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The Stingy News Quarterly (Q4/2004)

Happy Holidays!

Find a Good Cause
"By donating to your favourite charities through CanadaHelps you are ensuring that your gift goes even farther, since our entire process is electronic. CanadaHelps is a low cost service to the charities you support, and free for you."

The best ways to give to charity
"'Tis the season for giving. And, for many people that means more than just buying presents for friends and family -- it means giving to charity."

A Stingy Christmas

In defense of scrooge
"It's Christmas again, time to celebrate the transformation of Ebenezer Scrooge. You know the ritual: boo the curmudgeon initially encountered in Charles Dickens's A Christmas Carol, then cheer the sweetie pie he becomes in the end. It's too bad no one notices that the curmudgeon had a point - quite a few points, in fact."

In defense of scrooge
"Maligned for his thrift, besieged by home invaders, the old guy gives in to terrorists. This is the message of Christmas?"

Ebenezer Scrooge: In his own defense
"He scribbles something more in his notebook. Then he's off. Next thing I know that silly book about ghosts and angels is making the rounds. "God bless us every one." Isn't that the phrase he put in the mouth of Cratchit's kid? I'll agree with that. And may we all have a Merry Christmas on happy, full stomachs-thanks to inexpensive, imported corn. The Dickens with Dickens." New @ StingyInvestor

Intelligent Indexing
"Investors hurt by the speculative bubble in internet stocks have turned from high-fee technology funds to lower-fee index funds. The relative advantages of intelligent indexing are super-low fees, broad diversification, and relative simplicity."

Money for nothing
"When you find a dollar on the sidewalk, do you pick it up? I bet you do. After all, free money doesn't come along every day. What you may not know is that the stock market also offers up cheap money from time to time. You just have to learn how to spot it."

The Best Of Stingy Links

Stingy Links: Academia

Who gains from trade?
"After costs, we estimate that the trading of institutional investors adds one percentage point annually to their portfolio performance, while the trading of individuals subtracts over three percentage points annually from their performance."

A signal of future stock performance
"our value-stocks research team has studied how balance-sheet data that serve as indicators of the reliability and likely persistence of reported earnings can be used as a signal of future stock performance."

The effect of skill on the success of the less skilled
"This paper uses computer simulations to examine the effect of highly skilled gamblers on the success of moderately skilled gamblers. It shows that skilled players negatively impact the outcome for less skilled players. A player's winnings are not only affected by the house rake or vigorish but also by the skill of other players. It is concluded that less skilled players are often better off playing a game of chance than a game of skill."

Stingy Links: Accounting

Firms must expense options
"Companies must start expensing employee stock options in earnings statements next year, U.S. accounting rule makers declared on Thursday, a move that could signal the end of a long-standing bookkeeping practice that many argued allowed the masking of a key compensation cost."

The warranty windfall
"Critics say the companies are taking advantage of a gray area of accounting that involves judgment calls. Charles Mulford, a Georgia Institute of Technology accounting professor and expert on financial transparency, says the companies could make a case that product and contract sales are so intertwined that they don't need to be reported separately. But he contends that the companies should treat warranty sales as a separate business and break out its revenues and profits."

The fall of Andersen
"Trading his customary dark suit for a pair of jeans, Mike Gagel trudged over pallet after pallet of multicolored bricks in the central Ohio storage yard. The summer heat was stifling as he counted once, then twice. Something was wrong."

Non-financial reporting
"Yet even as NGOs are becoming more cynical about what firms are producing, some investors now think it is (or could be) a valuable source of information, such as about business risks in a swathe of areas not included on standard financial balance sheets. "We are not social activists; we're independent risk assessors," says George Dallas of S&P. The information in non-financial reports "contributes to building up a company's risk profile." And although it has still not been convincingly demonstrated that good environmental and social practices create value for shareholders, it is clear, says Mr Dallas, that bad ones can destroy it. Exxon's cavalier attitude to the oil spillage from the Exxon Valdez drove customers away from its pumps."

Stingy Links: Bonds

Global bond default rate rises slightly
"The four corporate bond defaults in October totaled US$2.3 billion, and all were by companies based in the U.S. The largest default last month also was the largest thus far in 2004: US$1.30 billion by Trump Atlantic City Associates. "

Downgraded: Triple-A credit ratings
"S&P's Nicholas Riccio on how the ranking's importance has been eroded by other priorities like growth and more cheap financing options"

Down at the dog pound
"Just how unlikely investors are to get their money back can be gauged by the default statistics that the rating agencies produce. According to Standard & Poor's, another big rating agency, a bit more than 13% of issuers with a rating of B- or less will default within a year, and 39% of them within five years. For those with a rating of CCC (roughly, its equivalent of Caa1, Moody's rating for Mueller) the figures are 30% and 53%. According to Standard & Poor's, 85% of junk bonds issued so far this year have a maturity of more than seven years. Chances are, in other words, that anyone hanging on to such bonds until maturity will not get their money back."

Global credit quality getting better
"The rating agency says in a new report that the global speculative-grade default rate slipped to 3.3% in June, down from 3.4% in May and 4.2% at the end of the first quarter 2004. This marks the ninth consecutive quarterly decline in the global speculative-grade default rate since its January 2002 peak. Moody's default rate forecasting model indicates that credit quality is expected to improve into the second quarter 2005."

Credit ratings and quality control for fund managers
"Mutual fund companies vary in their emphasis on these reports, depending on whether it's a bond fund with a significant placement in corporate debt or whether it's a straight-up equity fund, since a company's ability to pay debts cannot be completely separated from stock market performance. Leverage is something that value managers, now in vogue, take very seriously."

Stingy Links: Brokers

The brokers strike back
"They're dragging their feet in investor cases and suing ex-customers for damages"

TD Waterhouse ignored warnings
"In some of the most explosive revelations concerning controversial market timing practices among three big Bay Street brokerages, TD Waterhouse acknowledged yesterday that it had received and ignored eight written warnings from six mutual fund companies between 2002 and 2003. TD makes this and other admissions in a settlement with the Investment Dealers Association of Canada, under which it agreed to pay $20.7 million to the industry group and 20 mutual fund companies, including TD Mutual Funds Inc."

Brokerages hit with $41 million in penalties
"Three Canadian bank brokerage firms have been penalized more than $41 million by the IDA for mutual fund market timing violations. It's the largest penalty decision ever issued by the brokerage industry association."

