Detecting Fraud: Seminar on Reading 10Ks, 10Qs and More

Posted on March 13, 2014 | 3 comments

money-and-magnifying-glass-by-Images_of_Money-cropped

The free webinar, “SEC Filings Master Class,” took place Nov. 13-15, 2012.

Michelle Leder, who makes her living unearthing news in SEC filings, will help you feel more confident in your SEC-document sleuthing. In three one-hour sessions, you’ll enhance your ability to spot red flags in SEC filings.

WHAT YOU WILL LEARN

  • At least four things to look for in Form 10Ks that can result in good stories
  • At least four things to look for in proxies that can result in good stories
  • At least four things to look for in Form 10Qs that can result in good stories

AGENDA

For each of the documents below, Leder will point out at least four key things to watch for that can produce good stories. She’ll offer examples of stories that have been done, point out where to find these types of stories in the fine print of the SEC document and offer attendees a chance to practice finding the news themselves.

  •  Hour One: Form 10-K, or the annual summary of the company’s performance, is filed within 60 days of the end of its fiscal year.
  • Hour Two: Proxy, or Schedule 14A, provides information to shareholders before the annual meeting. It includes executives’ compensation.
  • Hour Three: Form 10-Q, or the quarterly summary of the company’s performance, is filed within 35 days of the end of each of its first three fiscal quarters. This session will also touch on other key filings.

YOUR INSTRUCTOR

Michelle Leder launched Footnoted.com (originally Footnoted.org) in 2003 to take “a closer look at the things that companies try to bury in their routine SEC filings,” according to the website. Its launch coincided with the release of her book, Financial Fine Print: Uncovering a Company’s True Value. Morningstar bought the site in 2010, but Leder bought it back in 2012.

What do you think?

SELF-GUIDED LESSON

Check out the resources below. At your own pace, you can walk through the self-guided lesson on tips for digging deeper into SEC filings.

http://businessjournalism.org/2012/11/12/sec-filings-master-class-self-guided-training/

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Understanding Bear Markets; Without Comment

Posted on March 13, 2014 | Leave a comment

Understanding Bear Markets:  http://www.nextbigtrade.com/2014/03/11/learning-from-the-devious-gold-bear/

Charts below from: http://www.alhambrapartners.com/2014/03/11/valuation-bonanza-march-2014/

ABOOK-Mar-2014-Valuations-FINRA-Margin-Debt

ABOOK-Mar-2014-Valuations-FINRA-Net-Worth

 ABOOK-Mar-2014-Valuations-FINRA-Net-Worth-Change

ABOOK-Mar-2014-Valuations-CAPE

ABOOK-Mar-2014-Inventory-to-Sales

 SP-500-vs-200-MA

 

Volatility-Index

 

Speculative Hedge Funds Piling In.

Nasdaq-COT

Market-Sentiment

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Posted in History, Investor Psychology, Risk Management, Search Strategies

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Investor Interview (Audio)

Posted on March 12, 2014 | 1 comment

Russian Bear

A good interview of a self-taught professional investor (John Hempton of http://brontecapital.blogspot.com/.   GO HERE: https://soundcloud.com/the-odd-lot/john-hempton-audio-interview

Certainly this investor is a tad eccentric, but he certainly has found a great method to find and manage short selling opportunities.  A great listen. Also, seek out http://oddlotinvest.wordpress.com/about/   Wow, a treasure chest of obscurities.

Risks for equities, IN GENERAL, are high.  Note that the equity and debt market combined for companies is at all-time highs. Be careful.

EV multiple all time high

EV mult vs return_0

Overvalued stock market HussmanInfAdjDow_2

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Part 1: Analyzing a Gold Mining Company–Where to Start?

Posted on March 10, 2014 | 10 comments

Idaho_Gold_Minegold mine 2

Gold mine 3gold mine

 

 

 

Assignment: Analyze and value a gold mining company

Mario Gabelli once suggested to a group of Columbia MBA students to become an expert in an industry. The process will take at least six months of intensive reading and research to get to a level of what you need to know and what you can ignore. Then in a year or so move on to another industry. After five or six years you will have competency in five to six different industries.   Since investing is all about context, we first need to learn about the gold (precious-metals) mining industry.

