Can Turtles Fly?

Investing life has been quite boring for the last two years—come to think of it, so has other aspects of life :( I didn't buy anything for several years now and haven't posted much on the blog either. I've been reading quite a bit though, but haven't found any compelling ideas. In any case, I just sold off one of my very first investments—one I made before I started this blog—for a small gain. That investment is a small reinsurance company called Montpelier Re (MRH). I bought it in February 2007 and sold it today (March 2012). Purchase price (approx): US$ 17.96 Sale price: US$ 19.49 Simple return (excl dividends; US$): 8.4% Total return (US$): 14.1% (2.67% annualized)

Rolling 10-Year Stock Market Return vs Starting P/E Ratio (source: " Gazing at the future: why stocks are underperforming ," Crestmont Research. Downloaded March 25, 2012) I think I posted similar, if not the same, charts, a few years ago and I thought it was a good time to revisit. The above chart plots the rolling 10-year S&P 500 return (annualized), along with the starting P/E ratio at the beginning of the 10-year period. The starting P/E ratio—you can think of the P/E ratio as a proxy for valuation—plays a huge role in determining future returns. After all, if you buy something at a high price, your returns are likely to be lower than if you buy the same thing at a lower price. Typically, a high P/E ratio will compress and you'll post weaker returns. The long-term stock market return is 10% per year and the average P/E ratio is around 15 (Crestmont has it pegged at 15.5). In the chart above, you'll notice that the 10 year return tends to be low

I don't think Wall Street is as bad as some claim—it's filled with sharks so you have to expect certain behaviour—and I'm not as negative on Goldman Sachs but given the controversy over the opinion piece by an ex-Goldman employee , I thought the following painting by Molly Crabapple captures the public mood. The painting, clearly influenced by Matt Taibbi's polemic on Goldman Sachs from a few years ago,  " The Great American Bubble Machine ," is very provocative and I think the artist has captured the symbolism and surrealism inherent in everything that has been happening around us. Some readers probably won't like the painting but it reflects the criticism from some who feel the ethics on Wall Street has been heading downhill for 25 years. (If interested, you can visit the artist's site to purchase her works .) Great American Bubble Machine (painting) by Molly Crabapple (2012) (source: Great American Bubble Machine (painting) by Molly Cr

Discretionary Spending of Americans (source: " Discretionary Dough: How Much Extra Cash Do American's Have? " Downloaded from Visualizing on March 10 2012: http://www.visualizing.org/full-screen/38365 )

Been going through a few Malcolm Gladwell speeches and here is another great one from 2003. It deals on the notion of how one's behaviour is altered when they are asked to think about a particular decision. It's an interesting talk and covers the material in his book Blink so some of you may be already aware of it. Gladwell touches on the famous Pepsi taste test and the failure of New Coke; the failure of up-and-coming musician Kenna; expert opinion vs non-expert opinion; and how packaging impacts the impression of the actual product. Those interested in advertising, sales, market research, social science, and human behaviour will find the following video insightful.

Most long-time readers know that I'm a big fan of Malcolm Gladwell and I ran across the following video of him having a discussion at High Point University. Anyone interested in social issues, entrepreneurship, or life in general, may find it interesting. Gladwell is a funny guy so it's not as boring as these discussions tend to be.

The Display Advertising Ecosystem (source: Downloaded from " I'm Being Followed: How Google—and 104 Other Companies—Are Tracking Me on the Web " by Alexis Madrigal, The Atlantic. Feb 29, 2012, 2:57 PM EST)