Complete Video Clips Course on Trading, Value Investing and Corporate Finance

Posted on March 6, 2012 | 1 comment

My father established our relationship when I was seven years old. He looked at me and said, “You know, I brought you in this world, and I can take you out. And it don’t make no difference to me, I’ll make another one look just like you.” –Bill Cosby

A Reader asks,”How can I learn about Wall Street and investing?”

My reply: Review and study the clips below–you will gain more than sitting in a classroom all day.

How auction markets work:http://www.youtube.com/watch?v=TSZKDkLgzhk

How investors think: http://www.youtube.com/watch?v=4zakyg3thfY

Price versus value: http://www.youtube.com/watch?v=jLo7tHDHgOc

Activist Investing and Corporate Finance: http://www.youtube.com/watch?v=p7rvupKipmY  Danny Devito:”I am not your best friend, I am your ONLY friend.”

How Wall Street REALLY works:

Sales:http://www.youtube.com/watch?v=zCf46yHIzSo&feature=related

Act as if: http://www.youtube.com/watch?v=oTFU9c9MrkE&feature=related

Making the sale:http://www.youtube.com/watch?v=TXBgEpUlPVg&feature=related

Learn how to negotiate:http://www.youtube.com/watch?v=xT5iqTgypVs

Really study the above to gain the wisdom to retire rich: http://www.youtube.com/watch?v=mmMS9nvi6eg&feature=related

or go to traditional college and begin your career here: http://www.youtube.com/watch?v=rJB0CzlzSwY or work here:http://www.youtube.com/watch?v=bYhXeirfMp8&feature=related

WHY even go to college? http://www.jamesaltucher.com/2012/03/did-obama-really-say-he-wants-everyone-to-go-to-college/

It is your choice–YOU decide!  Let me know what happens.

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Posted in Free Courses, Investing Careers

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Another Reader’s Question: Any Suggestions on How to Learn How to Invest?

Posted on March 5, 2012 | 18 comments

Index investing outperforms active management year after year.–Jim Rogers

Reader: How Do I learn how to invest? Suggestions?

My reply follows in three parts: What NOT to do, traditional advice, and what I suggest.

What NOT to do

Here is what you should NOT do when learning how to invest.

Ignore the difference between price and value: http://www.youtube.com/watch?v=pMz_sPs11HU

Sit all day watching CNBC so you can be “up on the economy and markets.” http://video.cnbc.com/gallery/?video=3000034368

Buy whatever Cramer recommends:http://www.youtube.com/watch?v=gUkbdjetlY8 but wait until the price pops higher so you can be sure.  You remember the adage: “Only buy what goes up, and if it don’t go up, don’t buy it.”  If you can find the most popular companies mentioned relentlessly in the news wait until the price has been rising for a several months, then buy. Price is everything. Be part of a group. Ignore any conflicting information in your investments because you won’t be successful being negative. After any purchase, ask friends what they think of the stock. Choose someone randomly and ask them why you own the stocks you have in your portfolio. If they don’t answer, yell at them for their stupidity.

After losses, blame anyone but yourself. Buy as many stock-tip newsletters as you can afford, so you don’t miss anything. If the story sounds good, then buy the stock.  Read Barron’s to supplement what you hear on CNBC and buy what the experts think–just do it quickly. Avoid becoming confused by reading the 10-K, proxy, annual reports, product and customer information and/or credit reports. Do what the charts say. Attend expensive training and trading schools like http://www.tradingacademy.com/stamford/ (Click on Video)

Or http://www.wallst-training.com/

You will make so much money that spending $10,000 for a two-day course will be a great “investment.”

Spend as much time learning about Macaulay Duration, efficient frontiers, and predicting the markets as you can. Live by the saying, “Often wrong, but never in doubt.”

Traditional advice in order of preference:

  1. http://www.aier.org/product/how-invest-wisely-2010 A non-profit research organization on economics and personal investing in Great Barrington, Ma. A good source of independent research for individual investors. Recommended that you view their store on investing materials.
  2. http://news.morningstar.com/classroom2/home.asp?colId=397&CN=COM This site has a series of classes to teach you the simple basics. Not bad for beginners.
  3. American Association of Individual Investors: http://www.aaii.com/
  4. http://www.fool.com/how-to-invest/index.aspx?source=ifltnvpnv0000001
  5. http://finance.yahoo.com/education/begin_investing/article/101181/Advice_for_a_Novice

What I suggest

Any advice I give is from my perspective so what works or worked for me may not fit your personality, goals and situation. With that caveat let me suggest:

First, read the classics: The Intelligent Investor by Ben Graham, Rev. Edition by Zweig. Get a feel for how Graham approaches investing. Next read, Margin of Safety by Seth Klarman (in Value Vault) as a further reinforcement of the value investing approach. You can then read, The Interpretation for Financial Statements by Graham in the Value Vault to give you a basic background for reading 10-Ks.