Whether you will analyze a gold mining company, a shipping firm, a title insurance business or a media company, you will need to develop an understanding of the industry within which your firm operates.

Since we do not have six months to study, we will move at an accelerated pace.

OK, so what do you need to start with and how would you begin?  Pretend that you wanted to build a mining company from scratch, how would you do it? If you were airdropped into Northern Pakistan, what would you first need after hitting the ground?

Friday, I will post my suggestions and information sources. Meanwhile, you can think and search for yourself. Eventually, we will move on to the particular company.   Don’t hesitate to post questions if you are unclear or my instructions are incomprehensible.

Good luck!

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Posted in Competitive Analysis, Valuation Techniques, YOU

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Looking At Bottoms; Gold Stocks

Posted on March 6, 2014 | 4 comments

200205666-001

No, not these…..

Bottom

 

 

 

I mean these……….. (Thanks to http://www.classicvalueinvestors.com/

Gold Stocks

The table below is meant to highlight the HUGE price ranges of the micro-cap junior precious metals sector. I tend to avoid or make allowance for some of these companies going to $0.00 or diluting shareholders with equity offerings.

GroupofMinersPerformanceFebruary182014-300x90

 If you go back and read the author’s post over the past two years, you will get a feel for the suffering of investors who ride a BIG BEAR market in small junior mining stocks. Be aware of the downside as well! See:  http://classicvalueinvestors.com/i/2014/03/goldgroup-mining-this-is-what-i-call-a-great-day/

How one investor changed his life by developing his OWN method of investing.

Below is an advertisement to get you to hear the audio story. The ad places the HOOK, “an unusual money-making secret.”  Baloney, he doesn’t use any “secret”. He simply found a method to value, buy cheaply, and manage a portfolio of precious metals’ stocks.  And over the years he has done extremely well while stomaching swings of 50% or more. He can hold on, because of his work and confidence. THAT is his secret. I know this guy and you should listen to the interview. Yes, a bit hokey at first –who cares that he got revenge on his ex-wife–but a true story. There are LESSONS here.

Dear Reader,

If you’re a middle-aged guy, divorce is one of the worst things that can happen to you. It can ruin you, both financially and emotionally.

But I recently heard the story of a Ft. Lauderdale man named John  (Actually, John Doody of www.goldstockanalyst.com) who discovered an unusual moneymaking secret after going through a bitter divorce.

John says this secret has made him a multimillionaire over the past decade… even though his ex-wife took almost all of his assets. And he asked us if he could share his story with you.

In fact, he says he even went through the expense of having his transactions verified by an independent auditing firm… just so he could prove his incredible story to the world.

Click here to listen to John’s story.

Jan. 2014 Interview of John Doody (down 50% in 2013!) http://youtu.be/95gjTXIGsgU

Regards,

Will Bonner, Publisher, Diary of a Rogue Economist 

Who Wants to Analyze a Gold Stock?

If there is interest, we can work through a company in a few posts next week.

HAVE A GREAT WEEKEND!

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Posted in Investing Gurus, Search Strategies, Special Situations, Valuation Techniques

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Activist Short-Selling

Posted on March 5, 2014 | 1 comment

Easily offended

NBER short selling study finds Asensio to be the Pioneer of recently defined field.   See www.asensio.com  There are plenty of research reports and case studies on short-selling hyped frauds. A worthwhile education.

March 5th, 2014.  In January 2014 the National Bureau of Economic Research [“NBER”] published a behavioral finance article titled the first titled “How Constraining Are Limits to Arbitrage? Evidence from a Recent Financial Innovation.”  The study indentifies Manuel P. Asensio of Asensio & Company as the “pioneer” of short selling “arbitrage” and found that Asensio & Company’s short targets experienced the largest price correction among this recent class of short sellers during the study’s timeframe.   The study defines this recent class of arbitrage short seller as “information producers as arbitrageurs rather than as short-sellers, to distinguish them from uninformed short-sellers in the market.” 

