Tag Archives: Austrian Economics

Job Openings at the FED; Can Knowing Austrian Economics Make You Rich? Bitcoin

logo-new-york-fedJOBS AVAILABLE Candidates sought for our market stabilization teams. Applicants should be from an Ivy-League school, have attended an investment training program and have market knowledge of stocks, bonds and commodities. You should be able to work closely with our affiliates, Goldman Sachs and JP Morgan, in maintaining market and price stability. There are several teams that need members: Gold and Silver Suppression, U.S. Government Bond Buying, S&P 500 Plunge-Protection, and Carnage Control. Candidates must be able to implement and execute complex market strategies such as described here: http://sibileau.com/martin/

  1. Gold Manipulation Part 1
  2. Gold Manipulation Part II
  3. Gold Manipulation Part III

Also, there are openings for our investigative team to uncover why this is happening: Gold-ReservesMassive withdrawals from Comex warehouses: http://bullmarketthinking.com/comex-gold-inventories-collapse-by-largest-amount-on-record/

All applicants should send a resume with cover letter to : Federal Reserve Bank of New York 33 Liberty Street, New York,  NY  10045

Can Knowing Austrian Economics Make You Rich? http://www.lewrockwell.com/lewrockwell-show/2013/04/02/359-does-knowing-austrian-economics-help-you-get-rich/

Readings on Bitcoin: Bitcoin

http://www.forbes.com/sites/jonmatonis/2012/11/03/ecb-roots-of-bitcoin-can-be-found-in-the-austrian-school-of-economics/

virtual currency schemes 201210en

Which Country You Invest In MATTERS!  http://greenbackd.com/2013/04/09/domicile-matters-backtest-of-performance-by-equal-weight-country-index/

Kyle Bass

April 9 (Bloomberg) — J. Kyle Bass, head of Dallas-based hedge fund Hayman Advisors LP, talks about the outlook for Japanese government bonds, gold, and the U.S. housing market. Bass, speaking with Erik Schatzker and Stephhanie Ruhle on Bloomberg Television’s “Market Makers,” also discussses activist investing. Bloomberg Industries metals and mining analyst Andrew Cosgrove also speaks. (Source: Bloomberg) http://bloom.bg/11P3V3V   Thanks to David Hui Lau! (Beg to be on his email list: dahhuilaudavid@gmail.com)

 

A Young Value Investor Interview http://www.eurosharelab.com/newsletter-archive/462-interview-with-a-remarkable-value-investor-josh-tarasoff

M. Thatcher R. I. P.

Watch your thoughts for they become words.

Watch your words for they become actions.

Watch your actions for they become habits.

Watch your habits for they become your character.

And watch your character for it becomes your destiny.

What we think, we become. My father always said that… and I think I am fine. –Margaret Thatcher

How the Stock Market and Economy Really Work

Readings: Munger-Talk-at-Harvard-Westlake and don’t forget to subscribe to kessler@robotti.com and www.santangelsreview.com to be up to date on all news related to investing.

How the Market Really Works

Editor: The author argues that GDP growth, as measured in money and stock market values as reflected by broad indices like the S&P 500 and the DJIA, rises as a result of the increase in money caused by the expansion of bank credit.  Note that the DJIA went from 809 on Jan 2, 1970 to 12,800.18 on January 4, 2008, a gain of 1,582 percent, even greater than the increase in the (m-2) money supply in that period.

If money supply was held constant or grew slowly (as would be typical under a classical gold standard), then capital gains could be made only by stock picking–by investing in companies that are expanding market share, bringing to market new products, etc., thus truly gaining proportionately more revenues and profits at the expense of these companies that are less innovative and efficient.

The stock prices of the gaining companies would rise while others fell. Since the average stock would not actually increase in value, most of the gains made by investors from stocks would be in the form of dividend payments. By contrast, in our world today, most stocks–good and bad ones–rise during inflationary bull markets and decline during bear markets. The good companies simply rise faster than the bad.

An interesting, important read: http://mises.org/daily/4654

In fact, the only real force that ultimately makes the stock market or any market rise (and, to a large extent, fall) over the longer term is simply changes in the quantity of money and the volume of spending in the economy. Stocks rise when there is inflation of the money supply (i.e., more money in the economy and in the markets). This truth has many consequences that should be considered.

Since stock markets can fall — and fall often — to various degrees for numerous reasons (including a decline in the quantity of money and spending), our focus here will be only on why they are able to rise in a sustained fashion over the longer term.

The Fundamental Source of All Rising Prices

For perspective, let’s put stock prices aside for a moment and make sure first to understand how aggregate consumer prices rise. In short, overall prices can rise only if the quantity of money in the economy increases faster than the quantity of goods and services. (In economically retrogressing countries, prices can rise when the supply of goods diminishes while the supply of money remains the same, or even rises.)

When the supply of goods and services rises faster than the supply of money — as happened during most of the 1800s — the unit price of each good or service falls, since a given supply of money has to buy, or “cover,” an increasing supply of goods or services. George Reisman offers us the critical formula for the derivation of economy-wide prices: [1]

In this formula, price (P) is determined by demand (D) divided by supply (S). The formula shows us that it is mathematically impossible for aggregate prices to rise by any means other than (1) increasing demand, or (2) decreasing supply; i.e., by either more money being spent to buy goods, or fewer goods being sold in the economy.

In our developed economy, the supply of goods is not decreasing, or at least not at enough of a pace to raise prices at the usual rate of 3–4 percent per year; prices are rising due to more money entering the marketplace.

The same price formula noted above can equally be applied to asset prices — stocks, bonds, commodities, houses, oil, fine art, etc. It also pertains to corporate revenues and profits. As Fritz Machlup states:

It is impossible for the profits of all or of the majority of enterprises to rise without an increase in the effective monetary circulation (through the creation of new credit or dishoarding).[2]

…….

The Link between the Economy and the Stock Market

The primary link between the stock market and the economy — in the aggregate — is that an increase in money and credit pushes up both GDP and the stock market simultaneously.

A progressing economy is one in which more goods are being produced over time. It is real “stuff,” not money per se, which represents real wealth. The more cars, refrigerators, food, clothes, medicines, and hammocks we have, the better off our lives. We saw above that, if goods are produced at a faster rate than money, prices will fall. With a constant supply of money, wages would remain the same while prices fell, because the supply of goods would increase while the supply of workers would not. But even when prices rise due to money being created faster than goods, prices still fall in real terms, because wages rise faster than prices. In either scenario, if productivity and output are increasing, goods get cheaper in real terms.