You will need to read Warren Buffett’s letters to shareholders several times to grasp all the points he is making. A good book, The Essays of Warren Buffett here:http://www.amazon.com/Essays-Warren-Buffett-Lessons-Corporate/dp/0966446119organizes his letters into subjects for easier reading. Or go to http://www.berkshirehathaway.com/letters/letters.html

Second, pick an industry with a simple product that you can understand with a few industry participants and pretend to write a story on the industry. Take the carbonated beverage or beer industry–the product is simple and there are fewer than a dozen major companies in either industry.  Read the 135-year history of Coca-Cola, read a book or two about Pepsi. Then take five years of annual reports and proxies from Cott beverages, Pepsi, and Coke and read them.

Third, figure out what their returns on capital are, sales trends, profit margins and company risks. Would you want to buy one of these businesses? At what price? Why are certain companies doing better or worse than their competitors? Have their market shares changed much over the years? Can they raise prices?

You will need to spend about two or three months reading about 30 minutes each day but you will become fairly knowledgeable about beverages. If you don’t like my idea for beverages then choose an industry/business that YOU are really interested in.

Finally, read through Security Analysis by Ben Graham (6th Edition). Note your interest in the readings. If sitting alone for hours is agony or pawing through Security Analysis is unbearable, then that will tell you volumes. Don’t worry if you haven’t the personality or interest to be a self-directed investor, just know your limitations and respect them.

If you struggle with financial statements, take a free internet course on accounting or take a course at a community college. There are plenty of programmed texts so you can learn on your own.

Learn Austrian economics–see prior post on studying financial history here: http://wp.me/p1PgpH-wN.

If you are very ambitious, get a subscription to Grants at http://www.grantspub.com. Then download all the issues since 1983, read all the books mentioned in the issues and try to understand the investment merits or lack thereof in the companies mentioned. You will learn more than going to business school.

Read the commentary in the Value Investors Club at http://www.valueinvestorsclub.com/value2

Learn how investors view various investments. Try to reverse engineer the company recommendation by looking at the original financial statements.

I hope this helps.  Let me know how your journey progresses.

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Posted in Accounting, Free Courses, Investing Careers

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More on ROIC……….

Posted on March 2, 2012 | 1 comment

It is not whether you are right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.- Stanley Druckenmiller

ROIC

First discussed here:http://wp.me/p1PgpH-v0

Greenblatt’s discussion of ROIC plus www.fool.com’s series of articles on ROIC so you can understand different approaches.

http://www.scribd.com/doc/83548528/ROIC-Greenblatt-and-Fool-Articles

For beginners or those who need a refresher, a Khan Academy Video on return on capital:

http://www.khanacademy.org/humanities ---other/finance/core-finance/v/return-on-capital

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Posted in Accounting, Search Strategies, Valuation Techniques

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Recommended Blog and Housekeeping

Posted on March 2, 2012 | 2 comments

The most important single factor in shaping security markets is public psychology. – Gerald Loeb

Wall Street never changes. The pockets change, the suckers change, the stocks change, but Wall Street never changes because human nature never changes. – Jesse Livermore

There is nothing more important than your emotional balance. – Jesse Livermore

There are styles in securities as there are in clothes. A security may be undervalued, but if it is also out of style it is of little interest to the speculator. He is, therefore, compelled to study the psychology of the stock market as well as the elements of real value. – Phil Carret

When events have thinking participants, the subject matter is no longer confined to facts but also includes the participants’ perceptions. The chain of causation does not lead directly from fact to fact but from fact to perception and from perception to fact. – George Soros

A Good Blog with free eBooks

http://gregspeicher.com/

I don’t know the writer nor have an affiliation, but beginning to intermediate investors may find many lessons and examples here.

There is a booklet called, 10 Ways to Improve Your Investment Process….and make more money that is worth a read–the link is on the left side of the page.

The author says:

  1. Define your outcome
  2. Define your process
  3. Don’t focus on the outcome
  4. Use checklists
  5. Improve your search strategy
  6. Improve your risk management
  7. Manage yourself (time management)
  8. Pay attention to the details
  9. Be patient
  10. Continuously improve.

Good advice, but how do you ACTUALLY IMPLEMENT the above?

Let’s take #1 Define your outcome.  If you want a 25% annual return, you will have to wait a long time, perhaps several years, to find opportunities sufficiently undervalued to reasonably expect such a return–like in 1932, 1974, and 2009.

Let me know your thoughts about the blog.