The study describes a “recent financial innovation that allows limits to arbitrage to be sidestepped, and overvaluation thereby to be corrected” even in settings characterized by extreme costs of information discovery and severe short-sale constraints or limits.  Limits “interfere with arbitrage processes so that security prices can deviate from true values for extended periods of time” and include costs of discovering a mispriced security, the costs of the resources needed to exploit a mispricing and short-sale constraints and the risk that mispricing could get worse, forcing early liquidation of a position at a loss.  Limits mentioned in the study also include “sophisticated public relations campaigns against shorts” and targets that “put pressure on their shareholders to recall stock out on loan, to put a squeeze on short sellers.” Yet the study found that short selling arbitrage can succeed in correcting mispricing and generate cumulative abnormal profits “even in this uninviting setting.”

The study “arbitrageurs” expend considerable resources to identify overvalued companies and profitably correct overpricing.  It notes that short selling arbitrageurs reveal their information publicly as a way to sidestep the so-called limits and found evidence that “revealing the information voluntarily and thereby accelerating price discovery reduces the risk of the arbitrage strategy and sidesteps the arbs’ limited-resource constraint.”

The study found that “[f]or this strategy to work, critical that the information the arbs reveal to the market is credible – or else the longs will ignore it. We observe that the arbs in our sample argue their case by way of highly detailed reports which they post publicly and for free.  Compared to reports published by sell-side equity analysts at investment banks, which have a tendency to be bothoptimistic and biased.”

The study contributes to the “growing literature on the role of short sellers in producing and transmitting information in capital markets. There is little prior evidence on what short sellers know and how they acquire information. Our unique data allow us to observe the information discovery process at the level of individual information producers and to study how the information the arbs discover is then incorporated in security prices.”

The study found the short seller arbitrageur evidence ‘illustrates why financial markets need short sellers to function well. While some short sellers may indeed be speculators who do little more than destabilize share prices, as is often alleged, the short sellers in our sample are information producers who help correct mispricing and thereby help make markets more efficient. This is all the more remarkable given that many targets in our sample were held by highly sophisticated investors who apparently did not spot the overvaluation until it was too late.”

The study is available at http://www.nber.org/papers/w19834 

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Posted in Search Strategies, Special Situations

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A New Monetary System

Posted on March 4, 2014 | Leave a comment

Room Service

Learn how we can move away from our dysfunctional paper-mache currency system.

On February 12, 2014, Nathan Lewis spoke at the Cato Institute in Washington DC, a well-known conservative “think tank,” about the topics in his new book, Gold: the Monetary Polaris.  The webcast video of the event is available at the Cato website here: 
http://www.cato.org/events/gold-monetary-polaris

Also, here’s the presentation from the event:

Click here for a .pdf of the presentation used at the Cato talk.

A gold standard simply produces stable money–a necessity for economic prosperity.

A gold standard does NOT depend upon the quantity of gold. It is a currency board based on gold.   Be one of the few people who can understand how such a system could work.

As always, try to find arguments against a proposition:

Recent Arguments AGAINST the Gold Standard

Why Bitcoins Will Fail As Money:Digital Mania

Hush

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CS on Critical Reading Skills; Sealed Air Video

Posted on March 3, 2014 | 14 comments

 

ECRI-Weekly-LEI-Growth

CASE STUDY ON CRITICAL READING

OK, you are working for this guy: Video: http://youtu.be/R8y6DJAeolo. He walks into your office and drops this on your desk early in the morning before you have had a chance to slurp your coffee and gobble your jelly-donut: Case Study Critical Reading_Bubbles. He wants a full report. He wants to know what causes bubbles and busts.

What do you tell him about the report he gave you? How long before you reached your conclusion? What evidence do you present for your conclusion?  Time is precious.

What do you suggest should be the next step to gain an answer for your hedgie boss?

How efficient are you at getting to the essence of the document? Stuck?

Ask Hannibal Lechter:

 Case Study “Response”

In its report Globalization and Monetary Policy Institute Working Paper No. 167, entitled “The Boy Who Cried Bubble” by authors Yasushi Asako and Kozo Ued.