Obviously, then, a growing economy consists of prices falling, not rising. No matter how many goods are produced, if the quantity of money remains constant, the only money that can be spent in an economy is the particular amount of money existing in it (and velocity, or the number of times each dollar is spent, could not change very much if the money supply remained unchanged).

This alone reveals that GDP does not necessarily tell us much about the number of actual goods and services being produced; it only tells us that if (even real) GDP is rising, the money supply must be increasing, since a rise in GDP is mathematically possible only if the money price of individual goods produced is increasing to some degree. Otherwise, with a constant supply of money and spending, the total amount of money companies earn — the total selling prices of all goods produced — and thus GDP itself would all necessarily remain constant year after year.

Austrian Capital Theory; Value Blogs

A new blog: www.valueuncovered.com   I hope readers learn from this blog. My initial glance shows that this blog focuses on smaller companies. I an impressed with this student’s (aren’t we all students) thoughtful analysis. Don’t forget to always ask of the business has a franchise or not. Does the business generate above average returns on capital. Don’t be deceived by multiples of EV to EBITDA or EBIT. And always do your own independent analysis.

My favorite blog: www.greenbackd.com for those who invest in asset type investments; net/nets, special situations, and activist stocks.

Austrian Capital Theory

I highly recommend this article for understanding our current situation: http://www.thefreemanonline.org/features/austrian-capital-theory-why-it-matters/   See www.cafehayek.com.

http://www.thefreemanonline.org/features/austrian-capital-theory-why-it-matters/

Austrian Capital Theory: Why It Matters

by Peter Lewin • June 2012 • Vol. 62/Issue 5

With the resurgence of Keynesian economic policy as a response to the current crisis, echoes of past debates are being heard—in particular the debate from the 1930s between John Maynard Keynes and Friedrich Hayek. Keynes talked about the “capital stock” of the economy. He argued that by stimulating spending on outputs (consumption goods and services), one can increase productive investment to meet that spending, thus adding to the capital stock and increasing employment.

Hayek accused Keynes of insufficient attention to the nature of capital in production. (By “capital” I mean the physical production structure of the economy, including machinery, buildings, raw materials, and human capital—skills). Hayek pointed out that capital investment does not simply add to production in a general way but rather is embodied in concrete capital items. That is, the productive capital of the economy is not simply an amorphous “stock” of generalized production power; it is an intricate structure of specific interrelated complementary components. Stimulating spending and investment, then, amounts to stimulating specific sections and components of this intricate structure.

The “shape” of production is changed by stimulatory activist spending. And given that in a world of scarcity productive resources are not free, this change comes at the expense of productive effort elsewhere. The pattern of production thus gets out of sync with the pattern of consumption, and eventually this must lead to a collapse. Productive sectors, like dot-com startups or residential housing, become “overbought” (while other sectors develop less), and eventually a “correction” must occur. Add this distortion to the fact that the original stimulus must somehow eventually be paid for, and we have a predictable bust.

These Hayekian criticisms are once again relevant. It is necessary therefore to return to the nature of capital to clarify the issues. Hayek was working from foundations that were developed by his intellectual forebears in the Austrian school of economics. Specifically, it is the Austrian theory of capital that is relevant, and we should begin with that.

The Austrian Theory

The best known Austrian capital theorist was Eugen von Böhm-Bawerk, though his teacher Carl Menger is the one who got the ball rolling, providing the central idea that Böhm-Bawerk elaborated. Böhm-Bawerk produced three volumes dedicated to the study of capital and interest, making the Austrian theory of capital his best-known theoretical contribution. He provided a detailed account of the fundamentals of capitalistic production. Later contributors include Hayek, Ludwig Lachmann, and Israel Kirzner. They added to and enriched Böhm-Bawerk’s account in crucial ways. The legacy we now have is a rich tapestry that accords amazingly well with the nature of production in the digital information age. Some current contributors along these lines include Peter Klein, Nicolai Foss, Howard Baetjer, and me.

The Austrians emphasize that production takes time: The more indirect it is, the more “time” it takes. Production today is much more “roundabout” (Böhm-Bawerk’s term) than older, more rudimentary production processes. Rather than picking fruit in our backyard and eating it, most of us today get it from fruit farms that use complex picking, sorting, and packing machinery to process carefully engineered fruits. Consider the amount of “time” (for example in “people-hours”) involved in setting up and assembling all the pieces of this complex production process from scratch—from before the manufacture of the machines and so on. This gives us some idea of what is meant by production methods that are “roundabout.”

(The scare quotes around time are used because in fact there is no perfectly rigorous way to define the length of a production process in purely physical terms. But, intuitively, what is being asserted is that doing things in a more complicated, specialized way is more difficult; loosely speaking it takes more “time” because it is more “roundabout,” more indirect.)

More Roundabout Production

Through countless self-interested individual production decisions, we have adopted more roundabout methods of production because they are more productive—they add more value—than less roundabout methods. Were this not the case, they would not be deemed worth the sacrifice and effort of the “time” involved—and would be abandoned in favor of more direct production methods. What are at work here are the benefits of specialization—the division of labor to which Adam Smith referred. Modern economies comprise complex, specialized processes in which the many steps necessary to produce any product are connected in a sequentially specific network—some things have to be done before others. There is a time structure to the capital structure.

This intricate time structure is partially organized, partially spontaneous (organic). Every production process is the result of some multi-period plan. Entrepreneurs envision the possibility of providing (new, improved, cheaper) products to consumers whose expenditure on them will be more than sufficient to cover the cost of producing them. In pursuit of this vision the entrepreneur plans to assemble the necessary capital items in a synergistic combination. These capital combinations are structurally composed modules that are the ingredients of the industry-wide or economy-wide capital structure. The latter is the result then of the dynamic interaction of multiple entrepreneurial plans in the marketplace; it is what constitutes the market process. Some plans will prove more successful than others, some will have to be modified to some degree, some will fail. What emerges is a structure that is not planned by anyone in its totality but is the result of many individual actions in the pursuit of profit. It is an unplanned structure that has a logic, a coherence, to it. It was not designed, and could not have been designed, by any human mind or committee of minds. Thinking that it is possible to design such a structure or even to micromanage it with macroeconomic policy is a fatal conceit.

