• 27 Mar
    Want To Find Great Investments? Find Mismatches Between Market Perception & Reality

    Want To Find Great Investments? Find Mismatches Between Market Perception & Reality

    • A great company isn’t always a great investment, while a bad company can be a great investment.
    • In this environment, it’s very difficult to find great investments as only 35% of listed companies are creating value for shareholders.
    • The essence of investing is to find mismatches between the market’s perception and the company’s future.

    Introduction

    One of the most famous investing quotes is Buffett’s reflection on owning great businesses:

    “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”

    In the current market, investors seem to focus only on the “wonderful company” part and totally forget the “fair price” part. More →

  • 26 Mar
    Sunday Edition: How Cash Can Be Like A Call Option On The Market

    Sunday Edition: How Cash Can Be Like A Call Option On The Market

    When the market reaches extreme levels—to either the upside or the downside—it’s pretty normal to see conditions generally start to become more volatile. With the market at historical highs, investors start to become more and more nervous about whether staying in the market exposes them to more risk, or whether taking profits now would mean leaving money on the table when the market surges to yet another historical high. A similar kind of uncertainty happens at or near market bottoms, as speculation centers around whether the market has dropped enough for investors to start buying obvious bargains or whether there is still even more downside to be avoided. More →

  • 24 Mar
    Using Intrinsic Value To Measure Portfolio Performance

    Using Intrinsic Value To Measure Portfolio Performance

    • The market is irrational and can’t be used as the only measure of investment performance.
    • Imagine if all the businesses you own suddenly delisted, you’d look at their value in a different way.
    • Intrinsic value is based on the business owner perspective which is essential for reaching healthy long term returns.

    Introduction

    This past Tuesday was a bad day for stocks with both the Dow and the S&P 500 falling more than 1%. This isn’t very significant for now, apart from the fact that it broke the longest run the S&P 500 has ever seen without a 1% decline (64 days in comparison to 34 days in August 1995). However, it’s an excellent introduction to today’s topic on how we measure investment performance. More →

  • 23 Mar
    Do You Have A Static Or Dynamic View Of The Markets?

    Do You Have A Static Or Dynamic View Of The Markets?

    • A static view tells us stocks are cheap. A dynamic view tells us hell is about to break loose.
    • Vehicle loans have increased 57% since 2010. If interest rates increase, car sales and other credit related sales will falter and lead the economy into a recession.
    • However, as always, there are ways to make money in any environment. Today we’ll discuss an actionable idea and introduce you to a profitable long term investing philosophy.

    Introduction

    This market has lost all connections to economic reality.

    The FED’s rate hike lowered treasury yields instead of pushing them higher. This is at odds with history as since 1954, the correlation between the federal funds rate and the yield on 10-year treasuries has been nearly perfectly correlated with a correlation ratio of 0.91, 1 being perfectly correlated. More →

  • 22 Mar
    Here’s What You Need To Know If You’re Counting On Dividend Income

    Here’s What You Need To Know If You’re Counting On Dividend Income

    • I’ll analyze the dividend environment by describing the risk reward scenario for dividend income investors.
    • The ‘monthly dividend company’ will still remain so, but you’ll be able to buy it at a 30% off, or even cheaper.
    • Whatever you’re doing, just don’t chase yields as that is the fastest way to lose a lot of money in this market.

    Introduction

    What dividend investors don’t like is uncertainty, especially uncertainty related to their dividend income. Nevertheless, uncertainty is exactly the feeling many investors have in this environment, not because of the market as the indexes are constantly breaking records, but because there is a certain feeling in the air that things might soon change and nobody knows how the financial world will look afterward. More →

  • 21 Mar
    When It Comes To Retail, Forget Buy & Hold – Buy The Trend

    When It Comes To Retail, Forget Buy & Hold – Buy The Trend

    • Retail is a dangerous business as there is always a new player on the block.
    • Traditional retailers see declining sales and margins while E-commerce retailers see growing sales and declining margins. This is not a good combo for investors.
    • As always, there will be many opportunities to make money, but be sure to know what you’re doing and forget about moats and long term buy and hold investments.

