Can Turtles Fly?

I hate losing articles and such was the case with one I was typing up earlier this week grr :( One area I have been researching lately is the historical behaviour of large-cap and mega-cap stocks. Some of you may have noticed it but I find it very bizarre that the market is pricing large-cap and mega-cap American stocks at relatively low valuations. In fact, depending on the measure you use, the market is pricing them lower than small-caps and mid-caps even. As an example, consider the P/E ratios of the following (I'm not recommending any; just picked some random big ones): Microsoft has a forward P/E of 9.7 and a trailing P/E 12.3. Intel (cyclical) has a forward P/E of 9.7 and a trailing P/E of 12.3. IBM has a forward P/E of 10.4 and trailing P/E of 12.1. ExxonMobil (cyclical) has a forward P/E of 8.8 and trailing of 13.4. JP Morgan (vulernable to dervatives implosion) has a forward P/E of 8.8 and trailing of 11.9. Pfizer (potential value trap) has a forward P/E of 6.7 an...

There have been many rumours and theories floating around, trying to explain how a broad index in the largest stock market in the world can drop more than 5% suddenly and recover almost immediately. Adding to the mix, The Globe & Mail quotes a story in the Wall Street Journal speculating on a new theory : One hefty trade in Chicago last Thursday may have played a big role in the afternoon stock market meltdown, The Wall Street Journal reports today. With markets already under pressure from global developments, the $7.5-million bet in the Chicago options trading pits may have served as something of a spark about 20 minutes before the heart-stopping plunge of almost 1,000 points in the Dow Jones industrial average, the newspaper says. The trade was made by Universa, a hedge fund that, ironically, is advised by Nassim Taleb, who authored Black Swan: The Impact of the Highly Improbable. Universa purchased 50,000 options contracts betting that stocks would continue to fall. Those c...

Was busy with my movies at TIFF*, thinking about my future, and starting my job hunting. Hope no one minded the infrequent posts this week... (* Non-investing thought: Of the 7 films I saw (still one more left,) none of them really blew me away. I think the best one that will appeal to mainstream fans is The Road , directed by John Hillcoat, and starring a young Kodi Smit-McPhee and Viggo Mortensen. It should open in theatres soon so keep an eye on that. If you are into pure science-fiction or drama, you may enjoy it (it's not an action film.). Cinematography, set design, and special effects were excellent, while the acting was superb too. The film deals with a post-apocalyptic world where a man and his young son are trying to survive. It's based on a book and, as usual, people who read the book may not find the film as enriching (I don't read novels so I can't say about this film.) Unlike post-apocalyptic worlds in movies like Mad Max or video games like Fallout , thi...

(Illustration by unknown artist. Blowing Up by Malcolm Gladwell. The New Yorker, April 22 & 29.) Nassim Nicholas Taleb is a controversial man these days. Some of it probably comes from the envy of others, but some of the criticisms are quite valid. For those not familiar, he is, without a doubt, Mr. Black Swan. He successfully profitted off the stock market crash, and has suggested that investors understate risk. Not just once or twice, but almost perpetually. I haven't linked to any of his works or commentary because his investing style isn't suited to me—he is essentially a trader and I am not—and I don't think his views can be successfully executed in the long run, at least when it comes to small investors. Some traders may profit from his strategies but it is a painful strategy. From what little I know of Taleb's work, I think most of it is useful for academics, risk officers, executives, policymakers, and the like. I was writing this post a few days ago and Blo...