The division of labor reflected by the capital structure is based on a division of knowledge. Within and across firms specialized tasks are accomplished by those who know best how to accomplish them. Such localized, often unconscious, knowledge could not be communicated to or collected by centralized decision-makers. The market process is responsible not only for discovering who should do what and how, but also how to organize it so that those best able to make decisions are motivated to do so. In other words, incentives and knowledge considerations tend to get balanced spontaneously in a way that could not be planned on a grand scale. The boundaries of firms expand and contract, and new forms of organization evolve. This too is part of the capital structure broadly understood.

Division of Knowledge

In addition, the heterogeneous capital goods that make up the cellular capital combinations also reflect the division of knowledge. Capital goods (like specialized machines) are employed because they “know” how to do certain important things; they embody the knowledge of their designers about how to perform the tasks for which they were designed. The entire production structure is thus based on an incredibly intricate extended division of knowledge, such knowledge being spread across its multiple physical and human capital components. Modern production management is more than ever knowledge management, whether involving human beings or machines—the key difference being that the latter can be owned and require no incentives to motivate their production, while the former depend on “relationships” but possess initiative and judgment in a way that machines do not.

The foregoing provides the barest account of the rich legacy of Austrian capital theory, but it should be sufficient to communicate the essential differences between the Austrian view of the economy and that of other schools of thought. For Austrians the whole macroeconomic approach is problematic, involving, as it does, the use of gross aggregrates as targets for policy manipulation—aggregates like the economy’s “capital stock.” For Austrians there is no “capital stock.” Any attempt to aggregate the multitude of diverse capital items involved in production into a single number is bound to result in a meaningless outcome: a number devoid of significance. Similarly the total of investment spending does not reflect in any accurate way the addition to value that can be produced by this “capital stock.” The values of capital goods and of capital combinations, or of the businesses in which they are employed, are determined only as the market process unfolds over time. They are based on the expectations of the entrepreneurs who hire them, and these expectations are diverse and often inconsistent. Not all of them will prove correct—indeed most will be, at least to some degree, proven false. Basing macroeconomic policy on an aggregate of values for assembled capital items as recorded or estimated at one point in time would seem to be a fool’s errand. What do the policymakers know that the entrepreneurs involved in the micro aspects of production do not?

Capital and Employment

The folly is compounded by connecting capital and investment aggregates to total employment under the assumption that stimulating the former will stimulate the latter. Such an assumption ignores the heterogeneity and structural nature of both capital and labor (human capital). Simply boosting expenditure on any kind of production will not guarantee the employment of people without jobs. How else to explain that our current economy is characterized by both sizeable unemployment numbers and job vacancies? Their coexistence is a result of a structural mismatch: The structure (that is, the pattern of skills) of the unemployed does not match those required to be able to work with the specific capital items that are currently unemployed.

In fact the current enduring recession is basically structural in nature. It is the bust of a credit-induced boom-bust cycle, augmented by far-reaching production-distorting regulation. The Austrian theory of the business cycle was developed first by Ludwig von Mises, combining insights from the Austrian theory of capital with the nature of modern central-bank-led monetary policy. The theory was later used, with some differences, by Hayek in his debates with Keynes. Over the years its popularity and acceptance have waxed and waned, but it appears to be highly relevant to our current situation.

Dot-Com and Other Bubbles

The dot-com boom no doubt reflected the advent of a pervasive new technological environment: the arrival and expansion of the digital age. It was a time of great promise and uncertainty and of enhanced risk-taking. Astronomical book values reflected expectations that in total could not be realized. A shakeup was inevitable—and known to be so. It was part of the market process. As the boom expanded, interest rates started to rise, reflecting the increased demand for a limited supply of loanable funds. This, as Hayek would have put it, is the natural brake of the economy, the signal and the incentive to slow down. But the Federal Reserve, not wishing to spoil the party, expanded reserves to keep interest rates low, thus allowing the boom to progress beyond its “natural” life. When the bust came it was bigger than it would have been had the cycle been allowed to run its natural course.

Notice how this story accords with our understanding of the capital structure. The expanding boom reflected entrepreneurs’ expectations of profitably making new capital combinations, only some of which would, in the event, prove to be profitable. But there was no way to know which they were ahead of time. That is why we need markets. Rising interest rates and the passage of time would tend to reveal the less viable ventures and weed them out. Keeping interest rates artificially low prevented this from happening, more so for those projects that were more interest-sensitive—namely, those that had a longer time horizon—or, loosely speaking in terms of our earlier discussion, contained more “time.”

But the dot-com collapse did not really mark the end of the cycle. Much of the extra liquidity was then directed into real estate, specifically into residential housing and into financial assets based on it. This investment channel was wide open as a result of a decades-long, recently intensified congressional and regulatory policy to expand homeownership in America. This is a familiar story that need not be repeated here. The result was an unprecedented expansion of home building and home purchases riding the tsunami wave of home prices. Once again the production structure was pushed out of sync with any kind of sustainable pattern of consumption.

The solution, from this perspective, is to remove the distortions—to allow the market process to “restructure” production. This would mean a sustained period of consolidation in the housing market, not a policy that attempts to revive it (to revive the bubble?) of the kind we are currently witnessing. But then today’s policymakers do not have the benefit of knowing Austrian capital theory.

Article printed from The Freeman | Ideas On Liberty: http://www.thefreemanonline.org

URL to article: http://www.thefreemanonline.org/features/austrian-capital-theory-why-it-matters/

Paul vs. Paul Debate

http://www.valuewalk.com/2012/04/ron-paul-vs-paul-krugman-exciting-debate-on-video-with-transcript/

www.valuewalk.com is a recommended blog. Several readers kindly sent me links to the Ron Paul vs. Paul Krugman debate.  I am biased toward Ron Paul, but for the life of me I could not understand what Krugman was saying. Perhaps using reason will not convince a religious fanatic.

I stopped reading half way through the discussion, because I knew Ron Paul’s positions but couldn’t understand the logic behind Krugman’s contrary position.  Do you? A few examples:

Krugman’s response to Ron Paul:

You can’t leave the government out of monetary policy. If you think we’re going to let it set itself, it doesn’t happen. If you think you can avoid the government from setting monetary policy, you’re living in the world that was 150 years ago. We have an economy in which money is not just green pieces of paper with faces of dead presidents on them. Money is a part of the financial system that includes a variety of assets – we’re not quite sure where the line between money and non-money is. It’s a continuum.”

