If you are free Saturday then check this out:
http://vip.marketfy.com/valueinvestingseries/
From my friend, Toby Carlisle, of Deep Value Investing Fame.
HAPPY WEEKEND!
If you are free Saturday then check this out:
http://vip.marketfy.com/valueinvestingseries/
From my friend, Toby Carlisle, of Deep Value Investing Fame.
HAPPY WEEKEND!
Posted in Free Courses
It’s the timing. Babson was two years early, so by the time the bubble peaked, no one cared. Sort of like today with six years of easy money/credit and rising prices in the US stock markets.
Note the housing bubble. Home prices were far above owner’s equivalent rent (the cash flow/income to support home prices) in 2002/2003 but then two to three years later the apex was reached. Soros in his theory of Reflexivity would propose to ride the bubble knowing you were in a bubble and then reversing course once it burst (the most marginal buyer has bought). Not easy in the hurly-burly world of investing.
The dollar “breaks-out” and
Sentiment and consensus rally–a new KING DOLLAR for many years to come.
Gold, of course, sells off on King Dollar, stronger US economy, and less inflation fears.
This post illustrates the HUGE swings in sentiment from the DEATH of THE DOLLAR in 2011 when this was occuring:
Back to today (Oct. 2014)
King Dollar, with the obvious understanding that it’s dominance has only just begun (Dennis Gartman at minute 2 proclaims a bull run for the US dollar-click on this link). My have we come a long way from the new moon of the dollar cycle low in late April of 2011, where many of the same players and pundits openly declared the dollar crisis in full swing and just getting started. Back then, the mood in the markets was decisively dimmer, from both the usual suspects – to the ominous warnings from leaders in the private sector that the US consumer would soon face “serious” inflation in the months ahead.
Lesson: The same pundit, Dennis Gartman, who was proclaiming the Death of the Dollar in 2011 near the absolute low is now, four years later, trumpeting that the Dollar is King. No one knows the path of the dollar or gold. We can make our own probabilities but to be CERTAIN is the sin. I gave up watching CNBC then years ago.
from: http://www.marketanthropology.com/
And what do the pundits say about this on CNBC?
I hear crickets…………..
What does it mean to be a true contrarian? (www.truecontrarian.com) Steve explains the fundamentals of his investment philosophy and how to apply it to real-world situations. He details how human herding, group following, and projection of the recent past into the indefinite future enabled our ancestors to survive thousands of years ago, while weeding out those who were contrarians. This has caused contrarian behavior to be quite rare in modern times because it goes against our hard-wired emotions. Steve analyzes why the financial markets often act most irrationally during the first hour of each trading week. He also describes the reasons that financial analysts at major corporations are unable to invest in a contrarian fashion even if they know intellectually why they should be doing so.
Letters to an Analyst http://researchpuzzle.com/
Everyone has a plan ’till they get punched in the mouth. —Mike Tyson
The author describes in Chapter 7: The Financial Crisis, Into the Void, his trauma. He learned not to be leveraged and to turn off the Bloomberg to avoid the daily carnage. But I wonder why—if the experience was so searing—he didn’t reflect deeply on the causes for what had happened. Like after seeing the dead and wounded in your safari camp after an elephant stampede and then wondering if changing the color of your tents would stave off disaster. Perhaps studying elephant migratory patterns would help. Value investors like Seth Klarman and Jim Grant were howling about rapidly burgeoning mortgage debt and centrally-planned interest rates. Mr. Spier should dust off his Mises and Rothbard texts on the Austrian theory of the business cycle.
On page 80, he believes that people’s human excesses and moral compromises helped cause the financial crisis. Poppycock! And even if true, then what lessons could be learned? People are always and everywhere greedy, kind, cruel, amoral, and just plain human. Forget the inner scorecards, Robert Cialdini, author of the book Influence, would be saying, “look at incentives.” The U.S. banking system is inherently flawed. Since 1840 the US has had 12 major banking crises, while Canada has had none—not even during the Great Depression. See Fragile by Design by Charles W. Calomiris and Stephen Haber. I don’t believe Canadians are less prone to humanness than Americans? Ever been to a hockey game? The author makes an assertion without theory, evidence or fact. That’s ugly.
The author seems to lack curiosity as to what happened to him. However, he did listen to Michael Burry’s warnings about the mortgage crisis, but he didn’t share what he thought happened. He bet that policymakers would use every available tool to avert disaster. But why should the politburo at the Federal Reserve intervene to pile more debt upon debt? To what effects and consequences? What about the crisis of 1920? The Fed did nothing and the result was the fastest and strongest recovery in US history. View: http://youtu.be/czcUmnsprQI.
