Articles for a Friday

It's getting colder in the Northern Hemisphere... Here are some articles for a chilly day...

Sorry about the lack of articles on specific investments. I haven't had much time to research them and I haven't found any potential long-term investments that I have liked. There have been quite a few mergers and takeovers announced but the spreads are likely small (no financial crisis or panic selling right now.) But if the market sells off, keep an eye on some of those announced deals to see if the spreads widen.


  • British Columbia's real estate appears to be on the verge of a bust (The Globe & Mail): Difficult to tell from these stories but it looks like the real estate boom in BC might be on its last legs. I imagine it is still strong due to the Olympics build-out but we'll know how bad the situation is after the Olympics.
  • Inside a day-trading software provider (The Globe & Mail): I am not actually sure that we are seeing a rise in day traders but I always find it interesting to read about what day-traders are up to. The latest word is that technology makes or breaks a day-trader and therefore, um, you should purchase or subscribe to trading software.
  • (Recommended) Walter Schloss revisited - 16 Golden Rules; Various articles (Mr. Market Blog & Alex Garcia via GuruFocus): I have linked to some of these material before but do check out Schloss' thoughts (especially if you are a classic value investor or a value investor pursuing wide diversification.)
  • Simoleon Sense interview with Greenbackd blogger (Simoleon Sense): This is an interesting interview that shows how one can leverage their skills to get an edge on the competition. Greenbackd's blogger says he—I'm assuming it's male—worked as a lawyer for a while and he is attempting to leverage his superior knowledge of the legal aspects of investing. He is focusing on liquidations, NCAV investments, and activist investing. I agree with his strategy and think his skills look like a good fit for those types of investments... Another interesting thing is how he has changed over from a Buffett-style investor to a Graham-type one... I hope the newfound fame, fortune, and vanity won't bring down Greenbackd ;) Actually, come to think of it, I think he needs to get on Jim Cramer's show to achieve the pinnacle of an investment celebrity and hit those three attributes at the same time. I think he is safe for now. But if he gets on Cramer, then, well...
  • Will investors learn anything from the financial crisis? Jim Chanos doesn't think so (Jim Chanos @ Virginia Value Investing Conference, University of Virginia via GuruFocus): Short-seller Jim Chanos thinks investors will quickly forget the lessons from the crisis. Thanks to GuruFocus for managing to get Jim Chanos' presentation at the Virginia Value Investing Conference.
  • John Paulson & his bearish bet on housing (Excerpt of book from The Wall Street Journal; h/t Greenbackd): Excerpt of the upcoming book, The Greatest Trade Ever by Gregory Zuckerman. Gives some interesting details of how John Paulson made $5 billion in one year off the housing bust. It's still amazing to me that elite Wall Street firms would sell financial products while also helping hedge funds that bet against those products. Very unethical and it's unfortunate that the guy in the excerpt, who was from Bear Stearns, was the one walking away from such duplicitous affairs yet his firm collapsed; while other firms like Deutche Bank and Goldman Sachs somehow survived while continuing that practice.
  • A gold bear - Robert Prechter (The Globe & Mail): A story recapping Prechter's bearish views of gold... oh, he is forecasting a deflationary collapse in nearly all assets by 2010. I am nowhere near as bearish on the markets or gold as Prechter but I do lean in that direction... one interesting note from the story is Prechter's contention that gold should have risen 25x, rather than the present 50x, if gold would have risen at the rate of inflation since 1933. I'm not sure how he is calculating this but it's an interesting thought.
  • Retailing & The Price War (The New Yorker): Whether you agree or not, you have to admit that James Surowiecki's articles in The New Yorker are always interesting. This one deals with price wars in retailing.
  • (Recommended) Japan's innovative companies (The Economist): Interesting piece dealing with highly innovative firms in Japan. Japan's economy will always remain a mystery to me, and I'm sure to others as well. Someone living 200 years from now will probably be as mystified as me. They are so advanced when it comes to technology but they just don't seem to be able to commercialize it or produce good corporations... They did miss one huge technological advance—software development—which some claim was because computer programming languages were in English while their native language comes from a completely different language tree(?). Not sure how true that is but missing out on software and related elements (such as the development of the Internet) really hurt them. As far as I know, Japan still doesn't have any world-class corporation in the software space or the Internet space (I could be mistaken and if so, leave a comment mentioning them.)
  • (Recommended) Dealing with Castro: Sherritt International & Cuba (The Walrus): The Walrus is Canada's best literature/current-affairs magazine—it's sort of a cross between The New Yorker and Harper's so is left-leaning—and this is long-form journalism at its best. In the linked story, Rachel Pulfer recaps the life of Sherritt International, a Canadian mining company, in Cuba. If you are interested in international business, you may find this article benefitial to read.
  • Productivity rises in America but not necessarily a good thing (BusinessWeek): Productivity gains are how citizens become wealthier. So a rise in productivity is generally good. However, the current surge in American productivity is due to massive lay-offs (i.e. same work being done by fewer workers) so it is questionable how good the recent numbers are.
  • East Germany after 20 years (BusinessWeek): German unification is a good case study for what may transpire in Korea within a few decades (this is wild speculation on my part but I'm calling for North and South Korea to merge within 20 years.)
  • Nanotech companies and their attempt at revolutionizing desalination of water (BusinessWeek): Cheap desalination will have a greater impact than many other advances being worked on. Most of the world has a shortage of clean water so the potential is massive. Something like this can become as large as the oil & gas industry right now (especially if the water can also be used to irrigate land for farming.) However, from an investment point of view, this is early-stage technology that may or may not turn into anything.