Housekeeping

The value vault has issues with downloading if there are many people trying to download large files at once.  We (me, myself and I and un-named others) have split the material into folders which people can view and download the material inside.  Try again another time. If the problem persists, contact www.yousendit.com customer service and then let me know if you are still struggling. We will eventually prevail.

I will build an email list of all those who have requested keys. This list can be used to update you on new quality additions to the value vault folders. I promise to keep the list private and only send when there is new material. For example, if a small file is added to a folder, you will be emailed the material with an attachment. If the addition is a video or book, then you will be alerted to the folder.  This will save you from having to email again and again to request a key.  With providence, we will make our way forward. Thanks for your infinite patience.

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Posted in Housekeeping, Investing Gurus

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Question on Buffett’s Record as an Investor

Posted on March 1, 2012 | 9 comments

Empty your mind, be formless, shapeless–like water. Now you put water into a cup, it becomes the cup, You put water into a bottle, it becomes the bottle, You put it in a teapot, it becomes the teapot. Now water can flow or it can crash! Be water my friend. – Bruce Lee. Ok, this quote comes from the world of martial arts, but the lesson transcends mere combat.

Research Question on Buffett

Today, someone asked if Warren Buffett–over the past five, ten and fifteen years–had a good investment record in marketable securities. The very idea that anyone would have the temerity to even consider such a question caused me to do this: http://www.youtube.com/watch?v=vK0wvZ70VrU

But after three people pulled me off of the questioner, I thought for a moment, “What proof did I have that Buffett has performed well? Where was my evidence, studies, facts, etc. that Buffett has performed better than a dart board portfolio?

I ask you, has anyone done or know of any research on Buffett’s investment performance in marketable securities? Of course, Buffett is hindered by massive assets and cash flows, but what is his performance compared to various benchmarks like mutual funds and the S&P 500? If no one has seen any proof, is Buffett being worshiped for his performance record of thirty years ago?

Let me know if you have any thoughts. No rush.

9 Comments

Posted in Investing Gurus

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Housekeeping–Banks and SURPRISE!

Posted on March 1, 2012 | 1 comment

I got wiped out personally in 1968, which was the last really crazy, silly stock market before the Internet era….After 1968, I became a great reader of history books. I was shocked and horrified to discover that I had just learned a lesson that was freely available all the way back to the South Sea Bubble.- Jeremy Grantham

As investors, we are only the limited product of our own experiences and therefore vulnerable unless we read and assimilate the accumulated wisdom of the great ones. And Financial history definitely tends to repeat itself.- Barton Biggs

Indeed, the evidence is compelling that when decade-long real stock returns are inordinately high by historical standards, returns in subsequent decades are likely to tumble; when past returns are exceptionally low, future returns are apt to rise. What it’s all about, it seems, is reversion to the mean. – John Bogle

The boom and the bust were normal—just two more swings in stock returns over the past century. Reversion to the mean is the iron rule of the financial markets. – John Bogle

Learn every day, but especially from the experiences of others. It’s cheaper! – John Bogle

People tell me this is a golden era –low inflation, low interest rates, slow growth-and therefore, we should all own common stocks. I remind those people that the best time I’ve ever know to invest in common stocks was, in fact, when we were not in a golden era. When we were in a very depressed period…the mid seventies….But it was precisely that gloom that created tremendous values in stocks. – Joe Rosenberg

You make money buying stocks on weakness and stocks in distress. You don’t make money buying stocks when they are in high demand. – Seth Glickenhaus

A period of prosperity contains the seed of its own destruction. – Phil Carret

http://www.prudentwealth.com/quotes.htm

Surprise!

All those who requested the folder on BANKS (Surprise is in there as well) should have received a key to the folder. I also sent out a SURPRISE to those who are in the VALUE VAULT. If you did not receive a link via email to the SURPRISE, then please email me at aldridge56@aol.com with only SURPRISE in the heading. Do not waste time with text just SURPRISE in the subject line. Sorry to be so secretive but if I told you then I would have to………..

Let me know what you learn from the link.

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Posted in Uncategorized

Learn Economics for Free

Posted on February 29, 2012 | 3 comments

The best organized source in the world for studying economics on your own: http://www.tomwoods.com/learn-austrian-economics/. You can supplement your studies by visiting www.mises.org.

You need to understand Austrian economics to place information into context.

Enjoy the nominal boom in the stock market for some of these reasons: http://scottgrannis.blogspot.com/2012/02/bank-loans-continue-to-accelerate.html. Loans and money supply rising.

New Book by Peter Schiff

But in the long run……..You might be thinking everything’s okay: the stock market is on the rise, jobs are growing, the worst of it is over.

You’d be wrong.