Why Wall Street hates the "S" word
"These realities create what might be described as Pascal's Wager for Brokerage Analysts, a risk/reward equation that, when everyone else is positive, makes it risky to be negative:"

Stingy Links: Buffett

The profitable hobby of Warren Buffett
"These "Workout" situations, as Buffett called them at the time, often represented up to 50% of the profits in his fund, depending on the year, and were heavily influenced by the writings and teachings of Buffett's mentor Ben Graham. In most cases, they were small companies, trading below liquidation value, or where Buffett thought liquidation was in the works or, in some cases, had already been announced. When Buffett expanded his repertoire to buying growing companies above their breakup value, he likened the Graham-Dodd approach to buying "cigar butts -- you can pick them off the ground and smoke one more puff, but that's about it.""

Buffett fans visit Neb. to learn tips firsthand
"Wharton junior Douglas Sherrets went to a Wharton Council function last January and was asked to introduce his club. After listening to other prestigious clubs list their accomplishments, Sherrets got up and simply said, "I am founder of the Warren Buffett Club." Sherrets said he was practically laughed out of the room. However, the Warren Buffett Club began to add accolades to its resume last weekend, after members took a trip to visit its namesake -- a former Wharton student and the second-richest man in the world."

What Warren Buffett learnt from Graham
"When Buffett graduated with a master's degree from Columbia Business School, he asked for a job at Graham-Newman, offering to work for no salary if necessary. Jokingly, Buffett has said Ben "made his customary calculation of value to price and said no.""

The 28 stocks in the Buffett portfolio
"The first thing to note about Berkshire's equity portfolio is that it has been shrinking, both in absolute terms and relative to other investments. Buffett has bought very few stocks over the past six years, which isn't surprising given his negative view of stock-market valuations during and after the bubble."

Financial time bombs
"The derivatives genie is now well out of the bottle, and these instruments will almost certainly multiply until some event makes their toxicity clear. Central banks and governments have so far found no effective way to control, or even monitor, the risks posed by these contracts. Derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal."

Students pay homage to Sage of Omaha
"On a subsequent question, Mr. Buffett dispelled the seeming contradiction between his preaching about the importance of honest and competent managers and his purchasing businesses after spending just a few minutes with management. The key factor, Mr. Buffett explained, is to determine whether the managers love the money or the business. Characteristically humble, Mr. Buffett admitted that occasionally he makes mistakes."

Secrets behind a successful media company
"The Washington Post Company adopted its 'no quarters' stance under the guidance of Warren Buffett, who bought $10 million of stock in the company during the recession of 1974 and joined the company's board that same year. 'My mother realized that he was the smartest businessman she had ever met,' said Graham. Buffett's input 'has been worth billions to the company.'"

Gleaning insights from Berkshire
"Overall, it was a quiet quarter of trading for Berkshire. It added net shares worth about $150 million -- driven primarily by the addition of $140 million of Comcast shares and ServiceMaster shares worth $72 million. These additions were offset by reductions in its holdings in HCA, Zenith, and Mueller."

The top givers
"Warren Buffett is famous for two things. First, for amassing the second-biggest fortune in the U.S. as one of the most talented investors the world has ever known. Second, for an aversion to spending a dime of that $41 billion on anything but the strictly necessary. That includes declining to provide his kids with fortunes of their own, collecting yachts or racehorses, or giving large chunks of his wealth to worthy causes. Thus it may strike some as the supreme paradox that the man who is one of America's greatest misers in life will probably become one of its greatest philanthropists in death."

Buffett's Berkshire could be the right 'fund' for you
"In uncertain investing times like these, it's nice to have someone smart looking after your money. How about Warren Buffett? One of this generation's greatest investment minds, Mr. Buffett probably could do wonders for you. He's fully occupied in his current position as chairman of Berkshire Hathaway Inc., but that's no problem. All you have to do is buy shares of Berkshire."

Do the right thing, Mr. Buffett
"The insurance scandal has rocked an industry, but I don't think Berkshire will be dragged into the mess. Of course, Buffett could go one better and unwind any questionable contracts." Stingy Links: Crime

Anatomy of an ID theft
"Five months rolled by without incident, but then the red flags popped up in rapid succession. A call from her bank, Wells Fargo, inquiring about her application for a line of credit. The same question from Chase, where she had no accounts. Then a message from a local Ford dealer, who said he hoped to see her later that day with the additional paperwork they had discussed. Harding knew nothing about these transactions. Instead, she realized, she had become a victim of one of the fastest-growing crimes in the U.S.: identity theft."

Stingy Links: Dreman

Some stocks are cheap
"Equities slowed first from fear of an overheated economy, then from fear of a slowdown. But you can safely ignore the hand-wringing."

Three out-of-favor stocks to consider
"I asked Dreman to recommend just one stock from his fund portfolio to hold for the next five to 10 years and tell us why. I got more than I asked for -- a lot more!"

Dodging the potholes
"Overcapacity in tech and rising inflation will keep stock gains moderate in 2005. The antidote: Buy shares with nice dividends."

Stingy Links: Economy

There's been a huge shift in how consumers spend
"Yet the shifts can be quite remarkable. In 1961, almost 53 per cent of all consumer spending went to what most of us might consider the necessities of life -- food, clothing and shelter. By 1981, that trio accounted for only 46 per cent of spending and by 2000, its share had dropped to just over 40 per cent."

Welcome to the risk economy
"The current economy has shifted risk to the individual. We shoulder more burden for our retirements, our paychecks and our insurance than previous generations. No wonder we're anxious."

Doing the math on the have and have-not provinces
"It's time again for the annual tally of some numbers that Ottawa and many provincial governments love to hate. Who gains and who loses from the federal government's getting and spending? Which provinces send more money to Ottawa than they get back in spending, and which get more from the federal treasury than they chip in?"

That Taco Bell boycott
"Staging a boycott against Taco Bell does not change the guided self interest of taco eating teenagers. In the short run it has the exact opposite effect of its intended purpose. Boycotting Taco Bell lowers the demand for tacos, which in turn lowers the demand for the inputs required to make them, which in turn lowers the prices for wages paid to migrant workers needed to pick tomatoes. A more effective method of raising the wages of Immokalee migrant workers would be to stage the exact opposite activist campaign. If college students were to buy more tacos and ask for extra tomatoes on those tacos the demand curve would be moved in the appropriate direction, raising migrant workers wages."

The evolution of everyday life
"The human capacity for calculation allowed this potential to be fully exploited because humans were able to design rules and institutions that, as Mr Seabright puts it, "make reciprocity go a long way". Much of the book is concerned with the trust-enhancing character of economic institutions such as money. Building on humans' inherited instincts, these rules and institutions allow people to treat strangers as "honorary friends"."