Now the US labors under high private debt, too-big-too-fail banks, absurd Dodd Frank bank regulations (10,000 pages and counting of rules), and a $4 trillion dollar Fed balance sheet. Imagine if the Fed did the right thing and shut down. The panic of 2008 was a global banking crisis. Wealth would have been unaffected, however titles to that wealth would change from the profligate to the prudent. Now, in 2014, bubbles and moral hazards abound.
My questions are not only asked of Mr. Spier but also of Mohnish Pabrai and Bill Miller. Mr. Miller once mentioned how cheap housing stocks were at 6 times earnings during 2006 http://www.bloomberg.com. Yet homebuilder company earnings were at 200-year peaks. Mr. Miller may have lacked understanding of how much mal-investment occurred along with a host of other reasons (community reinvestment act that forced banks to lend to poor credit risks so they could be rechartered). Mr. Pabrai can clutch a check-list but that won’t help in a credit crisis if he owns a subprime lender.
Ironically, Mr. Spier mentions sub-prime auto dealer/lender, Carmax (KMX), as a risk. Now with massive Fed intervention with QE, QE2, QE3, and QE Forever, why be a value investor? Move over Graham and Buffett, own the most leveraged, subprime lenders you can find like:
But be sure to sell in time:
Balance sheets matter when bubbles pop. Right now–for now–bubbles abound.
May Mr. Spier enjoy his nirvana, but I can’t recommend this book for anybody who is forging their own way. You are better off to read Buffett and Graham’s writings while thinking of your own strengths and weaknesses. Follow Mr. Spier’s example and keep a diary of your progress. It’s YOUR journey.
I won’t be doing other book reviews unless I am 100% behind recommending the book to you. I would like to next look at DEEP VALUE by Toby Carlisle. Ten thumbs up.
—
Tutorial on Gold and the Mining Business from the Denver Mining Show
Very good overviews of gold and mining
Updating the Bullish and Bearish Cases For Gold http://bit.ly/1B6LHte
Gold Bullion and the Need for Systematic Insurance. http://bit.ly/ZLb0pc An excellent review of market risk.
How Not to Blow it Next Time http://bit.ly/1tYZYYI
We do not see things as they are. We see them as we are. – The Talmud
Part II: The “Bad”
To be fair, the author delivered exactly on his promise in the first paragraph of his book:
My goal in writing this book is to share some of what I’ve learned on my path as an investor. It is about the education of this investor, not any other investor. This story is not an investment how-to. It’s not a road map. Rather, it is she story of my journey and of what I’ve learned along the way. With my own flaws and foibles and idiosyncratic abilities—and despite my considerable blind spots.
I titled this part of the review, “Bad” because I was hoping for so much more from the author. Much of his description of his investment process is cursory and his analysis seemed a mile wide and a half-inch thick. Examples will be discussed in part III. He never promised that in his opening paragraph, but more experienced investors will then have little to learn from this book.
If you want to learn about the psychology of investing and trading then start with the classic, Reminiscences of a Stock Operator by Edwin Lefevre. Tudor Jones calls it a textbook for speculation.
Another relatively unknown classic, Why You Win or Lose by Fred Kelly (1930) See a synopsis here:WHY_YOU_WIN_or_LOSE_Fred_Kelly (1)
Investing is something you do. Like sex, reading about another’s activities will only take you so far in understanding it. You must apply yourself, actually invest, and review your results.
Two excellent books on having an investment process and managing emotions:
Trader Vic-Methods of a Wall Street Master and Trader Vic II-Principles of Professional Speculation by Victor Sperandeo.
Back to a hardcore value investor. Read, There’s Always Something To Do, The Peter Cundill Investment Approach. Cundill was a Canadian Graham and Dodder.
An interesting romp through the investing world, The Money Game by Adam Smith.
Simple But Not Easy by Richard Oldfield is another interesting overview by an old pro.
Then if you want to understand why you must fit investment to YOUR OWN approach, read about all the different ways there are to trade and invest by reading the Market Wizard books by Jack Schwager or Free Capital by Guy Thomas.
Of course, go to the original sources and read all the investment letters from Buffett, Munger, Klarman, Tweedy Browne. Type in their names in the csinvesting.org search box and see where the links lead you.
In Part III, the “Ugly” I take off the gloves and point out the author’s fuzzy thinking regarding the financial crisis.
