Can Turtles Fly?

Not in any order, here are some articles I ran across recently that you may find interesting... I often link to old articles so if there are stock suggestions or macro speculations, pay attention to the date (thesis may have changed by now). The Oscars of Paper Currency (James Tarmy for Bloomberg Businessweek, Dec 1, 2016): Didn't know some entity actually gave out award for best currency design. Kind of fun to see the artistic style of various currencies. Horizon Kinetics presentation on indexation and ETF problems (Steven Bregman, Horizon Kinetics, for Grant's Fall 2016 Conference - Oct 4 2016): Pretty good presentation on some issues with ETFs and indexation. If you invest in ETFs, check it out. Bear case presentation on Home Capital Group (Marc Cohodes for Grant's Fall 2016 Conference - Oct 4 2016): Bearish thesis on Canadian mortgage lender. If the Canadian housing market falls, HCG might be one of the first ones to get hit badly. Contender for the worst t...

I haven't been following the markets, nor investing for about 3 or 4 years, and it is interesting to see how things have changed. Not sure if any long-time readers are still around but some may remember that my favourite company (from a business perspective) was Amazon (AMZN). It was always seemingly too expensive so I never invested in it but if the valuation was lower--say during a stock market crash--I would have no problem investing a large sum for a long time (big risk with Amazon is management risk--loss of Jeff Bezos would be a big negative). Amazon changes more than most other companies of its size so there has been quite a few changes over the last 5 years or so. First, the Kindle (or tablet in general) does not appear as lucrative or revolutionary as many investors, including me, imagined. I always thought Kindle had too much hype but I thought tablets as a category finally reached the stage where they could be used as a reading device. Obviously this didn't happen...

Here are some articles that I found interesting and insightful... (Recommended) "Stephen Elop's Nokia Adventure" (Bloomberg Businessweek): This is a good article on Nokia and its CEO, Stephen Elop. This article touches on why Nokia rejected Meego, its internal operating system, and also why Google and its Android platform was rejected. Anyone interested should check out the accompanying video and audio as well. Unfortunately for Elop, Nokia stock has fallen off a cliff and things aren't pretty. Investigation of Muddy Waters' allegations against Sino-forest (James' Analysis): Not sure who this person is but he seems to have started a blog with good analysis of the allegations by Carson Block of Muddy Waters. According to 'James,' some allegations appear incorrect while others may be plausible. I think the Sino-forest saga is only in chapter 1 and there is likely to be more to all this. Fundamentally-weighted passive investing and pure passive in...

This probably isn't news to anyone but I thought I would reiterate the point... One of the benefits of long-term investing is that accounting changes can generally be ignored. In contrast, shorter-term investors have to be careful in reading the financials. For example, consider Amazon's accounting change that is described in an article in The Globe & Mail : But a recent accounting change by the company will effectively goose Kindle revenue for all of 2010. Amazon says in its disclosures to investors that it has become an early adopter of a new accounting standard called ASU 2009-13, addressing “revenue arrangements with multiple deliverables.” In Amazon's case, the “multiple deliverables” are the Kindle hardware, the ongoing wireless connectivity, and any subsequent software upgrades for the device. Apple Inc., which has also adopted the standard, said earlier this year that its iPhones and Apple TV services fall under the standard. Under previous accountin...

I came across an interesting video  interview with Bruce Greenwald , conducted by Steve Forbes. You can also access a transcript on the right side of the webpage ( Thanks to Henry W. Schacht for bringing this to my attention.) Most people who read or listen to Greenwald do so for his thoughts on value investing (he is very close to a modern Benjamin Graham.) In contrast, I find him more interesting for his macro thoughts and his general views on industries. If you are interested in some macro-oriented thoughts from Greenwald, you may also want to check out these posts from last year: Interview with Advisor Perspectives part 1 Interview with Advisor Perspectives part 2 My comments on some topics that he covered follows..

