MAJOR ANALYST EXAM: Reading a Proxy then Assessing Management and Directors


KO ten

You always read the proxies and the notes to the financials. Today you read Coke 2014 Proxy.   

What is your assessment of management and the Board of Directors? What do you notice? Please justify your reply.

If you are struggling, then here is a hint:

You react:  Why?

Another hint: KO_VL Jan 2015 for context.

Take a few days if necessary.   This is a critical case study that should be taught at every business school!

Lesson: READ WITH A PURPOSE.   Why do you read a proxy?  Unless it is a merger proxy, you focus on who the management and Board of Directors are and how they are compensated.   Go to the heart of the matter, don’t read all 100 pages.

Update: Between Euphoria and Despair.

If you invest in cyclical companies, then you should listen to and SALT-Earnings-Presentation-Q2-2016-Supplemental-Information and SALT 2Q 2016 Q Report

Is Gold a Pet Rock; Hedge Fund Analyst Quiz

Gold is money

Is Gold a Pet Rock?

Hedge Fund Analyst Quiz

Your boss drops the earnings announcement from Skyworks (SKWS) on your desk.   He asks if he should buy the dip?


You spend five minutes on the 8-K: SEC-SWKS-4127-16-57

What hits you like a frozen flounder across the face?  Red lights should be flashing and sirens blaring.   You tell your boss……………………….

Anyone NOT figuring this out needs to read: Earning Quality

or face this:

Socialism at work:  A frantic search for food in Venezuela.   I am offering $5,000 to anyone who can explain how Socialism improves the lives of ALL citizens over the long-term? Can Socialism ever NOT collapse into death and despair?


Surf the Lquidity; Gold Stocks


surf bigSurf the liquidity

Below is a link to six videos that analyze the global debt problem.  A good review of our monetary system and the current/impending problems. Do YOU agree with the analysis? Your thoughts welcome.

Santiago Capital: What Massive Debt Means….

Gold Stock Update from Myrmikan Capital.

Myrmikan’s error in 2011 was an underappreciation of the forces the central banks brought to bear to reverse the credit collapse. Quantitative Easing was the least of the tools: it was the trillions of dollars of guarantees and the suspension of market-tomarket accounting that allowed the banks to puff the bubble even larger. And, there may remain policies that can lead into another round of even greater insanity, which would weigh on gold. Former Chairman Ben Bernanke, for example, recently traveled to Japan to educate them on “helicopter money.” According to Bloomberg, Bernanke suggested the government issue non-marketable, perpetual bonds with no maturity date and that the Bank of Japan directly buy them.

Read more Performance_Update_2016_06

Pinpoint Bottom in Drybulk Shipping Stocks!

shipwreckThe result for investors in shipping stocks–sinking more than 50% in 2015 alone or 95%+ since 2011.


A correlation between the Baltic Dry Index for Shipping with the Goldman Commodity Index. So, here’s an idea: Rather than piling onto the bearish bandwagon, when the real price of an indispensable service or commodity drops to a multi-decade low it might make more sense to be bullish. Read more Shipping rates will never go to zero

tsx perspective

Shame on you if you thought I or anyone could predict the bottom of any shipping cycle.  That impossibility allows reward for the investor who can use time arbitrage. You can use a longer time-frame (three-to-five years) than 99.999999% of all investors.  You can listen to an excellent shipping conference here: Marine Money NY Conference.  The whole conference is worth listening to so you develop an understanding the industry.  See 910 Adam Kent – From the Weeds to the Trees and 855 Jeff Pribor Marine Money Presentation and 250 Panel – Untitled, Uncut and 910 Adam Kent – From the Weeds to the Trees and Falling Knife or Bargain 855 and Jeff Pribor Marine Money Presentation.

At that conference, analyst Andrew Horrocks said that institutional investors all say to him, “Yes, Andrew we have the same data as you–assets are at generational lows and supply looks to be diminishing, but call us in 2017 or ‘just before the cycle turns!’ See chart below of drybulk shippers.


Read his handout Andrew Horrocks on the shipping market and go to page six, then listen to Horrocks Talk to Investors. At minute 11 he points out the good news for drybulk shipping. Supply is waning. There is high scrapping rates, low crude prices, and ordering of new ships is practically nil.  Mr. Horrocks says to never underestimate the dimension of time in investing. Even though public institutional investors see the same data, they can’t afford a longer-term investment horizon than six-to-twelve months.  Therein lies our opportunity.