Bush's jobs deficit
"According to the latest figures, American companies added far fewer workers to their payrolls last month than economists had forecast. This comes a week after the equally unexpected news that growth slowed significantly in the second quarter. How worried should George Bush be?"

Stingy Links: Fun

How 51 gorillas can make you seriously rich
"Given this strong motivation to succeed, it is astonishing how bad most business books are. Many appear to be little more than expanded PowerPoint presentations, with bullet points and sidebars setting out unrelated examples or unconnected thoughts. Some read like an extended paragraph from a consultant's report (and, indeed, many consultancies encourage their stars to write books around a single idea and lots of examples from the clientele). Few business books are written by a single author; lots require a whole support team of researchers. And all too many have meaningless diagrams."

Ben Stein's funny money
"Ben Stein (he of "Win Ben Stein's Money," on Comedy Central) and Phil DeMuth have written Yes, You Can Time the Market! They demonstrate that investors who move in and out of the market based on such simple criteria as price-earnings ratios and dividend yields will do better than the dollar-cost averager who dutifully invests a fixed amount in stocks month after month, year after year. Their numbers make perfect sense. Their advice to you does not."

Apprentice to a hoax
""A schoolboy's dream... a competitor's challenge. Donald J. Trump is the very definition of the American success story, continually setting the standards of excellence...." It's times like this that I wonder whether the TV-addled American public doesn't deserve every fleecing it gets at the hands of the world's biggest snake-oil peddlers."

Bigger than Coke?
"I really think it's a bigger brand.... " - and good chuckle

Stingy Links: Government

Money for nothing
"While it is true there is no actual EI fund (the premiums collected go straight into the government's consolidated revenue fund), the impact of this over-collection is by no means theoretical. Economic studies suggest that for every 1% increase in employer-paid payroll taxes, there is a corresponding 0.32% decrease in employment. If Ottawa followed its own legislation, a case could be made for an EI-premium rate holiday for the next two and a half years. Think of the impact that could have on employment."

The crime wave that wasn't
"One threat in particular stood out. The state prison system had become so crowded that the officials were exporting prisoners to private prisons in nearby Mississippi and Louisiana. The governor and his cronies often warned that failure to pass his tax increase would lead to the early release of many criminals. Voters were told that a cost of rejection would be a crime wave of unprecedented proportions. It was a threat worthy of "The Godfather." But the voters nixed the tax increases, like voters everywhere almost always do when given the chance. And the prison system did give early parole to many of its convicts. But that often mentioned crime wave never happened."

Receiving Social Security? Thank 9 workers
"It takes nine minimum-wage or one highly paid worker to cover the cost of the average monthly Social Security benefit. Now which kinds of jobs should we be trying to create?"

The economics of water in the West
"The American West faces severe water shortages because of U.S. Government policies of this past century; the solution is not for the government to further assert itself, but rather to end the water socialism that it has imposed. The command system of economics that has led nations like North Korea and Cuba into ruin has also created the crisis in the West."

$8.6 trillion bill sent to future generations
"It could probably be shown by facts and figures that there is no distinctly native American criminal class except Congress."

OT pay: Winners and losers
"Don't know if you're owed overtime pay? You're not alone."

Stingy Links: Graham

Too many let 'fruitcake' market dictate investments
"But when it comes to their financial lives, millions of people let the stock market tell them how to feel and what to do, despite the obvious fact that, from time to time it can get nuttier that a fruitcake."

Stingy Links: Grant

Happy Anniversary, Mr. Market
"This is a big year for market anniversaries--75 years since the Great Crash of 1929; one year since the start of a bond bear market."

A hazardous haven
"Following is a cautionary look at a refuge-that-isn't: the two dozen (and counting) mutual funds that invest in speculative-grade bank loans. With these claims--also known, a little confusingly, as leveraged loans--Wall Street has created a kind of trifecta of unfavorable terms. The yields on offer are small. The opportunity for price appreciation is nil. And the risks to principal are clear and present. What less could you want?"

Stingy Links: Gross

Haute con job
"The CPI as calculated may not be a conspiracy but it's definitely a con job foisted on an unwitting public by government officials who choose to look the other way or who convince themselves that they are fostering some logical adjustment in a New Age Economy dependent on the markets and not the marketplace for its survival. If the CPI is so low and therefore real wages in the black, tell me why U.S. consumers are resorting to hundreds of billions in home equity takeouts to keep consumption above the line. If real GDP growth is so high, tell me why this economy hasn't created any jobs over the past four years. High productivity? Nonsense, in part s and that real GDP is 1% less."

Con job redux
"My point, however, was as follows. The CPI inaccurately calculates Americans' cost of living."

A Federal inflation conspiracy?
"Influential bond guru Bill Gross says the government is intentionally understating the CPI -- and what a howl that has raised"

Tipping over
"one of PIMCO`s new strategic bets based on this hypothesis is to own intermediate TIPS with real yields higher than 0.5%. We`ll be voting with our dollars."

Too much!
"there's no doubt that the dollar is on the run and that higher U.S. interest rates are the inevitable consequence. Dollar depreciation leads to higher inflation and ultimately forces foreign creditors to question their rationale and indeed their sanity for continuing purchases of U.S. Treasuries."

Lemonade for sale
"So if you're thinking about a hedge fund to bolster your portfolio returns, give it a long think. They're risky and they're generally overpriced. You can do better elsewhere or even on your own."

Stingy Links: Health

The health of nations
"Health care consumes a large and growing chunk of rich countries' income, but does it provide value for money?"

Insurance premiums soar 11%
"Health insurance costs are going up, and up, and up. And in some cases, up some more."

Full price
"Dreams of a bright career in a big city lured Rebekah Nix here from the western plains of Texas two years ago. An appendectomy sent her home. But not because she was ill. Ms. Nix, 25 years old, was fleeing the nearly $19,200 in medical bills that had piled up on her bedroom dresser."

Stingy Links: Indexing

Can active management beat index funds?
"The best course may run counter to popular thinking."

Stingy Links: Law

The 7 myths of highly effective plaintiffs' lawyers
"Frederich Hayek in his opus, The Constitution of Liberty, wrote that "[t]here is probably no single factor which has contributed more to the prosperity of the West than the relative certainty of the law..." In the year 2003, American civil justice promises only the certainty of expense and a strange, relative sense of justice."

Outsourcing the lawyers
"Contrary to popular perception, Shakespeare didn't really suggest that killing all the lawyers might be a good thing. But that hasn't stopped some people from wishing they would just go away."

The class action industrial complex
"Congress tried to crack down on the class action racket in 1995. Today shareholders suits are bigger than ever, fed by a cozy cabal of lawyers, unions and public pension funds. The only real loser is you."