People who are lazy, like me, and rely on earnings numbers (such P/E ratios or EPS growth,) need to be always mindful that earnings may not accrue to the shareholder in the long run. This occurs when a company earns money (i.e. is highly profitable) but the money is squandered away in some manner. Sometimes, it is not the fault of management per se (i.e. not entirely bad capital allocation); it can simply be the nature of the industry. One of the most common ways this can occur is if the profits need to be recycled into the business just to keep the business running. What really matters for the long-term investor is something more along the lines of "owner earnings" or "free cash flow." Investors who lean more towards value investing tend to rely more on FCF (free cash flow) than on earnings. A good example of this is fund manager, Bruce Berkowitz, who appears to rely almost solely on FCF and rarely talks about EPS. Like most on the Street, I primarily rely o...

(This post has nothing to do with investing... unless you fancy buying a company trading at a P/E of 61...although its FCF is pretty good so the P/E appears far worse than it is i.e. it re-invests most of its FCF but if it hits a low growth phase, it will pay that out to shareholders.) source: " A New Page ", The New Yorker, August 3, 2009. Amazon wasn't the first one to introduce an e-book reader—that title goes to Sony—but it may just end up being remembered as the first one. After all, history has a cruel way of immortalizing the winners and not the inventors. I have always been dissapointed with the lack of progress in replacing paper—documents, newspapers, books, and all. So I was pleased when Amazon somehow ended up popularizing the (original) Kindle. It wasn't available in Canada, and even if it were I couldn't afford it. However, I have been keeping an eye on it. Today, Amazon expanded its Kindle offering to more than 100 countries . CEO and founder, Jeff ...

First week of July... the worst June for the stock market in quite a while--perhaps ever. My portfolio is a disaster this year (-30% so far), primarily because of my investment in Ambac. When I first started investing a few years, I always felt that the bear markets are what separates the successful investors from the rest. That is certainly true of anyone who follows some sort of contrarian strategy. People like me end up buying beaten down stocks and will get killed if our selection is wrong. But times like these are also what makes investing interesting. Investing was quite boring for the last few years but this year has been exciting to say the least. Losing a huge amount of money (losses haven't been crystallized yet but I think there will be some permanent impairment) is never fun but at least I somehow ended up getting front row seats to some of chaotic drama Wall Street has been putting on. As usual, here are some articles on various topics, along with my thoughts (admitte...

(Illustration by David Simonds; The Economist) Yahoo!'s descent, first gradual then sudden, during this decade marks a surprising reversal of the fates of the only three big internet firms to have survived since the web's earliest days. Back in 1994 Jerry Yang and David Filo, truant PhD students at Stanford, started to publish a list, eventually named Yahoo!, of links to cool destinations on the nascent web. Around the same time, Jeff Bezos was writing his business plan for a website, soon to be called Amazon, for selling books online. The following year, Pierre Omidyar, a French-born Iranian-American, put an auction site on the web that would become eBay. --The Economist I was quite bullish on Amazon in the post I wrote yesterday, and this article from The Economist provides a simple overview of how the turtle, Amazon, overtook the two hares, Yahoo and E-bay. Amazon looks wildly overvalued on earnings basis (trailing P/E around 70; forward P/E around 40) but I would take a lo...

Does it make sense to buy beaten-down stocks (say those that have fallen 50%+)? Most traders have a rule that says that one should never buy anything that is falling and hitting 52wk lows. Well, I'm not a trader so I don't follow that rule, but should one still avoid them? A stock that has fallen 50% would have wiped out 100% of its gains in the past since returns are geometric. For example, a stock appreciating from $5 to $10 results in a 100% gain, but if it falls to $5 then it is a 50% loss from the higher level. Roughly speaking, given that the stock market yields a long-term return of around 10% per year, that means it wipes out around 8 years worth of gains (10% compounded over roughly 8 years = 100%). Although stock price gains do not necessarily match profit growth, one can, in a simplistic sense, think of it as wiping out 8 years worth of company profits. A lot of the financial stocks in America have dropped 50% (or more) and are back to levels in early 2000's. Is...