See more on time arbitrage:

The reason prices for drybulk ships are at 35-year lows is because of simultaneous over-supply met with falling demand from a weaker global economy. Prices adjusted rapidly. Smart ship owners who have been through several cycles are snapping up second-hand ships for cents on the dollar using cash and then expecting to wait three or more years for the cycle to turn.   But for investors in shipping companies, we face the dangers of high debt loads and future dilution. The shipping companies that survive will go up 5, 10 even 30 times or go to ZERO ($0.00). The opportunity/dilemma.

Mr. Bugbee, the president of Scorpio Bulkers (SALT) whose company has diluted shareholders several times to survive, points out that the key is to survive to the other side of the cycle. Go to minute  11 and 24 Massive Opportunity or Bankruptcy? Bugbee discusses the opportunities and dangers as Mr. Bugbee talks about survival in this cycle.

He says, ” I have NEVER seen a market that is so EXCITING in the long-term but that is so TERRIFYING in the short-term. Capital is HARD TO COME BY. there is no cash flow in the the market. We hope the market stays ugly for another eighteen months to allow for scrapping rates to clear up the supply, but we should be careful what you wish for. The KEY is to get your company to the OTHER SIDE of this cycle.   Meanwhile investures face DAILY or WEEKLY performance pressures.

And finally, always remember:


P.S. Check out Fund Seeder





Search Tool to use words in OTC filings

Stating the Obvious: Our Monetary System is Flawed


My main takeaway from this book published in 2016:


Whoa!  I better clutch my gold tight then!  God help us all.

The End of Alchemy: Money, Banking, and the Future of the Global Economy by Mervyn King, former governor of the Bank of England.

“Mervyn King may well have written the most important book to come out of the financial crisis. Agree or disagree, King’s visionary ideas deserve the attention of everyone from economics students to heads of state.” –Lawrence H. Summers.

Well, what Mr. Summers describes as visionary ideas was discussed and warned about over a hundred years ago by Ludvig von Mises in The Theory of Money and Credit, 1912

From the book jacket: The Industrial Revolution built the foundation of our modern capitalist age. Yet the flowering of technological innovations during that dynamic period relied on the widespread adoption of two much older ideas: the creation of paper money and the invention of banks that issued credit. We take these systems for granted today, yet at their core both ideas were revolutionary and almost magical. Common paper became as precious as gold, and risky long-term loans were transformed into safe short-term bank deposits. As King argues, this is financial alchemy―the creation of extraordinary financial powers that defy reality and common sense. Faith in these powers has led to huge benefits; the liquidity they create has fueled economic growth for two centuries now. However, they have also produced an unending string of economic disasters, from hyperinflations to banking collapses to the recent global recession and current stagnation.

As readers of this blog know, I suggest studying the works of the Austrians, however, I don’t agree with all their theories such as their dislike of Real Bills Doctrine (Feteke)

I always try to seek out opposing views, so I eagerly picked up a book by an English central banker.  Though Mises foresaw the evils of fiat currency and fractional reserve deposit banking over a hundred years ago, I enjoyed seeing an insider discovering the dangers in our current monetary system for the “first” time.  Alas, I view his solutions as lacking since they don’t address the fatal flaw of central planning—Hayek’s Fatal Conceit. Dispersed information and knowledge, incentives, and the economic calculation problem mean that a centrally planned monetary system will inevitably fail as shown by the 2008 to ? financial crisis.

At least Mr. King realizes that our current system is flawed. From page five: “The idea that paper money could replace intrinsically valyuable gold and precious metals, and that banks could take secure shor-term deposits and transform them into long-term risky investments, came into its own with the Industrial Revoluton in the eighteenth century. It was both revolutionary and immensely seductive. It was in fact financial alchemy—the creation of extraordinary financial power that defy reality and common sense. Pursuit of this monetary elixir has brought a series of economuic disasters—from hyperinflation to banking collapses. Why have money and banking, the alchemists of a market economy, turned into its Achilles heel?

If Mr. Kind had turned to Murray Rothbard, the great Austrian economist in What Has The Government Done To Our Money (Rothbard) or Man, Economy, And State (Rothbard), Mr. Rothbard would say fractional reserve deposit banking is an inherently inflationary Ponzi scheme and that central bank quantitative easing distorts people’s time preferences and the economy’s structure of production.