What is he saying. Getting the government out of monetary policy would be like regressing? A fall into a primitive state?  Krugman makes an “Elephants can fly” assertion.

Has a monetary system worked without government control? Yes, in the brief period of a classical gold standard pre-WWI.  However, fractional reserve banking (ponzi finance) operated so, of course, booms and busts would not be eliminated. Another assertion without facts. Fiduciary media existed during the gold standard era.

“History tells us that in fact a completely unmanaged economy is subject to extreme volatility, subject to extreme downturns. I know this legend that some people like that the Great Depression was somehow caused by the government or the Federal Reserve, but that’s not true. The reality is it was a market economy run amok, which happens repeatedly…I’m a believer in capitalism. I want the market economy to be left as free as it can be, but there are limits. You do need the government to step in to stabilize. Depressions are a bad thing for capitalism and it’s the role of the government to make sure they don’t happen, or if they do happen, they don’t last too long.”

So let me try to understand……an unmanaged economy is subject to extreme volatility. But with the Fed operating since 1913, we have had the Great Depression, Inflation of the 1970s, Ultra high interest rates of the 1980s, credit crisis of 2007-2009, a managed economy (the FED cartelizing the fractional reserve banking system and suppressing interest rates) is LESS volatile? What amount of failed economic policies due to intervention would you need to say–this is a failure?

The Federal Reserve helped inflate the boom: http://library.mises.org/books/Murray%20N%20Rothbard/Americas%20Great%20Depression.pdf

Since the inception of the Federal Reserve System in 1913, the supply of money and bank credit in America has been totally in the control of the federal government, a control that has been further strengthened by the U.S. repudiating the domestic gold standard in 1933, as well as the gold standard behind the dollar in foreign transactions in 1968 and finally in 1971. With the gold standard abandoned, there is no necessity for the Federal Reserve or its controlled banks to redeem dollars in gold, and so the Fed may expand the supply of paper and bank dollars to its heart’s content. The more it does so, the more prices tend to accelerate upward, dislocating the economy and bringing impoverishment to those people whose incomes fall behind in the inflationary race.

The Austrian theory further shows that inflation is not the only unfortunate consequence of governmental expansion of the supply of money and credit. For this expansion distorts the structure of investment and production, causing excessive investment in unsound projects in the capital goods industries. This distortion is reflected in the well-known fact that, in every boom period, capital goods prices rise further than the prices of consumer goods.

See what Graham and Buffett had to say about booms and busts:A Study of Market History through Graham Babson Buffett and Others

Krugman seems neither to understand Austrian Business Cycle Theory nor economics (“ABCT”): http://mises.org/daily/4993 and http://mises.org/daily/3579

Krugman is constantly shifting arguments:http://mises.org/daily/5086

Krugman’s response:

“I want to say something about Milton Friedman here because if you actually read what he wrote in his writing for economists, as opposed to some of his loose popular writings, he actually said that the Federal Reserve was responsible for the Great Depression because it didn’t go enough. Friedman’s complaint was that the Federal Reserve did not print enough money. I know this. When Ben Bernanke was talking about the helicopter, he was taking that from Milton Friedman. That was really his idea. The state of the economic debate in America right now Milton Friedman would count on the far left of monetary policy.”

Milton Friedman was advocating for the government to intervene and prevent the market clearing. But why was a non-interventionist policy during the vicious 1920/21 depression so successful:http://www.youtube.com/watch?v=czcUmnsprQI. Both theory, common sense and empirical evidence expose Krugman’s and Friedman’s nonsense.

Here is a seven minute video that explains booms and busts: http://www.youtube.com/watch?v=d0nERTFo-Sk

What is Money? A Three Part Series of Video Lectures

We have the best government that money can buy. –Mark Twain
Three excellent videos on money–highly recommended for learning.

Part 1: What is Money by Joe Salerno:

http://www.youtube.com/watch?v=vowbrq_g5NM

Part 2: What is constitutional money by Dr. Viera:

http://www.youtube.com/watch?v=k6gMkKmQSW4

Mr. Viera says, “We have an irredeemable paper (electronic) currency coming out of a private banking cartel for which the American people are on the hook for some type of bailout. Of course, the banking cartel will always go to the public and say we made terrible mistakes–that if you don’t bail us out, the result will be total collapse. And by the way, next time will be worse. This cycle just perpetuates until the end—a hyperinflationary collapse of 50% monthly depreciation of the U.S. dollar. Ugly.

A summary of Viera’s book, Pieces of Eight on Constutional Money: http://mises.org/books/rozeff_us_constitution_and_money.pdf

An alternative to disaster? Rid the nation of legal tender laws and let states use different monies. Move away from the fiat dollar.

Part 3: What is it about Money that Causes Financial crisis by PEter Schiff

http://www.youtube.com/watch?v=npJ0CUT8d_Y&feature=relmfu

Buffett on Inflation or Why Stocks Beat Gold and Bonds

Investing is often described as the process of laying out money now in the expectation of receiving more money in the future. At Berkshire Hathaway (BRKA) we take a more demanding approach, defining investing as the transfer to others of purchasing power now with the reasoned expectation of receiving more purchasing power — after taxes have been paid on nominal gains — in the future. More succinctly, investing is forgoing consumption now in order to have the ability to consume more at a later date. –Warren Buffett

Warren Buffett: Why stocks beat gold and bonds

In an adaptation from his upcoming shareholder letter, the Oracle of Omaha explains why equities almost always beat the alternatives over time.

http://finance.fortune.cnn.com/2012/02/09/warren-buffett-berkshire-shareholder-letter/?section=money_topstories&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+rss%2Fmoney_topstories+%28Top+Stories%29

Obviously, the readers of this blog are aware of the Federal Reserves easy monetary policy–growing monetary aggregates, zero interest rate policy, and high reserves in the banking system. However, as followers of Austrian economics (some of us), we realize that there is no perfect correlation between X growth in money supply and Y increase in nominal stock prices. The world is an extremely complex place and to model precision and prediction is MADNESS. However, you can gain a sense of how the wind blows. If people wish to hold lower cash balances then the effects of inflation will be increased.

Learn more here about monetary policy: www.economicpolicyjournal.com and www.mises.org and http://scottgrannis.blogspot.com/

Inflation Swindles the Equity Investor

 

I strongly urge you to read one of the greatest articles on investing by Buffett, How Inflation Swindles the Equity Investor. HERE: http://www.scribd.com/doc/65198264/Inflation-Swindles-the-Equity-Investor

We spoke at length about investing and inflation during this post: http://wp.me/p1PgpH-1h

Klarman, Einhorn, Tudor Jones Readings, Hedge Funds and a Reader’s Questions

Note the chart below. Thoughts? Hedge Funds are a better deal for the fund managers than the clients.  Buyer beware.