Injustice at the Justice Department
"Republicans are criticizing John Kerry's choice for vice president because of John Edwards' trial lawyer background and connections. I'm hoping that maybe someone in the Bush administration will take this criticism to heart and do something about the most egregious trial lawyer operation of all time - the Bush administration's Department of Justice."

A smoke ring? That'll cost you $280 billion
"Has Philip Morris caught masochism of the throat? No, say its rivals: it is just trying to lock in its half-share of the American market. Tight marketing rules would hurt lesser brands more than they would Marlboro."

Stingy Links: Longleaf

Longleaf Partners Q3
"To summarize, many widely accepted investment assumptions lead to the conclusion that indexing is the best choice for investors. Lowenstein counters that this is wishful thinking, dangerous stuff that has seduced the public to have a lazy confidence that one need not bother with the arduous task of patient, thoughtful selection and has encouraged fund managers to cater to those impulses.Observing patterns during the recent five year boom-crash-rebound' cycle indicates that the market is not particularly efficient. Lowenstein challenges the EMT beliefs of many of his fellow academicians by presenting a group of investors who have beaten the market over the long run by meaningful amounts and in a systematic way."

Stingy Links: Management

The uncertain return of the hero boss
"Has Donald Trump saved American capitalism? Investors in the real-estate mogul's duff Atlantic City casino business are unlikely to agree. They are getting stiffed with a low share price and a probable debt restructuring. But Mr Trump's small-screen triumph as a reality-TV star is helping to revive interest in a figure not seen in public since the bursting of the stockmarket bubble in 2000-01: the celebrity boss. Even as erstwhile heroes of capitalism are led away in handcuffs, Americans seem to be flirting with the idea of falling in love with the boss all over again."

Voting 'No' on shareholder democracy
"Another company with dual classes of stock is Berkshire Hathaway Inc., run by the legendary Warren Buffett. The last thing in the world that even second-class shareholders of Berkshire want is shareholder democracy. They're buying into Buffett's benign dictatorship, not into pro-rata shares of the wisdom of any idiot who buys in too. They're delighted to have no say in the company, as long as they are assured that other shareholders have no say either. That is far from nuts."

The secret pensions of fat-cat executives
"When it comes to retirement plans, many top execs look forward to goodies unknown to most pensioners. Here's how companies pile on the pension perks."

Corporate culture still self-serving
"It was three years ago that Enron Corp. filed for bankruptcy, ushering in the "post-Enron era" that optimists hoped would curb corporate sin. If only it had. Two recent news stories, following many others in the last 36 months, underscored how much improvement American corporate culture still needs."

Governing in the goldfish bowl
"Many companies are reexamining the way they view investor relations and corporate communications. According to a number of directors, CEOs, and consultants interviewed for this story, some outfits need to do a far better job of understanding and addressing the concerns of institutional shareholders. They have no choice."

Passing the baton
"What is the best way to replace the boss? A recent study of large, non-diversified publicly traded American manufacturing firms in the Academy of Management Journal suggests that companies perform better under a new leader if that person has been groomed as the heir apparent"

CEOs and their Indian rope trick
"The new rules should not, however, deter companies from trying harder to design compensation schemes that more closely align actual pay with actual performance. Huge pay packets for bosses would be much less controversial if there was evidence they had actually earned them."

From gluttony to class warfare
"For corporate chief executive officers and hedge fund managers, the good times never stop rolling. Twenty years ago, CEOs made an average of 40 times more than the factory floor worker. Last year it was 400 times more, and is now climbing to a multiple of 500."

Always on the job, employees pay with health
"The traditional career, progressing step by step through the corridors of one or two institutions, "is finished," said Dr. Richard Sennett, a sociologist at New York University. He has calculated that a young American today with at least two years of college can expect to change jobs at least 11 times before retirement."

Stingy Links: Markets

Searching for an explanation
"Once again, investors are rushing to buy internet stocks. Will they never learn?"

Epic struggle looms as science tackles the market
"Not everybody is so enthusiastic. ''Academics are stock market technician/chartists whose fields of study are prices, markets and market price histories, not corporate nitty-gritty and the underlying characteristics of securities,'' says Martin Whitman, chairman of money manager Third Avenue Management LLC in New York. ''That does not seem to have much to do with what Third Avenue is, and what Third Avenue is trying to do,'' Whitman wrote in a recent shareholder report."

Growth and value data
"Further analysis of the complete set of style indices shows an interesting Sharpe Ratio pattern. It seems that not only do the value series outperform growth series on average, but their Sharpe Ratio is much higher. Sharpe Ratio is a measure of reward to variability. Basically, it measures the level of return per level of risk for an asset class. The specific measure is asset class return minus the risk-free rate (U.S. 30-day T Bills), divided by the standard deviation of the asset class. Every one of the Ibbotson value series has a higher Sharpe Ratio than its corresponding growth series. The traditional risk-return tradeoff does not seem to hold with regard to the split between growth and value. The value indices are offering more return and less risk."

Born suckers
"Human beings, it turns out, are wired to make dumb investing mistakes. What's more, we are wired not to learn from them, but to make them again and again. If there is consolation, it is that it's not our fault. We are born suckers." - Consider the source...

Realistic rewards
"The return on equities over the next decade is likely to be much lower than most investors expect"

Our elected insider traders
"It turns out that our senior legislators somehow are very astute stock pickers, whose transactions, when evaluated at published market prices, delivered an overall performance twice as good as that of all the corporate insiders themselves, who must report their every trade in their respective stocks within hours of making them so that they can be published promptly. Could the senators (those who reported trading, anyway) know something the rest of us don't know? While we think about that question, consider that US households overall underperformed the stock market in the same period by 1.4 percent, while their elected representatives in the senate outperformed the market by 12 percent (those corporate insiders outperformed by 6 percent). A rising tide like the 1995r boats."

Inflated expectations
"If money is too cheap, then rates of return will fall, companies will tend to use capital rather than labour, and people will spend money on riskier assets; on things that have little to do with underlying economic growth; and on things that are in short supply. As it happens, this is a decent description of America in the past few years. Companies have been slow to hire workers even as the economy has bounded along; and workers' share of national income is very low. The low cost of capital has, moreover, encouraged speculation in risky assets, such as emerging markets, or - closer to home, as it were - property."

Insuring for the future?
"Lloyd's is trying to make its business practices as sleek as its building. But will that be at the expense of the characteristics that make the market so distinctive?"

A new kind of risk, and it's your fault
"To company risk and market risk, add 'career risk' -- the danger that career-minded money managers take too many chances to satisfy the public's unrealistic expectations."