The article is 44 pages long. In the opening paragraph on page two in the Introduction, the authors state “History is rife with examples of bubbles and bursts. A prime example is the recent financial crisis that started in the summer of 2007; However, we have limited knowledge of how bubbles arise and how they can be prevented.” (Right there–you have your conclusion. These guys have no clue how bubbles occur. Secondly, seeing any higher level math means ignorance and folly. How can human action be quantified with mathematical precision–the fatal conceit).  Tell your boss that the paper is useless or even misleading. 

One could safely stop reading right at that point knowing full well that what follows cannot possibly be anything but self-serving platitudes and incomprehensible mathematical gibberish.

And that is precisely the case. The mathematical gibberish starts on page five and continues for the entire remainder of the document.

Here is a quick sample from page seven.

Math 1

All the remaining pages are equally incomprehensible to all but the geekiest of geeks. Here is another example from page 39.

Math 2

Hiding Behind Nonsensical Math

I am quite sure there are some academic geeks who understand the formulas presented by Yasushi Asako and Kozo Ued.

Regardless, it’s all mathematical nonsense in light of their ridiculous conclusion stated upfront “We have limited knowledge of how bubbles arise and how they can be prevented.”

Ben Graham argues, “higher-level math implies a level of precision that does not exist in the real world.” (p. 259 of The Intelligent Investor)

Read more at  http://globaleconomicanalysis.blogspot.com/2014/01/bubblicious-questions-what-causes.html#ueRA5dx1OFAvUKC9.99

SEALED AIR CASE STUDY

Video https://www.hightail.com/download/elNLTG01MHczeUp4Tk1UQw    Link Expires May 24 2014

Case Materials:

Greenwald_Class_Notes_6_-_Sealed_Air_Case_Study

Sealed Air 1998 10-K

Sealed Air Case Study_Handout

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Posted in Uncategorized

Hoping to be killed by a Hellfire Missle (Drone)

Posted on February 28, 2014 | Leave a comment

 

Americans cherish being killed by the President

Psychops: http://winteractionables.com/?p=9578

Let’s do away with the 6th Amendment: http://www.acting-man.com/?p=28930#more-28930

 

.

 

 

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LINKS

Posted on February 26, 2014 | Leave a comment

AK Rifles

“You can’t build lasting stock market gains or solid GDP growth on debt. Because debt cannot expand forever. Sooner or later it must stabilize and then it must contract. When that happens, all the positive features of debt become negative features. Instead of borrowing and spending more, people must spend less and pay off past debt. Instead of adding to corporate sales and profits, they subtract from them. Instead of driving up asset prices, they push them down.”

Borrowed money has an almost magical effect on the way up. It comes out of nowhere. So there is no labor cost to offset against it. It goes almost directly into corporate profits. http://www.rickackerman.com/2011/06/a-gloomy-richebacher-was-prescient-in-1999/

Links

If you have a few favorites, please let me know. 

                                                      -work in progress-

My Other Blogs

Un Inversor Inteligente www.uninversorinteligente.com (spanish)

Ferrer Invest www.ferrerinvest.com/un-inversor-inteligente.html (spanish)

Seeking Wisdom www.seekingworldlywisdom.tumblr.com

Value Investing Research

Magic Formula Investing www.magicformulainvesting.com

Outstanding Investor Digest www.oid.com

The Manual of Ideas www.manualofideas.com

Value Investors Club www.valueinvestorsclub.com

Value Investor Insight www.valueinvestorinsight.com

Value Line www.valueline.com

Value Investing Blogs

All Value Investing www.allvalueinvesting.com  Check out the videos!