READINGS

The Loser’s Game by Charles Ellis: http://www.scribd.com/doc/78279980/CWCM-the-Loser-s-Game

(Source: www.santangelsreview.comFailure Speech by Paul Tudor Jones (2009) http://www.scribd.com/doc/16588637/Paul-Tudor-Jones-Failure-Speech-June-2009

Einhorn on Why He Shorted Lehman Brothers’ Stock: http://foolingsomepeople.com/main/TCF%202008%20Speech.pdf

Seth Klarman Interview by TIFF: http://www.tiffeducationfoundation.org/commentaryPDFs/2009_Ed2_COM.pdf

Questions from a reader

I owe several of you replies to your questions. Bear with me as I finish reading the Wal-Mart and Global Crossing Case Studies.

 A new readers asks,

I spent about 3 hours yesterday catching up on posts from your site that I had saved in my Google Reader over the past month. I am not sure how to describe my feeling right now besides to say I was enthralled and inspired. Your website is like finding a value investor pirate’s secret treasure trove on a deserted island. There is such a wealth of material and information and it’s all such high quality thoughts that I kept thinking, “Who the hell is this guy?” Attempts to dig into posts related to answering that question yielded several tantalizing details but the mystery remains.

Are you currently or were you an MBA student? I am trying to figure out where these lecture notes are being pulled from. It says “auditing classes from 2001-2007″… that’s an awful long time and the institution and role of the note-taker are left unsaid. I get you’re trying to focus on quality, not reputation, a worthy goal, but I am fascinated simply from the stand point of why I am suddenly able to access all of this information, for free. It doesn’t really matter, I am just curious, that’s all.

My replay: Thanks for the kind words. I have never been an MBA student. I worked on Wall Street as a broker and investment banker before starting a few companies here in the US and Brazil. Upon selling those businesses, I sought to dig into value investing. I saw that the author of a value investing book was teaching at Columbia Business School so living in Greenwich, CT–only 45 minutes from the campus–I hopped the metro train and sat in on his class.  The first class was around 1999, when his students would regularly laugh at the idea of valuing companies when all you had to  was buy Price-Line or Yahoo and see the price rise five percent in an hour. All I had to do was sit in the back and keep my mouth shut. Now, I think Columbia is touchy about outsiders sitting in on classes.

But you really don’t have to do what I did. You just need to read, read and apply your independent thinking to investing. Look how Michael Burry learned (See the Big Short by Michael Lewis or search this blog). But, I do believe that becoming an “expert” or skilled investor probably takes 5 to 20 years of intensive commitment.  Of course, you never “master” investing which is why the journey is fascinating. Also, several great investors have confirmed my belief that the best way to learn about value investing is through your own efforts and application of principles that you will learn through Buffett, Fisher, Klarman, Graham and your accounting textbooks.  There are a lot of dead ends and wasted time if you do not know the proper principles and methods for investing.

SUCCESSFUL INVESTORS

Investing really is constant applied learning which is cumulative. Let me share what I have noticed with ALL successful investors:

NOT TEAM PLAYERS:

The investors work alone. Any group decisions for Buffett or Walter Schloss? They make their own deicsions, and they are little influcned by any form of group affiliation.  Buffett said of Walter Schloss: “I don’t seem to have much influence on Walter. That is one of his strengths: nobody seems to have much influence on him.” Ditto for Michael Burry.

FOXES, NOT HEDGEHOGS

These terms originate from a remark attributed to the Greek poet Archiloschu: “the fox knows many things, but the hedgehod knows on bigf thing.”  Foxes are eclectic, viewing the world through a variety of perspectives, with no allegiance to any single approach.  READ WIDELY and not just on finance and economics.

Understanding how markets work is more important to an investor than understanding technology (trading systems).

  • Few great investors are overnight successes. Many have to overcome failure.
  • Money is about freedom, not consumption.
  • They enjoy the process, not the proceeds.

Note that Michael Burry accumulated his investment knowledge gradually, from his own experience and from reading others’ experience via bulletin boards, rather than from finance textbooks. (Hint: study the www.valueinvestorsclub.com or www.yahoo.com finance boards of intelligent contributors).

Successful investing is a practical craft, not an academic discipline, and certainly not a science. The craft of investing is comprised of heuristics: a toolkit of approximate, experience-based rules for making sense of the world. (See the book: FREE CAPITAL by Guy Thomas).

GOALS FOR THIS BLOG

My goal is placing all this material here is multi-fold:

I have the material so I might as well post for the 20 or so hard-core students who will wish to use it. Many talented investors helped me, so giving back is my responsibility, though sharing this material helps me as much as anyone. I do not expect many readers because few people are suited for long-term, intensive self-directed learning.

There are those who are already in the business who think they already know everything; others seek a conventional route of the MBA; while some want investment ideas/tips–not theory, case studies and practice.   I wanted the material on the web for easy searching and access.

Secondly, many people have made excellent contributions to the value vault. Like the quarterback who hands the ball off to the running back who then runs 98 yards down field while breaking 7 tackles and leaping into the end zone, I receive too much credit.

Thirdly, interactions with curious readers help keep my thinking sharp.

Other questions:

I have a friend who has been working on developing a grass-based, intensive rotational grazing miniature farm on an acre of land about an hour north of Los Angeles, California. He looks at all the reading, time, energy and money he has spent on this project so far (and in the future) as the cost of acquiring a “personal MBA in agriculture” (yes, he gets that agriculturalists don’t get MBAs, but he’s approaching this project from the mindset of a businessman).

When I read through your site, I realize I could do the same thing using some of your material, as well as other blogs I follow and various recommended readings, as a launching point to pursue my own “personal MBA in investing” over the next 12 mos or so. The focus on case studies, and the ability to directly apply my learnings to my own small portfolio in real-time provide the perfect means to make real-world application to the theory being taught in the “classroom.” I think this is a big idea and I am very excited as I consider it more and more seriously. I plan to blog my entire journey and produce various supporting course materials along the way (such as reading list, top blog posts, favorite video lectures links, etc.) as well as keep a running tab on costs, so at the end of it all I can show other people what I learned and how much it cost to get the knowledge.