    Introduction

    In Buffett’s biography, The Snowball, retail is described as a marathon business where you have a new, fresh runner joining the race at every mile.

    One of Buffett’s first retail investments was a holding company, Diversified Retailing Company Inc. (DRC), formed by Buffett, Munger, and Gottesman in 1966 with the goal of acquiring retail businesses. Their first acquisition was Hochschild-Kohn, which on paper looked like a great buy due to its substantial discount from book value, good management, unrecorded real estate values, and a significant LIFO cushion. Despite the good fundamentals, they sold three years later at no profit. Selling without losing money might not seem all that bad to you, but it’s a terrible thing for Buffett because it means he has missed opportunities to better allocate capital. More →

  • 20 Mar
    Is This The Beginning Of The End For The Era Of Financial Engineering?

    Is This The Beginning Of The End For The Era Of Financial Engineering?

    • Most developed world economies can’t continue to grow without financial engineering.
    • However, inflation forced tightening will eventually have a significant impact on credit.
    • This will only lead to more accommodation and toward an eventual crash, so be prepared.

    Introduction

    Each significant historical bear market has an initial trigger. Weak home and car sales killed the 2003 – 2007 bull market, while the realization that stock valuations had gone too far initiated the bear market in March 2000.

    But what will trigger the next bear market? Well, there’s a great possibility that it will be monetary tightening. Perhaps it won’t be the latest quarter percentage point rate increase, but it will probably be one of the next rate hikes. More →

  • 19 Mar
    Sunday Edition: Sugar – The New Epidemic Killer Could Offer Your Portfolio A “Sweet” Low Risk Boost

    Sunday Edition: Sugar – The New Epidemic Killer Could Offer Your Portfolio A “Sweet” Low Risk Boost

    Being somewhat of health nut, a recent article published on FortuneThe Hunt for the Perfect Sugar” caught my attention.

    Today, it’s pretty common knowledge that high sugar consumption has been linked to obesity and type 2 diabetes. However, it’s now being linked to dreaded conditions such as heart disease, Alzheimer’s and even cancer – including lung cancer. More →

  • 17 Mar
    Do You Really Know What Risk Is & Can You Handle It?

    Do You Really Know What Risk Is & Can You Handle It?

    • Risk can’t be defined as volatility as it includes factors like your retirement, your children’s college tuitions, mortgage payments, unemployment, etc.
    • In life altering situations, nobody thinks about the highest expected utility hypothesis.
    • The personal side of risk is more important than any ratio, coefficient, or return potential.

    Introduction

    Defining investing risk is crucial for a healthy approach to investing. Some say risk is the chance that something goes wrong, some define it as volatility, others as the risk of permanent loss. However, 99.9% of the articles, news reports, and videos, don’t even mention risk, let alone define it or quantify it for the discussed investment. This is because 99.9% of people don’t like to face reality. It’s human nature to put our heads in the sand and postpone difficult decisions. More →

  • 16 Mar
    The U.S. Market Is Irrationally Expensive – What Does The Rest Of The World Have To Offer?

    The U.S. Market Is Irrationally Expensive – What Does The Rest Of The World Have To Offer?

    • Global markets are much cheaper, but there’s an even better option.
    • It’s relatively easy to find stocks that have huge growth potential at cheap valuations. I’ll describe three sectors.
    • In the long term, the current trend of favoring the U.S. dollar and equities is going to shift to where the growth is. There’s no doubt about it, so be prepared.

    Introduction

    The U.S. equity market is like driving a luxury car. It’s reliable (low volatility or as some say, low risk), costs you a bit more to maintain (low dividends), it makes you look good (investing with the big boys), and it will eventually bring you to where you want to go.

    Investing in emerging markets is like driving a cheap car. Nobody considers your investments cool (looking for bargains in unknown areas like Russia, China, or India), the car won’t be as reliable (break down more often – think volatility), but it will be cheap to repair (high dividends), and eventually will also bring you to where you want to go. More →

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