Above Average Odds www.aboveaverageodds.com

The Brooklyn Investor: http://brooklyninvestor.blogspot.com/

Buffett FAQ www.buffettfaq.com

Fundoo Professor www.fundooprofessor.wordpress.com

Gannon and Hoang on Investing http://gannonandhoangoninvesting.com/

GrahamandDoddsville www.grahamanddoddsville.net

Greenbackd.com    www.greenbackd.com

Greg Speicher www.gregspeicher.com

Margin of Safety www.amarginofsafety.com

Mungerisms www.mungerisms.blogspot.com

The Inoculated Investor www.inoculatedinvestor.com

Simoleon Sense www.simoleonsense.com

Street Capitalist www.streetcapitalist.com

Value Investing World www.valueinvestingworld.com

ValueWalk www.valuewalk.com

Warren Buffett Resource www.warrenbuffettresource.wordpress.com

Value Investing Sites

Alphaclone www.alphaclone.com

Dataroma www.dataroma.com

Gurufocus www.gurufocus.com

Seeking Alpha www.seekingalpha.com

Value Investing Firms

Ariel Investments www.arielinvestments.com

Aquamarine www.aquamarinefund.com

Baron Funds www.baronfunds.com

Baupost www.baupost.com

Bestinver www.bestinver.es

Century Management www.centman.com

Clipper Fund www.clipperfund.com

Davis Funds www.davisfunds.com

Dreman Value Management www.dreman.com

Fairholme www.fairholmefunds.com

First Eagle Funds www.firsteaglefunds.com

First Pacific Advisors www.fpafunds.com

Formula Investing Funds www.formulainvestingfunds.com

GMO www.gmo.com

Greenlight Capital www.greenlightcapital.com

Himalaya Capital Management www.himalayacapital.com

Hummingbird Value Fund www.hummingbirdvalue.com

Longleaf Partners www.longleafpartners.com

Mackenzie Investments www.mackenziefinancial.com

Muhlenkamp & Co. www.muhlenkamp.com

Oakmark Funds www.oakmark.com

Oaktree Capital Management www.oaktreecapital.com

Olstein Funds www.olsteinfunds.com

Pabrai Investment Funds www.pabraifunds.com

Pzena Investment Management http://www.pzena.com

Redfield, Blonsky & Co. www.rbcpa.com

Sarbit www.sarbit.com

Sequoia www.sequoiafund.com

T2 Partners www.t2partnersllc.com

Third Avenue www.thirdavenuefunds.com

Third Point www.thirdpoint.com

Tweedy, Browne www.tweedy.com

Weitz Funds www.weitzfunds.com

Wintergreen Funds www.wintergreenfund.com

Value Investing Schools and Courses

Centro Enseñanza Online Manuel Ayau www.umayau.com  (spanish)

Columbia Business School www7.gsb.columbia.edu/valueinvesting

Gabelli School of Business www.fordham.edu/cba

Kellogg School Of Management www.bit.ly/zU5n3b

Management Development Institute www.sanjaybakshi.net

Richard Ivey School of Business www.bengrahaminvesting.ca

UC Davis Graduate School of Management www.bit.ly/xkUZ4v

Value Oriented Companies

Berkshire Hathaway www.berkshirehathaway.com

Fairfax Financial Holdings www.fairfax.ca

Notable Economists

Carlos Rodriguez Braun www.carlosrodriguezbraun.com  (spanish)

Jesús Huerta de Soto www.jesushuertadesoto.com  (spanish)

Juan Ramón Rallo www.juanramonrallo.com  (spanish)

Philipp Bagus www.philippbagus.com

Xavier Sala-i-Martín www.salaimartin.com

Amateur Portfolio Managers

Covestor www.covestor.com

Marketocrazy www.marketocracy.com

Unience www.unience.com (spanish)

Media and other resources

Farnam Street www.farnamstreetblog.com

Barking up the wrong tree www.bakadesuyo.com

Futile Finance www.futile.free.fr

Inteligencia y Libertad www.intelib.com  (spanish)

Libre Mercado www.libremercado.com  (spanish)

Grupo Retiro www.gruporetiro.com  (Family Business, spanish)

Michael Mauboussin www.michaelmauboussin.com

Santa Fe Institute www.santafe.edu

Libertarian Think Tanks

CATO Institute www.cato.org

Instituto Juan de Mariana www.juandemariana.org  (spanish)

Ludwig von Mises Institute www.mises.org

A reader suggests:

  1. Bronte Capital’s blog – John Hempton shares his thought process and interacts frequently with readers on the blog. (http://brontecapital.blogspot.com/)
  2. Distressed debt investing blog (http://www.distressed-debt-investing.com/)
  3. Corner of Berkshire and Fairfax forums (http://www.cornerofberkshireandfairfax.ca/forum/)                                 

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