The 'recovery' is living on borrowed time
"The Fed thinks the economy is growing on its own. I think people are using their homes as ATMs. What I don't know is when the bubble will burst."

Peter Bernstein interview
"In 1995 I said, "Dividends don't matter." I've been eating those words ever since. I assumed that reinvestments [the cash that companies put back into the business instead of paying out as dividends] would earn the same rate of return. I was wrong. Managements are more careful when they're not floating in cash."

Money trends
"The investment business is constantly evolving; one of its eternal questions is how closely today's and the future's patterns will resemble the past. One of the most important developments in recent years is the burgeoning interest in hedge funds and the growing role they're playing in the markets. But innovations continue along a broad front."

Is investing in stocks worth the risk?
"Compared to cash, bonds and even the canned goods in your pantry, stocks come out on top -- until you consider the risk."

An alternative inflation index
"Browse the Index components and if you are old enough to remember, ponder how prices have evolved over 36 years."

An eerie calm
"Many financial catastrophes have been caused by selling options. The most famous came in 1995, when a rising star at a British bank sold 34,000 options on Japan's Nikkei 225, driving implied volatility on the world's second-biggest stockmarket from 22% to 11%. But share prices plummeted after the Kobe earthquake, volatility soared, and the bank went bust. The man's name was Nick Leeson and the bank was called Barings."

Sometimes they do ring a bell
"Why does this "chasing the hot stock" happen? Dreman and Lufkin tell us it is because investors become overconfident that the trends of the fundamentals in the first 10 years will repeat forever, "thereby carrying the prices of stocks that appear to have the 'best' and 'worst' prospects. Investors are likely to forecast a future not very different from the recent past, i.e., continuing improving fundamentals for favorites and deteriorating fundamentals for out-of-favor issues. Such forecasts result in favorites being overpriced, while out-of-favor issues are priced at a substantial discount to the real worth. The extrapolation of past results well into the future and the high confidence in the precise forecast is one of the most common errors made in finance.""

Of course investors can beat the market
"EMH also has a great paradox. In order for their scenario to occur then people will have to believe there are profit opportunities, but what EMH in effect says is that there are no profit opportunities! But if people believed there were no profit opportunities then there would be no one who would act to correct the discrepancy between fundamental value and current price. So a necessary -but not sufficient- condition for EMH to be true is if investors believe it is not true. The more people believe in it, the less true it will be. EMH must assume that people are completely irrational."

The new kings of capitalism
"In two decades, private-equity firms have moved from the outer fringe to the centre of the capitalist system. But, asks Matthew Bishop, can they keep it up?"

A watched pot makes me boil
"I have several bad investing habits. The worst, clearly, is that I sometimes buy stocks that go down. But a close second is my propensity to watch my portfolio a little too closely, occasionally wasting time staring at real-time changes in the fortunes of my 55 stocks. In my defense, I only do so on three occasions: when I'm up a lot on the market, when I'm down considerably or when I'm close to even."

The disastrous history of money
"Charles II was king of England from 1660 - 1685, when wooden sticks were being used as a form of money until the system collapsed. The story has obvious parallels to the modern world."

The day the '20s died
"It was not the first great crash in Wall Street history. Far from it. Major sellers' panics had swept the Street in 1837, 1857, 1873, 1893 and 1907, all except the last marking the start of a severe depression. Nor was it the greatest one-day decline in the market's history. Regardless, the stock market crash of 1929 has entered into the folk memory of the American people. Like 1492 and 1776, it is one of those dates that every schoolchild knows. Like the Alamo, the sinking of the Titanic and Custer's last stand, it has served as the historical backdrop of innumerable novels, plays, movies and songs."

The dividend rediscovered
"After years in the doghouse, dividends have investor appeal again"

Value will out, but not by a lot
"Laurence B. Siegel, director of investment policy research at the Ford Foundation, has great investment instincts. But he knows too much to follow them blindly, preferring instead to temper instinct with disciplines developed over a lifetime of experience in delving deeply into the best investment research available."

The taming of the shrewd
"With returns at hedge funds falling sharply, it is easy to see why their owners want to sell, but much less clear why big investment banks are so keen to buy"

All that glisters
"Perhaps a better argument can be made for other scarce metals: platinum, say, or silver. Silver, after all, not only spent centuries vying with gold as a form of money, but also has many industrial uses and is not held by central banks; annual demand is much higher than annual production. Along with many other metals, the price of silver fell sharply in April, but unlike gold it has not even regained the ground it lost."

Origins of the crash still present?
"Lowenstein places special emphasis on the insidious effects of excessive executive compensation, largely in the form of stock options, which in the end led to massive speculation and widespread corruption of corporate America and the institutions designed to regulate it. Lowenstein clearly doesn't believe that those excesses have been washed away."

Pop goes the bubble?
"Other economists aren't so sure. For one thing, the economy's recent health has been supported by a hot housing market. Refinancing put a ton of cash in consumers' pockets, and high home values made people wealthier. And several industries, from construction to furniture to finance, rely heavily on the housing market. And prices don't have to plunge to make a noticeable impact on these sectors of the economy."

Stingy Links: Media

Users' guide to the business media
"Many of us are hooked on the financial press and, as a result, we get most of our investment information from the newspaper, the Internet or the specialty cable TV channels. In light of this dependence, it's useful to pause once in a while and think about how we use it."

Stingy Links: Munger

Master's class
"I am more than skeptical of the orthodox view that huge diversification is a must for those wise enough that indexation is not the logical mode for equity investment. I think the orthodox view is grossly mistaken. In the United States, a person or institution with almost all wealth invested long-term in just three fine domestic corporations is securely rich. And why should such an owner care if at any time most other investors are faring somewhat better or worse? And particularly so when he rationally believes, like Berkshire, that his long-term results will be superior by reason of his lower costs, required emphasis on long-term effects, and concentration in his most-preferred choices."

Stingy Links: Stocks

Taking advantage of the terminally stupid
"After years of miserable performance, Concord Communications management came up with a novel approach to ensure that the stock options it granted during the bubble didn't expire worthless. In a public filing last week, Concord unveiled a plan to buy back employee options at prices up to $4. The trouble is, with a $9 share price, options granted at $40 are worth basically nothing."

Best Buy hopes to exorcize devil patrons
"As far as the old adage "the customer is always right" goes, Best Buy doesn't buy it. The massive retailer is being vocal about something that at first might sound a little uncouth: frankly, they'd rather not have 20% of their customers as customers. In an age where it seems like everyone casts their nets as wide as possible to bring in more eyes, feet, and wallets, Best Buy is doing the opposite. They believe that a small portion of their customers are bad for business, and they're looking to shut them out."

