Articles for the week ending May 23, 2009
Some articles that you may find interesting, in no particular order:
- Which economic indicators are important? (The Globe & Mail): A nice article that speculates on economic indicators that are useful, and those that may not be so. Even though I'm macro-oriented, I don't really pay regular attention to economic indicators. I think they are only useful in developing a rough idea of whether the world, or a country, or an industry is "good", "bad", or whatever. As for timing, or trying to pick sectors or stocks, they confuse me more than anything.
- David Rosenberg Q & A (The Globe & Mail): David Rosenberg was the senior economist at Merril Lynch who recently moved to a firm in Canada. I used to have access to his reports through my discount broker (HSBC) but not anymore. He was pretty good IMO. He was mildly bearish—but not superbearish like Stephen Roach at Morgan Stanley—throughout the last few years and I'm sure he saved his clients some money. He maintains his reputation with an out-of-consensus bearish call on the economy. He thinks the economy won't recover as quickly as many imagine. If you share similar views, the thing to do is not to go and short sell stocks (unless you are good at that.) Rather, I think we should build more pessimistic estimates into company earnings, growth rates, and things like that.
- Be careful with rare coins on E-Bay (Financial Post): I'm not that familiar with history but I can't think of another time period in human history when counterfeiting was so big. Particularly because of advances in technology and low manufacturing costs in China, almost anything is being counterfeited. This story deals with counterfeit rare coins bought on E-Bay. If you are buying coins, be careful; I'm not really sure how you can tell in advance.
- Are the Chinese GDP numbers overstated? (The Economist): It's hard to say if the GDP numbers coming out of China are too high or not. I don't know about the current (or near-term) numbers but the long-term historical numbers don't make any sense to me (as I have mentioned before, it's hard to imagine a country that can grow around 9% to 10% real (probably 10% to 15% nominal) for a long period of time.) According to some private analysts the article references, the numbers may have been overstated in the past, but they seem more accurate now. If the past GDP is lower than official reported, it's actually bullish in my eyes (because it means that misallocation of resources or any bubble is likely to be smaller—instead of super-charged bubbly growth, it would be slower, more rational, growth.)
- Citigroup quadrupling its share count (Fortune): Citigroup takes a page out of penny stocks and quadruples its common shares (by converting preferreds to common.) I wonder if this might set a record for a large-cap company (Citigroup's market cap is still $20+ billion.)
- Obituary of the real estate bust - Florida residential golf resorts (New York Times): I didn't even know there were such a thing—I guess it's mostly for the wealthy—but it looks like residential golf resorts also seem to have been in a bubble and are bursting right now. NYT profiles a key player in the Florida region and goes over various problems faced by his network of companies. The story also touches on some unethical practices—denied by the accused actors—seemingly used to loot private equity investors. I have talked about the possibility of massive unrecognized losses at private equity funds but I wonder how many funds also involve unethical practices that allowed employees and advisors to profit at the expense of the investors. Private equity is not very transparent so it remains to be seen what comes of all this.
- (recommended) A discussion among economists on the current crisis (The New York Review of Books; thanks to Conscience of a Liberal for pointing it out): I haven't read it yet but it looks a good discussion between economists on the current crisis. Although some look at the economics profession in negative light, given the collapse of the world economies and the financial crisis, I actually think it's great to see serious debate in economics. We are going to see revolutionary ideas come out of the current crisis.
- Snowball plus two other books reviewed (The New York Review of Books): I have little interest in Snowball, the Warren Buffett biography, and have it near the bottom of my list. I'm just starting out and a slow-reader so I have a ton of other books to read first (it also shows how I'm not a hardcore Buffett fan ;)). But I do love reading reviews of books. This might strike some as the dumbest and most unproductive thing ever—why not spend the time reading the actual book instead—but there is some enjoyment in reading well-written essays (I'm probably one of the few who enjoys reading essays or long reviews of movies, many I still haven't seen :)). Well, this New York Review of Books piece pulls ideas from Snowball and essentially examines what made Buffett sucessful. Building on the notion of success, the review also looks at Malcolm Gladwell's views in his latest book, Outliers, as well as Geoff Colvin's Why Talent is Overrated. If you want an interesting read check it out; but if you are looking for something primarily dealing with investing, business, or economics, skip it.
- Snowball review by Portfolio from last year (Portfolio; 4 parts): If you do want a good look at Snowball, especially if you are evaluating the merits of it, you should check out the multi-part review from Portfolio last year. As Felix Salmon, who writes the first part, mentions, the book is really more of a biography and doesn't really delve into why Buffett did what he did.
- Mohnish Pabri lecture at Columbia Business School (Columbia Business School; thanks to ValueHuntr): Pabri had a horrible year but he is generally very transparent with his methods and his strategies. I'm still not sure how good of an investor he is. I put him in the camp as David Einhorn, William Ackman, Jim Rogers, and Marc Faber. That is, someone who is pretty good and much better than average, but with spotty record and question marks over their dependence on certain economic or business environment.
- (Highly recommended) Notes from Value Investing Congress - West [part 1 - part 2 - part 3] (Cheap Stocks): Summary of various investment ideas and thoughts from up-and-coming value investors.
- The saga of Porsche & Volkswagen (The Economist): The squeeze of short-sellers by Porsche was a risky strategy. I said it was one of the greatest investment actions last year but it is not for the faint of heart. It is still unclear if Porsche can successfully complete the takeover; failure may result it it destroying itself (In one of his best posts, John Hempton of Bronte Capital laid out, late last year, why the Porsche strategy was very risky and can end up bankrupting the firm if it fails.)
- Outsourcing of a different type: agriculture (The Economist): The Economist asks, "Rich food importers are acquiring vast tracts of poor countries' farmland. Is this beneficial foreign investment or neocolonialism?" I'm free-market-oriented and think the idea of rich countries (like South Korea or Saudi Arabia) acquiring agricultural land in poor countries (like Ethiopia or Mozambique) is benefitial. However, the problem—a point most free marketers on the right seem to ignore—is that many poor countries have corrupt governments that do not benefit the poor, who tend to be reliant on agriculture. FDI (foreign direct investment) in poor countries' agriculture can revolutionize these countries like FDI in manufacturing has done to Asia. But how to do it without all the profits accruing solely to the corrupt governments (and the investors)?
- Jeremy Grantham 1st quarter 2009 letter (GMO): I was thinking about commenting on it but didn't find anything worthwhile. He basically says that the market will rally much further but it may not be for fundamental reasons.
- (Recommended) Berkshire Hathaway Q&A with the media(??) (GuruFocus): I haven't seen this before and I'm not sure what this is; I assume it's a media Q & A with Warren Buffett. In any case, the questions are very good and cut to the key points.