At least one central banker realizes that our current monetary system is a disaster, but his prescriptions are flawed.  I wish he studied Mises and Rothbard’s writings Or the words of a common man who explains his suffering under the yoke of central banking:

A reader in Amazon’s comment section beautifully expresses what is happening to the common man:

You cite one of the purposes of money is as a store of value. When interest rates are set below the rate of inflation how does money fulfill that requirement? How are the actual people who are forced to live under central bank policies to determine how much money they will require for the future when the price of a can of beans increases in cost by 500% over 20 years while interest rates dramatically decline? This leads to my issues with the ‘pawnbroker model’. On the surface it sounds perfectly reasonable and to the uneducated eye one might wonder why this model hasn’t been in place all along. The reason of course is human nature. I submit that the inherent human desire for ‘something for nothing’ or ‘I’ll gladly pay you Tuesday for a hamburger today’ is what actually underlies all these efforts to ‘optimize’ the economy. What makes you or any sane person believe that a ‘pawnbroker’ that can print money will value assets at a rate which will be sufficient to cover losses in a crisis? What makes you believe the bankers would stand for it or that anyone has any idea how bad the next crisis will be?

The final issue I want to bring up is “inside money”. I am sure you are aware that this money is not created nearly as simplistically as you describe. We are in an era of creditalism and leverage and there is a paper trail created by fractional reserve lending that a curious person could follow…if they were so inclined. My point is that it isn’t so much that borrowing/lending creates money as it is HOW MUCH money it ends up creating and how it is distributed. In the model as you described it borrowing/lending not only creates money it creates goods and services. I am at a loss to understand how most financial engineering produces much beside a huge wealth gap.

In summation, the issues I’ve raised (and a multitude more) could be easily addressed if the authors of books and the seekers of knowledge merely submitted their ideas and theories to audiences of real people. This is to say, if they left their cloistered environments where everyone agrees on ‘certain fundamentals’ they might discover many of these precepts are fundamentally flawed. They might also notice that their spreadsheets are a dismal representation of real individuals, in all their complexity of desire and behavior. Of course, if they ever did this, they would soon also discover they are in way over their heads!



Greenwald: The Death of Manufacturing; Deep Value Investing in Juniors

Prof. Greenwald on competitive advantage, the shift to services and why profit margins are so high and may remain so.

Most recent interview of Prof. Greenwald

You should think through Prof. Greenwald’s thoughts. Regarding investing, it is the art of the specific, so don’t let the the above macro talk affect your investing too much. I do agree that service companies develop competitive advantage through either product economices of scale or regional economies of scale.

Ajit Jain: 32_KeyInfluencers_AjitJain


Bhandari-High Risk High Reward in Junior Mining Companies

Game on or con on: Fraud in Junior Mining Equities:  or having fun with your money. The key is the lack of quality deposits!

Let me know what YOU think.


Time to Sell Some Miners, But Not Much

Junior Miners

There is no training, classroom or otherwise, that can prepare for trading the last third of a move, whether it’s the end of a bull market or the end of a bear market. Paul Tudor Jones

I am selling about 1/5 to 1/6 of my speculative miners like Minco Silver. It was trading back in Jan. 2016 at about 30 cents.

Minco one yr

This miner didn’t fit all my criteria like jurisdiction and top-flight management, but it had $1 per share in cash and short-term investments and $2.00 per share (basic shares outstanding) in book value with no debt.  I viewed the stock as a cheap call option.  My position was not a full position but diversified in these type of exploration/pre-development type of companies.

MSV_2015YE_FS  Minco Financials

Minco Presentation

This bull market is starting to smell like the 1970 rally!


So, I expect this bull market to last perhaps years or for miners to multiply several times over.  You make your money SITTING.  But when you start feeling smart or, worse, other people think you are smart (where were you in 2015 when my accounts were down 35% to 40%?), it is time to peel some positions off.   Sell into strength. Note the past history of the miners.


I wanna go back to the 70’s.

An educational video on the Federal Reserve or why you should own some gold

Have a Great Weekend!

The Problem: Too Much Debt

There are two ways to conquer and enslave a nation. One is by the sword and the other is by debt–John Adams, 1826

An excellent book from the 19th Century excoriating the idea of debt-based currency. Organization of Debt into Currency and Other Papers_2

Op. Leverage; Geico and Berkshire Case Study; In Gold We Trust; Overconfidence


Mauboussin on Operating Leverage is a review on margins and operating leverage.  I recommend reading pages 19 to 21 in addition to my prior post: ROIC and more

Berkshire CS_wedgewood partners 1st quarter 2016 client letter

geico case study and presentation 2016


Do not focus on forecasts but learn from history and economics about gold: In_Gold_we_Trust_2016-Extended_Version

In_Gold_we_Trust_2015-Extended_Version (Referenced in 2016 Ed. Why miners struggled to gain investor respect.)

Avoid Overconfidence

A lesson in trading

A lesson in valuation

It is never different this time

Happy Fourth of July Holiday.  

I will answer the option questions upon return.