The sorry saga of KHI
"The infamous fiascos at Bre-X Minerals Ltd., YBM Magnex Inc. and Nortel Networks Corp. have some new company. The rise and fall of a little-known Halifax company, Knowledge House Inc., is turning into one the largest, messiest morasses of securities litigation in recent memory."

The coming pension crisis
"Allegheny Technologies is on a roll. Thanks to rocketing prices for its specialty steel and some cost-cutting moves, the Pittsburgh-based company has seen its stock climb 172% in a year. But those expecting nothing but blue skies ought to consider this sobering fact: What it owes its workers in pension payments exceeds what the whole company would be worth in liquidation."

Flight into the red
"It's a basic problem of supply and demand: too many seats and too few passengers willing to pay full-fare prices. During the last downturn a decade ago, carriers lost more than $13-billion. Since the Sept. 11 terrorist attacks, airlines have lost $18-billion and project a loss of $10.7-billion more this year, counting the effects of a war with Iraq. That's enough to wipe out the industry's cumulative profits since commercial aviation took wing at the end of World War II."

The next wave of airline bankruptcies
"The five characteristics that I used to define the dynamics of the European low-cost air travel market apply to the future of other industries that sell commodity products as well. In an industry like that, companies must run as fast as they can just to stay in place. Price pressure from new entrants to the industry with lower costs are a constant threat. Since part of those lower costs is simply a result of newness, investors in these sectors need to reverse the conventional wisdom that gives the edge to the established companies in that market."

Grey Goose Billionaire's second act
"Frank can certainly afford to indulge in his fairway fantasies. The Grey Goose sale--the largest in liquor business history for a single brand--solidified his spot in the booze business pantheon. It also will land him on the Forbes 400. His personal proceeds from the deal, plus a 75% stake in Sidney Frank Importing, make him worth at least $1.6 billion."

Costco has its own formula for success
"Munger considers Sinegal one of the 10 best retailers of the past century. He'll need all his smarts to keep Sam's at bay. For seven of the first eight months of this year, Costco's U.S. same-store sales, a key measure of retail growth, have outpaced Sam's, says retail consultant Management Ventures."

Welcome to the bankruptcy economy
"The final costs of a bankruptcy economy aren't simply measured in cash, however. Workers who don't trust management at many private companies will believe even less in management promises. Workers in the public sectors who thought their pensions were guaranteed will go through a rude and bitter awakening. Social Security recipients will get less back just as current workers are asked to put more in. And taxpayers will get socked with the bill and be left with more anger and cynicism."

Pensions on a precipice
"The threat by UAL, parent of struggling United Airlines, to walk away from its four pension plans has set off shock waves throughout the airline industry."

Big Mac's makeover
"The world's biggest fast-food company has pulled off a remarkable comeback"

Customer service saved Xerox
"Salvation for Xerox Corp. started with a steak dinner in Nebraska four years ago. As Xerox's newly named president and chief operating officer, Anne Mulcahy faced many tasks, including resuscitating a company burdened with debt, a free-falling stock and a dwindling customer base. Who was she gonna call? Famed financier Warren Buffett, who invited her for dinner at one of his favorite restaurants and told her she had been "drafted into a war" she didn't start and to focus on customers."

Is Wal-Mart good for America?
"I was trying to make the same point that the great economist Joseph Schumpeter made about the Industrial Revolution. In his book, "Capitalism, Socialism and Democracy," he said, "The capitalist achievement does not typically consist in providing more silk stockings for queens, but in bringing them within the reach of factory girls in return for steadily decreasing amounts of effort.""

Giant slayer
"Albert Norman has made a minicareer out of blocking Wal-Mart. He has evidently had some success."

Market realities can't sustain TransAlta's dividend
"We note that the dividend yield, at 6.1 per cent, is only modestly higher than the yield on the company's 2011 bonds (about 5.5 per cent). (The gap is larger than it appears because of the dividend tax credit.) Still, to the conservative investor who's looking for TransAlta for income, what's better to own: a high-yield stock that's likely to cut its payout, or a slightly lower-yielding bond that, by comparison, looks pretty secure?"

Buffett of the North
"Insurer Fairfax Financial has been able to compound its book value at 31% annually since 1986 because of the exceptional investing abilities of its managers. Unfortunately, some recent questionable acquisitions have weakened its balance sheet significantly. Now Fairfax is priced at a huge discount to its sector, making it a high-risk, high-reward investment."

Stingy Links: Tilson

Don't stretch for performance
"How tight are credit spreads today? Here's one example: An index of speculative B-rated credits -- which are well below investment grade, with long-term five-year default rates exceeding 25% -- last week was yielding a mere 6.85%, only 368 basis points above Treasuries, the lowest spread ever. For comparison, only two years ago, for the week ending Oct. 10, 2002, the spread for the same B-rated index was 1088 basis points, an all-time high."

The perfect business
"Understanding the quality of a business is critical to being a successful investor, as it is a major determinant of what one should be willing to pay for a stock."

The 80-cent dollar dilemma
"Stocks trading at a 20% discount to intrinsic value will generally follow the market if it takes a tumble. But selling good companies trading at such a discount isn't an acceptable option either. What's an investor to do? Whitney Tilson shares his strategy."

The tech stock discount
"Whitney Tilson argues that tech stocks should trade at a discount, not a premium, to the earnings multiples of the market averages, and consequently, warns that tech stocks are valued at more than twice their fair value today."

Gaining an investment edge
"There are only three ways to beat the market: better stock picking, better market timing, or more portfolio leverage. It seems obvious, to me at least, that the former is the best option. Market timing is a fool's errand -- I challenge you to show me anyone among the wealthiest Americans who made their fortune doing so -- and if you use much leverage, the market will eventually carry you out on a stretcher. But with so many smart people with so much money looking for bargains, even the traditional pockets of inefficiency such as distressed securities, spinoffs and micro caps are increasingly picked over. So how can one pick stocks that will outperform? Only by having an edge. If you don't -- if you're the proverbial sucker at the poker table -- you're going to get creamed."

Blue-chip bargains?
"I'm often asked how I generate stock ideas. There are many sources, but mostly, I read constantly, regularly talk to a lot of smart investors, and occasionally use stock screens. There are dozens of screening tools -- some free, others very expensive -- and countless criteria that one might use to filter stocks, but I've found that one of the best is to simply search for stocks trading at or near their 52-week lows. This makes sense since I'm looking for 50-cent dollars -- stocks trading for half or less of their intrinsic value -- and such bargains are likely to be severely out of favor."

