Can Turtles Fly?

Large Hedge Funds with Good Long-Term Performance This chart isn't very useful since it doesn't show return in percentage-terms (the bar chart shows dollar gains). Nevertheless, I thought it was worth seeing how large funds are behaving. (source: " The Oracle of Boston ," The Economist. July 7, 2012)

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...

I think he is deserving of it—some won't agree—but it looks like Warren Buffett will receive the Presidential Medal of Freedom . Although awards of any sort are always controversial, given questionable recipients in the past, this is an important one. This is the highest civilian honour in the United States of America (the highest civilian award in Canada is the Order of Canada , although some seem to suggest it is the Order of Merit). You can't get anything higher unless you are in the military. Warren Buffett will be receiving the medal along with several other prominent individuals such as Yo-Yo Ma (artist), Bill Russell (basketball player), George H. W. Bush (former president), Angela Merkel (German chancellor), and a few others. Although some may disagree with awarding it to Warren Bufffett, I think it is an appropriate choice. If America represents capitalism, it is only fitting the greatest capitalist of modern times, Warren Buffett, receive the highest civilian hono...

Some articles you may have missed... Seth Klarman annual meeting notes (various sources; h/t itznuthin1 and toughiee @ GuruFocus): News spreads on the internet like wildfire. Apparently Baupost held its first annual meeting and someone took some notes. It was published on various sites but later withdrawn at the request of the author. I have no idea who the author is or why it was withdrawn so one should be careful when reading this. It either means that the information was not meant to be public or the information may be incorrect (possibly fake.) Since the withdrawl notice didn't suggest the reason for pulling the notes, one can only speculate... I don't really follow Seth Klarman closely because it is virtually impossible to implement his strategies (even if you were able to implement them, it is difficult to figure out why Klarman purchased or sold a security.) Anyway, one interesting tidbit that stood out was Klarman's view that stocks were not cheap, even at the Marc...

Here are some articles, interviews, and commentaries that I found interesting over the last couple of weeks. I don't know if it's a coincidence that quite a number of articles are about China; or am I subconsciously thinking about issues surrounding China? hmm... Overview of China (The Globe & Mail): A nice, detailed, recap of the situation in China. Seth Klarman Harvard interview (Harvard Business School): Forget where I got the original link from but here is a brief interview of Seth Klarman. It mainly deals with his life and his thoughts on life. Changing winds of capitalism (The New York Times): David Leonhardt's essay chronicles the changes that are occuring in economic thought. He suggests how Adam Smith was far less of a laissez-faire capitalist than generally suggested. Marc Faber audio interview with financialtube.com (Financialtube.com; Marc Faber Report, original mention by Alex Garcia at GuruFocus): The usual stuff... didn't find anything th...

Continuing the 1933-like rally, the market continues to push higher. The key questions from my newbie perspective are to figure out what the new sales level will be and what is a reasonable profit margin. A lot of companies, across varying sectors, have seen sales fall 20% to 30%, while profits have declined 10% to 50%. Are these temporary, trough, numbers? Or are these the norm for the next decade? If they are the decade norm, the market is likely overvalued. S&P 500 forward P/E ratio is around 17 right now and the historical average is around 15. However, the P/E ratio is always tricky to read because interest rates are very low right now and hence can support a higher P/E ratio. If you thought short-term rates will remain below 1% for many years, then the P/E ratio wouldn't be perceived as being high by investors. Here are some articles to consider... not as good as last week but some important ones... In defense of value investing (Greenbackd): Megan McArdle at The Atlanti...

I see some value investors suggesting that Seth Klarman is in the same league as Warren Buffett. How good is he? Quite frankly, I know very little of Seth Klarman so my comment should be taken in that light—namely, a distant observer with limited information. Institutional investors and others in the hedge fund world will have a better, truer, picture; but I have to go with what I have. I have no idea what Klarman's performance in the last decade has been. But I did run across the Baupost Fund letters in the 1990's —I think I linked to them before but if you haven't seen them, do check them out—and let's look at how he performed. If we go with the latest available information, at least to me, it is the 2001 letter. I extracted the performance table, which represents inception to 2001, which is around 10 years, from that letter: Well, you can get a feel for an investor's skill and investing style from long-term performance. It's sort of like looking at a 10 year ...