Comments

  1. Aki_IzayoiNovember 7, 2009 at 12:09 AM

    I do not know if about the German and Korea simularities. I do not know what life is like in North Korea, but life in East Germany wasn't a living hell. Besides the wall, the people in East Germany did not suffer from serious oppression, and perhaps starvation.

    ReplyDelete
  2. Sivaram VelauthapillaiNovember 7, 2009 at 11:46 PM

    Yeah... the sufferring of North Koreans is not comparable to East Germans. People weren't starving in East Germany, although they were living under a police state and were jailed at will under bogus charges. I think East Germans did suffer terribly but mainly right after WWII when the Soviets basically did whatever the hell they wanted. By the 60's and 70's I think East Germany was somewhat more independent and less abuse was going on. At least that's my impression from limited history.

    My point was more of the fact that like Germany, North and South Korea are the same people and are essentially the same country. It is logical, and natural, for them to join at some point. After the current dicator passes, I think the government stranglehold may weaken.

    If and when Korea does merge, it will present great opportunities and threats for the Koreans. On the one hand, like Germany, the South Koreans have to support the poor North and bring them up to modern standards. This means wealth from the South will be sucked into the Northern area. There may also be problems with the law, crime, etc, since the North wouldn't have had modern legal systems, democratic governments, etc. But on the other hand, it also means that there will be more opportunity to develop the North. South Korean businesses will have an advantage and profit from the growth of the North. East Germany was already developed ("2nd world") compared to West Germany but North Korea is not. So the potential with North Korea is much higher.

    ReplyDelete
  3. Miguel BarbosaNovember 8, 2009 at 9:17 PM

    Hi Sivaram,

    Thank you for kindly linking to SimoleonSense. I appreciate the support, you run a top notch blog.

    Miguel

    Founder of SimoleonSense.com

    ReplyDelete

Post a Comment

Popular Posts

Thoughts on the stock market - March 2020

Image
Right now, DJIA has a P/E of 16.8 and forwand P/E of 15.1, whereas S&P 500 is at 20.1 with forward P/E of 15.8. Source: WSJ market Data If you ignore interest rates and inflation expectations--both of these influence valuations but depends on your macro call-- the market is not cheap. Long-term P/E is around 15. Trailing P/E is around 20% (Dow) to 40% (S&P500) higher than average. Forward P/E is in line with long term average but that assumes a strong V recovery. Consensus forecast is for profits to drop 1.2% in 2020. In 2008, it dropped 25.4% so current forecast is a very mild recession. Covid-19 coronavirus is not going to last more than a few months but these forecasts are still too rosy in my opinion. So I wouldn't rely on forward P/E. The richly valued (mostly tech or high quality) have not fallen much but the distressed ones have. So if you want to outperform in the long run, I think one’s choice right now is to: • Wait for market to fall another, say...
✖ READ MORE >>>

Warren Buffett's Evolution and his Three Investment Styles

Image
A Young Warren Buffett In a comment to one of my posts , Mark Carter, who incidentally appears to have a  good blog worth checking out , asked: "Buffett Prime is 1970's to early 1990's" Could you elaborate? I have vaguely indicated how I view Warren Buffett in the past, but I thought I would detail my view of his investing behaviour. This is more of an opinion piece and many others would disagree with me (if you do, I'm curious to hear your thoughts). I don't follow Warren Buffett as closely as many value investors so I may get some facts wrong. My view is that Warren Buffett went through three different phases, with each consisting of different investment techniques. The overall investment theory remained the same—what people call value investing—but his execution, tactics, and strategy differs across the three phases. Some people may break up his career into additional periods but my feeling is that the three I will describe essentially capt...
✖ READ MORE >>>

Hugh Hendry discussion at the Alternative Investment Conference

Thanks to Value Investing World for bringing this Hugh Hendry interview to my attention. I may not agree with all the things—short-term orientation of hedge funds is actually worse IMO; the sharp pencil effect doesn't always work—but Hendry is a true contrarian and worth listening. Like Marc Faber or Jim Rogers, you also can't take everything Hugh Hendry says seriously. I had always felt Hugh Hendry was firmly in the deflation camp but I get the feeling that he is now opening up to high-inflation possibilities. Otherwise, his stance appears to be similar to past opinions.
✖ READ MORE >>>