The joy of cash
"Value investor Whitney Tilson scours the investment universe regularly, but says he's found few juicy pitches. So he coolly bides his time and holds onto his cash. Should he worry? Not according to Warren Buffett and other superinvestors."

Stock options hurt U.S. competitiveness
"There are legitimate arguments and difficult issues related to how to go about expensing options. Which formulas or methods to use and how often to update the values are points for debate. There are no credible arguments, however, for ignoring these expenses and thus intentionally overstating the earnings and understating the P/Es of not only companies with large options programs but also the market in general."

Focus Investing
"While there are a handful of exceptions such as Peter Lynch, the overwhelming majority of great investors that I'm aware of practice focus investing. They invest infrequently, only when they're highly confident that the odds are heavily in their favor, and then they bet big."

The tech stock opportunity
"Despite my reservations about the tech sector, I actually think that it is -- or at least should be -- fertile ground for value investors for the simple reason that most of the investors in the sector are irrational, momentum-driven speculators."

The scuttlebutt advantage
"Investing legend Philip Fisher, in his classic book, first published in 1958, Common Stocks and Uncommon Profits, wrote extensively about scuttlebutt and his techniques for collecting it"

Stingy Links: Value Investing

Pickings remain slim for FPA's Rodriguez
"Overall, the funds are run with a value orientation, though Rodriguez is the biggest cheapskate of the bunch. And unlike many shops which aim to remain fully invested in the market regardless of the conditions, FPA managers aren't afraid to build big cash stakes if they're unable to find attractive values."

Oddball investing
"It all started with Forrest Berwind "Bill" Tweedy in 1920... Bill was a strange fellow. No one really knows where he came from or when he was born. And if you saw him today, you would probably laugh. The man wore suspenders, had a bushy mustache and a good-sized potbelly. He never married or had kids. He ate lunch at the same place at the same time every day. He was an oddball, to put it bluntly. And if you happened to walk past 52 Wall Street, chances are, you would see Tweedy working at his cluttered desk - busy writing letters and looking through company reports."

Value skeptics
"Of course, it's very easy to talk about waiting and having patience, but it's very hard to actually do that. Many feel guilty or unproductive when they're not doing something. Their mind set is geared to change. Buffett tries to soothe the restless anxiety of some by saying that one of the wonderful things about the investment game is that you don't have to be right on everything. You only have to get a good idea every year or two. If you're right on a very few things in your lifetime, you can do very well as long as you never make big mistakes. As he's said many times, you just have to wait for the fat pitch."

A fund for the long-term worrywart
"Benjamin Graham was the mentor of Warren Buffett and the granddaddy of the school of investing that says cheap stocks will inevitably deliver greater returns than expensive ones. Barbee is another disciple. He's loath to pay more than about eight times earnings for a stock -- the market average is 26 -- and he never pays more than book value, or the net asset value of a company. The market happily pays nearly five times book."

The dividend elite
"Apart from warming the hearts of retirees who make an old-fashioned distinction between principal and income, dividends serve a beneficial function in braking executives' penchant to squander corporate resources. So argues Michael Jensen, a Harvard professor emeritus who believes that payouts make managers think twice about overspending on iffy projects that might endanger the dividend. Some contend that increasing dividends portend good things for the market overall. A study by AQR Capital Management's Clifford Asness and First Quadrant's Robert Arnott in the Financial Analysts Journal last year found that when dividend payout ratios are high, solid earnings growth lies ahead because managements are confident about the future."

My purloined portfolio
"I regularly monitor the portfolios of money managers I admire. Sure, they are my competitors. So what? Occasionally I pick up an idea worth stealing."

Identifying franchises
"So I think the answer is that franchises are different now, but I don't think they're any less present. And people aren't as good at managing them. So the irony is that where these franchises are concerned, where you've got a dominant market position, that in a global world -- because it's almost impossible to dominate big global markets (the example people got undermined are the auto companies) -- but in a big global world, you have to think locally. Because the only markets that you're going to be able to dominate are local markets."

Patient Capital Management Q3
"Many would be surprised to learn that the TSX Composite Index is extremely concentrated in just three sectors. Approximately seventy per cent of the TSX Composite Index is comprised of three industry groups; Energy at 18.5%, Materials at 17.5% and Financials at 33%. For those expecting diversification this index is not it! Canadian investors are unwittingly incurring this "concentration risk" through index funds and active money managers who mimic the index."

Value Investing 101
"Warren Buffett and Walter Schloss are not the typical guest lecturers at a business school class. Then again, the Columbia University Graduate School of Business isn't just any business school, and professor Bruce Greenwald's class is anything but ordinary. Greenwald teaches Columbia's value investing course and also authored a book on the topic. In part one of this five-part series, Greenwald shares with Fool contributor Matt Logan the three steps of value investing."

Francis Chou flies quietly under the industry's radar
"Chou screens about 2,000 names and looks at basic financial metrics, including price/earnings and price/book ratios and strong balance sheets. He may find 20 to 30 names that he deems "worth looking at." He then looks for opportunities in which firms are 40%-50% undervalued."

Value Hunting
"Columbia students bet on ugly ducklings"

Not just any dividend payer
"S&P screens for the most attractive -- stocks with high yields, a history of payout growth, and potential share-price gains"

Fund legend Gabelli shares insights, lessons
"Similar to one of his heroes, Warren Buffet (see below), Gabelli was a disciple of the investment approach taught by Graham and Dodd. He shared a clip of a series of lectures he had recorded from his former Professor at Columbia University in the 1970s discussing the concept of "Private Market Value." "Was private market value merely intrinsic value dressed up to make it more appealing?" The difference was that Private Market Value equaled intrinsic value plus a control premium. Valuation of companies using this concept is now the basis for the way Gabelli researches each stock."

Dividends: getting paid to wait
"The picks we selected via a computer screen all meet the following criteria: annualized dividend growth of at least 10% over the past three years, a market capitalization of at least $1 billion, 15% return on equity in the latest fiscal year and estimated 2004 payout ratios--indicated annual dividend divided by estimated earnings per share--below 0.60. Such metrics suggest that these companies can afford to pay a higher dividend at some point in the future."

Veteran value manager took a big risk
"In recent years, mutual-fund manager Jean-Marie Eveillard went from being revered, to reviled, then back to being revered againall without changing his self-described "quirky" investment strategy."

Japan: A rising sun for investors
"The Ivy Cundill Global Value Fund adheres to the classic deep-value investment philosophy of Graham and Dodd, selecting stocks with strong balance sheets, but trading at significant discounts to historical averages and industry peers."

