Can Turtles Fly?

I just joined Twitter and I can see how people's identities can be co-opted by others. I remember once when Malcolm Gladwell responded to someone asking about a comment of his on Twitter, that he doesn't even have a Twitter account (the point being that whoever that was tweeting using his name was a fake account). It's really hard to tell who is real and who isn't. This isn't a problem for no-name people but it's hard to tell with prominent individuals. Twitter does appear to verify some identities as authentic—for instance, Bill Gates is easy to find and follow —but I'm not sure if the user has to pay for this or not. In any case, it's an interesting world on Twitterland. It is also easy to fall prey to information overload. Having said all that, here are some articles you may find worthwhile reading... " The End of Borders and the Future of Books " (Bloomberg Businessweek): I can't believe William Ackman wanted to merge Borders and B...

Happy Canada Day to fellow Canadians... and Happy Fourth of July to my neighbours down south. Here are some articles that have been on my list that I have read or plan to read. As usual, unlike other blogs, I don't necessarily link to recent articles so do keep the timeline in mind when reading my posts. (Recommended) Bitcoins - a novel, virtual, currency (Bloomberg Businessweek): Interesting story of a virtual online currency. I don't know if the US government, and others, will start cracking down on this—it's a threat to the existing currency scheme—but it remains to be seen. It's also interesting to see how the value of fiat currencies—bitcoin is purely virtual but limited by an algorithm—is set. Bitcoin's value appears to fluctuate wildly but that is likely due to the small number of users. "Reinsurance explained" (Liarspoker for Gurufocus): A basic introduction to reinsurance companies. (Recommended) Retained earnings for net-net stocks (Geo...

Some articles, including some important ones summarizing the Berkshire Hathaway meeting held a few weeks ago. (Highly Recommended) Warren Buffet 2011 shareholder meeting notes (Ben Claremon for GuruFocus): Very detailed and extensive notes from last week's shareholder meeting. Too bad it's in scribd format (am I the only one on the planet without a Facebook account yet? ;) ) (Recommended) Summary of Warren Buffett 2011 shareholder meeting (Epic Investor): Another pretty lengthy summary of the shareholder meeting from earlier in the month. (Recommended) TV interview of Warren Buffett and Ajit Jain (NDTV via GuruFocus): First time I've seen the publicity-shy Ajit Jain... I wish someone would ask Buffett to walk through one of his past investments. The canned questions and short TV-oriented questions have been repeated a million times and are a complete waste of time for people like me. Oh well. Maybe Alice Shroeder will write an investment book soon. (Recommended) ...

If you didn't have enough reading for the week, fear not. Information overload is just around the corner ;) Here are some items that you may find interesting... Book excerpt - The Wizard of Lies: Bernie Madoff and the Death of Trust by Diana B. Henriques (New York Times): Major bubbles are often marked by criminal actions and the stock market crash that started in 2007 was no different. Bernie Madoff will be remembered for centuries, well beyond our lives. Book excerpt -  Money and Power: How Goldman Sachs Came to Rule the World  by Wiliam D. Cohan (vanity Fair): Haven't read it yet but it seems to be about the battle between Jon Corzine and Henry Paulson for the leadership of Goldman Sachs. Carl Icahn at 75 (New York Times; h/t The Reformed Broker): Hated by some, loved by some, we are seeing the final moments of one of the most influential shareholder activists that ever lived. ROIC in various industries (Barel Karsan): Although returns for stockpickers is ...

Here are some articles I ran across over the last few weeks. Articles near the very-bottom have nothing to do with investing so read it at your discretion. Fortress Paper & Chad Wasilenkoff (Report on Business magazine): Profile of a Canadian success story in the forestry industry " Is Apple once again riding for a fall? " (The Globe & Mail): Eric DeCloet, one of the best business writers in Canada, wonders if Apple is headed for a fall similar to what it experienced in the 90's. (Highly Recommended) John Paulson on the risk in risk arbitrage (market folly; h/t GuruFocus ): Good job by market folly on finding this gem from John Paulson. Before Paulson became famous for his bet against real estate, he was mostly into risk arbitrage. Anyone into risk arbitrage should check out the referenced article. ( PDF of cited article can be found here.) Is Steve Ballmer hurting Micrsoft? (Fortune): The company has been rock solid but on the other hand, it hasn't a...

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 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...

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...