire clone, a couple of U.S.-based holding companies offer a similar mix of experienced management, financial heft and the assurance that your money is being overseen by value-oriented investors who have much of their money riding along with yours."
Stocks Acting Like Commodities
"In the past few years, many investors have concluded that commodities like oil, corn and gold offer independent returns that can diversify away the risks of stocks. But the correlations between stocks and commodities—the extent to which their prices move together—are in many cases the highest they have been in nearly 30 years."
Speak softly and carry a big chainsaw
"Mr Obama badly needs to show that he can still lead on domestic policy. He should start by cajoling Congress into an agreement to tackle America’s ominous fiscal arithmetic. Conventional wisdom says such an agreement is impossible: the problem is too big, the politics too difficult. But it is wrong to suppose that the deficit is unfixable, as two proposals for fixing it have shown this month. And even the politics may not be totally intractable."
Wedbush's roof leaks, but his wallet doesn't
"His investment firm, Wedbush Inc., manages more than $15 billion in assets, employs 1,000 people and is valued at $"68%" million. His personal stake is worth more than $150 million. Yet Wedbush has never let go of a compulsive frugality with roots in a Great Depression boyhood and his early days as an entrepreneur, when pinching pennies was the difference between survival and oblivion. For Wedbush, cost control is much more than a slogan. It's a guiding principle, maybe even a way of life."
"After that there was no stopping the love affair between financial economists and number-crunching. Myron Scholes, now a Nobel laureate, became director of CRSP in 1974 and ensured the database was both kept up-to-date and made readily available to academic economists everywhere. In turn, this resource became ever more useful as computing power became more pervasive and affordable. The CRSP database has since been expanded to include bonds, property, some commodities, mutual funds and exchange-traded funds. It has been replicated across the world."
A Tax Cut To Save
"Ambac Financial declared bankruptcy, needlessly. Had Congress acted to change the tax code to give troubled corporations a much needed break, Ambac probably could have raised enough equity to rebuild its core business. Unfortunately the U.S. tax code left Ambac with no way of raising equity without destroying one of its most valuable assets, $7 billion worth of net operating losses that could have been used to offset future tax burdens after the company returns to profitability."
Bill Miller's Nov 2010 Commentary
"It is useful to remember that the great bond bull market that began nearly 30 years ago was preceded by a 30 plus year bond bear market that took long term treasury yields from 3% to nearly 15%. The devastating losses people suffered were such that my friend Lee Cooperman dubbed bonds, “certificates of guaranteed confiscation,” when he was overseeing the Goldman Sachs research and strategy effort. A common feature of that 30 year bond bear market was the bond swap. Almost every year, investors who owned bonds lost principal value as yields rose, so they sold their bonds in December and took a tax loss, replacing the bonds with others of similar maturity and quality. This continued year after year, inexorably. Finally, in 1982, yields started to fall. One elderly relative of mine had been taking her tax losses year after year, for over 30 years. When she asked me to look at her portfolio in late 1982, I told her there were some things I thought she needed to do. She said, “Oh yes, it’s time for my bond swap.” I told her that was not necessary as she now had gains in her bonds. She looked startled, and asked, “Is it legal to have gains in bonds?” I suspect that question may again be asked in the next 30 years."
Dear Uncle Sucker
"Well, Uncle Sam, you delivered a motherload of cash. Considering the dollar sums involved, your actions were remarkably ineffective. What was left over afterwards was a wildly over-leveraged consumer whose credit limits had been reached State and municipal budgets were heavily dependent upon that excess consumer spending, creating huge budget holes because of it. Net net: The resultant economy was in the worst recession since the Great Depression."
Pretty Good for Government Work
"You have been criticized, Uncle Sam, for some of the earlier decisions that got us in this mess — most prominently, for not battling the rot building up in the housing market. But then few of your critics saw matters clearly either. In truth, almost all of the country became possessed by the idea that home prices could never fall significantly. That was a mass delusion, reinforced by rapidly rising prices that discredited the few skeptics who warned of trouble. Delusions, whether about tulips or Internet stocks, produce bubbles. And when bubbles pop, they can generate waves of trouble that hit shores far from their origin. This bubble was a doozy and its pop was felt around the world. So, again, Uncle Sam, thanks to you and your aides. Often you are wasteful, and sometimes you are bullying. On occasion, you are downright maddening. But in this extraordinary emergency, you came through — and the world would look far different now if you had not."
Four Stocks Ben Graham Might Pick
"My Graham-inspired picks sell for less than book value (corporate net worth per share) and less than 12 times earnings. They also have debt less than 50 percent of stockholders’ equity."
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