The Third Avenue Management investor conference
"We were pleased therefore to have the opportunity to hear from four notable value investors including Marty Whitman, Chris Browne, Jean-Marie Eveillard and Mario Gabelli at a recent event in New York City."

Stingy Links: Whitman

Third Avenue Q3
"A radical change in thinking seems needed if GAAP are to be made more sensible, and even more useful as an analytical tool. Given its present direction, GAAP increasingly impose unneeded and counter-productive burdens on American corporations, American management and American capital markets. GAAP, first and foremost, ought to be geared toward meeting the needs and desires of creditors rather than the needs and desires of short-run stock market speculators, who are vitally interested in day-to-day stock market price fluctuations. Currently, GAAP are directed increasingly toward meeting the needs and desires of short-run stock market speculators. This is accomplished by setting up increasingly rigid sets of rules designed to meet an impossible goal: have periodic statements of cash flows from operations, earnings and earnings per share be as accurate (or truthful) as possible."

Stingy Links: World

The wolf at the door
"In the three years from 1985, the dollar fell by 50% against the other main currencies. Inflation and bond yields rose and, in October 1987, the stockmarket crashed. America's current-account deficit is now almost twice as big as it was then, so the total fall in the dollarand the fall-out in other financial marketscould well be larger. The wolf is licking his lips."

Dead firms walking
"Japan's unproductive service industries are holding back its improving economy from achieving even better performance"

Hudson's warmer bay
"Global warming means Hudson Bay is now open to shipping an extra week a year. Some scientists predict that as soon as 2010 there could be a regular shipping service during the summer in the Arctic, and that by 2050 there will be a year-round sea passage to Hudson Bay."

The sun also sets
"Never before have real house prices been rising so fast in so many countries"

For richer or for poorer?
"this may be politically convenient for Mr Putin: regional governors who cannot keep up with the payments will become unpopular, making it easier for the Kremlin to dislodge them. That is in line with the general trend of Mr Putin's federalism, which has been to put more of the burden for services on to the regions while concentrating more power and supervision at the federal level."

Flimsy foundations
"Calculations by The Economist suggest that house prices have hit record levels in relation to incomes in America, Australia, Britain, France, Ireland, the Netherlands, New Zealand and Spain. In other words, ratios of prices to incomes are now above levels that have proved unsustainable in the past. Taking the average ratio of house prices to incomes in 1975-2000 as a baseline, American house prices are now almost 30% overvalued."

China misconceptions
"In the following Ad Hoc comment we review what we believe are some of the more common consensus misunderstandings about China. Granted, we might be very wrong. After all, when looking at China, one is forced to look at either the official government statistics, or the limited market data. And making educated guesses with the above data points are often just that: educated guesses!"

Emerging markets, emerging risks
"Investors are once again buying emerging-market debt. A perilous punt, if ever there was one"

Crash landing coming for China
"What we have witnessed in China is not about efficient markets, rational investors, or bell curves of the fairy tale land of financial theory. It's about rank speculation on the part of the crowd, with the People's Bank of China and the US Federal Reserve acting in key supporting roles as accomplices."

Has a Chinese Enron popped up in Singapore?
"No matter how all this plays out, China Aviation Oil is a timely wake-up call for those who think China's 9 percent growth will shield them from problems there. Ditto for those who thought investing in other countries' markets would save them from ugly surprises. If this scandal turns out to be the tip of the iceberg in terms of China-related risks, investors are in for a rude awakening."

Consuming passions
"As the American consumer tires, can shoppers in Europe, Japan and China take up the burden?"

So much for hollowing out
"One factor pushing the trend is a growing realization that the savings from producing in China aren't all they're cracked up to be. Sure, China has low wages -- typically 5% of Japan's -- but they're rising in coastal areas. And the cost advantage is increasingly eroded by supply bottlenecks and power shortages, which shut down plants in many coastal cities over the summer."

Short haircuts all round
"Besides, Argentina is a past master at bilking its creditors. In a recent IMF study, Kenneth Rogoff, Carmen Reinhart and Miguel Savastano estimate that it has spent more than a quarter of its history since 1824 either defaulting on its debt or restructuring it. The default at the end of 2001 followed those of 1989, 1982, 1890 and 1828. Each time investors returned, albeit at a price. Mr Lavagna will hope they display a similarly short memory this time. The world's capital markets can be bitten more than once, it seems, before they turn shy."

The troll under the bridge
"The Ambassador Bridge is Detroit's lifeline to Canada. Sept. 11 turned it into a choke point and a security risk. The story of why it hasn't been fixed revolves around one man."

Roadblocks to small business curb growth
"The report makes a devastating estimate of potential gains from regulatory reform. It split countries studied into four equal groups, ranked according to ease of doing business. In countries where it was least difficult to do business, the economy grew an average of 2.6 per cent a year over the past decade. At that rate, economies can double their size in 27 years. But in countries that make it hardest for entrepreneurs to operate, the growth rate was only 1 per cent, a snail's pace that takes the doubling time to 70 years, roughly three generations."

Safety matters
"First they steal our jobs, then our credit-card numbers. Those seem to be the fears inspired by outsourcing back-office financial-services work to India. In both Europe and America, the argument that outsourcing costs jobs at home still has political resonance. But it is making way for another bogey: that India cannot offer the standards of privacy and data protection that consumers expect at home. Outsourcing is dangerous and perhaps even illegal."

Close, but no cigar
"A good outcome would be a gentle but sustained fall in the dollar. A bad outcome would be a dollar crisis."

We are never prepared by what we expect
"At the moment, the Japanese market cap is 9% of total market cap in the world. The US is 52% and the rest of Asia is 3.5%. So for 12.5% you get the whole of Asia's 3.6bn people will the fastest growing economies of China, Vietnam and India but for the US you have to pay 52% for a country that is economically doomed."

The dragon and the eagle
"American consumers and Chinese producers have led a global boom. China is creating genuine wealth, but America's binge is based partly on an illusion, says Pam Woodall, our economics editor"

Kyoto a-go-go
"The Russian government has approved the Kyoto protocol. Once approved by the country's parliament too, the global climate-change treaty will come into effect. But what effect will it have?"

Five key economic challenges for Bush
"Bush, who did not veto one spending bill in his first term, campaigned on a pledge to cut the deficit in half over the next five years by growing the economy and limiting discretionary spending. That may not be easy. Many economists say that Bush's spending proposals, combined with his desire to make permanent the tax cuts of recent years, mean that the numbers simply don't add up."

Stingy Links: Zweig

The way of the calm investor
"If getting rich is supposed to make you feel good, why are so many investors so agitated so much of the time -- even when the market goes up?"
Frugally Yours,
Norman Rothery
ISSN 1499-2787

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