Yes, use the material how you wish. Start a study group and work on several of the cases. Eventually, there will be sections on special situation investing, competitive analysis, valuation, Austrian Economics.  Or you can take a case study and develop it further.  Seek higher; you can also sign up for courses at the Mises academy (www.mises.org) or go to www.thomasewoods.com to learn about Austrian economics.

I want to thank you again for the resources you place on your site. I’ve only just begun to dig into them and it may be some time before I begin actively participating in your site’s discussion but I do think it’s wonderful already.

And I absolutely LOVE that you’re into Austrian economics, as well. Finally, I’ve found someone else who is interested in synthesizing these two great (and in my view, complimentary) philosophies/disciplines, just as I am:   http://valueprax.wordpress.com/about/ (going to need to re-write that soon, though, to reflect my slightly new direction for the site, ie, cataloging my progress in acquiring a “personal MBA”)

My reply: I became interested in Austrian Economics because Rothbard and von Mises had the only coherent theory and explanation for booms and busts. But as I studied fruther, I learned more about the structure of production  and time preference which helps you understand the risks in different businesses. Every wonder why a steel company fluctuates more in earnings and price than a beverage company? The distance from the consumers in terms of time and production structure. Look at your watch. How long did it take to make? Two hours? Well, who mined the sand to make the glass? Who mined the metal to make the case? Who killed the cow to make the leather wrist-band? And who planned all the production? Perhaps your watch took two years from the moment of assembly to the first production of the materials.  You need to understand this if you EVER invest in a highly cyclical company–what company isn’t at some level cyclical?

Okay, that’s all for now. Thanks for sending the link to the Value Vault. Where are you located geographically, generally speaking? East Coast, West Coast? Big city, small town?

I live in Greenwich, CT home of many hedge funds, but I have never been to one.

Good luck on your journey.

Readers’ Questions: Buffett Compunding $1 Mil. and Why Should an Investor Learn Austrian Economics

Readers’ Questions

Rather than email a reply, I thought sharing with other readers might be helpful.

A reader writes: Your emphasis on capital compounders raises a question in my mind. WEB (Buffett) famously said that if he was running a million bucks, he could get returns of 50% per year. If you reverse engineer this statement, you have to think he would be investing in the following: small caps, special situations, and catalysts.

I don’t think you can get those kinds of return with capital compounders. Thoughts?

My response: Good point. By the way, any future questions that you have for Warren can be answered here: http://buffettfaq.com/.  An organized web-site of all of Buffett’s articles, writings, and speeches organized by subject, source and date–an excellent resource for Buffaholics.  Buffett said he could compound a small amount of money at 50% as he mentions below:

Interviewer to Buffett: According to a business week report published in 1999, you were quoted as saying “it’s a huge structural advantage not to have a lot of money. I think I could make you 50% a year on $1 million. No, I know I could. I guarantee that.” First, would you say the same thing today? Second, since that statement infers that you would invest in smaller companies, other than investing in small-caps, what else would you do differently?

Buffett: Yes, I would still say the same thing today. In fact, we are still earning those types of returns on some of our smaller investments. The best decade was the 1950s; I was earning 50% plus returns with small amounts of capital. I could do the same thing today with smaller amounts. It would perhaps even be easier to make that much money in today’s environment because information is easier to access.

You have to turn over a lot of rocks to find those little anomalies. You have to find the companies that are off the map – way off the map. You may find local companies that have nothing wrong with them at all. A company that I found, Western Insurance Securities, was trading for $3/share when it was earning $20/share!! I tried to buy up as much of it as possible. No one will tell you about these businesses. You have to find them.

Other examples: Genesee Valley Gas, public utility trading at a P/E of 2, GEICO, Union Street Railway of New Bedford selling at $30 when $100/share is sitting in cash, high yield position in 2002. No one will tell you about these ideas, you have to find them.

The answer is still yes today that you can still earn extraordinary returns on smaller amounts of capital. For example, I wouldn’t have had to buy issue after issue of different high yield bonds. Having a lot of money to invest forced Berkshire to buy those that were less attractive. With less capital, I could have put all my money into the most attractive issues and really creamed it.

I know more about business and investing today, but my returns have continued to decline since the 50′s. Money gets to be an anchor on performance. At Berkshire’s size, there would be no more than 200 common stocks in the world that we could invest in if we were running a mutual fund or some other kind of investment business.

  • Source: Student Visit 2005
  • URL: http://boards.fool.com/buffettjayhawk-qa-22736469.aspx?sort=whole#22803680
  • Time: May 6, 2005

So the Wizard of Omaha agrees with you that returns are probably to be found in small caps where greater mis-pricing on the downside and upside can occur. The problem you have is paying higher taxes on short-term (less than one year and a day) gains and reinvestment risk.  Once you sell you have to be able to find other attractive opportunities to redeploy capital.  Special situations like liquidations may give you high annualized returns but the positions may only be held for four months until the investment is liquidated.

Investing in a Coca-Cola may give you high risk adjusted returns but not 50% annual returns because of its side and lack of reinvestment opportunities. Unless you find an emerging franchise which is quite difficult, then if you hold Coke for years, you will eventually earn the company’s return on equity.

This writer organizes his investment world into franchises and non-franchises. With non-franchises you are hoping to buy at enough of a discount to asset value and earnings power value to generate attractive returns. A catalyst like a special situation or corporate restructuring may increase the certainty and lessen the time needed to close the gap between price and your estimate of  intrinsic value. Often, with non-franchises you do not have time on your side. You must buy at a huge discount to have a chance at 50% returns.  These opportunities may be limited to micro-caps with large discounts  partially due to illiquidity issues.

By the way, I am a big fan of small cap special situations, and I plan to post my library for readers, but we have to go step-by-step in posting material.

