Saturday, December 3, 2011 2 comments

Articles to start off the last month of 2011

The year is almost done... hope everyone has had a good year. Now that I'm Twittering, a lot of the articles will be duplicates for any Twitter follower.

  • (Highly Recommended) John Paulson's arbitrage notes (Anh Hoang): John Paulson, before he became popular for short-selling mortgage bonds, was a successful risk arbitrageur. Special situations investing is something that amateur investors should look at.
  • (Recommended) Charlie Rose interviews superinvestor Seth Klarman (CanadianValue for GuruFocus): Arguably the top value investor in the world right now, Seth Klarman rarely gives interviews so you should check this out. However, unfortunately, there isn't anything insightful about investing in the interview. One thing Klarman does point out is that he is still a Graham-type investor whereas Buffett has moved on to a, what I call, 'modern Buffett' investing style. The style that I aspire to is what I call 'Buffett Prime'. Roughly speaking, I would say Graham-type Warren Buffett spanned up to late 1960's; Buffett Prime is 1970's to early 1990's; and modern Buffett is late 90's to present (these are just rough dates without deep analysis). My impression of amateur value-oriented Buffett-aspiring investors (from blogs, message boards, etc) is that probably 50% are Graham-type; maybe 25% are modern Buffett; 15% are Buffett Prime; and 10% are a complicated mix.
  • Bullish article on Netflix that touches all the bear arguments (Fortune): Anyone interested in Netflix or new media should check it out.
  • "Facebook vs. Google: The battle for the future of the Web" (Fortune): Amazing that Facebook has such high number of unique visitors... never would have imagined.
  • Is the Buffett premium dissapearing? (The Globe & Mail): Berkshire Hathaway shares have been off lately and is the market re-pricing Berkshire Hathaway to remove the Buffett premium? For those not familiar, Buffett premium refers the above-typical prices paid by investors for Berkshire Hathaway shares in order to own a company run by the best investor of modern time. According to some, conglomerates should be traded at a discount due to their opaqueness and diverse, non-synergistic, asset holdings, yet Berkshire Hathaway was generally more expensive than a typical conglomerate.
  • "Are banks good businesses?" (Fortune): It's not easy to figure out if a bank is a really good business.
  • Economics of the NBA league (Freakonomics): Interesting article on the economic considerations of the negotiations between the owners and the players. Check it out if you are into the economics of sports.
  • (Recommended) "Are Corporate Balance Sheets Really the Strongest in History?" (Hussman Funds):  John Hussman presents his thoughts on the situation in Europe, along with an examination of the strength of corporate balance sheets in America. I disagree with Hussman and share the same view as the consensus that corporate balance sheets of non-financial corporations are indeed strong. Some of the data supports Hussman's skepticism of the strength of balance sheets but some are inconclusive. For instance, tangible assets to total assets has been declining because of, I believe, the collapse of manufacturing (which tended to have high fixed assets) and the rise of service industries like financial services, computer software, Internet services, and many areas within "information technology." I still think any adverse outcome for equities in America and Canada is more likely to come from the extremely weak consumer balance sheet and, to a smaller degree, government financial issues, than from inherent weakness in coporate balance sheets (this view doesn't apply to financial firms, whose balance sheets are extremely weak IMO.)
  • "After Massive Job Cuts, Wall Street's a Different Place" (Bloomberg Businessweek): "Around the globe, more than 220,000 financial service positions are slated to disappear this year. They won't necessarily come back." My feeling has been that the financial services industry was way too big so, as painful as it is for the workers impacted, it was inevitable and possibly good for the economy in the long-run.
  • Detroit finances near collapse (Bloomberg): Detroit's finances are so bad that the state of Michigan is contemplating "taking over" the city. Although Detroit has unique problems due to the collapse of auto manufacturing, this could be a precursor to what may happen in several other overly-indebted and fiscally-weak cities and municipalities in other parts of USA (and maybe even Canada in the future :( ).
  • (Recommended) Book review - Free Ride: How Digital Parasites are Destroying the Culture Business, and How the Culture Business Can Fight Back by Robert Levine (Brain Pickings): Interesting essay that tackles whether free content on the Internet is destroying the culture business. A lot of jobs are being lost, and companies are being destroyed (think of newspapers and magazines) but is this for the worst? The situation reminds me of when printing press was invented and artisans and craftsmen lost their jobs when books went from carefully prepared, rich, manuscripts to mass-produced goods. There was a painful adjustment period but it's blatantly obvious that it was for the better.
  • Sino-forest just as murky as before the accusations (The Globe & Mail): Potential fraud, Sino Forest, released the independent committe's report on the fraud allegations by short-seller, Carson Block of Muddy Waters. Not surprisingly, nothing concrete came out of the report and it's still not clear what Sino Forest's business model is and who actually owns what. In particular, it is still not clear if Sino Forest actually owns the trees that it claims it does.
  • (non-investing) Can computers ever think like humans? (Philosophy Now): "Namit Arora considers the complexity of consciousness and its implications for artificial intelligence."
  • (non-investing) Ten classic book gift ideas for the intellectual (Brain Pickings): Classics for those who like to think.
  • (non-investing) From 'Brothers Grimm' to 'Stuck,' the 11 Best Picture Books of 2011 (Brain Pickings via The Atlantic): Picture books, including some kids-oriented ones.
  • (Recommended) (non-investing) "The 11 Best Art and Design Books of 2011" (Brain Pickings): If you want to give some book gifts, or just want to entertain yourself with visual books, check out this list.

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2 Response to Articles to start off the last month of 2011

December 7, 2011 at 9:57 AM

"Buffett Prime is 1970's to early 1990's"

Could you elaborate?

"Can computers ever think like humans?"

Reminds me of the following quotes:

"The question of whether a computer can think is no more interesting than the question of whether a submarine can swim." -- Edsger W. Dijkstra

"If the human brain would be so simple that we could understand it, then we would be so dumb that we would not understand it"

December 7, 2011 at 7:10 PM

LOL@Dijkstra quote :)

As for your question about Buffett, I thought I would write a post about it. Check the about-to-be-posted blog entry.

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