Posted in Investing Gurus
The Education of a Value Investor: The Good, the “Bad,” and the “Ugly.”
Editor: In full disclosure I received this book from the publicist, and I actually read the book.
The title of this review has the words bad and ugly in quotes because I will define those words in part II and III of this review.
Part I: The Good
Here is a story of a young hedge fund manager on a Hero’s Journey (Joseph Campbell) to become a more integrated human being—to become, as the author says, authentic. Though managing money is the author’s profession there isn’t much in the way of investing strategy or techniques. The author writes with honesty and humility about his journey through life starting as a young investment banker. The author provides an example for investors and non-investors alike by taking responsibility for his failures and setbacks, understanding his weaknesses and then designing workarounds to improve his investing and life. A person must develop self-understanding and go where his or her strengths can benefit.
Perhaps Nassim Taleb, author of Fooled by Randomness describes the main investing lesson I took away from the book, “We are faulty and there is no need to bother trying to correct our flaws. We are so defective and so mismatched to our environment that we can just work around these flaws. I am convinced of that after spending almost all my adult and professional years in a fierce fight between my brain (not Fooled by Randomness) and my emotions (completely Fooled by Randomness) in which the only success I’ve had is going around my emotions rather than rationalizing them. Perhaps ridding ourselves of our humanity is not in the works; we need wily tricks, not some grandiose moralizing help. As an empiricist I despise the moralizers beyond anything on this planet: I wonder why they blindly believe in ineffectual methods. Delivering advice assumes that our cognitive apparatus rather than our emotional machinery exerts some meaningful control over our actions. We will see how modern behavioral science shows this to be completely untrue.
For example, the only way for a chocaholic like me to avoid temptation is not to stop loving chocolate but to be kept here in a padded cell: http://youtu.be/pjProtBm4Dc.
Along the way, Mr. Spier shares life lessons such as:
Certainly, the above are excellent lessons, but information is not knowledge and wisdom may not translate into action. How to go from here to there? The author suggests the Nike commercial, “Just Do It!” If only action were so easy. But remember the author battles his own flaws and vulnerabilities not the readers’. You may be better off reading Dante’s pilgrimage in the The Devine Comedy. Perhaps Plato’s Dialogues or Nicomachean Ethics by Aristotle. My favorite: Watch Groundhog Day over and over. See: http://youtu.be/6VF5P7qLaEQ (I’m serious).
There are flashes of good writing: “In hindsight, I can see with clarity that the real value to the firm of my Oxford degree and my Harvard MBA was to adorn its (D.H. Blair, an investment bank bucket shop) deals and documents with my pristine credentials. I thereby provided a kind of Ivy League fig leaf.”
But there are spots of overwrought description: “This book is about my journey from that dark place toward the Nirvana where I now live.” Nirvana? A tad over the top.
This is Mr. Spier’s particular journey and a beginning investor or those who need inspiration may learn how honesty and self-knowledge helped transform a hedgie into a better human being. Mr. Spier continues on that journey. Part II and III will describe a few of this reviewer’s disappointments.
More on Mr. Spier here:
https://www.youtube.com/results?search_query=mr+guy+spier
Selling today in the pits-gold and silver
Above is a chart of CEF, Canadien Gold (60%) and Silver (40%) bullion closed-end fund trading at a 6.5% discount today. ON SALE! I have no clue if tomorrow the price will be higher or lower.
http://www.cefconnect.com/Details/Summary.aspx?Ticker=CEF
Note the premiums as high as 10% and currently 6.5% discount.
Learn more about interpretating sentiment indicators: www.acting-man.com
Long term sentiment
A Great blog, Down the Rabbit Hole: http://biiwii.com/wordpress/2014/09/10/sentiment-shifting-gold-bugs/
Though, I like miners more, but now is a good time to pick up tangible money at a discount. Pay 94 cents and get a dollar of gold and silver today–I will take it. SOLD! Miners make money on the arbitrage between their input costs and output prices. You don’t need a rising nominal gold price; you need a rising REAL gold price.
Now is the time for me to post on Yamana (by this weekend, I pray) because it is at a price $7.33 that I have purchased in the past and it may be a reasonable choice for a BASKET of miners.
Also, you want to see analysts pile-on negatively AFTER price has fully dicounted the news. I am not being contrarian or cynical, it is just how markets work–they DISCOUNT.
Yamana Gold suffers rash of stock price target cuts • 12:58 PM
Read the link below and the link within it to gain more understanding on gold and miners.
Posted in Economics & Politics, Special Situations