The Ben Graham Centre for Value Investing at the Richard Ivey School of Business (University of Western Ontario) generally conducts very good, hour-long, interviews with prominent value investors. I have linked to some of the speeches in the past and I got around to listening to Seth Klarman's speech from March . This speech made the rounds on various value investing blogs a few months ago so some of you may have already encountered it. I'm not a big fan of Seth Klarman, mostly because he is opaque and his investments are hard for newbies to understand. He is sort of like Edward Lampert. Sites such as GuruFocus list his publicly disclosed stock picks but one can never tell what they represent. Could it be a pair trade where you can't see the short pair? Could it be a special position undertaken because Klarman or his portfolio managers know the principals at the company? Are some of the public picks spin-offs that he received for owning other private companies? Who knows? ...

Seth Klarman doesn't conduct too many public interviews but I ran across a detailed interview conducted by TIFF Education Foundation (thanks to ValuePlays for referring to it.) A large chunk of the interview dealt with institutional issues, such as picking the right analyst or manager and retaining them, but the latter portion is likely to be useful for small investors. I don't follow Seth Klarman closely—he is not my style and virtually impossible to tell why his fund is purchasing or selling a security—but many value investors consider him to be one of the top investors around. Seth Klarman's record in the 90's is nothing spectacular but many claim he is very risk-averse and has done exceptionally well in the 2000's (I haven't seen anything to confirm this but it is probable that his record, if you include the last 9 years, is quite good.) I will quote some of his thoughts, while injecting my views, in the rest of this post. Note that the text is not quoted i...

Some articles, in no particular order, that may be of interest... Current recession close to being the worst since the 60's (The New York Times): According to some indicators, our the recession in the US is on par to be one of the worst since the 60's. The question is, will it linger on? (Further comment below) Andrew Mickey interview with John Calamos, a convertible bond investor (Q1 Publishing; via SeekingAlpha): I don't know the track record of either of these guys but I ran across this insightful interview regarding convertible bonds. As I have remarked before, convertible bonds are arguably the ultimate security for distressed investment. They generally give you the upside of equity and the downside of bonds. Unfortunately many companies haven't issued them in the last decade (possibly because financing cost of straight bonds was really low in the last 5 years; and it leaves them open for hedge funds to aggresively short-sell shares while owning the convertibles....

I don't know if it's just me but I am seeing quite a number of amateur-oriented investment blogs start up in the last year. Several of them seem to be focused on value investing and tend to cover material that are useful for newbies like me. I don't know if it's just the rising popularity of blogging or if it's someone trying to take out their misery on the written ink ;) but I hope the bloggers continue doing what they are doing... Older investors or those with good historical research skills may have seen the following two articles before but it's the first time I have encountered them and thought others may find it interesting. The two interviews come from a new blog I ran across, Mr. Market Blog . The first is an interview with Seth Klarman conducted by Fortune in 1990 . From the article, you can get a sense of the type of investments he was investing in when he started out. I don't really follow Klarman--not my style and virtually impossible to know wha...

Mostly macro stuff... Seth Klarman Interview at Harvard Business School (HBS): Thanks to gurufocus.com for bringing this interview to my attention. Some people put Seth Klarman a step below Warren Buffett when it comes to value investing but I have no idea. It's really hard to say how good, or bad, any of these guys are when they run opaque funds and all we know is some quoted return. For instance, I'm still uncertain of Edward Lampert's skills. Anyway, Seth Klarman is one of the few value investors who actually seems to follow Benjamin Graham's principles fairly closely. Oil keeps sliding (MarketWatch): Near-term futures contracts breached the $37 mark and analysts are lowering their estimates. From a long-term contrarian point of view, analysts cutting estimates is good. Semiconductors seeking bailouts (BusinessWeek): It's not only the auto industry that is seeking bailouts. The semiconductor industry, particularly in Taiwan and Korea, are seeking bailouts as ...