In The Real Crash, New York Times bestselling author Peter D. Schiff argues that America is enjoying a government-inflated bubble, one that reality will explode . . . with disastrous consequences for the economy and for each of us. Schiff demonstrates how the infusion of billions of dollars of stimulus money has only dug a deeper hole: the United States government simply spends too much and does not collect enough money to pay its debts, and in the end, Americans from all walks of life will face a crushing consequence.

We’re in hock to China, we can’t afford the homes we own, and the entire premise of our currency–backed by the full faith and credit of the United States–is false. Our system is broken, Schiff says, and there are only two paths forward.  The one we’re on now leads to a currency and sovereign debt crisis that will utterly destroy our economy and impoverish the vast majority of our citizens.

However, if we change course, the road ahead will be a bit rockier at first, but the final destination will be far more appealing.  If we want to avoid complete collapse, we must drastically reduce government spending–eliminate entire agencies, end costly foreign military escapades and focus only on national defense–and stop student loan or mortgage interest deductions, as well as drug wars and bank-and-business bailouts. We must also do what no politician or pundit has proposed: America should declare bankruptcy, default on its debts, and reform our system from the ground up.

Persuasively argued and provocative, The Real Crash explains how we got into this mess, how we might get out of it, and what happens if we don’t. And, with wisdom born from having predicted the Crash of 2008, Peter Schiff explains how to protect yourself, your family, your money, and your country against what he predicts.

 

3 Comments

Posted in Economics & Politics, Free Courses

Giving Away Money; Interesting Blogs Organized; Avoid Small Caps

Posted on February 29, 2012 | 10 comments

I’m for human lib, the liberation of all people, not just black people or female people or gay people. –Richard Pryor

Blogs

Not all here are of interest to me but you decide: http://www.onlineuniversities-weblog.com/50226711/100-best-blogs-for-econ-students.php

Bronte Capital with a post on avoiding small caps: http://brontecapital.blogspot.com/2012/02/why-i-do-not-like-small-cap-stocks-much.html

 Video

Trying to give away money http://www.youtube.com/watch?v=Gk5aRIz17fk

Why don’t you think people won’t take a $1,100 in market value 0ne-ounce gold coin for $50 or for free?

10 Comments

Posted in Economics & Politics, Investor Psychology, Search Strategies

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Housekeeping

Posted on February 29, 2012 | 1 comment 

A man does what he must - in spite of personal consequences,
in spite of obstacles and dangers and pressures - and
that is the basis of all human morality.  

A pessimist sees the difficulty in every opportunity;
an optimist sees the opportunity in every difficulty.
-- Winston Churchill

New Folder on Banks in the Value Vault

Several posts ago I discussed analyzing banks: http://wp.me/p1PgpH-vD

I said my expertise in banks was nil. But thanks to generous contributors too numerous to mention, I have received several books, research reports and readings on analyzing banks and the banking industry. If you would like the key to this folder you can email: aldridge56@aol.com just with the subject line: BANKS and by tomorrow morning, I will send you the key.

More to follow: Next, I will post the answers to the questions from Chapter 8 in Competition Demystified or The Games Companies Play. Then a post on ROIC. After that, I will have the Harvard Case Studies on the Cola Wars (Chapter 9 from Competition Demystified).  Of course, there will be some other posts as well.

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Economic Nonsense: UVA Student on a Hunger Strike for Higher Minimum Wages for University Janitors

Posted on February 28, 2012 | 7 comments

Anyone who’s tried to pay a heating bill, fill a prescription, or simply buy groceries knows all too well that the current minimum wage does not cut the mustard.–Sherrod Brown

At the current $5.15 an hour, the federal minimum wage has become a poverty wage. A full-time worker with one child lives below the official poverty line.–Bernie Sanders

Nonsense

The article below has numerous fallacies. How many can you find?

http://www.washingtonpost.com/blogs/cavaliers-journal/post/virginia-football-player-joseph-williams-on-hunger-strike/2012/02/24/gIQA3berXR_blog.html

http://www.livingwageatuva.org/

What exactly are the UVA students demanding and what are the implications?  What economic laws are being ignored?  If YOU directly wanted to help these janitors but you were a broke student, what would you suggest your group do?

What can people do to raise all wages without coercion? What exactly is a minimum wage and what are the consequences of the students’ demands. Are there any unintended effects? If the students were not violating any economic laws what wage rate should they demand?

What motivates the students’ actions? Are they stupid, ignorant, noble or viscious?

If you need help analyzing this then go to Economics in One Lesson by Henry Hazlitt and read the chapter on minimum wage laws or view the video here:

http://www.youtube.com/watch?v=VD28vNVovow and go to 2 hours and 36 minute mark–interview with George Reisman.

If you want to see a commentary on the above article, read this: http://cafehayek.com/2012/02/hungry-for-attention.html

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Posted in Economics & Politics

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