The reasons I want to focus on franchises are the following:

  1. A study of franchises will teach us about investing in growth which is difficult to value.
  2. Studying competitive advantages will hone our skills in business analysis making us better investors.
  3. Knowing that a company is not a franchise is also important, because–then with no competitive advantage–the company must be managed efficiently. We know what to look for in management activity. Diversification would be a warning signal, for example.
  4. Investing in franchises can be quite profitable if bought at the right price. Say 3M (MMM) at $42 back in 2009 was purchased, then you would be receiving today about a 5.5% to 6% dividend with growth in cash flows of 8% to 10% or more, then in a few years you will have a 14% dividend yield leaving out any rise in share price. You compound at a low base while you defer taxes and reinvestment headaches. I think Buffett receives double in dividends each year more than the original purchase price of Washington Post.  MMM_35
  5.  The biggest gap today in industry and company research is the lack of interest or knowledge in analyzing competitive advantage. Rarely do you ever see an analyst focus on barriers to entry in their valuation work. My hat is off to Morningstar, Inc. because their stock research is geared toward franchises. Many managements have no idea what are structural competitive advantages are. Often, they say their company’s competitive advantage stems from “culture.”
  6. Finally, you want to avoid Hell. Hell is paying a premium for growth for a non-franchise company. Look at Salesforce.com (“CRM”) as an example for today. Full disclosure: I have held short positions in CRM.   Thanks again for your question.

Another reader:

First I would like to thank you for the quality work you are doing. I am new to Austrian economics and I would really appreciate if you can walk us on how to get started and how is it different from other Keynesian and mainstream economics. I, also, want to know why Austrian economics would be more valuable to value investors than other schools. I also wonder why we have not been taught about Austrian economics in school and why it’s not taught.

My reply: Oh boy, you are asking for an all-night discussion. I came out of school having studied Keynesian economics (Samuelson’s text-book, http://en.wikipedia.org/wiki/Paul_Samuelson) because that is what American Universities taught back then and still do about economic theory. Imagine studying geography and being told that the world was flat, yet once in the real world ships were circling the globe.  What I experienced in real life (raging inflation with high unemployment in the late 1970s) completely contradicted Keynesian theory.  Also, the conceit of central planning, having the government intervene, made no sense. How could bureaucrats in Washington, DC allocate resources in Alaska better than an entrepreneur, say, in Alaska?  The only economists that predicted the Great Depression and the collapse of the Soviet Union and Eastern Europe BEFORE the events occurred were the Austrians, von Mises and Hayek. So I read, Human Action by von Mises, and became hooked. The world of booms and busts, inflation, deflation and capital formation started to make sense. But I had to UNlearn a lot of nonsense.

See how flawed Keynesian prediction has been vs. American history: http://www.youtube.com/watch?v=6XbG6aIUlog. Bernanke in 2005 discussing housing vs. the Austrian view. http://www.youtube.com/watch?feature=endscreen&NR=1&v=x2qr5cSln3Q. Bernanke’s confident ignorance is terrifying.

As an investor you must understand how man operates in an economy allocating scarce resources to better his condition or lesson his unease. Only Austrians–from what I know–have a coherent theory of the business cycle and the structure of production. But then you may ask, “If Keynesianism is such a repeated failure, then how come it is still prevalent today?” Think of human motivation. If you are a politician, what better cover to weld power than Keynesian theory?   Constant intervention to “help” is your guide.

Successful investors who are considered Austrians because they study/follow the precepts of Austrian Economics): http://www.dailystocks.com/forum/showtopic.php?tid/2623

Noted investors who use Austrian Economics:

George Soros is the legendary investor who started Quantum Fund in the 1960s and is a multi-billionaire as a result of some winning macro trades. Soros’ prescription for healing broken economies cannot be mistaken for Austrian Economics, but Soros’ analysis of markets as expressed in his books seems to borrow a lot of influence from the Austrian Economists.

Jim Rogers is acknowledged as one of the most successful investors of all time. Making an early start when he was in his twenties, he was able to build a huge fortune with an initial investment of just $600 by the time he was 37. A firm believer in Austrian economics, he advocates investing in China, Uruguay and Mongolia.

Marc Faber was born in Switzerland and received his PhD in Economics from the University of Zurich at age 24. He was Managing Director at Drexel Burnham Lambert from 1978-1990, and continues to reside in Hong Kong. He is famed for his insights into the Asian markets, and his timely warning about market crashes earned him the name of Dr.Doom. In 1987 he warned his clients to cash out before Black Monday hit Wall Street. In 1990 he predicted the bursting of the Japanese bubble. In 1993 he anticipated the collapse of U.S. gaming stocks and foretold the Asia Pacific Crisis of 1997-98. A contrarian at heart, his credo has always been: “Follow the course opposite to custom and you will almost always be right.”

James Grant, a newsletter writer who publishes “Grant’s Interest Rate Observer” is also a follower of Austrian Economics. He is a “Graham & Dodder” too. Go to www.grantspub.com

Ron Paul, a Republican Congressman for the Texas State, is also a believer of Austrian Economics.

Interestingly enough, Howard Buffett, the father of Warren Buffett is also an Austrian Economics follower. His son, Warren, however, seems to be more inclined to the Keynesian method of healing broken economies as opposed to the strict and rigid ones espoused by Austrian economists. Warren Buffett did acknowledge in a recent TV interview that one will have a hard time finding a paper based currency that appreciates in value over time. (All fiat currencies have been debased to worthlessness.)

Austrian Economics vs. Keynesianism

What is Austrian Economics http://mises.org/etexts/austrian.asp

http://mises.org/daily/4095   Hayek vs. Keynes Rap video and discussion. http://mises.org/daily/3465    The Austrian Recipe vs. Keynesian Fantasy.

A recent civil debate between an Austrian economist and a New Age Keynesian.  http://board.freedomainradio.com/forums/t/32178.aspx

Free School in Austrian Economics

If you REALLY want to learn Austrian economics, the lessons couldn’t be laid out better for you than here: http://www.tomwoods.com/learn-austrian-economics/.   Start with Economics in One Lesson by Hazlitt.

And if you want to interact with professors you can go to the Mises Academy here: http://academy.mises.org/.   Don’t go by what I say, but by what YOU think after delving into the material. Does it make sense? Forget political labels of Right-wing, Democrat, Liberal, and Conservative; think of how the world works.  I hope that helps partially answer your question.

The same reader asks another question:

I have another question related to Bruce Greenwald book, Competition Demystified. In his book he mentioned that if the company has no competitive advantage then strategy is irrelevant and the course of action should be efficiency. However, following this argument, investors would have avoided many companies during the journey to become industry dominant player.

Correct me if mistaken, but I don’t think you have read the entire book yet. Greenwald will talk about entrant strategies from the point of view of the incumbent (crush an entrant) to an entrant (how to gain a foothold profitably against an incumbent). Greenwald will also talk about cooperation between incumbents.

If you want a more detailed description of emerging franchises–though I suggest you read it after Greenwald’s book–read Hidden Champions of the 21st Century by Hermann Simon.

I can promise you that one of the reasons for Buffett’s success is his amazing understanding of competitive advantages in his investments.  As a business person understanding strategy is critical.

Here is a question.  You own a chain of very profitable movie theaters within a 150 mile radius of a major city. These theatres are spread about 5 to 20 miles from each other and are nicely profitable. You have economies of scale in hiring, securing first-run films, buying condiments, etc.  You awake one morning to find that another large regional theater chain from 800 miles away wants to open a theatre near one of your 29 theatres.  What response might you offer to send a strong message not to enter this market?  A paragraph is enough.

Thanks for your questions, you make me work hard.

What has the Government Done to our Money?

Money

Once again it’s time to review basic economics. When we invest in equity, we take a dollar from current consumption to gain title to capital goods (a company) which will pay out dividends and/or our investment will eventually be sold for dollars for future consumption.

If you do not understand money in a free society and how government came to meddle with money, you will not understand our ponzi financial system.

A short, clear book on money by Murray Rothbard is excellent. http://mises.org/books/whathasgovernmentdone.pdf

If you read any book to understand our current situation read that one. To understand more about money, banking, and monetary history read the following:

  1. http://mises.org/books/mysteryofbanking.pdf  How fractional reserve banking works.
  2. http://mises.org/books/historyofmoney.pdf  The history of American Banking
  3. http://mises.org/Rothbard/AGD.pdf   The definitive study of the the cause of the Great Depression

Investors discussing the dangers of inflation in today’s investment environment

Julian Robertson Part 1: http://video.cnbc.com/gallery/?video=3000062558

Part 2: http://video.cnbc.com/gallery/?video=3000062485

Kyle Bass: part 1: http://watch.bnn.ca/library/#clip584881

Part 2: http://watch.bnn.ca/the-street/december-2011/the-street-december-13-2011/#clip584882

Economic ignorance Refuted

Here is an article by an investing pundit that is riddled with nonsense and ignorance. No wonder the writer blew up his clients as a securities analyst in the late 1990′s and early 2000′s. http://www.businessinsider.com/keynes-was-right-2011-12

A reply to the above article and an excellent blog: http://finance.townhall.com/columnists/jeffcarter/2011/12/18/obama_and_the_keynesians_total_fail/page/full/

If you read the above recommended books, you will have an excellent grasp of our current monetary chaos, possible solutions and the consequences of our nation’s current course of action. Ignorance is not an excuse.

Strategic Logic Quiz, Review of Austrian Economics, and What about Tomorrow?

The three biggest achievements of the Cuban revolution are health, education, and low infant-mortality rates, and that its three biggest failures are breakfast, lunch, and dinner. — Government Worker, Habana, Cuba.

Strategic Logic Quiz

Last week, I promised the greatest business analysis ever done.  See here: http://wp.me/p1PgpH-cs

A reader, Logan, gave a strong hint for the solution.  Before I post the answer, let’s try another question.

Use Munger’s multidisciplinary thinking or Professor Greenwald’s strategic logic to find an answer to the following problem: The Cuban dictatorship collapses and property rights are restored. You have been given the job to develop a business in Cuba with barriers to entry.  You must build a business with the strongest combination of competitive advantages. What business would you choose, why and how would you build barriers to entry? How many advantages can you design for development? If you come up with a sensible plan, you will be given $5 million to start.

Two hints: the business can not be involved in cigars or tourism (like hotels or restaurants). A reading of Cuban business history would lead you to an answer, but I presume many have little knowledge of that history.

Tip: A great way to learn about businesses is to read corporate history or the biographies of business leaders.  You will sense how a business grows and develops advantages or loses them.

Austrian Economic Review

What are the markets telling us? Deflation has gold and commodities selling off?   I don’t think so. Never predict, but here goes………The Fed and the ECB both have the ability to print money and exchange good collateral for bad collateral with banks. What do central banks know how to do? What motivates central bankers? What are the monetary aggregates telling us?

The dollar is weak: http://scottgrannis.blogspot.com/2011/12/dollar-is-still-very-weak.html#links

Keeping an eye on longer-term investors: Insiders are long-term bullish. http://www.marketwatch.com/story/those-bullish-corporate-insiders-2011-12-07

Place facts into a coherent theory

How do we place facts into context? A rap video of Hayek (Austrian Economist) vs. Keynes (An Interventionist)http://www.youtube.com/watch?v=d0nERTFo-Sk

Bernanke vs. the Austrians during the housing bubble:http://www.youtube.com/watch?feature=player_embedded&v=MnekzRuu8wo

What confidence do you have in Bernanke’s planning ability or in bureaucrats controlling our monetary system?

Inflation today: http://www.economicpolicyjournal.com/2011/12/exposed-why-krugman-smoothed-inflation.html

Note the unusual bond yields.http://scottgrannis.blogspot.com/2011/12/bond-yields-are-out-of-whack.html

MF Global is an example of our Ponzi financial system in action: http://lewrockwell.com/french/french143.html

Murray Rothbard wrote, “If no business firm can be insured, then an industry consisting of hundreds of insolvent (banks) firms is surely the last institution about which anyone can mention ‘insurance’ with a straight face. ‘Deposit insurance’ is simply a fraudulent racket, and a cruel one at that, since it may plunder the life savings and the money stock of the entire public.”

Our Media

The videos below reinforce the need to read original documents or to speak to people who are actually involved in an industry or sent to war rather than believing our press. Excuse the political connotations.

A savage spoof of the media and our government that hits closer to the truth than I would like! Hitler reacts to Ron Paul’s Rise in the Polls: http://www.youtube.com/watch?src_vid=fFbc3sHl3Ic&annotation_id=annotation_162843&feature=iv&v=5ScPXDRcIfc

War and the importance of understanding history: http://www.youtube.com/watch?v=I8NhRPo0WAo&feature=youtu.be  Note that many against war are the folks who actually have experienced it.

Entrepreneurial Alertness

A podcast on finding opportunity: http://www.economicpolicyjournal.com/search/label/The%20Robert%20Wenzel%20Show  Scroll down to the second or third show.

Adapt or Die: Be Creative and Sell your Skills http://www.lewrockwell.com/north/north1073.html

Old (2007) but detailed Longleaf Interview:  http://www.palmerstongroup.com/articles/2007july/interview.html

Interesting Blog from a former Wall Streeter: Reading Fiction will Make You a Better Investor: http://interloping.com/

Have a great day and weekend.